Oppenheimer Quest Value Fund, Inc.
Prospectus dated December 16, 1996
Oppenheimer Quest Value Fund, Inc. is a mutual fund that
seeks capital appreciation through investment in securities
(primarily equity securities) of companies believed by the Manager
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 Objective and Policies for more information
about the types of securities in which the Fund invests and refer
to "Investment Risks" for a discussion of 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 December 16, 1996 Statement of
Additional Information. For a free copy, call OppenheimerFunds
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
Investment Risks
Investment Techniques and Strategies
How the Fund is Managed
Performance of the Fund
ABOUT YOUR ACCOUNT
How to Buy Shares
Class A Shares
Class B Shares
Class C Shares
Class Y 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, Capital Gains and Taxes
Appendix A: Special Sales Charge Arrangements for
Shareholders of the Former Quest for Value Funds
<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 will bear
indirectly. The numbers below are based on the Fund's expenses
during its last fiscal year ended October 31, 1996.
- Shareholder Transaction Expenses are charges you pay when
you buy or sell shares of the Fund. Please refer to "About Your
Account," starting on page ___ for an explanation of how and when
these charges apply.
<TABLE>
<CAPTION>
Class Class Class Class
A Shares B Shares C Shares Y Shares
<S> <C> <C> <C> <C>
Maximum Sales Charge
on Purchases
(as a % of
offering price) 5.75% None None None
- ----------------------------------------------------------------------
Maximum Deferred Sales
Charge (as a % of
the lower of the
original offering
price or redemption
proceeds) None(1) 5% in the first 1% if None
year, declining redeemed
to 1% in the within 12
sixth year months of
and eliminated purchase(2)
thereafter(2)
- ------------------------------------------------------------------------
Maximum Sales Charge
on Reinvested
Dividends None None None None
- ----------------------------------------------------------------------
Exchange Fee None None None None
</TABLE>
(1) If you invest $1 million or more ($500,000 or more for
purchases by "Retirement Plans," as defined in "Class A
Contingent Deferred Sales Charge" on page ___) in Class A
shares, you may have to pay a sales charge of up to 1% if you
sell your shares within 18 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 - Buying Class A Shares," below.
(2) See "How to Buy Shares - Buying Class B Shares" and "How to
Buy Shares - Buying 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 of operating its business.
For example, the Fund pays management fees to its investment
adviser, OppenheimerFunds, Inc. (referred to in this Prospectus as
the "Manager"). The rates of the Manager's fees are set forth in
"How the Fund is Managed," below. The Fund has other regular
expenses for services, such as transfer agent fees, custodial fees
paid to the bank that holds the Fund s portfolio securities, audit
fees and legal expenses. Those expenses are detailed in the Fund's
Financial Statements in the Statement of Additional Information.
Annual Fund Operating Expenses (as a Percentage of Average Net
Assets)
<TABLE>
<CAPTION>
Class Class Class Class
A Shares B Shares C Shares Y Shares
- ------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Management Fees 0.99% 0.99% 0.99% 0.99%
- ------------------------------------------------------------------------
12b-1 Distribution
Plan Fees 0.50% 1.00% 1.00% None
- ------------------------------------------------------------------------
Other Expenses 0.22% 0.27% 0.21% 0.22%
- ------------------------------------------------------------------------
Total Fund Operating
Expenses 1.71% 2.26% 2.20% 1.21%
</TABLE>
The numbers in the chart above are based upon the Fund's
expenses in its last fiscal year ended October 31, 1996. 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 Distribution
Plan 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 Distribution
Plan 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 chart, depending on a
number of factors, including changes in the actual value of the
Fund's assets represented by each class of shares. Class Y shares
were not available during the fiscal year ended October 31, 1996.
Accordingly, the Annual Fund Operating Expenses shown for Class Y
shares are estimates based on amounts that would have been payable
in that period assuming that Class Y shares were outstanding during
such fiscal year.
- 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 chart 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 $101 $141 $233
Class C Shares $32 $ 69 $118 $253
Class Y Shares $12 $ 38 $ 67 $147
If you did not redeem your investment, it would incur the
following expenses:
1 year 3 years 5 years 10 years*
Class A Shares $74 $108 $145 $248
Class B Shares $23 $ 71 $121 $233
Class C Shares $22 $ 69 $118 $253
Class Y Shares $12 $ 38 $ 67 $147
*In the first example, expenses include the Class A initial sales
charge and the applicable Class B or Class C contingent deferred
sales charge. In the second example, Class A expenses include the
initial sales charge, but Class B and Class C expenses do not
include contingent deferred sales charges. 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 effect of the higher
asset-based sales charge and the contingent deferred sales charge
imposed on Class B and Class C shares, long-term holders of Class
B and Class C shares 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 - Buying 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 may be more or less
than those shown.
<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 by the Manager to be
undervalued in the marketplace in relation to factors such as the
companies' assets, earnings, growth potential and cash flows.
What Does the Fund Invest In? The equity securities in
which the Fund invests are common stocks and preferred stocks;
bonds, debentures and notes convertible into common stocks; and
depository receipts for such securities. To provide liquidity, the
Fund typically invests a part of its assets in various types of
U.S. Government securities and money market instruments. For
temporary defensive purposes, the Fund may invest up to 100% of its
assets in such securities. These investments are more fully
explained in "Investment Policies and Strategies," starting on page
__.
Who Manages the Fund? The Manager supervises the Fund's
investment program and handles its day-to-day business. The
Manager (including a subsidiary) manages investment company
portfolios having over $55 billion in assets as of September 30,
1996. The Manager is paid an advisory fee by the Fund, based on
its net assets. The Fund s sub-adviser is OpCap Advisors (the "Sub-
Adviser"), which is paid a fee by the Manager, not the Fund. The
Sub-Adviser provides day-to-day portfolio management of the Fund.
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 "How the Fund is Managed," starting on page for more
information about the Manager, the Sub-Adviser and their fees.
How Risky is the Fund? All investments carry risks to
some degree. It is important to remember that the Fund is designed
for long-term investors. The Fund's investments in stocks and
bonds are subject to changes in their value from a number of
factors such as changes in general stock and bond market movements,
or the change in value of particular stocks or bonds because of an
event affecting the issuer. Changes in interest rates can affect
stock and bond prices. These changes affect the value of the
Fund's investments and its price per share. Investments in foreign
securities involve additional risks not associated with investments
in domestic securities, including risks associated with changes in
currency rates.
While the Manager tries to reduce risks by diversifying
investments, by carefully researching securities before they are
purchased for the portfolio, and in some cases by using hedging
techniques, there is no guarantee of success in achieving the
Fund's objective, and your shares may be worth more or less than
their original cost when you redeem them. Please refer to
"Investment Risks" starting on page for a more complete
discussion of the Fund's investment risks.
How Can I Buy Shares? You can buy shares through your
dealer or financial institution, or you can purchase shares
directly through OppenheimerFunds Distributor, Inc. (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 offers
Class A, Class B and Class C shares to the individual investor.
All classes have the same investment portfolio but have different
expenses. Class A shares are offered with a front-end sales
charge, starting at 5.75%, and reduced for larger purchases. Class
B and Class C shares are offered without a front-end sales charge,
but may be subject to a contingent deferred sales charge if
redeemed within six years or 12 months, respectively, of buying
them. There is also an annual asset-based sales charge which is
higher on Class B and Class C 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 to other Oppenheimer
funds, described in "How to Exchange Shares" on page .
How Has the Fund Performed? The Fund measures its
performance by quoting its average annual total returns and
cumulative total returns, 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. The Fund's
performance can also be compared to a broad-based market index,
which we have done on pages __ and __. Please remember that past
performance does not guarantee future results.
<PAGE>
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. This
information for the fiscal year ended October 31, 1996 has been
audited by Price Waterhouse LLP, the Fund's independent
accountants, whose report on the Fund's financial statements for
the fiscal year ended October 31, 1996 is included in the Statement
of Additional Information. The information provided in the table
with respect to the fiscal years ended October 31, 1995, and prior
thereto, were audited by other independent accountants.
<PAGE>
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS CLASS A
----------------------------------------------------------------------------------------
YEAR ENDED OCTOBER 31,
1996(2) 1995 1994 1993 1992 1991 1990(3)
====================================================================================================================================
PER SHARE OPERATING DATA:
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $14.51 $12.59 $12.51 $11.71 $10.61 $ 7.84 $9.85
- ------------------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income (loss) .08 .12(5) .09(5) .05(5) .04(5) .09(5) .18(5)
Net realized and unrealized gain (loss) 3.79 2.71 .50 1.34 1.77 2.84 (1.38)
----------------------------------------------------------------------------------------
Total income (loss) from investment
operations 3.87 2.83 .59 1.39 1.81 2.93 (1.20)
- ------------------------------------------------------------------------------------------------------------------------------------
Dividends and distributions to
shareholders:
Dividends from net investment income (.10) (.08) (.04) (.05) (.07) (.16) (.26)
Distributions from net realized gain (.98) (.83) (.47) (.54) (.64) -- (.55)
----------------------------------------------------------------------------------------
Total dividends and distributions
to shareholders (1.08) (.91) (.51) (.59) (.71) (.16) (.81)
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $17.30 $14.51 $12.59 $12.51 $11.71 $10.61 $7.84
========================================================================================
====================================================================================================================================
TOTAL RETURN, AT NET ASSET VALUE(6) 28.39% 24.74% 5.01% 12.27% 18.45% 37.94% (13.43)%
====================================================================================================================================
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in thousands) $412,246 $282,615 $238,085 $245,320 $142,939 $79,914 $49,740
- ------------------------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $338,429 $257,240 $237,923 $205,074 $122,319 -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets:
Net investment income (loss) 0.58% 0.90% 0.72% 0.40% 0.53% 1.06% 1.71%
Expenses 1.71% 1.68% 1.71% 1.75% 1.75% 1.83% 1.82%
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate(8) 36.0% 36.0% 49.0% 27.0% 41.0% 48.0% 51.0%
Average brokerage commission rate(9) $0.0559 -- -- -- -- -- --
</TABLE>
1. For the period from September 1, 1993 (inception of offering) to
October 31, 1993.
2. On November 22, 1995, OppenheimerFunds, Inc. became the investment adviser
to the Fund.
3. Per share data has been retroactively restated to reflect a 200% stock
dividend as of July 1, 1991.
4. The Fund changed its fiscal year end from April 30 to October 31.
5. Based on average shares outstanding for the period.
6. Assumes a hypothetical initial investment on the business day before the
first day of the fiscal period (or inception of offering), with all dividends
and distributions reinvested in additional shares on the reinvestment date, and
redemption at the net asset value calculated on the last business day of the
fiscal period. Sales charges are not reflected in the total returns. Total
returns are not annualized for periods of less than one full year.
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS CLASS A (CONTINUED) CLASS B
------------------------------------------------ ------------------------------------
YEAR
ENDED
YEAR ENDED OCTOBER 31, APRIL 30, YEAR ENDED OCTOBER 31,
1989(3) 1988(3) 1987(3)(4) 1987(3) 1996(2) 1995 1994
====================================================================================================================================
PER SHARE OPERATING DATA:
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $8.99 $7.94 $9.44 $9.47 $14.37 $12.53 $12.51
- ------------------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income (loss) .24(5) .09(5) .03(5) .09(5) .05 .05(5) .02(5)
Net realized and unrealized gain (loss) 1.09 1.38 (1.14) .81 3.71 2.69 .50
----------------------------------------------------------------------------------------
Total income (loss) from investment
operations 1.33 1.47 (1.11) .90 3.76 2.74 .52
- ------------------------------------------------------------------------------------------------------------------------------------
Dividends and distributions to
shareholders:
Dividends from net investment income (.10) (.05) (.09) (.07) (.07) (.07) (.03)
Distributions from net realized gain (.37) (.37) (.30) (.86) (.98) (.83) (.47)
----------------------------------------------------------------------------------------
Total dividends and distributions
to shareholders (.47) (.42) (.39) (.93) (1.05) (.90) (.50)
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $9.85 $8.99 $7.94 $9.44 $17.08 $14.37 $12.53
========================================================================================
====================================================================================================================================
TOTAL RETURN, AT NET ASSET VALUE(6) 15.68% 19.54% (12.19)% 10.25% 27.76% 24.08% 4.43%
====================================================================================================================================
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in thousands) $77,205 $83,228 $91,255 $104,538 $111,130 $38,557 $14,373
- ------------------------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) -- -- -- -- $ 68,175 $25,393 $ 8,341
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets:
Net investment income (loss) 2.31% 0.94% 0.76%(7) 1.23% 0.06% 0.36% 0.14%
Expenses 1.81% 2.21% 2.24%(7) 2.17% 2.26% 2.21% 2.24%
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate(8) 30.0% 15.0% 21.0% 34.0% 36.0% 36.0% 49.0%
Average brokerage commission rate(9) -- -- -- -- $0.0559 -- --
</TABLE>
7. Annualized.
8. The lesser of purchases or sales of portfolio securities for a period,
divided by the monthly average of the market value of portfolio securities owned
during the period. Securities with a maturity or expiration date at the time of
acquisition of one year or less are excluded from the calculation. Purchases and
sales of investment securities (excluding short-term securities) for the period
ended October 31, 1996 were $215,220,520 and $127,851,243, respectively.
9. Total brokerage commissions paid on applicable purchases and sales of
portfolio securities for the period, divided by the total number of related
shares purchased and sold.
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS CLASS B
(CONTINUED) CLASS C
------------ --------------------------------------------------
YEAR ENDED
OCT. 31, YEAR ENDED OCTOBER 31,
1993(1) 1996(2) 1995 1994 1993(1)
============================================================================================================
PER SHARE OPERATING DATA:
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $12.66 $14.35 $12.52 $12.50 $12.66
- ------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income (loss) (.01)(5) .04 .04(5) .01(5) (.01)(5)
Net realized and unrealized gain (loss) (.14) 3.71 2.70 .51 (.15)
----------------------------------------------------------------
Total income (loss) from investment
operations (.15) 3.75 2.74 .52 (.16)
- ------------------------------------------------------------------------------------------------------------
Dividends and distributions to
shareholders:
Dividends from net investment income -- (.05) (.08) (.03) --
Distributions from net realized gain -- (.98) (.83) (.47) --
-----------------------------------------------------------------
Total dividends and distributions
to shareholders -- (1.03) (.91) (.50) --
- ------------------------------------------------------------------------------------------------------------
Net asset value, end of period $12.51 $17.07 $14.35 $12.52 $12.50
================================================================
============================================================================================================
TOTAL RETURN, AT NET ASSET VALUE(6) (1.19)% 27.73% 24.10% 4.45% (1.26)%
============================================================================================================
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in thousands) $2,015 $29,256 $10,140 $3,581 $221
- ------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $1,136 $18,099 $ 6,711 $1,725 $169
- ------------------------------------------------------------------------------------------------------------
Ratios to average net assets:
Net investment income (loss) (1.19)%(7) 0.06% 0.31% 0.09% (0.90)%(7)
Expenses 2.27%(7) 2.20% 2.26% 2.28% 2.27%(7)
- ------------------------------------------------------------------------------------------------------------
Portfolio turnover rate(8) 27.0% 36.0% 36.0% 49.0% 27.0%
Average brokerage commission rate(9) -- $0.0559 -- -- --
</TABLE>
Investment Objective and Policies
Objective. The Fund seeks capital appreciation through investment
in securities (primarily equity securities) of companies believed
by the Manager to be undervalued in the marketplace in relation to
factors such as the companies' assets, earnings, growth potential
and cash flows.
Investment Policies and Strategies. The Sub-Adviser manages the
portfolio of the Fund in accordance with the Fund's investment
objective and policies pursuant to a Subadvisory Agreement with the
Manager.
As a non-fundamental policy, under normal market conditions,
the Fund will invest at least 75% of its total assets in equity
securities. The equity securities in which the Fund invests are
common stocks and preferred stocks; bonds, debentures and notes
convertible into common stocks; and depository receipts for such
securities. 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 money
market instruments. 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.
Can the Fund's Investment Objective and Policies Change?
The Fund has an investment objective, which is described above, as
well as investment policies it follows to try to achieve its
objective. Additionally, the Fund uses certain investment
techniques and strategies in carrying out those investment
policies. Except as indicated, the investment objective and
policies described above are fundamental policies; the Fund's
investment policies and practices described elsewhere in this
Prospectus or in the Statement of Additional Information are not
"fundamental" unless stated to be "fundamental".
Fundamental policies are those that cannot be changed without
the approval of a "majority" of the Fund's outstanding voting
shares. The term "majority" is defined in the Investment Company
Act to be a particular percentage of outstanding voting shares (and
this term is explained in the Statement of Additional Information).
The Fund's Board of Directors (the "Board of Directors") may change
non-fundamental policies without shareholder approval, although
significant changes will be described in amendments to this
Prospectus.
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. The
Fund may buy securities in any country, including emerging market
countries. The Fund will hold foreign currency only in connection
with the purchase or sale of foreign securities.
Investment in Convertible Securities. The Fund invests in
convertible fixed-income securities to seek its investment
objective. Such convertible securities are bonds, debentures or
notes that may be converted into or exchanged for a prescribed
amount of common stock of the same or a different issue within a
particular period of time at a specified price or formula. The
Fund considers convertible securities to be "equity equivalents"
because of the conversion feature, and the security's rating has
less impact on the investment decision than in the case of non-
convertible securities.
The Fund's investments may include securities rated lower
than "Baa3" by Moody's Investors Service, Inc. ("Moody's") or "BBB-
" by Standard & Poor's Corporation ("S&P")(commonly known as "junk
bonds"), or having comparable ratings by another nationally
recognized statistical rating organization, although it is the
present intention of the Fund to invest no more than 5% of its
total assets in securities rated lower than Baa3/BBB-. High yield,
lower-grade securities often have speculative characteristics and
special risks that make them riskier investments than investment
grade securities. The Fund may invest in securities rated as low
as "C" or "D". The Fund does not intend to invest in bonds that
are in default. See the Appendix to the Statement of Additional
Information for a more complete general description of Moody's and
S&P's ratings.
Portfolio Turnover. A change in the securities held by the
Fund is known as "portfolio turnover." The Fund ordinarily does not
engage in short-term trading to try to achieve its objective. As a
result, the Fund's portfolio turnover (excluding turnover of
securities having a maturity of one year or less) is not expected
to be more than 100% each year. The "Financial Highlights" table
above shows the Fund's portfolio turnover rate during past fiscal
years.
Portfolio turnover affects brokerage costs, dealer markups
and other transaction costs, and results in the Fund's realization
of capital gains or losses for tax purposes. It may also affect
the Fund's ability to qualify as a "regulated investment company"
under the Internal Revenue Code for tax deductions for dividends
and capital gains distributions the Fund pays to shareholders. The
Fund qualified in its last fiscal year and intends to do so in the
coming year, although there is no guarantee that it will qualify.
Investment Risks
All investments carry risks to some degree, whether they are risks
that market prices of the investment will fluctuate (this is known
as "market risk") or that the underlying issuer will experience
financial difficulties and may default on its obligation under a
fixed-income investment to pay interest and repay principal (this
is referred to as "credit risk"). These general investment risks
and the special risks of certain types of investments that the Fund
may hold are described below. They affect the value of the Fund's
investments, its investment performance and the prices of its
shares. These risks collectively form the risk profile of the Fund.
Because of the types of securities the Fund invests in and
the investment techniques the Fund uses, the Fund is designed for
investors who are investing for the long term. It is not intended
for investors seeking assured income or preservation of capital.
While the Manager tries to reduce risks by diversifying
investments, by carefully researching securities before they are
purchased, and in some cases by using hedging techniques, changes
in overall market prices can occur at any time, and there is no
assurance that the Fund will achieve its investment objective. When
you redeem your shares, they may be worth more or less than what
you paid for them.
Stock Investment Risks. Because the Fund normally invests
a substantial portion of its assets in stocks, the value of the
Fund's portfolio will be affected by changes in the stock markets.
At times, the stock markets can be volatile and stock prices can
change substantially. This market risk will affect the Fund's net
asset value per share, which will fluctuate as the values of the
Fund's portfolio securities change. Not all stock prices change
uniformly or at the same time and not all stock markets move in the
same direction at the same time. Other factors can affect a
particular stock's prices, such as poor earnings reports by an
issuer, loss of major customers, major litigation against an
issuer, or changes in government regulations affecting an industry.
Not all of these factors can be predicted.
The Fund attempts to limit market risks by diversifying its
investments, that is, by not holding a substantial amount of the
stock of any one company and by not investing too great a
percentage of the Fund's assets in any one company. Because
changes in market prices can occur at any time, there is no
assurance that the Fund will achieve its investment objective, and
when you redeem your shares, they may be worth more or less than
what you paid for them.
Foreign Securities Have Special Risks. For example,
foreign issuers are not subject to the same accounting and
disclosure requirements as U.S. companies. The value of foreign
investments may be affected by changes in foreign currency rates,
exchange control regulations, expropriation or nationalization of
a company's assets, foreign taxes, delays in settlement of
transactions, changes in governmental economic or monetary policy
in the U.S. or abroad, or other political and economic factors. The
Fund may invest in emerging market countries; such countries may
have relatively unstable governments, economies based on only a few
industries that are dependent upon international trade and reduced
secondary market liquidity. More information about the risks and
potential rewards of investing in foreign securities is contained
in the Statement of Additional Information.
Risks of Fixed-Income Securities. In addition to credit
risks, described below, debt securities are subject to changes in
their value due to changes in prevailing interest rates. When
prevailing interest rates fall, the value of already-issued debt
securities generally rise. When interest rate rise, the values of
already-issued debt securities generally decline. The magnitude of
these fluctuations will often be greater for a longer-term debt
securities than short-term debt securities. Changes in the value
of securities held by the Fund mean that the Fund's share prices
can go up or down when interest rates change because of the effect
of the change on the value of the Fund's portfolio of debt
securities. Credit risk relates to the ability of the issuer to
meet interest or principal payments on a security as they become
due. Generally, higher-yielding lower-grade bonds, are subject to
credit risks to a greater extent than lower-yielding, investment-
grade bonds.
Hedging Instruments Can Be Volatile Investments and May
Involve Special Risks. The Fund may invest in certain hedging
instruments, as described below. The use of hedging instruments
requires special skills and knowledge of investment techniques that
are different than what is required for normal portfolio
management. If the Manager uses a hedging instrument at the wrong
time or judges market conditions incorrectly, hedging strategies
may reduce the Fund's return. The Fund could also experience losses
if the prices of its futures and options positions were not
correlated with its other investments or if it could not close out
a position because of an illiquid market for the future or option.
Options trading involves the payment of premiums and has
special tax effects on the Fund. There are also special risks in
particular hedging strategies. If a covered call written by the
Fund is exercised on an investment that has increased in value, the
Fund will be required to sell the investment at the call price and
will not be able to realize any profit if the investment has
increased in value above the call price. In writing a put, there
is a risk that the Fund may be required to buy the underlying
security at a disadvantageous price. The use of forward contracts
may reduce the gain that would otherwise result from a change in
the relationship between the U.S. dollar and a foreign currency.
These risks are described in greater detail in the Statement of
Additional Information.
Investment Techniques and Strategies
The Fund may also use the investment techniques and strategies
described below. These techniques involve certain risks. The
Statement of Additional Information contains more information about
these practices, including limitations on their use that may help
to reduce some of the risks.
Investing in Small, Unseasoned Companies. The Fund may
invest in securities of small, unseasoned companies. These are
companies that have been in continuous operation for less than
three years, counting the operations of any predecessors.
Securities of these companies may have limited liquidity (which
means that the Fund may have difficulty selling them at an
acceptable price when it wants to) and the prices of these
securities may be volatile. The Fund may not invest more than 15%
of its total assets in securities of small, unseasoned issuers. See
"Investing in Small, Unseasoned Companies" in the Statement of
Additional Information for a further discussion of the risks
involved in such investments.
Hedging. As described below, the Fund may purchase and
sell certain kinds of futures contracts, forward contracts, and
options on futures and broadly-based stock indices. These are all
referred to as "hedging instruments." The Fund does not use
hedging instruments for speculative purposes, and has limits on the
use of them, described below. The hedging instruments the Fund may
use are described below and in greater detail in "Other Investment
Techniques and Strategies" in the Statement of Additional
Information.
The Fund may buy and sell options, futures and forward
contracts for a number of purposes. It may do so to try to manage
its exposure to the possibility that the prices of its portfolio
securities may decline, or to establish a position in the
securities market as a temporary substitute for purchasing
individual securities. Some of these strategies, such as selling
futures, buying puts and writing covered calls, hedge the Fund's
portfolio against price fluctuations. Other hedging strategies,
such as buying futures and call options, tend to increase the
Fund's exposure to the securities market.
Forward contracts are used to try to manage foreign currency
risks on the Fund's foreign investments. Foreign currency options
are used to try to protect against declines in the dollar value of
foreign securities the Fund owns, or to protect against an increase
in the dollar cost of buying foreign securities.
Futures. The Fund may buy and sell futures contracts that
relate to broadly-based stock indices (these are referred to as
Stock Index Futures) or foreign currencies (these are called
Forward Contracts and are discussed below).
Put and Call Options. The Fund may buy and sell put
options (puts) and call options (calls) on broadly-based stock
indices, foreign currencies or on Stock Index Futures. 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 Board of Directors.
When the Fund writes (that is, sells) a call, it receives
cash (called a premium). The call gives the buyer the ability to
buy the investment on which the call was written from the Fund at
the call price during the period in which the call may be
exercised. If the value of the investment does not rise above the
call price, it is likely that the call will lapse without being
exercised, while the Fund keeps the cash premium (and the
investment). Each call the Fund writes must be "covered" while it
is outstanding. That means the Fund owns the investment on which
the call was written or the Fund owns and segregates liquid assets
to satisfy its obligations if the call is exercised.
The Fund may purchase and sell put options. Buying a put on
an investment gives the Fund the right to sell the investment at a
set price to a seller of a put on that investment. The Fund can
buy only those puts that relate to broadly-based stock indices,
foreign currencies or Stock Index Futures. The Fund can buy a put
on a Stock Index Future whether or not the Fund owns the particular
Stock Index Future in its portfolio. The Fund may write puts on
broadly-based stock indices, foreign currencies or Stock Index
Futures, but only if those puts are covered by segregated liquid
assets.
Forward Contracts. Forward contracts are foreign currency
exchange contracts. They are used to buy or sell foreign currency
for future delivery at a fixed price. The Fund uses them to try to
"lock in" the U.S. dollar price of a security denominated in a
foreign currency that the Fund has bought or sold, or to protect
against possible losses from changes in the relative values of the
U.S. dollar and foreign currency. The Fund limits its exposure in
foreign currency exchange contracts in a particular foreign
currency to the amount of its assets denominated in that currency
or in a closely-correlated currency.
Illiquid and Restricted Securities. Under the policies and
procedures established by the Board of Directors, the Manager
determines the liquidity of certain of the Fund's investments.
Investments may be illiquid because of the absence of an active
trading market, making it difficult to value them or dispose of
them promptly at an acceptable price. A restricted security is one
that a contractual restriction on its resale or which cannot be
sold publicly until it is registered under the Securities Act of
1933. As a matter of fundamental policy, the Fund will not invest
more than 15% of its net assets in illiquid securities, including
restricted securities (notwithstanding the foregoing, the Fund has
agreed to limit investments in restricted securities to 5% of its
total assets, although this restriction is not a fundamental policy
of the Fund and may be changed by the Board). The Fund's percentage
limitation on illiquid and restricted investments does not apply to
certain restricted securities that are eligible for resale to
qualified institutional purchasers. The Manager monitors holdings
of illiquid securities on an ongoing basis and at times the Fund
may be required to sell some holdings to maintain adequate
liquidity.
Loans of Portfolio Securities. To attempt to raise cash
for liquidity purposes, the Fund may lend its portfolio securities
to brokers, dealers and other financial institutions. The Fund
must receive collateral for a loan. After any loan, the value of
the securities loaned is not expected to exceed 10% of the value of
the total assets of the Fund. Other conditions to which loans are
subject are described in the Statement of Additional Information.
There are some risks in connection with securities lending. The
Fund might experience a delay in receiving additional collateral to
secure a loan or a delay in recovery of the loaned securities.
Repurchase Agreements. The Fund may enter into repurchase
agreements to generate income for liquidity purposes to meet
anticipated redemptions, or pending the investment of proceeds from
sales of Fund shares or settlement of purchases of portfolio
investments. In a repurchase transaction, the Fund buys a security
and simultaneously sells it to the vendor for delivery at a future
date. Repurchase agreements must be fully collateralized. However,
if the vendor fails to pay the resale price on the delivery date,
the Fund may incur costs in disposing of the collateral and may
experience losses if there is any delay in its ability to do so.
There is no limit on the amount of the Fund's net assets that may
be subject to repurchase agreements of seven days or less.
Repurchase agreements having a maturity beyond seven days are
subject to the limitations set forth above under "Illiquid and
Restricted Securities."
"When-Issued" and Delayed Delivery Transactions. The Fund
may purchase securities on a "when-issued" basis and may purchase
or sell securities on a "delayed delivery" basis or on a "firm
commitment" basis. These terms refer to securities that have been
created and for which a market exists, but which are not available
for immediate delivery. The Fund does not intend to make such
purchases for speculative purposes. During the period between the
purchase and settlement, the underlying securities are subject to
market fluctuations and no interest accrues prior to delivery of
the securities.
Warrants and Rights. Warrants basically are options to
purchase stock at set prices that are valid for a limited period of
time. Rights are similar to warrants but normally have a short
duration and are distributed directly by the issuers to its
shareholders. The Fund may invest up to 5% of its assets in
warrants. That 5% excludes warrants the Fund has acquired in units
or that are attached to other securities. Of such 5%, no more than
2% of the Fund's assets may be invested in warrants that are not
listed on the New York or American Stock Exchanges.
Other Investment Restrictions. The Fund has other investment
restrictions which are fundamental policies. Under these
fundamental policies, the Fund cannot do any of the following:
With respect to 75% of its total assets, invest more than 5% of
the value of its total assets in the securities of any one issuer.
Purchase more than 10% of the voting securities of any one issuer
(this restriction does not apply to U.S. Government securities).
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 (this restriction does
not apply to U.S. Government securities).
Concentrate its investments in any particular industry, but if
deemed appropriate for attaining its investment objective, the Fund
may invest less than 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) (this restriction does not apply to U.S.
Government securities).
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). With respect to this fundamental policy,
the Fund can borrow only if it maintains a 300% ratio of assets to
borrowings at all times in the manner set forth in the Investment
Company Act.
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.
Invest more than 15% of the Fund's net 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 (the Fund has
undertaken as a non-fundamental policy, to limit investments in
restricted securities to 5% of its total assets). Notwithstanding
this restriction on illiquid securities, the Fund may purchase
securities which are not registered under the Securities Act of
1933 but which can be sold to "qualified institutional buyers" in
accordance with Rule 144A under that Act. Any such security will
not be considered illiquid, provided that the Manager, under
guidelines established by the Board of Directors, determines that
an adequate trading market exists for that security.
Unless the prospectus states that a percentage restriction
applies on an ongoing basis, it applies only at the time the Fund
makes an investment, and the Fund need not sell securities to meet
the percentage limits if the value of the investment increases in
proportion to the size of the Fund. Other investment restrictions
are listed in Investment Restrictions in the Statement of
Additional Information.
How the Fund is Managed
Organization and History. The Fund was incorporated in Maryland on
August 6, 1979. The Fund is an open-end, diversified management
investment company.
The Fund is governed by a Board of Directors, which is
responsible for protecting the interests of shareholders under
Maryland law. The Directors meet periodically throughout the year
to oversee the Fund's activities, review its performance, and
review the actions of the Manager and the Sub-Adviser. "Directors
and Officers of the Fund" in the Statement of Additional
Information names the Directors and officers of the Fund and
provides more information about them. Although the Fund is not
required by law to hold annual meetings, it may hold shareholder
meetings from time to time on important matters, and shareholders
have such rights as are provided under Maryland law.
The Board of Directors has the power, without shareholder
approval, to divide unissued shares of the Fund into two or more
classes. The Board has done so, and the Fund currently has four
classes of shares, Class A, Class B, Class C and Class Y. Only
certain institutional investors may elect to purchase Class Y
shares. All classes invest in the same investment portfolio. Each
class has its own dividends and distributions and pays certain
expenses which may be different for the different classes. Each
class may have a different net asset value. Each share entitles a
shareholder to one vote on matters submitted to the shareholders to
vote on with fractional shares voting proportionally. Only shares
of a particular class vote as a class on matters that affect that
class alone. Shares are freely transferrable. Please refer to
"How the Fund is Managed" in the Statement of Additional
Information on the voting of shares.
The Manager. The Fund is managed by the Manager, OppenheimerFunds,
Inc., 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 Investment Advisory Agreement sets
forth the fees paid by the Fund to the Manager and describes the
expenses that the Fund is responsible to pay 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 $55 billion as of September 30, 1996, and with more than 3
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.
The Sub-Adviser. The Manager has retained the Sub-Adviser to
provide day-to-day portfolio management of the Fund. Prior to
November 22, 1995, the Sub-Adviser was named Quest for Value
Advisors and was the investment adviser to the Fund. The Sub-
Adviser is a majority-owned subsidiary of Oppenheimer Capital, a
registered investment adviser, whose employees perform all
investment advisory services provided to the Fund by the Sub-
Adviser. Oppenheimer Financial Corp., a holding company, holds a
33% interest in Oppenheimer Capital, a registered investment
adviser. 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 adviser since 1968.
Portfolio Manager. The Fund's portfolio manager, Eileen
Rominger, is employed by the Sub-Adviser and is primarily
responsible for the selection of the Fund's securities. Ms.
Rominger, who is also a Managing Director of Oppenheimer Capital,
has been portfolio manager of the Fund since 1988 and has been an
analyst and portfolio manager at Oppenheimer Capital since 1981.
The Sub-Adviser's equity investment policy is overseen by
George Long, President and Chief Investment Officer for Oppenheimer
Capital. Mr. Long has been with Oppenheimer Capital since 1981.
Fees and Expenses. Under the Investment Advisory
Agreement, the Fund pays the Manager an annual fee based on the
Fund's daily net assets, as follows: 1.00% of the first $400
million of average annual net assets, 0.90% of the next $400
million of average annual net assets, and 0.85% of average annual
net assets in excess of $800 million. This management fee is
higher than that paid by most other investment companies. The Fund
pays expenses related to its daily operations, such as custodian
fees, Directors' fees, transfer agency fees and legal and auditing
costs; the Fund also reimburses the Manager for bookkeeping and
accounting services performed on behalf of the Fund. Those
expenses are paid out of the Fund's assets and are not paid
directly by shareholders. However, those expenses reduce the net
asset value of shares, and therefore are indirectly borne by
shareholders through their investment. More information about the
Investment Advisory Agreement and the other expenses paid by the
Fund is contained in the Statement of Additional Information.
The Manager pays 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 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 net assets of
the Fund that exceed the Base Amount.
The Sub-Adviser 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, the
Sub-Adviser may consider their record of sales of shares of the
Fund. Further information about the Fund's brokerage policies and
practices is set forth in "Brokerage Policies of the Fund" in the
Statement of Additional Information.
The Distributor. The Fund's shares are sold through dealers,
brokers and other financial institutions that have a sales
agreement with OppenheimerFunds Distributor, Inc., a subsidiary of
the Manager that acts as the Fund's Distributor. The Distributor
also distributes the shares of the other Oppenheimer funds managed
by the Manager and is sub-distributor for funds managed by a
subsidiary of the Manager.
The Transfer Agent and Shareholder Servicing Agent. The Fund's
transfer agent and shareholder servicing agent is OppenheimerFunds
Services, a division of the Manager. It also acts as the
shareholder servicing agent for certain other Oppenheimer funds.
Shareholders should direct inquiries about their accounts to the
Transfer Agent at the address and toll-free number shown below in
this Prospectus and on the back cover. 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.
Performance of the Fund
Explanation of Performance Terminology. The Fund uses the terms
"total return" and "average annual total return" to illustrate its
performance. The performance of each class of shares is shown
separately, because the performance of each class of shares will
usually be different as a result of the different kinds of expenses
each class bears. These returns measure the performance of a
hypothetical account in the Fund over various periods, and do not
show the performance of each shareholder's investment (which will
vary if dividends are received in cash, or shares are sold or
additional shares are purchased). The Fund's performance
information may help you see how well your investment in the Fund
has done over time and to compare it to other funds or market
indices, as we have done on pages and .
It is important to understand that the Fund's total returns
represent past performance and should not be considered to be
predictions of future returns or performance. This performance
data is described below, but more detailed information about how
total returns are calculated is contained in the Statement of
Additional Information, which also contains information about other
ways to measure and compare the Fund's performance. The Fund's
investment performance will vary over time, depending on market
conditions, the composition of the portfolio, expenses and which
class of shares you purchase.
Total Returns. There are different types of total returns
used to measure the Fund's performance. Total return is the change
in value of a hypothetical investment in the Fund over a given
period, assuming that all dividends and capital gains distributions
are reinvested in additional shares. The cumulative total return
measures the change in value over the entire period (for example,
ten years). An average annual total return shows the average rate
of return for each year in a period that would produce the
cumulative total return over the entire period. However, average
annual total returns do not show the Fund's actual year-by-year
performance.
When total returns are quoted for Class A shares, normally
the current maximum initial sales charge has been deducted. When
total returns are shown for Class B or Class C shares, normally the
contingent deferred sales charge that applies to the period for
which total return is shown has been deducted. However, total
returns may also be quoted at net asset value, without including
the sales charge, and those returns would be less if sales charges
were deducted.
How Has the Fund Performed? Below is a discussion by the Manager of
the Fund's performance during its last fiscal year ended October
31, 1996, followed by a graphical comparison of the Fund's
performance to an appropriate broad-based market index.
Management's Discussion of Performance. During the fiscal
year ended October 31, 1996, the Fund remained virtually fully
invested in equity securities, and participated in the domestic
stock market's strong performance. Consistent with its investment
objective, the Fund sought reasonably priced investments in
companies with above-average returns that were in strong
competitive positions. The Fund's performance during the past
fiscal year benefited from its significant holdings of financial
service company stocks, one of the market's strong sectors. During
the latter part of the Fund's past fiscal year, the Fund maintained
an above-average cash position resulting from profit taking on
certain stocks, and was positioned to take advantage of attractive
buying opportunities. The Fund's portfolio and its portfolio
manager's strategies are subject to change.
Comparing the Fund's Performance to the Market. The graphs
below show the performance of a hypothetical $10,000 investment in
Class A, Class B and Class C shares of the Fund held until October
31, 1996. In the case of Class A shares, performance is measured
for the past ten fiscal years and in the case of Class B and Class
C shares, performance is measured from the inception of the class
(September 1, 1993). Class Y shares were not publicly offered
during the fiscal year ended October 31, 1996. Accordingly, no
information is presented on Class Y shares in the graphs below.
The Fund's performance is compared to the performance of the
S&P 500 Index, a broad-based index of equity securities widely
regarded as a general measurement of the performance of the U.S.
equity securities market. Index performance reflects the
reinvestment of dividends but does not consider the effect of
capital gains or transaction costs, and none of the data below
shows the effect of taxes. The Fund's performance reflects the
reinvestment of all dividends and capital gains distributions, and
the effect of Fund business and operating expenses. While index
comparisons may be useful to provide a benchmark for the Fund's
performance, it must be noted that the Fund's investments are not
limited to the securities in the S&P 500 Index. Moreover, the index
performance data does not reflect any assessment of the risk of the
investments included in the index.
Oppenheimer Quest Value Fund, Inc.
Comparison of Change in Value
of $10,000 Hypothetical Investments
in Oppenheimer Quest Value Fund, Inc. and
the S&P 500 Index
[Graph]
Past performance is not predictive of future performance.
Average Annual Total Returns
of the Fund at 10/31/96
Class A Shares(1)
1-Year 5-Years 10-Years
21.01% 16.08% 12.81%
Class B Shares(2)
1-Year Life of Class
22.76% 16.36%
<PAGE>
Class C Shares (2)
1-Year Life of Class
26.73% 16.79%
_____________________
Total returns and the ending account values in the graphs show
change in share value and include reinvestment of all dividends and
capital gains distributions.
(1) Class A returns are shown net of the current applicable 5.75%
maximum initial sales charge. The inception date of the Fund
(Class A shares) was 4/30/80.
(2) Class B shares and Class C of the Fund were first publicly
offered on 9/01/93. Class B share returns are shown net of the
applicable 5% and 3% contingent deferred sales charges,
respectively, for the 1-year period and life-of-the-class. The
ending account for Class B shares value in the graph is net of the
applicable 3% contingent deferred sales charge. As to Class C
shares, returns are shown net of the applicable 1% contingent
deferred sales charge for the 1-year period; after one year, such
sales charge is not applicable.
ABOUT YOUR ACCOUNT
How to Buy Shares
Classes of Shares. The Fund offers an individual investor three
different classes of shares, Class A, Class B and Class C. Only
certain institutional investors may purchase a fourth class of
shares, Class Y 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 "Retirement Plans," as defined in "Class
A Contingent Deferred Sales Charge on page ____). If you purchase
Class A shares as part of an investment of at least $1 million
($500,000 for Retirement Plans) in shares of one or more
Oppenheimer funds, you will not pay an initial sales charge, but if
you sell any of those shares within 18 months of buying them, you
may pay a contingent deferred sales charge. The amount of that
sales charge will vary depending on the amount you invested. Sales
charge rates 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 of buying them you will normally pay a contingent
deferred sales charge that varies, depending on how long you have
owned your shares as described in "Buying Class B Shares" below.
Class C Shares. If 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% as described in "Buying Class C Shares"
below.
Class Y Shares. Class Y shares are sold at net asset
value per share without the imposition of a sales charge at the
time of purchase to separate accounts of insurance companies and
other institutional investors ("Class Y Sponsors") having an
agreement ("Class Y Agreements") with the Manager or the
Distributor. The intent of Class Y Agreements is to allow tax
qualified institutional investors to invest indirectly (through
separate accounts of the Class Y Sponsor) in Class Y shares of the
Fund and to allow institutional investors to invest directly in
Class Y shares of the Fund. Individual investors are not permitted
to invest directly in Class Y shares. As of the date of this
Prospectus, Massachusetts Mutual Life Insurance Company (an
affiliate of the Manager and the Distributor) acts as Class Y
Sponsor for all outstanding Class Y shares of the Fund. While
Class Y shares are not subject to a contingent deferred sales
charge, asset-based sales charge or service fee, a Class Y Sponsor
may impose charges on separate accounts investing in Class Y
shares.
None of the instructions described elsewhere in this
Prospectus or the Statement of Additional Information for the
purchase, redemption, reinvestment, exchange or transfer of shares
of the Fund, the selection of classes of shares or the reinvestment
of dividends apply to its Class Y shares. Clients of Class Y
Sponsors must request their Sponsor to effect all transactions in
Class Y shares on their behalf.
Which Class of Shares Should You Choose? Once you decide that the
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 to consider are how much you plan to invest and how long
you plan to hold your investment. 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 assumed you are an individual investor, and therefore
ineligible to purchase Class Y shares. We used the sales charge
rates that apply to Class A, Class B and Class C shares, and
considered the effect of the asset-based sales charge on Class B
and Class C expenses (which, like all expenses, 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 of shares 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. The effect of the sales
charge, over time, using our assumptions, will generally depend on
the amount invested. 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 Class 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 higher Class B contingent deferred sales charge if
you redeem within 6 years, as well as the effect of the higher
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 higher annual
asset-based sales charge on Class C shares will have a greater
economic 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 Class 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 more for Class B shares or $1 million or more of C
shares, 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 Class 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, you should analyze your options
carefully.
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, or other features (such as Automatic
Withdrawal Plans) may not be advisable ( because of the effect of
the contingent deferred sales charge in non-retirement accounts)
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, or higher expenses, such as the
asset-based sales charges to which Class B and Class C shares are
subject, as 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 of shares than for selling
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 is the same as the
purpose of the front-end sales charge on sales of Class A shares:
that is, 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, profit-sharing plans, 401(k) 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.
The Distributor may appoint certain servicing agents as the
Distributor's agent to accept purchase (and redemption) orders.
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 "OppenheimerFunds 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 to your bank
account.
Shares are purchased for your account on AccountLink 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, Colorado. In
most cases, to enable you to receive that day's offering price, the
Distributor or its designated agent 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,
in its sole discretion, may reject any purchase order for the
Fund's shares.
Special Sales Charge Arrangements for Certain Persons. Appendix A
to this Prospectus sets forth conditions for the waiver of, or
exemption from, sales charges or the special sales charge rates
that apply to shareholders of the Former Quest for Value Funds (as
defined in that Appendix), including the Fund.
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, purchases are not
subject to an initial sales charge, and the offering price will be
the 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 initial 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.
Purchases by a retirement plan qualified under sections
401(a) or 401(k) of the Internal Revenue Code, by a non-qualified
deferred compensation plan (not including Section 457 plans),
employee benefit plan, group retirement plan (see "How to Buy
Shares - Retirement Plans" in the Statement of Additional
Information for further details), an employee's 403(b)(7) custodial
plan account, SEP IRA, SARSEP, or SIMPLE plan (all of these plans
are collectively referred to as "Retirement Plans"); 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 $200,000 or more.
Purchases by an OppenheimerFunds Rollover IRA if the
purchases are made (1) through a broker, dealer, bank or registered
investment adviser that has made special arrangements with the
Distributor for these purchases, or (2) by a direct rollover of a
distribution from a qualified retirement plan if the administrator
of that plan has made special arrangements with the Distributor for
those purchases.
The Distributor pays dealers of record commission on those
purchases in an amount equal to (i) 1.0% for non-Retirement Plan
accounts, and (ii) for Retirement Plan accounts, 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
those purchases that were not previously subject to a front-end
sales charge and dealer commission. No sales commission will be
paid to the dealer, broker or financial institution on sales of
Class A shares purchased with the redemption proceeds of shares of
a mutual fund offered as an investment option in a Retirement Plan
in which Oppenheimer funds are also offered as investment options
under a special arrangement with the Distributor if the purchase
occurs more than 30 days after the addition of the Oppenheimer
funds as an investment option to the Retirement Plan.
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 may be equal to
1.0% of the lesser 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
offering price (which is the original net asset value) of the
redeemed shares. However, the Class A contingent deferred sales
charge will not exceed the aggregate amount of the 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
subject to a contingent deferred sales charge prior to November 24,
1995 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 18 months of the end of the calendar month of the purchase
of the exchanged shares, the contingent deferred 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. Until January 1, 1997, 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 count all 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 your 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, banks 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 (those clients
may be charged a transaction fee by their dealer, broker or adviser
for the purchase or sale of Fund shares);
(1) investment advisers and financial planners who charge an
advisory, consulting or other fee for their services and buy shares
for their own accounts or the accounts of their clients, (2)
Retirement Plans and deferred compensation plans and trusts used to
fund those Plans (including, for example, plans qualified or
created under sections 401(a), 403(b) or 457 of the Internal
Revenue Code), and "rabbi trusts" that buy shares for their own
accounts, in each case if those purchases are made through a broker
or agent or other financial intermediary that has made special
arrangements with the Distributor for those purchases; and (3)
clients of such investment advisers or financial planners who buy
shares for their own accounts may also purchase shares without
sales charge but only if their accounts are linked to a master
account of their investment adviser or financial planner on the
books and records of the broker, agent or financial intermediary
with which the Distributor has made such special arrangements (each
of these investors may be charged a fee by the broker, agent or
financial intermediary for purchasing shares).
directors, trustees, officers or full time employees of
OpCap Advisors or its affiliates, their relatives or any trust,
pension, profit sharing or other benefit plan which beneficially
owns shares for those persons;
employee benefit plans purchasing shares through a
shareholder servicing agent which the Distributor has appointed as
agent to accept those purchase orders;
accounts for which Oppenheimer Capital is the investment
adviser (the Distributor must be advised of this arrangement) and
persons who are directors or trustees of the company or trust which
is the beneficial owner of such accounts;
any unit investment trust that has entered into an
appropriate agreement with the Distributor;
a TRAC-2000 401(k) plan (sponsored by the former Quest for
Value Advisors) whose Class B or Class C shares of a Former Quest
for Value Fund were exchanged for Class A shares of that Fund due
to the termination of the Class B and Class C TRAC-2000 program on
November 24, 1995; or
qualified retirement plans that had agreed with the former
Quest for Value Advisors to purchase shares of any of the Former
Quest for Value Funds at net asset value, with such shares to be
held through DCXchange, a sub-transfer agency mutual fund
clearinghouse, provided that such arrangements are consummated and
share purchases commence by December 31, 1996.
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;
shares purchased and paid for with the proceeds of shares
redeemed in the past 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; or
shares purchased with the proceeds of maturing principal of
units of any Qualified Unit Investment Liquid Trust Series.
Waivers of the Class A Contingent Deferred Sales Charge for
Certain Redemptions. The Class A contingent deferred sales charge
is also waived if shares that would otherwise be subject to the
contingent deferred sales charge are redeemed in the following
cases:
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 in writing 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);
for distributions from a TRAC-2000 401(k) plan sponsored by
the Distributor due to the termination of the TRAC-2000 program.
for distributions from Retirement Plans, deferred
compensation plans or other employee benefit plans for any of the
following 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) to return excess
contributions; (3) to return contributions made due to a mistake of
fact; (4) hardship withdrawals, as defined in the plan; (5) under
a Qualified Domestic Relations Order, as defined in the Internal
Revenue Code; (6) to meet the minimum distribution requirements of
the Internal Revenue Code; (7) to establish "substantially equal
periodic payments" as described in Section 72(t) of the Internal
Revenue Code; (8) for retirement distributions or loans to
participants or beneficiaries; (9) separation from service; (10)
participant-directed redemptions to purchase shares of a mutual
fund (other than a fund managed by the Manager or its subsidiary)
offered as an investment option in a Retirement Plan in which
Oppenheimer funds are also offered as investment options under a
special arrangement with the Distributor; or (11) plan termination
or "in-service distributions", if the redemption proceeds are
rolled over directly to an OppenheimerFunds IRA.
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 at an annual
rate 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% annually 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. 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
contingent deferred sales charge will be based on the lesser of the
net asset value of the redeemed shares at the time of redemption or
the original offering price (which is the original net asset
value). 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. 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 contingent
deferred sales charge is not imposed in the circumstances described
in "Waivers of Class B and Class C Sales Charges" below.
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. 72 months 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 and Service 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. This Plan is described below under "Buying
Class C Shares - Distribution and Service Plans for Class B and
Class C Shares."
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 contingent deferred sales charge will be based
on the lesser of the net asset value of the redeemed shares at the
time of redemption or the original offering price (which is the
original net asset value). 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. The
Class C contingent deferred sales charge is paid to compensate the
Distributor for 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 Plans for Class B and Class C
Shares. The Fund has adopted Distribution and Service Plans for
Class B and Class C shares to compensate the Distributor for its
services and costs in distributing Class B and Class C shares and
servicing accounts. Under the Plans, 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 and on Class C
shares. The Distributor also receives a service fee of 0.25% per
year under each Plan.
Under each Plan, both fees are computed on the average of the
net asset value of shares in the respective class, determined as of
the close of each regular business day during the period. The
asset-based sales charge and service fees increase Class B and
Class C expenses by up to 1.00% of the net assets per year of the
respective class.
The Distributor uses the service fees to compensate dealers
for providing personal services for accounts that hold Class B or
Class C shares. Those services are similar to those provided under
the Class A Service Plan, described above. The Distributor pays
the 0.25% service fees to dealers in advance for the first year
after Class B or Class C shares have been sold by the dealer and
retains the service fee paid by the Fund in that year. After the
shares have been held for a year, the Distributor pays the service
fees to dealers on a quarterly basis.
The asset-based sales charge allows investors to buy Class B
or Class C shares without a front-end sales charge while allowing
the Distributor to compensate dealers that sell those shares. The
Fund pays the asset-based sales charges to the Distributor for its
services rendered in distributing Class B and Class C shares.
Those payments are at a fixed rate that 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
and Class C shares.
The Distributor currently pays sales commissions of 3.75% of
the purchase price of Class B shares to dealers from its own
resources at the time of sale. Including the advance of the
service fee the total amount paid by the Distributor to the dealer
at the time of sale of Class B shares is 4.00% of the purchase
price. The Distributor retains the Class B asset-based sales
charge.
The Distributor currently pays sales commissions of 0.75% of
the purchase price of Class C shares to dealers from its own
resources at the time of sale. Including the advance of the
service fee, the total amount 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 retains the asset-based sales charge during
the first year Class C shares are outstanding to recoup sales
commissions it has paid, the advance of service fee payments it has
made, and its financing costs and other expenses. 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 Distributor's actual expenses in selling Class B and Class
C shares may be more than the payments it receives from contingent
deferred sales charges collected on redeemed shares and from the
Fund under the Distribution and Service Plans for Class B and Class
C shares. If either Plan is terminated by the Fund, the Board of
Directors may allow the Fund to continue payments of the asset-
based sales charge to the Distributor for distributing 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, if the Transfer Agent
is notified that these conditions apply at redemption:
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 receives the
request), or (b) following the death or disability (as defined in
the Internal Revenue Code ("Internal Revenue Code")) 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
including a trustee of a "grantor" trust or revocable living trust
for which the trustee is also the sole beneficiary (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 retirement plans to make "substantially
equal periodic payments" under Section 72(t) of the Internal
Revenue Code, provided the distributions do not exceed 10% of the
account value annually, measured from the date of the Transfer
Agent receives 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 Internal Revenue Code; (3) to
meet minimum distribution requirements as defined in the Internal
Revenue Code; (4) to make "substantially equal periodic payments"
as described in Section 72(t) of the Internal Revenue Code; or (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 of reorganization to which the Fund
is a party.
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 should 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 by sending
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 OppenheimerFunds 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 OppenheimerFunds 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 worth
$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
or Class B shares of the Fund, you have up to 6 months to reinvest
all or part of the redemption proceeds in Class A shares of the
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 or Class B shares
on which you paid a contingent deferred sales charge when you
redeemed them. This privilege does not apply to Class C shares.
You must be sure to ask the Distributor for this privilege when you
send your payment. 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 by selling
(redeeming) some or all of your shares on any regular business day.
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 OppenheimerFunds
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 account 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:
OppenheimerFunds Services OppenheimerFunds 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 in any 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 statement. 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
transfer 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 transferred.
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 of the Fund 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 to be 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 obtain
one by calling a service representative at 1-800-525-7048. That
list can change from time to time.
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 up to 7 days 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 sale of portfolio 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.
For tax purposes, exchanges of shares involve a redemption
of the shares of the Fund you own and a purchase of the shares of
the other fund, which may result in a capital gain or loss. For
more information about the taxes affecting exchanges, please refer
to "How to Exchange Shares" in the Statement of Additional
Information.
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.
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 that day,
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 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 the Transfer Agent nor the 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, Class
C and Class Y 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 to have your
bank 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
"How to Sell Shares" in the Statement of Additional Information for
more details.
"Backup Withholding" of Federal income tax may be applied at
the rate of 31% from taxable dividends, distributions and
redemption proceeds (including exchanges) if you fail to furnish
the Fund a certified Social Security or Employer 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.
Dividends, Capital Gains and Taxes
Dividends. The Fund declares dividends separately for Class
A, Class B, Class C and Class Y shares from net investment income
on an annual basis and normally pays those dividends to
shareholders following the end of its fiscal year (which is October
31). Dividends paid on Class A and Class Y shares generally are
expected to be higher than for Class B and Class C shares because
expenses allocable to Class B and Class C shares will generally be
higher. There is no fixed dividend rate and there can be no
assurance as to the payment of any dividends or the realization of
any gains.
Capital Gains. The Fund may make distributions annually in December
out of any net short-term or long-term capital gains, and the Fund
may make supplemental distributions of dividends and capital gains
following the end of its fiscal year. Short-term capital gains are
treated as dividends for tax purposes. Long-term capital gains will
be separately identified in the tax information the Fund sends you
after the end of the calendar year. There can be no assurances
that the Fund will pay any capital gains distributions in a
particular year.
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 Long-Term 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 Fund
Account. You can reinvest all distributions in another Oppenheimer
fund 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 a 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.
Generally speaking, a capital gain or loss is the difference
between the price you paid for the shares and the price you receive
when you sell 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.
<PAGE>
APPENDIX A
Special Sales Charge Arrangements for Shareholders of
the Former Quest for Value Funds
The initial and contingent deferred sales charge rates and
waivers for Class A, Class B and Class C shares of the Fund
described elsewhere in this Prospectus are modified as described
below for those shareholders of (i) Oppenheimer Quest Value Fund,
Inc., Oppenheimer Quest Growth & Income Value Fund, Oppenheimer
Quest Opportunity Value Fund, Oppenheimer Quest Small Cap Value
Fund and Oppenheimer Quest Global Value Fund, Inc. on November 24,
1995, when OppenheimerFunds, Inc. became the investment adviser to
those funds, and (ii) Quest for Value U.S. Government Income Fund,
Quest for Value Investment Quality Income Fund, Quest for Value
Global Income Fund, Quest for Value New York Tax-Exempt Fund, Quest
for Value National Tax-Exempt Fund and Quest for Value California
Tax-Exempt Fund when those funds merged into various Oppenheimer
funds on November 24, 1995. The funds listed above are referred to
in this Prospectus as the "Former Quest for Value Funds."
Class A Sales Charges
Reduced Class A Initial Sales Charge Rates for Certain Former
Quest Shareholders
Purchases by Groups, Associations and Certain Qualified
Retirement Plans. The following table sets forth the initial sales
charge rates for Class A shares purchased by a "Qualified
Retirement Plan" through a single broker, dealer or financial
institution, or by members of "Associations" formed for any purpose
other than the purchase of securities if that Qualified Retirement
Plan or that Association purchased shares of any of the Former
Quest for Value Funds or received a proposal to purchase such
shares from OCC Distributors prior to November 24, 1995. For this
purpose only, a "Qualified Retirement Plan" includes any 401(k)
plan, 403(b) plan, and SEP/IRA or IRA plan for employees of a
single employer.
Front-End Front-End
Sales Sales Commission
Charge Charge as
as a as a Percentage
Number of Percentage Percentage of
Eligible Employees of Offering of Amount Offering
or Members Price Invested
Price
9 or fewer 2.50% 2.56% 2.00%
At least 10 but not
more than 49 2.00% 2.04% 1.60%
For purchases by Qualified Retirement plans and Associations
having 50 or more eligible employees or members, there is no
initial sales charge on purchases of Class A shares, but those
shares are subject to the Class A contingent deferred sales charge
described on pages __ to __ of this Prospectus.
Purchases made under this arrangement qualify for the lower of
the sales charge rate in the table based on the number of eligible
employees in a Qualified Retirement Plan or members of an
Association or the sales charge rate that applies under the Rights
of Accumulation described above in the Prospectus. In addition,
purchases by 401(k) plans that are Qualified Retirement Plans
qualify for the waiver of the Class A initial sales charge if they
qualified to purchase shares of any of the Former Quest For Value
Funds by virtue of projected contributions or investments of $1
million or more each year. Individuals who qualify under this
arrangement for reduced sales charge rates as members of
Associations, or as eligible employees in Qualified Retirement
Plans also may purchase shares for their individual or custodial
accounts at these reduced sales charge rates, upon request to the
Fund's Distributor.
Special Class A Contingent Deferred Sales Charge Rates
Class A shares of the Fund purchased by exchange of shares of other
Oppenheimer funds that were acquired as a result of the merger of
Former Quest for Value Funds into those Oppenheimer funds, and
which shares were subject to a Class A contingent deferred sales
charge prior to November 24, 1995 will be subject to a contingent
deferred sales charge at the following rates: if they are redeemed
within 18 months of the end of the calendar month in which they
were purchased, at a rate equal to 1.0% if the redemption occurs
within 12 months of their initial purchase and at a rate of 0.50 of
1.0% if the redemption occurs in the subsequent six months. Class
A shares of any of the Former Quest for Value Funds purchased
without an initial sales charge on or before November 22, 1995 will
continue to be subject to the applicable contingent deferred sales
charge in effect as of that date as set forth in the then-current
prospectus for such fund.
Waiver of Class A Sales Charges for Certain Shareholders
Class A shares of the Fund purchased by the following investors are
not subject to any Class A initial or contingent deferred sales
charges:
Shareholders of the Fund who were shareholders of the AMA
Family of Funds on February 28, 1991 and who acquired shares of any
of the Former Quest for Value Funds by merger of a portfolio of the
AMA Family of Funds.
Shareholders of the Fund who acquired shares of any Former
Quest for Value Fund by merger of any of the portfolios of the
Unified Funds.
Shareholders of the Fund that have continually owned shares
of the Fund prior to November 1, 1988.
Waiver of Class A Contingent Deferred Sales Charge in Certain
Transactions
The Class A contingent deferred sales charge will not apply to
redemptions of Class A shares of the Fund purchased by the
following investors who were shareholders of any Former Quest for
Value Fund:
Investors who purchased Class A shares from a dealer that is
or was not permitted to receive a sales load or redemption fee
imposed on a shareholder with whom that dealer has a fiduciary
relationship under the Employee Retirement Income Security Act of
1974 and regulations adopted under that law.
Participants in Qualified Retirement Plans that purchased
shares of any of the Former Quest For Value Funds pursuant to a
special "strategic alliance" with the distributor of those funds.
The Fund's Distributor will pay a commission to the dealer for
purchases of Fund shares as described above in "Class A Contingent
Deferred Sales Charge."
Class A, Class B and Class C Contingent Deferred Sales Charge
Waivers
Waivers for Redemptions of Shares Purchased Prior to March 6,
1995
In the following cases, the contingent deferred sales charge will
be waived for redemptions of Class A, Class B or Class C shares of
the Fund if those shares were 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 or from custodial accounts under Section 403(b)(7) of the
Code, Individual Retirement Accounts, deferred compensation plans
under Section 457 of the Code, and other employee benefit plans,
and returns of excess contributions made to each type of plan,
(ii) withdrawals under an automatic withdrawal plan holding only
either Class B or C shares if the annual withdrawal does not exceed
10% of the initial value of the account, 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 value of such
accounts.
Waivers for Redemptions of Shares Purchased on or After March 6,
1995 but Prior to November 24, 1995.
In the following cases, the contingent deferred sales charge will
be waived for redemptions of Class A, Class B or Class C shares of
the Fund if those shares were purchased on or after March 6, 1995,
but prior to November 24, 1995: (1) distributions to participants
or beneficiaries from Individual Retirement Accounts under
Section 408(a) of the Internal Revenue Code or retirement plans
under Section 401(a), 401(k), 403(b) and 457 of the Code, if those
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 Code) 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
(but only for Class B or C shares) where the annual withdrawals do
not exceed 10% of the initial value of the account; 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 account value. A shareholder's account will be credited
with the amount of any contingent deferred sales charge paid on the
redemption of any Class A, B or C shares of the Fund described in
this section if within 90 days after that redemption, the proceeds
are invested in the same Class of shares in this Fund or another
Oppenheimer fund.
Special Dealer Arrangements
Dealers who sold Class B shares of a Former Quest for Value Fund to
Quest for Value prototype 401(k) plans that were maintained on the
TRAC-2000 recordkeeping system and that were transferred to an
OppenheimerFunds prototype 401(k) plan shall be eligible for an
additional one-time payment by the Distributor of 1% of the value
of the plan assets transferred, but that payment may not exceed
$5,000 as to any one plan.
Dealers who sold Class C shares of a Former Quest for Value Fund to
Quest for Value prototype 401(k) plans that were maintained on the
TRAC-2000 recordkeeping system and (i) the shares held by those
plans were exchanged for Class A shares, or (ii) the plan assets
were transferred to an OppenheimerFunds prototype 401(k) plan,
shall be eligible for an additional one-time payment by the
Distributor of 1% of the value of the plan assets transferred, but
that payment may not 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
OppenheimerFunds, Inc.
Two World Trade Center
New York, New York 10048-0203
Sub-Adviser
OpCap Advisors
One World Financial Center
New York, New York 10281
Distributor
OppenheimerFunds Distributor, Inc.
Two World Trade Center
New York, New York 10048-0203
Transfer Agent
OppenheimerFunds 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 Accountants
Price Waterhouse LLP
950 Seventeenth Street
Denver, Colorado 80202
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, OppenheimerFunds, Inc., OppenheimerFunds 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.
prosp\225PSP.#4
<PAGE>
APPENDIX TO PROSPECTUS OF
OPPENHEIMER QUEST VALUE FUND, INC.
Graphic material included in Prospectus of Oppenheimer Quest
Value Fund, Inc.: "Comparison of Total Return of Oppenheimer Quest
Value Fund, Inc. with the S&P 500 Index - Change in Value of
$10,000 Hypothetical Investments in Class A, Class B and Class C
Shares of Oppenheimer Quest Value Fund, Inc. and the S&P 500 Index"
Linear graphs will be included in the Prospectus of
Oppenheimer Quest Value Fund, Inc. (the "Fund") depicting the
initial account value and subsequent account value of a
hypothetical $10,000 investment in the Fund. In the case of the
Fund's Class A shares, that graph will cover the performance of the
Fund for the ten fiscal years ended 10/31/96 and in the case of the
Fund's Class B and Class C shares will cover the period from the
inception of the class (September 1, 1993) through 10/31/96. The
graph will compare such values with hypothetical $10,000
investments over the same time periods in the S&P 500 Index. Set
forth below are the relevant data points that will appear on the
linear graph. Additional information with respect to the
foregoing, including a description of the S&P 500 Index, is set
forth in the Prospectus under "Performance of the Fund - Comparing
the Fund's Performance to the Market."
Fiscal Year Oppenheimer S&P 500
Ended Quest Value Fund, Inc.A Index
10/31/86 $9,425 $10,000
10/31/87 $9,040 $10,640
10/31/88 $10,805 $12,210
10/31/89 $12,500 $15,248
10/31/90 $10,823 $14,274
10/31/91 $14,928 $19,044
10/31/92 $17,683 $20,939
10/31/93 $19,852 $24,061
10/31/94 $20,847 $24,989
10/31/95 $26,004 $31,589
10/31/96 $33,387 $39,196
Fiscal Year Oppenheimer S&P
(Period) Ended Quest Value Fund, Inc.B 500 Index
09/01/93(1) $10,000 $10,000
10/31/93 $9,882 $10,128
10/31/94 $10,319 $10,519
10/31/95 $12,805 $13,297
10/31/96 $16,159 $16,499
Fiscal Year Oppenheimer S & P
(Period) Ended Quest Value Fund, Inc. C 500 Index
09/01/93(1) $10,000 $10,000
10/31/93 $9,874 $10,128
10/31/94 $10,313 $10,519
10/31/95 $12,798 $13,297
10/31/96 $16,347 $16,499
(1) Class B and Class C shares of the Fund were first publicly
offered on September 1, 1993.
<PAGE>
OPPENHEIMER QUEST VALUE FUND, INC.
Two World Trade Center, New York, New York 10048
1-800-525-7048
Statement of Additional Information dated December 16, 1996
This Statement of Additional Information of Oppenheimer Quest Value
Fund, Inc. is not a Prospectus. This document contains additional
information about the Fund and supplements information in the
Prospectus dated December 16, 1996. It should be read together
with the Prospectus, which may be obtained upon written request to
the Fund's Transfer Agent, OppenheimerFunds Services at P.O. Box
5270, Denver, Colorado 80217, or by calling the Transfer Agent at
the toll-free number shown above.
Contents
Page
About the Fund
Investment Objective and Policies 2
Investment Policies and Strategies 2
Other Investment Techniques and Strategies 5
Other Investment Restrictions 13
How the Fund is Managed 14
Organization and History 14
Directors and Officers of the Fund 15
The Manager and Its Affiliates 18
Brokerage Policies of the Fund 20
Performance of the Fund 22
Distribution and Service Plans 26
About Your Account
How To Buy Shares 28
How To Sell Shares 35
How To Exchange Shares 39
Dividends, Capital Gains and Taxes 41
Additional Information About the Fund 42
Financial Information About the Fund
Independent Accountants' Report 43
Financial Statements 44
Appendix A: Description of Ratings A-1
Appendix B: Corporate Industry Classifications B-1
<PAGE>
ABOUT THE FUND
Investment Objective and Policies
Investment Policies and Strategies. The investment objective and
policies of the Fund are described in the Prospectus. Set forth
below is supplemental information about those policies and the
types of securities in which the Fund may invest, as well as the
strategies the Fund may use to try to achieve its objective.
Capitalized terms used in this Statement of Additional Information
have the same meaning as those terms have in the Prospectus.
Foreign Securities. "Foreign securities" include equity and
debt securities of companies organized under the laws of countries
other than the United States and debt securities of foreign
governments that are traded on foreign securities exchanges or in
the foreign over-the-counter markets. Securities of foreign
issuers that are represented by American Depository Receipts or
that are listed on a U.S. securities exchange or traded in the U.S.
over-the-counter markets are not considered "foreign securities"
for the purpose of the Fund's investment allocations, because they
are not subject to many of the special considerations and risks,
discussed below, that apply to foreign securities traded and held
abroad.
Investing in foreign securities offers the Fund potential
benefits not available from investing solely in securities of
domestic issuers, including the opportunity to invest in foreign
issuers that appear to offer growth potential, or in foreign
countries with economic policies or business cycles different from
those of the U.S., or to reduce fluctuations in portfolio value by
taking advantage of foreign stock markets that do not move in a
manner parallel to U.S. markets. If the Fund's portfolio securities
are held abroad, the countries in which such securities may be held
and the sub-custodians or depositories holding them must be
approved by the Corporation's Board of Directors to the extent that
approval is required under applicable rules of the Securities and
Exchange Commission ( SEC ). In buying foreign securities, the
Fund may convert U.S. dollars into foreign currency, but only to
effect securities transactions on foreign securities exchanges and
not to hold such foreign currency as an investment.
Risks of Foreign Investing. Investing in foreign securities
involves special additional risks and considerations not typically
associated with investing in securities of issuers traded in the
U.S. These include: reduction of income by foreign taxes;
fluctuation in value of foreign portfolio investments due to
changes in currency rates and control regulations (e.g., currency
blockage); transaction charges for currency exchange; lack of
public information about foreign issuers; lack of uniform
accounting, auditing and financial reporting standards comparable
to those applicable to domestic issuers; less volume on foreign
exchanges than on U.S. exchanges; greater volatility and less
liquidity on foreign markets than in the U.S.; less regulation of
foreign issuers, stock exchanges and brokers than in the U.S.;
greater difficulties in commencing lawsuits and obtaining judgments
in foreign courts; higher brokerage commission rates than in the
U.S.; increased risks of delays in settlement of portfolio
transactions or loss of certificates for portfolio securities;
possibilities in some countries of expropriation or nationalization
of assets, confiscatory taxation, political, financial or social
instability or adverse diplomatic developments; and unfavorable
differences between the U.S. economy and foreign economies. In the
past, U.S. Government policies have discouraged certain
investments abroad by U.S. investors, through taxation or other
restrictions, and it is possible that such restrictions could be
re-imposed.
Emerging Market Countries. The Fund may invest in 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 counties
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.
U.S. Government Securities. Obligations of U.S. Government
agencies or instrumentalities (including mortgage-backed
securities) may or may not be guaranteed or supported by the "full
faith and credit" of the United States. Some are backed by the
right of the issuer to borrow from the U.S. Treasury; others, by
discretionary authority of the U.S. Government to purchase the
agencies' obligations; while others are supported only by the
credit of the instrumentality. All U.S. Treasury obligations are
backed by the full faith and credit of the United States. If the
securities are not backed by the full faith and credit of the
United States, the owner of the securities must look principally to
the agency issuing the obligation for repayment and may not be able
to assert a claim against the United States in the event that the
agency or instrumentality does not meet its commitment. The Fund
will invest in U.S. Government securities of such agencies and
instrumentalities only when the Manager is satisfied that the
credit risk with respect to such instrumentality is minimal.
Money Market Securities. As stated in the Prospectus, the
Fund typically invests a part of its assets in money market
securities, and may invest up to 100% of its total assets in money
market securities for temporary defensive purposes. Money market
securities in which the Fund may invest include the following:
Time Deposits and Variable Rate Notes. The Fund may invest
in fixed time deposits, whether or not subject to withdrawal
penalties. However, investment in such deposits which are subject
to withdrawal penalties, other than overnight deposits, are subject
to the 15% limit on illiquid investments set forth in the
Prospectus for the Fund.
The commercial paper obligations which the Fund may buy are
unsecured and may include variable rate notes. The nature and
terms of a variable rate note (i.e., a "Master Note") permit the
Fund to invest fluctuating amounts at varying rates of interest
pursuant to a direct arrangement between the Fund as lender, and
the issuer, as borrower. It permits daily changes in the amounts
borrowed. The Fund has the right at any time to increase, up to
the full amount stated in the note agreement, or to decrease the
amount outstanding under the note. The issuer may prepay at any
time and without penalty any part or the full amount of the note.
The note may or may not be backed by one or more bank letters of
credit. Because these notes are direct lending arrangements
between the Fund and the issuer, it is not generally contemplated
that they will be traded; moreover, there is currently no secondary
market for them. Except as specifically provided in the Prospectus
for the Fund, there is no limitation on the type of issuer from
whom these notes will be purchased. However, in connection with
such purchase and on an ongoing basis, OpCap Advisors (the "Sub-
Adviser") will consider the earning power, cash flow and other
liquidity ratios of the issuer, and its ability to pay principal
and interest on demand, including a situation in which all holders
of such notes made demand simultaneously. The Fund will not invest
more than 5% of its total assets in variable rate notes. Variable
rate notes are subject to the Fund's investment restriction on
illiquid securities unless such notes can be put back to the issuer
on demand within seven days.
Insured Bank Obligations. The Federal Deposit Insurance
Corporation ("FDIC") insures the deposits of federally insured
banks and savings and loan associations (collectively referred to
as "banks") up to $100,000. The Fund may, within the limits set
forth in the Prospectus, purchase bank obligations which are fully
insured as to principal by the FDIC. Currently, to remain fully
insured as to principal, these investments must be limited to
$100,000 per bank. If the principal amount and accrued interest
together exceed $100,000, the excess principal and accrued interest
will not be insured. Insured bank obligations may have limited
marketability. Unless the Board of Directors determines that a
readily available market exists for such obligations, the Fund will
treat such obligations as subject to the 15% limit for illiquid
investments set forth in the Prospectus for the Fund unless such
obligations are payable at principal amount plus accrued interest
on demand or within seven days after demand.
Convertible Securities. The Fund may invest in fixed-
income securities which are convertible into common stock.
Convertible securities rank senior to common stocks in a
corporation's capital structure and, therefore, entail less risk
than the corporation's common stock. The value of a convertible
security is a function of its "investment value" (its value as if
it did not have a conversion privilege), and its "conversion value"
(the security's worth if it were to be exchanged for the underlying
security, at market value, pursuant to its conversion privilege).
To the extent that a convertible security's investment value
is greater than its conversion value, its price will be primarily
a reflection of such investment value and its price will be likely
to increase when interest rates fall and decrease when interest
rates rise, as with a fixed-income security (the credit standing of
the issuer and other factors may also have an effect on the
convertible security's value). If the conversion value exceeds the
investment value, the price of the convertible security will rise
above its investment value and, in addition, will sell at some
premium over its conversion value. (This premium represents the
price investors are willing to pay for the privilege of purchasing
a fixed-income security with a possibility of capital appreciation
due to the conversion privilege.) At such times the price of the
convertible security will tend to fluctuate directly with the price
of the underlying equity security. Convertible securities may be
purchased by the Fund at varying price levels above their
investment values and/or their conversion values in keeping with
the Fund's objectives.
Investment Risks of Fixed-Income Securities. All fixed-
income securities are subject to two types of risks: credit risk
and interest rate risk. Credit risk relates to the ability of the
issuer to meet interest or principal payments on a security as they
become due. Generally, higher yielding lower-grade bonds are
subject to credit risk to a greater extent than lower-yielding,
investment grade bonds. Interest rate risk refers to the
fluctuations in value of fixed-income securities resulting solely
from the inverse relationship between price and yield of
outstanding fixed-income securities. An increase in prevailing
interest rates will generally reduce the market value of already-
issued fixed-income investments, and a decline in interest rates
will tend to increase their value. In addition, debt securities
with longer maturities, which tend to produce higher yields, are
subject to potentially greater changes in their prices from changes
in interest rates than obligations with shorter maturities.
Fluctuations in the market value of fixed-income securities after
the Fund buys them will not affect the interest payable on those
securities, nor the cash income from such securities. However,
those price fluctuations will be reflected in the valuations of
these securities and therefore the Fund's net asset values.
Lower-Grade Securities. The Fund may invest up to 5% of its
assets in bonds rated below "BBB" by Standard & Poor's Corporation,
or "Baa3" by Moody's Investors Service, Inc. ( Moody s ) (commonly
known as "high yield" or "junk bonds"), or that have a comparable
rating from another rating organization. If unrated, the security
must be determined by the Sub-Adviser to be of comparable quality
to securities rated less than investment grade.
Special Risks of Lower-Grade Securities. High yield, lower-
grade securities, whether rated or unrated, often have speculative
characteristics. Lower-grade securities have special risks that
make them riskier investments than investment grade securities.
They may be subject to greater market fluctuations and risk of loss
of income and principal than lower-yielding, investment-grade
securities. There may be less of a market for them and therefore
they may be harder to sell at an acceptable price. There is a
relatively greater possibility that the issuer's earnings may be
insufficient to make the payments of interest due on the bonds.
The issuer's low creditworthiness may increase the potential for
its insolvency.
These risks mean that the Fund may not achieve the expected
income from lower-grade securities, and that the Fund's net asset
value per share may be affected by declines in value of these
securities. However, the Fund's limitations on investments in
these types of securities may reduce some of the risk, as will the
Fund's policy of diversifying its investments.
Rights and 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 basically are options to
purchase equity securities at specific prices valid for a specific
period of time. Their prices do not necessarily move parallel to
the prices of the underlying securities. Rights are similar to
warrants, but normally have a shorter maturity and are distributed
directly by the issuer to its shareholders. Rights and warrants
have no voting rights, receive no dividends and have no rights with
respect to the assets of the issuer.
Investing in Small, Unseasoned Companies. The securities of
small, unseasoned companies may have a limited trading market,
which may adversely affect the Fund's ability to dispose of them
and can reduce the price the Fund might be able to obtain for them.
If other investment companies and investors that invest in this
type of securities trade the same securities when the Fund attempts
to dispose of its holdings, the Fund may receive lower prices than
might otherwise be obtained, because of the thinner market for such
securities.
Other Investment Techniques and Strategies.
Borrowing. From time to time, the Fund may increase its
ownership of securities by borrowing from banks on a unsecured
basis and investing the borrowed funds, subject to the restrictions
stated in the Prospectus. Any such borrowing will be made only
from banks. Under the requirements of the Investment Company Act,
the Fund can borrow only if it maintains a 300% ratio of net assets
to borrowings at all times. If the value of the Fund's assets so
computed should fail to meet the 300% asset coverage requirement,
the Fund is required within three days to reduce its bank debt to
the extent necessary to meet such requirement and may have to sell
a portion of its investments at a time when independent investment
judgment would not dictate such sale. Borrowing for investment
increases both investment opportunity and risk. Since
substantially all of the Fund's assets fluctuate in value, but
borrowing obligations are fixed, when the Fund has outstanding
borrowings, its net asset value per share correspondingly will tend
to increase and decrease more when portfolio assets fluctuate in
value than otherwise would be the case.
When-Issued Securities. The Fund may take advantage of
offerings of eligible portfolio securities on a "when-issued" basis
where delivery of and payment for such securities take place
sometime after the transaction date on terms established on such
date. Normally, settlement on U.S. Government securities takes
place within ten days. The Fund only will make when-issued
commitments on eligible securities with the intention of actually
acquiring the securities. If the Fund chooses to dispose of the
right to acquire a when-issued security prior to its acquisition,
it could, as with the disposition of any other portfolio
obligation, incur a gain or loss due to market fluctuation. When-
issued commitments will not be made if, as a result, more than 15%
of the net assets of the Fund would be so committed.
Repurchase Agreements. The Fund may acquire securities
subject to repurchase agreements for liquidity purposes to meet
anticipated redemptions, or pending the investment of the proceeds
from sales of Fund shares, or pending the settlement of purchases
of portfolio securities.
In a repurchase transaction, the Fund purchases a security
from, and simultaneously resells it to, an approved vendor (a U.S.
commercial bank or the U.S. branch of a foreign bank or a broker-
dealer with a net worth of at least $50 million and which has been
designated a primary dealer in government securities, which must
meet credit requirements set by the Fund's Board of Directors from
time to time) for delivery on an agreed-on future date. The resale
price exceeds the purchase price by an amount that reflects an
agreed-upon interest rate effective for the period during which the
repurchase agreement is in effect. The majority of these
transactions run from day to day, and delivery pursuant to the
resale typically will occur within one to five days of the
purchase. Repurchase agreements are considered "loans" under the
Investment Company Act, collateralized by the underlying security.
The Fund's repurchase agreements require that at all times while
the repurchase agreement is in effect, the value of the collateral
must equal or exceed the repurchase price to fully collateralize
the repayment obligation. Additionally, the Manager will impose
creditworthiness requirements to confirm that the vendor is
financially sound and will continuously monitor the collateral's
value.
Illiquid and Restricted Securities. To enable the Fund to
sell restricted securities not registered under the Securities Act
of 1933, the Fund may have to cause those securities to be
registered. The expenses of registration of restricted securities
may be negotiated by the Fund with the issuer at the time such
securities are purchased by the Fund, if such registration is
required before such securities may be sold publicly. When
registration must be arranged because the Fund wishes to sell the
security, a considerable period may elapse between the time the
decision is made to sell the securities and the time the Fund would
be permitted to sell them. The Fund would bear the risks of any
downward price fluctuation during that period. The Fund may also
acquire, through private placements, securities having contractual
restrictions on their resale, which might limit the Fund's ability
to dispose of such securities and might lower the amount realizable
upon the sale of such securities.
The Fund has percentage limitations that apply to purchases of
restricted securities, as stated in the Prospectus. Those
percentage restrictions do not limit purchases of restricted
securities that are eligible for sale to qualified institutional
purchasers pursuant to Rule 144A under the Securities Act of 1933,
provided that those securities have been determined to be liquid by
the Board of Directors of the Fund or by the Sub-Adviser under
Board-approved guidelines. Those guidelines take into account the
trading activity for such securities and the availability of
reliable pricing information, among other factors. If there is a
lack of trading interest in a particular Rule 144A security, the
Fund's holding of that security may be deemed to be illiquid.
Loans of Portfolio Securities. The Fund may lend its
portfolio securities subject to the restrictions stated in the
Prospectus. Under applicable regulatory requirements (which are
subject to change), the loan collateral on each business day must
at least equal the value of the loaned securities and must consist
of cash, bank letters of credit or securities of the U.S.
Government (or its agencies or instrumentalities). To be
acceptable as collateral, letters of credit must obligate a bank to
pay amounts demanded by the Fund if the demand meets the terms of
the letter. Such terms and the issuing bank must be satisfactory
to the Fund. When it lends securities, the Fund receives amounts
equal to the dividends or interest on loaned securities and also
receives one or more of (a) negotiated loan fees, (b) interest on
securities used as collateral, and (c) interest on short-term debt
securities purchased with such loan collateral. Either type of
interest may be shared with the borrower. The Fund may also pay
reasonable finder's, custodian and administrative fees. The terms
of the Fund's loans must meet applicable tests under the Internal
Revenue Code and must permit the Fund to reacquire loaned
securities on five days' notice or in time to vote on any important
matter.
Hedging With Options and Futures Contracts. The Fund may
employ one or more types of Hedging Instruments for the purposes
described in the Prospectus. When hedging to attempt to protect
against declines in the market value of the Fund's portfolio, or to
permit the Fund to retain unrealized gains in the value of
portfolio securities which have appreciated, or to facilitate
selling securities for investment reasons, the Fund may: (i) sell
Stock Index Futures, (ii) buy puts, or (iii) write covered calls
(as described in the Prospectus). When hedging to establish a
position in the equity securities markets as a temporary substitute
for the purchase of individual equity securities the Fund may: (i)
buy Stock Index Futures, or (ii) buy calls on Stock Index Futures.
Normally, the Fund would then purchase the equity securities and
terminate the hedging portion.
The Fund's strategy of hedging with Futures and options on Futures
will be incidental to the Fund's investment activities in the
underlying cash market. In the future, the Fund may employ hedging
instruments and strategies that are not presently contemplated but
which may be subsequently developed, to the extent such investment
methods are consistent with the Fund's investment objective, and
are legally permissible and disclosed in the Prospectus.
Additional information about the hedging instruments the Fund may
use is provided below.
Writing Call Options. As described in the Prospectus, the Fund
may write covered calls. When the Fund writes a call on an
investment, it receives a premium and agrees to sell the callable
investment to a purchaser of a corresponding call during the call
period (usually not more than 9 months) at a fixed exercise price
(which may differ from the market price of the underlying
investment) regardless of market price changes during the call
period. To terminate its obligation on a call it has written, the
Fund may purchase a corresponding call in a "closing purchase
transaction." A profit or loss will be realized, depending upon
whether the net of the amount of option transaction costs and the
premium received on the call the Fund has written is more or less
than the price of the call the Fund subsequently purchased. A
profit may also be realized if the call lapses unexercised because
the Fund retains the underlying investment and the premium
received. Those profits are considered short-term capital gains
for Federal income tax purposes, as are premiums on lapsed calls,
and when distributed by the Fund are taxable as ordinary income.
If the Fund could not effect a closing purchase transaction due to
the lack of a market, it would have to hold the callable investment
until the call lapsed or was exercised.
The Fund may also write calls on Futures without owning a futures
contract or deliverable securities, provided that at the time the
call is written, the Fund covers the call by segregating in escrow
an equivalent dollar value of deliverable securities or liquid
assets. The Fund will segregate additional liquid assets if the
value of the escrowed assets drops below 100% of the current value
of the Future. In no circumstances would an exercise notice as to
a Future put the Fund in a short futures position.
Writing Put Options. A put option on securities gives the
purchaser the right to sell, and the writer the obligation to buy,
the underlying investment at the exercise price during the option
period. Writing a put covered by segregated liquid assets equal to
the exercise price of the put has the same economic effect to the
Fund as writing a covered call. The premium the Fund receives from
writing a put option represents a profit, as long as the price of
the underlying investment remains above the exercise price.
However, the Fund has also assumed the obligation during the option
period to buy the underlying investment from the buyer of the put
at the exercise price, even though the value of the investment may
fall below the exercise price. If the put expires unexercised, the
Fund (as the writer of the put) realizes a gain in the amount of
the premium less transaction costs. If the put is exercised, the
Fund must fulfill its obligation to purchase the underlying
investment at the exercise price, which will usually exceed the
market value of the investment at that time. In that case, the
Fund may incur a loss, equal to the sum of the current market value
of the underlying investment and the premium received minus the sum
of the exercise price and any transaction costs incurred.
When writing put options on securities, to secure its obligation to
pay for the underlying security, the Fund will deposit in escrow
liquid assets with a value equal to or greater than the exercise
price of the underlying securities. The Fund therefore forgoes the
opportunity of investing the segregated assets or writing calls
against those assets. As long as the obligation of the Fund as the
put writer continues, it may be assigned an exercise notice by the
exchange or broker-dealer through whom such option was sold,
requiring the Fund to exchange currency at the specified rate of
exchange or to take delivery of the underlying security against
payment of the exercise price. The Fund may have no control over
when it may be required to purchase the underlying security, since
it may be assigned an exercise notice at any time prior to the
termination of its obligation as the writer of the put. This
obligation terminates upon expiration of the put, or such earlier
time at which the Fund effects a closing purchase transaction by
purchasing a put of the same series as that previously sold. Once
the Fund has been assigned an exercise notice, it is thereafter not
allowed to effect a closing purchase transaction.
The Fund may effect a closing purchase transaction to realize a
profit on an outstanding put option it has written or to prevent an
underlying security from being put. Furthermore, effecting such a
closing purchase transaction will permit the Fund to write another
put option to the extent that the exercise price thereof is secured
by the deposited assets, or to utilize the proceeds from the sale
of such assets for other investments by the Fund. The Fund will
realize a profit or loss from a closing purchase transaction if the
cost of the transaction is less or more than the premium received
from writing the option. As above for writing covered calls, any
and all such profits described herein from writing puts are
considered short-term capital gains for Federal tax purposes, and
when distributed by the Fund, are taxable as ordinary income.
Purchasing Puts and Calls. The Fund may purchase calls to
protect against the possibility that the Fund's portfolio will not
participate in an anticipated rise in the securities market. When
the Fund purchases a call (other than in a closing purchase
transaction), it pays a premium and, except as to calls on stock
indices, has the right to buy the underlying investment from a
seller of a corresponding call on the same investment during the
call period at a fixed exercise price. In purchasing a call, the
Fund benefits only if the call is sold at a profit or if, during
the call period, the market price of the underlying investment is
above the sum of the exercise price, transaction costs, and the
premium paid, and the call is exercised. If the call is not
exercised or sold (whether or not at a profit), it will become
worthless at its expiration date and the Fund will lose its premium
payment and the right to purchase the underlying investment. When
the Fund purchases a call on a stock index, it pays a premium, but
settlement is in cash rather than by delivery of the underlying
investment to the Fund.
When the Fund purchases a put, it pays a premium and, except as to
puts on stock indices, has the right to sell the underlying
investment to a seller of a corresponding put on the same
investment during the put period at a fixed exercise price. Buying
a put on an investment the Fund owns (a "protective put") enables
the Fund to attempt to protect itself during the put period against
a decline in the value of the underlying investment below the
exercise price by selling the underlying investment at the exercise
price to a seller of a corresponding put. If the market price of
the underlying investment is equal to or above the exercise price
and as a result the put is not exercised or resold, the put will
become worthless at its expiration and the Fund will lose the
premium payment and the right to sell the underlying investment.
However, the put may be sold prior to expiration (whether or not at
a profit).
Buying a put on a investment it does not own, either a put on an
index or a put on a Stock Index Future not held by the Fund,
permits the Fund either to resell the put or buy the underlying
investment and sell it at the exercise price. The resale price of
the put will vary inversely with the price of the underlying
investment. If the market price of the underlying investment is
above the exercise price and as a result the put is not exercised,
the put will become worthless on its expiration date. In the event
of a decline in the stock market, the Fund could exercise or sell
the put at a profit to attempt to offset some or all of its loss on
its portfolio securities. When the Fund purchases a put on an
index, or on a Future not held by it, the put protects the Fund to
the extent that the index or Future moves in a similar pattern to
the securities held. In the case of a put on an index or Future,
settlement is in cash rather than by delivery by the Fund of the
underlying investment.
Puts and calls on broadly-based stock indices or Stock Index
Futures are similar to puts and calls on securities or futures
contracts except that all settlements are in cash and gain or loss
depends on changes in the index in question (and thus on price
movements in the stock market generally) rather than on price
movements of individual securities or futures contracts. When the
Fund buys a call on a stock index or Stock Index Future, it pays a
premium. If the Fund exercises the call during the call period, a
seller of a corresponding call on the same investment will pay the
Fund an amount of cash to settle the call if the closing level of
the stock index or Future upon which the call is based is greater
than the exercise price of the call. That cash payment is equal to
the difference between the closing price of the call and the
exercise price of the call times a specified multiple (the
"multiplier") which determines the total dollar value for each
point of difference. When the Fund buys a put on a stock index or
Stock Index Future, it pays a premium and has the right during the
put period to require a seller of a corresponding put, upon the
Fund's exercise of its put, to deliver cash to the Fund to settle
the put if the closing level of the stock index or Stock Index
Future upon which the put is based is less than the exercise price
of the put. That cash payment is determined by the multiplier, in
the same manner as described above as to calls.
When the Fund purchases a put on a stock index, or on a Stock Index
Future not owned by it, the put protects the Fund to the extent
that the index moves in a similar pattern to the securities the
Fund holds. The Fund can either resell the put or, in the case of
a put on a Stock Index Future, buy the underlying investment and
sell it at the exercise price. The resale price of the put will
vary inversely with the price of the underlying investment. If the
market price of the underlying investment is above the exercise
price, and as a result the put is not exercised, the put will
become worthless on the expiration date. In the event of a decline
in price of the underlying investment, the Fund could exercise or
sell the put at a profit to attempt to offset some or all of its
loss on its portfolio securities.
The Fund's option activities may affect its portfolio turnover rate
and brokerage commissions. The exercise of calls written by the
Fund may cause the Fund to sell related portfolio securities, thus
increasing its turnover rate. The exercise by the Fund of puts on
securities will cause the sale of underlying investments,
increasing portfolio turnover. Although the decision whether to
exercise a put it holds is within the Fund's control, holding a put
might cause the Fund to sell the related investments for reasons
that would not exist in the absence of the put. The Fund will pay
a brokerage commission each time it buys or sells a call, put or an
underlying investment in connection with the exercise of a put or
call. Those commissions may be higher than the commissions for
direct purchases or sales of the underlying investments.
Premiums paid for options are small in relation to the market value
of the underlying investments and, consequently, put and call
options offer large amounts of leverage. The leverage offered by
trading in options could result in the Fund's net asset value being
more sensitive to changes in the value of the underlying
investments.
Stock Index Futures. As described in the Prospectus, the Fund
may invest in Stock Index Futures only if they relate to broadly-
based stock indices. A stock index is considered to be broadly-
based if it includes stocks that are not limited to issuers in any
particular industry or group of industries. A stock index assigns
relative values to the common stocks included in the index and
fluctuates with the changes in the market value of those stocks.
Stock indices cannot be purchased or sold directly.
Stock index futures are contracts based on the future value of the
basket of securities that comprise the underlying stock index. The
contracts obligate the seller to deliver, and the purchaser to
take, cash to settle the futures transaction or to enter into an
offsetting contract. No physical delivery of the securities
underlying the index is made on settling the futures obligation. No
monetary amount is paid or received by the Fund on the purchase or
sale of a Stock Index Future. Upon entering into a Futures
transaction, the Fund will be required to deposit an initial margin
payment, in cash or U.S. Treasury bills, with the futures
commission merchant (the "futures broker"). Initial margin
payments will be deposited with the Fund's Custodian in an account
registered in the futures broker's name; however, the futures
broker can gain access to that account only under certain specified
conditions. As the Future is marked-to-market (that is, its value
on the Fund's books is changed) to reflect changes in its market
value, subsequent margin payments, called variation margin, will be
paid to or by the futures broker on a daily basis.
At any time prior to the expiration of the Future, the Fund may
elect to close out its position by taking an opposite position, at
which time a final determination of variation margin is made and
additional cash is required to be paid by or released to the Fund.
Any gain or loss is then realized by the Fund on the Future for tax
purposes. Although Stock Index Futures by their terms call for
settlement by the delivery of cash, in most cases the settlement
obligation is fulfilled without such delivery by entering into an
offsetting transaction. All futures transactions are effected
through a clearing house associated with the exchange on which the
contracts are traded.
Regulatory Aspects of Hedging Instruments. The Fund is required
to operate within certain guidelines and restrictions with respect
to its use of futures and options thereon as established by the
Commodities Futures Trading Commission ("CFTC"). In particular,
the Fund is excluded from registration as a "commodity pool
operator" if it complies with the requirements of Rule 4.5 adopted
by the CFTC. Under this Rule, the Fund is not limited regarding
the percentage of its assets committed to futures margins and
related options premiums subject to a hedge position. However,
aggregate initial futures margins and related options premiums are
limited to 5% or less of the Fund's net asset value for other than
bona fide hedging strategies employed by the Fund within the
meaning and intent of applicable provisions of the Commodity
Exchange Act and CFTC regulations thereunder.
Transactions in options by the Fund are subject to limitations
established by option exchanges governing the maximum number of
options that may be written or held by a single investor or group
of investors acting in concert, regardless of whether the options
were written or purchased on the same or different exchanges or are
held in one or more accounts or through one or more different
exchanges or through one or more brokers. Thus the number of
options which the Fund may write or hold may be affected by options
written or held by other entities, including other investment
companies having the same adviser as the Fund (or an adviser that
is an affiliate of the Fund's adviser). The exchanges also impose
position limits on Futures transactions. An exchange may order the
liquidation of positions found to be in violation of those limits
and may impose certain other sanctions.
Due to requirements under the Investment Company Act, when the Fund
purchases a Stock Index Future, the Fund will maintain, in a
segregated account or accounts with its custodian, cash or readily-
marketable, short-term (maturing in one year or less) debt
instruments in an amount equal to the market value of the
securities underlying such Future, less the margin deposit
applicable to it.
Additional Information About Hedging Instruments and Their Use.
The Fund's Custodian, or a securities depository acting for the
Custodian, will act as the Fund's escrow agent, through the
facilities of the Options Clearing Corporation ("OCC"), as to the
investments on which the Fund has written options traded on
exchanges or as to other acceptable escrow securities, so that no
margin will be required for such transactions. OCC will release
the securities on the expiration of the option or upon the Fund's
entering into a closing transaction. An option position may be
closed out only on a market which provides secondary trading for
options of the same series, and there is no assurance that a liquid
secondary market will exist for any particular option.
When the Fund writes an over-the-counter("OTC") option, it will
enter into an arrangement with a primary U.S. Government securities
dealer, which would establish a formula price at which the Fund
would have the absolute right to repurchase that OTC option. That
formula price would generally be based on a multiple of the premium
received for the option, plus the amount by which the option is
exercisable below the market price of the underlying security (that
is, the extent to which the option is "in-the-money"). When the
Fund writes an OTC option, it will treat as illiquid (for purposes
of the limit on its assets that may be invested in the illiquid
securities, stated in the Prospectus) the marked-to-market value of
any OTC option held by it. The Securities and Exchange Commission
("SEC") is evaluating whether OTC options should be considered
liquid securities, and the procedure described above could be
affected by the outcome of that evaluation.
The Fund's option activities may affect its turnover rate and
brokerage commissions. The exercise of calls written by the Fund
may cause the Fund to sell related portfolio securities, thus
increasing its turnover rate in a manner beyond the Fund's control.
The exercise by the Fund of puts on securities will cause the sale
of related investments, increasing portfolio turnover. Although
such exercise is within the Fund's control, holding a put might
cause the Fund to sell the related investments for reasons which
would not exist in the absence of the put. The Fund will pay a
brokerage commission each time it buys a put or call, sells a call,
or buys or sells an underlying investment in connection with the
exercise of a put or call. Such commissions may be higher than
those which would apply to direct purchases or sales of such
underlying investments. Premiums paid for options are small in
relation to the market value of the related investments, and
consequently, put and call options offer large amounts of leverage.
The leverage offered by trading options could result in the Fund's
net asset value being more sensitive to changes in the value of the
underlying investments.
Tax Aspects of Covered Calls and Hedging Instruments. The Fund
intends to qualify as a "regulated investment company" under the
Internal Revenue Code (although it reserves the right not to
qualify). That qualification enables the Fund to "pass through"
its income and realized capital gains to shareholders without the
Fund having to pay tax on them. This avoids a "double tax" on that
income and capital gains, since shareholders normally will be taxed
on the dividends and capital gains they receive from the Fund
(unless the Fund's shares are held in a retirement account or the
shareholder is otherwise exempt from tax). One of the tests for
the Fund's qualification as a regulated investment company is that
less than 30% of its gross income must be derived from gains
realized on the sale of securities held for less than three months.
To comply with this 30% cap, the Fund will limit the extent to
which it engages in the following activities, but will not be
precluded from them: (i) selling investments, including Stock Index
Futures, held for less than three months, whether or not they were
purchased on the exercise of a call held by the Fund; (ii)
purchasing options which expire in less than three months; (iii)
effecting closing transactions with respect to calls or puts
written or purchased less than three months previously; (iv)
exercising puts or calls held by the Fund for less than three
months; or (v) writing calls on investments held less than three
months.
Certain foreign currency exchange contracts ("Forward Contracts")
in which the Fund may invest are treated as "section 1256
contracts." Gains or losses relating to section 1256 contracts
generally are characterized under the Internal Revenue Code as 60%
long-term and 40% short-term capital gains or losses. However,
foreign currency gains or losses arising from certain section 1256
contracts (including Forward Contracts) generally are treated as
ordinary income or loss. In addition, section 1256 contracts held
by the Fund at the end of each taxable year are "marked-to-market"
with the result that unrealized gains or losses are treated as
though they were realized. These contracts also may be marked-to-
market for purposes of the excise tax applicable to investment
company distributions and for other purposes under rules prescribed
pursuant to the Internal Revenue Code. An election can be made by
the Fund to exempt these transactions from this marked-to-market
treatment.
Certain Forward Contracts entered into by the Fund may result in
"straddles" for Federal income tax purposes. The straddle rules
may affect the character of gains (or losses) realized by the Fund
on straddle positions. Generally, a loss sustained on the
disposition of a position making up a straddle is allowed only to
the extent such loss exceeds any unrecognized gain in the
offsetting positions making up the straddle. Disallowed loss is
generally allowed at the point where there is no unrecognized gain
in the offsetting positions making up the straddle, or the
offsetting position is disposed of.
Under the Internal Revenue Code, gains or losses attributable to
fluctuations in exchange rates that occur between the time the Fund
accrues interest or other receivables or accrues expenses or other
liabilities denominated in a foreign currency and the time the Fund
actually collects such receivables or pays such liabilities
generally are treated as ordinary income or ordinary loss.
Similarly, on disposition of debt securities denominated in a
foreign currency and on disposition of foreign currency forward
contracts, gains or losses attributable to fluctuations in the
value of a foreign currency between the date of acquisition of the
security or contract and the date of the disposition also are
treated as an ordinary gain or loss. Currency gains and losses are
offset against market gains and losses on each trade before
determining a net "Section 988" gain or loss under the Internal
Revenue Code, which may ultimately increase or decrease the amount
of the Fund's investment company income available for distribution
to its shareholders.
Additional Risk Factors in Hedging. An option position may be
closed out only on a market that provides secondary trading for
options of the same series, and there is no assurance that a liquid
secondary market will exist for any particular option. In addition
to the risks with respect to options discussed in the Prospectus
and above, there is a risk in using short hedging by (i) selling
Stock Index Futures or (ii) purchasing puts on stock indices or
Stock Index Futures to attempt to protect against declines in the
value of the Fund's equity securities. The risk is that the prices
of Stock Index Futures will correlate imperfectly with the behavior
of the cash (i.e., market value) prices of the Fund's equity
securities. The ordinary spreads between prices in the cash and
futures markets are subject to distortions, due to differences in
the natures of those markets. First, all participants in the
futures markets are subject to margin deposit and maintenance
requirements. Rather than meeting additional margin deposit
requirements, investors may close out futures contracts through
offsetting transactions which could distort the normal relationship
between the cash and futures markets. Second, the liquidity of the
futures markets depends on participants entering into offsetting
transactions rather than making or taking delivery. To the extent
participants decide to make or take delivery, liquidity in the
futures markets could be reduced, thus producing distortion.
Third, from the point of view of speculators, the deposit
requirements in the futures markets are less onerous than margin
requirements in the securities markets. Therefore, increased
participation by speculators in the futures markets may cause
temporary price distortions.
The risk of imperfect correlation increases as the composition of
the Fund's portfolio diverges from the securities included in the
applicable index. To compensate for the imperfect correlation of
movements in the price of the equity securities being hedged and
movements in the price of the hedging instruments, the Fund may use
hedging instruments in a greater dollar amount than the dollar
amount of equity securities being hedged if the historical
volatility of the prices of the equity securities being hedged is
more than the historical volatility of the applicable index. It is
also possible that if the Fund has used hedging instruments in a
short hedge, the market may advance and the value of equity
securities held in the Fund's portfolio may decline. If that
occurred, the Fund would lose money on the hedging instruments and
also experience a decline in value in its portfolio securities.
However, while this could occur for a very brief period or to a
very small degree, over time the value of a diversified portfolio
of equity securities will tend to move in the same direction as the
indices upon which the hedging instruments are based.
If the Fund uses hedging instruments to establish a position in the
equities markets as a temporary substitute for the purchase of
individual equity securities (long hedging) by buying Stock Index
Futures and/or calls on such Futures, on securities or on stock
indices, it is possible that the market may decline. If the Fund
then concludes not to invest in equity securities at that time
because of concerns as to a possible further market decline or for
other reasons, the Fund will realize a loss on the hedging
instruments that is not offset by a reduction in the price of the
equity securities purchased.
Other Investment Restrictions
The Fund's most significant investment restrictions are set forth
in the Prospectus. There are additional investment restrictions
that the Fund must follow that are also fundamental policies.
Fundamental policies and the Fund's investment objective cannot be
changed without the vote of a "majority" of the Fund's outstanding
voting securities. Under the Investment Company Act, such a
majority vote is defined as the vote of the holders of the lesser
of: (i) 67% or more of the shares present or represented by proxy
at a shareholder meeting, if the holders of more than 50% of the
outstanding shares are present or represented by proxy, or (ii)
more than 50% of the outstanding shares.
Under these additional restrictions, the Fund cannot:
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;
Purchase securities on margin;
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);
Mortgage, hypothecate or pledge any of its assets;
Invest or hold securities of any issuer if the officers
and Directors of the Fund or its Manager or Subadvisor owning
individually more then one-half of 1% of the securities of such
issuer together own more than 5% of the securities of such
issuer; or
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);
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;
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
total assets, invest more than 5% of the value of its total assets
in the securities of any one issuer. In addition, the Fund has
made the following undertakings which are non-fundamental policies:
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. For purposes of the Fund's policy not to
concentrate its assets as described in the Prospectus, the Fund has
adopted, as a matter of non-fundamental policy, the corporate
industry classifications set forth in Appendix B to this Statement
of Additional Information.
How the Fund is Managed
Organization and History. The Fund is organized as a Maryland
Corporation. This Statement of Additional Information may be used
with the Fund's Prospectus only to offer shares of the Fund.
The Directors are authorized to create new series and classes
of series. The Directors may reclassify unissued shares of the
Fund or classes into additional classes of shares. The Directors
may also divide or combine the shares of a class into a greater or
lesser number of shares without thereby changing the proportionate
beneficial interest of a shareholder in the Fund. Shares do not
have cumulative voting rights or preemptive or subscription rights.
Shares may be voted in person or by proxy.
As a Maryland corporation, the Fund is not required to hold,
and does not plan to hold, regular annual meetings of shareholders.
The Fund will hold meetings when required to do so by the
Investment Company Act or other applicable law, or when a
shareholder meeting is called by the Directors or upon proper
request of the shareholders. Each share of the Fund represents an
interest in the Fund proportionately equal to the interest of each
other share of the same class and entitles the holder to one vote
per share (and a fractional vote for a fractional share) on matters
submitted to their vote at shareholders' meetings. Shareholders of
the Fund vote together in the aggregate on certain matters at
shareholders' meetings, such as the election of Directors and
ratification of appointment of auditors for the Fund. Shareholders
of a particular class vote separately on proposals which affect
that class, and shareholders of a class which is not affected by
that matter are not entitled to vote on the proposal. For example,
only shareholders of a class of a series vote on certain amendments
to the Distribution and/or Service Plans if the amendments affect
that class.
Directors and Officers of the Fund. The Fund's Directors and
officers, and the Fund's portfolio manager (who is not an officer),
are listed below, together with principal occupations and business
affiliations during the past five years. The address of each is
Two World Trade Center, New York, New York 10048, except as noted.
All of the Directors are also directors or trustees of Oppenheimer
Quest Global Value Fund, Inc., Oppenheimer Quest For Value Funds
(Oppenheimer Quest Growth & Income Value Fund, Oppenheimer Quest
Officers Value Fund, Oppenheimer Quest Opportunity Value Fund,
Oppenheimer Quest Small Cap Value Fund) (collectively, the
"Oppenheimer Quest Funds") and Rochester Fund Municipals,
Rochester Portfolio Series - Limited-Term New York Municipal Fund
and Bond Fund Series - Oppenheimer Bond Fund for Growth
(collectively the "Rochester Funds"). As of November 18, 1996, the
directors and officers of the Fund as a group owned less than 1% of
each class of shares of the Fund. The foregoing does not include
shares held of record by an employee benefit plan for employees of
the Manager for which plan one of the officers listed below, Mr.
Donohue, is a trustee, other than the shares beneficially owned
under that plan by officers of the Fund listed below.
Bridget A. Macaskill, Chairman of the Board of Directors and
President*; Age: 48.
President, Chief Executive Officer and a Director of the Manager
and HarbourView Asset Management Corporation ("HarbourView"), a
subsidiary of the Manager; President and a Director of Oppenheimer
Acquisition Corp. ("OAC"), the Manager's parent holding company,
and Oppenheimer Partnership Holdings, Inc.; Chairman and a Director
of Shareholder Services, Inc. ("SSI"), a transfer agent subsidiary
of the Manager and Shareholder Financial Services, Inc. ("SFSI");
and a director of Oppenheimer Real Asset Management, Inc.
Paul Y. Clinton, Director; Age: 65
39 Blossom Avenue, Osterville, Massachusetts 02655
Principal of Clinton Management Associates, a financial and venture
capital consulting firm; Trustee of Capital Cash Management Trust,
a money-market fund and Narraganssett Tax-Free Fund, a tax-exempt
bond fund; Director of Quest Cash Reserves, Inc. and Trustee of
Quest For Value Accumulation Trust, all of which are open-end
investment companies. Formerly: Director, External Affairs,
Kravco Corporation, a national real estate owner and property
management corporation; President of Essex Management Corporation,
a management consulting company; a general partner of Capital
Growth Fund, a venture capital partnership; a general partner of
Essex Limited Partnership, an investment partnership; President of
Geneve Corp., a venture capital fund; Chairman of Woodland Capital
Corp., a small business investment company; and Vice President of
W.R. Grace & Co.
_________________________
* A Director who is an "interested person" as defined in the
Investment Company Act.
<PAGE>
Thomas W, Courtney, Director; Age: 63
P.O. Box 580, Sewickley, Pennsylvania 15143
Principal of Courtney Associates, Inc. (venture capital firm);
former General Partner of Trivest Venture Fund (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., 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, Director; Age: 67
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 Trustees 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 Trustees of Capital Cash Management Trust ("CCMT"), and an
Officer and Trustee/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 of Quest Cash
Reserves, 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: 81
51 Herrick Road, Sharon, Connecticut 06069
Private Investor; Director of Quest Cash Reserves, 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: 42
Executive Vice President and Director of Equity Investments of the
Manager; a Vice President and director of OAC an officer and
Portfolio Manager of other Oppenheimer funds.
Andrew J. Donohue, Secretary; Age: 46
Executive Vice President and General Counsel of the Manager and
OppenheimerFunds Distributor, Inc. (the "Distributor"); President
and a director of Centennial; Executive Vice President, General
Counsel and a director of HarbourView, SFSI, SSI and Oppenheimer
Partnership Holdings Inc.; President and a director of Real Asset
Management, Inc.; General Counsel of OAC; Executive Vice President,
Chief Legal Officer and a director of MultiSource Services, Inc. (a
broker-dealer) 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: 60
3410 South Galena Street Denver, Colorado 80231
Senior Vice President and Treasurer of the Manager; Vice President
and Treasurer of the Distributor and HarbourView; 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 Shareholder Financial Services, Inc. ("SFSI"), a transfer agent
subsidiary of the Manager; Senior Vice President and Secretary of
SSI, Vice President and Treasurer of Oppenheimer Real Asset
Management, Inc.; Chief Executive Officer, Treasurer and a director
of MultiSource Services, Inc. (a broker-dealer); an officer of
other Oppenheimer funds.
Robert G. Zack, Assistant Secretary; Age: 48
Senior Vice President and Associate General Counsel of the Manager;
Assistant Secretary of SSI and SFSI; an officer of other
Oppenheimer funds.
Robert J. Bishop, Assistant Treasurer; Age: 38
3410 South Galena Street, Denver, Colorado 80231
Vice President of the Manager/Mutual Fund Accounting; an officer of
other Oppenheimer funds; 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: 31
3410 South Galena Street, Denver, Colorado 80231
Vice President of the Manager/Mutual Fund Accounting, an officer of
other Oppenheimer funds; 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.
Eileen Rominger, Portfolio Manager; Age: 42
Two World Financial Center, 225 Liberty Street, New York, New York
10080
Managing Director of Oppenheimer Capital.
Remuneration of Directors. All officers of the Fund and Ms.
Macaskill, a Director, are officers or directors of the Manager and
receive no salary or fee from the Fund. The remaining Directors of
the Fund received the total amounts shown below from (i) the Fund
during its fiscal year ended October 31, 1996, and (ii) other
investment companies (or series thereof) managed by the Manager and
the Sub-Adviser, estimated to be paid during the calendar year
ended December 31, 1996.
Pension or
Retirement
Aggregate Benefits Estimated Total
Compensation Accrued as Annual Compensation
from the Part of Fund Benefits Upon From Fund
Name of Person Fund Expenses Retirement Complex(1)
Paul Y. Clinton $6,632 None None $90,225
Thomas W. Courtney $6,632 None None $87,525
Lacy B. Herrmann $6,632 None None $90,225
George Loft $6,632 None None $95,700
(1)For the purpose of the chart above, "Fund Complex" includes the
Fund, the other Oppenheimer Quest Funds, the Rochester Funds and
three other funds advised by the Sub-Adviser (the Sub-Adviser
Funds ). For these purposes, each series constitutes a separate
fund. Messrs. Clinton, Courtney and Herrman served as directors or
trustees of two Sub-Adviser Funds, for which they are to receive
$38,550, $35,850 and $38,550, respectively, and Mr. Loft served as
a director or trustee of three Sub-Adviser Funds, for which he is
to receive $44,025.
Major Shareholders. As of November 18, 1996, no person
owned of record or was known by the Fund to own beneficially 5% or
more of the Fund's outstanding Class A, Class B or Class C shares
except: Unified Advisers, Inc. as agent for Oppenheimer Quest Value
Fund, Inc., 429 North Pennsylvania Street, Indianapolis, Indiana
46204-1873, which owned of record 2,879,194.454 Class A shares
(approximately 11.81% of the Class A shares then outstanding). As
of the date of this Statement of Additional Information, the
Manager was the sole record and beneficial holder of Class Y
shares.
The Manager and its Affiliates. The Manager is wholly-owned by
Oppenheimer Acquisition Corp. ("OAC"), a holding company controlled
by Massachusetts Mutual Life Insurance Company. 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 a Director of the Fund.
The Manager and the Fund have a Code of Ethics. In addition
to having its own Code of Ethics, the Sub-Adviser is obligated to
report to the Manager any violations of the Sub-Adviser s Code of
Ethics relating to the Fund. The Code of Ethics is designed to
detect and prevent improper personal trading by certain employees,
including the Fund's portfolio manager, who is an employee of the
Sub-Adviser, that would compete with or take advantage of the Funds
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. The
Sub-Adviser previously served as the Fund's investment adviser from
the Fund's inception (April 30, 1980) to 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 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, except that each
class of shares of the Fund will pay the Manager an annual fee for
calculating the Fund s daily net asset value at the annual rate of
$55,000, plus reimbursement for out-of-pocket expenses.
Expenses not assumed by the Manager under the Investment
Advisory Agreement or paid by the Distributor under the General
Distributor's Agreement will be paid by the Fund. Certain expenses
are further allocated to certain classes of shares of a series as
explained in the Prospectus and under "How to Buy Shares," below.
The Investment Advisory Agreement lists examples of expenses paid
by the Fund, including interest, taxes, brokerage commissions,
insurance premiums, fees of non-interested Directors, legal and
audit expenses, transfer agent and custodian expenses, share
issuance costs, certain printing and registration costs, and non-
recurring expenses, including litigation. For the fiscal period
November 24, 1995 (when the Manager became the investment adviser
to the Fund) to October 31, 1996 (the "Fiscal Period"), the Fund
paid to the Manager $3,995,867 in management fees and paid or
accrued accounting service fees to the Manager in the amount of
$54,047.
The Investment Advisory Agreement contains no expense
limitation. However, because of state regulations limiting fund
expenses that previously applied, the Manager had voluntarily
undertaken that the Fund s total expenses 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) would
not exceed the most stringent state regulatory limitation
applicable to the Fund. Due to changes in federal securities laws,
such state regulations no longer apply and the Manager s
undertaking is therefore inapplicable and has been withdrawn.
During the Fund s last fiscal year, the Fund s expenses did not
exceed the most stringent state regulatory limit and the voluntary
undertaking was not invoked.
The Investment Advisory Agreement provides that in the absence
of 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
for any loss resulting from good faith errors or omissions 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 adviser or general distributor.
If the Manager shall no longer act as investment adviser to a Fund,
the right of the Fund to use "Oppenheimer" as part of its name may
be withdrawn.
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 Funds provided that the Fund is not
required to pay any additional fees for such services. The Manager
has retained the Sub-Adviser pursuant to a separate Subadvisory
Agreement, dated as of November 22, 1995, with respect to the Fund
as described below.
Fees Paid Under the Prior Investment Advisory Agreement. The
Sub-Adviser served as investment adviser to the Fund from the
inception of the Fund (April 30, 1980) until November 22, 1995.
Under the prior Investment Advisory Agreement, the total advisory
fees accrued or paid by the Fund were $2,479,887 for the fiscal
year ended October 31, 1994, $2,893,435 for the fiscal year ended
October 31, 1995 and $204,232 for the fiscal period from November
1, 1995 to November 22, 1995 (the "Interim Period").
The Subadvisory Agreement. The Subadvisory Agreement provides
that the Sub-Adviser shall regularly provide investment advice with
respect to the Fund and invest and reinvest cash, securities and
the property comprising the assets of the Fund. Under the
Subadvisory Agreement, the Sub-Adviser 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 Investment
Company 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 the Sub-
Adviser 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 from 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, the Sub-Adviser 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.
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 its Class A, Class B, Class C and Class Y 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.
During the Fund's fiscal year ended October 31, 1996, the aggregate
amount of sales charges on sales of the Fund's Class A shares was
$1,599,423, of which the Distributor and affiliated brokers
retained $584,527; no amounts were retained by OCC Distributors,
the Fund's distributor prior to November 22, 1995, with respect to
the Interim Period. During the fiscal year ended October 31, 1996,
the Distributor received contingent deferred sales charges of
$166,112, upon redemption of Class B shares, and received $7,700,
upon redemption of Class C shares. 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.
The Transfer Agent. OppenheimerFunds Services acts as the
Fund's Transfer Agent pursuant to a Transfer Agency and Service
Agreement dated November 22, 1995. Pursuant to the Agreement, the
Transfer Agent is responsible for maintaining the Fund's
shareholder registry and shareholder accounting records, and for
shareholder servicing and administrative functions. As
compensation therefor, the Fund is obligated to pay the Transfer
Agent an annual maintenance fee for each Fund shareholder account
and reimburse the Transfer Agent for its out of pocket expenses.
Shareholder Servicing Agent for Certain Shareholders.
Unified Management Corporation (1-800-346-4601) is the shareholder
servicing agent of the Fund for former shareholders of the AMA
Family of Funds and clients of AMA Investment Advisers, Inc. (which
had been the investment adviser of AMA Family of Funds) who acquire
shares of any Oppenheimer Quest Fund, and for (i) former
shareholders of the Unified Funds and Liquid Green Trusts, (ii)
accounts which participated or participate in a retirement plan for
which Unified Investment Advisers, Inc. or an affiliate acts as
custodian or trustee, (iii) accounts which have a Money Manager
brokerage account, and (iv) other accounts for which Unified
Management Corporation is the dealer of record.
Brokerage Policies of the Fund
Brokerage Provisions of the Investment Advisory and Subadvisory
Agreement. The Investment Advisory Agreement contains provisions
relating to the selection of broker-dealers ("brokers") for the
Fund's portfolio transactions. The Manager and the Sub-Adviser 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 Sub-Adviser, 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 the Sub-Adviser.
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 Sub-Adviser that the commissions are
reasonable in relation to the services provided, viewed either in
terms of that transaction or the Manager s or the Sub-Adviser 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 Sub-Adviser 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 Sub-Adviser 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 rules of the
Securities and Exchange Commission ("SEC").
In addition, the Subadvisory Agreement permits the Sub-Adviser
to enter into soft dollar arrangements through the agency of third
parties to obtain services for the Fund. Pursuant to these
arrangements, the Sub-Adviser 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.
Description of Brokerage Practices. 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.
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 the Sub-Adviser;
information received in connection with directed orders of other
accounts managed by the Manager or the Sub-Adviser or its
affiliates may or may not be useful to one or more of the Funds.
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 the Sub-Adviser, to make available additional views for
consideration and comparison, and to enable the Manager or the Sub-
Adviser to obtain market information for the valuation of
securities held in the Fund's assets.
Sales of shares of the Fund, subject to applicable rules
covering the Distributor's activities in this area, will also be
considered as a factor in the direction of portfolio transactions
to dealers, but only in conformity with the price, execution and
other considerations and practices discussed above. The Fund will
not purchase any securities from or sell any securities to an
affiliated broker-dealer including Oppenheimer & Co., Inc.
("Opco"), an affiliate of the Sub-Adviser, acting as principal for
its own account.
The Sub-Adviser currently serves as investment manager to a
number of clients, including other investment companies, and may in
the future act as investment manager or advisor to others. It is
the practice of the Sub-Adviser to cause purchase or sale
transactions to be allocated among the Fund and others whose assets
it manages in such manner as it deems equitable. In making such
allocations among the Fund and other client accounts, the main
factors considered are the respective investment objectives, the
relative size of portfolio holdings of the same or comparable
securities, the availability of cash for investment, the size of
investment commitments generally held and the opinions of the
persons responsible for managing the portfolios of each Fund and
other client accounts.
When orders to purchase or sell the same security on identical
terms are placed by more than one of the funds and/or other
advisory accounts managed by the Sub-Adviser or its affiliates, the
transactions are generally executed as received, although a fund or
advisory account that does not direct trades to a specific broker
("free trades") usually will have its order executed first.
Purchases are combined where possible for the purpose of
negotiating brokerage commissions, which in some cases might have
a detrimental effect on the price or volume of the security in a
particular transaction as far as the Fund is concerned. Orders
placed by accounts that direct trades to a specific broker will
generally be executed after the free trades. All orders placed on
behalf of the Fund are considered free trades. However, having an
order placed first in the market does not necessarily guarantee the
most favorable price.
The following table presents information as to the allocation
of brokerage commissions paid by the Fund for the fiscal years
ended October 31, 1994, 1995 and 1996:
<TABLE>
<CAPTION>
For the Total Brokerage Commissions Total Amount of Transactions
Fiscal Year Brokerage Paid to Opco Where Brokerage Commissions
Ended Commissions Dollar Paid to Opco
October 31, Paid Amounts % Dollar Amounts %
<S> <C> <C> <C> <C> <C>
1994 $318,014 $162,914 51.2% $103,314,410 53.2%
1995 $309,310 $156,970 50.7% $ 99,572,945 52.1%
1996 $387,892 $159,127 41% $135,054,378 39.4%
</TABLE>
During the Fund's fiscal year ended October 31, 1996, $25,392
was paid by the Fund to brokers as commissions in return for
research services; the aggregate dollar amount of those
transactions was $14,103,478.
Performance of the Fund
Total Return Information. As described in the Prospectus, from
time to time the "average annual total return," "cumulative total
return" and "total return at net asset value" of an investment in
a class of shares of the Fund may be advertised. An explanation of
how these total returns are calculated for each class and the
components of those calculations is set forth below. No
performance information is presented below for Class Y shares
because no Class Y shares were publicly offered during the fiscal
year ended October 31, 1996.
The Fund's advertisements of its performance data must, under
applicable rules of the SEC, include the average annual total
returns for each advertised class of shares of the Fund for the 1,
5, and 10-year periods (or the life of the class, if less) ending
as of the most recently-ended calendar quarter prior to the
publication of the advertisement. This enables an investor to
compare the Fund's performance to the performance of other funds
for the same periods. However, a number of factors should be
considered before using such information as a basis for comparison
with other investments. An investment in the Fund is not insured;
its returns and share prices are not guaranteed and normally will
fluctuate on a daily basis. When redeemed, an investor's shares
may be worth more or less than their original cost. Returns for
any given past period are not a prediction or representation by the
Fund of future returns. The returns of Class A, Class B and Class
C shares of the Fund are affected by portfolio quality, the type of
investments the Fund holds and its operating expenses allocated to
the particular class.
Average Annual Total Returns. The "average annual total
return" of each class is an average annual compounded rate of
return for each year in a specified number of years. It is the
rate of return based on the change in value of a hypothetical
initial investment of $1,000 ("P" in the formula below) held for a
number of years ("n") to achieve an Ending Redeemable Value ("ERV")
of that investment, according to the following formula:
1/n
(ERV)
(---) -1 = Average Annual Total Return
( P )
The average annual total returns on an investment in Class A
shares of the Fund (using the method described above) for the one,
five and ten year periods ended October 31, 1996 and for the period
from April 30, 1980 (commencement of operations) to October 31,
1996 were 21.01%, 16.08%, 12.81% and 18.65%, respectively.
The average annual total return on Class B shares for the one-
year period ended October 31, 1996 and for the period September 1,
1993 (commencement of the public offering of the class) through
October 31, 1996 were 22.76% and 16.36%, respectively.
The average annual total return on Class C shares for the one-
year period ended October 31, 1996 and for the period September 1,
1993 (commencement of the public offering of the class) through
October 31, 1996 were 26.73% and 16.79%, respectively.
Cumulative Total Returns. The cumulative "total return"
calculation measures the change in value of a hypothetical
investment of $1,000 over an entire period of years. Its
calculation uses some of the same factors as average annual total
return, but it does not average the rate of return on an annual
basis. Cumulative total return is determined as follows:
ERV - P
------- = Total Return
P
In calculating total returns for Class A shares, the current
maximum sales charge of 5.75% (as a percentage of the offering
price) is deducted from the initial investment ("P") (unless the
return is shown at net asset value, as described below). Prior to
November 24, 1995, the maximum initial sales charge on Class A
shares was 5.50%. For Class B shares, the payment of the
applicable contingent deferred sales charge (5% for the first year,
4% for the second year, 3% for the third and fourth years, 2% for
the fifth year, 1% for the sixth year, and none thereafter) is
applied to the investment result for the period shown (unless the
total return is shown at net asset value, as described below). For
Class C shares, the 1.0% contingent deferred sales charge is
applied to the investment result for the one-year period (or less).
Class Y shares are not subject to a sales charge. Total returns
also assume that all dividends and capital gains distributions
during the period are reinvested to buy additional shares at net
asset value per share, and that the investment is redeemed at the
end of the period.
The "cumulative total return" on Class A shares for the period
from April 30, 1980 (commencement of operations) to October 31,
1996 was 1580.36%. The cumulative total return on Class B shares
for the period from September 1, 1993 (commencement of the public
offering of the class) through October 31, 1996 was 61.59%. The
cumulative total return on Class C shares for the period from
September 1, 1993 (commencement of the public offering of the
class) through October 31, 1996 was 63.47%.
Total Returns at Net Asset Value. From time to time the
Fund may also quote an "average annual total return at net asset
value" or a "cumulative total return at net asset value" for Class
A, Class B, Class C or Class Y shares. Each is based on the
difference in net asset value per share at the beginning and the
end of the period for a hypothetical investment in that class of
shares (without considering front-end or contingent deferred sales
charges) and takes into consideration the reinvestment of dividends
and capital gains distributions.
The average annual total returns at net asset value on the
Fund's Class A shares for the one, five and ten year periods ended
October 31, 1996 and for the period from April 30, 1980
(commencement of operations) to October 31, 1996 were 28.39%,
17.47%, 13.48%, and 19.07%, respectively. The cumulative total
return at net asset value on the Fund's Class A shares for the
period from April 30, 1980 (commencement of operations) through
October 31, 1996 was 1682.88%.
The average annual total returns at net asset value on the
Fund's Class B shares for the one year period ended October 31,
1996 and for the period from September 1, 1993 (commencement of the
public offering of the class) through October 31, 1996 were 27.76%
and 16.82%, respectively. The cumulative total return at net asset
value on the Fund's Class B shares for the period September 1, 1993
(commencement of the public offering of the class) through October
31, 1996 was 63.59%.
The average annual total returns at net asset value on the
Fund's Class C shares for the one-year period ended October 31,
1996 and for the period September 1, 1993 (commencement of the
public offering of the class) through October 31, 1996 were 27.73%
and 16.79%, respectively. The cumulative total return at net asset
value on the Fund's Class C shares for the period September 1, 1993
(commencement of the public offering of the class) through October
31, 1996 was 63.47%.
Other Performance Comparisons. From time to time the Fund may
publish the ranking of its Class A, Class B, Class C or Class Y
shares by Lipper Analytical Services, Inc. ("Lipper"), a widely-
recognized independent mutual fund monitoring service. Lipper
monitors the performance of regulated investment companies,
including the Fund, and ranks their performance for various periods
based on categories relating to investment objectives. The
performance of the Fund is ranked against (i) all other funds, (ii)
all other capital appreciation funds and (iii) all other capital
appreciation funds in a specific size category. The Lipper
performance rankings are based on total returns that include the
reinvestment of capital gain distributions and income dividends but
do not take sales charges or taxes into consideration.
From time to time the Fund may publish the ranking of the
performance of its Class A, Class B, Class C or Class Y shares by
Morningstar, Inc., an independent mutual fund monitoring service
that ranks mutual funds, including the Fund, monthly in broad
investment categories (domestic stock, international stock, taxable
bond, municipal bond and hybrid) based on risk-adjusted investment
return. Investment return measures a fund's three, five and ten-
year average annual total returns (when available) in excess of 90-
day U.S. Treasury bill returns after considering sales charges and
expenses. Risk measures fund performance below 90-day U.S.
Treasury bill monthly returns. Risk and investment return are
combined to produce star rankings reflecting performance relative
to the average fund in a fund's category. Five stars is the
"highest" ranking (top 10%), four stars is "above average" (next
22.5%), three stars is "average" (next 35%), two stars is "below
average" (next 22.5%) and one star is "lowest" (bottom 10%).
Morningstar ranks the Fund in relation to other rated capital
appreciation funds. Rankings are subject to change. From time to
time the Fund may include its advertisements and sales literature
performance information about the Fund cited in newspapers and
other periodicals, such as The New York Times, which may include
performance quotations from other sources, including Lipper.
The total return on an investment in the Fund's Class A, Class
B, Class C or Class Y shares may be compared with performance for
the same period of the S&P 500 Index as described in the
Prospectus. The performance of the index includes a factor for the
reinvestment of income dividends, but does not reflect reinvestment
of capital gains, expenses or taxes.
The performance of the Fund's Class A, Class B, Class C or
Class Y shares may also be compared in publications to (i) the
performance of various market indices or to other investments for
which reliable performance data is available, and (ii) to averages,
performance rankings or other benchmarks prepared by recognized
mutual fund statistical services.
Total return information may be useful to investors in
reviewing the performance of the Fund's Class A, Class B, Class C
or Class Y shares. However, when comparing total return of an
investment in Class A, Class B, Class C and Class Y shares of the
Fund, a number of factors should be considered before using such
information as a basis for comparison with other investments. For
example investor may also wish to compare the Fund's Class A, Class
B, Class C or Class Y return to the returns on fixed income
investments available from banks and thrift institutions, such as
certificates of deposit, ordinary interest-paying checking and
savings accounts, and other forms of fixed or variable time
deposits, and various other instruments such as Treasury bills.
However, the Fund's returns and share price are not guaranteed or
insured by the FDIC or any other agency and will fluctuate daily,
while bank depository obligations may be insured by the FDIC and
may provide fixed rates of return, and Treasury bills are
guaranteed as to principal and interest by the U.S. government.
From time to time, the Fund's Manager may publish rankings or
ratings of the Manager (or Transfer Agent) or the investor services
provided by them to shareholders of the Oppenheimer funds, other
than performance rankings of the Oppenheimer funds themselves.
Those ratings or rankings of shareholder/investor services by third
parties may compare the Oppenheimer funds' services to those of
other mutual fund families selected by the rating or ranking
services and may be based upon the opinions of the rating or
ranking service itself, based on its research or judgment, or based
upon surveys of investors, brokers, shareholders or others.
Distribution and Service Plans
The Fund has adopted separate Amended and Restated
Distribution and Service Plans and Agreements for Class A, Class B
and Class C shares of the Fund under Rule 12b-1 of the Investment
Company Act pursuant to which the Fund will compensate the
Distributor for all or a portion of its costs incurred in
connection with the distribution and/or servicing of the shares of
that class, as described in the Prospectus. No such Plan has been
adopted for Class Y shares. Each Plan has been approved by a vote
of (i) the Board of Directors of the Fund, including a majority of
the Directors who are not "interested persons" (as defined in the
Investment Company Act) of the Fund and who have no direct or
indirect financial interest in the operation of the Fund's 12b-1
plans or in any related agreement ("Independent Directors"), cast
in person at a meeting on June 22, 1995 called for the purpose,
among others, of voting on that Plan, and (ii) the holders of a
"majority" (as defined in the Investment Company Act) of the shares
of each class at a meeting on November 3, 1995.
In addition, under the Plans the Manager and the Distributor,
in their sole discretion, from time to time may use their own
resources (which, in the case of the Manager, may include profits
from the advisory fee it receives from the Fund) to make payments
to brokers, dealers or other financial institutions (each is
referred to as a "Recipient" under the Plans) for distribution and
administrative services they perform at no cost to the Fund. 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.
Unless terminated as described below, each plan continues in
effect from year to year but only as long as such continuance is
specifically approved at least annually by the Fund's Board of
Directors and its "Independent Directors" by a vote cast in person
at a meeting called for the purpose of voting on such continuance.
Any Plan may be terminated at any time by the vote of a majority of
the Independent Directors or by the vote of the holders of a
"majority" (as defined in the Investment Company Act) of the
outstanding shares of that class. No Plan may be amended to
increase materially the amount of payments to be made unless such
amendment is approved by shareholders of the class affected by the
amendment. In addition, because Class B shares of the Fund
automatically convert into Class A shares after six years, the Fund
is required by a Securities and Exchange Commission rule to obtain
the approval of Class B as well as Class A shareholders for a
proposed material amendment to the Class A Plan that would
materially increase payments under the 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 Board of Directors and
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 payments were made and the
identity of each Recipient that received any such payment. The
reports shall also include the distribution costs for that quarter,
and such costs for previous fiscal periods that are carried
forward, as explained in the Prospectus and below. 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 the 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 did 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
requirement for a minimum amount.
The Plans allow the service fee payments to be paid by the
Distributor to Recipients in advance for the first year shares are
outstanding, and thereafter on a quarterly basis, as described in
the Prospectus. The advance payment is based on the net assets of
the Class A, Class B and Class C shares sold. An exchange of
shares does not entitle the Recipient to an advance service fee
payment. In the event Class A, Class B or Class C shares are
redeemed during the first year such shares are outstanding, the
Recipient will be obligated to repay a pro rata portion of such
advance payment to the Distributor.
Although the Plans permit the Distributor to retain both the
asset-based sales charge and the service fee, or to pay Recipients
the service fee on a quarterly basis, without payment in advance,
the Distributor presently intends to pay the service fee to
Recipients in the manner described above. A minimum holding period
may be established from time to time under the Plans by the Board.
Initially, the Board has set no minimum holding period. All
payments under the Class B Plan and Class C Plan are subject to the
limitations imposed by the Conduct Rules of the National
Association of Securities Dealers, Inc. on payments of asset-based
sales charges and service fees.
For the Fiscal Period, (i) payments under the Plan for Class
A shares totaled $1,688,380, all of which was paid by the
Distributor to Recipients including $7,893 that was paid to an
affiliate of the Distributor, (ii) payments made under the Class B
Plan totaled $673,147, of which $576,105 was retained by the
Distributor and $299 was paid to a dealer affiliated with the
Distributor and (iii)payments made under the Class C plan amounted
to $177,281, of which $118,643 was retained by the Distributor.
The Plans provide for the Distributor to be compensated at a flat
rate, whether the Distributor's expenses are more or less than the
amounts paid by the Fund during that period. The asset-based sales
charges paid to the Distributor by the Fund under the Plans are
intended to allow the Distributor to recoup the cost of sales
commissions paid to authorized brokers and dealers at the time of
sale, plus financing costs, as described in the Prospectus. Such
payments may also be used to pay for the following expenses in
connection with the distribution of shares: (i) financing the
advance of the service fee payment to Recipients under the Plan,
(ii) compensation and expenses of personnel employed by the
Distributor to support distribution of shares, and (iii) costs of
sales literature, advertising and prospectuses (other than those
furnished to current shareholders).
The Prior Plans. From the inception date of the Fund (on
April 30, 1980) through to and including November 22, 1995, OCC
Distributors (formerly known as Quest for Value Distributors)
served as Distributor to the Fund. OCC Distributors provided
distribution services for the Fund's Class A, Class B and Class C
shares pursuant to separate plans adopted for each class under the
Investment Company Act (the "Prior Plans"). The total distribution
fees accrued or paid by Class A, Class B and Class C shares of the
Fund under the Prior Plans for the Interim Period were $6,964,
$24,112 and $6,191, respectively.
ABOUT YOUR ACCOUNT
How To Buy Shares
Alternative Sales Arrangements - Class A, Class B and Class C
Shares. The availability of three classes of shares permits an
individual investor to choose the method of purchasing shares that
is more beneficial to an investor depending on the amount of the
purchase, the length of time the investor expects to hold shares
and other relevant circumstances. Investors should understand that
the purpose and function of the deferred sales charge and asset-
based sales charge with respect to Class B and Class C shares are
the same as those of the initial sales charge with respect to Class
A shares. Any salesperson or other person entitled to receive
compensation for selling Fund shares may receive different
compensation with respect to one class of shares than another. The
Distributor will generally not accept any order for $500,000 or
more of Class B shares or $1 million or more of Class C shares on
behalf of a single investor (not including dealer "street name" or
omnibus accounts) because generally it will be more advantageous
for that investor to purchase Class A shares of the Fund instead.
A fourth class of shares, may be purchased only by certain
institutional investors at net asset value per shares (the "Class
Y Shares").
The four classes of shares each represent an interest in the
same portfolio investments of the Fund. However, each class has
different shareholder privileges and features. The net income
attributable to Class B and Class C shares and the dividends
payable on Class B and Class C shares will be reduced by
incremental expenses borne solely by that class, respectively,
including the asset-based sales charges to which Class B and Class
C shares are subject.
The conversion of Class B shares to Class A shares after six
years is subject to the continuing availability of a private letter
ruling from the Internal Revenue Service, or an opinion of counsel
or tax adviser, to the effect that the conversion of Class B shares
does not constitute a taxable event for the holder under Federal
income tax law. If such a revenue ruling or opinion is no longer
available, the automatic conversion feature may be suspended, in
which event no further conversions of Class B shares would occur
while such suspension remained in effect. Although Class B shares
could then be exchanged for Class A shares on the basis of relative
net asset value of the two classes, without the imposition of a
sales charge or fee, such exchange could constitute a taxable event
for the holder, and absent such exchange, Class B shares might
continue to be subject to the asset-based sales charge for longer
than six years.
The methodology for calculating the net asset value, dividends
and distributions of the Fund's Class A, Class B, Class C and Class
Y shares recognizes two types of expenses. General expenses that
do not pertain specifically to any class are allocated pro rata to
the shares of each class, based on the percentage of the net assets
of such class to the Fund's total net assets, and then equally to
each outstanding share within a given class. Such general expenses
include (i) management fees, (ii) legal, bookkeeping and audit
fees, (iii) printing and mailing costs of shareholder reports,
Prospectuses, Statements of Additional Information and other
materials for current shareholders, (iv) fees to Independent
Directors, (v) custodian expenses, (vi) share issuance costs, (vii)
organization and start-up costs, (viii) interest, taxes and
brokerage commissions, and (ix) non-recurring expenses, such as
litigation costs. Other expenses that are directly attributable to
a class are allocated equally to each outstanding share within that
class. Such expenses include (a) Distribution Plan fees, (b)
incremental transfer and shareholder servicing agent fees and
expenses, (c) registration fees and (d) shareholder meeting
expenses, to the extent that such expenses pertain to a specific
class rather than to the Fund as a whole.
Determination of Net Asset Values Per Share. The net asset values
per share of Class A, Class B, Class C and Class Y shares of the
Fund are determined as of the close of business of The New York
Stock Exchange (the "Exchange") on each day that the Exchange is
open, by dividing the value of the Fund's net assets attributable
to that class by the total number of Fund shares of that class
outstanding. The Exchange normally closes at 4:00 P.M. New York
time, but may close earlier on some other days (for example, in
case of weather emergencies or on days falling before a holiday).
The Exchange's most recent annual announcement (which is subject to
change) states that it will close on New Year's Day, President's
Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving Day and Christmas Day. It may also close on other
days. The Fund may invest a substantial portion of its assets in
foreign securities primarily listed on foreign exchanges which may
trade on Saturdays or customary U.S. business holidays on which the
Exchange is closed. Because the Fund's net asset values will not
be calculated on those days, the Fund's net asset value per share
may be significantly affected on such days when shareholders may
not purchase or redeem shares.
The Fund's Board of Directors has established procedures for
the valuation of the Fund's securities, generally as follows: (i)
equity securities traded on a U.S. securities exchange or on the
Automated Quotation System ("NASDAQ") of the Nasdaq Stock Market,
Inc. for which last sale information is regularly reported are
valued at the last reported sale price on their primary exchange or
NASDAQ that day (or, in the absence of sales that day, at values
based on the last sale prices of the preceding trading day, or
closing bid prices that day); (ii) securities traded on a foreign
securities exchange are valued generally at the last sale price
available to the pricing service approved by the Fund's Board of
Directors or to the Manager as reported by the principal exchange
on which the security is traded; or at the mean between "bid" and
"asked" prices obtained from the principal exchange or two active
market makers in the security on the basis of reasonable inquiry;
(iii) long-term debt securities having a remaining maturity in
excess of 60 days are valued based on the mean between the "bid"
and "asked" prices determined by a portfolio pricing service
approved by the Fund's Board of Directors or obtained by the
Manager from two active market makers in the security on the basis
of reasonable inquiry; (iv) debt instruments having a maturity of
more than 397 days when issued, and non-money market type
instruments having a maturity of 397 days or less when issued,
which have a remaining maturity of 60 days or less are valued at
the mean between the "bid" and "asked" prices determined by a
pricing service approved by the Fund's Board of Directors or
obtained from active market makers in the security on the basis of
reasonable inquiry; (v) money market debt securities that had a
maturity of less than 397 days when issued that have a remaining
maturity of 60 days or less are valued at cost, adjusted for
amortization of premiums and accretion of discounts; and (vi)
securities (including restricted securities) not having readily-
available market quotations are valued at fair value determined
under the Board's procedures. If the Manager is unable to locate
two market makers willing to give quotes (see (ii), (iii) and (iv)
above), the security may be priced at the mean between the "bid"
and "asked" prices provided by a single active market maker (which
in certain cases may be the bid price if no ask price is
available).
In the case of U.S. Government securities and mortgage-backed
securities, where last sale information is not generally available,
such pricing procedures may include "matrix" comparisons to the
prices for comparable instruments on the basis of quality, yield,
maturity and other special factors involved. The Manager may use
pricing services approved by the Board of Trustees to price any of
the types of securities described above to price U.S. Government
securities, mortgage-backed securities, foreign government
securities and corporate bonds. The Manager will monitor the
accuracy of such pricing services, which may include comparing
prices used for portfolio evaluation to actual prices of selected
securities.
Trading in securities on European and Asian exchanges and
over-the-counter markets is normally completed before the close of
the Exchange. Events affecting the values of foreign securities
traded in such securities markets that occur between the time their
prices are determined and the close of the Exchange will not be
reflected in the Fund's calculation of its net asset value unless
the Board of Directors or the Manager, under procedures established
by the Board, determines that the particular event is likely to
effect a material change in the value of such security. Foreign
currency, including forward contracts, will be valued at the
closing price in the London foreign exchange market that day as
provided by a reliable bank, dealer or pricing service. The values
of securities denominated in foreign currency will be converted to
U.S. dollars at the closing price in the London foreign exchange
market that day as provided by a reliable bank, dealer or pricing
service.
Puts, calls and futures are valued at the last sale price on
the principal exchanges on which they are traded or on NASDAQ, as
applicable, as determined by a pricing service approved by the
Board of Directors or by the Manager. If there were no sales that
day, value shall be the last sale price on the preceding trading
day if it is within the spread of the closing bid and asked prices
on the principal exchange or on NASDAQ on the valuation date, or,
if not, value shall be the closing bid price on the principal
exchange or on NASDAQ on the valuation date. If the put, call or
future is not traded on an exchange or on NASDAQ, it shall be
valued at the mean between bid and asked prices obtained by the
Manager from two active market makers (which in certain cases may
be the bid price if no asked price is available).
When the Fund writes an option, an amount equal to the premium
received is included in the Fund's Statement of Assets and
Liabilities as an asset, and an equivalent credit is included in
the liability section. Credit is adjusted ("marked-to-market") to
reflect the current market value of the option. In determining the
Fund's gain on investments, if a call or put written by the Fund is
exercised, the proceeds are increased by the premium received. If
a call or put written by the Fund expires, the Fund has a gain in
the amount of the premium; if the Fund enters into a closing
purchase transaction, it will have a gain or loss depending on
whether the premium received was more or less than the cost of the
closing transaction. If the Fund exercises a put it holds, the
amount the Fund receives on its sale of the underlying investment
is reduced by the amount of premium paid by the Fund.
AccountLink. When shares are purchased through AccountLink, each
purchase must be at least $25.00. Shares will be purchased on the
regular business day the Distributor is instructed to initiate the
Automated Clearing House ("ACH") transfer to buy the shares.
Dividends will begin to accrue on shares purchased by the proceeds
of ACH transfers on the business day the Fund receives Federal
Funds for the purchase through the ACH system before the close of
The New York Stock Exchange. The Exchange normally closes at 4:00
P.M., but may close earlier on certain days. If Federal Funds are
received on a business day after the close of the Exchange, the
shares will be purchased and dividends will begin to accrue on the
next regular business day. The proceeds of ACH transfers are
normally received by the Fund three days after the transfers are
initiated. The Distributor and the Fund are not responsible for
any delays in purchasing shares resulting from delays in ACH
transmissions.
Reduced Sales Charges. As discussed in the Prospectus, a reduced
sales charge rate may be obtained for Class A shares under Rights
of Accumulation and Letters of Intent because of the economies of
sales efforts and reduction in expenses realized by the Distributor
or dealer or broker making such sales. No sales charge is imposed
in certain other circumstances described in the Prospectus because
the Distributor incurs little or no selling expenses. The term
"immediate family" refers to one's spouse, children, grandchildren,
parents, grandparents, parents-in-law, aunts, uncles, nieces,
nephews, sons-and daughters-in-law, siblings, a sibling's spouse
and a spouse's siblings.
The Oppenheimer Funds. The Oppenheimer funds are those
mutual funds for which the Distributor acts as the distributor or
the sub-distributor and include the following:
Oppenheimer Municipal Bond Fund
Oppenheimer New York Municipal Fund
Oppenheimer California Municipal Fund
Oppenheimer Intermediate Municipal Fund
Oppenheimer Insured Municipal Fund
Oppenheimer Main Street California Municipal Fund
Oppenheimer Florida Municipal Fund
Oppenheimer Pennsylvania Municipal Fund
Oppenheimer New Jersey Municipal Fund
Oppenheimer Fund
Oppenheimer Discovery Fund
Oppenheimer Capital Appreciation Fund
Oppenheimer Growth Fund
Oppenheimer Equity Income Fund
Oppenheimer Value Stock Fund
Oppenheimer Asset Allocation Fund
Oppenheimer Total Return Fund, Inc.
Oppenheimer Main Street Income & Growth Fund
Oppenheimer High Yield Fund
Oppenheimer Champion Income Fund
Oppenheimer Bond Fund
Oppenheimer U.S. Government Trust
Oppenheimer Limited-Term Government Fund
Oppenheimer Global Fund
Oppenheimer Global Emerging Growth Fund
Oppenheimer Global Growth & Income Fund
Oppenheimer Gold & Special Minerals Fund
Oppenheimer Strategic Income Fund
Oppenheimer Strategic Income & Growth Fund
Oppenheimer International Bond Fund
Oppenheimer International Growth Fund
Oppenheimer Enterprise Fund
Oppenheimer Quest Opportunity Value Fund
Oppenheimer Quest Growth & Income Value Fund
Oppenheimer Quest Small Cap Value Fund
Oppenheimer Quest Officers Value Fund
Oppenheimer Quest Global Value Fund, Inc.
Oppenheimer Quest Value Fund, Inc.
Bond Fund Series - Oppenheimer Bond Fund for Growth
Rochester Portfolio Series - Limited-Term New York Municipal
Fund*
Rochester Fund Municipals*
Oppenheimer Disciplined Value Fund
Oppenheimer Allocation Fund
Oppenheimer LifeSpan Balanced Fund
Oppenheimer LifeSpan Income Fund
Oppenheimer LifeSpan Growth Fund
Oppenheimer Developing Markets Fund
and the following "Money Market Funds":
Oppenheimer Money Market Fund, Inc.
Oppenheimer Cash Reserves
Centennial Money Market Trust
Centennial Tax Exempt Trust
Centennial Government Trust
Centennial New York Tax Exempt Trust
Centennial California Tax Exempt Trust
Centennial America Fund, L.P.
Daily Cash Accumulation Fund, Inc.
________________________-
* Shares of the Fund are not presently exchangeable for shares of
this fund.
There is an initial sales charge on the purchase of Class A
shares of each of the Oppenheimer funds except Money Market Funds
(under certain circumstances described herein, redemption proceeds
of Money Market Fund shares may be subject to a contingent
deferred sales charge).
Letters of Intent. A Letter of Intent ("Letter") is the
investor's statement in writing to the Distributor of the intention
to purchase Class A and Class B shares (or shares of either class)
of the Fund (and other eligible Oppenheimer funds) during the 13-
month period from the investor's first purchase pursuant to the
Letter (the "Letter of Intent period"), which may, at the
investor's request, include purchases made up to 90 days prior to
the date of the Letter. The Letter states the investor's intention
to make the aggregate amount of purchases (excluding any purchases
made by reinvestment of dividends or distributions or purchases
made at net asset value without sales charge), which together with
the investor's holdings of such funds (calculated at their
respective public offering prices calculated on the date of the
Letter) will equal or exceed the amount specified in the Letter.
This enables the investor to count the shares to be purchased under
the Letter of Intent to obtain the reduced sales charge rate on
purchases of Class A shares of the Fund (and other Oppenheimer
funds) that applies under the Right of Accumulation to current
purchases of Class A shares. Each purchase of Class A shares under
the Letter will be made at the public offering price (including the
sales charge) that applies to a single lump-sum purchase of shares
in the amount intended to be purchased under the Letter.
In submitting a Letter, the investor makes no commitment to
purchase shares, but if the investor's purchases of shares within
the Letter of Intent period, when added to the value (at offering
price) of the investor's holdings of shares on the last day of that
period, do not equal or exceed the intended purchase amount, the
investor agrees to pay the additional amount of sales charge
applicable to such purchases, as set forth in "Terms of Escrow,"
below (as those terms may be amended from time to time). The
investor agrees that shares equal in value to 5% of the intended
purchase amount will be held in escrow by the Transfer Agent
subject to the Terms of Escrow. Also, the investor agrees to be
bound by the terms of the Prospectus, this Statement of Additional
Information and the Application used for such Letter of Intent, and
if such terms are amended, as they may be from time to time by the
Fund, that those amendments will apply automatically to existing
Letters of Intent.
For purchases of shares of the Fund and other Oppenheimer
funds by OppenheimerFunds prototype 401(k) plans under a Letter of
Intent, the Transfer Agent will not hold shares in escrow. If the
intended purchase amount under the Letter entered into by an
OppenheimerFunds prototype 401(k) plan is not purchased by the plan
by the end of the Letter of Intent period, there will be no
adjustment of commissions paid to the broker-dealer or financial
institution of record for accounts held in the name of that plan.
If the total eligible purchases made during the Letter of
Intent period do not equal or exceed the intended purchase amount,
the commissions previously paid to the dealer of record for the
account and the amount of sales charge retained by the Distributor
will be adjusted to the rates applicable to actual total purchases.
If total eligible purchases during the Letter of Intent period
exceed the intended purchase amount and exceed the amount needed to
qualify for the next sales charge rate reduction set forth in the
applicable prospectus, the sales charges paid will be adjusted to
the lower rate, but only if and when the dealer returns to the
Distributor the excess of the amount of commissions allowed or paid
to the dealer over the amount of commissions that apply to the
actual amount of purchases. The excess commissions returned to the
Distributor will be used to purchase additional shares for the
investor's account at the net asset value per share in effect on
the date of such purchase, promptly after the Distributor's receipt
thereof.
In determining the total amount of purchases made under a
Letter, shares redeemed by the investor prior to the termination of
the Letter of Intent period will be deducted. It is the
responsibility of the dealer of record and/or the investor to
advise the Distributor about the Letter in placing any purchase
orders for the investor during the Letter of Intent period. All
of such purchases must be made through the Distributor.
Terms of Escrow That Apply to Letters of Intent.
1. Out of the initial purchase (or subsequent purchases if
necessary) made pursuant to a Letter, shares of the Fund equal in
value up to 5% of the intended purchase amount specified in the
Letter shall be held in escrow by the Transfer Agent. For example,
if the intended purchase amount is $50,000, the escrow shall be
shares valued in the amount of $2,500 (computed at the public
offering price adjusted for a $50,000 purchase). Any dividends and
capital gains distributions on the escrowed shares will be credited
to the investor's account.
2. If the total minimum investment purchase amount specified
under the Letter is completed within the thirteen-month Letter of
Intent period, the escrowed shares will be promptly released to the
investor.
3. If, at the end of the thirteen-month Letter of Intent
period the total purchases pursuant to the Letter are less than the
intended purchase amount specified in the Letter, the investor must
remit to the Distributor an amount equal to the difference between
the dollar amount of sales charges actually paid and the amount of
sales charges which would have been paid if the total amount
purchased had been made at a single time. Such sales charge
adjustment will apply to any shares redeemed prior to the
completion of the Letter. If such difference in sales charges is
not paid within twenty days after a request from the Distributor or
the dealer, the Distributor will, within sixty days of the
expiration of the Letter, redeem the number of escrowed shares
necessary to realize such difference in sales charges. Full and
fractional shares remaining after such redemption will be released
from escrow. If a request is received to redeem escrowed shares
prior to the payment of such additional sales charge, the sales
charge will be withheld from the redemption proceeds.
4. By signing the Letter, the investor irrevocably
constitutes and appoints the Transfer Agent as attorney-in-fact to
surrender for redemption any or all escrowed shares.
5. The shares eligible for purchase under the Letter (or the
holding of which may be counted toward completion of a Letter)
include (a) Class A shares sold with a front-end sales charge or
subject to a Class A contingent deferred sales charge, (b) Class B
shares acquired subject to a contingent deferred sales charge, and
(c) Class A or Class B shares of other Oppenheimer funds acquired
in exchange for either (i) Class A shares of one of the other
Oppenheimer funds that were acquired subject to a Class A initial
or contingent deferred sales charge or (ii) Class B shares of one
of the other Oppenheimer funds that were acquired subject to a
contingent deferred sales charge.
6. Shares held in escrow hereunder will automatically be
exchanged for shares of another fund to which an exchange is
requested, as described in the section of the Prospectus entitled
"How to Exchange shares" and the escrow will be transferred to that
other fund.
Asset Builder Plans. To establish an Asset Builder Plan from a
bank account, a check (minimum $25) for the initial purchase must
accompany the application. Shares purchased by Asset Builder Plan
payments from bank accounts are subject to the redemption
restrictions for recent purchases described in "Shareholder Account
Rules and Policies" in the Prospectus. Asset Builder Plans also
enable shareholders of Oppenheimer Cash Reserves to use those
accounts for monthly automatic purchases of shares of up to four
other Oppenheimer funds.
There is a front-end sales charge on the purchase of certain
Oppenheimer funds, or a contingent deferred sales charge may apply
to shares purchased by Asset Builder payments. An application
should be obtained from the Distributor, completed and returned,
and a prospectus of the selected fund(s) should be obtained from
the Distributor or your financial advisor before initiating Asset
Builder payments. The amount of the Asset Builder investment may
be changed or the automatic investments may be terminated at any
time by writing to the Transfer Agent. A reasonable period
(approximately 15 days) is required after the Transfer Agent's
receipt of such instructions to implement them. The Fund reserves
the right to amend, suspend, or discontinue offering such plans at
any time without prior notice.
Cancellation of Purchase Orders. Cancellation of purchase orders
for the Fund's shares (for example, when a purchase check is
returned to the Fund unpaid) causes a loss to be incurred when the
net asset value of the Fund's shares on the cancellation date is
less than on the purchase date. That loss is equal to the amount
of the decline in the net asset value per share multiplied by the
number of shares in the purchase order. The investor is
responsible for that loss. If the investor fails to compensate the
Fund for the loss, the Distributor will do so. The Fund may
reimburse the Distributor for that amount by redeeming shares from
any account registered in that investor's name, or the Fund or the
Distributor may seek other redress.
Retirement Plans. In describing certain types of employee benefit
plans that may purchase Class A shares without being subject to the
Class A contingent differed sales charge, the term "employee
benefit plan" means any plan or arrangement, whether or not
"qualified" under the Internal Revenue Code, including, medical
savings accounts, payroll deduction plans, or similar plans in
which Class A shares are purchased by a fiduciary or other person
for the account of participants who are employees of a single
employer or of affiliated employers, if the Fund account is
registered in the name of the fiduciary or other person for the
benefit of participants in the plan.
The term "group retirement plan" means any qualified or non-
qualified retirement plan (including 457 plans, SEPs, SARSEPs,
403(b) plans, and SIMPLE plans) for employees of a corporation or
a sole proprietorship, members and employees of a partnership or
association or other organized group of persons (the members of
which may include other groups), if the group has made special
arrangements with the Distributor and all members of the group
participating in the plan purchase Class A shares of the Fund
through a single investment dealer, broker or other financial
institution designated by the group.
How to Sell Shares
Information on how to sell shares of the Fund is stated in the
Prospectus. The information below supplements the terms and
conditions for redemptions set forth in the Prospectus.
Involuntary Redemptions. The Fund's Board of Directors has
the right to cause the involuntary redemption of the shares held in
any Fund account if the aggregate net asset value of those shares
is less than $200 or such lesser amount as the Board may fix. The
Board of Directors will not cause the involuntary redemption of
shares in an account if the aggregate net asset value of the shares
has fallen below the stated minimum solely as a result of market
fluctuations. Should the Board elect to exercise this right, it
may also fix, in accordance with the Investment Company Act, and
the provisions of Maryland law, the requirements for any notice to
be given to the shareholders in question (not less than 30 days),
or the Board may set requirements for granting permission to the
Shareholder to increase the investment, and set other terms and
conditions so that the shares would not be involuntarily redeemed.
Reinvestment Privilege. Within six months of a redemption, a
shareholder may reinvest all or part of the redemption proceeds of
(i) Class A shares that you purchased subject to an initial sales
charge, or (ii) Class B shares on which you paid a contingent
deferred sales charge when you redeemed them. This privilege does
not apply to Class C shares. The reinvestment may be made without
sales charge only in Class A shares of the Fund or any of the other
Oppenheimer funds into which shares of the Fund are exchangeable as
described below, at the net asset value next computed after the
Transfer Agent receives the reinvestment order. The shareholder
must ask the Distributor for that privilege at the time of
reinvestment. Any capital gain that was realized when the shares
were redeemed is taxable, and reinvestment will not alter any
capital gains tax payable on that gain. If there has been a
capital loss on the redemption, some or all of the loss may not be
tax deductible, depending on the timing and amount of the
reinvestment. Under the Internal Revenue Code, if the redemption
proceeds of Fund shares on which a sales charge was paid are
reinvested in shares of the Fund or another of the Oppenheimer
funds within 90 days of payment of the sales charge, the
shareholder's basis in the shares of the Fund that were redeemed
may not include the amount of the sales charge paid. That would
reduce the loss or increase the gain recognized from the
redemption. However, in that case the sales charge would be added
to the basis of the shares acquired by the reinvestment of the
redemption proceeds. The Fund may amend, suspend or cease offering
this reinvestment privilege at any time as to shares redeemed after
the date of such amendment, suspension or cessation.
Transfers of Shares. Shares are not subject to the payment of a
contingent deferred sales charge of any class at the time of
transfer to the name of another person or entity (whether the
transfer occurs by absolute assignment, gift or bequest, not
involving, directly or indirectly, a public sale). The transferred
shares will remain subject to the contingent deferred sales charge,
calculated as if the transferee shareholder had acquired the
transferred shares in the same manner and at the same time as the
transferring shareholder. If less than all shares held in an
account are transferred, and some but not all shares in the account
would be subject to a contingent deferred sales charge if redeemed
at the time of transfer, the priorities described in the Prospectus
under "How to Buy Shares" for the imposition of the Class B or
Class C contingent deferred sales charge will be followed in
determining the order in which shares are transferred.
Distributions From Retirement Plans. Requests for distributions
from OppenheimerFunds-sponsored IRAs, 403(b)(7) custodial plans,
401(k) plans, or pension or profit-sharing plans should be
addressed to "Trustee, OppenheimerFunds Retirement Plans," c/o the
Transfer Agent at its address listed in "How To Sell Shares" in the
Prospectus or on the back cover of the Statement of Additional
Information. The request must: (i) state the reason for the
distribution; (ii) state the owner's awareness of tax penalties if
the distribution is premature; and (iii) conform to the
requirements of the plan and the Fund's other redemption
requirements. Participants, other than self-employed persons
maintaining a plan account in their own name, in OppenheimerFunds-
sponsored prototype pension or profit-sharing or 401(k) plans may
not directly redeem or exchange shares held for their account under
those plans. The employer or plan administrator must sign the
request. Distributions from pension plans or 401(k) profit sharing
plans are subject to special requirements under the Internal
Revenue Code and certain documents (available from the Transfer
Agent) must be completed before the distribution may be made.
Distributions from retirement plans are subject to withholding
requirements under the Internal Revenue Code, and IRS Form W-4P
(available from the Transfer Agent) must be submitted to the
Transfer Agent with the distribution request, or the distribution
may be delayed. Unless the shareholder has provided the Transfer
Agent with a certified tax identification number, the Internal
Revenue Code requires that tax be withheld from any distribution
even if the shareholder elects not to have tax withheld. The Fund,
the Manager, the Distributor, the Trustee and the Transfer Agent
assume no responsibility to determine whether a distribution
satisfies the conditions of applicable tax laws and will not be
responsible for any tax penalties assessed in connection with a
distribution.
Special Arrangements for Repurchase of Shares from Dealers and
Brokers. The Distributor is the Fund's agent to repurchase its
shares from authorized dealers or brokers on behalf of their
customers. The shareholder should contact the broker or dealer to
arrange this type of redemption. The repurchase price per share
will be the net asset value next computed after the Distributor
receives the order placed by the dealer or broker, except that if
the Distributor receives a repurchase order from the dealer or
broker after the close of The New York Stock Exchange on a regular
business day, it will be processed at that day's net asset value,
if the order was received by the dealer or broker from its customer
prior to the time the Exchange closes (normally, that is 4:00 P.M.,
but may be earlier on some days) and the order was transmitted to
and received by the Distributor prior to its close of business that
day (normally 5:00 P.M.). Ordinarily, for accounts redeemed by a
broker-dealer under this procedure, payment will be made within
three business days after the shares have been redeemed upon the
Distributor's receipt of the required redemption documents in
proper form, with the signature(s) of the registered owners
guaranteed on the redemption document as described in the
Prospectus.
Automatic Withdrawal and Exchange Plans. Investors owning shares
of the Fund valued at $5,000 or more can authorize the Transfer
Agent to redeem shares (minimum $50) automatically on a monthly,
quarterly, semi-annual or annual basis under an Automatic
Withdrawal Plan. Shares will be redeemed three business days prior
to the date requested by the shareholder for receipt of the
payment. Automatic withdrawals of up to $1,500 per month may be
requested by telephone if payments are to be made by check payable
to all shareholders of record and sent to the address of record for
the account (and if the address has not been changed within the
prior 30 days). Required minimum distributions from
OppenheimerFunds-sponsored retirement plans may not be arranged on
this basis. Payments are normally made by check, but shareholders
having AccountLink privileges (see "How To Buy Shares") may arrange
to have Automatic Withdrawal Plan payments transferred to the bank
account designated on the OppenheimerFunds New Account Application
or signature-guaranteed instructions. The Fund cannot guarantee
receipt of a payment on the date requested and reserves the right
to amend, suspend or discontinue offering such plans at any time
without prior notice. Because of the sales charge assessed on
Class A share purchases, shareholders should not make regular
additional Class A share purchases while participating in an
Automatic Withdrawal Plan. Class B and Class C shareholders should
not establish withdrawal plans because of the imposition of the
contingent deferred sales charges on such withdrawals (except where
the Class B or the Class C contingent deferred sales charges are
waived as described in the Prospectus under "Waivers of Class B and
Class C Sales Charges").
By requesting an Automatic Withdrawal or Exchange Plan, the
shareholder agrees to the terms and conditions applicable to such
plans, as stated below and in the provisions of the
OppenheimerFunds Application relating to such Plans, as well as the
Prospectus. These provisions may be amended from time to time by
the Fund and/or the Distributor. When adopted, such amendments
will automatically apply to existing Plans.
Automatic Exchange Plans. Shareholders can authorize the
Transfer Agent (on the OppenheimerFunds Application or signature-
guaranteed instructions) to exchange a pre-determined amount of
shares of the Fund for shares (of the same class) of other
Oppenheimer funds automatically on a monthly, quarterly, semi-
annual or annual basis under an Automatic Exchange Plan. The
minimum amount that may be exchanged to each other fund account is
$25. Exchanges made under these plans are subject to the
restrictions that apply to exchanges as set forth in "How to
Exchange Shares" in the Prospectus and below in this Statement of
Additional Information.
Automatic Withdrawal Plans. Fund shares will be redeemed as
necessary to meet withdrawal payments. Shares acquired without a
sales charge will be redeemed first and shares acquired with
reinvested dividends and capital gains distributions will be
redeemed next, followed by shares acquired with a sales charge, to
the extent necessary to make withdrawal payments. Depending upon
the amount withdrawn, the investor's principal may be depleted.
Payments made under withdrawal plans should not be considered as a
yield or income on your investment. It may not be desirable to
purchase additional Class A shares while making automatic
withdrawals because of the sales charges that apply to purchases
when made. Accordingly, a shareholder normally may not maintain an
Automatic Withdrawal Plan while simultaneously making regular
purchases of Class A shares.
The Transfer Agent will administer the investor's Automatic
Withdrawal Plan (the "Plan") as agent for the investor (the
"Planholder") who executed the Plan authorization and application
submitted to the Transfer Agent. Neither Transfer Agent nor the
Fund shall incur any liability to the Planholder for any action
taken or omitted by the Transfer Agent in good faith to administer
the Plan. Certificates will not be issued for shares of the Fund
purchased for and held under the Plan, but the Transfer Agent will
credit all such shares to the account of the Planholder on the
records of the Fund. Any share certificates held by a Planholder
may be surrendered unendorsed to the Transfer Agent with the Plan
application so that the shares represented by the certificate may
be held under the Plan.
For accounts subject to Automatic Withdrawal Plans,
distributions of capital gains must be reinvested in shares of the
Fund, which will be done at net asset value without a sales charge.
Dividends on shares held in the account may be paid in cash or
reinvested.
Redemptions of shares needed to make withdrawal payments will
be made at the net asset value per share determined on the
redemption date. Checks or ACH transfer payments of the proceeds
of Plan withdrawals will normally be transmitted three business
days prior to the date selected for receipt of the payment (receipt
of payment on the date selected cannot be guaranteed), according to
the choice specified in writing by the Planholder.
The amount and the interval of disbursement payments and the
address to which checks are to be mailed or AccountLink payments
are to be sent may be changed at any time by the Planholder by
writing to the Transfer Agent. The Planholder should allow at
least two weeks' time in mailing such notification for the
requested change to be put in effect. The Planholder may, at any
time, instruct the Transfer Agent by written notice (in proper form
in accordance with the requirements of the then-current Prospectus
of the Fund) to redeem all, or any part of, the shares held under
the Plan. In that case, the Transfer Agent will redeem the number
of shares requested at the net asset value per share in effect in
accordance with the Fund's usual redemption procedures and will
mail a check for the proceeds to the Planholder.
The Plan may be terminated at any time by the Planholder by
writing to the Transfer Agent. A Plan may also be terminated at
any time by the Transfer Agent upon receiving directions to that
effect from the Fund. The Transfer Agent will also terminate a
Plan upon receipt of evidence satisfactory to it of the death or
legal incapacity of the Planholder. Upon termination of a Plan by
the Transfer Agent or the Fund, shares that have not been redeemed
from the account will be held in uncertificated form in the name of
the Planholder, and the account will continue as a dividend-
reinvestment, uncertificated account unless and until proper
instructions are received from the Planholder or his or her
executor or guardian, or other authorized person.
To use shares held under the Plan as collateral for a debt,
the Planholder may request issuance of a portion of the shares in
certificated form. Upon written request from the Planholder, the
Transfer Agent will determine the number of shares for which a
certificate may be issued without causing the withdrawal checks to
stop because of exhaustion of uncertificated shares needed to
continue payments. However, should such uncertificated shares
become exhausted, Plan withdrawals will terminate.
If the Transfer Agent ceases to act as transfer agent for the
Fund, the Planholder will be deemed to have appointed any successor
transfer agent to act as agent in administering the Plan.
How To Exchange Shares
As stated in the Prospectus, shares of a particular class of
Oppenheimer funds having more than one class of shares may be
exchanged only for shares of the same class of other Oppenheimer
funds. Shares of the Oppenheimer funds that have a single class
without a class designation are deemed "Class A" shares for this
purpose. All of the Oppenheimer funds offer Class A, Class B and
Class C shares except Oppenheimer Money Market Fund, Inc.,
Centennial Money Market Trust, Centennial Tax Exempt Trust,
Centennial Government Trust, Centennial New York Tax Exempt Trust,
Centennial California Tax-Exempt Trust, Centennial Money Market
Trust, Centennial America Fund, L.P., and Daily Cash Accumulation
Fund, Inc., which only offer Class A shares and Oppenheimer Main
Street California Municipal Fund which only offers Class A and
Class B shares (Class B and Class C shares of Oppenheimer Cash
Reserves are generally available only by exchange from the same
class of shares of other Oppenheimer funds or through
OppenheimerFunds sponsored 401(k) plans). A current list showing
which funds offer which classes can be obtained by calling the
distributor at 1-800-525-7048.
For accounts established on or before March 8, 1996 holding
Class M shares of Oppenheimer Bond Fund for Growth, Class M shares
can be exchanged only for Class A shares of other Oppenheimer
funds, including Rochester Fund Municipals and Limited Term New
York Municipal Fund. Class A shares of Rochester Fund Municipals
or Limited Term New York Municipal Fund acquired on the exchange of
Class M shares of Oppenheimer Bond Fund for Growth may be exchanged
for Class M shares of that fund. For accounts of Oppenheimer Bond
Fund for Growth established after March 8, 1996, Class M shares may
be exchanged for Class A shares of other Oppenheimer funds except
Rochester Fund Municipals and Limited-Term New York Municipals.
Exchanges to Class M shares of Oppenheimer Bond Fund for Growth are
permitted from Class A shares of Oppenheimer Money Market Fund,
Inc. or Oppenheimer Cash Reserves that were acquired by exchange
from Class M shares. Otherwise no exchanges of any class of any
Oppenheimer fund into Class M shares are permitted.
Class A shares of Oppenheimer funds may be exchanged at net
asset value for shares of any Money Market Fund. Shares of any
Money Market Fund purchased without a sales charge may be exchanged
for shares of Oppenheimer funds offered with a sales charge upon
payment of the sales charge (or, if applicable, may be used to
purchase shares of Oppenheimer funds subject to a contingent
deferred sales charge). However, shares of Oppenheimer Money
Market Fund, Inc. purchased with the redemption proceeds of shares
of other mutual funds (other than funds managed by the Manager or
its subsidiaries) redeemed within the 12 months prior to that
purchase may subsequently be exchanged for shares of other
Oppenheimer funds without being subject to an initial or contingent
deferred sales charge, whichever is applicable. To qualify for
that privilege, the investor or the investor's dealer must notify
the Distributor of eligibility for this privilege at the time the
shares of Oppenheimer Money Market Fund, Inc. are purchased, and,
if requested, must supply proof of entitlement to this privilege.
Shares of the Fund acquired by reinvestment of dividends or
distributions from any other of the Oppenheimer funds (except
Oppenheimer Cash Reserves) or from any unit investment trust for
which reinvestment arrangements have been made with the Distributor
may be exchanged at net asset value for shares of any of the
Oppenheimer funds. No contingent deferred sales charge is imposed
on exchanges of shares of any class purchased subject to a
contingent deferred sales charge. However, when Class A shares
acquired by exchange of Class A shares of other Oppenheimer funds
purchased subject to a Class A contingent deferred sales charge are
redeemed within 18 months of the end of the calendar month of the
initial purchase of the exchanged Class A shares, the Class A
contingent deferred sales charge is imposed on the redeemed shares
(see "Class A Contingent Deferred Sales Charge" in the Prospectus).
The Class B contingent deferred sales charge is imposed on Class B
shares acquired by exchange if they are redeemed within six years
of the initial purchase of the exchanged Class B shares. The Class
C contingent deferred sales charge is imposed on Class C shares
acquired by exchange if they are redeemed within 12 months of the
initial purchase of the exchanged Class C shares.
When Class B or Class C shares are redeemed to effect an
exchange, the priorities described in "How To Buy Shares" in the
Prospectus for the imposition of the Class B and Class C contingent
deferred sales charges will be followed in determining the order in
which the shares are exchanged. Shareholders should take into
account the effect of any exchange on the applicability and rate of
any contingent deferred sales charge that might be imposed in the
subsequent redemption of remaining shares. Shareholders owning
shares of more than one class must specify whether they intend to
exchange Class A, Class B or Class C shares.
The Fund reserves the right to reject telephone or written
exchange requests submitted in bulk by anyone on behalf of more
than one account. The Fund may accept requests for exchanges of up
to 50 accounts per day from representatives of authorized dealers
that qualify for this privilege. In connection with any exchange
request, the number of shares exchanged may be less than the number
requested if the exchange or the number requested would include
shares subject to a restriction cited in the Prospectus or this
Statement of Additional Information or would include shares covered
by a share certificate that is not tendered with the request. In
those cases, only the shares available for exchange without
restriction will be exchanged.
When exchanging shares by telephone, a shareholder must either
have an existing account in, or obtain and acknowledge receipt of
a prospectus of, the fund to which the exchange is to be made. For
full or partial exchanges of an account made by telephone, any
special account features such as Asset Builder Plans, Automatic
Withdrawal Plans and retirement plan contributions will be switched
to the new account unless the Transfer Agent is instructed
otherwise. If all telephone lines are busy (which might occur, for
example, during periods of substantial market fluctuations),
shareholders might not be able to request exchanges by telephone
and would have to submit written exchange requests.
Shares to be exchanged are redeemed on the regular business
day the Transfer Agent receives an exchange request in proper form
(the "Redemption Date"). Normally, shares of the fund to be
acquired are purchased on the Redemption Date, but such purchases
may be delayed by either fund up to five business days if it
determines that it would be disadvantaged by an immediate transfer
of the redemption proceeds. The Fund reserves the right, in its
discretion, to refuse any exchange request that may disadvantage it
(for example, if the receipt of multiple exchange requests from a
dealer might require the disposition of portfolio securities at a
time or at a price that might be disadvantageous to the Fund).
The different Oppenheimer funds available for exchange have
different investment objectives, policies and risks, and a
shareholder should assure that the Fund selected is appropriate for
his or her investment and should be aware of the tax consequences
of an exchange. For federal income tax purposes, an exchange
transaction is treated as a redemption of shares of one fund and a
purchase of shares of another. "Reinvestment Privilege," above,
discusses some of the tax consequences of reinvestment of
redemption proceeds in such cases. The Fund, the Distributor, and
the Transfer Agent are unable to provide investment, tax or legal
advice to a shareholder in connection with an exchange request or
any other investment transaction.
Dividends, Capital Gains and Taxes
Tax Status of the Fund's Dividends and Distributions. The Federal
tax treatment of the Fund's dividends and capital gains
distributions is explained in the Prospectus under the caption
"Dividends, Capital Gains and Taxes." Special provisions of the
Internal Revenue Code govern the eligibility of the Fund's
dividends for the dividends-received deduction for corporate
shareholders. 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 that the Fund derives
from its portfolio investments that the Fund has held for a minimum
period, usually 46 days. A corporate shareholder will not be
eligible for the deduction on dividends paid on Fund shares held
for 45 days or less. To the extent the Fund's dividends are
derived from gross income from option premiums, interest income or
short-term gains from the sale of securities or dividends from
foreign corporations, those dividends will not qualify for the
deduction.
Under the Internal Revenue Code, by December 31 each year, the
Fund must distribute 98% of its taxable investment income earned
from January 1 through December 31 of that year and 98% of its
capital gains realized in the period from November 1 of the prior
year through October 31 of the current year, or else the Fund must
pay an excise tax on the amounts not distributed. While it is
presently anticipated that the Fund will meet those requirements,
the Board of Directors and the Manager might determine in a
particular year that it would be in the best interest of
shareholders for the Fund not to make such distributions at the
required levels and to pay the excise tax on the undistributed
amounts. That would reduce the amount of income or capital gains
available for distribution to shareholders.
If the Fund qualifies as a "regulated investment company"
under the Internal Revenue Code, it will not be liable for Federal
income taxes on amounts paid by it as dividends and distributions.
The Fund qualified during its last fiscal year, and intends to
qualify in current and future years, but reserves the right not to
do so. The Internal Revenue Code contains a number of complex
tests to determine whether the Fund will qualify, and the Fund
might not meet those tests in a particular year. For example, if
the Fund derives 30% or more of its gross income from the sale of
securities held less than three months, it may fail to qualify (see
"Tax Aspects of Covered Calls and Hedging Instruments," above). If
it did not so qualify, the Fund would be treated for tax purposes
as an ordinary corporation and receive no tax deduction for
payments made to shareholders.
The amount of a class's distributions may vary from time to
time depending on market conditions, the composition of the Fund's
portfolio, and expenses borne by the Fund or borne separately by a
class, as described in "Alternative Sales Arrangements -- Class A,
Class B and Class C Shares," above. Dividends are calculated in
the same manner, at the same time and on the same day for shares of
each class. However, dividends on Class B and Class C shares are
expected to be lower as a result of the asset-based sales charge on
Class B and Class C shares, and Class B and Class C dividends will
also differ in amount as a consequence of any difference in net
asset value between the classes.
Dividends, distributions and the proceeds of the redemption of
Fund shares represented by checks returned to the Transfer Agent by
the Postal Service as undeliverable will be invested in shares of
Oppenheimer Money Market Fund, Inc., as promptly as possible after
the return of such checks to the Transfer Agent, to enable the
investor to earn a return on otherwise idle funds.
Dividend Reinvestment in Another Fund. Shareholders of the Fund
may elect to reinvest all dividends and/or capital gains
distributions in shares of the same class of any of the other
Oppenheimer funds listed in "Reduced Sales Charges," above, at net
asset value without sales charge. To elect this option, a
shareholder must notify the Transfer Agent in writing and either
must have an existing account in the fund selected for reinvestment
or must obtain a prospectus for that fund and an application from
the Distributor to establish an account. The investment will be
made at the net asset value per share in effect at the close of
business on the payable date of the dividend or distribution.
Dividends and/or distributions from certain of the Oppenheimer
funds may be invested in shares of this Fund on the same basis.
Additional Information About the Fund
The Custodian. State Street Bank and Trust Company acts as
custodian of the assets of the Fund. The Fund's cash balances in
excess of $100,000 are not protected by Federal deposit insurance.
Such uninsured balances may be substantial.
Independent Accountants. Price Waterhouse LLP serves as the
Fund's independent accountants. Their services include examining
the annual financial statements of the Fund as well as other
related services.
<PAGE>
=================================
REPORT OF INDEPENDENT ACCOUNTANTS
================================================================================
To the Board of Directors and Shareholders of
Oppenheimer Quest Value Fund, Inc.
In our opinion, the accompanying statement of assets and liabilities,
including the statement of investments, and the related statements of
operations and of changes in net assets and the financial highlights
present fairly, in all material respects, the financial position of
Oppenheimer Quest Value Fund, Inc., formerly Quest for Value Fund, Inc.
(the Fund) at October 31, 1996, the results of its operations, the changes
in its net assets and the financial highlights for the year then ended, in
conformity with generally accepted accounting principles. These financial
statements and financial highlights (hereafter referred to as financial
statements) are the responsibility of the Fund's management; our
responsibility is to express an opinion on these financial statements based
on our audit. We conducted our audit of these financial statements in
accordance with generally accepted auditing standards which require that we
plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audit, which included
confirmation of securities at October 31, 1996 by correspondence with the
custodian, provides a reasonable basis for the opinion expressed above. The
financial statments of the Fund for the year ended October 31, 1995 were
audited by other independent accountants whose report dated December 20,
1995 expressed an unqualified opinion on those statements.
/s/ Price Waterhouse LLP
Price Waterhouse LLP
Denver, Colorado
November 21, 1996
<PAGE>
<TABLE>
<CAPTION>
=========================================
STATEMENT OF INVESTMENTS October 31, 1996
FACE
MARKET VALUE
AMOUNT
SEE NOTE 1
================================================================================================================
==================
SHORT-TERM NOTES - 17.7%
- ----------------------------------------------------------------------------------------------------------------
- ------------------
<S> <C> <C> <C>
<C>
Beneficial Finance Corp., 5.24%, 11/25/96 (3) $20,000,000
$ 19,930,134
- ----------------------------------------------------------------------------------------------------------------
- -------
Deere (John) Capital Corp., 5.27%, 11/4/96 (3) 7,828,000
7,824,562
- ----------------------------------------------------------------------------------------------------------------
- -------
Household Finance Corp., 5.25%, 11/12/96 (3) 14,818,000
14,794,230
- ----------------------------------------------------------------------------------------------------------------
- -------
IBM Corp., 5.23%, 11/21/96 (3) 12,679,000
12,642,020
- ----------------------------------------------------------------------------------------------------------------
- -------
IBM Credit Corp., 5.23%, 11/21/96 (3) 20,934,000
20,873,112
- ----------------------------------------------------------------------------------------------------------------
- -------
Merrill Lynch & Co., Inc., 5.40%, 11/4/96 (3) 5,969,000
5,966,367
- ----------------------------------------------------------------------------------------------------------------
- -------
Prudential Funding Corp., 5.25%, 12/4/96 (3) 15,605,000
15,529,901
-------------
Total Short-Term Notes (Cost $97,560,326)
97,560,326
================================================================================================================
==================
CONVERTIBLE CORPORATE BONDS AND NOTES - 0.4%
- ----------------------------------------------------------------------------------------------------------------
- ------------------
Security Capital Realty, Inc., 12% Cv. Sub. Debs., 6/30/14 (1) 2,310,155
2,390,546
- ----------------------------------------------------------------------------------------------------------------
- -------
Security Capital Realty, Inc., 12% Cv. Sub. Debs. Interest Shares, (1)
6/30/14 73,836
73,836
-------------
Total Convertible Corporate Bonds and Notes (Cost $2,262,185)
2,464,382
SHARES
================================================================================================================
==================
COMMON STOCKS - 81.6%
- ----------------------------------------------------------------------------------------------------------------
- ------------------
BASIC MATERIALS - 5.9%
- ----------------------------------------------------------------------------------------------------------------
- ------------------
CHEMICALS - 3.8%
- ----------------------------------------------------------------------------------------------------------------
- -------
Du Pont (E.I.) De Nemours & Co. 60,000
5,565,000
- ----------------------------------------------------------------------------------------------------------------
- -------
Hercules, Inc. 146,000
6,953,250
- ----------------------------------------------------------------------------------------------------------------
- -------
Monsanto Co. 215,000
8,519,375
--------------
21,037,625
- ----------------------------------------------------------------------------------------------------------------
- ------------------
METALS - 1.6%
- ----------------------------------------------------------------------------------------------------------------
- -------
Freeport McMoRan, Inc. 66,333
2,114,364
- ----------------------------------------------------------------------------------------------------------------
- -------
Freeport-McMoRan Copper & Gold, Inc., Cl. B 229,290
6,964,684
--------------
9,079,048
- ----------------------------------------------------------------------------------------------------------------
- ------------------
PAPER - 0.5%
- ----------------------------------------------------------------------------------------------------------------
- -------
Champion International Corp. 60,000
2,610,000
- ----------------------------------------------------------------------------------------------------------------
- ------------------
CONSUMER CYCLICALS - 7.6%
- ----------------------------------------------------------------------------------------------------------------
- ------------------
AUTOS & HOUSING - 0.6%
- ----------------------------------------------------------------------------------------------------------------
- -------
Security Capital Realty, Inc. (1)(2) 3,049
3,301,006
- ----------------------------------------------------------------------------------------------------------------
- ------------------
LEISURE & ENTERTAINMENT - 2.5%
- ----------------------------------------------------------------------------------------------------------------
- -------
AMR Corp. (2) 162,000
13,608,000
- ----------------------------------------------------------------------------------------------------------------
- ------------------
MEDIA - 0.8%
- ----------------------------------------------------------------------------------------------------------------
- -------
Tele-Communications, Inc. (New), TCI Group, Series A (2) 340,000
4,228,750
- ----------------------------------------------------------------------------------------------------------------
- ------------------
RETAIL: GENERAL - 3.7%
- ----------------------------------------------------------------------------------------------------------------
- -------
May Department Stores Co. 428,000
20,276,500
- ----------------------------------------------------------------------------------------------------------------
- ------------------
CONSUMER NON-CYCLICALS - 7.7%
- ----------------------------------------------------------------------------------------------------------------
- ------------------
HEALTHCARE/DRUGS - 0.9%
- ----------------------------------------------------------------------------------------------------------------
- -------
Warner-Lambert Co. 81,000
5,153,625
- ----------------------------------------------------------------------------------------------------------------
- ------------------
HEALTHCARE/SUPPLIES & SERVICES - 5.5%
- ----------------------------------------------------------------------------------------------------------------
- -------
Becton, Dickinson & Co. 398,000
17,313,000
- ----------------------------------------------------------------------------------------------------------------
- -------
OrNda Healthcorp (2) 100,000
2,725,000
- ----------------------------------------------------------------------------------------------------------------
- -------
Tenet Healthcare Corp. (2) 500,000
10,437,500
--------------
30,475,500
- ----------------------------------------------------------------------------------------------------------------
- ------------------
HOUSEHOLD GOODS - 1.3%
- ----------------------------------------------------------------------------------------------------------------
- -------
Avon Products, Inc. 135,600
7,356,300
- ----------------------------------------------------------------------------------------------------------------
- ------------------
FINANCIAL - 36.8%
- ----------------------------------------------------------------------------------------------------------------
- ------------------
BANKS - 7.3%
- ----------------------------------------------------------------------------------------------------------------
- -------
Citicorp 170,000
16,830,000
- ----------------------------------------------------------------------------------------------------------------
- -------
Wells Fargo & Co. 88,666
23,684,905
-------------
40,514,905
</TABLE>
5 Oppenheimer Quest Value Fund, Inc.
<PAGE>
<TABLE>
<CAPTION>
====================================
STATEMENT OF INVESTMENTS (Continued)
MARKET VALUE
SHARES
SEE NOTE 1
- ----------------------------------------------------------------------------------------------------------------
- ------------------
DIVERSIFIED FINANCIAL - 8.1%
- ----------------------------------------------------------------------------------------------------------------
- -------
<S> <C> <C>
<C>
American Express Co. 80,000
$ 3,760,000
- ----------------------------------------------------------------------------------------------------------------
- -------
Countrywide Credit Industries, Inc. 620,000
17,670,000
- ----------------------------------------------------------------------------------------------------------------
- -------
Federal Home Loan Mortgage Corp. 158,000
15,958,000
- ----------------------------------------------------------------------------------------------------------------
- -------
Transamerica Corp. 101,000
7,663,375
-------------
45,051,375
- ----------------------------------------------------------------------------------------------------------------
- ------------------
INSURANCE - 21.4%
- ----------------------------------------------------------------------------------------------------------------
- -------
ACE Ltd. 571,200
31,273,200
- ----------------------------------------------------------------------------------------------------------------
- -------
AFLAC, Inc. 329,050
13,203,131
- ----------------------------------------------------------------------------------------------------------------
- -------
American International Group, Inc. 89,000
9,667,625
- ----------------------------------------------------------------------------------------------------------------
- -------
Everest Reinsurance Holdings, Inc. 340,000
8,670,000
- ----------------------------------------------------------------------------------------------------------------
- -------
EXEL Ltd. 796,400
30,263,200
- ----------------------------------------------------------------------------------------------------------------
- -------
Mid Ocean Ltd. 294,900
13,860,300
- ----------------------------------------------------------------------------------------------------------------
- -------
Progressive Corp. 162,000
11,137,500
-------------
118,074,956
- ----------------------------------------------------------------------------------------------------------------
- ------------------
INDUSTRIAL - 12.9%
- ----------------------------------------------------------------------------------------------------------------
- ------------------
ELECTRICAL EQUIPMENT - 1.6%
- ----------------------------------------------------------------------------------------------------------------
- -------
General Electric Co. 90,200
8,726,850
- ----------------------------------------------------------------------------------------------------------------
- ------------------
INDUSTRIAL SERVICES - 2.1%
- ----------------------------------------------------------------------------------------------------------------
- -------
Donnelley (R.R.) & Sons Co. 380,000
11,542,500
- ----------------------------------------------------------------------------------------------------------------
- ------------------
MANUFACTURING - 8.6%
- ----------------------------------------------------------------------------------------------------------------
- -------
AlliedSignal, Inc. 127,000
8,318,500
- ----------------------------------------------------------------------------------------------------------------
- -------
Caterpillar, Inc. 265,000
18,185,625
- ----------------------------------------------------------------------------------------------------------------
- -------
LucasVarity plc, ADR (2) 520,900
20,966,225
-------------
47,470,350
- ----------------------------------------------------------------------------------------------------------------
- ------------------
TRANSPORTATION - 0.6%
- ----------------------------------------------------------------------------------------------------------------
- -------
Canadian Pacific Ltd. (New) 130,000
3,282,500
- ----------------------------------------------------------------------------------------------------------------
- ------------------
TECHNOLOGY - 10.7%
- ----------------------------------------------------------------------------------------------------------------
- ------------------
AEROSPACE/DEFENSE - 6.0%
- ----------------------------------------------------------------------------------------------------------------
- -------
Lockheed Martin Corp. 155,000
13,891,875
- ----------------------------------------------------------------------------------------------------------------
- -------
McDonnell Douglas Corp. 354,000
19,293,000
-------------
33,184,875
- ----------------------------------------------------------------------------------------------------------------
- ------------------
COMPUTER HARDWARE - 1.1%
- ----------------------------------------------------------------------------------------------------------------
- -------
Adaptec, Inc. (2) 100,000
6,087,500
- ----------------------------------------------------------------------------------------------------------------
- ------------------
COMPUTER SOFTWARE - 0.7%
- ----------------------------------------------------------------------------------------------------------------
- -------
Electronic Arts, Inc. (2) 100,000
3,750,000
- ----------------------------------------------------------------------------------------------------------------
- ------------------
ELECTRONICS - 1.1%
- ----------------------------------------------------------------------------------------------------------------
- -------
Arrow Electronics, Inc. (2) 129,500
6,167,438
- ----------------------------------------------------------------------------------------------------------------
- ------------------
TELECOMMUNICATIONS-TECHNOLOGY - 1.8%
- ----------------------------------------------------------------------------------------------------------------
- -------
Sprint Corp. 260,200
10,212,850
-------------
Total Common Stocks (Cost $309,631,476)
451,192,453
- ----------------------------------------------------------------------------------------------------------------
- -------
TOTAL INVESTMENTS, AT VALUE (COST $409,453,987) 99.7%
551,217,161
- ----------------------------------------------------------------------------------------------------------------
- -------
OTHER ASSETS NET OF LIABILITIES 0.3
1,415,480
------
-------------
NET ASSETS 100.0%
$552,632,641
======
=============
</TABLE>
1. Identifies issues considered to be illiquid - See Note 5 of Notes
to Financial Statements.
2. Non-income producing security.
3. Short-term notes are generally traded on a discount basis; the
interest rate is the discount rate received by the Fund at the time
of purchase.
See accompanying Notes to Financial Statements.
6 Oppenheimer Quest Value Fund, Inc.
<PAGE>
<TABLE>
<CAPTION>
====================================================
STATEMENT OF ASSETS AND LIABILITIES OCTOBER 31, 1996
================================================================================================================
===================
<S> <C>
<C>
ASSETS Investments, at value (cost $409,453,987) - see accompanying statement
$551,217,161
- -------------------------------------------------------------------------------------------------------
Receivables:
Shares of capital stock sold
4,419,152
Interest and dividends
452,440
- -------------------------------------------------------------------------------------------------------
Other
32,085
-------------
Total assets
556,120,838
================================================================================================================
===================
LIABILITIES Bank overdraft
512,979
- -------------------------------------------------------------------------------------------------------
Payables and other liabilities:
Shares of capital stock redeemed
2,672,405
Distribution and service plan fees
113,956
Transfer and shareholder servicing agent fees
19,923
Directors' fees
3,968
Other
164,966
-------------
Total liabilities
3,488,197
================================================================================================================
===================
NET ASSETS
$552,632,641
=============
================================================================================================================
===================
COMPOSITION OF Par value of shares of capital stock
$32,053,007
NET ASSETS
- -------------------------------------------------------------------------------------------------------
Additional paid-in capital
345,509,634
- -------------------------------------------------------------------------------------------------------
Undistributed net investment income
1,919,807
- -------------------------------------------------------------------------------------------------------
Accumulated net realized gain on investment transactions
31,387,019
- -------------------------------------------------------------------------------------------------------
Net unrealized appreciation on investments - Note 3
141,763,174
-------------
Net assets
$552,632,641
=============
================================================================================================================
===================
NET ASSET VALUE Class A Shares:
PER SHARE Net asset value and redemption price per share (based on
net assets of $412,246,475 and 23,831,339 shares of capital stock outstanding)
$17.30
Maximum offering price per share (net asset value plus sales charge
of 5.75% of offering price)
$18.36
- -------------------------------------------------------------------------------------------------------
Class B Shares:
Net asset value, redemption price and offering price per share (based on
net assets of $111,130,226 and 6,507,830 shares of capital stock outstanding)
$17.08
- -------------------------------------------------------------------------------------------------------
Class C Shares:
Net asset value, redemption price and offering price per share (based on
net assets of $29,255,940 and 1,713,838 shares of capital stock outstanding)
$17.07
</TABLE>
See accompanying Notes to Financial Statements.
7 Oppenheimer Quest Value Fund, Inc.
<PAGE>
<TABLE>
<CAPTION>
===========================================================
STATEMENT OF OPERATIONS FOR THE YEAR ENDED OCTOBER 31, 1996
================================================================================================================
===================
<S> <C>
<C>
INVESTMENT INCOME Dividends
$ 5,762,517
- -------------------------------------------------------------------------------------------------------
Interest
3,979,691
-------------
Total income
9,742,208
================================================================================================================
===================
EXPENSES Management fees - Note 4
4,200,099
- -------------------------------------------------------------------------------------------------------
Distribution and service plan fees - Note 4:
Class A
1,688,380
Class B
673,147
Class C
177,281
- -------------------------------------------------------------------------------------------------------
Transfer and shareholder servicing agent fees - Note 4
430,241
- -------------------------------------------------------------------------------------------------------
Shareholder reports
197,560
- -------------------------------------------------------------------------------------------------------
Registration and filing fees:
Class A
118,001
Class B
42,286
Class C
11,018
- -------------------------------------------------------------------------------------------------------
Custodian fees and expenses
56,155
- -------------------------------------------------------------------------------------------------------
Legal and auditing fees
39,448
- -------------------------------------------------------------------------------------------------------
Directors' fees and expenses
30,394
- -------------------------------------------------------------------------------------------------------
Other
60,004
-------------
Total expenses
7,724,014
================================================================================================================
===================
NET INVESTMENT INCOME
2,018,194
================================================================================================================
===================
REALIZED AND Net realized gain on investments
31,502,109
UNREALIZED GAIN
- -------------------------------------------------------------------------------------------------------
Net change in unrealized appreciation or depreciation on investments
69,588,617
-------------
Net realized and unrealized gain
101,090,726
================================================================================================================
===================
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS
$103,108,920
=============
</TABLE>
See accompanying Notes to Financial Statements.
8 Oppenheimer Quest Value Fund, Inc.
<PAGE>
<TABLE>
<CAPTION>
===================================
STATEMENTS OF CHANGES IN NET ASSETS
YEAR ENDED OCTOBER
31,
1996
1995
================================================================================================================
===================
<S> <C> <C>
<C>
OPERATIONS Net investment income $ 2,018,194
$ 2,439,300
- -------------------------------------------------------------------------------------------------------
Net realized gain 31,502,109
22,321,532
- -------------------------------------------------------------------------------------------------------
Net change in unrealized appreciation or depreciation 69,588,617
39,322,642
- ----------------------------------
Net increase in net assets resulting
from operations 103,108,920
64,083,474
================================================================================================================
===================
DIVIDENDS AND Dividends from net investment income:
DISTRIBUTIONS Class A (1,990,608)
(1,649,576)
TO SHAREHOLDERS Class B (187,734)
(108,497)
Class C (36,026)
(29,366)
- -------------------------------------------------------------------------------------------------------
Distributions from net realized gain:
Class A (18,878,099)
(15,501,438)
Class B (2,778,986)
(1,014,005)
Class C (689,670)
(255,884)
================================================================================================================
===================
CAPITAL STOCK Net increase in net assets resulting from capital
TRANSACTIONS stock transactions - Note 2:
Class A 67,398,927
4,613,188
Class B 59,694,507
19,757,134
Class C 15,679,507
5,377,738
================================================================================================================
===================
NET ASSETS Total increase 221,320,738
75,272,768
- -------------------------------------------------------------------------------------------------------
Beginning of period 331,311,903
256,039,135
- ----------------------------------
End of period (including undistributed net investment
income of $1,919,807 and $2,115,981, respectively) $552,632,641
$331,311,903
==================================
</TABLE>
See accompanying Notes to Financial Statements.
9 Oppenheimer Quest Value Fund, Inc.
<PAGE>
<TABLE>
<CAPTION>
====================
FINANCIAL HIGHLIGHTS
CLASS A
----------------------------------------------------------------------
YEAR ENDED OCTOBER 31,
1996(2) 1995 1994 1993 1992
====================================================================================================================
PER SHARE OPERATING DATA:
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $14.51 $12.59 $12.51 $11.71 $10.61
- --------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income (loss) .08 .12(3) .09(3) .05(3) .04(3)
Net realized and unrealized gain (loss) 3.79 2.71 .50 1.34 1.77
- --------------------------------------------------------------------------------------------------------------------
Total income (loss) from investment
operations 3.87 2.83 .59 1.39 1.81
- --------------------------------------------------------------------------------------------------------------------
Dividends and distributions to shareholders:
Dividends from net investment income (.10) (.08) (.04) (.05) (.07)
Distributions from net realized gain (.98) (.83) (.47) (.54) (.64)
- --------------------------------------------------------------------------------------------------------------------
Total dividends and distributions
to shareholders (1.08) (.91) (.51) (.59) (.71)
- --------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $17.30 $14.51 $12.59 $12.51 $11.71
======================================================================
====================================================================================================================
TOTAL RETURN, AT NET ASSET VALUE(4) 28.39% 24.74% 5.01% 12.27% 18.45%
====================================================================================================================
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in thousands) $412,246 $282,615 $238,085 $245,320 $142,939
- --------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $338,429 $257,240 $237,923 $205,074 $122,319
- --------------------------------------------------------------------------------------------------------------------
Ratios to average net assets:
Net investment income (loss) 0.58% 0.90% 0.72% 0.40% 0.53%
Expenses 1.71% 1.68% 1.71% 1.75% 1.75%
- --------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate(6) 36.0% 36.0% 49.0% 27.0% 41.0%
Average brokerage commission rate(7) $0.0559 -- -- -- --
</TABLE>
1. For the period from September 1, 1993 (inception of offering) to
October 31, 1993.
2. On November 22, 1995, OppenheimerFunds, Inc. became the investment adviser
to the Fund.
3. Based on average shares outstanding for the period.
4. Assumes a hypothetical initial investment on the business day before the
first day of the fiscal period (or inception of offering), with all dividends
and distributions reinvested in additional shares on the reinvestment date, and
redemption at the net asset value calculated on the last business day of the
fiscal period. Sales charges are not reflected in the total returns. Total
returns are not annualized for periods of less than one full year.
10 Oppenheimer Quest Value Fund, Inc.
<PAGE>
<TABLE>
<CAPTION>
====================
FINANCIAL HIGHLIGHTS
CLASS B CLASS C
-------------------------------------------- --------------
YEAR ENDED OCTOBER 31, YEAR ENDED OCTOBER 31,
1996(2) 1995 1994 1993(1) 1996(2) 1995 1994
1993(1)
================================================================================================================
====================
PER SHARE OPERATING DATA:
<S> <C> <C> <C> <C> <C> <C> <C>
<C>
Net asset value, beginning of period $14.37 $12.53 $12.51 $12.66 $14.35 $12.52
$12.50 $12.66
- ----------------------------------------------------------------------------------------------------------------
- --------------------
Income (loss) from investment operations:
Net investment income (loss) .05 .05(3) .02(3) (.01)(3) .04 .04(3)
.01(3) (.01)(3)
Net realized and unrealized gain (loss) 3.71 2.69 .50 (.14) 3.71 2.70
.51 (.15)
- ----------------------------------------------------------------------------------------------------------------
- --------------------
Total income (loss) from investment
operations 3.76 2.74 .52 (.15) 3.75 2.74
.52 (.16)
- ----------------------------------------------------------------------------------------------------------------
- --------------------
Dividends and distributions to
shareholders:
Dividends from net investment income (.07) (.07) (.03) -- (.05) (.08)
(.03) --
Distributions from net realized gain (.98) (.83) (.47) -- (.98) (.83)
(.47) --
- ----------------------------------------------------------------------------------------------------------------
- --------------------
Total dividends and distributions
to shareholders (1.05) (.90) (.50) -- (1.03) (.91)
(.50) --
- ----------------------------------------------------------------------------------------------------------------
- --------------------
Net asset value, end of period $17.08 $14.37 $12.53 $12.51 $17.07 $14.35
$12.52 $12.50
======================================================================================
================================================================================================================
====================
TOTAL RETURN, AT NET ASSET VALUE(4) 27.76% 24.08% 4.43% (1.19)% 27.73% 24.10%
4.45% (1.26)%
================================================================================================================
====================
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in thousands) $111,130 $38,557 $14,373 $2,015 $29,256 $10,140
$3,581 $221
- ----------------------------------------------------------------------------------------------------------------
- --------------------
Average net assets (in thousands) $ 68,175 $25,393 $ 8,341 $1,136 $18,099 $ 6,711
$1,725 $169
- ----------------------------------------------------------------------------------------------------------------
- --------------------
Ratios to average net assets:
Net investment income (loss) 0.06% 0.36% 0.14% (1.19)%(5) 0.06% 0.31%
0.09% (0.90)%(5)
Expenses 2.26% 2.21% 2.24% 2.27%(5) 2.20% 2.26%
2.28% 2.27%(5)
- ----------------------------------------------------------------------------------------------------------------
- --------------------
Portfolio turnover rate(6) 36.0% 36.0% 49.0% 27.0% 36.0% 36.0% 49.0%
27.0%
Average brokerage commission rate(7) $0.0559 -- -- -- $0.0559 --
- -- --
</TABLE>
5. Annualized.
6. The lesser of purchases or sales of portfolio securities for a period,
divided by the monthly average of the market value of portfolio securities owned
during the period. Securities with a maturity or expiration date at the time of
acquisition of one year or less are excluded from the calculation. Purchases and
sales of investment securities (excluding short-term securities) for the period
ended October 31, 1996 were $215,220,520 and $127,851,243, respectively.
7. Total brokerage commissions paid on applicable purchases and sales of
portfolio securities for the period, divided by the total number of related
shares purchased and sold.
See accompanying Notes to Financial Statements.
11 Oppenheimer Quest Value Fund, Inc.
<PAGE>
=============================
NOTES TO FINANCIAL STATEMENTS
================================================================================
1. SIGNIFICANT ACCOUNTING POLICIES
Oppenheimer Quest Value Fund, Inc. (the Fund), formerly named Quest for
Value Fund, Inc., is registered under the Investment Company Act of 1940,
as amended, as a diversified, open-end management investment company. The
Fund's investment objective is to seek capital appreciation, primarily
through investment in equity securities. On November 22, 1995, OCC
Distributors (previously Quest for Value Distributors), OpCap Advisors
(previously Quest for Value Advisors) and their parent Oppenheimer Capital
consummated a transaction with OppenheimerFunds, Inc. (the Manager), which
resulted in the sale to the Manager of certain mutual fund assets of OCC
Distributors and OpCap Advisors, including the transfer of Quest for Value
Funds and the use of the name "Quest for Value." As part of the
transaction, the Fund entered into an investment advisory agreement with
the Manager and the Manager entered into a sub-advisory agreement with
OpCap Advisors (the former Manager). The Fund offers Class A, Class B and
Class C shares. Class A shares are sold with a front-end sales charge.
Class B and Class C shares may be subject to a contingent deferred sales
charge. All three classes of shares have identical rights to earnings,
assets and voting privileges, except that each class has its own
distribution and/or service plan, expenses directly attributable to a
particular class and exclusive voting rights with respect to matters
affecting a single class. Class B shares will automatically convert to
Class A shares six years after the date of purchase. The following is a
summary of significant accounting policies consistently followed by the
Fund.
---------------------------------------------------------------------------
INVESTMENT VALUATION. Portfolio securities are valued at the close of the
New York Stock Exchange on each trading day. Listed and unlisted securities
for which such information is regularly reported are valued at the last
sale price of the day or, in the absence of sales, at values based on the
closing bid or the last sale price on the prior trading day. Long-term and
short-term "non-money market" debt securities are valued by a portfolio
pricing service approved by the Board of Directors. Such securities which
cannot be valued by the approved portfolio pricing service are valued using
dealer-supplied valuations provided the Manager is satisfied that the firm
rendering the quotes is reliable and that the quotes reflect current market
value, or are valued under consistently applied procedures established by
the Board of Directors to determine fair value in good faith. Short-term
"money market type" debt securities having a remaining maturity of 60 days
or less are valued at cost (or last determined market value) adjusted for
amortization to maturity of any premium or discount.
---------------------------------------------------------------------------
ALLOCATION OF INCOME, EXPENSES, AND GAINS AND LOSSES. Income, expenses
(other than those attributable to a specific class) and gains and losses
are allocated daily to each class of shares based upon the relative
proportion of net assets represented by such class. Operating expenses
directly attributable to a specific class are charged against the
operations of that class.
---------------------------------------------------------------------------
FEDERAL TAXES. The Fund intends to continue to comply with provisions of
the Internal Revenue Code applicable to regulated investment companies and
to distribute all of its taxable income, including any net realized gain on
investments not offset by loss carryovers, to shareholders. Therefore, no
federal income or excise tax provision is required.
---------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS. Dividends and distributions to shareholders
are recorded on the ex-dividend date.
12 Oppenheimer Quest Value Fund, Inc.
<PAGE>
=============================
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
================================================================================
1. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
CLASSIFICATION OF DISTRIBUTIONS TO SHAREHOLDERS. Net investment income
(loss) and net realized gain (loss) may differ for financial statement and
tax purposes. The character of the distributions made during the year from
net investment income or net realized gains may differ from their ultimate
characterization for federal income tax purposes. Also, due to timing of
dividend distributions, the fiscal year in which amounts are distributed
may differ from the year that the income or realized gain (loss) was
recorded by the Fund.
During the year ended October 31, 1996, the Fund adjusted the
classification of net investment income and capital gain (loss) to reflect
the differences between financial statement amounts and distributions
determined in accordance with income tax regulations. Accordingly, during
the year ended October 31, 1996, amounts have been reclassified to reflect
a decrease in paid-in capital of $17,129. Accumulated net realized gain on
investments was increased by the same amount.
---------------------------------------------------------------------------
OTHER. Investment transactions are accounted for on the date the
investments are purchased or sold (trade date) and dividend income is
recorded on the ex-dividend date. Realized gains and losses on investments
and unrealized appreciation and depreciation are determined on an
identified cost basis, which is the same basis used for federal income tax
purposes.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of income and expenses during
the reporting period. Actual results could differ from those estimates.
================================================================================
2. CAPITAL STOCK
The Fund has authorized 35,000,000 shares of $1.00 par value capital stock.
Transactions in shares of capital stock were as follows:
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31, 1996 YEAR ENDED OCTOBER 31, 1995
----------------------------- -----------------------------
SHARES AMOUNT SHARES AMOUNT
-------------------------------------------------------------------------------------------------------------
Class A:
<S> <C> <C> <C> <C>
Sold 6,823,030 $109,212,436 4,045,256 $ 53,027,793
Dividends and distributions
reinvested 1,381,459 19,409,592 1,440,961 16,047,556
Redeemed (3,849,611) (61,223,101) (4,924,606) (64,462,161)
----------- ------------- ----------- -------------
Net increase 4,354,878 $ 67,398,927 561,611 $ 4,613,188
=========== ============= =========== =============
-------------------------------------------------------------------------------------------------------------
Class B:
Sold 4,315,316 $ 67,660,385 1,718,575 $ 22,392,431
Dividends and distributions
reinvested 196,585 2,738,062 94,418 1,045,812
Redeemed (686,922) (10,703,940) (277,524) (3,681,109)
----------- ------------- ----------- -------------
Net increase 3,824,979 $ 59,694,507 1,535,469 $ 19,757,134
=========== ============= =========== =============
-------------------------------------------------------------------------------------------------------------
Class C:
Sold 1,267,566 $ 20,075,574 523,083 $ 6,835,837
Dividends and distributions
reinvested 51,443 716,599 25,381 280,898
Redeemed (311,646) (5,112,666) (127,913) (1,738,997)
----------- ------------- ----------- -------------
Net increase 1,007,363 $ 15,679,507 420,551 $ 5,377,738
=========== ============= =========== =============
</TABLE>
================================================================================
3. UNREALIZED GAINS AND LOSSES ON INVESTMENTS
At October 31, 1996, net unrealized appreciation on investments of
$141,763,174 was composed of gross appreciation of $146,132,768, and gross
depreciation of $4,369,594.
13 Oppenheimer Quest Value Fund, Inc.
<PAGE>
=========================================
NOTES TO FINANCIAL STATEMENTS (Continued)
================================================================================
4. MANAGEMENT FEES AND OTHER TRANSACTIONS WITH AFFILIATES
Management fees paid to the Manager were in accordance with the investment
advisory agreement with the Fund which provides for a fee of 1.00% of the
first $400 million of average annual net assets, 0.90% of the next $400
million and 0.85% of net assets in excess of $800 million. Prior to November
22, 1995, management fees were paid to the former Manager at an annual rate
of 1.00% of the Fund's average net assets. The Manager has agreed to
reimburse the Fund if aggregate expenses (with specified exceptions) exceed
the most stringent applicable regulatory limit on Fund expenses. The Manager
acts as the accounting agent for the Fund at an annual fee of $55,000, plus
out-of-pocket costs and expenses reasonably incurred. Prior to November 22,
1995, accounting service fees were paid monthly to the former Manager.
Effective November 22, 1995, the Manager pays OpCap Advisors (the
Sub-Adviser) a monthly fee based on the fee schedule set forth in the
Prospectus. For the period ended October 31, 1996, the Manager paid
$1,524,058 to the Sub-Adviser.
For the year ended October 31, 1996, commissions (sales charges paid by
investors) on sales of Class A shares totaled $1,572,574, of which $584,527
was retained by OppenheimerFunds Distributor, Inc. (OFDI), a subsidiary of
the Manager, as general distributor, and by affiliated broker/dealers. Sales
charges advanced to broker/dealers by OFDI on sales of the Fund's Class B
and Class C shares totaled $2,244,538 and $183,698, of which $90,556 and
$1,937, respectively, were paid to an affiliated broker/dealer. During the
year ended October 31, 1996, OFDI received contingent deferred sales charges
of $166,112 and $7,700, respectively, upon redemption of Class B and Class C
shares as reimbursement for sales commissions advanced by OFDI at the time
of sale of such shares.
OppenheimerFunds Services (OFS), a division of the Manager, is the transfer
and shareholder servicing agent for the Fund and for other registered
investment companies. The Fund pays OFS an annual maintenance fee for each
Fund shareholder account and reimburses OFS for its out-of-pocket expenses.
During the period ended October 31, 1996, the Fund paid OFS $376,090.
The Fund has adopted a Distribution and Service Plan for Class A shares to
compensate OFDI for a portion of its costs incurred in connection with the
personal service and maintenance of accounts that hold Class A shares. Under
the Plan, the Fund pays an annual asset-based sales charge to OFDI of 0.25%
per year on Class A shares. The Fund also pays a service fee to OFDI of
0.25% per year. Both fees are computed on the average annual net assets of
Class A shares of the Fund, determined as of the close of each regular
business day. OFDI uses all of the service fee and a portion of the
asset-based sales charge to compensate brokers, dealers, banks and other
financial institutions quarterly for providing personal service and
maintenance of accounts of their customers that hold Class A shares. OFDI
retains the balance of the asset-based sales charge to reimburse itself for
its other expenditures under the Plan. During the year ended October 31,
1996, OFDI paid $7,893 to an affiliated broker/dealer as compensation for
Class A personal service and maintenance expenses.
The Fund has adopted compensation type Distribution and Service Plans for
Class B and Class C shares to compensate OFDI for its services and costs in
distributing Class B and Class C shares and servicing accounts. Under the
Plans, the Fund pays OFDI an annual asset-based sales charge of 0.75% per
year on Class B and Class C shares, as compensation for sales commissions
paid from its own resources at the time of sale and associated financing
costs. OFDI also receives a service fee of 0.25% per year as compensation
for costs incurred in connection with the personal service and maintenance
of accounts that hold shares of the Fund, including amounts paid to brokers,
dealers, banks and other financial institutions. Both fees are computed on
the average annual net assets of Class B and Class C shares, determined as
of the close of each regular business day. During the year ended October 31,
1996, OFDI retained $576,105 and $118,643, respectively, as compensation for
Class B and Class C sales commissions and service fee advances, as well as
financing costs. If the Plans are terminated by the Fund, the Board of
Directors may allow the Fund to continue payments of the asset-based sales
charge to OFDI for certain expenses it incurred before the Plans were
terminated. At October 31, 1996, OFDI had incurred unreimbursed expenses of
$1,827,648 for Class B and $191,798 for Class C.
14 Oppenheimer Quest Value Fund, Inc.
<PAGE>
=========================================
NOTES TO FINANCIAL STATEMENTS (Continued)
================================================================================
5. ILLIQUID AND RESTRICTED SECURITIES
At October 31, 1996, investments in securities included issues that are
illiquid or restricted. Restricted securities are often purchased in private
placement transactions, are not registered under the Securities Act of 1933,
may have contractual restrictions on resale, and are valued under methods
approved by the Board of Directors as reflecting fair value. A security may
be considered illiquid if it lacks a readily available market or if its
valuation has not changed for a certain period of time. The Fund intends to
invest no more than 10% of its net assets (determined at the time of
purchase and reviewed from time to time) in illiquid or restricted
securities. Certain restricted securities, eligible for resale to qualified
institutional investors, are not subject to that limit. The aggregate value
of illiquid or restricted securities subject to this limitation at October
31, 1996 was $5,765,388, which represents 1.04% of the Fund's net assets.
Information concerning restricted securities is as follows:
<TABLE>
<CAPTION>
VALUATION PER UNIT
SECURITY ACQUISITION DATES COST PER UNIT AS OF OCT. 31, 1996
----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Security Capital Realty, Inc. 9/15/94-4/17/95 $925.50 $1,082.40
----------------------------------------------------------------------------------------------------------
Security Capital Realty, Inc., 12% Cv.
Sub. Debs., 6/30/14 9/15/94-10/11/95 94.25 103.48
----------------------------------------------------------------------------------------------------------
Security Capital Realty, Inc., 12% Cv.
Sub. Debs. Interest Shares, 6/30/14 1/1/95-6/30/96 100.00 100.00
</TABLE>
<PAGE>
Appendix A
DESCRIPTION OF RATINGS
Bond Ratings
Moody's Investors Service, Inc.
Aaa: Bonds which are rated "Aaa" are judged to be the best quality
and to carry the smallest degree of investment risk. Interest
payments are protected by a large or by an exceptionally stable
margin and principal is secure. While the various protective
elements are likely to change, the changes that can be expected are
most unlikely to impair the fundamentally strong position of such
issues.
Aa: Bonds which are rated "Aa" are judged to be of high quality by
all standards. Together with the "Aaa" group, they comprise what
are generally known as "high-grade" bonds. They are rated lower
than the best bonds because margins of protection may not be as
large as with "Aaa" securities or fluctuation of protective
elements may be of greater amplitude or there may be other elements
present which make the long-term risks appear somewhat larger than
those of "Aaa" securities.
A: Bonds which are rated "A" possess many favorable investment
attributes and are to be considered as upper-medium grade
obligations. Factors giving security to principal and interest are
considered adequate but elements may be present which suggest a
susceptibility to impairment sometime in the future.
Baa: Bonds which are rated "Baa" are considered medium grade
obligations, i.e., they are neither highly protected nor poorly
secured. Interest payments and principal security appear adequate
for the present but certain protective elements may be lacking or
may be characteristically unreliable over any great length of time.
Such bonds lack outstanding investment characteristics and have
speculative characteristics as well.
Ba: Bonds which are rated "Ba" are judged to have speculative
elements; their future cannot be considered well-assured. Often
the protection of interest and principal payments may be very
moderate and not well safeguarded during both good and bad times
over the future. Uncertainty of position characterizes bonds in
this class.
B: Bonds which are rated "B" generally lack characteristics of
desirable investment. Assurance of interest and principal payments
or of maintenance of other terms of the contract over any long
period of time may be small.
Caa: Bonds which are rated "Caa" are of poor standing and may be in
default or there may be present elements of danger with respect to
principal or interest.
Ca: Bonds which are rated "Ca" represent obligations which are
speculative in a high degree and are often in default or have other
marked shortcomings.
C: Bonds which are rated "C" can be regarded as having extremely
poor prospects of ever retaining any real investment standing.
Standard & Poor's Corporation
AAA: "AAA" is the highest rating assigned to a debt obligation and
indicates an extremely strong capacity to pay principal and
interest.
AA: Bonds rated "AA" also qualify as high quality debt obligations.
Capacity to pay principal and interest is very strong, and in the
majority of instances they differ from "AAA" issues only in small
degree.
A: Bonds rated "A" have a strong capacity to pay principal and
interest, although they are somewhat more susceptible to adverse
effects of change in circumstances and economic conditions.
BBB: Bonds rated "BBB" are regarded as having an adequate capacity
to pay principal and interest. Whereas they normally exhibit
protection parameters, adverse economic conditions or changing
circumstances are more likely to lead to a weakened capacity to pay
principal and interest for bonds in this category than for bonds in
the "A" category.
BB, B, CCC, CC: Bonds rated "BB," "B," "CCC" and "CC" are regarded,
on balance, as predominantly speculative with respect to the
issuer's capacity to pay interest and repay principal in accordance
with the terms of the obligation. "BB" indicates the lowest degree
of speculation and "CC" the highest degree. While such bonds will
likely have some quality and protective characteristics, these are
outweighed by large uncertainties or major risk exposures to
adverse conditions.
C, D: Bonds on which no interest is being paid are rated "C."
Bonds rated "D" are in default and payment of interest and/or
repayment of principal is in arrears.
Fitch Investors Service, Inc.
AAA Bonds considered to be investment grade and of the highest
credit quality. The obligor has an exceptionally strong ability to
pay interest and repay principal, which is unlikely to be affected
by reasonably foreseeable events.
AA Bonds considered to be investment grade and of very high credit
quality. The obligor's ability to pay interest and repay principal
is very strong, although not quite as strong as bonds rated "AAA."
Because bonds rated in the "AAA" and "AA" categories are not
significantly vulnerable to foreseeable future developments, short-
term debt of these issuers is generally rated "F-1+."
A Bonds considered to be investment grade and of high credit
quality. The obligor's ability to pay interest and repay principal
is considered to be strong, but may be more vulnerable to adverse
changes in economic conditions and circumstances than bonds with
higher ratings.
BBB Bonds considered to be investment grade and of satisfactory
credit quality. The obligor's ability to pay interest and repay
principal is considered to be adequate. Adverse changes in
economic conditions and circumstances, however, are more likely to
have adverse impact on these bonds, and therefore impair timely
payment. The likelihood that the ratings of these bonds will fall
below investment grade is higher than for bonds with higher
ratings.
BB Bonds are considered speculative. The obligor's ability to pay
interest and repay principal may be affected over time by adverse
economic changes. However, business and financial alternatives can
be identified which could assist the obligor in satisfying its debt
service requirements.
B Bonds are considered highly speculative. While bonds in this
class are currently meeting debt service requirements, the
probability of continued timely payment of principal and interest
reflects the obligor's limited margin of safety and the need for
reasonable business and economic activity through the life of the
issue.
CCC Bonds have certain identifiable characteristics which, if not
remedied, may lead to default. The ability to meet obligations
requires an advantageous business and economic environment.
CC Bonds are minimally protected. Default in payment of interest
and/or principal seems probable over time.
C Bonds are in imminent default in payment of interest or
principal.
DDD, DD, and D Bonds are in default on interest and/or principal
payments. Such bonds are extremely speculative and should be
valued on the basis of their ultimate recovery value in liquidation
or reorganization of the obligor. "DDD" represents the highest
potential for recovery of these bonds, and "D" represents the
lowest potential for recovery.
Plus (+) Minus (-) Plus and minus signs are used with a rating
symbol to indicate the relative position of a credit within the
rating category. Plus and minus signs, however, are not used in
the "DDD," "DD," or "D" categories.
Short-Term Debt Ratings.
Moody's Investors Service, Inc. The following rating
designations for commercial paper (defined by Moody's as promissory
obligations not having original maturity in excess of nine months),
are judged by Moody's to be investment grade, and indicate the
relative repayment capacity of rated issuers:
Prime-1: Superior capacity for repayment. Capacity will normally
be evidenced by the following characteristics: (a) leveling market
positions in well-established industries; (b) high rates of return
on funds employed; conservative capitalization structures with
moderate reliance on debt and ample asset protection; (d) broad
margins in earning coverage of fixed financial charges and high
internal cash generation; and (e) well established access to a
range of financial markets and assured sources of alternate
liquidity.
Prime-2: Strong capacity for repayment. This will normally be
evidenced by many of the characteristics cited above but to a
lesser degree. Earnings trends and coverage ratios, while sound,
will be more subject to variation. Capitalization characteristics,
while still appropriate, may be more affected by external
conditions. Ample alternate liquidity is maintained.
Moody's ratings for state and municipal short-term obligations are
designated "Moody's Investment Grade" ("MIG"). Short-term notes
which have demand features may also be designated as "VMIG". These
rating categories are as follows:
MIG1/VMIG1: Best quality. There is present strong protection by
established cash flows, superior liquidity support or demonstrated
broadbased access to the market for refinancing.
MIG2/VMIG2: High quality. Margins of protection are ample
although not so large as in the preceding group.
Standard & Poor's Corporation ("S&P"): The following ratings by
S&P for commercial paper (defined by S&P as debt having an original
maturity of no more than 365 days) assess the likelihood of
payment:
A-1: Strong capacity for timely payment. Those issues determined
to possess extremely strong safety characteristics are denoted with
a plus sign (+) designation.
A-2: Satisfactory capacity for timely payment. However, the
relative degree of safety is not as high as for issues designated
"A-1".
S&P's ratings for Municipal Notes due in three years or less are:
SP-1: Very strong or strong capacity to pay principal and
interest. Those issues determined to possess overwhelming safety
characteristics will be given a plus (+) designation.
SP-2: Satisfactory capacity to pay principal and interest.
S&P assigns "dual ratings" to all municipal debt issues that have
a demand or double feature as part of their provisions. The first
rating addresses the likelihood of repayment of principal and
interest as due, and the second rating addresses only the demand
feature. With short-term demand debt, S&P's note rating symbols
are used with the commercial paper symbols (for example, "SP-1+/A-
1+").
Fitch Investors Service, Inc. Fitch assigns the following short-
term ratings to debt obligations that are payable on demand or have
original maturities of generally up to three years, including
commercial paper, certificates of deposit, medium-term notes, and
municipal and investment notes:
F-1+: Exceptionally strong credit quality; the strongest degree of
assurance for timely payment.
F-1: Very strong credit quality; assurance of timely payment is
only slightly less in degree than issues rated "F-1+".
F-2: Good credit quality; satisfactory degree of assurance for
timely payment, but the margin of safety is not as great as for
issues assigned "F-1+" or "F-1" ratings.
Duff & Phelps, Inc. The following ratings are for commercial
paper (defined by Duff & Phelps as obligations with maturities,
when issued, of under one year), asset-backed commercial paper, and
certificates of deposit (the ratings cover all obligations of the
institution with maturities, when issued, of under one year,
including bankers' acceptance and letters of credit):
Duff 1+: Highest certainty of timely payment. Short-term
liquidity, including internal operating factors and/or access to
alternative sources of funds, is outstanding, and safety is just
below risk-free U.S. Treasury short-term obligations.
Duff 1: Very high certainty of timely payment. Liquidity factors
are excellent and supported by good fundamental protection factors.
Risk factors are minor.
Duff 1-: High certainty of timely payment. Liquidity factors are
strong and supported by good fundamental protection factors. Risk
factors are very small.
Duff 2: Good certainty of timely payment. Liquidity factors and
company fundamentals are sound. Although ongoing funding needs may
enlarge total financing requirements, access to capital markets is
good. Risk factors are small.
IBCA Limited or its affiliate IBCA Inc. Short-term ratings,
including commercial paper (with maturities up to 12 months), are
as follows:
A1+: Obligations supported by the highest capacity for timely
repayment.
A1: Obligations supported by a very strong capacity for timely
repayment.
A2: Obligations supported by a strong capacity for timely
repayment, although such capacity may be susceptible to adverse
changes in business, economic, or financial conditions.
Thomson BankWatch, Inc. The following short-term ratings apply
to commercial paper, certificates of deposit, unsecured notes, and
other securities having a maturity of one year or less.
TBW-1: The highest category; indicates the degree of safety
regarding timely repayment of principal and interest is very
strong.
TBW-2: The second highest rating category; while the degree of
safety regarding timely repayment of principal and interest is
strong, the relative degree of safety is not as high as for issues
rated "TBW-1".
<PAGE>
Appendix B
Corporate Industry Classifications
Aerospace/Defense
Air Transportation
Auto Parts Distribution
Automotive
Bank Holding Companies
Banks
Beverages
Broadcasting
Broker-Dealers
Building Materials
Cable Television
Chemicals
Commercial Finance
Computer Hardware
Computer Software
Conglomerates
Consumer Finance
Containers
Convenience Stores
Department Stores
Diversified Financial
Diversified Media
Drug Stores
Drug Wholesalers
Durable Household Goods
Education
Electric Utilities
Electrical Equipment
Electronics
Energy Services & Producers
Entertainment/Film
Environmental
<PAGE>
Food
Gas Transmission*
Gas Utilities*
Gold
Health Care/Drugs
Health Care/Supplies & Services
Homebuilders/Real Estate
Hotel/Gaming
Industrial Services
Insurance
Leasing & Factoring
Leisure
Manufacturing
Metals/Mining
Nondurable Household Goods
Oil - Integrated
Paper
Publishing/Printing
Railroads
Restaurants
Savings & Loans
Shipping
Special Purpose Financial
Specialty Retailing
Steel
Supermarkets
Telecommunications - Technology
Telephone - Utility
Textile/Apparel
Tobacco
Toys
Trucking<PAGE>
* For purposes of the Fund's investment policy not to concentrate
in securities of issuers in the same industry, gas utilities and
gas transmission utilities each will be considered a separate
industry.
Oppenheimer Quest Value Fund, Inc.
Two World Trade Center
New York, New York 10048-0203
1-800-525-7048
Investment Adviser
OppenheimerFunds, Inc.
Two World Trade Center
New York, New York 10048-0203
Sub-Adviser
OpCap Advisors
One World Financial Center
New York, New York 10281
Distributor
OppenheimerFunds Distributor, Inc.
Two World Trade Center
New York, New York 10048-0203
Transfer Agent
OppenheimerFunds 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 Accountants
Price Waterhouse LLP
950 Seventeenth Street
Denver, Colorado 80202
Legal Counsel
Gordon Altman Butowsky Weitzen
Shalov & Wein
114 West 47th Street
New York, New York 10036
