As filed with the Securities and Exchange Commission on March 6, 1998
Registration No. 333-_____
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-14
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 / X /
PRE-EFFECTIVE AMENDMENT NO. / /
POST-EFFECTIVE AMENDMENT NO. / /
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OPPENHEIMER QUEST VALUE FUND, INC.
(Exact Name of Registrant as Specified in Charter)
- ------------------------------------------------------------------------------
Two World Trade Center, New York, New York 10048-0203
(Address of Principal Executive Offices)
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212-323-0200
(Registrant's Telephone Number)
Andrew J. Donohue, Esq.
Executive Vice President & General Counsel
OppenheimerFunds, Inc.
Two World Trade Center, New York, New York 10048-0203
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(212) 323-0256
(Name and Address of Agent for Service)
As soon as practicable after the Registration Statement becomes effective.
(Approximate Date of Proposed Public Offering)
Title of Securities Being Registered: Class A shares of Common Stock of
Registrant, par value $1.00 per share
It is proposed that this filing will become effective on March 31, 1998,
pursuant to Rule 488.
No filing fee is due because of reliance on Section 24(f) of the Investment
Company Act of 1940.
Pursuant to Rule 429, this Registration Statement relates to shares
previously registered by the Registrant on
Form N-1A (Reg. No. 2-65223; 811-2944).
<PAGE>
CONTENTS OF REGISTRATION STATEMENT
This Registration Statement contains the following pages and documents:
Front Cover
Contents Page
Cross-Reference Sheet
Part A
Proxy Statement for Oppenheimer Quest Officers Value Fund and Prospectus for
Oppenheimer Quest Value Fund, Inc.
Part B
Statement of Additional Information
Part C
Other Information
Signatures
Exhibits
<PAGE>
FORM N-14
OPPENHEIMER QUEST VALUE FUND, INC.
Cross Reference Sheet
Part A of Form N-14
Item No. Proxy Statement and Prospectus Heading and/or Title of Document
1 (a) Cross Reference Sheet
(b) Front Cover Page
(c) *
2 (a) *
(b) Table of Contents
3 (a) Comparative Fee Tables
(b) Synopsis
(c) Principal Risk Factors
4 (a) Synopsis; Approval of the Reorganization; Comparison between
Officers Fund and Value Fund;
Miscellaneous
(b) Approval of the Reorganization - Capitalization Table
5 (a) Registrant's Prospectus; Comparison Between Officers Fund and
Value Fund
(b) *
(c) *
(d) *
(e) Miscellaneous
(f) Miscellaneous
6 (a) Prospectus of Oppenheimer Quest Officers Value Fund; Annual
Report of
Oppenheimer Quest Officers Value Fund; Comparison Between
Officers Fund and Value Fund
(b) Miscellaneous
(c) *
(d) *
7 (a) Synopsis; Introduction
(b) *
(c) Synopsis; Introduction; Comparison Between Officers Fund and
Value Fund
8 (a) Proxy Statement
(b) *
9 *
Part B of Form N-14
Item No. Statement of Additional Information Heading
10 Cover Page
11 Table of Contents
12 (a) Registrant's Statement of Additional Information
(b) *
(c) *
13 (a) Statement of Additional Information about Oppenheimer Quest
Officers Value Fund
(b) *
(c) *
14 Registrant's Statement of Additional Information; Statement of
Additional Information about
Oppenheimer Quest Officers Value Fund; Annual Report of
Oppenheimer Quest Officers Value
Fund at 10/31/97; Registrant's Annual Report at 10/31/97.
<PAGE>
Part C of Form N-14
Item No. Other Information Heading
15 Indemnification
16 Exhibits
17 Undertakings
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* Not Applicable or negative answer
proxy\225cover
Preliminary Copy
OPPENHEIMER QUEST OFFICERS VALUE FUND
Two World Trade Center, New York, New York 10048-0203
1-800-525-7048
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON MAY 26, 1998
To the Shareholders of Oppenheimer Quest Officers Value Fund:
Notice is hereby given that a Special Meeting of the Shareholders of Oppenheimer
Quest Officers Value Fund ("Officers Fund"), a series of Oppenheimer Quest For
Value Funds (the "Trust"), a registered management investment company, will be
held at 6803 South Tucson Way, Englewood, Colorado 80112 at 10:00 A.M., Denver
time, on May 26, 1998, or any adjournments thereof (the "Meeting"), for the
following purposes:
1. To approve or disapprove an Agreement and Plan of Reorganization between the
Trust, on behalf of Officers Fund, and Oppenheimer Quest Value Fund, Inc.
("Value Fund"), and the transactions contemplated thereby, including the
transfer of substantially all the assets of Officers Fund to Value Fund in
exchange for Class A shares of Value Fund, the distribution of such Class A
shares of Value Fund to the Class A shareholders of Officers Fund in complete
liquidation of Officers Fund and the cancellation of the outstanding shares of
Officers Fund (the "Proposal").
2. To act upon such other matters as may properly come before the Meeting.
Shareholders of record at the close of business on March 10, 1998 are entitled
to notice of, and to vote at, the Meeting. The Proposal is more fully discussed
in the Proxy Statement and Prospectus. Please read it carefully before telling
us, through your proxy or in person, how you wish your shares to be voted. The
Trust's Board of Trustees recommends a vote in favor of the Proposal. WE URGE
YOU TO SIGN, DATE AND MAIL THE ENCLOSED PROXY PROMPTLY.
By Order of the Board of Trustees,
Andrew J. Donohue, Secretary
____________, 1998
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Shareholders who do not expect to attend the Meeting are requested to indicate
voting instructions on the enclosed proxy and to date, sign and return it in the
accompanying postage-paid envelope. To avoid unnecessary duplicate mailings, we
ask your cooperation in promptly mailing your proxy no matter how large or small
your holdings may be.
229
<PAGE>
Preliminary Copy
Oppenheimer Quest Officers Value Fund
Two World Trade Center, New York, New York 10048-0203
1-800-525-7048
PROXY STATEMENT
Oppenheimer Quest Value Fund, Inc.
Two World Trade Center, New York, New York 10048-0203
1-800-525-7098
PROSPECTUS
This Proxy Statement of Officers Fund relates to the Agreement and Plan of
Reorganization (the "Reorganization Agreement")and the transactions contemplated
thereby (the "Reorganization") between Oppenheimer Quest For Value Funds (the
"Trust"), on behalf of its series, Oppenheimer Quest Officers Value Fund
("Officers Fund"), and Oppenheimer Quest Value Fund, Inc.("Value Fund"). This
Proxy Statement also constitutes a Prospectus of Value Fund included in a
Registration Statement on Form N-14 (the "Registration Statement") filed by
Value Fund with the Securities and Exchange Commission (the "SEC"). Such
Registration Statement relates to the registration of Class A shares of Value
Fund to be offered to the shareholders of Officers Fund pursuant to the
Reorganization Agreement. Officers Fund is located at Two World Trade Center,
New York, New York 10048-0203 (telephone 1-800-525-7048).
This Proxy Statement and Prospectus sets forth concisely information about Value
Fund and the Reorganization that shareholders of Officers Fund should know
before voting on the Reorganization. A copy of the Prospectus for Value Fund,
dated February 27, 1998, is enclosed and incorporated herein by reference. The
following documents have been filed with the SEC and are available without
charge upon written request to OppenheimerFunds Services, the transfer and
shareholder servicing agent for Value Fund and Officers Fund (the "Transfer
Agent"), at P.O. Box 5270, Denver, Colorado 80217, or by calling the toll-free
number shown above: (i) a Prospectus for Officers Fund, dated January 26, 1998
and (ii) a Statement of Additional Information about Officers Fund, dated
January 26, 1998 (the "Officers Fund Additional Statement"). The following
documents have been filed with the SEC, are incorporated herein by reference and
are available without charge upon written request to the Transfer Agent or by
calling the toll-free number shown above: (i) a Prospectus for Value Fund, dated
February 27, 1998; and (ii) a Statement of Additional Information relating to
the Reorganization described in this Proxy Statement and Prospectus (the
"Additional Statement"), dated ____________, 1998 and filed as part of the
Registration Statement, which Additional Statement includes, among other things,
the Prospectus for Officers Fund, the Officers Fund Additional Statement and a
Statement of Additional Information about Value Fund, dated February 27, 1998
(the "Value Fund Additional Statement") which contains more detailed information
about Value Fund and its management.
Investors are advised to read and retain this Proxy Statement and Prospectus for
future reference.
<PAGE>
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION PASSED ON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
This Proxy Statement and Prospectus is dated ____________, 1998.
<PAGE>
TABLE OF CONTENTS
PROXY STATEMENT AND PROSPECTUS
Page
Introduction.............................................................
General...............................................................
Record Date; Vote Required; Share Information.........................
Proxies...............................................................
Costs of the Solicitation and the Reorganization......................
Comparative Fee Tables...................................................
Synopsis.................................................................
Purpose of the Meeting................................................
Parties to the Reorganization.........................................
The Reorganization ..............................................
Reasons for the Reorganization........................................
Tax Consequences of the Reorganization................................
Investment Objectives and Policies....................................
Investment Advisory and Distribution and Service Plan Fees
Purchases, Exchanges and Redemptions..................................
Principal Risk Factors...................................................
Approval of the Reorganization (The Proposal)............................
Reasons for the Reorganization........................................
The Reorganization....................................................
Tax Aspects of the Reorganization.....................................
Capitalization Table (Unaudited)......................................
Comparison Between Officers Fund and Value Fund
Investment Objectives and Policies....................................
Investment Restrictions...............................................
Description of Brokerage Practices....................................
Expense Ratios and Performance........................................
Shareholder Services..................................................
Rights of Shareholders................................................
Organization and History..............................................
Management and Distribution Arrangements..............................
Purchase of Additional Shares.........................................
Dividends and Distributions...........................................
Method of Carrying Out the Reorganization ...............................
Miscellaneous............................................................
Additional Information................................................
Financial Information.................................................
Public Information....................................................
Other Business...........................................................
Exhibit A - Agreement and Plan of Reorganization by and between
Oppenheimer Quest For Value Funds, on behalf of Oppenheimer Quest
Officers Value Fund, and Oppenheimer Quest Value Fund, Inc. ..........A-1
Enclosure - Prospectus of Oppenheimer Quest Value Fund, Inc. dated February
27, 1998.
<PAGE>
Oppenheimer Quest Officers Value Fund
Two World Trade Center, New York, New York 10048-0203
1-800-525-7048
PROXY STATEMENT
Oppenheimer Quest Value Fund, Inc.
Two World Trade Center, New York, New York 10048-0203
1-800-525-7098
PROSPECTUS
Special Meeting of Shareholders
to be held May 26, 1998
INTRODUCTION
General
This Proxy Statement and Prospectus is being furnished to the shareholders of
Oppenheimer Quest Officers Value Fund ("Officers Fund"), a series of Oppenheimer
Quest For Value Funds (the "Trust"), a registered management investment company,
in connection with the solicitation by the Board of Trustees of the Trust (the
"Board") of proxies to be used at the Special Meeting of Shareholders of
Officers Fund to be held at 6803 South Tucson Way, Englewood, Colorado 80112, at
10:00 A.M., Denver time, on May 26, 1998, or any adjournments thereof (the
"Meeting"). It is expected that the mailing of this Proxy Statement and
Prospectus will commence on or about ____________, 1998.
At the Meeting, shareholders of Officers Fund will be asked to approve an
Agreement and Plan of Reorganization (the "Reorganization Agreement") between
the Trust, on behalf of Officers Fund, and Oppenheimer Quest Value Fund, Inc.
("Value Fund"), and the transactions contemplated thereby (the
"Reorganization"), including the transfer of substantially all the assets of
Officers Fund to Value Fund in exchange for Class A shares of Value Fund, the
distribution of such Class A shares of Value Fund to the shareholders of
Officers Fund in complete liquidation of Officers Fund and the cancellation of
the outstanding shares of Officers Fund. A copy of the Reorganization Agreement
is attached hereto as Exhibit A and is incorporated by reference herein. As a
result of the proposed Reorganization, each shareholder of Officers Fund will
receive that number of Class A shares of Value Fund having an aggregate net
asset value equal to the net asset value of such shareholder's shares of
Officers Fund. This transaction has been structured in a manner intended to
qualify as a tax-free reorganization for federal income tax purposes. See
"Approval of the Reorganization".
Value Fund currently offers Class A, Class B, Class C and Class Y shares. Class
A shares are generally sold with a sales charge imposed at the time of purchase;
however certain purchases of Class A shares aggregating $1 million or more
($500,000 or more as to purchases by certain retirement plans) are not subject
to a sales charge, but may be subject to a contingent deferred sales charge
("CDSC") if redeemed within 12 calendar months (18 calendar months if shares
were purchased prior to May 1, 1997) of the date of purchase. Class B shares are
sold without a front-end sales charge but may be subject to a CDSC if redeemed
within six years of the date of purchase.
-1-
<PAGE>
Class C shares are sold without a front-end sales charge but may be subject to a
CDSC if not held for one year. Class Y shares are offered at net asset value
without sales charge only to certain institutional investors. As a result of the
Reorganization, shareholders of Officers Fund will receive Class A shares of
Value Fund and no sales charge will be imposed on the Value Fund Class A shares
received by Officers Fund's shareholders in the Reorganization. Because Officers
Fund has only Class A shares outstanding, Value Fund will not issue Class B,
Class C or Class Y shares in the Reorganization. Accordingly, complete
information on Class B, Class C and Class Y shares of Value Fund is not included
in this Proxy Statement and Prospectus, and no offering of Class B, Class C or
Class Y shares is made hereby. Additional information with respect to Value Fund
and fees and expenses is set forth herein, in the Prospectus of Value Fund
accompanying this Proxy Statement and Prospectus and in the Value Fund Statement
of Additional Information ("Value Fund Additional Statement"), both of which are
incorporated herein by reference.
Record Date; Vote Required; Share Information
The Board has fixed the close of business on March 10, 1998 as the record date
(the "Record Date") for the determination of shareholders entitled to notice of,
and to vote at, the Meeting. An affirmative vote of the holders of a "majority
of the outstanding voting securities" (as defined in the Investment Company Act
of 1940, as amended (the "Investment Company Act")) of Officers Fund is required
to approve the Reorganization. That level of vote is defined in the Investment
Company Act as the vote of the holders of the lesser of: (i) 67% or more of the
voting securities present or represented by proxy at the shareholders meeting,
if the holders of more than 50% of the outstanding voting securities are present
or represented by proxy, or (ii) more than 50% of the outstanding voting
securities. Each shareholder will be entitled to one vote for each share and a
fractional vote for each fractional share held of record at the close of
business on the Record Date. Only shareholders of Officers Fund will vote on the
Reorganization. The vote of shareholders of Value Fund is not being solicited.
At the close of business on the Record Date, there were approximately
______________ Class A shares of Officers Fund issued and outstanding. Although
Officers Fund is authorized to issue Class B and Class C shares, no such shares
have been issued as of this date. At the close of business on the Record Date,
there were _________________ shares of Value Fund issued and outstanding,
consisting of ____________ Class A shares, _____________ Class B shares and
- -------------
Class C shares. The presence in person or by proxy of the holders of a majority
of the shares of Officers Fund constitutes a quorum for the transaction of
business at the Meeting. To the knowledge of Officers Fund, as of the Record
Date, no person owned of record or beneficially 5% or more of its outstanding
shares except for :_____________________________. As of the Record Date, to the
knowledge of Value Fund, no person owned of record or beneficially 5% or more of
its outstanding shares except for: __________________________________. In
addition, as of the Record Date, the Trustees and officers of the Trust and the
Directors and officers of Value Fund, in each case, owned less than 1% of the
outstanding shares of Officers Fund and Value Fund, respectively.
-2-
<PAGE>
Proxies
The enclosed form of proxy, if properly executed and returned, will be voted (or
counted as an abstention or withheld from voting) in accordance with the choices
specified thereon, and will be included in determining whether there is quorum
to conduct the Meeting. The proxy will be voted in favor of the Proposal unless
a choice is indicated to vote against or to abstain from voting on the Proposal.
Shares owned of record by broker-dealers for the benefit of their customers
("street account shares") will be voted by the broker-dealer based on
instructions received from its customers. If no instructions are received, and
the broker-dealer does not have discretionary power to vote such street account
shares under applicable stock exchange rules, the shares represented thereby
will be considered to be present at the Meeting for purposes of determining the
quorum, but will have the same effect as a vote "against" the Proposal. If a
shareholder executes and returns a proxy but fails to indicate how the votes
should be cast, the proxy will be voted in favor of the Proposal. The proxy may
be revoked at any time prior to the voting thereof by: (i) writing to the
Secretary of Officers Fund at Two World Trade Center, New York, New York
10048-0203 (if received in time to be acted upon); (ii) attending the Meeting
and voting in person; or (iii) signing and returning a new proxy (if returned
and received in time to be voted).
Costs of the Solicitation and the Reorganization
All expenses of this solicitation, including the cost of printing and mailing
this Proxy Statement and Prospectus, will be borne by Officers Fund. Any
documents such as existing Prospectuses or annual reports that are included in
that mailing will be a cost of the fund issuing the document. In addition to the
solicitation of proxies by mail, proxies may be solicited by officers of
Officers Fund or officers and employees of OppenheimerFunds Services, personally
or by telephone or telegraph; any expenses so incurred will be borne by
OppenheimerFunds Services. Proxies may also be solicited by a proxy solicitation
firm hired at Officers Fund's expense for such purpose. Brokerage houses, banks
and other fiduciaries may be requested to forward soliciting material to the
beneficial owners of shares of Officers Fund and to obtain authorization for the
execution of proxies.
For those services, if any, they will be reimbursed by Officers Fund for their
reasonable out-of-pocket expenses.
With respect to the Reorganization, Officers Fund and Value Fund will bear the
cost of the tax opinion. Any other out-of-pocket expenses of Officers Fund and
Value Fund associated with the Reorganization, including legal, accounting and
transfer agent expenses, will be borne by Officers Fund and Value Fund,
respectively, in the amounts so incurred by each.
-3-
<PAGE>
COMPARATIVE FEE TABLES
Officers Fund and Value Fund each pay a variety of expenses for management of
their assets, administration, distribution of their shares and other services,
and those expenses are reflected in each fund's net asset value per share.
Shareholders pay other expenses directly, such as sales charges. The following
table is provided to help you compare the direct expenses of investing in
Officers Fund with the direct expenses of investing in Value Fund. Pro forma
transaction charges for the combined fund after giving effect to the
Reorganization will be the same as the charges noted below for Value Fund.
Shareholder Transaction Expenses
<TABLE>
<CAPTION>
Officers Fund Value Fund
Class AClass B Class C Class A Class B Class C Class Y
Shares Shares Shares Shares Shares Shares Shares
<S> <C> <C> <C> <C> <C> <C> <C>
Maximum Sales Charge 5.75% None None 5.75% None None None
on Purchases (as
a % of
offering price)
- ------------------------------------------------------------------------------
Maximum
Deferred Sales None(1) 5% in the1% if None(1) 5% in the 1% if None
Charge (as a % first yeashares first year shares are
of the lower decliningare declining redeemed
of the original to 1% in redeemed to 1% in within 12
purchase price the sixthwithin 12 the six months of
or redemption year and months of year and purchase
proceeds) eliminatepurchase eliminated
thereafter thereafter
- ------------------------------------------------------------------------------
Maximum
Sales Charge on None None None None None None None
Reinvested Dividends
- ------------------------------------------------------------------------------
Exchange Fee None None None None None None None
- ------------------------------------------------------------------------------
Redemption Fee None None None 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" in
each fund's
Prospectus) in Class A shares,
you may have to pay a sales charge of up to 1% if you sell your shares within 12
calendar months (18 months for shares purchased prior to May 1, 1997) from the
end of the calendar month during which you purchased those shares.
Expenses of Value Fund and Officers Fund; Pro Forma Expenses
The following tables are the operating expenses of Class A shares of Officers
Fund and the operating expenses of Class A shares of Value Fund and are based on
expenses for the fund's fiscal year ended October 31, 1997. All amounts shown
are a percentage of net assets of Officers Fund and of Class A shares of Value
Fund. Pro forma expenses for the surviving Value Fund after giving effect to the
Reorganization are not shown, as they do not differ from the fees indicated
below for Value Fund.
-4-
<PAGE>
Officers Fund Value Fund*
Class A Class A
Management Fees 0.66% (with waiver) 0.94%
12b-1 Plan Fees None (with waiver) 0.50%
Other Expenses 0.63% 0.16%
Total Fund Operating
Expenses 1.29% (with waivers) 1.60%
- -----------------
*These fees will be the same for the surviving Value Fund after giving effect to
the Reorganization.
The 12b-1 fees for shares of Officers Fund and Value Fund are service fees and
asset-based sales charges. The service fees are a maximum of 0.25% of average
annual net assets of Class A shares of each fund and the asset-based sales
charge for Class A shares is 0.25% of average annual net assets of that class.
The Management Fees, 12b-1 Plan Fees and Total Fund Operating Expenses for
Officers Fund in the table above reflect fee waivers by the Manager and the
Distributor that are currently in effect. These fee waivers, which are described
in "Investment Advisory and Distribution and Service Plan Fees", lowered
Officers Fund's overall expense ratio.
Without such fee waivers,
Management Fees, 12b-1 Plan Fees and Total Fund Operating Expenses for
Officers Fund would
have been 1.00%, 0.50% and 2.15%, respectively.
Examples
To try and show the effect of these expenses on an investment over time, the
hypotheticals shown below have been created. Assume that you make a $1,000
investment in Class A shares of Officers Fund, Class A shares of Value Fund or
Class A shares of the pro forma surviving Value Fund, and that the annual return
is 5% and that the operating expenses for each fund are the ones shown in the
chart above. 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 each
period shown.
1 year 3 years 5 years 10 years
Oppenheimer Quest
Officers Value Fund
Class A Shares* $70 $ 96 $124 $204
Oppenheimer Quest Capital
Value Fund, Inc.
Class A Shares* $73 $105 $140 $237
-5-
<PAGE>
* Expenses for Officers Fund and Value Fund include the Class A initial sales
charge. Currently, only Class A shares of Officers Fund are offered and only to
certain individuals and entities that qualify for a waiver of the Class A
initial sales charge. The expenses in the table above for Officers Fund without
giving effect to the Class A initial sales charge would be $13, $41, $71 and
$156 for the 1 year, 3 years, 5 years and 10 years, respectively. Pro forma
expenses for the surviving Value Fund after giving effect to the Reorganization
are not shown, as they do not differ from the fees indicated above for Value
Fund.
The 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 funds,
all of which may be more or less than the amounts shown.
SYNOPSIS
The following is a synopsis of certain information contained in or incorporated
by reference in this Proxy Statement and Prospectus and presents key
considerations for shareholders of Officers Fund to assist them in determining
whether to approve the Reorganization. This synopsis is only a summary and is
qualified in its entirety by the more detailed information contained in or
incorporated by reference in this Proxy Statement and Prospectus and by the
Reorganization Agreement which is Exhibit A hereto. Shareholders should
carefully review this Proxy Statement and Prospectus and the Reorganization
Agreement in their entirety and, in particular, the current Prospectus of Value
Fund which accompanies this Proxy Statement and Prospectus and is incorporated
herein by reference.
Purpose of the Meeting
At the Meeting, shareholders of Officers Fund will be asked to approve or
disapprove the Reorganization.
Parties to the Reorganization
Oppenheimer Quest For Value Funds was organized in April 1987 as a multi-series
Massachusetts business trust and Oppenheimer Quest Officers Value Fund is a
non-diversified series of that Trust. Oppenheimer Quest For Value Funds is an
open-end management investment company, with an unlimited number of authorized
shares of beneficial interest. Value Fund is a diversified, open-end management
investment company that was organized in August 1979 as a Maryland corporation.
Officers Fund and Value Fund (collectively referred to herein as the "funds")
are located at Two World Trade Center, New York, New York 10048-0203.
OppenheimerFunds, Inc. (the "Manager"), located at Two World Trade Center, New
York, New York 10048-0203, acts as investment adviser to the funds. OpCap
Advisors (the "Sub-Adviser") acts as sub-adviser to the funds and is located at
One World Financial Center, New York, New York 10281. The portfolio manager for
Officers Fund (Jeffrey C. Whittington), and the portfolio manager for Value Fund
(Eileen Rominger) are each employed by the Sub-Adviser. The Trustees of the
Trust and the Directors of Value Fund are the same, and oversee the Manager, the
Sub-Adviser and the portfolio managers. Additional information about the funds,
the Manager and the Sub-Adviser is set forth below.
-6-
<PAGE>
The Reorganization
The Reorganization Agreement provides for the transfer of substantially all the
assets of Officers Fund to Value Fund in exchange for the issuance of Class A
shares of Value Fund. The net asset value of Value Fund Class A shares issued in
the exchange will equal the value of the assets of Officers Fund received by
Value Fund. In conjunction with the Closing (as defined below) of the
Reorganization, presently scheduled for May 29, 1998, Officers Fund will
distribute the Class A shares of Value Fund received by Officers Fund on the
Closing Date (as defined below) to holders of Class A shares of Officers Fund.
As a result of the Reorganization, each Class A Officers Fund shareholder will
receive the number of full and fractional Class A Value Fund shares that equals
in value such shareholder's pro rata interest in the assets transferred to Value
Fund as of the Valuation Date (as defined below). The Board has determined that
the interests of existing Officers Fund shareholders will not be diluted as a
result of the Reorganization. For the reasons set forth below under "Approval of
the Reorganization - Reasons for the Reorganization," the Board, including the
trustees who are not "interested persons" of the Trust, as that term is defined
in the Investment Company Act (the "Independent Trustees"), has concluded that
the Reorganization is in the best interests of Officers Fund and its
shareholders and recommends approval of the Reorganization by Officers Fund
shareholders. The Board of Directors of Value Fund has also approved the
Reorganization and determined that the interests of existing Value Fund
shareholders will not be diluted as a result of the Reorganization. If the
Reorganization is not approved, Officers Fund will continue in existence and the
Board will determine whether to pursue alternative actions.
Reasons for the Reorganization
The Manager proposed to the Board a reorganization into Value Fund so that
shareholders of Officers Fund may become shareholders of a substantially larger
fund, which after such reorganization is anticipated to allow shareholders to
participate in a fund with the same investment objective and similar investment
policies and strategies but with the potential for lower ongoing transfer agency
and other non-management and distribution expenses and, to the extent the
voluntary fee waivers of Officers Fund were terminated, lower overall operating
expenses. The Board also considered information with respect to the historical
performance of the funds. For the one and three year periods ended October 31,
1997, the average annual total returns at net asset value were significantly
better for Value Fund than for Officers Fund. The Board also considered that the
Reorganization would be a tax free reorganization, and there would be no sales
charge imposed in effecting the Reorganization.
Tax Consequences of the Reorganization
In the opinion of Price Waterhouse LLP, tax adviser to Officers Fund, the
Reorganization will qualify as a tax-free reorganization for Federal income tax
purposes. As a result, it is expected that no gain or loss will be recognized by
either fund, or by the shareholders of either fund for Federal income tax
purposes as a result of the Reorganization. For further information about the
tax consequences of the Reorganization, see "Approval of the Reorganization -
Tax Aspects of the Reorganization" below.
-7-
<PAGE>
Investment Objectives and Policies
The investment objectives and investment policies of the funds are substantially
the same. Each fund seeks capital appreciation. In seeking this investment
objective, each fund will invest in securities (primarily equity securities) of
companies believed to be undervalued in the marketplace in relation to factors
such as the companies' assets, earnings, growth potential and cash flows. The
funds may also invest in bonds rated below investment grade by Moody's Investors
Service, Inc. ("Moody's") or Standard & Poor's Corporation ("S&P") or another
rating organization or as determined to be of similar quality by the
Sub-Adviser. Such investment is limited by Officers Fund to up to 25% of net
assets; there is no limit as to Value Fund, although it is the present intention
of Value Fund to invest no more than 5% of its total assets in such securities.
The funds may also invest in foreign equity and debt securities. The funds may
use certain hedging instruments to try to manage investment risks. To provide
liquidity, the funds typically invest a portion of their respective assets in
various types of U.S. Government securities and certain money market
instruments; for temporary defensive purposes, the funds may invest all of their
respective assets in such securities. See "Principal Risk Factors" and
"Comparison Between Officers Fund and Value Fund".
Investment Advisory and Distribution and Service Plan Fees
The funds obtain investment management services from the Manager pursuant to the
terms of investment advisory agreements that are substantially the same except
for fee amounts. The management fee payable to the Manager is computed on the
net asset value of each fund as of the close of business each day and is payable
monthly. Officers Fund pays a management fee at the annual rate of 1.0% of
average annual net assets. A voluntary waiver of a portion of this fee is
currently in effect, as described below. Value Fund pays a management fee at the
following annual rates: 1.00% of the first $400 million of average annual net
assets; 0.90% of the next $400 million; 0.85% of the next $3.2 billion; 0.80% of
the next $4 billion; and 0.75% of average annual net assets over $8 billion.
The Manager has retained a sub-adviser, OpCap Advisors (the "Sub-Adviser"), on
behalf of each fund to provide day-to-day portfolio management of the fund. For
such services the Manager (not the fund) pays the Sub-Adviser an annual fee
payable monthly based on the average daily net assets of the fund equal to 40%
of the net 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 total net assets of the fund
that exceed the Base Amount, calculated after any applicable waivers. As to
Officers Fund, the Sub-Adviser voluntarily agreed to waive its entire
subadvisory fee. Concurrently with such waiver, the Manager voluntarily agreed
to waive that portion of its management fee equal to what would otherwise have
been payable to the Sub-Adviser if the Sub-Adviser had not waived its
subadvisory fee. These expense waivers are voluntary and may be modified or
withdrawn at any time.
Officers Fund and Value Fund have adopted Distribution and Service Plans under
Rule 12b-1 of the Investment Company Act for Class A shares (the "Plans") to
compensate the Distributor for its services and costs in connection with the
distribution of Class A shares and the personal service and maintenance of
shareholder accounts that hold Class A shares. Under each Plan, the funds pay
the Distributor an asset-based sales charge of 0.25% per annum on Class A shares
and a service fee of
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0.25% per annum on Class A shares. All fee amounts are computed on the average
annual net assets of the class determined as of the close of each regular
business day of each fund. 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 of the
funds. The Distributor retains the balance of the asset-based sales charge to
compensate itself for its other expenditures under the Plan. As to Officers
Fund, the Distributor currently voluntarily waives all fees payable to it under
the Class A Plan. Such waiver may be terminated at any time.
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. A description of the Distribution and Service
Plans for Class B and Class C shares of the funds is set forth in their
respective Prospectuses. The Plans are compensation plans whereby payments by
the funds are made at a fixed rate as specified above and the funds' payments
are not limited to reimbursing the Distributor's costs.
Purchases, Exchanges and Redemptions
Both Officers Fund and Value Fund are part of the OppenheimerFunds complex of
mutual funds. The procedures for purchases, exchanges and redemptions of shares
of the funds are substantially the same. Shares of either fund may be exchanged
for shares of the same class of other Oppenheimer funds offering such shares.
Class A shares of Officers Fund and Value Fund are generally sold subject to a
maximum initial sales charge of 5.75%. Currently, Class A shares of Officers
Fund are only offered to a limited group of individuals and entities as
described in Officers Fund's Prospectus, and such individuals and entities
qualify for purchase of shares at net asset value without a sales charge.
Investors who purchase $1
million or more ($500,000 or more for purchases by "Retirement Plans" as defined
in "Class A Contingent Deferred Sales Charge" in each fund's Prospectus) in
Class A shares pay no initial sales charge but may have to pay a sales charge of
up to 1% if shares are sold within 12 calendar months (18 months for shares
purchased prior to May 1, 1997) from the end of the calendar month during which
shares are purchased. Class A shares of the funds may also be purchased at
reduced sales charges, or at net asset value, as described in the fund's
Prospectus. Class B and Class C shares of the funds generally are sold without a
front-end sales charge but may be subject to a contingent deferred sales charge
("CDSC") upon redemption. See "Comparative Fee Tables" above for a complete
description of such sales charges. Class A shares of Value Fund received in the
Reorganization will be issued at net asset value and without a sales charge.
Shareholders of the funds may exchange their shares at net asset value for
shares of the same class issued by other mutual funds in the OppenheimerFunds
complex, subject to certain conditions. Class A shares of the funds may be
redeemed without charge at their respective net asset values per share
calculated after the redemption order is received and accepted; however, Class A
shares that were not subject to a front-end sales charge at the time of purchase
in amounts of $1 million or more
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($500,000 or more for purchases by certain retirement plans) may be subject to a
CDSC as described above. Services available to shareholders of both funds
include purchase and redemption of shares through OppenheimerFunds AccountLink
and PhoneLink (an automated telephone system), telephone redemptions, and
exchanges by telephone to other Oppenheimer funds which offer Class A, Class B
and Class C shares, and reinvestment privileges. Please see "Shareholder
Services," below and each fund's Prospectus for further information.
PRINCIPAL RISK FACTORS
In evaluating whether to approve the Reorganization and invest in Value Fund,
shareholders should carefully consider the following risk factors, the
information set forth in this Proxy Statement and Prospectus and the more
complete description of risk factors set forth in the documents incorporated by
reference herein, including the Prospectuses of the funds and their respective
Statements of Additional Information.
General
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
affect the value of both funds' investments, their investment performance, and
the prices of their shares. Because of the types of the securities in which the
funds invest, and the investment techniques they use, the funds are designed for
long-term investors. There is no assurance that either 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.
Stock Investment Risks
Because both funds usually invest a substantial portion (and from time to time
may invest all) of their assets in stocks, the value of each fund's portfolio
will be affected by changes in the stock markets. This market risk will affect
each fund's net asset values 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 other factors can affect a particular stock's price (for
example, 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. Changes in the overall
market conditions and prices can occur at any time. Because of the types of
companies each fund invests in and the investment techniques used, some of which
may be speculative, both funds are designed for those investors who are
investing for the long-term and who are willing to accept greater risks of loss
of their capital in the hope of achieving capital appreciation. Investing for
capital appreciation entails the risk of loss of all or part of your principal.
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Risks of Fixed-Income Securities
Debt securities are subject to changes in their values due to changes in
prevailing interest rates (this is known as interest rate risk). When prevailing
interest rates fall, the value of already-issued debt securities generally rise.
When interest rates rise, the values of already-issued debt securities generally
decline. The magnitude of these fluctuations will often be greater for
longer-term debt securities than shorter-term debt securities. A 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. Debt securities
are also subject to credit risk. Credit risk relates to the ability of the
issuer to meet interest or principal payments on a security as they become due.
Each fund has the ability to invest its net assets (subject to limitations
described below) in high-yield, lower-grade debt securities commonly known as
"junk bonds". However, as of the fiscal year ended October 31, 1997, neither
fund held any high-yield securities. If a fund were to invest in high-yield
securities, those securities may be subject to greater market fluctuation and
risk of loss of income and principal than lower yielding, investment grade
securities. There are additional risks of investing in lower grade securities
that are described in the Prospectus of each fund.
Foreign Securities
There are risks of foreign investing that increase the risk of investing in both
Officers Fund and in Value Fund and also increase the operating costs of both
funds. For example, foreign issuers are not required to use generally-accepted
accounting principles. If foreign securities are not registered for sale in the
U.S. under U.S. securities laws, the issuer does not have to comply with the
disclosure requirements of U.S. laws, which are generally more stringent than
foreign laws. The values of foreign securities investments will be affected by
other factors, including exchange control regulations or currency blockage and
possible expropriation or nationalization of assets.
There are risks of changes in foreign currency values. Because Officers Fund and
Value Fund may purchase securities denominated in foreign currencies, a change
in value of a foreign currency against the U.S. dollar will result in a change
in the U.S. dollar value of securities of that Fund denominated in that
currency. There may also be changes in governmental administration or economic
or monetary policy in the U.S. or abroad that can affect foreign investing. In
addition, it is generally more difficult to obtain court judgments outside the
United States if that Fund has to sue a foreign broker or issuer. Additional
costs may be incurred because foreign broker commissions are generally higher
than U.S. rates, and there are additional custodial costs associated with
holding securities abroad. More information about the risks and potential
rewards of investing in foreign securities is contained in the Statement of
Additional Information of both funds.
Hedging Instruments
Each fund may use certain hedging instruments. 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
Sub-Adviser uses a hedging instrument at the wrong time or judges market
conditions incorrectly, hedging strategies may reduce the fund's return. Losses
could also be experienced 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 funds.
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There are also special risks in particular hedging strategies. 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. To limit its
exposure in foreign currency exchange contracts, the funds limit their exposure
to the amount of its assets denominated in foreign currency.
Non-Diversification
Officers Fund is classified as a "non-diversified" investment company under the
Investment Company Act so that the proportion of the Fund's assets that may be
invested in the securities of a single issuer is not limited by the Investment
Company Act. An investment in Officers Fund therefore entails greater risk than
an investment in a diversified investment company, such as Value Fund, because a
higher percentage of investments among fewer issuers may result in greater
fluctuation in the total market value of Officers Fund's portfolio, and
economic, political or regulatory developments may have a greater impact on the
value of Officers Fund's portfolio than would be the case if the portfolio were
diversified among more issuers.
APPROVAL OF THE REORGANIZATION
(The Proposal)
Reasons for the Reorganization
At a meeting held on February 18, 1998, the Board, including the Independent
Trustees, unanimously approved the Reorganization and the Reorganization
Agreement, determined that the Reorganization is in the best interests of
Officers Fund and its shareholders and resolved to recommend that shareholders
of Officers Fund vote for approval of the Reorganization . The Board further
determined that the Reorganization would not result in dilution of Officers
Funds' shareholders' interests.
In evaluating the Reorganization, the Board reviewed and discussed with
independent legal counsel the materials provided by the Manager with respect to
the proposed Reorganization. Included in the materials was information with
respect to the funds' investment objectives and policies, management fees,
distribution fees and other operating expenses, historical performance and asset
size.
The Board was advised that Officers Fund, with approximately only $7 million in
net assets as of October 31, 1997, was a small fund in terms of net assets with
higher shareholder administration, transfer agency, legal and other
non-management fee operating expenses than most other funds in the
OppenheimerFunds complex. Such expenses were 0.63% at October 31, 1997. In
comparison, Value Fund had over $1 billion of net assets as of October 31, 1997,
with substantially lower non-management fee and distribution operating expenses
of 0.16% as of such date. The Board, in reviewing financial information,
considered that after giving effect to the fee waivers for Officers Fund, the
Total Fund Operating Expenses of Value Fund at October 31, 1997 (including
management fee and distribution expenses) were higher than those of Officers
Fund and would be higher on a pro forma basis after giving effect to the
Reorganization; however, without giving effect to the fee waivers for Officers
Fund, which are voluntary and can be terminated by the Manager and OFDI at any
time, the total operating expenses of Value Fund were, and after the
Reorganization would be, lower. See "Comparative Fee Tables". The Board
concluded that pursuant to the Reorganization, the shareholders of Officers Fund
would be shareholders of a substantially larger fund, with the
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potential to incur lower-ongoing transfer agency and other non-management and
distribution expenses and, to the extent the voluntary fee waivers of Officers
Fund were terminated, lower overall operating expenses. The Board further
concluded that economies of scale that apply to a larger fund may benefit
shareholders of Officers Fund.
The Board considered that the funds have the same investment objective of
seeking capital appreciation, that the portfolio managers employ substantially
similar investment techniques and strategies for the funds, and that the
investment policies of the funds as recited in their respective Prospectuses
with respect to purchasing portfolio securities, hedging instruments, illiquid
securities, convertible securities, warrants and rights, portfolio lending and
the borrowing of money are substantially the same. The only notable difference
between the funds regarding investment policy is with respect to
diversification; Officers Fund is a non-diversified investment company, and the
proportion of its assets that may be invested in the securities of a single
issuer is not limited by the Investment Company Act, while Value Fund is a
diversified investment company and is diversified with respect to 75% of its
total assets. Due to these similarities, the Manager advised the Boards that the
portfolio securities held by Officers Fund could be suitable for investment by
Value Fund and, pursuant to the Reorganization, would be acquired without the
payment of brokerage commissions and other fees. The Board determined that the
funds, in terms of investment objectives, techniques and strategies, were
comparable and that pursuant to the Reorganization shareholders of Officers Fund
would be invested in a comparable fund.
In addition to the above, the Board also considered information with respect to
the historical performance of Officers Fund and Value Fund, including the
performance information set forth below in "Expense Ratios and Performance". The
Board was advised by the Manager that overall, the average annual return on
Class A shares for Value Fund was better than that of Officers Fund and that the
prospects for Value Fund's performance in the future were positive. By contrast,
the Board also considered the future viability of Officers Fund due to its small
size, and that its prospects for increasing its asset base to achieve
efficiencies of scale was uncertain due to, among other things, below-average
performance, as discussed below.
The Board next considered the terms and conditions of the Reorganization,
including that there would be no sales charge imposed in effecting the
Reorganization and that the Reorganization is
expected to be a tax free reorganization.
After consideration of the above factors, and such other factors and information
as the Board deemed relevant, the Board, including the Independent Trustees,
unanimously approved the Reorganization and the Reorganization Agreement and
voted to recommend its approval to the shareholders of Officers Fund.
The Board of Directors of Value Fund, including the Directors who are not
"interested persons" of Value Fund, unanimously approved the Reorganization and
the Reorganization Agreement and determined that the Reorganization is in the
best interests of Value Fund and its shareholders. The Board of Directors
further determined that the Reorganization would not result in dilution of Value
Fund shareholders' interests. The Board of Directors considered, among other
things, that Value Fund could acquire portfolio securities without incurring
brokerage and other transaction expenses,
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and that an increase in the asset base of the fund could benefit Value Fund
shareholders due to the economies of scale available to a larger fund.
The Reorganization
The Reorganization Agreement (a copy of which is set forth in full as Exhibit A
to this Proxy Statement and Prospectus) contemplates a reorganization under
which (i) all of the assets of Officers Fund (other than the cash reserve
described below (the "Cash Reserve")) will be transferred to Value Fund in
exchange for Class A shares of Value Fund, (ii) these Class A shares of Value
Fund will be distributed among the shareholders of Officers Fund in complete
liquidation of Officers Fund, and (iii) the outstanding shares of Officers Fund
will be canceled. Value Fund will not assume any of Officers Fund's liabilities
except for portfolio securities purchased which have not settled and outstanding
shareholder redemption and dividend checks.
The result of effectuating the Reorganization would be that: (i) Value Fund will
add to its gross assets all of the assets (net of any liability for portfolio
securities purchased but not settled and outstanding shareholder redemption and
dividend checks) of Officers Fund other than its Cash Reserve; and (ii) the
shareholders of Officers Fund as of the close of business on the Closing Date
will become holders of Class A shares of Value Fund.
The effect of the Reorganization will be that shareholders of Officers Fund who
vote their Class A shares in favor of the Reorganization will be electing to
redeem their shares of Officers Fund (at net asset value on the Valuation Date
referred to below under "Method of Carrying Out the Reorganization Plan,"
calculated after subtracting the Cash Reserve) and reinvest the proceeds in
Class A shares of Value Fund at net asset value without sales charge and without
recognition of taxable gain or loss for Federal income tax purposes (see "Tax
Aspects of the Reorganization" below). The Cash Reserve is that amount retained
by Officers Fund which is sufficient in the discretion of the Board for the
payment of: (a) Officers Fund's expenses of liquidation, and (b) its
liabilities, other than those assumed by Value Fund. Officers Fund and Value
Fund will bear all of their respective expenses associated with the
Reorganization, as set forth under "Costs of the Solicitation and the
Reorganization" above. Management estimates that such expenses associated with
the Reorganization to be borne by Officers Fund will not exceed $25,000.
Liabilities as of the
date of the transfer of assets will consist primarily of accrued but unpaid
normal operating expenses of Officers Fund, excluding the cost of any portfolio
securities purchased but not yet settled and outstanding shareholder redemption
and dividend checks. See "Method of Carrying Out the Reorganization Plan" below.
The Reorganization Agreement provides for coordination between the funds as to
their respective portfolios so that, after the closing, Value Fund will be in
compliance with all of its investment policies and restrictions. Officers Fund
will recognize capital gain or loss on any sales made pursuant to this
paragraph.
Tax Aspects of the Reorganization
Immediately prior to the Valuation Date referred to in the Reorganization
Agreement, Officers Fund will pay a dividend or dividends which, together with
all previous dividends, will have the effect of
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distributing to Officers Fund's shareholders all of Officers Fund's investment
company taxable income for taxable years ending on or prior to the Closing Date
(computed without regard to any deduction for dividends paid) and all of its net
capital gain, if any, realized in taxable years ending on or prior to the
Closing Date (after reduction for any available capital loss carry-forward).
Such dividends will be included in the taxable income of Officers Fund's
shareholders as ordinary income and capital gain, respectively.
The exchange of the assets of Officers Fund for Class A shares of Value Fund and
the assumption by Value Fund of certain liabilities of Officers Fund is intended
to qualify for Federal income tax purposes as a tax-free reorganization under
Section 368(a)(1) of the Internal Revenue Code of 1986, as amended (the "Code").
Officers Fund has represented to Price Waterhouse LLP, tax adviser to the funds,
that there is no plan or intention by any Officers Fund shareholder who owns 5%
or more of Officers Fund's outstanding shares, and, to Officers Fund's best
knowledge, there is no plan or intention on the part of the remaining Officers
Fund shareholders, to redeem, sell, exchange or otherwise dispose of a number of
Value Fund Class A shares received in the transaction that would reduce Officers
Fund shareholders' ownership of Value Fund shares to a number of shares having a
value, as of the Closing Date, of less than 50% of the value of all the formerly
outstanding Officers Fund shares as of the same date. Value Fund and Officers
Fund have each represented to Price Waterhouse LLP, that, as of the Closing
Date, it will qualify as a regulated investment company or will meet the
diversification test of Section 368(a)(2)(F)(ii) of the Code.
As a condition to the closing of the Reorganization, Value Fund and Officers
Fund will receive the opinion of Price Waterhouse LLP to the effect that, based
on the Reorganization Agreement, the above representations, existing provisions
of the Code, Treasury Regulations issued thereunder, current Revenue Rulings,
Revenue Procedures and court decisions, for Federal income tax purposes:
1. The transactions contemplated by the Reorganization Agreement will qualify
as a tax-free "reorganization" within the meaning of Section 368(a)(1) of
the Code.
2. Officers Fund and Value Fund will each qualify as "a party to a
reorganization" within the meaning of Section 368(b)(2) of the Code.
3. No gain or loss will be recognized by the shareholders of Officers Fund
upon the distribution of Class A shares of Value Fund to the shareholders
of Officers Fund pursuant to Section 354 of the Code.
4. Under Section 361(a) of the Code no gain or loss will be recognized by
Officers Fund by reason of the transfer of its assets solely in exchange
for Class A
shares of Value Fund.
5. Under Section 1032 of the Code no gain or loss will be recognized by Value
Fund by reason of the transfer of Officers Fund's assets solely in
exchange for Class
A shares of Value Fund.
6. The shareholders of Officers Fund will have the same tax basis and holding
period for the Class A shares of Value Fund that they receive as they had
for Officers Fund shares that they previously held, pursuant to Sections
358(a) and 1223(1) of the Code, respectively.
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7. The securities transferred by Officers Fund to Value Fund will have the
same tax basis and holding period in the hands of Value Fund as they had
for Officers Fund, pursuant to Sections
362(b) and 1223(1) of the Code, respectively.
Shareholders of Officers Fund should consult their tax advisors regarding the
effect, if any, of the Reorganization in light of their individual
circumstances. Since the foregoing discussion relates only to the Federal income
tax consequences of the Reorganization, shareholders of Officers Fund should
also consult their tax advisers as to state and local tax consequences, if any,
of the Reorganization.
Capitalization Table (Unaudited)
The table below sets forth the capitalization of Officers Fund and Value Fund
and indicates the pro forma combined capitalization as of October 31, 1997 as if
the Reorganization had occurred on that date.
Net Asset
Shares Value
Net Assets Outstanding Per Share
Oppenheimer Quest
Officers Value Fund
Class A $ 7,465,799 538,024 $13.88
Oppenheimer Quest
Value Fund, Inc.
Class A $699,230,322 34,130,613 $20.49
Class B* $298, 348,393 14,788,764 $20.17
Class C* $ 82,098,206 4,070,613 $20.17
Class Y* $ 3,086,417 150,224 $20.55
Oppenheimer Quest
Value Fund, Inc.
(Pro Forma Surviving Fund)**
Class A $706,696,121 34,494,976 $20.49
Class B* $298,348,393 14,788,764 $20.17
Class C* $ 82,098,206 4,070,613 $20.17
Class Y* $ 3,086,417 150,224 $20.55
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* No Value Fund Class B, Class C or Class Y shares are being issued in the
Reorganization because Officers Fund does not have Class B, Class C or Class Y
shares. ** Reflects issuance of 364,363 Class A shares of Value Fund in a
tax-free exchange for the net assets of Officers Fund, aggregating $7,465,799.
The pro forma ratio of expenses to average annual net assets of the combined
funds at October 31, 1997 would have been 1.60% with respect to Class A shares.
COMPARISON BETWEEN
OFFICERS FUND AND VALUE FUND
Comparative information about Officers Fund and Value Fund is presented below.
More complete information about Value Fund and Officers Fund is set forth in
their respective Prospectuses (which as to Value Fund accompanies this Proxy
Statement and Prospectus and is incorporated herein by reference), and
additional information about both funds is set forth in documents that may be
obtained upon request of the transfer agent or upon review at the offices of the
SEC.
See "Miscellaneous -
Public Information."
Investment Objectives and Policies
The investment objectives and investment policies of the funds are substantially
the same. Each fund seeks capital appreciation. In seeking this investment
objective, each fund will invest in securities (primarily equity securities) of
companies believed to be undervalued in the marketplace in relation to factors
such as the companies' assets, earnings, growth potential and cash flows. Equity
securities are common stocks and preferred stocks; bonds, debentures and notes
convertible into common stocks; and depository receipts for such securities. The
funds may invest their assets in equity securities of companies with no limit as
to market capitalization.
Additional information with respect to the funds' investments and investment
policies is set forth below. Information about the risks and potential rewards
of such investments and investment policies is described above in the section
entitled "Principal Risk Factors" and is contained in each fund's respective
Prospectus and Statement of Additional Information. Unless stated to apply on an
ongoing basis, percentage restrictions set forth below and in "Investment
Restrictions" apply 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.
Fixed-Income Securities
The funds are permitted to invest in fixed-income securities and may invest up
to 25% of net assets (as to Officers Fund) or without limit (as to Value Fund,
although it is the present intention of Value Fund to invest no more than 5% of
its total assets) in high-yield, lower-grade bonds (commonly known as "high
yield" or "junk bonds"). Such securities are rated below "investment grade,"
which means they have a rating lower than "Baa3" by Moody's or lower than "BBB-"
by S&P or similar ratings by other rating organizations, or if unrated, are
determined by the Sub-Adviser to be of comparable quality to debt securities
rated below investment grade. A reduction in the rating of a
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security after its purchase by the fund will not require the fund to dispose of
the security. As of the October 31, 1997, the end of the funds' last fiscal
year, neither fund held securities rated below investment grade.
Both funds may invest in convertible fixed-income securities. These securities
are bonds, debentures or notes that may be converted into or exchanged for a
prescribed amount of company stock of the same or a different issue within a
particular period of time at a specified price or formula. The funds consider
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.
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").
Foreign Securities
The funds 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, European Depository
Receipts or Global Depository Receipts. There is no limit to the amount of
foreign securities the funds may acquire. Investments in securities of issuers
in underdeveloped countries or countries that have emerging markets generally
may offer greater potential for gain but involve more risk and may be considered
highly speculative. The funds will hold foreign currency only in connection with
the purchase or sale of foreign securities.
Portfolio Turnover
A change in the securities held by either fund is known as "portfolio turnover."
Neither fund ordinarily engages in short-term trading to try to achieve its
objective. As a result, each 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. For each fund's portfolio turnover rate, see "Financial
Highlights" in each fund's respective Prospectus or Annual Report. 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.
Hedging
Both funds may purchase and sell certain kinds of futures contracts, forward
contracts, and options. These are all referred to as "hedging instruments."
Neither fund uses hedging instruments for speculative purposes, and both have
limits on the use of them. Both funds may use hedging instruments for a number
of purposes. Each fund 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
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against price fluctuations. Other hedging strategies, such as buying futures and
call options, tend to increase the funds' exposure to the securities market.
Forward contracts are used by both funds to try to manage foreign currency risks
on foreign investments.
Both funds may buy and sell futures contracts that relate to broadly-based stock
indices (these are referred to as Stock Index Futures) and foreign currencies
(these are called Forward Contracts and are discussed below). Officers Fund may
also buy and sell futures contracts that relate to commodities.
Both Funds may buy and sell exchange-traded put options (puts) and call options
(calls) on broadly- based stock indices to protect their respective assets. A
call or put option may not be purchased by either fund if the value of all of
the fund's put and call options would exceed 5% of the fund's total assets. Each
call the funds write must be "covered" while it is outstanding.
That means the fund must
own other securities that are acceptable for the escrow arrangements required
for calls. After Officers Fund writes a call, not more than 25% of its assets
may be subject to calls. Officers fund will not write a put if it will require
more than 25% of its total assets to be
segregated.
Forward contracts are foreign currency exchange contracts. They are used to buy
or sell foreign currency for future delivery at a fixed price. Both funds may
use 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. Both funds limit their exposure in foreign currency exchange
contracts in a particular foreign currency to the amount of their respective
assets denominated in that currency or in a closely- correlated currency.
Loans of Portfolio Securities
To attempt to raise cash for liquidity purposes, the funds may lend their
respective 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 33-1/3% (as to Officers
Fund) or 10% (as to Value Fund) of the value of the total assets of the fund.
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.
Illiquid and Restricted Securities
Both of the funds may invest in illiquid and restricted securities. 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 has a contractual restriction on its resale or
which cannot be sold publicly until it is registered under the Securities Act of
1933. The funds will not invest more than 15% of their net assets in illiquid
and restricted securities, including repurchase agreements that have a maturity
of longer than seven days and certain over-the-counter options. The fund's
percentage limitation on these investments does not apply to certain restricted
securities that are eligible for resale to qualified institutional purchasers.
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Repurchase Agreements
Each of the funds 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. Neither of the funds will enter into repurchase agreements that
will cause more than 15% of its net assets to be subject to repurchase
agreements having a maturity beyond seven days. 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. The funds may also enter into reverse repurchase
agreements. Under such agreements, the fund sells securities and agrees to
repurchase them at a mutually agreed upon date and price. Reverse repurchase
agreements create leverage, a speculative factor, and will be considered
borrowings by the fund for purposes of certain percentage limitations on
borrowing.
"When-Issued" and Delayed Delivery Transactions
Both funds may purchase securities on a "when-issued" basis, and may purchase or
sell such 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. 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.
Borrowing
As a fundamental policy, neither fund may borrow money in excess of 33-1/3% of
the value of its total assets. Further, Officers Fund will not purchase any
securities at a time while such borrowings exceed 5% of its total assets and
will only borrow as a temporary measure for extraordinary or emergency purposes.
Value Fund may, but has no present intention to, borrow for leveraging purposes.
This investment technique may subject the fund to greater risks and costs,
including the burden of interest expense, an expense the fund would not
otherwise incur. 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.
Investment in Other Investment Companies
The funds generally may invest up to 10% of their respective total assets in the
aggregate in shares of other investment companies and up to 5% of their
respective total assets in any one investment company, as long as each
investment does not represent more than 3% of the outstanding voting securities
of the acquired investment company. These limitations do not apply in the case
of investment company securities which may be purchased as part of a plan of
merger, consolidation, reorganization or acquisition. Investment in other
investment companies may involve the payment of substantial premiums above the
value of such investment companies' portfolio securities, and is subject to
limitations under the Investment Company Act and market availability. The fund
does not intend to invest in such investment companies unless, in the judgment
of the Manager, the potential benefits of such investment justify the payment of
any applicable premiums or sales charge. As a
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shareholder in an investment company, the fund would bear its ratable share of
that investment company's expenses, including its advisory and administration
fees. At the same time, the fund would continue to pay its own management fees
and other expenses.
Temporary Defensive Investments
In times of unstable market or economic conditions, when the Sub-Adviser
determines it appropriate to do so to attempt to reduce fluctuations in the
value of the fund's net assets, the fund may assume a temporary defensive
position and invest an unlimited amount of assets in U.S. Government securities
and money market instruments of the type identified above under "Fixed-Income
Securities". At any time that either fund invests for temporary defensive
purposes, to the extent of such investments, it is not pursuing its investment
objective.
Investing in Small, Unseasoned Companies
Value Fund may invest up to 15% of its total assets and Officers Fund may invest
up to 5% of its total assets 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.
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 issuer to its shareholders.
Officers Fund may invest up to 5% of its total assets in warrants or rights.
Value Fund may not invest more than 5% of its total assets in warrants; this 5%
limitation does not apply to warrants Value Fund has acquired as part of units
with other securities or that are attached to other securities.
Investment Restrictions
Both Officers Fund and Value Fund have certain additional investment
restrictions that, together with their investment objectives, are fundamental
policies, changeable only by shareholder approval. Generally, these investment
restrictions are similar between the funds and are discussed below.
Similar investment restrictions that are fundamental policies:
Concentration: Officers Fund cannot concentrate its investments in any
particular industry, but if deemed appropriate for attaining its investment
objective, the fund may invest up to 25% of its total assets (valued at the time
of investment) in any one industry classification used by the fund for
investment purposes (for this purpose, a foreign government is considered an
industry); (this restriction does not apply to U.S. government securities);
Value Fund has the same restriction.
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<PAGE>
Borrowing: Neither fund may borrow money in excess of 33-1/3% of the value of
the its total assets (see "Borrowing" above).
Real Estate: Officers 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;
Value Fund has the same restriction.
Underwriting: Officers Fund cannot 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); Value Fund has the same restriction.
Pledge Assets: Officers Fund cannot mortgage, hypothecate or pledge any of its
assets; Value Fund has the same restriction.
Investment in Certain Issuers: Officers Fund cannot invest or hold securities of
any issuer if the Officers and Trustees of the fund or its Manager or
Sub-Adviser owning individually more then 1/2 of 1% of the securities of such
issuer together own more than 5% of the securities of such issuer; Value Fund
has the same restriction.
Investment for Control: Officers Fund cannot 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); Value Fund has the same restriction.
Investment in Commodities: Officers Fund cannot invest in physical commodities
or physical commodity contracts; however, the fund may: (i) buy and sell hedging
instruments to the extent specified in its Prospectus from time to time, and
(ii) buy and sell options, futures, securities or other instruments backed by,
or the investment return from which is linked to changes in the price of,
physical commodities; Value Fund has the same restriction but is limited as to
(ii) to options on stock indices.
Options: Officers Fund cannot 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; Value
Fund has the same restriction.
Different investment restrictions that are fundamental policies:
Diversification: Value Fund cannot, 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 or purchase more than 10% of the outstanding voting securities of any
one issuer (other than U.S. Government securities issued or guaranteed by the
U.S. Government or any agency of instrumentality thereof) or 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).
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Set forth below are certain non-fundamental policies and guidelines of the funds
changeable without shareholder vote.
Margin and Short Sales: Officers Fund cannot purchase securities on margin, or
make short sales of securities; Value Fund has the same restriction.
Loans: Officers Fund cannot make loans to any person or individual (except that
portfolio securities may be loaned within the limitations set forth in the
Prospectus); Value Fund has the same restriction.
Oil, Gas and Mineral Investment: Officers Fund cannot invest in interests in
oil, gas or other mineral exploration or development programs or leases; Value
Fund has the same restriction.
Description of Brokerage Practices
The brokerage practices of the funds are the same. Portfolio decisions are based
upon recommendations of the portfolio manager and the judgment of the portfolio
managers. The funds 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 funds
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 consid eration 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 funds, 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
funds will not purchase any securities from or sell any securities to an
affiliated broker-dealer 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 each of the funds and others
whose assets it manages in such manner as it deems equitable. In making such
allocations among the funds 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
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<PAGE>
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 funds for the fiscal years ended October 31, 1995, 1996
and 1997.
Prior to November 3,
1997, Oppenheimer & Co., Inc. ("OpCo"), a broker-dealer, was an affiliate of
the Sub-Adviser.
<TABLE>
<CAPTION>
Total Amount of
Total Transactions Where
For the Brokerage Brokerage Commissions Brokerage Commissions
Fiscal Year Commissions Paid to Opco Paid to Opco
Ended Paid Dollar Amount % Dollar Amount %
Value Fund
<S> <C> <C> <C> <C> <C> <C>
10/31/95 $309,310 $156,970 50.7% $ 99,572,945 52.1%
10/31/96 $387,892 $159,127 41.0 % $135,054,378 39.4%
10/31/97 $484,014 $198,916 41.1 % $198,471,852 38.4%
Officers Fund
10/31/95 $11,593 $ 4,461 38.5% $2,153,416 39.8%
10/31/96 $34,368 $13,921 40.5% $8,359,426 34.3%
10/31/97 $39,359 $13,558 34.4 % $4,535,870 20.2%
</TABLE>
During Value Fund's fiscal year ended October 31, 1997, $50,922 was paid by
Value Fund to brokers as commissions in return for research services; the
aggregate dollar amount of those transactions was $47,589,083. During Officers
Fund's fiscal year ended October 31, 1997, $3,255 was paid by Officers Fund to
brokers as commissions in return for research services; the aggregate dollar
amount of those transactions was $1,589,791.
Please refer to the Statement of Additional Information for each fund for
further information on each fund's brokerage practices.
Expense Ratios and Performance
The ratio of expenses to average annual net assets for Class A shares of
Officers Fund for the fiscal year ended October 31, 1997 both before and after
giving effect to fee waivers was 2.15% and 1.29%, respectively. The ratio of
expenses to average annual net assets for Class A shares of Value
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Fund for the fiscal year ended October 31, 1997 was 1.60%. Further details are
set forth above under "Comparative Fee Table", and in Officers Fund's Annual
Report as of October 31, 1997 and Value Fund's Annual Report as of October 31,
1997, which are included in the Statement of Additional Information.
The average annual total returns on an investment in Class A shares of Officers
Fund the one year period ended October 31, 1997 and for the period from November
8, 1994 (commencement of operations) to October 31, 1997 were (4.28%) and
17.01%, respectively. The average annual total returns at net asset value for
Class A shares of Officers Fund for the one year period ended October 31, 1997
and for the period from November 8, 1994 through October 31, 1997 were 1.56% and
19.36%, respectively. Total returns for Officers Fund reflect the waiver of
management fees and distribution expenses as described herein. Without such
waivers, the total returns for Officers Fund for such periods would have been
lower. These waivers became effective on August 1, 1996.
The average annual total returns on an investment in Class A shares of Value
Fund for the one, five and ten year periods ended October 31, 1997 and for the
period from April 30, 1980 (commencement of operations) to October 31, 1997 were
18.20%, 17.42%, 15.88% and 19.02%, respectively. The average annual total return
at net asset value for Class A shares for the one, five and ten year periods
ended October 31, 1997 and for the period from April 30, 1980 through October
31, 1997 were 25.41%, 18.82%, 16.57% and 19.43%, respectively.
An explanation of the different performance calculations is in each fund's
Prospectus.
Shareholder Services
The policies of Officers Fund and Value Fund with respect to minimum initial
investments and subsequent investments by its shareholders are the same. Both
Officers Fund and Value Fund offer the following privileges: (i) Right of
Accumulation, (ii) Letter of Intent, (iii) reinvestment of dividends and
distributions at net asset value, (iv) net asset value purchases by certain
individuals and entities, (v) Asset Builder (automatic investment) Plans, (vi)
Automatic Withdrawal and Exchange Plans for shareholders who own shares of the
fund valued at $5,000 or more, (vii) AccountLink and PhoneLink arrangements,
(viii) exchanges of shares for shares of the same class of certain other funds
at net asset value, and (ix) telephone redemption and exchange privileges.
Shareholders may purchase shares through OppenheimerFunds AccountLink, which
links a shareholder account to an account at a bank or financial institution and
enables shareholders to send money electronically between those accounts to
perform a number of types of account transactions. This includes the purchase of
shares through the automated telephone system (PhoneLink). Exchanges can also be
made by telephone, or automatically through PhoneLink. After AccountLink
privileges have been established with a bank account, shares may be purchased by
telephone in an amount up to $100,000. Shares of either Fund may be exchanged
for shares of certain OppenheimerFunds at net asset value per share; however,
shares of a particular class may be exchanged only for shares of the same class
of other OppenheimerFunds. Shareholders of the funds may redeem their shares by
written request or by telephone request in an amount up to $50,000 in any
seven-day period. Shareholders may arrange to have share redemption proceeds
wired to a predesignated account at a U.S. bank or other financial institution
that is an ACH member, through
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<PAGE>
AccountLink. There is no dollar limit on telephone redemption proceeds sent to a
bank account when AccountLink has been established. Shareholders may also redeem
shares automatically by telephone by using PhoneLink. Shareholders of Value Fund
may also have the Transfer Agent send redemption proceeds of $2,500 or more by
Federal Funds wire to a designated commercial bank which is a member of the
Federal Reserve wire system. Shareholders of the funds have up to six months to
reinvest redemption proceeds of their Class A shares which they purchase subject
to a sales charge or, as to Value Fund, their Class B shares on which they paid
a contingent deferred sales charge, in Class A shares of the funds or other
Oppenheimer funds without paying a sales charge. Officers Fund may redeem
accounts valued at less than $1,000, if the account has fallen below such stated
amount for reasons other than market value fluctuations. Value Fund may redeem
accounts with less than 100 shares if the account has fallen below such stated
amount for reasons other than market value fluctuations. Both funds offer
Automatic Withdrawal and Automatic Exchange Plans under certain conditions.
Rights of Shareholders
The shares of each such fund, including shares of each class, entitle the holder
to one vote per share on the election of trustees of the Trust or directors of
Value Fund all other matters submitted to shareholders of the fund. 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 entitle 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 Value Fund
vote together, and shareholders of Officers Fund vote together with the
shareholders of other series of the Trust in the aggregate, on certain matters
at shareholders' meetings, such as the election of Trustees and ratification of
appointment of auditors. Shareholders of a particular series or class vote
separately on proposals which affect that series or class, and shareholders of a
series or class which is not affected by that matter are not entitled to vote on
the proposal. For example, only shareholders of a series, such as Officers Fund,
vote exclusively on any material amendment to the investment advisory agreement
with respect to the series. Only shareholders of a class of shares vote on
certain amendments to the Distribution and/or Service Plans if the amendments
affect only that class. The Board and the Board of Directors of Value Fund are
authorized to create new series and classes of series. The Boards may reclassify
unissued shares of the funds into additional series or classes of shares. The
Boards 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 each fund. Shares do not have cumulative voting rights or
preemptive or subscription rights. Shares may be voted in person or by proxy.
Each share has one vote at shareholder meetings, with fractional shares voting
proportionately. Shares of a particular class vote together on matters that
affect that class. Most amendments to the Declaration of Trust governing
Officers Fund or the Articles of Incorporation governing Value Fund require the
approval of a "majority" of the outstanding voting securities (as defined in the
Investment Company Act) of the respective Trust or Value Fund's shares without
regard to class. Under certain circumstances, shareholders of Officers Fund may
be held personally liable as partners for the funds' obligations, however, under
the Declaration of Trust such a shareholder is entitled to certain
indemnification rights and the risk of a shareholder incurring any such loss is
limited to the remote circumstances in which the fund is unable to meet its
obligations.
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<PAGE>
As to Value Fund, outstanding Class A, B and C shares participate equally in the
funds' dividends and distributions and in the funds' net assets upon
liquidation, after taking into account the different expenses paid by each
class. Distributions and dividends for each class will be different and Class B
and Class C dividends and distributions will be lower than Class A dividends.
Officers Fund has one class of shares outstanding.
It is not contemplated that the Trust or Value Fund will hold regular annual
meetings of shareholders. Under the Investment Company Act, shareholders of
Officers Fund do not have rights of appraisal as a result of the transactions
contemplated by the Reorganization Agreement.
However, they have the right at any time prior to the consummation of such
transaction to redeem their shares at net asset value, less any applicable
contingent deferred sales charge. Shareholders of both of the funds have the
right, under certain circumstances, to remove a Trustee or Director and will be
assisted in communicating with other shareholders for such purpose.
Organization and History
Oppenheimer Quest For Value Funds was organized in April 1987 as a multi-series
Massachusetts business trust and Oppenheimer Quest Officers Value Fund is a
non-diversified series of that Trust. Oppenheimer Quest For Value Funds is an
open-end management investment company, with an unlimited number of authorized
shares of beneficial interest. Value Fund is a diversified, open-end management
investment company that was organized in August 1979 as a Maryland corporation.
The Manager acts as investment adviser to the funds, the Sub-Adviser acts as
sub-adviser to the funds and the portfolio managers for the funds are employed
by the Sub-Adviser. The Trustees of the Trust and the Directors of Value Fund
are the same, and oversee the Manager, the Sub-Adviser and the portfolio
managers.
Management and Distribution Arrangements
The Manager, located at Two World Trade Center, New York, New York 10048-0203,
acts as the investment adviser for Officers Fund and also acts as the investment
adviser to Value Fund. The terms and conditions of the investment advisory
agreement for each fund are substantially the same. The monthly management fee
payable to the Manager by each fund is set forth under "Synopsis Investment
Advisory and Distribution and Service Plan Fees" along with the fees paid by the
Manger to the Sub-Adviser for the funds. The 12b-1 Distribution and Service Plan
fees paid by the funds with respect to Class A shares are also set forth above
under "Synopsis Investment Advisory and Distribution and Service Plan Fees."
Pursuant to each investment advisory agreement, the Manager acts as the
investment adviser for the funds and supervises the investment program of the
funds. The investment advisory agreements provide that the Manager will provide
administrative services for the funds, 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. Further, the Manager has agreed to furnish the funds with office space,
facilities and equipment and arrange for its employees to serve as officers of
the Trust (as to Officers Fund) and Value Fund. The administrative services to
be provided by the
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<PAGE>
Manager under the investment advisory agreement will be at its own expense,
except that the funds pay the Manager an annual fee for calculating their
respective daily net asset value at an annual rate of $6,000 (as to Officers
Fund) and $55,000 (as to Value Fund), plus reimbursement for out-of-pocket
expenses.
The Sub-Adviser acts as the sub-adviser to the funds pursuant to the terms of a
subadvisory agreement between the Manager and the Sub-Adviser for each fund. The
Sub-Adviser previously acted as the investment adviser to the funds prior to
November 22, 1995. The terms and conditions of the subadvisory agreements for
each fund are substantially the same. The subadvisory agreements provide that
the Sub-Adviser will regularly provide investment advice with respect to the
funds, invest and reinvest cash, securities and the property comprising the
assets of each fund and perform such other duties and responsibilities as are
set forth in its contract with the Manager. The Manager, not the fund, pays the
Sub-Adviser.
Expenses not expressly assumed by the Manager under each fund's advisory
agreement or by the Distributor under the General Distributor's Agreement are
paid by the funds. The advisory agreements list examples of expenses paid by the
funds, the major categories of which relate to interest, taxes, brokerage
commissions, fees to certain Trustees or Directors, legal and audit expenses,
custodian and transfer agent expenses, share issuance costs, certain printing
and registration costs and non-recurring expenses, including litigation costs.
The management fee paid by Officers Fund for the fiscal year ended October 31,
1997 was $60,074 (after giving effect to fee waivers). During the fiscal year
ended October 31, 1997, Officers Fund also paid or accrued accounting service
fees to the Manager in the amount of $5,987. The management fee paid by Value
Fund for the fiscal year ended October 31, 1997 was $7,708,982. During the
fiscal year ended October 31, 1997, Value Fund also paid or accrued accounting
service fees to the Manager in the amount of $54,325.
The investment advisory agreement for Officers Fund contains no expense
limitation. However, independently of the Agreement, effective August 1, 1996,
the Manager voluntarily agreed to waive that portion of its management fee equal
to what the Manager would have been required to pay the Sub-Adviser under the
Subadvisory Agreement described below. Pursuant to the foregoing, the Manager's
fee at the end of any month will be reduced or eliminated such that there will
not be any accrued but unpaid liability under the fee waiver. Any waiver of fees
would lower Officers Fund's overall expense ratio and increase its total return
during any period in which they are in effect.
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" or
"Quest For Value" 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" or "Quest For Value" as part of its name may be withdrawn.
The Manager is controlled by Oppenheimer Acquisition Corp., a holding company
owned in part by senior management of the Manager and ultimately controlled by
Massachusetts Mutual Life Insurance
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<PAGE>
Company, a mutual life insurance company that also advises pension plans and
investment companies. The Manager has operated as an investment company adviser
since 1959. The Manager and its affiliates currently advise investment companies
with combined net assets aggregating over $75 billion as of December 31, 1997,
with more than 3.5 million shareholder accounts. OppenheimerFunds Services, a
division of the Manager, acts as transfer and shareholder servicing agent for
Officers Fund and Value Fund and for certain other open-end funds managed by the
Manager and its affiliates; for its services, the funds pay the transfer agent
an annual maintenance fee for each fund shareholder account and reimburse the
transfer agent for its out of pocket expenses.
The Sub-Adviser is a majority owned subsidiary of Oppenheimer Capital, a
registered investment advisor, whose employees perform all investment advisory
services provided to the Fund by the Sub- Adviser. On November 4, 1997, PIMCO
Advisors L.P. ("PIMCO Advisors"), a registered investment adviser with $125
billion in assets under management through various subsidiaries and affiliates,
acquired control of Oppenheimer Capital and the Sub-Adviser. On November 5,
1997, the new Sub-advisory Agreement between the Sub-Adviser and the Manager
became effective. On November 30, 1997, Oppenheimer Capital merged with a
subsidiary of PIMCO Advisors and, as a result, Oppenheimer Capital and the
Sub-Adviser became indirect wholly-owned subsidiaries of PIMCO Advisors. PIMCO
Advisors has two general partners: PIMCO Partners, G.P., a California general
partnership ("PIMCO GP"), and PIMCO Advisors Holdings L.P. (formerly Oppenheimer
Capital, L.P.), an NYSE-listed Delaware limited partnership of which PIMCO GP is
the sole general partner.
PIMCO GP beneficially owns or controls (through its general partner interest in
Oppenheimer Capital, L.P.) greater than 80% of the units of limited partnership
("Units") of PIMCO Advisors. PIMCO GP has two general partners. The first of
these is Pacific Investment Management Company, a wholly-owned subsidiary of
Pacific Financial Asset Management Company, which is a direct subsidiary of
Pacific Life Insurance Company ("Pacific Life").
The managing general partner of PIMCO GP is PIMCO Partners L.L.C. ("PPLLC"), a
California limited liability company. PPLLC's members are the Managing Directors
(the "PIMCO Managers") of Pacific Investment Management Company, a subsidiary of
PIMCO Advisors (the "PIMCO Subpartnership"). The PIMCO Managers are: William H.
Gross, Dean S. Meiling, James F. Muzzy, William F. Podlich, III, Brent R.
Harris, John L. Hague, William S. Thompson Jr., William C. Powers, David H.
Edington, Benjamin Trosky, William R. Benz, II and Lee R. Thomas, III.
PIMCO Advisors is governed by a Management Board, which consists of sixteen
members, pursuant to a delegation by its general partners. PIMCO GP has the
power to designate up to nine members of the Management Board and the PIMCO
Subpartnership, of which the PIMCO Managers are the Managing Directors, has the
power to designate up to two members. In addition, PIMCO GP, as the controlling
general partner of PIMCO Advisors, has the power to revoke the delegation to the
Management Board and exercise control of PIMCO Advisors. As a result, Pacific
Life and/or the PIMCO Managers may be deemed to control PIMCO Advisors. Pacific
Life and the PIMCO Managers disclaim such control.
The Distributor, under a General Distributor's Agreement for each of the funds,
acts as the principal underwriter in the continuous public offering of Class A,
Class B and Class C shares of each fund but
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is not obligated to sell a specific number of shares. To date, Class B and Class
C shares of Officers Fund have not been issued. 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 Officers Fund's fiscal year ended October 31, 1997, the
aggregate amount of sales charges on sales of its Class A shares was $1,822,
none of which was retained by the Distributor or an affiliated broker. During
Value Fund's fiscal year ended October 31, 1997, the aggregate amount of sales
charges on sales of its Class A shares was $3,638,204, of which the Distributor
and affiliated brokers retained $910,431. For additional information about
distribution of the funds' shares and the payments made by the funds to the
Distributor in connection with such activities, please refer to "Distribution
and Service Plans," in each fund's Statement of Addition Information.
Purchase of Additional Shares
Class A shares of Officers Fund and Class A shares of Value Fund generally may
be purchased with an initial sales charge of 5.75% for purchases of less than
$25,000. The sales charge of 5.75% is reduced for purchases of either fund's
Class A shares of $25,000 or more. For purchases of $1 million or more ($500,000
or more for purchases by "Retirement Plans", as defined in each fund's
Prospectus) if those shares are redeemed within 12 calendar months (18 months
for shares purchased prior to May 1, 1997) of the end of the calendar month of
their purchase, a contingent sales charge may be deducted from the redemption
proceeds. Class A shares of Officers Fund have to date been sold to a limited
group of individuals and entities, as noted above, and who have qualified for a
waiver of the Class A sales charge as set forth in the fund's Prospectus.
Class B shares of the funds are sold at net asset value without an initial sales
charge, however, if Class B shares are redeemed within six years of the end of
the calendar month of their purchase, a contingent deferred sales charge may be
deducted of up to 5%, depending upon how long such shares had been held. Class C
shares may be purchased without an initial sales charge, but if sold within 12
months of buying them, a contingent deferred sales charge of 1% may be deducted.
The Class A shares to be issued under the Reorganization Agreement will be
issued by Value Fund at net asset value. Future dividends and capital gain
distributions of Value Fund, if any, may be reinvested without sales charge. The
initial sales charge and contingent deferred sales charge on Class A shares of
Value Fund will only affect shareholders of Officers Fund to the extent that
they desire to make additional purchases of shares of Value Fund in addition to
the shares which they will receive as a result of the Reorganization and to the
extent that they no longer qualify for a waiver of the Class A sales charge as
set forth in Captial Fund's current Prospectus.
Dividends and Distributions
The funds declare dividends from net investment income on an annual basis and
normally pay those dividends to shareholders following the end of their
respective fiscal years (October 31). The funds may also make distributions
annually in December out of any net short-term or long-term capital gains, and
may make supplemental distributions of dividends and capital gains following its
fiscal year. Dividends are paid separately for each class of shares and
normally, the dividends on Class A shares are generally expected to be higher
than for Class B and Class C shares because the expenses
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allocable to Class B and Class C shares will generally be higher than for Class
A shares. There is no fixed dividend rate for either fund and there can be no
assurance that either fund will pay any dividends or distributions.
METHOD OF CARRYING OUT THE REORGANIZATION
The consummation of the transactions contemplated by the Reorganization
Agreement is contingent upon the approval of the Reorganization by the
shareholders of Officers Fund and the receipt of the opinions and certificates
set forth in Sections 10 and 11 of the Reorganization Agreement and the
occurrence of the events described in those Sections. Under the Reorganization
Agreement, all the assets of Officers Fund, excluding the Cash Reserve, will be
delivered to Value Fund in exchange for Class A shares of Value Fund. The Cash
Reserve to be retained by Officers Fund will be sufficient in the discretion of
the Board for the payment of Officers Fund's liabilities, and Officers Fund's
expenses of liquidation.
Assuming the shareholders of Officers Fund approve the Reorganization, the
actual exchange of assets is expected to take place on May 29, 1998, or as soon
thereafter as is practicable (the "Closing Date") on the basis of net asset
values as of the close of business on the business day preceding the Closing
Date (the "Valuation Date"). Under the Reorganization Agreement, all redemptions
of shares of Officers Fund shall be permanently suspended at the close of
business on the Valuation Date; only redemption requests received in proper form
on or prior to the close of business on that date shall be fulfilled by it;
redemption requests received by Officers Fund after that date will be treated as
requests for redemptions of Class A shares of Value Fund to be distributed to
the shareholders requesting redemption. The exchange of assets for shares will
be done on the basis of the per share net asset value of the Class A shares of
Value Fund, and the value of the assets of Officers Fund to be transferred as of
the close of business on the Valuation Date, valued in the manner used by Value
Fund in the valuation of assets. Value Fund is not assuming any of the
liabilities of Officers Fund, except for portfolio securities purchased which
have not settled and outstanding shareholder redemption and dividend checks.
The net asset value of the shares transferred by Value Fund to Officers Fund
will be the same as the value of the assets received by Value Fund. For example,
if, on the Valuation Date, Officers Fund were to have securities with a market
value of $95,000 and cash in the amount of $10,000 (of which $5,000 was to be
retained by it as the Cash Reserve), the value of the assets which would be
transferred to Value Fund would be $100,000. If the net asset value per Class A
share of Value Fund were $10 per share at the close of business on the Valuation
Date, the number of Class A shares to be issued would be 10,000 ($100,000 /
$10). These 10,000 Class A shares of Value Fund would be distributed to the
former shareholders of Officers Fund. This example is given for illustration
purposes only and does not bear any relationship to the dollar amounts or shares
expected to be involved in the Reorganization.
In conjunction with the Closing Date, Officers Fund will distribute on a pro
rata basis to its shareholders of record on the Valuation Date the Class A
shares of Value Fund received by Officers Fund at the closing, in liquidation of
the outstanding shares of Officers Fund, and the outstanding shares of Officers
Fund will be canceled. To assist Officers Fund in this distribution, Value Fund
will,
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in accordance with a shareholder list supplied by Officers Fund, cause its
transfer agent to credit and confirm an appropriate number of shares of Value
Fund to each shareholder of Officers Fund. Certificates for Class A shares of
Value Fund will be issued upon written request of a former shareholder of
Officers Fund but only for whole shares with fractional shares credited to the
name of the shareholder on the books of Value Fund and only of shares
represented by certificates are delivered for cancellation. Former shareholders
of Officers Fund who wish certificates representing their shares of Value Fund
must, after receipt of their confirmations, make a written request to
OppenheimerFunds Services, P.O. Box 5270, Denver, Colorado 80217. Shareholders
of Officers Fund holding certificates representing their shares will not be
required to surrender their certificates to anyone in connection with the
Reorganization. After the Reorganization, however, it will be necessary for such
shareholders to surrender such certificates in order to redeem, transfer, pledge
or exchange any shares of Value Fund.
Under the Reorganization Agreement, within one year after the Closing Date,
Officers Fund shall: (a) either pay or make provision for all of its debts and
taxes; and (b) either (i) transfer any remaining amount of the Cash Reserve to
Value Fund, if such remaining amount is not material (as defined below) or (ii)
distribute such remaining amount to the shareholders of Officers Fund who were
such on the Valuation Date. Such remaining amount shall be deemed to be material
if the amount to be distributed, after deducting the estimated expenses of the
distribution, equals or exceeds one cent per share of the number of Officers
Fund shares outstanding on the Valuation Date. Within one year after the Closing
Date, Officers Fund will complete its liquidation.
Under the Reorganization Agreement, either Officers Fund or Value Fund may
abandon and terminate the Reorganization Agreement without liability if the
other party breaches any material provision of the Reorganization Agreement or,
if prior to the closing, any legal, administrative or other proceeding shall be
instituted or threatened (i) seeking to restrain or otherwise prohibit the
transactions contemplated by the Reorganization Agreement and/or (ii) asserting
a material liability of either party, which proceeding or liability has not been
terminated or the threat thereto removed prior to the Closing Date.
In the event that the Reorganization Agreement is not consummated for any
reason, the Board will consider and may submit to the shareholders other
alternatives.
ADDITIONAL INFORMATION
Financial Information
The Reorganization will be accounted for by the surviving fund in its financial
statements similar to a pooling without restatement. Further financial
information as to Officers Fund is contained in its current Prospectus, which is
available without charge from OppenheimerFunds Services, the Transfer Agent,
P.O. Box 5270, Denver, Colorado 80217, and is incorporated herein by reference,
and in its Annual Report as of October 31, 1997, which are included in its
Statement of Additional Information. Financial information for Value Fund is
contained in its current Prospectus accompanying this Proxy Statement and
Prospectus and incorporated herein by reference, and in its Annual Report as of
October 31, 1997, which are included in its Statement of Additional Information.
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Public Information
Additional information about Officers Fund and Value Fund is available, as
applicable, in the following documents which are incorporated herein by
reference: (i) Value Fund's Prospectus dated February 27, 1998 accompanying this
Proxy Statement and incorporated herein; (ii) Officers Fund's Prospectus dated
January 26, 1998, which may be obtained without charge by writing to
OppenheimerFunds Services, P.O. Box 5270, Denver, Colorado 80217; (iii) Value
Fund's Annual Report as of October 31, 1997, which may be obtained without
charge by writing to OppenheimerFunds Services at the address indicated above;
and (iv) Officers Fund's Annual Report as of October 31, 1997, which may be
obtained without charge by writing to OppenheimerFunds Services at the address
indicated above. All of the foregoing documents may be obtained by calling the
toll-free number on the cover of this Proxy Statement and Prospectus.
Additional information about the following matters is contained in the Statement
of Additional Information relating to this Reorganization, which incorporates by
reference the Value Fund Statement of Additional Information dated
__________________, 1998, and Officers Fund's Prospectus and Statement of
Additional Information, each dated January 26, 1998: the organization and
operation of Value Fund and Officers Fund; more information on investment
policies, practices and risks; information about the Trust and Value Fund's
respective Boards and their responsibilities; a further description of the
services provided by Value Fund's and Officers Fund's investment adviser,
sub-adviser, distributor, and transfer and shareholder servicing agent; dividend
policies; tax matters; an explanation of the method of determining the offering
price of the shares and/or contingent deferred sales charges, as applicable of
Class A, Class B and Class C shares of Value Fund and Officers Fund; purchase,
redemption and exchange programs; the different expenses paid by each class of
shares; and distribution arrangements.
Value Fund and the Trust, on behalf of Officers Fund, are subject to the
informational requirements of the Securities Exchange Act of 1934, as amended,
and in accordance therewith, file reports and other information with the SEC.
Proxy material, reports and other information about Officers Fund and Value Fund
which are of public record can be inspected and copied at public reference
facilities maintained by the SEC in Washington, D.C. and certain of its regional
offices, and copies of such materials can be obtained at prescribed rates from
the Public Reference Branch, Office of Consumer Affairs and Information
Services, SEC, Washington, D.C. 20549.
OTHER BUSINESS
Management of Officers Fund knows of no business other than the matters
specified above which will be presented at the Meeting. Since matters not known
at the time of the solicitation may come before the Meeting, the proxy as
solicited confers discretionary authority with respect to such matters as
properly come before the Meeting, including any adjournment or adjournments
thereof, and it is the
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intention of the persons named as attorneys-in-fact in the proxy to vote this
proxy in accordance with their judgment on such matters.
By Order of the Board of Trustees
Andrew J. Donohue, Secretary
_____________, 1998 229
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EXHIBIT A
AGREEMENT AND PLAN OF REORGANIZATION
AGREEMENT AND PLAN OF REORGANIZATION (the "Agreement") dated as of
____________, 1998 by and between Oppenheimer Quest For Value Funds (the
"Trust"), on behalf of its series, Oppenheimer Quest Officers Value Fund
("Officers Fund"), a Massachusetts business trust, and Oppenheimer Quest Value
Fund, Inc. ("Value Fund"), a Maryland Corporation.
W I T N E S S E T H:
WHEREAS, the parties are each open-end investment companies of the
management type;
and
WHEREAS, the parties hereto desire to provide for the reorganization
pursuant to Section 368(a)(1) of the Internal Revenue Code of 1986, as amended
(the "Code"), of Officers Fund through the acquisition by Value Fund of
substantially all of the assets of Officers Fund in exchange for the voting
shares of beneficial interest ("shares") of Class A of Value Fund and the
assumption by Value Fund of certain liabilities of Officers Fund, which Class A
shares of Value Fund are to be distributed by Officers Fund pro rata to its
shareholders in complete liquidation of Officers Fund and complete cancellation
of its shares;
NOW, THEREFORE, in consideration of the mutual promises herein contained,
the parties hereto agree as follows:
1. The parties hereto hereby adopt this Agreement and Plan of
Reorganization (the "Agreement") pursuant to Section 368(a)(1) of the Code as
follows: The reorganization will be comprised of the acquisition by Value Fund
of substantially all of the assets of Officers Fund in exchange for Class A
shares of Value Fund and the assumption by Value Fund of certain liabilities of
Officers Fund, followed by the distribution of such Class A shares of Value Fund
shares to the shareholders of Officers Fund in exchange for their shares of
Officers Fund, all upon and subject to the terms of the Agreement hereinafter
set forth.
The share transfer books of Officers Fund will be permanently closed
at the close of business on the Valuation Date (as hereinafter defined) and only
redemption requests received in proper form on or prior to the close of business
on the Valuation Date shall be fulfilled by Officers Fund; redemption requests
received by Officers Fund after that date shall be treated as requests for the
redemption of the shares of Value Fund to be distributed to the shareholder in
question as provided in Section 5 hereof.
2. On the Closing Date (as hereinafter defined), all of the assets of
Officers Fund on that date, excluding a cash reserve (the "Cash Reserve") to be
retained by Officers Fund sufficient in its
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discretion for the payment of the expenses of Officers Fund's dissolution and
its liabilities, but not in excess of the amount contemplated by Section 10E,
shall be delivered as provided in Section 8 to Value Fund, in exchange for and
against delivery to Officers Fund on the Closing Date of a number of Class A
shares of Value Fund, having an aggregate net asset value equal to the value of
the assets of Officers Fund so transferred and delivered.
3. The net asset value of Class A shares of Value Fund and the value of
the assets of Officers Fund to be transferred shall in each case be determined
as of the close of business of The New York Stock Exchange on the Valuation
Date. The computation of the net asset value of the Class A shares of Value Fund
and the Class A shares of Officers Fund shall be done in the manner used by
Value Fund and Officers Fund, respectively, in the computation of such net asset
value per share as set forth in their respective prospectuses. The methods used
by Value Fund in such computation shall be applied to the valuation of the
assets of Officers Fund to be transferred to Value Fund.
Officers Fund shall declare and pay, immediately prior to the
Valuation Date, a dividend or dividends which, together with all previous such
dividends, shall have the effect of distributing to Officers Fund's shareholders
all of Officers Fund's investment company taxable income for taxable years
ending on or prior to the Closing Date (computed without regard to any dividends
paid) and all of its net capital gain, if any, realized in taxable years ending
on or prior to the Closing Date (after reduction for any capital loss
carry-forward).
4. The closing (the "Closing") shall be at the offices of
OppenheimerFunds, Inc. (the "Agent"), Two World Trade Center, 34th Floor, New
York, New York 10048, at 4:00 P.M. New York time on _______, 1998 or at such
other time or place as the parties may designate or as provided below (the
"Closing Date"). The business day preceding the Closing Date is herein referred
to as the "Valuation Date."
In the event that on the Valuation Date either party has, pursuant
to the Investment Company Act of 1940, as amended (the "Act"), or any rule,
regulation or order thereunder, suspended the redemption of its shares or
postponed payment therefore, the Closing Date shall be postponed until the first
business day after the date when both parties have ceased such suspension or
postponement; provided, however, that if such suspension shall continue for a
period of 60 days beyond the Valuation Date, then the other party to the
Agreement shall be permitted to terminate the Agreement without liability to
either party for such termination.
5. In conjunction with the Closing, Officers Fund shall distribute on a
pro rata basis to the shareholders of Officers Fund on the Valuation Date the
Class A shares of Value Fund received by Officers Fund on the Closing Date in
exchange for the assets of Officers Fund in complete liquidation of Officers
Fund; for the purpose of the distribution by Officers Fund of Class A shares of
Value Fund to Officers Fund's shareholders, Value Fund will promptly cause its
transfer agent to: (a) credit an appropriate number of Class A shares of Value
Fund on the books of Value Fund to each Class A shareholder of Officers Fund in
accordance with a list (the "Shareholder List") of Officers Fund shareholders
received from Officers Fund; and (b) confirm an appropriate number of Class A
shares of Value Fund to each shareholder of Officers Fund; certificates for
Class A shares of Value
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Fund will be issued upon written request of a former shareholder of Officers
Fund but only for whole shares, with fractional shares credited to the name of
the shareholder on the books of Value Fund.
The Shareholder List shall indicate, as of the close of business on
the Valuation Date, the name and address of each shareholder of Officers Fund,
indicating his or her share balance. Officers Fund agrees to supply the
Shareholder List to Value Fund not later than the Closing Date. Shareholders of
Officers Fund holding certificates representing their shares shall not be
required to surrender their certificates to anyone in connection with the
reorganization.
After the Closing Date,
however, it will be necessary for such shareholders to surrender their
certificates in order to redeem, transfer or pledge the shares of Value Fund
which they received.
6. Within one year after the Closing Date, Officers Fund shall (a) either
pay or make provision for payment of all of its liabilities and taxes, and (b)
either (i) transfer any remaining amount of the Cash Reserve to Value Fund, if
such remaining amount (as reduced by the estimated cost of distributing it to
shareholders) is not material (as defined below) or (ii) distribute such
remaining amount to the shareholders of Officers Fund on the Valuation Date.
Such remaining amount shall be deemed to be material if the amount to be
distributed, after deduction of the estimated expenses of the distribution,
equals or exceeds one cent per share of Officers Fund outstanding on the
Valuation Date.
7. Prior to the Closing Date, there shall be coordination between the
parties as to their respective portfolios so that, after the Closing, Value Fund
will be in compliance with all of its investment policies and restrictions. At
the Closing, Officers Fund shall deliver to Value Fund two copies of a list
setting forth the securities then owned by Officers Fund. Promptly after the
Closing, Officers Fund shall provide Value Fund a list setting forth the
respective federal income tax bases thereof.
8. Portfolio securities or written evidence acceptable to Value Fund of
record ownership thereof by The Depository Trust Company or through the Federal
Reserve Book Entry System or any other depository approved by Officers Fund
pursuant to Rule 17f-4 and Rule 17f-5 under the Act shall be endorsed and
delivered, or transferred by appropriate transfer or assignment documents, by
Officers Fund on the Closing Date to Value Fund, or at its direction, to its
custodian bank, in proper form for transfer in such condition as to constitute
good delivery thereof in accordance with the custom of brokers and shall be
accompanied by all necessary state transfer stamps, if any. The cash delivered
shall be in the form of certified or bank cashiers' checks or by bank wire or
intra-bank transfer payable to the order of Value Fund for the account of Value
Fund. Class A shares of Value Fund representing the number of Class A shares of
Value Fund being delivered against the assets of Officers Fund, registered in
the name of Officers Fund, shall be transferred to Officers Fund on the Closing
Date. Such shares shall thereupon be assigned by Officers Fund to its
shareholders so that the shares of Value Fund may be distributed as provided in
Section 5.
If, at the Closing Date, Officers Fund is unable to make delivery
under this Section 8 to Value Fund of any of its portfolio securities or cash
for the reason that any of such securities purchased by Officers Fund, or the
cash proceeds of a sale of portfolio securities, prior to the Closing Date have
not yet been delivered to it or Officers Fund's custodian, then the delivery
requirements of this Section 8 with respect to said undelivered securities or
cash will be waived and Officers Fund
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will deliver to Value Fund by or on the Closing Date with respect to said
undelivered securities or cash executed copies of an agreement or agreements of
assignment in a form reasonably satisfactory to Value Fund, together with such
other documents, including a due bill or due bills and brokers' confirmation
slips as may reasonably be required by Value Fund.
9. Value Fund shall not assume the liabilities (except for portfolio
securities purchased which have not settled and for shareholder redemption and
dividend checks outstanding) of Officers Fund, but Officers Fund will,
nevertheless, use its best efforts to discharge all known liabilities, so far as
may be possible, prior to the Closing Date. The cost of printing and mailing the
proxies and proxy statements will be borne by Officers Fund. Officers Fund and
Value Fund will bear the cost of their respective tax opinion. Any documents
such as existing prospectuses or annual reports that are included in that
mailing will be a cost of the fund issuing the document. Any other out-of-pocket
expenses of Value Fund and Officers Fund associated with this reorganization,
including legal, accounting and transfer agent expenses, will be borne by
Officers Fund and Value Fund, respectively, in the amounts so incurred by each.
10. The obligations of Value Fund hereunder shall be subject to the
following conditions:
A. The Board of Trustees of the Trust shall have authorized the
execution of the Agreement, and the shareholders of Officers Fund shall have
approved the Agreement and the transactions contemplated hereby, and Officers
Fund shall have furnished to Value Fund copies of resolutions to that effect
certified by the Secretary or the Assistant Secretary of the Trust; such
shareholder approval shall have been by the affirmative vote of "a majority of
the outstanding voting securities" (as defined in the Act) of Officers Fund at a
meeting for which proxies have been solicited by the Proxy Statement and
Prospectus (as hereinafter defined).
B. Value Fund shall have received an opinion dated the Closing Date
of counsel to Officers Fund, to the effect that (i) Officers Fund is a series of
the Trust which is a business trust duly organized, validly existing and in good
standing under the laws of the Commonwealth of Massachusetts with full powers to
carry on its business as then being conducted and to enter into and perform the
Agreement (Massachusetts counsel may be relied upon for this opinion); and (ii)
that all action necessary to make the Agreement, according to its terms, valid,
binding and enforceable on Officers Fund and to authorize effectively the
transactions contemplated by the Agreement have been taken by Officers Fund.
C. The representations and warranties of Officers Fund contained
herein shall be true and correct at and as of the Closing Date, and Value Fund
shall have been furnished with a certificate of the President, or a Vice
President, or the Secretary or the Assistant Secretary or the Treasurer of the
Trust, dated the Closing Date, to that effect.
D. On the Closing Date, Officers Fund shall have furnished to Value
Fund a certificate of the Treasurer or Assistant Treasurer of the Trust as to
the amount of the capital loss carry-over and net unrealized appreciation or
depreciation, if any, with respect to Officers Fund as of the Closing Date.
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E. The Cash Reserve shall not exceed 10% of the value of the net
assets, nor 30% in value of the gross assets, of Officers Fund at the close of
business on the Valuation Date.
F. A Registration Statement on Form N-14 filed by Value Fund under
the Securities Act of 1933, as amended (the "1933 Act"), containing a
preliminary form of the Proxy Statement and Prospectus, shall have become
effective under the 1933 Act not later than ____________, 1998.
G. On the Closing Date, Value Fund shall have received a letter of
Andrew J. Donohue or other senior executive officer of OppenheimerFunds, Inc.
acceptable to Value Fund, stating that nothing has come to his or her attention
which in his or her judgment would indicate that as of the Closing Date there
were any material actual or contingent liabilities of Officers Fund arising out
of litigation brought against Officers Fund or claims asserted against it, or
pending or to the best of his or her knowledge threatened claims or litigation
not reflected in or apparent from the most recent audited financial statements
and footnotes thereto of Officers Fund delivered to Value Fund. Such letter may
also include such additional statements relating to the scope of the review
conducted by such person and his or her responsibilities and liabilities as are
not unreasonable under the circumstances.
H. Value Fund shall have received an opinion, dated the Closing
Date, of Price Waterhouse LLP, to the same effect as the opinion contemplated by
Section
11.E. of the Agreement.
I. Value Fund shall have received at the Closing all of the assets
of Officers Fund to be conveyed hereunder, which assets shall be free and clear
of all liens, encumbrances, security
interests, restrictions and limitations whatsoever.
11. The obligations of Officers Fund hereunder shall be subject to the
following conditions:
A. The Board of Directors of Value Fund shall have authorized the
execution of the Agreement, and the transactions contemplated thereby, and Value
Fund shall have furnished to Officers Fund copies of resolutions to that effect
certified by the Secretary or the Assistant Secretary of Value Fund.
B. Officers Fund's shareholders shall have approved the Agreement
and the transactions contemplated hereby, by an affirmative vote of "a majority
of the outstanding voting securities" (as defined in the Act) of Officers Fund,
and Officers Fund shall have furnished Value Fund copies of resolutions to that
effect certified by the Secretary or an Assistant Secretary of the Trust.
C. Officers Fund shall have received an opinion dated the Closing
Date of counsel to Value Fund, to the effect that (i) Value Fund is duly
organized, validly existing and in good standing under the laws of the State of
Maryland with full powers to carry on its business as then being conducted and
to enter into and perform the Agreement (Maryland counsel may be relied upon for
this opinion); (ii) all action necessary to make the Agreement, according to its
terms, valid, binding and enforceable upon Value Fund and to authorize
effectively the transactions contemplated
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by the Agreement have been taken by Value Fund, and (iii) the shares of Value
Fund to be issued hereunder are duly authorized and when issued will be validly
issued, fully-paid and non-assessable.
D. The representations and warranties of Value Fund contained herein
shall be true and correct at and as of the Closing Date, and Officers Fund shall
have been furnished with a certificate of the President, a Vice President or the
Secretary or the Assistant Secretary or the Treasurer of Value Fund to that
effect dated the Closing Date.
E. Officers Fund shall have received an opinion of Price Waterhouse
LLP to the effect that the Federal tax consequences of the transaction, if
carried out in the manner outlined in the Agreement and in accordance with (i)
Officers Fund's representation that there is no plan or intention by any
Officers Fund shareholder who owns 5% or more of Officers Fund's outstanding
shares, and, to Officers Fund's best knowledge, there is no plan or intention on
the part of the remaining Officers Fund shareholders, to redeem, sell, exchange
or otherwise dispose of a number of Value Fund shares received in the
transaction that would reduce Officers Fund shareholders' ownership of Value
Fund shares to a number of shares having a value, as of the Closing Date, of
less than 50% of the value of all of the formerly outstanding Officers Fund
shares as of the same date, and (ii) the representation by each of Officers Fund
and Value Fund that, as of the Closing Date, Officers Fund and Value Fund will
qualify as regulated investment companies or will meet the diversification test
of Section 368(a)(2)(F)(ii) of the Code, will be as follows:
1. The transactions contemplated by the Agreement will qualify
as a tax-free "reorganization" within the meaning of Section 368(a)(1) of the
Code, and under the regulations promulgated thereunder.
2. Officers Fund and Value Fund will each qualify as a "party
to a reorganization" within the meaning of Section 368(b)(2) of the Code.
3. No gain or loss will be recognized by the shareholders of
Officers Fund upon the distribution of Class A shares of beneficial interest in
Value Fund to the shareholders of
Officers Fund pursuant to Section 354 of the Code.
4. Under Section 361(a) of the Code no gain or loss will be
recognized by Officers Fund by reason of the transfer of substantially all its
assets in exchange for Class A shares of Value Fund.
5. Under Section 1032 of the Code no gain or loss will be
recognized by Value Fund by reason of the transfer of substantially all of
Officers Fund's assets in exchange for Class A shares of Value Fund and Value
Fund's assumption of certain liabilities of Officers Fund.
6. The shareholders of Officers Fund will have the same tax
basis and holding period for the Class A shares of beneficial interest in Value
Fund that they receive as they had for Officers Fund shares that they previously
held, pursuant to Section 358(a) and 1223(1), respectively, of the Code.
-40-
<PAGE>
7. The securities transferred by Officers Fund to Value Fund
will have the same tax basis and holding period in the hands of Value Fund as
they had for Officers Fund, pursuant to Section 362(b) and 1223(1),
respectively, of the Code.
F. The Cash Reserve shall not exceed 10% of the value of the net
assets, nor 30% in value of the gross assets, of Officers Fund at the close of
business on the Valuation Date.
G. A Registration Statement on Form N-14 filed by Value Fund under
the 1933 Act, containing a preliminary form of the Proxy Statement and
Prospectus, shall have become effective under the 1933 Act not later than
_________, 1998.
H. On the Closing Date, Officers Fund shall have received a letter
of Andrew J. Donohue or other senior executive officer of OppenheimerFunds, Inc.
acceptable to Officers Fund, stating that nothing has come to his or her
attention which in his or her judgment would indicate that as of the Closing
Date there were any material actual or contingent liabilities of Value Fund
arising out of litigation brought against Value Fund or claims asserted against
it, or pending or, to the best of his or her knowledge, threatened claims or
litigation not reflected in or apparent by the most recent audited financial
statements and footnotes thereto of Value Fund delivered to Officers Fund. Such
letter may also include such additional statements relating to the scope of the
review conducted by such person and his or her responsibilities and liabilities
as are not unreasonable under the circumstances.
I. Officers Fund shall acknowledge receipt of the Class A shares of
Value Fund.
12. The Trust on behalf of Officers Fund hereby represents and warrants
that:
A. The financial statements of Officers Fund as at October 31, 1997
(audited) heretofore furnished to Value Fund, present fairly the financial
position, results of operations, and changes in net assets of Officers Fund as
of that date, in conformity with generally accepted accounting principles
applied on a basis consistent with the preceding year; and that from October 31,
1997 through the date hereof there have not been, and through the Closing Date
there will not be, any material adverse change in the business or financial
condition of Officers Fund, it being agreed that a decrease in the size of
Officers Fund due to a diminution in the value of its portfolio and/or
redemption of its shares shall not be considered a material adverse change;
B. Contingent upon approval of the Agreement and the transactions
contemplated thereby by Officers Fund's shareholders, Officers Fund has
authority to transfer all of the assets of Officers Fund to be conveyed
hereunder free and clear of all liens, encumbrances, security interests,
restrictions and limitations whatsoever;
C. The Prospectus, as amended and supplemented, contained in
Officers Fund's Registration Statement under the 1933 Act, as amended, is true,
correct and complete, conforms to the requirements of the 1933 Act and does not
contain any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading. The Registration Statement, as amended, was, as of the date of the
filing of the last Post- Effective Amendment, true, correct and complete,
conformed to the requirements of the 1933 Act
-41-
<PAGE>
and did not contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading;
D. There is no material contingent liability of Officers Fund and no
material claim and no material legal, administrative or other proceedings
pending or, to the knowledge of Officers Fund, threatened against Officers Fund,
not reflected in such Prospectus;
E. Except for the Agreement, there are no material contracts
outstanding to which
Officers Fund is a party other than those ordinary in the conduct of its
business;
F. Officers Fund is a series of the Trust which is a business trust
duly organized, validly existing and in good standing under the laws of the
Commonwealth of Massachusetts; and has all necessary and material Federal and
state authorizations to own all of its assets and to carry on its business as
now being conducted; and Officers Fund is duly registered under the Act and such
registration has not been rescinded or revoked and is in full force and effect;
G. All Federal and other tax returns and reports of Officers Fund
required by law to be filed have been filed, and all Federal and other taxes
shown due on said returns and reports have been paid or provision shall have
been made for the payment thereof and to the best of the knowledge of Officers
Fund no such return is currently under audit and no assessment has been asserted
with respect to such returns and to the extent such tax returns with respect to
the taxable year of Officers Fund ended October 31, 1997 have not been filed,
such returns will be filed when required and the amount of tax shown as due
thereon shall be paid when due; and
H. Officers Fund has elected to be treated as a regulated investment
company and, for each fiscal year of its operations, Officers Fund has met the
requirements of Subchapter M of the Code for qualification and treatment as a
regulated investment company and Officers Fund intends to meet such requirements
with respect to its current taxable year.
13. Value Fund hereby represents and warrants that:
A. The financial statements of Value Fund as at October 31, 1997
(audited) heretofore furnished to Officers Fund, present fairly the financial
position, results of operations, and changes in net assets of Value Fund, as of
that date, in conformity with generally accepted accounting principles applied
on a basis consistent with the preceding year; and that from October 31, 1997
through the date hereof there have not been, and through the Closing Date there
will not be, any material adverse changes in the business or financial condition
of Value Fund, it being understood that a decrease in the size of Value Fund due
to a diminution in the value of its portfolio and/or redemption of its shares
shall not be considered a material or adverse change;
B. The Prospectus, as amended and supplemented, contained in Value
Fund's Registration Statement under the 1933 Act, is true, correct and complete,
conforms to the requirements of the 1933 Act and does not contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein not misleading. The
Registration Statement, as amended, was, as of the date of the filing of the
last Post- Effective Amendment, true, correct and complete, conformed to the
requirements of the 1933 Act
A-1
<PAGE>
and did not contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading;
C. Except for this Agreement, there is no material contingent
liability of Value Fund and no material claim and no material legal,
administrative or other proceedings pending or, to the knowledge of Value Fund,
threatened against Value Fund, not reflected in such Prospectus;
D. There are no material contracts outstanding to which Value
Fund is a party
other than those ordinary in the conduct of its business;
E. Value Fund is a Maryland corporation duly organized, validly
existing and in good standing under the laws of the State of Maryland; has all
necessary and material Federal and state authorizations to own all its
properties and assets and to carry on its business as now being conducted; the
Class A shares of Value Fund which it issues to Officers Fund pursuant to the
Agreement will be duly authorized, validly issued, fully-paid and
non-assessable, will conform to the description thereof contained in Value
Fund's Registration Statement and will be duly registered under the 1933 Act and
in the states where registration is required; and Value Fund is duly registered
under the Act and such registration has not been revoked or rescinded and is in
full force and effect;
F. All Federal and other tax returns and reports of Value Fund
required by law to be filed have been filed, and all Federal and other taxes
shown due on said returns and reports have been paid or provision shall have
been made for the payment thereof and to the best of the knowledge of Value Fund
no such return is currently under audit and no assessment has been asserted with
respect to such returns and to the extent such tax returns with respect to the
taxable year of Value Fund ended October 31, 1997 have not been filed, such
returns will be filed when required and the amount of tax shown as due thereon
shall be paid when due;
G. Value Fund has elected to be treated as a regulated investment
company and, for each fiscal year of its operations, Value Fund has met the
requirements of Subchapter M of the Code for qualification and treatment as a
regulated investment company and Value Fund intends to meet such requirements
with respect to its current taxable year;
H. Value Fund has no plan or intention (i) to dispose of any of the
assets transferred by Officers Fund, other than in the ordinary course of
business, or (ii) to redeem or reacquire any of the Class A shares issued by it
in the reorganization other than pursuant to valid requests of shareholders; and
I. After consummation of the transactions contemplated by the
Agreement, Value Fund intends to operate its business in a substantially
unchanged manner.
14. Each party hereby represents to the other that no broker or finder has
been employed by it with respect to the Agreement or the transactions
contemplated hereby. Each party also represents and warrants to the other that
the information concerning it in the Proxy Statement and Prospectus will not as
of its date contain any untrue statement of a material fact or omit to state a
fact necessary to make the statements concerning it therein not misleading and
that the financial statements concerning it will present the information shown
fairly in accordance with generally
A-2
<PAGE>
accepted accounting principles applied on a basis consistent with the preceding
year. Each party also represents and warrants to the other that the Agreement is
valid, binding and enforceable in accordance with its terms and that the
execution, delivery and performance of the Agreement will not result in any
violation of, or be in conflict with, any provision of any charter, by-laws,
contract, agreement, judgment, decree or order to which it is subject or to
which it is a party. Value Fund hereby represents to and covenants with Officers
Fund that, if the reorganization becomes effective, Value Fund will treat each
shareholder of Officers Fund who received any of Value Fund's shares as a result
of the reorganization as having made the minimum initial purchase of shares of
Value Fund received by such shareholder for the purpose of making additional
investments in shares of Value Fund, regardless of the value of the shares of
Value Fund received.
15. Value Fund agrees that it will prepare and file a Registration
Statement on Form N-14 under the 1933 Act which shall contain a preliminary form
of proxy statement and prospectus contemplated by Rule 145 under the 1933 Act.
The final form of such proxy statement and prospectus is referred to in the
Agreement as the "Proxy Statement and Prospectus." Each party agrees that it
will use its best efforts to have such Registration Statement declared effective
and to supply such information concerning itself for inclusion in the Proxy
Statement and Prospectus as may be necessary or desirable in this connection.
Officers Fund covenants and agrees to deregister as an investment company under
the Investment Company Act of 1940, as amended, as soon as practicable to the
extent required, and, upon closing, to cause the cancellation of its outstanding
shares.
16. The obligations of the parties under the Agreement shall be subject to
the right of either party to abandon and terminate the Agreement without
liability if the other party breaches any material provision of the Agreement or
if any material legal, administrative or other proceeding shall be instituted or
threatened between the date of the Agreement and the Closing Date (i) seeking to
restrain or otherwise prohibit the transactions contemplated hereby and/or (ii)
asserting a material liability of either party, which proceeding has not been
terminated or the threat thereof removed prior to the Closing Date.
17. The Agreement may be executed in several counterparts, each of which
shall be deemed an original, but all taken together shall constitute one
Agreement. The rights and obligations of each party pursuant to the Agreement
shall not be assignable.
18. All prior or contemporaneous agreements and representations are merged
into the Agreement, which constitutes the entire contract between the parties
hereto. No amendment or modification hereof shall be of any force and effect
unless in writing and signed by the parties and no party shall be deemed to have
waived any provision herein for its benefit unless it executes a written
acknowledgment of such waiver.
19. Officers Fund understands that the obligations of Value Fund under the
Agreement are not binding upon any Director or shareholder of Value Fund
personally, but bind only Value Fund
and Value Fund's property.
20. Value Fund understands that the obligations of Officers Fund under the
Agreement are not binding upon any Trustee or shareholder of Officers Fund
personally, but bind only Officers Fund and Officers Fund's property. Value Fund
represents that it has notice of the provisions of the
A-3
<PAGE>
Declaration of Trust of Officers Fund disclaiming shareholder and Trustee
liability for acts or obligations of Officers Fund.
A-4
<PAGE>
IN WITNESS WHEREOF, each of the parties has caused the Agreement to be
executed and attested by its officers thereunto duly authorized on the date
first set forth above.
OPPENHEIMER QUEST VALUE FUND, INC.
By:__________________________________
OPPENHEIMER QUEST FOR VALUE FUNDS
on behalf of
OPPENHEIMER QUEST OFFICERS VALUE FUND
By:_________________________________
A-5
Oppenheimer Quest Value Fund, Inc.
Prospectus dated February 27, 1998
Oppenheimer Quest Value Fund, Inc. is a mutual fund that seeks capital
appreciation. The Fund seeks its investment objective through investment in
securities (primarily equity securities) of companies believed by management 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 February
27, 1998 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 NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
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
-2-
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, 1997.
o 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.
Class Class Class Class
A Shares B Shares C Shares Y Shares
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, decling 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
- ------------------------------------------------------------------------------
Redemption Fee None(3) None(3) None(3) None
(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 12 calendar months
(18 months for shares purchased prior to May 1, 1997) from the end of
the calendar month during which you purchased those 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.
(3) There is a $10 transaction fee for redemptions paid by Federal Funds
wire, but not for redemptions paid by ACH transfer through
AccountLink.
o 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)
Class Class Class Class
A Shares B Shares C Shares Y Shares
- ------------------------------------------------------------------------------
Management Fees 0.94% 0.94% 0.94% 0.94%
- ------------------------------------------------------------------------------
12b-1 Distribution
Plan Fees 0.50% 1.00% 1.00% None
- ------------------------------------------------------------------------------
Other Expenses 0.16% 0.16% 0.16% 0.25%
- ------------------------------------------------------------------------------
Total Fund Operating
Expenses 1.60% 2.10% 2.10% 1.19%
The numbers in the chart above are based upon the Fund's expenses in its last
fiscal year ended October 31, 1997. 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 the 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 the
actual value of the Fund's assets represented by each class of shares. Class Y
shares were not publicly offered prior to December 16, 1996. Therefore, the
Annual Fund Operating Expenses shown for Class Y shares are based on the period
from December 16, 1996 until October 31, 1997.
o 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 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 $73 $105 $140 $237
Class B Share $71 $ 96 $133 $219
Class C Share $31 $ 66 $113 $243
Class Y Shares $12 $ 38 $ 65 $144
If you did not redeem your investment, it would incur the following expenses:
1 year 3 years 5 years 10 years*
------ ------- ------- ---------
Class A Share $73 $105 $140 $237
Class B Share $21 $ 66 $113 $219
Class C Share $21 $ 66 $113 $243
Class Y Shares $12 $ 38 $ 65 $144
*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.
-3-
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.
o What is the Fund's Investment Objective? The Fund seeks capital appreciation.
o What Does the Fund Invest In? The Fund seeks its investment objective through
investment in securities (primarily equity securities) of companies believed by
management to be undervalued in the marketplace in relation to factors such as
the companies' assets, earnings, growth potential and cash flows. 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 total assets in such securities. These investments are more fully
explained in "Investment Policies and Strategies," starting on page __.
o Who Manages the Fund? The Manager, OppenheimerFunds, Inc., supervises the
Fund's investment program and handles its day-to-day business. The Manager
(including subsidiaries) manages investment company portfolios having over $75
billion in assets as of December 31, 1997. 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, Eileen Rominger, 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.
o 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 Sub-Adviser 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 investment 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.
o 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.
o Will I Pay a Sales Charge to Buy Shares? The Fund has four classes of shares.
Each class of shares has the same investment portfolio but has 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 6 years or 12 months, respectively, of purchase.
There is also an annual asset-based sales charge which is higher on Class B and
Class C shares. Class Y shares are offered at net asset value without sales
charge only to certain institutional investors. 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.
o 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 __.
o 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.
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 each of the two years and the
period ended October 31, 1997 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, 1997 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, was audited by other
independent accountants.
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
CLASS A
------------------------------------------------------------------
YEAR ENDED OCTOBER 31,
1997 1996(3) 1995 1994 1993 1992
================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING DATA:
Net asset value, beginning of period $17.30 $14.51 $12.59 $12.51 $11.71 $10.61
- ----------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income (loss) .11 .08 .12(5) .09(5) .05(5) .04(5)
Net realized and unrealized gain (loss) 4.07 3.79 2.71 .50 1.34 1.77
------ ------ ------ ------ ----- ------
Total income (loss) from investment
operations 4.18 3.87 2.83 .59 1.39 1.81
- ----------------------------------------------------------------------------------------------------------------
Dividends and distributions to shareholders:
Dividends from net investment income (.07) (.10) (.08) (.04) (.05) (.07)
Distributions from net realized gain (.92) (.98) (.83) (.47) (.54) (.64)
------ ------ ------ ------ ----- ------
Total dividends and distributions
to shareholders (.99) (1.08) (.91) (.51) (.59) (.71)
- ----------------------------------------------------------------------------------------------------------------
Net asset value, end of period $20.49 $17.30 $14.51 $12.59 $12.51 $11.71
====== ====== ====== ====== ====== ======
================================================================================================================
TOTAL RETURN, AT NET ASSET VALUE(6) 25.41% 28.39% 24.74% 5.01% 12.27% 18.45%
================================================================================================================
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in thousands) $699,230 $412,246 $282,615 $238,085 $245,320 $142,939
- ----------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $560,582 $338,429 $257,240 $237,923 $205,074 $122,319
- ----------------------------------------------------------------------------------------------------------------
Ratios to average net assets:
Net investment income (loss) 0.74% 0.58% 0.90% 0.72% 0.40% 0.53%
Expenses 1.60% 1.71% 1.68% 1.71% 1.75% 1.75%
- ----------------------------------------------------------------------------------------------------------------
Portfolio turnover rate(8) 19.7% 36.0% 36.0% 49.0% 27.0% 41.0%
Average brokerage commission rate(9) $0.0573 $0.0559 -- -- -- --
</TABLE>
1. For the period from December 16, 1996 (inception of offering) to October 31,
1997.
2. For the period from September 1, 1993 (inception of offering) to October 31,
1993.
3. On November 22, 1995, OppenheimerFunds, Inc. became the investment advisor to
the Fund.
4. Per share data has been retroactively restated to reflect a 200% stock
dividend as of July 1, 1991.
5. Based on average shares outstanding for the period.
8
<PAGE>
<TABLE>
<CAPTION>
CLASS B
- ---------------------------------------------- -----------------------------------------------------------
YEAR ENDED OCTOBER 31,
1991 1990(4) 1989(4) 1988(4) 1997 1996(3) 1995 1994 1993(2)
==============================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$ 7.84 $9.85 $8.99 $7.94 $17.08 $14.37 $12.53 $12.51 $12.66
- --------------------------------------------------------------------------------------------------------------
.09(5) .18(5) .24(5). .09(5) .05 .05 .05(5) .02(5) (.01)(5)
2.84 (1.38) 1.09 1.38 3.97 3.71 2.69 .50 (.14)
------ ----- ----- ----- ------ ------ ------ ------ ------
2.93 (1.20) 1.33 1.47 4.02 3.76 2.74 .52 (.15)
- --------------------------------------------------------------------------------------------------------------
(.16) (.26) (.10) (.05) (.01) (.07) (.07) (.03) --
-- (.55) (.37) (.37) (.92) (.98) (.83) (.47) --
------ ----- ----- ----- ------ ------ ------ ------ ------
(.16) (.81) (.47) (.42) (.93) (1.05) (.90) (.50) --
- --------------------------------------------------------------------------------------------------------------
$10.61 $7.84 $9.85 $8.99 $20.17 $17.08 $14.37 $12.53 $12.51
====== ===== ===== ===== ====== ====== ====== ====== ======
==============================================================================================================
37.94% (13.43)% 15.68% 19.54% 24.71% 27.76% 24.08% 4.43% (1.19)%
==============================================================================================================
$79,914 $49,740 $77,205 $83,228 $298,348 $111,130 $38,557 $14,373 $2,015
- --------------------------------------------------------------------------------------------------------------
-- -- -- -- $200,752 $ 68,175 $25,393 $ 8,341 $1,136
- --------------------------------------------------------------------------------------------------------------
1.06% 1.71% 2.31% 0.94% 0.25% 0.06% 0.36% 0.14% (1.19)%(7)
1.83% 1.82% 1.81% 2.21% 2.10% 2.26% 2.21% 2.24% 2.27%(7)
- --------------------------------------------------------------------------------------------------------------
48.0% 51.0% 30.0% 15.0% 19.7% 36.0% 36.0% 49.0% 27.0%
-- -- -- -- $0.0573 $0.0559 -- -- --
</TABLE>
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.
7. Annualized.
9
<PAGE>
FINANCIAL HIGHLIGHTS (Continued)
<TABLE>
<CAPTION>
CLASS C CLASS Y
---------------------------------------------------- -----------
PERIOD
ENDED
YEAR ENDED OCTOBER 31, OCTOBER 31,
1997 1996(3) 1995 1994 1993(2) 1997(1)
=======================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING DATA:
Net asset value, beginning of period $17.07 $14.35 $12.52 $12.50 $12.66 $16.50
- -----------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income (loss) .05 .04 .04(5) .01(5) (.01)(5) .10
Net realized and unrealized gain (loss) 3.98 3.71 2.70 .51 (.15) 3.95
------ ------ ------ ------ ------ ------
Total income (loss) from investment
operations 4.03 3.75 2.74 .52 (.16) 4.05
- -----------------------------------------------------------------------------------------------------------------------
Dividends and distributions to shareholders:
Dividends from net investment income (.01) (.05) (.08) (.03) -- --
Distributions from net realized gain (.92) (.98) (.83) (.47) -- --
------ ------ ------ ------ ------ ------
Total dividends and distributions
to shareholders (.93) (1.03) (.91) (.50) -- --
- -----------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $20.17 $17.07 $14.35 $12.52 $12.50 $20.55
====== ====== ====== ====== ====== ======
=======================================================================================================================
TOTAL RETURN, AT NET ASSET VALUE(6) 24.79% 27.73% 24.10% 4.45% (1.26)% 24.55%
=======================================================================================================================
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in thousands) $82,098 $29,256 $10,140 $3,581 $221 $3,086
- -----------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $55,969 $18,099 $ 6,711 $1,725 $169 $1,372
- -----------------------------------------------------------------------------------------------------------------------
Ratios to average net assets:
Net investment income (loss) 0.25% 0.06% 0.31% 0.09% (0.90)%(7) 1.20%(7)
Expenses 2.10% 2.20% 2.26% 2.28% 2.27%(7) 1.19%(7)
- -----------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate(8) 19.7% 36.0% 36.0% 49.0% 27.0% 19.7%
Average brokerage commission rate(9) $0.0573 $0.0559 -- -- -- $0.0573
</TABLE>
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, 1997 were $387,455,107 and $129,795,392, 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.
-5-
<PAGE>
Investment Objective and Policies
Objective. The Fund seeks capital appreciation.
Investment Policies and Strategies. The Fund seeks its investment objective
through investment in securities (primarily equity securities) of companies
believed by management to be undervalued in the marketplace in relation to
factors such as the companies' assets, earnings, growth potential and cash
flows.
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 such U.S. Government
securities and money market instruments.
o 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.
The Fund's investment policies and practices are not "fundamental" unless this
Prospectus or the Statement of Additional Information states that a particular
policy is "fundamental." The Fund's investment objective is a fundamental
policy.
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.
o 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.
Foreign currency will be held by the Fund only in connection with the purchase
or sale of foreign securities.
o 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 Appendix A to the Statement of
Additional Information for a more complete general description of Moody's and
S&P ratings.
o 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. 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. The "Financial
Highlights" table above shows the Fund's portfolio turnover rate during past
fiscal years.
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 Sub-Adviser 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.
o Stock Investment Risks. Because the Fund may invest 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.
o Foreign Securities Have Special Risks. For example, foreign issuers may not
be 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.
o Risks of Fixed-Income Securities. In addition to credit risks, described
below, debt securities are subject to changes in their values 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 longer-term debt securities than
shorter-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.
o Special Risks of Hedging Instruments. 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 Sub-Adviser 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 options trading and other hedging
strategies as described 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.
o Temporary Defensive Investments. In times of unstable market or economic
conditions, when the Sub-Adviser determines it appropriate to do so to attempt
to reduce fluctuations in the value of the Fund's net assets, the Fund may
assume a temporary defensive position and invest an unlimited amount of assets
in U.S. Government securities and money market instruments of the type
identified on page __ under "Investment Policies and Strategies." At any time
that the Fund invests for temporary defensive purposes, to the extent of such
investments, it is not pursuing its investment objective.
o Investing in Small, Unseasoned Companies. The Fund may invest up to 15% of
its total assets 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. See "Investing in Small, Unseasoned Companies" in the Statement
of Additional Information for a further discussion of the risks involved in such
investments.
o Hedging. The Fund may purchase and sell certain kinds of futures contracts,
forward contracts, and options. 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.
o Futures. The Fund may buy and sell futures contracts that relate to (1)
broadly-based stock indices (these are referred to as Stock Index Futures), and
(2) foreign currencies (these are called Forward Contracts and are discussed
below).
o Put and Call Options. The Fund may buy and sell exchange-traded put and call
options on broadly-based stock indices. A call or put may be purchased only if,
after the purchase, the value of all call and put options held by the Fund will
not exceed 5% of the Fund's total assets.
If the Fund sells (that is, writes) a call option, it must be "covered." That
means the Fund must segregate liquid assets to enable it to satisfy its
obligations if the call is exercised. For other types of written calls, a fund
must own the security subject to the call while the call is outstanding. If the
Fund writes a put, the put must be covered by segregated liquid assets.
o 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.
o 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 has a contractual restriction on its resale or that cannot be sold publicly
until it is registered under the Securities Act of 1933.
The Fund may not invest more than 15% of its net assets in illiquid and
restricted securities, including repurchase agreements that have a maturity of
longer than seven days and certain over-the-counter options. The Fund's
percentage limitation on these investments does not apply to certain restricted
securities that are eligible for resale to "qualified institutional buyers". The
Manager monitors holdings of illiquid securities on an ongoing basis to
determine whether to sell any holdings to maintain adequate liquidity.
o Loans of Portfolio Securities. 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.
o Repurchase Agreements. The Fund may enter into repurchase agreements
primarily 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 on investment in
illiquid and restricted securities, discussed above.
o "When-Issued" and "Delayed Delivery" Transactions. The Fund may purchase
securities on a "when-issued" basis and may purchase or sell such securities on
a "delayed delivery" 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.
o Warrants and Rights. Warrants generally 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
issuer to its shareholders. The Fund may not invest more than 5% of its total
assets in warrants. That 5% excludes warrants the Fund has acquired in units or
that are attached to other securities.
o Investment in Other Investment Companies. The Fund generally may invest up to
10% of its total assets in the aggregate in shares of other investment companies
and up to 5% of its total assets in any one investment company, as long as each
investment does not represent more than 3% of the outstanding voting securities
of the acquired investment company. These limitations do not apply in the case
of investment company securities which may be purchased as part of a plan of
merger, consolidation, reorganization or acquisition. Investment in other
investment companies may involve the payment of substantial premiums above the
value of such investment companies' portfolio securities, and is subject to
limitations under the Investment Company Act and market availability. The Fund
does not intend to invest in such investment companies unless, in the judgment
of the Manager, the potential benefits of such investment justify the payment of
any applicable premiums or sales charge. As a shareholder in an investment
company, the Fund would bear its ratable share of that investment company's
expenses, including its advisory and administration fees. At the same time, the
Fund would continue to pay its own management fees and other expenses.
Other Investment Restrictions. The Fund has other investment restrictions
that are fundamental policies. Under these fundamental policies, the Fund
cannot do any of the following:
o 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.
o Purchase more than 10% of the voting securities of any one issuer (this
restriction does not apply to U.S. Government securities).
o 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).
o 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).
o 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.
Unless this 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 for more 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 subsidiaries) currently manages investment companies, including other
Oppenheimer funds, with assets of more than $75 billion as of December 31, 1997,
and with more than 3.5 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 management services provided to the Fund by the Manager, and the services
provided by the Distributor and the Transfer Agent to shareholders, depend on
the smooth functioning of their computer systems. Many computer software systems
in use today cannot distinguish the year 2000 from the year 1900 because of the
way dates are encoded and calculated. That failure could have a negative impact
on the handling of securities trades, pricing and account services. The Manager,
the Distributor and the Transfer Agent have been actively working on necessary
changes to their computer systems to deal with the year 2000 and expect that
their systems will be adapted in time for that event, although there can be no
assurance of success.
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 advisor, whose employees perform all investment advisory
services provided to the Fund by the Sub-Adviser.
On November 4, 1997, PIMCO Advisors L.P. ("PIMCO Advisors"), a registered
investment adviser with $125 billion in assets under management through various
subsidiaries and affiliates, acquired control of Oppenheimer Capital and the
Sub-Adviser. On November 5, 1997, a new sub-advisory agreement between the
Sub-Adviser and the Manager, on terms identical to the prior sub-advisory
agreement, became effective. The new sub-advisory agreement had been approved by
shareholders of the Fund on June 2, 1997. On November 30, 1997, Oppenheimer
Capital merged with a subsidiary of PIMCO Advisors and, as a result, Oppenheimer
Capital and the Sub-Adviser became indirect wholly-owned subsidiaries of PIMCO
Advisors. PIMCO Advisors has two general partners: PIMCO Partners, G.P., a
California general partnership, and PIMCO Advisors Holdings L.P. (formerly
Oppenheimer Capital, L.P.), an NYSE-listed Delaware limited partnership of which
PIMCO Partners, G.P. is the sole general partner.
o 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
portfolio 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, who is
the Chairman, Chief Executive Officer and Chief Investment Officer for
Oppenheimer Capital. Mr. Long has been with Oppenheimer Capital since 1981.
o Fees and Expenses. Under the Investment Advisory Agreement, the Fund pays the
Manager a monthly fee at the annual rates hereinafter set forth, which decline
on additional assets as the Fund grows. Effective October 22, 1997, the annual
management fee is 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, 0.85%
of the next $3.2 billion of average annual net assets, 0.80% of the next $4
billion of average annual net assets; and 0.75% of average annual net assets
over $8 billion. Prior to October 22, 1997, the annual management fee was 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
over $800 million. The Fund's management fee for its last fiscal year was 0.94%
of average annual net assets for its Class A, Class B, Class C and Class Y
shares.
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.
Information about the Fund's brokerage policies and practices is set forth in
"Brokerage Policies of the Fund" in the Statement of Additional Information.
That section discusses how brokers and dealers are selected for the Fund's
portfolio transactions. When deciding which broker to use, the Manager and the
Sub-Adviser are permitted by the Investment Advisory Agreement to consider
whether brokers have sold shares of the Fund or any other funds for which the
Manager serves as investment adviser.
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, as we have done on
pages and , a broad-based market index.
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.
o 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 considering the effect
of the sales charge, and those returns would be lower 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, 1997, followed by a
graphical comparison of the Fund's performance to an appropriate broad-based
market index.
o Management's Discussion of Performance. During the fiscal year ended October
31, 1997, the Fund remained virtually fully invested in equity securities. The
Fund participated in the domestic stock market's strong performance and
performed ahead of the average for its peer group for the year. Two of the
Fund's substantial investments, both in the insurance industry, significantly
contributed to the Fund's strong performance during the past fiscal year. During
the 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, seeking investments in quality undervalued
stocks of issuers with potential for profitability, growth and stability; the
Fund did not seek investment in specific industries or business sectors. Due to
a perceived overvaluation of securities in the marketplace, however, the Fund
mainly increased the size of existing holdings that it believed were positioned
for long term capital appreciation. The Fund's portfolio holdings, allocations
and strategies are subject to change.
o 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, Class C
and Class Y shares of the Fund held until October 31, 1997. In the case of Class
A shares, performance is measured for the past ten fiscal years, in the case of
Class B and Class C shares, performance is measured from the inception of those
classes on September 1, 1993 and in the case of Class Y shares, from inception
of the class on December 16, 1996.
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.
-6-
<PAGE>
Class A Shares
Comparison of Change in Value of $10,000 Hypothetical Investment In:
Oppenheimer Quest Value Fund, Inc. (Class A) and the S & P 500 Index
[Graph]
Average Annual Total Returns of Class A Shares of the Fund at 10/31/971
1 Year 5 Years 10 years
18.20% 17.42% 15.88%
Class B Shares
Comparison of Change in Value of $10,000 Hypothetical Investment In:
Oppenheimer Quest Value Fund, Inc. (Class B) and the S & P 500 Index
[Graph]
Average Annual Total Returns of Class B Shares of the Fund at 10/31/972
1 Year Life of Class
19.71% 18.38%
Class C Shares
Comparison of Change in Value of $10,000 Hypothetical Investment In:
Oppenheimer Quest Value Fund, Inc. (Class C) and the S & P 500 Index
[Graph]
Average Annual Total Returns of Class C Shares of the Fund at 10/31/973
1 Year Life of Class
23.79% 18.66%
Class Y Shares
Comparison of Change in Value of $10,000 Hypothetical Investment In:
Oppenheimer Quest Value Fund, Inc. (Class Y) and the S & P 500 Index
[Graph]
Average Annual Total Returns of Class Y Shares of the Fund at 10/31/974
Life of Class
24.55%
Total returns and ending account values in the graphs show change in share value
and include reinvestment of all dividends and capital gains distributions. The
performance information for the S & P 500 Index begins on 11/1/87 for Class A
shares, 8/31/93 for Class B and Class C shares and 1/1/97 for Class Y shares.
1The inception date of the Fund (Class A shares) was 4/30/80. Class A returns
are shown net of the applicable 5.75% maximum initial sales charge. 2Class B
shares of the Fund were first publicly offered on 9/1/93. Returns are shown net
of the applicable 5% and 2% contingent deferred sales charges, respectively, for
the one year period and the life-of-class. The ending account value for Class B
shares in the graph is net of the applicable 2% contingent deferred sales
charge. 3Class C shares of the Fund were first publicly offered on 9/1/93. The
1-year return is shown net of the applicable 1% contingent deferred sales
charge. 4Class Y shares of the Fund, first publicly offered on 12/16/96, are
currently offered at net asset value without sales charges to certain
institutional investors. Past performance is not predictive of future
performance. Graphs are not drawn to same scale.
-7-
<PAGE>
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.
o 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
12 months of buying them (18 months if the shares were purchased prior to May 1,
1997), 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.
o 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.
o 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.
o Class Y Shares. Class Y shares are offered only to certain institutional
investors that have special agreements with the Distributor.
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 higher annual 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.
o 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.
o Investing for the Short Term. If you have a short-term investment horizon
(that is, you plan to hold your shares for not more than six years), you should
probably consider purchasing Class A or Class C shares rather than Class B
shares, because of the effect of the Class B contingent deferred sales charge if
you redeem within 6 years, as well as the effect of the Class B asset-based
sales charge on the investment return for that class in the short-term. Class C
shares might be the appropriate choice (especially for investments of less than
$100,000), because there is no initial sales charge on Class C shares, and the
contingent deferred sales charge does not apply to amounts you sell after
holding them one year.
However, if you plan to invest more than $100,000 for the shorter term, then
the more you invest and the more your investment horizon increases toward six
years, Class C shares might not be as advantageous as Class A shares. That is
because the annual asset-based sales charge on Class C shares will have a
greater 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 of Class B shares or $1 million or more of
Class C shares, from a single investor.
o 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.
o 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.
o 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.
The Distributor may pay additional periodic compensation from its own resources
to securities dealers or financial institutions based upon the value of shares
of the Fund owned by the dealer or financial institution for its own account or
for its customers.
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:
o 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. o Under pension, profit-sharing and 401(k) plans
and Individual Retirement Accounts (IRAs), you can make an initial investment of
as little as $250 (if your IRA is established under an Asset Builder Plan, the
$25 minimum applies), and subsequent investments may be as little as $25.
There is no minimum investment requirement if you are buying shares by
reinvesting dividends or distributions 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.
o 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.
o Buying Shares Through Your Dealer. Your dealer will place your order with the
Distributor on your behalf.
o 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.
Payment by Federal Funds Wire: Shares may be purchased by Federal Funds wire.
The minimum investment is $2,500. You must first call the Distributor's Wire
Department at 1-800-525-7041 to notify the Distributor of the wire, and receive
further instructions.
o 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.
o 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 in the Statement of Additional Information.
o 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, or the order is received and transmitted to the Distributor by an
entity authorized by the Fund to accept purchase or redemption orders. The Fund
has authorized the Distributor, certain broker-dealers and agents or
intermediaries designated by the Distributor or those broker-dealers to accept
orders. In most cases, to enable you to receive that day's offering price, the
Distributor or an authorized entity 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 close of The New York Stock Exchange on a regular
business day and normally your order must be transmitted 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 one 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 net asset value. In some cases, reduced sales charges
may be available, as described below. Out of the amount you invest, the Fund
receives the net asset value to invest for your account. The sales charge varies
depending on the amount of your purchase. A portion of the sales charge may be
retained by the Distributor and allocated to your dealer as commission. The
current 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.
o 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:
o Purchases by a retirement plan qualified under Section 401(a) of the
Internal Revenue Code if the retirement plan has total plan assets of $500,000
or more.
o Purchases aggregating $1 million or more.
o 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,
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.
o 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 commissions 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 and calculated on a
calendar year basis. 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 purchased prior to May 1, 1997 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. A Class A contingent deferred sales
charge may be deducted from the redemption proceeds of any of those shares
purchased on or after May 1, 1997 that are redeemed within 12 months of the end
of the calendar month of their purchase. 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.
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.
o 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.
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:
o 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 Distributor will add the value,
at current offering price, of the shares you previously purchased and currently
own to the value of current purchases to determine the sales charge rate that
applies. 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.
o 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.
o 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. In
order to receive a waiver of the Class A contingent deferred sales charge, you
must notify the Transfer Agent as to which conditions apply.
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:
o the Manager or its affiliates;
o 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;
o registered management investment companies, or separate accounts of
insurance companies having an agreement with the Manager or the Distributor for
that purpose;
o 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;
o 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);
o 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);
o (1) investment advisers and financial planners who have entered into an
agreement for this purpose with the Distributor and 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 investment advisers or financial
planners (that have entered into an agreement for this purpose with the
Distributor) 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);
o 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;
o employee benefit plans purchasing shares through a shareholder servicing
agent which the Distributor has appointed as agent to accept those purchase
orders;
o 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;
o any unit investment trust that has entered into an appropriate agreement
with the Distributor;
o 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
o 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 commenced 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:
o shares issued in plans of reorganization, such as mergers, asset
acquisitions and exchange offers, to which the Fund is a party;
o 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;
o 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;
o shares purchased and paid for with the proceeds of shares redeemed in
the prior 30 days 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
o 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:
o to make Automatic Withdrawal Plan payments that are limited annually to
no more than 12% of the original account value;
o involuntary redemptions of shares by operation of law or involuntary
redemptions of small accounts (see "Shareholder Account Rules and Policies,"
below);
o if, at the time of purchase of shares (prior to May 1, 1997) the dealer
agreed in writing to accept the dealer's portion of the sales commission 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);
o if, at the time of purchase of shares (if purchased during the period
May 1, 1997 through December 31, 1997) the dealer agreed in writing to accept
the dealer's portion of the sales commission in installments of 1/12th of the
commission per month (and no further commission will be payable if the shares
are redeemed within 12 months of purchase);
o for distributions from a TRAC-2000 401(k) plan sponsored by the
Distributor due to the termination of the TRAC-2000 program;
o 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
subsidiaries) 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;
o for distributions from Retirement Plans having 500 or more eligible
participants, except distributions due to termination of all of the Oppenheimer
funds as an investment option under the Plan; and
o for distributions from 401(k) plans sponsored by broker-dealers that
have entered into a special agreement with the Distributor allowing this waiver.
o Distribution and Service Plan for Class A Shares. The Fund has adopted a
Distribution and Service Plan for Class A shares to compensate the Distributor
for its services in connection with the distribution of shares and the personal
service and maintenance of shareholder accounts that hold Class A shares. Under
the Plan, the Fund pays an 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 compensate
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 compensate the Distributor for
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 and (2) 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. Class B shares held for a period greater than 6 years
automatically convert to Class A shares.
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.
o 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.
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 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.
o 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 Distribution and
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 may pay the Class B service fee and the asset-based sales charge
to the dealer quarterly in lieu of paying the sales commission and service fee
advance at the time of purchase.
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 advances 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 advances 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 may pay the Class C service fee and
asset-based sales charge to the dealer quarterly in lieu of paying the sales
commission and service fee advance at the time of purchase.
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. At October 31, 1997, the end of
the Class B Plan year, the Distributor had incurred unreimbursed expenses in
connection with sales of Class B shares of $7,193,352 (equal to 2.41% of the
Fund's net assets represented by Class B shares on that date). At October 31,
1997, the end of the Class C Plan year, the Distributor had incurred
unreimbursed expenses in connection with sales of Class C shares of $740,978
(equal to 0.90 % of the Fund's net assets represented by Class C shares on that
date).
If either Plan is terminated by the Fund, the Board of Directors may allow
the Fund to continue payments of the service fee and/or asset-based sales charge
to the Distributor for distributing Class B and Class C shares, as appropriate,
before the Plan was terminated.
o 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 Class B and Class shares
redeemed in certain circumstances as described below. The reasons for this
policy are in "Reduced Sales Charges" in the Statement of Additional
Information. In order to receive a waiver of the Class B or Class C contingent
deferred sales charge, you must notify the Transfer Agent as to which conditions
apply.
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:
o 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) of the participant or beneficiary (the death or
disability must have occurred after the account was established);
o 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);
o returns of excess contributions to Retirement Plans;
o distributions from retirement plans to make "substantially equal
periodic payments" as permitted in 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;
o shares redeemed involuntarily, as described in "Shareholder Account
Rules and Policies," below; or
o distributions from OppenheimerFunds prototype 401(k) plans and from
certain Massachusetts Mutual Life Insurance Company 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;(5) for separation from service; or (6) for loans to participants.
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:
o shares sold to the Manager or its affiliates;
o 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;
o shares issued in plans of reorganization to which the Fund is a
party; or
o distributions from 401(k) plans sponsored by broker-dealers that have
entered into a special agreement with the Distributor allowing this waiver.
Buying Class Y Shares. Class Y shares are sold at net asset value per share
without sales charge directly to certain institutional investors, such as
insurance companies, registered investment companies and employee benefit plans,
that have special agreements with the Distributor for this purpose. These
include Massachusetts Mutual Life Insurance Company, an affiliate of the
Manager, which may purchase Class Y shares of the Fund and other Oppenheimer
funds for asset allocation programs, investment companies or separate investment
accounts it sponsors and offers to its customers. Individual investors are not
able to invest in Class Y shares directly.
While Class Y shares are not subject to initial or contingent deferred
sales charges or asset-based sales charges, an institutional investor buying the
shares for its customers' accounts may impose charges on those accounts. The
procedures for purchasing, redeeming, exchanging, or transferring the Fund's
other classes of shares, and the special account features that apply to those
shares described elsewhere in this Prospectus (other than provisions as to the
timing of the Fund's receipt of purchase, redemption and exchange orders) in
general do not apply to Class Y shares.
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 call the Transfer
Agent for more information.
AccountLink privileges should be requested 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.
o 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.
o 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.
o 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.
o 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.
o 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.
Shareholder Transactions by Fax. Requests for certain account transactions may
be sent to the Transfer Agent by fax (telecopier). Please call 1-800-525-7048
for information about which transactions are included. Transaction requests
submitted by fax are subject to the same rules and restrictions as written and
telephone requests described in this Prospectus.
OppenheimerFunds Internet Web Site. Information about the Fund, including your
account balance, daily share prices, market and Fund portfolio information, may
be obtained by visiting the OppenheimerFunds Internet Web Site, at the following
Internet address: http://www.oppenheimerfunds.com. In 1998, the Transfer Agent
anticipates offering certain account transactions through the Internet Web Site.
To find out more information about those transactions and procedures, please
visit the Web Site.
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:
o 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 Statement of Additional Information for more details.
o 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:
o Individual Retirement Accounts including rollover IRAs, for individuals
and their spouses and SIMPLE IRAs offered by employers
o 403(b)(7) Custodial Plans for employees of eligible tax-exempt
organizations, such as schools, hospitals and charitable organizations
o SEP-IRAs (Simplified Employee Pension Plans) for small business owners
or people with income from self-employment, including SAR/SEP IRAs
o Pension and Profit-Sharing Plans for self-employed persons and other
employers
o 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.
o 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.
o 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):
o You wish to redeem more than $50,000 worth of shares and receive a check
o The redemption check is not payable to all shareholders listed on the
account statement
o The redemption check is not sent to the address of record on your
account statement
o Shares are being transferred to a Fund account with a different owner
or name
o Shares are redeemed by someone other than the owners (such as an
Executor)
o 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:
o Your name
o The Fund's name
o Your Fund account number (from your account statement) o The dollar
amount or number of shares to be redeemed o Any special payment
instructions o Any share certificates for the shares you are selling o The
signatures of all registered owners exactly as the account is registered,
and o 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.
o To redeem shares through a service representative, call 1-800-852-8457 o
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.
-8-
<PAGE>
o 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.
Shareholders may also have the Transfer Agent send redemption proceeds of
$2,500 or more by Federal Funds wire to a designated commercial bank account.
The bank must be a member of the Federal Reserve wire system. There is a $10 fee
for each Federal Funds wire. To place a wire redemption request, call the
Transfer Agent at 1-800-852-8457. The wire will normally be transmitted on the
next bank business day after the shares are redeemed. There is a possibility
that the wire may be delayed up to seven days to enable the Fund to sell
securities to pay the redemption proceeds. No dividends are accrued or paid on
the proceeds of shares that have been redeemed and are awaiting transmittal by
wire. To establish wire redemption privileges on an account that is already
established, please contact the Transfer Agent for instructions.
o Telephone Redemptions Through AccountLink or by Wire. 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.
Shareholders may also have the Transfer Agent send redemption proceeds of
$2,500 or more by Federal Funds wire to a designated commercial bank account.
The bank must be a member of the Federal Reserve wire system. There is a $10 fee
for each Federal Funds wire. To place a wire redemption request, call the
Transfer Agent at 1-800-852-8457. The wire will normally be transmitted on the
next bank business day after the shares are redeemed. There is a possibility
that the wire may be delayed up to seven days to enable the Fund to sell
securities to pay the redemption proceeds. No dividends are accrued or paid on
the proceeds of shares that have been redeemed and are awaiting transmittal by
wire. To establish wire redemption privileges on an account that is already
established, please contact the Transfer Agent for instructions.
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 call your dealer for more
information about this procedure. 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:
o Shares of the fund selected for exchange must be available for sale in
your state of residence
o The prospectuses of this Fund and the fund whose shares you want to buy
must offer the exchange privilege
o 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
o You must meet the minimum purchase requirements for the fund you
purchase by exchange
o 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:
o 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."
o 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:
o 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.
o 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.
o 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.
o 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.
o 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.
The Distributor has entered into agreements with certain dealers and
investment advisers permitting them to exchange their clients' shares by
telephone. These privileges are limited under those agreements and the
Distributor has the right to reject or suspend those privileges. As a result,
those exchanges may be subject to notice requirements, delays and other
limitations that do not apply to shareholders who exchange their shares directly
by calling or writing to the Transfer Agent.
Shareholder Account Rules and Policies
o 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.
o 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.
o 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.
o 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.
o 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.
o 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 or improperly.
o 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.
o 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 federal funds wire, certified check or arrange to have your
bank provide telephone or written assurance to the Transfer Agent that your
purchase payment has cleared.
o 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.
o 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.
o "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 correct and properly certified
Social Security or Employer Identification Number when you sign your
application, or if you underreport your income to the Internal Revenue Service.
o 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 charge when redeeming certain Class A, Class B and
Class C shares.
o 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:
o 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.
o 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.
o 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.
o Reinvest Your Distributions in Another Oppenheimer Fund Account. You can
reinvest all distributions in the same class of shares of 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 have 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. So that the Fund will
not have to pay taxes on the amounts it distributes to shareholders as dividends
and capital gains, the Fund intends to manage its investments so that it will
qualify as a "regulated investment company" under the Internal Revenue Code,
although it reserves the right not to qualify in a particular year.
o "Buying a Dividend". 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.
o 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.
o 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.
-9-
<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
o Reduced Class A Initial Sales Charge Rates for Certain Former Quest
Shareholders
o 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 __ and 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.
o 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:
o 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.
o 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.
o Shareholders of the Fund that have continually owned shares of the Fund
prior to November 1, 1988.
o 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:
o 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.
o 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
o 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 Class 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.
o 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 Class 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, Class B
or Class 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.
A-1
<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 10/31/97, in the case of the Fund's Class B and Class
C shares will cover the period from the inception of those classes on 9/1/93
through 10/31/97 and in the case of the Fund's Class Y shares will cover the
period from the inception of the class on 12/16/96 through 10/31/97. The graph
will compare such values with hypothetical $10,000 investments over the time
periods indicated below 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(1)
10/31/87 $ 9,425 $10,000
10/31/88 $11,267 $11,476
10/31/89 $13,033 $14,501
10/31/90 $11,284 $13,416
10/31/91 $15,564 $17,899
10/31/92 $18,436 $19,680
10/31/93 $20,697 $22,680
10/31/94 $21,736 $23,486
10/31/95 $27,113 $29,689
10/31/96 $34,813 $36,838
10/31/97 $43,659 $48,663
Fiscal Year Oppenheimer S&P
(Period) Ended Quest Value Fund, Inc. B 500 Index(2)
09/01/93 $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 $16,359 $16,499
10/31/97 $20,203 $21,796
A-2
<PAGE>
Fiscal Year Oppenheimer S & P
(Period) Ended Quest Value Fund, Inc. C 500 Index(2)
09/01/93 $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
10/31/97 $20,400 $21,796
Fiscal Year Oppenheimer S&P
(Period) Ended Quest Value Fund, Inc. Y 500 Index(3)
12/16/96 $10,000 $10,000
10/31/97 $12,455 $12,531
(1) Performance information for the S & P 500 Index begins on 11/1/87 for Class
A shares.
(2) Performance information for the S & P 500 Index begins on 8/31/93 for Class
B and Class C
shares.
(3) Performance information for the S & P 500 Index begins on 1/1/97 for Class Y
shares.
A-3
<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
OppenheimerFunds Internet WebSite:
http://www.oppenheimerfunds.com
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. PRO225.001.0298 Printed on recycled paper prosp\225PSP.#6
Oppenheimer Quest Officers Value Fund
Proxy For Special Shareholders Meeting
To Be Held May 26, 1998
The undersigned shareholder of Oppenheimer Quest Officers Value Fund, a series
of Oppenheimer Quest For Value Funds ("Officers Fund"), does hereby appoint
George C. Bowen, Andrew J. Donohue, Robert Bishop and Scott Farrar, and each of
them, as attorneys-in-fact and proxies of the undersigned, with full power of
substitution, to attend the Special Meeting of Shareholders of Officers Fund to
be held on May 26, 1998 at 3410 South Galena Street, Denver, Colorado at 10:00
A.M., Denver time, and at all adjournments thereof, and to vote the shares held
in the name of the undersigned on the record date for said meeting on the
Proposal specified on the reverse side. Said attorneys-in-fact shall vote in
accordance with their best judgment as to any other matter.
PROXY SOLICITED ON BEHALF OF THE BOARD OF TRUSTEES, WHO RECOMMENDS A VOTE FOR
THE PROPOSAL ON THE REVERSE SIDE. THE SHARES REPRESENTED HEREBY WILL BE VOTED AS
INDICATED ON THE REVERSE SIDE OR FOR NO CHOICE IS INDICATED.
Please mark your proxy, date and sign it on the reverse side and return it
promptly in the accompanying envelope, which requires no postage if mailed in
the United States.
The Proposal:
To approve an Agreement and Plan of Reorganization between Officers Fund and
Oppenheimer Quest Capital Value Fund, Inc., ("Capital Fund") and the
transactions contemplated thereby, including the transfer of substantially all
the assets of Officers Fund in exchange for Class A shares of Capital Fund, the
distribution of such Class A shares of Capital Fund to the shareholders of
Officers Fund in complete liquidation of Officers Fund and the cancellation of
the outstanding shares of Officers Fund.
FOR______ AGAINST______ ABSTAIN_______
Dated: _________________________________, 1998
(Month) (Day)
---------------------------------
Signature(s)
---------------------------------
Signature(s)
Please read both sides of this ballot.
NOTE: PLEASE SIGN EXACTLY AS YOUR NAME(S) APPEAR HEREON. When signing as
custodian, attorney, executor, administrator, trustee, etc., please give your
full title as such. All joint owners should sign this proxy. If the account is
registered in the name of a corporation, partnership or other entity, a duly
authorized individual must sign on its behalf and give his or her title.
229
merge\229.bal
OPPENHEIMER QUEST VALUE FUND, INC.
Two World Trade Center, New York, New York 10048
1-800-525-7048
PART B
STATEMENT OF ADDITIONAL INFORMATION
_________, 1998
-----------------------------------
This Statement of Additional Information of Oppenheimer Quest Value
Fund, Inc. consists
of this cover page and the following documents:
1. Statement of Additional Information of Oppenheimer Quest Value Fund,
Inc. dated
February 27, 1998.
2. Prospectus of Oppenheimer Quest Officers Value Fund dated January 26,
1998.
3. Statement of Additional Information of Oppenheimer Quest Officers Value
Fund dated January 26, 1998.
4. Annual Report of Oppenheimer Quest Value Fund, Inc. as of October 31,
1997.
5. Annual Report of Oppenheimer Quest Officers Value Fund as of October 31,
1997.
This Statement of Additional Information is not a Prospectus. This
Statement of Additional Information should be read in conjunction with the Proxy
Statement and Prospectus, which may be obtained by written request to
OppenheimerFunds Services ("OFS"), P.O. Box 5270, Denver, Colorado 80217, or by
calling OFS at the toll-free number shown above.
MERGE\225.ptb
OPPENHEIMER QUEST VALUE FUND, INC.
Two World Trade Center, New York, New York 10048
1-800-525-7048
Statement of Additional Information dated February 27, 1998
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 February 27, 1998. 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......................................
Investment Policies and Strategies.................................
Other Investment Techniques and Strategies.........................
Other Investment Restrictions......................................
How the Fund is Managed ...............................................
Organization and History...........................................
Directors and Officers of the Fund.................................
The Manager and Its Affiliates.....................................
Brokerage Policies of the Fund.........................................
Performance of the Fund................................................
Distribution and Service Plans.........................................
About Your Account
How To Buy Shares......................................................
How To Sell Shares.....................................................
How To Exchange Shares.................................................
Dividends, Capital Gains and Taxes.....................................
Additional Information About the Fund..................................
Financial Information About the Fund
Report of Independent Accountants......................................
Financial Statements...................................................
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.
o 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 Fund'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.
o 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.
o Emerging Market Countries. Certain developing countries may have
relatively unstable governments, economies based on only a few industries that
are dependent upon international trade and reduced secondary market liquidity.
Foreign investment in certain emerging market countries is restricted or
controlled in varying degrees. In the past, securities in these countries have
experienced greater price movement, both positive and negative, than securities
of companies located in developed countries. Lower-rated high-yielding emerging
market securities may be considered to have speculative elements.
o U.S. Government Obligations. 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.
o 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:
o 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 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.
o 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.
o 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.
o 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.
o 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.
o Rights and Warrants. 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 short duration 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.
o 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 sell them and can reduce the price the Fund might
be able to obtain for them. If other investors holding the same securities as
the Fund sell them 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.
o 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.
o 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 takes 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.
o 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 having total domestic assets of at least $1
billion 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.
o 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. Illiquid
securities include repurchase agreements maturing in more than seven days, or
certain participation interests other than those with puts exercisable within
seven days.
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.
o 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.
o 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 exchange-traded puts on stock indices, or (iii) write exchange-traded
covered calls on stock indices (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 exchange-traded calls on stock indices or (iii) write
exchange-traded puts on stock indices. Normally, the Fund would then purchase
the equity securities and terminate the hedging portion.
The Fund's strategy of hedging with Futures and options 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.
o Writing Call Options. As described in the Prospectus, the Fund may write
covered calls on stock indices. The call is covered by segregating liquid assets
equal to the obligation under the call. When the Fund writes a call on a stock
index, it receives a premium. If the buyer of the call exercises the call, the
Fund will pay an amount of cash 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. 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 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 call until the call lapsed or was exercised.
o Writing Put Options. Written puts on stock indices are settled in cash and
gain or loss depends on changes in the index. 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 index remains above the exercise price. However, the Fund has also assumed
the obligation during the option period to settle in cash with 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 settle
in cash at the exercise price, which will usually exceed the market value of the
investment at that time.
The Fund may effect a closing purchase transaction to realize a profit on an
outstanding put option it has written. 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 covered by segregated 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.
o Purchasing Puts and Calls. Settlement for puts and calls on broadly-based
stock indices 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). When the
Fund buys a call on a stock index, 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 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, 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 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, 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 resell the put. 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.
o 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.
o 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, under the Rule the Fund must limit its aggregate
initial futures margins and related options premiums to 5% or less of the Fund's
total assets for hedging strategies that are considered bona fide hedging
strategies under the Rule. Under the Rule, the Fund also must use short futures
and options on futures positions solely for bona fide hedging purposes within
the meaning and intent of applicable provisions of the Commodity Exchange Act.
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.
o 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 unless the option is
subject to a buy back agreement by the executing broker. The 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 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.
o 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).
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 and
timing of gains (or losses) recognized 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.
o Additional Risk Factors in Hedging. 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:
o 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;
o 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);
o Mortgage, hypothecate or pledge any of its assets;
o Invest or hold securities of any issuer if the officers and Directors of
the Fund or its Manager or Subadvisor owning individually more then 1/2 of 1% of
the securities of such issuer together own more than 5% of the securities of
such issuer; or
o 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);
o Invest in physical commodities or physical commodity contracts; however,
the Fund may: (i) buy and sell hedging instruments to the extent specified in
its Prospectus from time to time, and (ii) buy and sell options (subject to the
fundamental policy set forth below), futures, securities or other instruments
backed by, or the investment return from which is linked to changes in the price
of, physical commodities;
o 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.
Non-Fundamental Investment Restrictions. The following operating policies of the
Fund are not fundamental policies and, as such, may be changed by vote of a
majority of the Fund's Board of Directors without shareholder approval. These
additional restrictions provide that the Fund cannot:
o purchase securities on margin or make short sales;
o make loans to any person or individual (except that portfolio securities
may be loaned within the limitations set forth in the Prospectus); and
o 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. The percentage
restrictions described above and in the Prospectus apply only at the time of
investment and require no action by the Fund as a result of subsequent changes
in relative values.
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 directors or trustees of Oppenheimer Quest
For Value Funds (Oppenheimer Quest Opportunity Value Fund, Oppenheimer Quest
Growth & Income Value Fund, Oppenheimer Quest Small Cap Value Fund and
Oppenheimer Quest Officers Value Fund), Oppenheimer Quest Value Fund, Inc.,
Oppenheimer Quest Global Value Fund, Inc. and Oppenheimer Quest Capital Value
Fund, Inc. (collectively, the "Oppenheimer Quest Funds"), Rochester Portfolio
Series - Limited-Term New York Municipal Fund, Bond Fund Series -Oppenheimer
Bond Fund For Growth and Rochester Fund Municipals (collectively, the
"Oppenheimer Rochester Funds") and Oppenheimer MidCap Fund. As of February 2,
1998, the Directors and officers of the Fund as a group owned less than 1% of
the outstanding shares of each class of the Fund. The foregoing does not include
shares held of record by an employee benefit plan for employees of the Manager
for which 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: 49
President (since June 1991), Chief Executive Officer (since September 1995) and
a Director (since December 1994) of the Manager; President and director (since
June 1991) of HarbourView Asset Management Corporation ("HarbourView"), a
subsidiary of the Manager; Chairman and a director of Shareholder Services, Inc.
("SSI") (since August 1994) and Shareholder Financial Services, Inc. ("SFSI")
(September 1995), transfer agent subsidiaries of the Manager; President (since
September 1995) and a director (since October 1990) of Oppenheimer Acquisition
Corp. ("OAC"), the Manager's parent holding company; President (since September
1995) and a director (since November 1989) of Oppenheimer Partnership Holdings,
Inc., a holding company subsidiary of the Manager; a director of Oppenheimer
Real Asset Management, Inc. (since July 1996); President and a director (since
October 1997) of OppenheimerFunds International Ltd. ("OFIL"), an offshore fund
manager subsidiary of the Manager and Oppenheimer Millennium Funds plc (since
October 1997); President and a director of other Oppenheimer funds; a director
of the NASDAQ Stock Market, Inc. and of Hillsdown Holdings plc (a U.K. food
company); formerly an Executive Vice President of the Manager.
Paul Y. Clinton, Director; Age: 67
39 Blossom Avenue, Osterville, Massachusetts 02655
Principal of Clinton Management Associates (financial and venture capital
consulting firm); Trustee of Capital Cash Management Trust (money-market fund)
and Narragansett Tax-Free Fund (tax-exempt bond fund); Director of OCC Cash
Reserves, Inc. and Trustee of OCC Accumulation Trust, (both open-end investment
companies). Formerly: Director, External Affairs, Kravco Corporation, ( national
real estate owner and property management corporation); President of Essex
Management Corporation (management consulting company); a general partner of
Capital Growth Fund (venture capital partnership); a general partner of Essex
Limited Partnership ( investment partnership); President of Geneve Corp.
(venture capital fund); Chairman of Woodland Capital Corp. (small business
investment company); and Vice President of W.R. Grace & Co.
- -----------------
* A director who is an "interested person" of the FUnd as defined in the
Investment Company Act.
Thomas W. Courtney, Director; Age: 64
833 Wyndemere Way, Naples, Florida 34105
Principal of Courtney Associates, Inc. (venture capital firm); former General
Partner of Trivest Venture Fund (private venture capital fund); Trustee of Cash
Assets Trust, (money market fund); Director of OCC Cash Reserves, Inc., and
Trustee of OCC Accumulation Trust, both open-end investment companies); Trustee
of Hawaiian Tax-Free Trust and Tax Free Trust of Arizona, (both tax-exempt bond
funds); Director of several privately owned corporations. Formerly President of
Investment Counseling Federated Investors, Inc.; former President of Boston
Company Institutional Investors; Director of Financial Analysts Federation.
Lacy B. Herrmann, Director; Age: 68
380 Madison Avenue, Suite 2300, New York, New York 10017
Chairman and Chief Executive Officer of Aquila Management Corporation
(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, Aquila Cascadia Equity Fund,
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 OCC Cash Reserves, Inc.,
and Trustee of OCC Accumulation Trust (both open-end investment companies);
Trustee Emeritus of Brown University.
George Loft, Director; Age: 83
51 Herrick Road, Sharon, Connecticut 06069
Private Investor; Director of OCC Cash Reserves, Inc. and Trustee of OCC
Accumulation Trust (both open-end investment companies).
Robert C. Doll, Jr., Vice President; Age: 43
Executive Vice President and Director of the Manager (since January 1993) ;
Executive Vice President of HarbourView (since January 1993); Vice President and
a director of OAC (since September 1995); an officer of other Oppenheimer funds.
Eileen Rominger, Portfolio Manager; Age: 43
One World Financial Center, 200 Liberty Street, New York, New York 10281
Managing Director of Oppenheimer Capital.
Andrew J. Donohue, Secretary; Age: 47
Executive Vice President (since January 1993), General Counsel (since October
1991) and a Director (since September 1995) of the Manager; Executive Vice
President (since September 1993), and a director (since January 1992) of
OppenheimerFunds Distributor, Inc. (the "Distributor"); Executive Vice
President, General Counsel and a director of HarbourView, SSI, SFSI and
Oppenheimer Partnership Holdings, Inc. since (September 1995) and MultiSource
Services, Inc. (a broker-dealer) (since December 1995); President and a director
of Centennial Asset Management Corporation ("Centennial") (since September
1995); President and a director of Oppenheimer Real Asset Management, Inc.
(since July 1996); General Counsel (since May 1996) and Secretary (since April
1997) of OAC; Vice President of OFIL and Oppenheimer Millennium Funds plc (since
October 1997); an officer of other Oppenheimer funds. George C. Bowen,
Treasurer; Age: 61 6803 South Tucson Way, Englewood, Colorado 80112 Senior Vice
President (since September 1987) and Treasurer (since March 1985) of the
Manager; Vice President (since June 1983) and Treasurer (since March 1985) of
the Distributor; Vice President (since October 1989) and Treasurer (since April
1986) of HarbourView; Senior Vice President (since February 1992), Treasurer
(since July 1991) and a director (since December 1991) of Centennial; President,
Treasurer and a director of Centennial Capital Corporation (since June 1989);
Vice President and Treasurer (since August 1978) and Secretary (since April
1981) of SSI; Vice President, Treasurer and Secretary of SFSI (since November
1989); Treasurer of OAC (since June 1990); Treasurer of Oppenheimer Partnership
Holdings, Inc. (since November 1989); Vice President and Treasurer of
Oppenheimer Real Asset Management, Inc. (since July 1996); Chief Executive
Officer, Treasurer and a director of MultiSource Services, Inc., a broker-dealer
(since December 1995); a director and officer of other Oppenheimer funds.
Robert Bishop, Assistant Treasurer; Age: 39
6803 South Tucson Way, Englewood, Colorado 80112
Vice President of the Manager/Mutual Fund Accounting (since May 1996); an
officer of other Oppenheimer funds; formerly an Assistant Vice President of the
Manager/Mutual Fund Accounting (April 1994-May 1996), and a Fund Controller for
the Manager.
Scott T. Farrar, Assistant Treasurer; Age: 32
6803 South Tucson Way, Englewood, Colorado 80112
Vice President of the Manager/Mutual Fund Accounting (since May 1996); Assistant
Treasurer of Oppenheimer Millennium Funds plc (since October 1997); an officer
of other Oppenheimer funds; formerly an Assistant Vice President of the
Manager/Mutual Fund Accounting (April 1994-May 1996), and a Fund Controller for
the Manager.
Robert G. Zack, Assistant Secretary; Age: 49 Senior Vice President (since May
1985) and Associate General Counsel (since May 1981) of the Manager, Assistant
Secretary of SSI (since May 1985), and SFSI (since November 1989); Assistant
Secretary of Oppenheimer Millennium Funds plc (since October 1997); an officer
of other Oppenheimer funds.
o 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, 1997, and
(ii) other investment companies (or series thereof) managed by the Manager and
the Sub-Adviser, paid during the calendar year ended December 31, 1997.
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 $7,965 None None $68,379
Thomas W. Courtney $7,965 None None $68,379
Lacy B. Herrmann $7,415 None None $63,154
George Loft $7,965 None None $68,379
(1) For the purpose of the chart above, "Fund Complex" includes the Oppenheimer
Quest Funds (including the Fund), the Oppenheimer Rochester Funds, Oppenheimer
MidCap Fund and three other funds advised by the Sub-Adviser (the "Sub-Adviser
Funds"). For these purposes, each series constitutes a separate fund. Messrs.
Clinton and Courtney served as directors or trustees of two Sub- Adviser Funds,
for which they are to receive $49,250 and $49,250, respectively, and Messrs.
Herrmann and Loft served as a directors or trustees of three Sub-Adviser Funds,
for which they are to receive $45,388 and $50,688, respectively. Effective April
1997, Messrs. Herrmann and Loft resigned as trustees from the third Sub-Adviser
Fund.
Deferred Compensation Plan. The Board of Directors has adopted a Deferred
Compensation plan for disinterested Directors that enables a Director to elect
to defer receipt of all or a portion of the annual fees they are entitled to
receive from the Fund. Under the plan, the compensation deferred by a Director
is periodically adjusted as though an equivalent amount had been invested in
shares of one or more Oppenheimer funds selected by the Director. The amount
paid to the Director under the plan will be determined based upon the
performance of the selected funds.
Deferral of Directors' fees under the plan will not materially affect the Fund's
assets, liabilities or net income per share. The plan will not obligate the Fund
to retain the services of any Director or to pay any particular level of
compensation to any Director. Pursuant to an Order issued by the SEC, the Fund
may, without shareholder approval, invest in the funds selected by the Director
under the plan for the limited purpose of determining the value of the
Director's deferred fee account.
o Major Shareholders. As of February 2, 1998, 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, Class C or Class Y shares except as follows: Merrill Lynch
Pierce Fenner & Smith, Inc., 4800 Deer Lake Drive, Jacksonville, Florida
32246-6484, which owned of record 539,201.679 Class C shares (approximately
11.18% of the Class C shares then outstanding) (the Manager has been advised
that such shares were held by Merrill Lynch for the benefit of its customers);
and Massachusetts Mutual Life Insurance Company, 1295 State Street, Springfield,
Massachusetts 01111, which owned of record 190,180.056 Class Y shares
(representing 99.94% of the Class Y shares then outstanding). Massachusetts
Mutual Life Insurance Company's affiliation with the Manager is described below.
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.
o Portfolio Management. The Portfolio Manager of the Fund is Eileen
Rominger, who is principally responsible for the day-to-day management of the
Fund's portfolio. Ms. Rominger's background is described in the Prospectus under
"Portfolio Manager."
o The Investment Advisory Agreement. The Manager acts as investment
adviser to the Fund pursuant to the terms of an Investment Advisory Agreement
dated June 2, 1997, as amended on October 22, 1997, which replaced the
investment advisory agreement dated as of November 22, 1995. The Investment
Advisory Agreement was approved by the Board of Directors , including a majority
of the Directors who are not "interested persons" of the Fund (as defined in the
Investment Company Act) and who have no direct or indirect financial interest in
such agreement on February 4, 1997 and the shareholders of the Fund at a meeting
held for that purpose on June 2, 1997. 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 SEC, 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 an 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 22, 1995 (when the Manager became the investment adviser
to the Fund) to October 31, 1996 (the "Fiscal Period") and the fiscal year ended
October 31, 1997, the Fund paid to the Manager $3,995,867 and $7,708,982,
respectively, in management fees. During the Fiscal Period and the fiscal year
ended October 31, 1997, the Fund also paid or accrued accounting service fees to
the Manager in the amounts of $54,047 and $54,325, respectively.
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" or
"Quest for Value" 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" or "Quest for Value" 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 5, 1997 with respect to the Fund,
described below, which replaced the Subadvisory Agreement dated as of November
22, 1995.
o 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 $2,893,435
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").
o 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 agreement, on February 28, 1997 and by the
shareholders of the Fund at a meeting held for that purpose on June 2, 1997.
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 November 22, 1995 (the
"Base Amount") plus 30% of the investment advisory fee collected by the Manager
based on the total net assets of the Fund that exceed the Base Amount.
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 Sub-Adviser is a majority owned subsidiary of Oppenheimer Capital, a
registered investment advisor, whose employees perform all investment advisory
services provided to the Fund by the Sub-Adviser. On November 4, 1997, PIMCO
Advisors L.P. ("PIMCO Advisors"), a registered investment adviser with $125
billion in assets under management through various subsidiaries and affiliates,
acquired control of Oppenheimer Capital and the Sub-Adviser. On November 5,
1997, the new Sub-advisory Agreement between the Sub-Adviser and the Manager
became effective. On November 30, 1997, Oppenheimer Capital merged with a
subsidiary of PIMCO Advisors and, as a result, Oppenheimer Capital and the
Sub-Adviser became indirect wholly-owned subsidiaries of PIMCO Advisors. PIMCO
Advisors has two general partners: PIMCO Partners, G.P., a California general
partnership ("PIMCO GP"), and PIMCO Advisors Holdings L.P. (formerly Oppenheimer
Capital, L.P.), an NYSE-listed Delaware limited partnership of which PIMCO GP is
the sole general partner.
PIMCO GP beneficially owns or controls (through its general partner
interest in Oppenheimer Capital, L.P.) greater than 80% of the units of limited
partnership ("Units") of PIMCO Advisors. PIMCO GP has two general partners. The
first of these is Pacific Investment Management Company, a wholly-owned
subsidiary of Pacific Financial Asset Management Company, which is a direct
subsidiary of Pacific Life Insurance Company ("Pacific Life").
The managing general partner of PIMCO GP is PIMCO Partners L.L.C.
("PPLLC"), a California limited liability company. PPLLC's members are the
Managing Directors (the "PIMCO Managers") of Pacific Investment Management
Company, a subsidiary of PIMCO Advisors (the "PIMCO Subpartnership"). The PIMCO
Managers are: William H. Gross, Dean S. Meiling, James F. Muzzy, William F.
Podlich, III, Brent R. Harris, John L. Hague, William S. Thompson Jr., William
C. Powers, David H. Edington, Benjamin Trosky, William R. Benz, II and Lee R.
Thomas, III.
PIMCO Advisors is governed by a Management Board, which consists of
sixteen members, pursuant to a delegation by its general partners. PIMCO GP has
the power to designate up to nine members of the Management Board and the PIMCO
Subpartnership, of which the PIMCO Managers are the Managing Directors, has the
power to designate up to two members. In addition, PIMCO GP, as the controlling
general partner of PIMCO Advisors, has the power to revoke the delegation to the
Management Board and exercise control of PIMCO Advisors. As a result, Pacific
Life and/or the PIMCO Managers may be deemed to control PIMCO Advisors. Pacific
Life and the PIMCO Managers disclaim such control.
o 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, 1997, the aggregate amount of sales charges on sales of
the Fund's Class A shares was $3,638,204, of which the Distributor and
affiliated brokers retained $910,431. During the fiscal year ended October 31,
1997, the Distributor received contingent deferred sales charges of $348,684,
upon redemption of Class B shares, and received contingent deferred sales charge
of $23,932, 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.
o 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.
o 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 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 consid eration 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 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, 1995, 1996
and 1997. Prior to November 3, 1997, Oppenheimer & Co., Inc. ("OpCo"), a broker
dealer, was an affiliate of the Sub-Adviser.
<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> <C>
1995 $309,310 $156,970 50.7% $ 99,572,945 52.1%
1996 $387,892 $159,127 41% $135,054,378 39.4%
1997 $484,014 $198,916 41.1% $198,471,852 38.4%
</TABLE>
During the Fund's fiscal year ended October 31, 1997, $50,922 was paid by
the Fund to brokers as commissions in return for research services; the
aggregate dollar amount of those transactions was $47,589,083.
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.
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, Class C and Class Y 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.
o 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:
(ERV )1/n
(_____ - 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, 1997 and for the period from April 30, 1980 (commencement of
operations) to October 31, 1997 were 18.20%, 17.42%,15.88% and 19.02%
respectively.
The average annual total return on Class B shares for the one-year period
ended October 31, 1997 and for the period September 1, 1993 (commencement of the
public offering of the class) through October 31, 1997 were 19.71% and 18.38%,
respectively.
The average annual total return on Class C shares for the one-year period
ended October 31, 1997 and for the period September 1, 1993 (commencement of the
public offering of the class) through October 31, 1997 were 23.79% and 18.66%,
respectively.
o 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 (5.0% for the first year, 4.0% for the second
year, 3.0% for the third and fourth years, 2.0% for the fifth year, 1.0% 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, 1997 was 2,007.38%. 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, 1997 was
102.02%. 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, 1997 was 103.99%. The cumulative total return on Class Y shares for
the period from December 16, 1996 (commencement of the offering of the class)
through October 31, 1997 was 24.55%.
o 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, 1997 and for the
period from April 30, 1980 (commencement of operations) to October 31, 1997 were
25.41%, 18.82%, 16.57%, and 19.43%, 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, 1997 was 2,135.95%.
The average annual total returns at net asset value on the Fund's Class B
shares for the one year period ended October 31, 1997 and for the period from
September 1, 1993 (commencement of the public offering of the class) through
October 31, 1997 were 24.71% and 18.66%, 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,
1997 was 164.02%.
The average annual total returns at net asset value on the Fund's Class C
shares for the one-year period ended October 31, 1997 and for the period
September 1, 1993 (commencement of the public offering of the class) through
October 31, 1997 were 24.79% and 18.66%, 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,
1997 was 103.99%.
The cumulative total return at net asset value on the Fund's Class Y shares for
the period December 16, 1996 (commencement of the offering of the class) through
October 31, 1997 was 24.55%.
Other Performance Comparisons. From time to time the Fund may publish the
ranking of its Class A, Class B, Class C and/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 star ranking of the performance
of its Class A, Class B, Class C or Class Y shares by Morningstar, Inc.,
("Morningstar") an independent mutual fund monitoring service. Morningstar ranks
mutual funds monthly in broad investment categories (domestic stock funds,
international stock funds, taxable bond funds, municipal bond funds) based on
risk-adjusted investment return. The Fund is ranked among domestic stock funds.
Investment return measures a fund's or class's one, three, five and ten-year
average annual total returns (depending on the inception of the fund or class)
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 the 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%). The current star
rankings is the fund's or class's 3-year ranking or its combined 3 and 5-year
ranking (weighted 60%/40% respectively) or its combined 3-,5-and 10-year ranking
(weighted 40%, 30% and 30%, respectively) depending on the inception of the fund
or class. 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 Fund may also compare its performance to that of other funds in its
Morningstar category. In addition to its star ranking, Morningstar also
categorizes and compares a fund's 3-year performance based on Morningstar's
classification of the fund's investment objective. Morningstar's four broad
categories are each further subdivided into categories based on types of
investments and investment styles. Those comparisons by Morningstar are based on
the same risk and return measurements as its star rankings but do not consider
the effect of sales charges.
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 each dated February 3, 1998 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 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 February 3, 1998 called for the purpose, among others, of voting on
that Plan. The Plans replace the amended and restated distribution and service
plans and agreements dated November 22, 1996.
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 an SEC 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
detailing services rendered in connection with the distribution of shares, the
amount of all payments made pursuant to each Plan and the purpose for which the
payments were made. 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 shares sold of that class. An exchange of shares
does not entitle the Recipient to an advance service fee payment. In the event
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 year ended October 31, 1997, (i) payments made under the
Class A Plan totaled $2,797,969, none of which was retained by the Distributor
and $547,120 was paid to a dealer affiliated with the Distributor, (ii) payments
made under the Class B Plan totaled $2,001,839, of which $1,751,281 was retained
by the Distributor and $44,146 was paid to a dealer affiliated with the
Distributor and (iii) payments made under the Class C plan amounted to $558,092
of which $350,569 was retained by the Distributor and $35,579 was paid to a
dealer affiliated with 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).
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 the 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, Class Y shares, may be purchased only by
certain institutional investors at net asset value per share.
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 and Service 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, Martin Luther King Jr. 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 the principal exchange
for such security or NASDAQ that day (the "Valuation Date") or, in the absence
of sales that day, at the last reported sale price preceding the Valuation Date
if it is within the spread of the closing "bid" and "asked" prices on the
Valuation Date or, if not, the closing "bid" price on the Valuation Date; (ii)
equity securities traded on a foreign securities exchange are valued generally
at the last sales 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 at its last trading session on or immediately
preceding the Valuation Date, or, if unavailable, 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) a non-money market
fund will value (x) debt instruments that had a maturity of more than 397 days
when issued, (y) debt instruments that had a maturity of 397 days or less when
issued and have a remaining maturity in excess of 60 days, and (z) non-money
market type debt instruments that had a maturity of 397 days or less when issued
and have a remaining maturity of sixty days or less, at the mean between "bid"
and "asked" prices determined by a pricing service approved by the Fund's Board
of Directors or, if unavailable, obtained by the Manager from two active market
makers in the security on the basis of reasonable inquiry; (iv) money
market-type debt securities held by a non-money market fund that had a maturity
of less than 397 days when issued and have a remaining maturity of 60 days or
less, and debt instruments held by a money market fund that have a remaining
maturity of 397 days or less, shall be valued at cost, adjusted for amortization
of premiums and accretion of discount; and (v) 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) and (iii) 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 "asked" price is available) provided that the Manager is satisfied that
the firm rendering the quotes is reliable and that the quotes reflect the
current market value.
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 Directors to price
U.S. Government securities or mortgage-backed securities for which last sale
information is not generally available. The Manager will monitor the accuracy of
such pricing services, which may include comparing prices used for portfolio
evaluation to actual sales 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.
Relations by virtue of a remarriage (step-children, step-parents, etc.) are
included.
o 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 Discovery Fund
Oppenheimer Capital Appreciation Fund
Oppenheimer Growth Fund
Oppenheimer Equity Income Fund
Oppenheimer Multiple Strategies 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 Growth & Income Fund
Oppenheimer Gold & Special Minerals Fund
Oppenheimer Strategic Income Fund
Oppenheimer International Bond Fund
Oppenheimer International Growth Fund
Oppenheimer International Small Company Fund
Oppenheimer Enterprise Fund
Oppenheimer Quest Capital Value Fund, Inc.
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.
Oppenheimer MidCap Fund
Oppenheimer Bond Fund for Growth
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
Oppenheimer Real Asset 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.
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).
o Letters of Intent. A Letter of Intent ("Letter") is an investor's
statement in writing to the Distributor of the intention to purchase Class A
shares or 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.
o 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 of other Oppenheimer funds acquired subject to
a contingent deferred sales charge, and (c) Class A or Class B shares acquired
in exchange for either (i) Class A shares sold with a front-end sales charge or
Class B 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 "How to Sell Shares" 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. If you make payments from your bank account to purchase
shares of the Fund, your bank account will be automatically debited normally
four to five days business days prior to the investment dates selected in the
Account Application. Neither the Distributor, the Transfer Agent nor the Fund
shall be responsible for any delays in purchasing shares resulting from delays
in ACH transmissions.
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 other than
public school 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 or association has made special arrangements with the
Distributor and all members of the group or association participating in or who
are eligible to participate in the plan(s) purchase Class A shares of the Fund
through a single investment dealer, broker, or other financial institution
designated by the group. "Group retirement plan" also includes qualified
retirement plans and non-qualified deferred compensation plans and IRAs that
purchase Class A shares of the Fund through a single investment dealer, broker,
or other financial institution, if that broker-dealer has made special
arrangements with the Distributor enabling those plans to purchase Class A
shares of the Fund at net asset value but subject to a contingent deferred sales
charge.
In addition to the discussion in the Prospectus relating to the ability of
Retirement Plans to purchase Class A shares at net asset value in certain
circumstances, there is no initial sales charge on purchases of Class A shares
of any one or more of the Oppenheimer funds by a Retirement Plan in the
following cases: (i) the recordkeeping for the Retirement Plan is performed on a
daily valuation basis by Merrill Lynch Pierce Fenner & Smith, Inc. ("Merrill
Lynch") and, on the date the plan sponsor signs the Merrill Lynch recordkeeping
service agreement, the Retirement Plan has $3 million or more in assets invested
in mutual funds other than those advised or managed by Merrill Lynch Asset
Management, L.P. ("MLAM") that are made available pursuant to a Service
Agreement between Merrill Lynch and the mutual fund's principal underwriter or
distributor and in funds advised or managed by MLAM (collectively, the
"Applicable Investments"); or (ii) the recordkeeping for the Retirement Plan is
performed on a daily valuation basis by an independent record keeper whose
services are provided under a contract or arrangement between the Retirement
Plan and Merrill Lynch. On the date the plan sponsor signs the Merrill Lynch
record keeping service agreement, the Plan must have $3 million or more in
assets, excluding assets held in money market funds, invested in Applicable
Investments; or (iii) the Plan has 500 or more eligible employees, as determined
by the Merrill Lynch plan conversion manager on the date the plan sponsor signs
the Merrill Lynch record keeping service agreement.
If a Retirement Plan's records are maintained on a daily valuation basis
by Merrill Lynch or an independent record keeper under a contract or alliance
arrangement with Merrill Lynch, and if on the date the plan sponsor signs the
Merrill Lynch record keeping service agreement the Retirement Plan has less than
$3 million in assets, excluding money market funds, invested in Applicable
Investments, then the Retirement Plan may purchase only Class B shares of one or
more of the Oppenheimer funds. Otherwise, the Retirement Plan will be permitted
to purchase Class A shares of one or more of the Oppenheimer funds. Any of those
Retirement Plans that currently invest in Class B shares of the Fund will have
their Class B shares be converted to Class A shares of the Fund once the Plan's
Applicable Investments have reached $5 million.
Any redemptions of shares of the Fund held by Retirement Plans whose
records are maintained on a daily valuation basis by Merrill Lynch or an
independent record keeper under a contract with Merrill Lynch that are currently
invested in Class B shares of the Fund shall not be subject to the Class B CDSC.
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.
o 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 Class A contingent deferred
sales charge, or (ii) Class B shares that were subject to the Class B contingent
deferred sales charge when you redeemed them. This privilege does not apply to
Class C or Class Y 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 in "How to Exchange
Shares" 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. Shares are
normally redeemed pursuant to an Automatic Withdrawal Plan three business days
before the date you select in the Account Application. If a contingent deferred
sales charge applies to the redemption, the amount of the check or payment will
be reduced accordingly. 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 and 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 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.
o 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.
o 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 the
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, and Centennial America Fund, L.P. 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. 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 12 months of the end of the calendar
month of the initial purchase of the exchanged Class A shares (18 months if the
shares were initially purchased prior to May 1, 1997), 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.
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.
26 Oppenheimer Quest Value Fund, Inc.
<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.
(the Fund), at October 31, 1997, the results of its operations for the year then
ended, the changes in its net assets and the financial highlights for each of
the two years in the period then ended, in conformity with generally accepted
accounting principles. These financial statements and financial highlights
(hereafter referred to as financial statements) are the responsibility of the
Fund's management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
financial statements in accordance with generally accepted auditing standards
which require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits, which included
confirmation of securities at October 31, 1997 by correspondence with the
custodian and the application of alternative auditing procedures where
securities purchased had not been received, provide a reasonable basis for the
opinion expressed above. The financial statements 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, 1997
10 Oppenheimer Quest Value Fund, Inc.
<PAGE>
- -------------------------------------------------------------------------------
Statement of Investments October 31, 1997
- -------------------------------------------------------------------------------
Market Value
Shares See Note 1
=========================================================================
Common Stocks--81.9%
- -------------------------------------------------------------------------
Basic Materials--5.3%
- -------------------------------------------------------------------------
Chemicals--4.5%
Du Pont (E.I.) De Nemours & Co. 370,000 $21,043,750
- -------------------------------------------------------------------------
Hercules, Inc. 241,000 11,055,875
- -------------------------------------------------------------------------
Monsanto Co. 365,000 15,603,750
- -------------------------------------------------------------------------
Solutia, Inc. 43,000 951,375
-----------
48,654,750
- -------------------------------------------------------------------------
Metals-- 0.5%
Freeport-McMoRan Copper & Gold, Inc., Cl. B 229,290 5,474,299
- -------------------------------------------------------------------------
Paper-- 0.3%
Champion International Corp. 60,000 3,311,250
- -------------------------------------------------------------------------
Consumer Cyclicals--10.9%
- -------------------------------------------------------------------------
Autos & Housing -- 0.7%
Security Capital Group, Inc.(1) 5,258 7,887,405
- -------------------------------------------------------------------------
Leisure & Entertainment--6.5%
AMR Corp.(1) 187,000 21,773,812
- -------------------------------------------------------------------------
Carnival Corp., Cl. A 450,000 21,825,000
- -------------------------------------------------------------------------
McDonald's Corp. 600,000 26,887,500
-----------
70,486,312
- -------------------------------------------------------------------------
Media--1.5%
Omnicom Group, Inc. 225,500 15,925,937
- -------------------------------------------------------------------------
Retail: General--2.2%
May Department Stores Cos. 448,000 24,136,000
- -------------------------------------------------------------------------
Consumer Non-Cyclicals--6.2%
- -------------------------------------------------------------------------
Healthcare/Drugs-- 0.7%
Warner-Lambert Co. 55,000 7,875,312
- -------------------------------------------------------------------------
Healthcare/Supplies & Services--4.4%
Becton, Dickinson & Co. 398,000 18,332,875
- -------------------------------------------------------------------------
Tenet Healthcare Corp.(1) 955,500 29,202,469
-----------
47,535,344
- -------------------------------------------------------------------------
Household Goods--1.1%
Avon Products, Inc. 175,600 11,501,800
11 Oppenheimer Quest Value Fund, Inc.
<PAGE>
- -------------------------------------------------------------------------------
Statement of Investments (Continued)
- -------------------------------------------------------------------------------
Market Value
Shares See Note 1
- ------------------------------------------------------------------
Financial--33.8%
- ------------------------------------------------------------------
Banks-- 6.7%
BankBoston Corp. 273,000 $ 22,130,062
- ------------------------------------------------------------------
Citicorp 170,000 21,260,625
- ------------------------------------------------------------------
Wells Fargo & Co. 98,666 28,748,806
------------
72,139,493
- ------------------------------------------------------------------
Diversified Financial--4.7%
Countrywide Credit Industries, Inc. 620,000 21,273,750
- ------------------------------------------------------------------
Freddie Mac 772,000 29,239,500
------------
50,513,250
- ------------------------------------------------------------------
Insurance --22.4%(2)
ACE Ltd. 766,200 71,208,712
- ------------------------------------------------------------------
AFLAC, Inc. 329,050 16,740,419
- ------------------------------------------------------------------
American International Group, Inc. 88,500 9,032,531
- ------------------------------------------------------------------
Everest Reinsurance Holdings, Inc. 400,000 15,050,000
- ------------------------------------------------------------------
EXEL Ltd. 1,131,400 68,378,987
- ------------------------------------------------------------------
General Re Corp. 164,000 32,338,750
- ------------------------------------------------------------------
Mid Ocean Ltd. 259,900 16,861,013
- ------------------------------------------------------------------
Progressive Corp. 127,000 13,239,750
------------
242,850,162
- ------------------------------------------------------------------
Industrial--17.8%
- ------------------------------------------------------------------
Electrical Equipment-- 0.9%
General Electric Co. 150,400 9,710,200
- ------------------------------------------------------------------
Industrial Materials--1.2%
Armstrong World Industries, Inc. 190,000 12,646,875
- ------------------------------------------------------------------
Industrial Services-- 0.8%
Donnelley (R.R.) & Sons Co. 280,000 9,135,000
- ------------------------------------------------------------------
Manufacturing--13.1%
AlliedSignal, Inc. 300,000 10,800,000
- ------------------------------------------------------------------
Caterpillar, Inc. 740,000 37,925,000
- ------------------------------------------------------------------
Dover Corp. 340,000 22,950,000
- ------------------------------------------------------------------
Grand Metropolitan plc, Sponsored ADR 350,000 13,081,250
- ------------------------------------------------------------------
LucasVarity plc, ADR 720,900 24,600,713
- ------------------------------------------------------------------
Tenneco, Inc. 216,000 9,706,500
- ------------------------------------------------------------------
Textron, Inc. 400,000 23,125,000
------------
142,188,463
- ------------------------------------------------------------------
Transportation--1.8%
Canadian Pacific Ltd. (New) 650,000 19,378,125
12 Oppenheimer Quest Value Fund, Inc.
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Market Value
Shares See Note 1
- ----------------------------------------------------------------------------
Technology--7.9%
- ----------------------------------------------------------------------------
Aerospace/Defense --3.8%
Lockheed Martin Corp. 430,000 $ 40,876,875
- ----------------------------------------------------------------------------
Computer Hardware --0.7%
Adaptec, Inc.(1) 150,000 7,265,625
- ----------------------------------------------------------------------------
Electronics--1.8%
Arrow Electronics, Inc.(1) 179,000 5,079,125
- ----------------------------------------------------------------------------
Avnet, Inc. 231,000 14,538,563
--------------
19,617,688
- ----------------------------------------------------------------------------
Telecommunications-Technology--1.6%
Sprint Corp. 285,200 14,830,400
- ----------------------------------------------------------------------------
Tele-Communications TCI Ventures Group, Cl. A(1) 111,177 2,564,020
--------------
17,394,420
--------------
Total Common Stocks (Cost $617,464,138) 886,504,585
<TABLE>
<CAPTION>
Face
Amount
=========================================================================================
Short-Term Notes--19.2%(3)
- -----------------------------------------------------------------------------------------
Beneficial Corp.:
<S> <C> <C>
5.50%, 12/4/97 $ 3,377,000 3,359,974
5.51%, 12/10/97 25,000,000 24,850,771
- -----------------------------------------------------------------------------------------
Deere (John) Capital Corp.:
5.47%, 11/6/97 1,904,000 1,902,554
5.49%, 11/19/97 50,000,000 49,862,750
- -----------------------------------------------------------------------------------------
Ford Motor Credit Corp.:
5.48%, 12/8/97 39,530,000 39,307,358
5.50%, 11/5/97 13,183,000 13,174,947
- -----------------------------------------------------------------------------------------
General Motors Acceptance Corp., 5.51%, 12/1/97 38,590,000 38,412,703
- -----------------------------------------------------------------------------------------
Household Finance Corp., 5.49%, 11/13/97 3,264,000 3,258,027
- -----------------------------------------------------------------------------------------
International Business Machines Corp., 5.48%, 11/10/97 4,112,000 4,106,367
- -----------------------------------------------------------------------------------------
Merrill Lynch & Co., 5.53%, 11/3/97 30,327,000 30,317,688
----------
Total Short-Term Notes (Cost $208,553,139) 208,553,139
- -----------------------------------------------------------------------------------------
Total Investments, at Value (Cost $826,017,277) 101.1% 1,095,057,724
- -----------------------------------------------------------------------------------------
Liabilities in Excess of Other Assets (1.1) (12,294,386)
------------ -------------
Net Assets 100.0% $1,082,763,338
============ ==============
</TABLE>
1. Non-income producing security.
2. The Fund may have elements of risk due to concentrated investments in
specific industries. Such concentrations may subject the Fund to additional
risks resulting from future political or economic conditions. 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.
13 Oppenheimer Quest Value Fund, Inc.
<PAGE>
- -------------------------------------------------------------------------------
Statement of Assets and Liabilities October 31, 1997
- -------------------------------------------------------------------------------
<TABLE>
=========================================================================================
<S> <C>
Assets
Investments, at value (cost $826,017,277)--see accompanying statement $1,095,057,724
- -----------------------------------------------------------------------------------------
Cash 295,542
- -----------------------------------------------------------------------------------------
Receivables:
Shares of capital stock sold 7,810,765
Interest and dividends 519,477
- -----------------------------------------------------------------------------------------
Other 18,189
--------------
Total assets 1,103,701,697
=========================================================================================
Liabilities Payables and other liabilities:
Investments purchased 16,826,880
Shares of capital stock redeemed 3,644,431
Distribution and service plan fees 231,537
Transfer and shareholder servicing agent fees 74,868
Other 160,643
--------------
Total liabilities 20,938,359
=========================================================================================
Net Assets $1,082,763,338
==============
=========================================================================================
Composition of Net Assets
Par value of shares of capital stock $ 53,140,214
- -----------------------------------------------------------------------------------------
Additional paid-in capital 707,981,325
- -----------------------------------------------------------------------------------------
Undistributed net investment income 4,754,927
- -----------------------------------------------------------------------------------------
Accumulated net realized gain on investment transactions 47,846,425
- -----------------------------------------------------------------------------------------
Net unrealized appreciation on investments--Note 3 269,040,447
--------------
Net assets $1,082,763,338
==============
</TABLE>
14 Oppenheimer Quest Value Fund, Inc.
<PAGE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<TABLE>
<S> <C>
Net Asset Value Per Share
Class A Shares:
Net asset value and redemption price per share (based on net assets
of $699,230,322 and 34,130,613 shares of capital stock outstanding) $20.49
Maximum offering price per share (net asset value plus sales charge
of 5.75% of offering price) $21.74
- -------------------------------------------------------------------------------------
Class B Shares:
Net asset value, redemption price (excludes applicable contingent deferred sales
charge) and offering price per share (based on net assets of $298,348,393 and
14,788,764 shares of capital stock outstanding) $20.17
- -------------------------------------------------------------------------------------
Class C Shares:
Net asset value, redemption price (excludes applicable contingent deferred sales
charge) and offering price per share (based on net assets of $82,098,206 and
4,070,613 shares of capital stock outstanding) $20.17
- -------------------------------------------------------------------------------------
Class Y Shares:
Net asset value, redemption price and offering price per share (based on net
assets of $3,086,417 and 150,224 shares of capital stock outstanding) $20.55
</TABLE>
See accompanying Notes to Financial Statements.
15 Oppenheimer Quest Value Fund, Inc.
<PAGE>
- -------------------------------------------------------------------------------
Statement of Operations For the Year Ended October 31, 1997
- -------------------------------------------------------------------------------
<TABLE>
====================================================================================
<S> <C>
Investment Income
Dividends (net of foreign withholding taxes of $69,652) $ 10,022,532
- ------------------------------------------------------------------------------------
Interest 9,123,410
------------
Total income 19,145,942
====================================================================================
Expenses
Management fees--Note 4 7,708,982
- ------------------------------------------------------------------------------------
Distribution and service plan fees--Note 4:
Class A 2,797,969
Class B 2,001,839
Class C 558,092
- ------------------------------------------------------------------------------------
Transfer and shareholder servicing agent fees--Note 4 742,902
- ------------------------------------------------------------------------------------
Shareholder reports 222,784
- ------------------------------------------------------------------------------------
Registration and filing fees:
Class A 115,978
Class B 56,901
Class C 15,512
Class Y 600
- ------------------------------------------------------------------------------------
Custodian fees and expenses 34,544
- ------------------------------------------------------------------------------------
Legal and auditing fees 34,224
- ------------------------------------------------------------------------------------
Directors' fees and expenses 13,184
- ------------------------------------------------------------------------------------
Other 71,008
------------
Total expenses 14,374,519
====================================================================================
Net Investment Income 4,771,423
====================================================================================
Realized and Unrealized Gain
Net realized gain on investments 47,887,290
- ------------------------------------------------------------------------------------
Net change in unrealized appreciation or depreciation on investments 127,277,273
------------
Net realized and unrealized gain 175,164,563
====================================================================================
Net Increase in Net Assets Resulting from Operations $179,935,986
============
</TABLE>
See accompanying Notes to Financial Statements.
16 Oppenheimer Quest Value Fund, Inc.
<PAGE>
- -------------------------------------------------------------------------------
Statements of Changes in Net Assets
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended October 31,
1997 1996
<S> <C> <C>
==========================================================================================
Operations
Net investment income $ 4,771,423 $ 2,018,194
- ------------------------------------------------------------------------------------------
Net realized gain 47,887,290 31,502,109
- ------------------------------------------------------------------------------------------
Net change in unrealized appreciation or depreciation 127,277,273 69,588,617
-------------- ------------
Net increase in net assets resulting from operations 179,935,986 103,108,920
==========================================================================================
Dividends and Distributions to Shareholders Dividends from net investment
income:
Class A (1,801,385) (1,990,608)
Class B (107,344) (187,734)
Class C (27,574) (36,026)
- ------------------------------------------------------------------------------------------
Distributions from net realized gain:
Class A (22,962,861) (18,878,099)
Class B (6,696,217) (2,778,986)
Class C (1,768,806) (689,670)
==========================================================================================
Capital Stock Transactions
Net increase in net assets resulting from capital stock transactions--Note 2:
Class A 186,699,902 67,398,927
Class B 151,470,057 59,694,507
Class C 42,571,844 15,679,507
Class Y 2,817,095 --
==========================================================================================
Net Assets
Total increase 530,130,697 221,320,738
- ------------------------------------------------------------------------------------------
Beginning of period 552,632,641 331,311,903
-------------- ------------
End of period (including undistributed net investment
income of $4,754,927 and $1,919,807, respectively) $1,082,763,338 $552,632,641
============== ============
</TABLE>
See accompanying Notes to Financial Statements.
17 Oppenheimer Quest Value Fund, Inc.
<PAGE>
- -------------------------------------------------------------------------------
Financial Highlights
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Class A
------------------------------------------------------------
Year Ended October 31,
1997 1996(3) 1995 1994 1993
=======================================================================================================
<S> <C> <C> <C> <C> <C>
Per Share Operating Data:
Net asset value, beginning of period $17.30 $14.51 $12.59 $12.51 $11.71
- -------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income (loss) .11 .08 .12(4) .09(4) .05(4)
Net realized and unrealized gain (loss) 4.07 3.79 2.71 .50 1.34
------ ------ ------ ------ ------
Total income (loss) from investment
operations 4.18 3.87 2.83 .59 1.39
- -------------------------------------------------------------------------------------------------------
Dividends and distributions to
shareholders:
Dividends from net investment income (.07) (.10) (.08) (.04) (.05)
Distributions from net realized gain (.92) (.98) (.83) (.47) (.54)
------ ------ ------ ------ ------
Total dividends and distributions to
shareholders (.99) (1.08) (.91) (.51) (.59)
- -------------------------------------------------------------------------------------------------------
Net asset value, end of period $20.49 $17.30 $14.51 $12.59 $12.51
====== ====== ====== ====== ======
=======================================================================================================
Total Return, at Net Asset Value(5) 25.41% 28.39% 24.74% 5.01% 12.27%
=======================================================================================================
Ratios/Supplemental Data:
Net assets, end of period
(in thousands) $699,230 $412,246 $282,615 $238,085 $245,320
- -------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $560,582 $338,429 $257,240 $237,923 $205,074
- -------------------------------------------------------------------------------------------------------
Ratios to average net assets:
Net investment income (loss) 0.74% 0.58% 0.90% 0.72% 0.40%
Expenses 1.60% 1.71% 1.68% 1.71% 1.75%
- -------------------------------------------------------------------------------------------------------
Portfolio turnover rate(7) 19.7% 36.0% 36.0% 49.0% 27.0%
Average brokerage commission rate(8) $0.0573 $0.0559 -- -- --
</TABLE>
1. For the period from December 16, 1996 (inception of offering) to October 31,
1997. 2. For the period from September 1, 1993 (inception of offering) to
October 31, 1993. 3. On November 22, 1995, OppenheimerFunds, Inc. became the
investment advisor to the Fund. 4. Based on average shares outstanding for the
period. 5. 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.
18 Oppenheimer Quest Value Fund, Inc.
<PAGE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Class B Class C
- ----------------------------------------------------------------------- ----------------------
Year Ended October 31, Year Ended October 31,
1997 1996(3) 1995 1994 1993(2) 1997 1996(3)
=================================================================================================
<S> <C> <C> <C> <C> <C> <C>
$17.08 $14.37 $12.53 $12.51 $12.66 $17.07 $14.35
- -------- -------- --------- --------- ------- ------- -------
.05 .05 .05(4) .02(4) (.01)(4) .05 .04
3.97 3.71 2.69 .50 (.14) 3.98 3.71
- -------- -------- --------- --------- ------- ------- -------
4.02 3.76 2.74 .52 (.15) 4.03 3.75
- -------------------------------------------------------------------------------------------------
(.01) (.07) (.07) (.03) -- (.01) (.05)
(.92) (.98) (.83) (.47) -- (.92) (.98)
- -------- -------- --------- --------- ------- ------- -------
(.93) (1.05) (.90) (.50) -- (.93) (1.03)
- -------- -------- --------- --------- ------- ------- -------
$20.17 $17.08 $14.37 $12.53 $12.51 $20.17 $17.07
======== ======== ========= ========= ======= ======== ========
=================================================================================================
24.71% 27.76% 24.08% 4.43% (1.19)% 24.79% 27.73%
=================================================================================================
$298,348 $111,130 $38,557 $14,373 $2,015 $82,098 $29,256
- -------- -------- --------- --------- ------- ------- -------
$200,752 $68,175 $25,393 $8,341 $1,136 $55,969 $18,099
- -------- -------- --------- --------- ------- -------- --------
0.25% 0.06% 0.36% 0.14% (1.19)%(6) 0.25% 0.06%
2.10% 2.26% 2.21% 2.24% 2.27%(6) 2.10% 2.20%
- -------- -------- --------- --------- ------- ------- --------
19.7% 36.0% 36.0% 49.0% 27.0% 19.7% 36.0%
$0.0573 $0.0559 -- -- -- $0.0573 $0.0559
</TABLE>
6. Annualized.
7. The lesser of purchases or sales of portfolio securities for a period,
divided by the monthly average of the market value of portfolio securities owned
during the period. Securities with a maturity or expiration date at the time of
acquisition of one year or less are excluded from the calculation. Purchases and
sales of investment securities (excluding short-term securities) for the period
ended October 31, 1997 were $387,455,107 and $129,795,392, respectively. 8.
Total brokerage commissions paid on applicable purchases and sales of portfolio
securities for the period, divided by the total number of related shares
purchased and sold. See accompanying Notes to Financial Statements.
19 Oppenheimer Quest Value Fund, Inc.
<PAGE>
Financial Highlights (Continued)
<TABLE>
<CAPTION>
Class C Class Y
--------------------------------------------- ------------
Period Ended
Year Ended October 31, October 31,
1995 1994 1993(2) 1997(1)
========================================================================================================
<S> <C> <C> <C> <C>
Per Share Operating Data:
Net asset value, beginning of period $12.52 $12.50 $12.66 $16.50
- --------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income (loss) .04(4) .01(4) (.01)(4) .10
Net realized and unrealized gain (loss) 2.70 .51 (.15) 3.95
------- ------- ------- ------
Total income (loss) from investment
operations 2.74 .52 (.16) 4.05
- --------------------------------------------------------------------------------------------------------
Dividends and distributions to shareholders:
Dividends from net investment income (.08) (.03) -- --
Distributions from net realized gain (.83) (.47) -- --
------- ------- ------- ------
Total dividends and distributions
to shareholders (.91) (.50) -- --
- --------------------------------------------------------------------------------------------------------
Net asset value, end of period $14.35 $12.52 $12.50 $20.55
======= ====== ====== ======
========================================================================================================
Total Return, at Net Asset Value(5) 24.10% 4.45% (1.26)% 24.55%
========================================================================================================
Ratios/Supplemental Data:
Net assets, end of period
(in thousands) $10,140 $3,581 $221 $3,086
- --------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $6,711 $1,725 $169 $1,372
- --------------------------------------------------------------------------------------------------------
Ratios to average net assets:
Net investment income (loss) 0.31% 0.09% (0.90)%(6) 1.20%(6)
Expenses 2.26% 2.28% 2.27%(6) 1.19%(6)
- --------------------------------------------------------------------------------------------------------
Portfolio turnover rate(7) 36.0% 49.0% 27.0% 19.7%
Average brokerage commission rate(8) -- -- -- $0.0573
</TABLE>
20 Oppenheimer Quest Value Fund, Inc.
<PAGE>
- -------------------------------------------------------------------------------
Notes to Financial Statements
- -------------------------------------------------------------------------------
===============================================================================
1. Significant Accounting Policies
Oppenheimer Quest Value Fund, Inc. (the Fund) 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. It is the intention of the Fund to continue to invest in equity
securities of companies believed by the Manager to be undervalued. The Fund's
investment advisor is OppenheimerFunds, Inc. (the Manager). The Fund offers
Class A, Class B, Class C and Class Y shares. Class A shares are sold with a
front-end sales charge. Class B and Class C shares may be subject to a
contingent deferred sales charge. All classes of shares have identical rights to
earnings, assets and voting privileges, except that each class has its own
expenses directly attributable to that class and exclusive voting rights with
respect to matters affecting that class. Classes A, B and C have separate
distribution and/or service plans. No such plan has been adopted for Class Y
shares. Class B shares will automatically convert to Class A shares six years
after the date of purchase. 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
an approved portfolio pricing service are valued using dealer-supplied
valuations provided the Manager is satisfied that the firm rendering the quotes
is reliable and that the quotes reflect current market value, or are valued
under consistently applied procedures established by the Board of 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.
21 Oppenheimer Quest Value Fund, Inc.
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (Continued)
- --------------------------------------------------------------------------------
1. Significant Accounting Policies (continued)
Distributions to Shareholders. Dividends and distributions to shareholders are
recorded on the ex-dividend date.
- --------------------------------------------------------------------------------
Classification of Distributions to Shareholders. Net investment income (loss)
and net realized gain (loss) may differ for financial statement and tax
purposes. The character of the distributions made during the year from net
investment income or net realized gains may differ from 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 fiscal year in which the income or realized gain was recorded by
the Fund.
- --------------------------------------------------------------------------------
Other. Investment transactions are accounted for on the date the investments are
purchased or sold (trade date) and dividend income is recorded on the
ex-dividend date. Interest income is accrued on a daily basis. Realized gains
and losses on investments and unrealized appreciation and depreciation are
determined on an identified cost basis, which is the same basis used for federal
income tax purposes.
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of income and expenses during the reporting
period. Actual results could differ from those estimates.
22 Oppenheimer Quest Value Fund, Inc.
<PAGE>
2. Capital Stock
The Fund has authorized 100 million shares of $1.00 par value capital stock in
the aggregate to be apportioned among each class of shares. Transactions in
shares of capital stock were as follows:
<TABLE>
<CAPTION>
Year Ended October 31, 1997(1) Year Ended October 31, 1996
------------------------------ ---------------------------
Shares Amount Shares Amount
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class A:
Sold 15,030,841 $ 278,180,029 6,823,030 $109,212,436
Dividends and distributions
reinvested 1,380,466 23,316,006 1,381,459 19,409,592
Redeemed (6,112,033) (114,796,133) (3,849,611) (61,223,101)
---------- ------------- ---------- ------------
Net increase 10,299,274 $ 186,699,902 4,354,878 $ 67,398,927
========== ============= ========== ============
- -------------------------------------------------------------------------------------------
Class B:
Sold 9,222,271 $ 169,517,668 4,315,316 $ 67,660,385
Dividends and distributions
reinvested 382,280 6,387,808 196,585 2,738,062
Redeemed (1,323,617) (24,435,419) (686,922) (10,703,940)
---------- ------------- ---------- ------------
Net increase 8,280,934 $ 151,470,057 3,824,979 $ 59,694,507
========== ============= ========== ============
- -------------------------------------------------------------------------------------------
Class C:
Sold 2,955,467 $ 54,066,076 1,267,566 $ 20,075,574
Dividends and distributions
reinvested 105,641 1,764,202 51,443 716,599
Redeemed (704,333) (13,258,434) (311,646) (5,112,666)
---------- ------------- ---------- ------------
Net increase 2,356,775 $ 42,571,844 1,007,363 $ 15,679,507
========== ============= ========== ============
- -------------------------------------------------------------------------------------------
Class Y:
Sold 176,674 $ 3,355,435 -- $ --
Redeemed (26,450) (538,340) -- --
---------- ------------- ---------- ------------
Net increase 150,224 $ 2,817,095 -- $ --
========== ============= ========== ============
</TABLE>
1. For the year ended October 31, 1997 for Class A, B and C and for the period
from December 16, 1996 (inception of offering) to October 31, 1997 for Class Y
shares.
===============================================================================
3. Unrealized Gains and Losses on Investments
At October 31, 1997, net unrealized appreciation on investments of $269,040,447
was composed of gross appreciation of $272,174,847, and gross depreciation of
$3,134,400.
23 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 of
average annual net assets, and 0.85% of average annual net assets over $800
million. Effective October 22, 1997, the investment advisory agreement was
amended to include additional breakpoints for average annual net assets in
excess of $800 million. The new investment advisory agreement provides for a fee
of 1.00% of the first $400 million of average annual net assets, 0.90% of the
next $400 million of average annual net assets, 0.85% of the next $3.2 billion
of average annual net assets, 0.80% of the next $4 billion of average annual net
assets, and 0.75% of average annual net assets over $8 billion. The Manager acts
as the accounting agent for the Fund at an annual fee of $55,000, plus
out-of-pocket costs and expenses reasonably incurred.
The Manager pays OpCap Advisors (the Sub-Advisor) based on the fee
schedule set forth in the Prospectus. For the year ended October 31, 1997, the
Manager paid $2,660,509 to the Sub-Advisor. On February 13, 1997 PIMCO Advisors
L.P. signed a definitive agreement with Oppenheimer Group, Inc. and its
subsidiary Oppenheimer Financial Corp. for PIMCO Advisors L.P. and its
affiliate, Thomson Advisory Group, Inc., to acquire the one-third managing
general partner interest in Oppenheimer Capital (the parent of OpCap Advisors)
and the 1.0% general interest in Oppenheimer Capital L.P.
For the year ended October 31, 1997, commissions (sales charges
paid by investors) on sales of Class A shares totaled $3,638,204, of which
$910,431 was retained by OppenheimerFunds Distributor, Inc. (OFDI), a subsidiary
of the Manager, as general distributor, and by an affiliated broker/dealer.
Sales charges advanced to broker/dealers by OFDI on sales of the Fund's Class B
and Class C shares totaled $5,794,972 and $474,699, respectively, of which
$222,454 and $6,853, respectively, was paid to an affiliated broker/dealer.
During the year ended October 31, 1997, OFDI received contingent deferred sales
charges of $348,684 and $23,932, respectively, upon redemption of Class B and
Class C shares as reimbursement for sales commissions advanced by OFDI at the
time of sale of such shares.
OppenheimerFunds Services (OFS), a division of the Manager, is the
transfer and shareholder servicing agent for the Fund and for other registered
investment companies. The Fund pays OFS an annual maintenance fee of $14.85 for
each Fund shareholder account and reimburses OFS for its out-of-pocket expenses.
During the year ended October 31, 1997, the Fund paid OFS $615,475.
24 Oppenheimer Quest Value Fund, Inc.
<PAGE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
===============================================================================
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 shareholder accounts of their customers that
hold Class A shares. OFDI retains the balance of the asset-based sales charge to
reimburse itself for its other expenditures under the Plan. During the year
ended October 31, 1997, OFDI paid $547,120 to an affiliated broker/dealer as
compensation for Class A personal service and maintenance expenses.
The Fund has adopted Distribution and Service Plans for Class B
and C shares to compensate OFDI for its costs in distributing Class B and Class
C shares and servicing accounts. Under the Plans, the Fund pays OFDI an annual
asset-based sales charge of 0.75% per year on Class B shares and Class C shares
for its services rendered in distributing Class B and Class C shares. OFDI also
receives a service fee of 0.25% per year to compensate dealers for providing
personal services for accounts that hold Class B and C shares. Each fee is
computed on the average annual net assets of Class B and Class C shares,
determined as of the close of each regular business day. During the year ended
October 31, 1997, OFDI paid $44,146 and $35,579, respectively, to an affiliated
broker/dealer as compensation for Class B and Class C personal service and
maintenance expenses and retained $1,751,281 and $350,569, respectively, as
compensation for Class B and Class C sales commissions and service fee advances,
as well as financing costs. If either Plan is terminated by the Fund, the Board
of Directors may allow the Fund to continue payments of the asset-based sales
charge to OFDI for distributing shares before the Plan was terminated. At
October 31, 1997, OFDI had incurred unreimbursed expenses of $7,193,352 for
Class B and $740,978 for Class C.
25 Oppenheimer Quest Value Fund, Inc.
<PAGE>
- -------------------------------------------------------------------------------
Notes to Financial Statements (Continued)
- -------------------------------------------------------------------------------
===============================================================================
5. Bank Borrowings
The Fund may borrow from a bank for temporary or emergency purposes including,
without limitation, funding of shareholder redemptions provided the asset
coverage for borrowings exceeds 300%. The Fund has entered into an agreement
which enables it to participate with other Oppenheimer funds in an unsecured
line of credit with a bank, which permits borrowings up to $400 million,
collectively. Interest is charged to each fund, based on its borrowings, at a
rate equal to the Federal Funds Rate plus 0.35%. Borrowings are payable 30 days
after such loan is executed. The Fund also pays a commitment fee equal to its
pro rata share of the average unutilized amount of the credit facility at a rate
of 0.0575% per annum.
The Fund had no borrowings outstanding during the year ended
October 31, 1997.
<PAGE>
Appendix A
DESCRIPTION OF RATINGS
Bond Ratings
o 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.
o 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.
o 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.
o 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; (c) 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.
o 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+").
o 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.
o 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.
o 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.
o 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".
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
Food
Gas Utilities
Gold
Health Care/Drugs Health Care/Supplies & Services Homebuilders/Real Estate
Hotel/Gaming Industrial Services Information Technology 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 Wireless Services
B-1
<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
225sai.#5
OPPENHEIMER QUEST OFFICERS VALUE FUND
Prospectus dated January 26, 1998
OPPENHEIMER QUEST OFFICERS VALUE FUND is a mutual fund that seeks capital
appreciation as its investment objective. The Fund seeks its investment
objective through investment in a non-diversified portfolio of securities
(primarily equity securities) of companies believed to be undervalued in the
marketplace in relation to factors such as the companies' assets, earnings,
growth potential and cash flows. The Fund may invest its assets in equity
securities of companies without limit as to market capitalization. The Fund may
invest up to 25% of its net assets in lower-grade, high-yield debt 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 January
26, 1998 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 NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
-1-
<PAGE>
CONTENTS
PAGE
ABOUT THE FUND
3 EXPENSES
6 A BRIEF OVERVIEW OF THE FUND
8 FINANCIAL HIGHLIGHTS
10 INVESTMENT OBJECTIVE AND POLICIES
12 INVESTMENT RISKS
14 INVESTMENT TECHNIQUES AND STRATEGIES
17 HOW THE FUND IS MANAGED
21 PERFORMANCE OF THE FUND
ABOUT YOUR ACCOUNT
23 HOW TO BUY SHARES
Class A Shares
Class B Shares
Class C Shares
38 SPECIAL INVESTOR SERVICES
AccountLink
Automatic Withdrawal and Exchange Plans
Reinvestment Privilege
Retirement Plans
40 HOW TO SELL SHARES
By Mail
By Telephone
42 HOW TO EXCHANGE SHARES
43 SHAREHOLDER ACCOUNT RULES AND POLICIES
45 DIVIDENDS, CAPITAL GAINS AND TAXES
A-1 APPENDIX A: SPECIAL SALES CHARGE ARRANGEMENTS FOR
SHAREHOLDERS OF THE FORMER QUEST FOR VALUE FUNDS
B-1 APPENDIX B: DESCRIPTION OF RATINGS
-2-
<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, 1997.
o 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
23, for an explanation of how and when these charges apply. THE FUND CURRENTLY
OFFERS ONLY CLASS A SHARES.
Class Class Class
A SHARES B SHARES C SHARES
Maximum Sales Charge
on Purchases (as a %
of offering price) 5.75% None None
Maximum Deferred Sales None(1) 5% in the first 1% if redeemed
Charge(as a % of year, declining within 12
the lower of the to 1% in the months of
original offering sixth year purchase(2)
price or redemption and eliminated
proceeds) thereafter(2)
- ------------------------------------------------------------------------------
Maximum Sales Charge
on Reinvested Dividends None None None
- ------------------------------------------------------------------------------
Exchange Fee None None None
- ------------------------------------------------------------------------------
Redemption Fee None(3) None(3) None(3)
(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 28) in Class A shares, you may have to pay a sales charge
of up to 1% if you sell your shares within 12 calendar months (18 months
for shares purchased prior to May 1, 1997)from the end of the calendar
month during which you purchased those 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.
(3) There is a $10 transaction fee for redemptions paid by Federal Funds wire,
but not for redemptions paid by ACH transfer through AccountLink.
o 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)
Class A
SHARES
Management Fees (after waiver) 0.66%
12b-1 Distribution
Plan Fees (after waiver) None
Other Expenses 0.63%
Total Fund Operating ________
Expenses (after waivers) 1.29%
The numbers in the table above are based upon the Fund's expenses in its
last fiscal year ended October 31, 1997. These amounts are shown as a percentage
of the average net assets of Class A shares of the Fund for that year. Class B
and C shares have not been issued as of this date; accordingly, expense
information for Class B and Class C shares is not set forth in the table above.
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. This plan and the plans for Class B and Class C shares are described in
greater detail in "How to Buy Shares."
The "Management Fees", "12b-1 Distribution Plan Fees" and "Total Fund
Operating Expenses" in the table above reflect voluntary fee waivers by the
Manager, the Distributor (as defined below) and the Sub-Adviser (as defined
below). These fee waivers lowered the Fund's overall expense ratio. Without such
fee waivers, the "Management Fees," "12b-1 Distribution Plan Fees" and "Total
Fund Operating Expenses" for Class A shares would have been 1.00%, 0.50% and
2.15%, respectively. The voluntary fee waivers are described in "How the Fund is
Managed - Fees and Expenses" and in the Statement of Additional Information and
may be modified or withdrawn by the Manager, the Distributor and the Sub-Adviser
at any time.
The actual expenses for Class A shares in future years may be more or less
than the numbers in the chart above, depending on a number of factors, including
changes in the actual value of the Fund's assets represented by such shares.
O 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 Class A shares of the Fund, and the Fund's
annual return is 5%, and that its operating expenses for Class A shares are the
ones shown in the Annual Fund Operating Expenses table above. Your investment
would incur the following expenses by the end of 1, 3, 5 and 10 years whether
you redeemed your shares or did not redeem your shares:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
Class A Shares $13 $41 $71 $156
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. Currently, only Class A
shares of the Fund are offered, and such Class A shares are only offered to
certain purchasers described below in "About Your Account - How to Buy Shares"
that are eligible to purchase such shares without a sales charge. Accordingly,
these examples do not reflect the maximum sales charge on purchases which, if
imposed, would increase shareholder transaction expenses.
-3-
<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.
O WHAT IS THE FUND'S INVESTMENT OBJECTIVE? The Fund's investment objective
is to seek capital appreciation.
o WHAT DOES THE FUND INVEST IN? The Fund seeks its investment objective
through investment in a non-diversified portfolio of securities (primarily
equity securities) of companies believed by the Sub-Adviser (defined below) to
be undervalued in the marketplace in relation to factors such as the companies'
assets, earnings, growth potential and cash flows. Equity securities are common
stocks and preferred stocks; bonds, debentures and notes convertible into common
stock; and depository receipts for such securities. The Fund may invest up to
25% of its net assets in lower-grade, high-yield debt securities (commonly known
as "junk bonds").
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 10.
o WHO MANAGES THE FUND? The Manager, OppenheimerFunds, Inc., supervises the
Fund's investment program and handles its day-to-day business. The Manager
(including subsidiaries) manages investment company portfolios having over $75
billion in assets as of December 31, 1997. 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, Jeffrey C. Whittington, is employed by the Sub-Adviser and is
primarily responsible for the selection of the Fund's securities. The Board of
Trustees, elected by shareholders, oversees the Manager, the Sub-Adviser and the
portfolio manager. Please refer to "How the Fund is Managed," starting on page
17 for more information about the Manager, the Sub-Adviser and their fees.
-4-
<PAGE>
o 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, the change in value of particular stocks because of an event
affecting the issuer or changes in interest rates that can affect bond prices.
These changes affect the value of the Fund's investments and its price per
share. Lower-grade, high-yield debt securities are subject to greater market
fluctuations and risk of loss of income and principal than higher-grade
securities and may be considered to have certain speculative characteristics.
Investment in foreign securities involve additional risks not associated with
investments in domestic securities, including risks associated with changes in
currency rates.
While the Sub-Adviser tries to reduce risks by carefully researching
securities before they are purchased for the Fund's portfolio, and in some cases
by using hedging techniques, there is no guarantee of success in achieving the
Fund's investment 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 12 for a more complete discussion of the Fund's investment
risks.
o 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 23 for more details.
o WILL I PAY A SALES CHARGE TO BUY SHARES? The Fund is authorized to issue
three classes of shares. All classes have the same investment portfolio but have
different expenses. Currently, the only class of shares offered is Class A
shares. 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 would be
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 23 for more details, including a discussion about factors you and your
financial advisor should consider in determining which class may be appropriate
for you.
o 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 45. The Fund also offers exchange
privileges to other Oppenheimer funds, described in "How to Exchange Shares" on
page 42.
o HOW HAS THE FUND PERFORMED? The Fund measures its performance by quoting
its average annual total return and cumulative total return, which measure
historical performance. Those returns can be compared to the returns (over
similar periods) of other funds. Of course, other funds may have different
objectives, investments, and levels of risk. The Fund's performance can also be
compared to a broad-based market index, which we have done on page 22. Please
remember that past performance does not guarantee future results.
-5-
<PAGE>
FINANCIAL HIGHLIGHTS
The table on the following page 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 has been audited by Price
Waterhouse LLP, the Fund's independent accountants whose report on the Fund's
financial statements for the fiscal years ended October 31, 1996 and 1997 is
included in the Statement of Additional Information. The information provided in
the table with respect to the period ended October 31, 1995 and prior thereto
was audited by other independent accountants.
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS YEAR ENDED OCTOBER 31,
1997 1996(2) 1995(1)
===================================================================================================
PER SHARE OPERATING DATA:
<S> <C> <C> <C>
Net asset value, beginning of period $15.26 $12.30 $10.00
- ---------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income (loss) .07 (.01) .24
Net realized and unrealized gain .03 4.06 2.10
------ ------ ------
Total income from investment
operations .10 4.05 2.34
- ---------------------------------------------------------------------------------------------------
Dividends and distributions to shareholders:
Dividends from net investment income -- (.26) (.04)
Distributions from net realized gain (1.48) (.83) --
------ ------ ------
Total dividends and distributions
to shareholders (1.48) (1.09) (.04)
- ---------------------------------------------------------------------------------------------------
Net asset value, end of period $13.88 $15.26 $12.30
====== ====== ======
===================================================================================================
TOTAL RETURN, AT NET ASSET VALUE(3) 1.56% 35.17% 23.44%
===================================================================================================
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in thousands) $7,466 $11,429 $3,647
- ---------------------------------------------------------------------------------------------------
Average net assets (in thousands) $9,148 $ 6,973 $2,873
- ---------------------------------------------------------------------------------------------------
Ratios to average net assets:
Net investment income (loss) 0.39%(6) (0.42)%(6)% 2.44%(4)(5)
Expenses, before voluntary reimbursement by
the Manager 2.15%(7) 2.24% 1.97%(5)
Expenses, net of voluntary reimbursement by
the Manager 1.29% 1.92% 0.00%
- ---------------------------------------------------------------------------------------------------
Portfolio turnover rate(8) 111.0% 137.4% 108.0%
Average brokerage commission rate(9) $0.0551 $0.0501 --
</TABLE>
1. For the period from November 8, 1994 (commencement of operations) to October
31, 1995. 2. On November 22, 1995, OppenheimerFunds, Inc. became the investment
advisor to the Fund. 3. Assumes a hypothetical initial investment on the
business day before the first day of the fiscal period, with all dividends and
distributions reinvested in additional shares on the reinvestment date, and
redemption at the net asset value calculated on the last business day of the
fiscal period. Sales charges are not reflected in the total returns. Total
returns are not annualized for periods of less than one full year. 4. During the
period noted above, the former Manager voluntarily waived all of its fees and
reimbursed the Fund for all of its operating expenses. If such waivers and
reimbursements had not been in effect, the annualized ratio of net investment
income to average daily net assets would have been 0.47%. 5. Annualized. 6. For
the years ended October 31, 1997 and 1996, the ratio of net investment income to
average net assets would have been (0.47)% and (0.74)%, respectively, absent the
voluntary reimbursement by both the former Manager and the current Manager. 7.
The expense ratio reflects the effect of expenses paid indirectly by the Fund.
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, 1997 were $9,257,710 and $13,205,846, 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.
-6-
<PAGE>
-7-
<PAGE>
INVESTMENT OBJECTIVE AND POLICIES
OBJECTIVE. The Fund seeks capital appreciation.
INVESTMENT POLICIES AND STRATEGIES. The Fund seeks its investment objective
through investment in a non-diversified portfolio of securities (primarily
equity securities) of companies believed by the Sub-Adviser to be undervalued in
the marketplace in relation to factors such as the companies' assets, earnings,
growth potential and cash flows. The Fund may invest its assets in equity
securities of companies with no limit as to market capitalization. For the
purposes of this Prospectus the term equity securities is defined as common
stocks and preferred stocks; bonds, debentures and notes convertible into common
stocks; and depository receipts for such securities.
The Fund may invest up to 25% of its net assets in bonds rated below Baa3
by Moody's Investors Service, Inc. ("Moody's") or BBB- by Standard & Poor's
Corporation ("S&P")(such lower- grade, high-yield debt securities are commonly
known as "junk bonds"). To provide liquidity for the purchase of new instruments
and to effect redemptions of shares, the Fund typically invests a part of its
assets in various types of U.S. Government securities and high quality,
short-term debt securities with remaining maturities of one year or less such as
government obligations, certificates of deposit, bankers' acceptances,
commercial paper, short-term corporate securities and repurchase agreements
("money market instruments"). For temporary defensive purposes, the Fund may
invest up to 100% of its assets in such U.S. Government securities and money
market instruments.
o 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.
The Fund's investment policies and practices are not "fundamental" unless this
Prospectus or the Statement of Additional Information states that a particular
policy is "fundamental". The Fund's investment objective is a fundamental
policy.
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 of 1940 to be a particular percentage of
outstanding voting shares (and this term is explained in the Statement of
Additional Information). The Board of Trustees of the Trust (as defined below)
(the "Board of Trustees") may change non-fundamental policies without
shareholder approval, although significant changes will be described in
amendments to this Prospectus.
o INVESTMENT IN BONDS AND CONVERTIBLE SECURITIES. The Fund may invest in
debt obligations with remaining maturities of one year or more of U.S. or
foreign corporate, governmental or bank issuers. The Fund may invest up to 25%
of its net assets in high-yield, "lower-grade" bonds (commonly known as "junk
bonds"). Such securities are rated below "investment grade," which means they
have a rating lower than "Baa" by Moody's or lower than "BBB" by S&P or similar
ratings by other rating organizations, or if unrated, are determined by the
Sub-Adviser to be of comparable quality to debt securities rated below
investment grade. Appendix B to this Prospectus describes these rating
categories. A reduction in the rating of a security after its purchase by the
Fund will not require the Fund to dispose of the security. Once the rating of a
security has been changed, the Fund will consider all circumstances deemed
relevant in determining whether to continue to hold the security. "Lower-grade"
debt securities are subject to special risks as described in "Investment Risks"
below.
Convertible fixed-income securities in which the Fund invests are bonds,
debentures or notes that may be converted into or exchanged for a prescribed
amount of company 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.
o 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,
European Depository Receipts or Global Depository Receipts. There is no limit to
the amount of foreign securities the Fund may acquire. The Fund will hold
foreign currency only in connection with the purchase or sale of foreign
securities.
o 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. 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. The "Financial
Highlights" table above shows the Fund's portfolio turnover rate during past
fiscal years.
-8-
<PAGE>
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.
o 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 (for example, 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.
o 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 rates rise, the
values of already-issued debt securities generally decline. The magnitude of
these fluctuations will often be greater for longer-term debt securities than
shorter-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, described below, are subject to credit risks
to a greater extent than lower yielding, investment grade bonds.
o SPECIAL RISK OF LOWER-GRADE SECURITIES. The Fund may invest up to 25% of
its net assets in high-yield, "lower-grade" bonds as described above in
"Investment Policies and Strategies". High-yield, lower-grade securities,
whether rated or unrated, often have speculative characteristics and 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'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. Also,
convertible securities may be less subject to some of these risks than other
debt securities, to the extent they can be converted into stock, which may be
more liquid and less affected by these other risk factors.
o FOREIGN SECURITIES HAVE SPECIAL RISKS. For example, foreign issuers may
not be 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.
o SPECIAL RISKS OF HEDGING INSTRUMENTS. 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 Sub-Adviser 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.
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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. o
TEMPORARY DEFENSIVE INVESTMENTS. In times of unstable market or economic
conditions, when the Sub-Adviser determines it appropriate to do so to attempt
to reduce fluctuations in the value of the Fund's net assets, the Fund may
assume a temporary defensive position and invest an unlimited amount of assets
in U.S. Government securities and money market instruments of the type
identified on page 10 under "Investment Policies and Strategies." At any time
that the Fund invests for temporary defensive purposes, to the extent of such
investments, it is not pursuing its investment objective.
o INVESTING IN SMALL, UNSEASONED COMPANIES. The Fund may invest up to 5%
of its total assets 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.
o HEDGING. 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. It may do so to try to manage its exposure to
changing interest rates. 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.
o FUTURES. The Fund may buy and sell futures contracts that relate to (1)
broadly-based stock indices (these are referred to as Stock Index Futures), (2)
foreign currencies (these are called Forward Contracts and are discussed below)
or (3) commodities (these are referred to as commodity futures).
o PUT AND CALL OPTIONS. The Fund may buy and sell exchange-traded put and
call options on broadly-based stock indices, foreign currencies or on Stock
Index Futures. A call or put may be purchased only if, after the purchase, the
value of all call and put options held by the Fund will not exceed 5% of the
Fund's total assets.
If the Fund sells (that is, writes) a call option, it must be "covered."
That means the Fund must own the investment subject to the call while the call
is outstanding, or, for other types of written calls, the Fund must segregate
liquid assets to enable it to satisfy its obligations if the call is exercised.
Up to 25% of the Fund's total assets may be subject to calls.
If the Fund writes a put, the put must be covered by segregated liquid
assets. The Fund will not write puts if more than 25% of the Fund's net assets
would have to be segregated to cover put options.
o 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.
O 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
issuer to its shareholders. The Fund may invest up to 5% of its total assets in
warrants or rights. For further details about these investments, please refer to
"Warrants and Rights" in the Statement of Additional Information.
o ILLIQUID AND RESTRICTED SECURITIES. Under the policies and procedures
established by the Board of Trustees, 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 has a contractual restriction on its resale or that cannot be sold publicly
until it is registered under the Securities Act of 1933.
The Fund may not invest more than 15% of its net assets in illiquid and
restricted securities, including repurchase agreements that have a maturity of
longer than seven days and certain over-the-counter options. The Fund's
percentage limitation on these investments does not apply to certain restricted
securities that are eligible for resale to "qualified institutional buyers". The
Manager monitors holdings of illiquid securities on an ongoing basis to
determine whether to sell any holdings to maintain adequate liquidity.
o LOANS OF PORTFOLIO SECURITIES. To attempt to raise cash for liquidity
purposes, the Fund may lend its portfolio securities to certain types of
eligible borrowers approved by the Board of Trustees. Each loan must be
collateralized in accordance with applicable regulatory requirements. After any
loan, the value of the securities loaned is not expected to exceed 33-1/3% of
the value of the total assets of the Fund. 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.
o REPURCHASE AGREEMENTS. The Fund may enter into repurchase agreements
primarily 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.
The Fund may also enter into reverse repurchase agreements. Under such
agreements, the Fund sells securities and agrees to repurchase them at a
mutually agreed upon date and price. Reverse repurchase agreements create
leverage, a speculative factor, and will be considered borrowings by the Fund.
Investment in repurchase agreements having a maturity beyond seven days is
subject to the limitations set forth above under "Illiquid and Restricted
Securities." Additional information about repurchase agreements is set forth in
"Repurchase Agreements" in the Statement of Additional Information.
o "WHEN-ISSUED" AND DELAYED DELIVERY TRANSACTIONS. The Fund may purchase
securities on a "when-issued" basis, and may purchase or sell such 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.
o INVESTMENT IN OTHER INVESTMENT COMPANIES. The Fund generally may invest
up to 10% of its total assets in the aggregate in shares of other investment
companies and up to 5% of its total assets in any one investment company, as
long as each investment does not represent more than 3% of the outstanding
voting securities of the acquired investment company. These limitations do not
apply in the case of investment company securities which may be purchased as
part of a plan of merger, consolidation, reorganization or acquisition.
Investment in other investment companies may involve the payment of substantial
premiums above the value of such investment companies' portfolio securities, and
is subject to limitations under the Investment Company Act and market
availability. The Fund does not intend to invest in such investment companies
unless, in the judgment of the Manager, the potential benefits of such
investment justify the payment of any applicable premiums or sales charge. As a
shareholder in an investment company, the Fund would bear its ratable share of
that investment company's expenses, including its advisory and administration
fees. At the same time, the Fund would continue to pay its own management fees
and other expenses.
o NON-DIVERSIFICATION. The Fund is classified as a "non-diversified"
investment company under the Investment Company Act of 1940 so that the
proportion of the Fund's assets that may be invested in the securities of a
single issuer is not limited by the Investment Company Act. An investment in the
Fund therefore will entail greater risk than an investment in a diversified
investment company because a higher percentage of investments among fewer
issuers may result in greater fluctuation in the total market value of the
Fund's portfolio, and economic, political or regulatory developments may have a
greater impact on the value of the Fund's portfolio than would be the case if
the portfolio were diversified among more issuers.
However, the Fund intends to conduct its operations so as to qualify as a
"regulated investment company" for purposes of the Internal Revenue Code, which
will relieve the Fund from liability for Federal income tax to the extent that
more than 90% of its earnings are distributed to shareholders. Among the
requirements for such qualification are that: (1) not more than 25% of the
market value of the Fund's total assets will be invested in securities of a
single issuer, and (2) with respect to 50% of the market value of its total
assets, not more than 5% of the market value of its total assets may be invested
in the securities of a single issuer and the Fund must not own more than 10% of
the outstanding voting securities of a single issuer.
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:
o Concentrate its investments in any particular industry, but if deemed
appropriate for attaining its investment objective, the Fund may invest up to
25% of its total assets (valued at the time of investment) in any one industry
classification used by the Fund for investment purposes (for this purpose, a
foreign government is considered an industry); (this restriction does not apply
to U.S. government securities).
o Borrow money in excess of 33 1/3% of the value of the Fund's total assets; the
Fund may borrow only from banks and only as a temporary measure for
extraordinary or emergency purposes and will make no additional investments
while such borrowings exceed 5% of the total assets. 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.
Unless this 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 is one of four portfolios of Oppenheimer
Quest For Value Funds (the "Trust"), an open-end management investment company
organized as a Massachusetts business trust in April, 1987. The Fund is a
non-diversified investment company with an unlimited number of authorized shares
of beneficial interest.
The Trust is governed by a Board of Trustees, which is responsible for
protecting the interests of shareholders under Massachusetts law. The Trustees
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.
"Trustees and Officers of the Trust" in the Statement of Additional Information
names the Trustees and officers of the Trust and provides more information about
them. Although the Trust will not normally hold annual meetings, it may hold
shareholder meetings from time to time on important matters, and shareholders
have the right to call a meeting to remove a Trustee or to take other action
described in the Trust's Declaration of Trust.
The Board of Trustees 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 is authorized to issue three classes of shares, Class
A, Class B and Class C, although only Class A shares are currently offered. 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 on matters
submitted to the vote of shareholders. 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 for more 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 Trustees, under an Investment Advisory Agreement with the Fund which
states the Manager's responsibilities. The Agreement sets forth the fees paid by
the Fund to the Manager and describes the expenses that the Fund is responsible
to pay to conduct its business.
The Manager has operated as an investment adviser since 1959. The Manager
(including subsidiaries) currently manages investment companies, including other
Oppenheimer funds, with assets of more than $75 billion as of December 31, 1997,
and with more than 3.5 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 management services provided to the Fund by the Manager, and the
services provided by the Distributor and the Transfer Agent to shareholders,
depend on the smooth functioning of their computer systems. Many computer
software systems in use today cannot distinguish the year 2000 from the year
1900 because of the way dates are encoded and calculated. That failure could
have a negative impact on the handling of securities trades, pricing and account
services. The Manager, the Distributor and the Transfer Agent have been actively
working on necessary changes to their computer systems to deal with the year
2000 and expect that their systems will be adapted in time for that event,
although there can be no assurance of success.
The Board of Trustees has determined that it is in the best interest of
the Fund's shareholders that the Fund reorganize with and into Oppenheimer Quest
Capital Value Fund, Inc. ("Capital Value Fund"). The Board unanimously approved
the terms of an agreement and plan of reorganization to be entered into between
these funds (the "reorganization plan") and the transactions contemplated
thereby (the "reorganization"). The Board further determined that the
reorganization should be submitted to the Fund's shareholders for approval, and
recommended that shareholders approve the reorganization.
Pursuant to the reorganization plan, (i) substantially all of the assets
of the Fund would be exchanged for Class A shares of Capital Value Fund, (ii)
these shares of Capital Value Fund would be distributed to the shareholders of
the Fund, (iii) the Fund would be liquidated, and (iv) the outstanding shares of
the Fund would be canceled. It is expected that the reorganization will be
tax-free, pursuant to Section 368(a)(1) of the Internal Revenue Code of 1986, as
amended, and the Fund will request an opinion of tax counsel to that effect.
A meeting of the shareholders of the Fund is expected to be held on or
about May 26, 1998 to vote on the reorganization. Approval of the reorganization
requires the affirmative vote of a majority of the outstanding shares of the
Fund (the term "majority" is defined in the Investment Company Act as a special
majority. It is also explained in the Statement of Additional Information).
Details about the proposed reorganization will be contained in a proxy statement
and other soliciting materials which will be mailed on or about April 1, 1998 to
Fund shareholders of record on March 10, 1998. Persons who became shareholders
of the Fund after the record date for the shareholder meeting will not be
entitled to vote on the reorganization.
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 advisor, whose employees perform all investment advisory
services provided to the Fund by the Sub-Adviser.
On November 4, 1997, PIMCO Advisors L.P. ("PIMCO Advisors"), a registered
investment adviser with $125 billion in assets under management through various
subsidiaries and affiliates, acquired control of Oppenheimer Capital and the
Sub-Adviser. On November 5, 1997, a new sub- advisory agreement between the
Sub-Adviser and the Manager, on terms identical to the prior sub- advisory
agreement, became effective. The new sub-advisory agreement had been approved by
shareholders of the Fund on May 6, 1997. On November 30, 1997, Oppenheimer
Capital merged with a subsidiary of PIMCO Advisors and, as a result, Oppenheimer
Capital and the Sub-Adviser became indirect wholly-owned subsidiaries of PIMCO
Advisors. PIMCO Advisors has two general partners: PIMCO Partners, G.P., a
California general partnership, and PIMCO Advisors Holdings L.P. (formerly
Oppenheimer Capital, L.P.), an NYSE-listed Delaware limited partnership of which
PIMCO Partners, G.P. is the sole general partner.
o PORTFOLIO MANAGER. The Fund's portfolio manager, Jeffrey C. Whittington,
is employed by the Sub-Adviser and is primarily responsible for the selection of
the Fund's portfolio securities. Mr. Whittington, who is also a Senior Vice
President of Oppenheimer Capital, has been the Fund's portfolio manager since
its inception and has been a portfolio manager at Oppenheimer Capital since
August, 1994, and from June 1986 to May 1991. From August 1993 to July 1994 he
was a portfolio manager with Neuberger & Berman.
The Sub-Adviser's equity investment policy is overseen by George Long, who
is Chairman, Chief Executive Officer and Chief Investment Officer for
Oppenheimer Capital. Mr. Long has been with Oppenheimer Capital since 1981.
o FEES AND EXPENSES. Under the Investment Advisory Agreement, the Fund
pays the Manager a monthly fee at the annual rate of 1.0% of the Fund's average
annual net assets. A voluntary waiver of a portion of this fee is currently in
effect, as described below. After giving effect to the voluntary fee waiver, the
Fund's management fee for its last fiscal year was 0.66% of average annual net
assets for its Class A shares. The Fund pays expenses related to its daily
operations, such as custodian fees, Trustees' 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. These expenses are paid
out of the Fund's assets and are not paid directly by shareholders. However,
they 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. Effective August 1, 1996,
the Sub-Adviser voluntarily agreed to waive its entire subadvisory fee.
Concurrently with such waiver, the Manager voluntarily agreed to waive that
portion of its management fee equal to what would otherwise have been payable to
the Sub-Adviser if the Sub-Adviser had not waived its subadvisory fee. These
expense waivers may be modified or withdrawn at any time.
Information about the Fund's brokerage policies and practices is set forth
in "Brokerage Policies of the Fund" in the Statement of Additional Information.
That section discusses how brokers and dealers are selected for the Fund's
portfolio transactions. When deciding which broker to use, the Manager and the
Sub-Adviser are permitted by the Investment Advisory Agreement to consider
whether brokers have sold shares of the Fund or any other funds for which the
Manager serves as investment adviser.
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.
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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, as we have done on page 22, a market index.
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.
o 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 the total return is shown has been deducted.
However, total returns may also be quoted at "net asset value", without
considering the effect of the sales charge, and those returns would be lower 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, 1997, followed by a
graphical comparison of the Fund's performance to an appropriate broad-based
market index.
o MANAGEMENT'S DISCUSSION OF PERFORMANCE. During the fiscal year ended
October 31, 1997, the Fund remained virtually fully invested in equity
securities. Despite the domestic stock market's strong performance during the
year, the Fund's returns lagged the S&P MidCap 400 Index. This was due in
significant part to the poor performance of certain of the Fund's largest
holdings. The Fund held a limited number of equity positions, and the decline in
one or more of its holdings had an adverse effect on the entire portfolio.
During the year, consistent with its investment objective, the Fund sought
reasonably priced investments in companies with potential for profitability,
growth and stability; the Fund did not seek investment in specific industries or
business sectors. The Fund's portfolio holdings, allocations and strategies are
subject to change.
o COMPARING THE FUND'S PERFORMANCE TO THE MARKET. The graph below shows
the performance of a hypothetical $10,000 investment in Class A shares of the
Fund held from inception (November 8, 1994) until October 31, 1997. Class B and
C shares have not been issued as of this date; consequently, no information on
such classes is included in the graph.
The Fund's performance is compared to the performance of the S&P MidCap
400 Index, a capitalization-weighted index of 400 U.S. issuers whose common
stocks are traded on the New York and American Stock Exchanges and the NASDAQ
and is recognized as a measure of the performance of "mid-capitalization"
stocks. Index performance reflects the reinvestment of dividends but does not
consider the effect of capital gains or transaction costs, and none of the data
below shows the effect of taxes. Currently, only Class A shares of the Fund are
offered, and such Class A shares are only offered to certain purchasers
described below in "About Your Account - How to Buy Shares" that are eligible to
purchase such shares without a sales charge. Accordingly, the Fund's performance
does not reflect the deduction of the current maximum sales charge of 5.75% for
Class A shares which, if imposed, would decrease returns. The Fund's performance
does reflect 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
MidCap 400 Index. Moreover, the index performance data does not reflect any
assessment of the risk of the investments included in the index.
-11-
<PAGE>
ABOUT YOUR ACCOUNT
HOW TO BUY SHARES
CLASSES OF SHARES. The Fund is authorized to issue three different classes of
shares. CURRENTLY, THE ONLY CLASS OF SHARES OFFERED TO INVESTORS IS CLASS A
SHARES, AND SUCH CLASS A SHARES ARE ONLY OFFERED TO THE FOLLOWING INDIVIDUALS
AND ENTITIES AT THIS TIME: (I) OFFICERS, DIRECTORS, TRUSTEES AND EMPLOYEES (AND
MEMBERS OF THEIR "IMMEDIATE FAMILIES", AS HEREINAFTER DEFINED) OF THE TRUST, THE
MANAGER AND ITS AFFILIATES, AND RETIREMENT PLANS ESTABLISHED BY THEM FOR THEIR
EMPLOYEES AND (II) OFFICERS, DIRECTORS, TRUSTEES AND EMPLOYEES OF OPPENHEIMER
CAPITAL, AND ITS AFFILIATES, THEIR RELATIVES OR ANY TRUST, PENSION, PROFIT
SHARING OR OTHER BENEFIT PLAN FOR ANY OF THEM. Presently, as a policy matter,
trustees of the Trust will not purchase shares of the Fund until it is generally
available for sale to the public. The different classes of shares represent
investments in the same portfolio of securities but may be subject to different
expenses and will likely have different share prices. Although Class B and Class
C shares are not currently offered, a discussion with respect to such classes of
shares is set forth below for your information.
o 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 32). 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 12 months of buying them (18 months if the shares were purchased
prior to May 1, 1997), 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.
o 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.
o 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.
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 used the sales
charge rates that apply to each class, and considered the effect of the higher
annual 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.
o 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.
o INVESTING FOR THE SHORT-TERM. If you have a short-term investment
horizon (that is, you plan to hold your shares for not more than six years), you
should probably consider purchasing Class A or Class C shares rather than Class
B shares, because of the effect of the Class B contingent deferred sales charge
if you redeem within 6 years, as well as the effect of the Class B asset-based
sales charge on the investment return for that class in the short-term. Class C
shares might be the appropriate choice (especially for investments of less than
$100,000), because there is no initial sales charge on Class C shares, and the
contingent deferred sales charge does not apply to amounts you sell after
holding them one year.
However, if you plan to invest more than $100,000 for the shorter term,
then the more you invest and the more your investment horizon increases toward
six years, Class C shares might not be as advantageous as Class A shares. That
is because the annual asset-based sales charge on Class C shares will have a
greater 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 of Class B shares or $1 million or
more of Class C shares from a single investor.
o 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.
o 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.
o 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. The Distributor may pay additional periodic
compensation from its own resources to securities dealers or financial
institutions based upon the value of shares of the Fund owned by the dealer or
financial institution for its own account or for its customers.
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:
o 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.
o Under pension, profit-sharing and 401(k) plans and Individual
Retirement Accounts (IRAs), you can make an initial investment of as little as
$250 (if your IRA is established under an Asset Builder Plan, the $25 minimum
applies), and subsequent investments may be as little as $25.
There is no minimum investment requirement if you are buying shares by
reinvesting dividends or distributions 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.
o 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.
o BUYING SHARES THROUGH YOUR DEALER. Your dealer will place your order
with the Distributor on your behalf.
o 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.
PAYMENT BY FEDERAL FUNDS WIRE: Shares may be purchased by Federal Funds wire.
The minimum investment is $2,500. You must FIRST call the Distributor's Wire
Department at 1-800-525-7041 to notify the Distributor of the wire, and receive
further instructions.
o 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.
o 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 in the Statement of Additional Information.
o 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, or the order is received and transmitted to the Distributor by
an entity authorized by the Fund to accept purchase or redemption orders. The
Fund has authorized the Distributor, certain broker-dealers and agents or
intermediaries designated by the Distributor or those broker-dealers to accept
orders. In most cases, to enable you to receive that day's offering price, the
Distributor or an authorized entity 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 close of The New York Stock Exchange on a regular
business day and normally your order must be transmitted 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 one 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 net asset value. In some cases, reduced sales charges
may be available, as described below. Out of the amount you invest, the Fund
receives the net asset value to invest for your account. The sales charge varies
depending on the amount of your purchase. A portion of the sales charge may be
retained by the Distributor and allocated to your dealer as commission. The
current sales charge rates and commissions paid to dealers and brokers are as
follows:
-12-
<PAGE>
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.
o 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:
o Purchases by a retirement plan qualified under Section 401(a) of the
Internal Revenue Code if the retirement plan has total plan assets of $500,000
or more.
o Purchases aggregating $1 million or more.
o 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,
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.
o 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 commissions 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, and calculated on a
calendar year basis. 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 purchased prior to May 1, 1997 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. A Class A contingent deferred sales
charge may be deducted from the redemption proceeds of any of those shares
purchased on or after May 1, 1997 that are redeemed within 12 months of the end
of the calendar month of their purchase. 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.
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.
o 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.
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:
o 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 Distributor will add the value,
at current offering price, of the shares you previously purchased and currently
own to the value of current purchases to determine the sales charge rate that
applies. 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.
o 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.
o 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. In
order to receive a waiver of the Class A contingent deferred sales charge, you
must notify the Transfer Agent as to which conditions apply.
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:
o the Manager or its affiliates;
o 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;
o registered management investment companies, or separate accounts of
insurance companies having an agreement with the Manager or the Distributor for
that purpose;
o 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;
o 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);
o 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);
o (1) investment advisers and financial planners who have entered into an
agreement for this purpose with the Distributor and 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 investment advisers or financial
planners (that have entered into an agreement for this purpose with the
Distributor) 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)
o 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;
o employee benefit plans purchasing shares through a shareholder servicing
agent which the Distributor has appointed as agent to accept those purchase
orders;
o 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;
o any unit investment trust that has entered into an appropriate agreement
with the Distributor;
o 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
o 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 commenced 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:
o shares issued in plans of reorganization, such as mergers, asset
acquisitions and exchange offers, to which the Fund is a party;
o 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;
o 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;
o shares purchased and paid for with the proceeds of shares redeemed in
the prior 30 days 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
o 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:
o to make Automatic Withdrawal Plan payments that are limited annually to
no more than 12% of the original account value;
o involuntary redemptions of shares by operation of law or involuntary
redemptions of small accounts (see "Shareholder Account Rules and Policies,"
below);
o if, at the time of purchase of shares (prior to May 1, 1997) the dealer
agreed in writing to accept the dealer's portion of the sales commission 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);
o if, at the time of purchase of shares (if purchased during the period
May 1, 1997 through December 31, 1997) the dealer agreed in writing to accept
the dealer's portion of the sales commission in installments of 1/12th of the
commission per month (and no further commission will be payable if the shares
are redeemed within 12 months of purchase);
o for distributions from a TRAC-2000 401(k) plan sponsored by the
Distributor due to the termination of the TRAC-2000 program;
o 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
subsidiaries) 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;
o for distributions from Retirement Plans having 500 or more eligible
participants, except distributions due to termination of all of the Oppenheimer
funds as an investment option under the Plan; and
o for distributions from 401(k) plans sponsored by broker-dealers that
have entered into a special agreement with the Distributor allowing this waiver.
o DISTRIBUTION AND SERVICE PLAN FOR CLASS A SHARES. The Fund has adopted a
Distribution and Service Plan for Class A shares to compensate the Distributor
for its services in connection with the distribution of shares and 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 at an annual rate 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
compensate itself for its other expenditures under the Plan. The Distributor
currently voluntarily waives all fees payable to it 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 and(2) 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. Class B shares held for a period greater than 6 years
automatically convert to Class A shares.
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:
-13-
<PAGE>
YEARS SINCE BEGINNING CONTINGENT DEFERRED SALES CHARGE
OF MONTH IN WHICH PURCHASE ON REDEMPTIONS IN THAT YEAR
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.
o 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.
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.
O 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 Distribution and
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 therefore
4.00% of the purchase price. The Distributor retains the Class B asset-based
sales charge. The Distributor may pay the Class B service fee and the
asset-based sales charge to the dealer quarterly in lieu of paying the sales
commission and service fee advance at the time of purchase.
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 therefore
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 advances 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 may pay
the Class C service fee and asset-based sales charge to the dealer quarterly in
lieu of paying the sales commission and service fee advance at the time of
purchase.
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 Trustees may allow the Fund to continue payments of the
service fee and/or asset-based sales charge to the Distributor for distributing
Class B or Class C shares, as appropriate, before the Plan was terminated.
o 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 Class B and Class C shares
redeemed in certain circumstances as described below. The reasons for this
policy are in "Reduced Sales Charges" in the Statement of Additional
Information. In order to receive a waiver of the Class B or Class C contingent
deferred sales charge, you must notify the Transfer Agent which conditions
apply.
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:
o 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) of the participant or beneficiary (the death or
disability must have occurred after the account was established);
o 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);
o returns of excess contributions to Retirement Plans;
o distributions from retirement plans to make "substantially equal
periodic payments" as permitted in Section 72(t) of the Internal Revenue Code
provided the distributions do not exceed 10% of the account value annually,
measured from the date the Transfer Agent receives the request;
o shares redeemed involuntarily, as described in "Shareholder Account
Rules and Policies," below;
o distributions from OppenheimerFunds prototype 401(k) plans and from
certain Massachusetts Mutual Life Insurance Company 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; (5) for separation from service; or (6) for loans to participants; or
o distributions from 401(k) plans sponsored by broker-dealers that have
entered into a special agreement with the Distributor allowing this waiver.
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:
o shares sold to the Manager or its affiliates;
o 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
o 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 call the Transfer
Agent for more information.
AccountLink privileges should be requested 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.
o 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.
o 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.
o 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.
o 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.
o 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. SHAREHOLDER TRANSACTIONS BY FAX. Requests for certain account
transactions may be sent to the Transfer Agent by fax (telecopier). Please call
1-800-525-7048 for information about which transactions are included.
Transaction requests submitted by fax are subject to the same rules and
restrictions as written and telephone requests described in this Prospectus.
OPPENHEIMERFUNDS INTERNET WEB SITE. Information about the Fund, including your
account balance, daily share prices, market and Fund portfolio information, may
be obtained by visiting the OppenheimerFunds Internet Web Site, at the following
Internet address: http://www.oppenheimerfunds.com. In 1998, the Transfer Agent
anticipates offering certain account transactions through the Internet Web Site.
To find out more information about those transactions and procedures, please
visit the Web Site.
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:
o 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 Statement of Additional Information for more
details.
o 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 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:
o INDIVIDUAL RETIREMENT ACCOUNTS including rollover IRAs, for individuals
and their spouses and SIMPLE IRAs offered by employers
o 403(B)(7) CUSTODIAL PLANS for employees of eligible tax-exempt
organizations, such as schools, hospitals and charitable organizations
o SEP-IRAS (Simplified Employee Pension Plans) for small business owners
or people with income from self-employment, including SAR/SEP IRAs
o PENSION AND PROFIT-SHARING PLANS for self-employed persons and other
employers
o 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.
o 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.
o 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):
o You wish to redeem more than $50,000 worth of shares and receive a check
o The redemption check is not payable to all shareholders listed on the
account statement
o The redemption check is not sent to the address of record on your
account statement
o Shares are being transferred to a Fund account with a different owner
or name
o Shares are redeemed by someone other than the owners (such as an
Executor)
o 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:
o Your name
o The Fund's name
o Your Fund account number (from your account statement) o The dollar
amount or number of shares to be redeemed o Any special payment
instructions o Any share certificates for the shares you are selling, o
The signatures of all registered owners exactly as the account is
registered, and
o 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 Ave.,
Denver, Colorado 80217 Building D
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.
o To redeem shares through a service representative, call 1-800-852-8457 o
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.
o 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.
o TELEPHONE REDEMPTIONS THROUGH ACCOUNTLINK OR BY WIRE. 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.
Shareholders may also have the Transfer Agent send redemption proceeds of
$2,500 or more by Federal Funds wire to a designated commercial bank account.
The bank must be a member of the Federal Reserve wire system. There is a $10 fee
for each Federal Funds wire. To place a wire redemption request, call the
Transfer Agent at 1-800-852-8457. The wire will normally be transmitted on the
next bank business day after the shares are redeemed. There is a possibility
that the wire may be delayed up to seven days to enable the Fund to sell
securities to pay the redemption proceeds. No dividends are accrued or paid on
the proceeds of shares that have been redeemed and are awaiting transmittal by
wire. To establish wire redemption privileges on an account that is already
established, please contact the Transfer Agent for instructions.
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 call your dealer for more
information about this procedure. 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:
o Shares of the fund selected for exchange must be available for sale in
your state of residence
o The prospectuses of this Fund and the fund whose shares you want to buy
must offer the exchange privilege
o 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
o You must meet the minimum purchase requirements for the fund you
purchase by exchange
o 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:
o 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."
o 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:
o 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.
o 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.
o 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.
o 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.
o 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
o 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 Trustees 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.
o 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 Trustees at any time the Board believes it is in the Fund's best
interest to do so.
o 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.
o 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.
o 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.
o 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 or improperly.
o THE REDEMPTION PRICE FOR SHARES WILL VARY from day to day because the
value of the securities in the Fund's portfolio fluctuates, and the redemption
price, which is the net asset value per share, will normally be different for
Class A, Class B and Class C shares. Therefore, the redemption value of your
shares may be more or less than their original cost.
o 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 FEDERAL FUNDS WIRE, CERTIFIED CHECK OR ARRANGE TO HAVE YOUR
BANK TO PROVIDE TELEPHONE OR WRITTEN ASSURANCE TO THE TRANSFER AGENT THAT YOUR
PURCHASE PAYMENT HAS CLEARED.
o 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.
o 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.
o "BACKUP WITHHOLDING" of Federal income tax may be applied at the rate of
31% taxable from dividends, distributions and redemption proceeds (including
exchanges) if you fail to furnish the Fund a correct and properly certified
Social Security or Employer Identification Number when you sign your
application, or if you underreport your income to the Internal Revenue Service.
o 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.
o 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 and
Class C 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 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 than for Class A shares. 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 its fiscal year which
ended October 31. 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:
o 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.
o 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.
o 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.
o REINVEST YOUR DISTRIBUTIONS IN ANOTHER OPPENHEIMER FUND ACCOUNT. You can
reinvest all distributions in the same class of shares of 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 have 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. So that the Fund will
not have to pay taxes on the amounts it distributes to shareholders as dividends
and capital gains, the Fund intends to manage its investments so that it will
qualify as a "regulated investment company" under the Internal Revenue Code,
although it reserves the right not to qualify in a particular year.
o "BUYING A DIVIDEND": 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.
o 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.
o 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.
-14-
<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
o REDUCED CLASS A INITIAL SALES CHARGE RATES FOR CERTAIN FORMER QUEST
SHAREHOLDERS
o 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 28 and 29 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.
O 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:
o 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.
o 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.
O 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:
o 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.
o 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
O 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.
O 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.
A-1
<PAGE>
APPENDIX B
DESCRIPTION OF RATINGS
BOND RATINGS
o 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.
o 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.
o 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.
o 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; (c) 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.
o 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+").
o 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.
o 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.
o 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.
o 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".
B-1
<PAGE>
APPENDIX TO PROSPECTUS OF
OPPENHEIMER QUEST OFFICERS VALUE FUND
Graphic material included in Prospectus of Oppenheimer Quest Officers Value
Fund: "Comparison of Total Return of Oppenheimer Quest Officers Value Fund with
the S&P MidCap 400 Index - Change in Value of $10,000 Hypothetical Investment in
Class A Shares of Oppenheimer Quest Officers Value Fund and the S&P MidCap 400
Index"
A linear graph will be included in the Prospectus of Oppenheimer Quest
Officers Value Fund (the "Fund") depicting the initial account value and
subsequent account value of a hypothetical $10,000 investment in the Fund. That
graph will cover the performance of Class A shares of the Fund since inception
(November 8, 1994) to 10/31/97; Class B and Class C shares are not included as
such shares are not currently issued. The graph will compare such values with
hypothetical $10,000 investment over the time period indicated below in the S&P
Index 400. 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 MidCap 400 Index, is set forth in the Prospectus under
"Performance of the Fund - Comparing the Fund's Performance to the Market."
Fiscal
Period Oppenheimer Quest S&P MidCap
ENDED OFFICERS VALUE FUND INDEX
11/08/94 $10,000 $10,000
10/31/95 $12,344 $12,119
10/31/96 $16,686 $14,219
10/31/97 $16,945 $18,863
(1) Performance information for the S&P MidCap 400 Index begins on 10/31/94 for
Class A shares.
B-2
<PAGE>
OPPENHEIMER QUEST OFFICERS VALUE FUND
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
OPPENHEIMERFUNDS INTERNET WEB SITE:
http://www.oppenheimerfunds.com
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\229psp.#4
B-3
<PAGE>
OPPENHEIMER QUEST OFFICERS VALUE FUND
Two World Trade Center, New York, New York 10048
1-800-525-7048
STATEMENT OF ADDITIONAL INFORMATION DATED JANUARY 26, 1998
This Statement of Additional Information of Oppenheimer Quest Officers Value
Fund is not a Prospectus. This document contains additional information about
the Fund and supplements information in the Prospectus dated January 26, 1998.
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......................................
Investment Policies and Strategies................................
Other Investment Techniques and Strategies........................
Other Investment Restrictions......................................
How the Fund is Managed ...............................................
Organization and History..........................................
Trustees and Officers of the Trust.................................
The Manager and Its Affiliates.....................................
Brokerage Policies of the Fund.........................................
Performance of the Fund................................................
Distribution and Service Plans.........................................
ABOUT YOUR ACCOUNT
How To Buy Shares.....................................................
How To Sell Shares...................................................
How To Exchange Shares...............................................
Dividends, Capital Gains and Taxes...................................
Additional Information About the Fund..................................
FINANCIAL INFORMATION ABOUT THE FUND
Report of Independent Accountants....................................
Financial Statements...................................................
APPENDIX A: Corporate Industry Classifications......................A-1
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ABOUT THE FUND
INVESTMENT OBJECTIVE AND POLICIES
INVESTMENT POLICIES AND STRATEGIES. The investment objective and policies of the
Fund are described in the Prospectus. The Fund is one of four portfolios of
Oppenheimer Quest For Value Funds (the "Trust"). 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.
O FOREIGN SECURITIES. The Fund may invest in securities (which may be
denominated in U.S. dollars or non-U.S. currencies) issued or guaranteed by
foreign corporations, certain supranational entities (described below) and
foreign governments or their agencies or instrumentalities, and in securities
issued by U.S. corporations denominated in non-U.S. currencies. All such
securities are referred to as "foreign securities."
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 Trust's Board of Trustees to the extent that
approval is required under applicable rules of the Securities and Exchange
Commission (the "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.
o 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.
o EMERGING MARKET COUNTRIES: Certain developing countries may have
relatively unstable governments, economies based on only a few industries that
are dependent upon international trade, and reduced secondary market liquidity.
Foreign investment in certain emerging market countries is restricted or
controlled in varying degrees. In the past, securities in these countries have
experienced greater price movement, both positive and negative, than securities
of companies located in developed countries. Lower-rated high-yielding emerging
market securities may be considered to have speculative elements.
O U.S. GOVERNMENT OBLIGATIONS. 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.
o 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:
o 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.
o 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 Trustees deter
mines 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.
o CONVERTIBLE SECURITIE 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.
o 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. 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.
o LOWER-GRADE SECURITIES. As stated in the Prospectus, the Fund may invest
up to 25% of its net assets in bonds rated below Baa3 by Moody's or BBB- by
Standard & Poor's (commonly known as "high yield" or "junk bonds"). The Manager
will not rely solely on the ratings assigned by rating services and may invest,
without limit, in unrated securities which offer, in the opinion of the Manager,
yields and risks comparable to those of rated securities in which the Fund may
invest.
Some of the principal risks of high yield securities include: (i) limited
liquidity and secondary market support, (ii) substantial market price volatility
resulting from changes in prevailing interest rates, (iii) subordination of the
holder's claims to the prior claims of banks and other senior lenders in
bankruptcy proceedings, (iv) the operation of mandatory sinking fund or
call/redemption provisions during periods of declining interest rates, whereby
the holder might receive redemption proceeds at times when only lower-yielding
portfolio securities are available for investment, (v) the possibility that
earnings of the issuer may be insufficient to meet its debt service, and (vi)
the issuer's low creditworthiness and potential for insolvency during periods of
rising interest rates and economic downturn. Some high yield bonds pay interest
in kind rather than in cash.
As a result of the limited liquidity of high yield securities, their
prices have at times experienced significant and rapid decline when a
significant number of holders of high yield securities simultaneously decided to
sell them. A decline is also likely in the high yield bond market during an
economic downturn. An economic downturn or an increase in interest rates could
severely disrupt the market for high yield securities and adversely affect the
value of outstanding securities and the ability of the issuers to repay
principal and interest. In addition, in recent years there have been several
Congressional attempts to limit the use or limit tax and other advantages of
high yield bonds. If enacted, such proposals could adversely affect the value of
these securities and consequently the Fund's net asset value per share. For
example, federally insured savings and loan associations have been required to
divest their investments in high yield securities.
O WARRANTS AND RIGHTS. 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 short duration 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.
O 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 sell them and can reduce the price the Fund might
be able to obtain for them. If other investors holding the same securities as
the Fund sell them 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.
o 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, and pursuant to the requirements of the
Investment Company Act, will be made only to the extent that the value of that
Fund's assets, less its liabilities other than borrowings, is equal to at least
300% of all borrowings as set forth in the Investment Company Act including the
proposed borrowing and amounts covering the Fund's obligations under "forward
roll" transactions. 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.
OTHER INVESTMENT TECHNIQUES AND STRATEGIES
o 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 takes 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.
o 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 having total domestic assets of at least $1
billion or a broker-dealer with a net worth of at least $50 million and which
has been designated a primary dealer in government securities) that must meet
credit requirements set by the Trust's Board of Trustees 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.
The Fund may enter into reverse repurchase agreements. Under a reverse
repurchase agreement, the Fund sells securities and agrees to repurchase them at
a mutually agreed upon date and price. At the time the Fund enters into a
reverse repurchase agreement, it will establish and maintain a segregated
account with an approved custodian containing liquid assets of any type
including equity and debt securities of any grade having a value not less than
the repurchase price (including accrued interest). Reverse repurchase agreements
involve the risk that the market value of the securities retained in lieu of
sale by the Fund may decline more than or appreciate less than the securities
the Fund has sold but is obligated to repurchase. In the event the buyer of
securities under a reverse repurchase agreement files for bankruptcy or becomes
insolvent, such buyer or its trustee or receiver may receive an extension of
time to determine whether to enforce the Fund's obligation to repurchase the
securities and the Fund's use of the proceeds of the reverse repurchase
agreements may effectively be restricted pending such decisions. Reverse
repurchase agreements create leverage, a speculative factor, and will be
considered borrowings for purposes of the Fund's limitation on borrowing.
O 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. Illiquid
securities include repurchase agreements maturing in more than seven days, or
certain participation interests other than those with puts exercisable within
seven days.
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
Trustees of the Trust 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.
O 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.
o 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,
securities indices or securities. 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.
o 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.
o 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 sale
price of the underlying investment and the premium received minus the sum of the
exercise price and any transaction costs incurred.
When writing put options, 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.
o 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).
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.
o 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.
o 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, under the Rule the Fund must
limit its aggregate initial futures margins and related options premiums to 5%
or less of the Fund's total assets for hedging strategies that are considered
bona fide hedging strategies under the Rule. Under the Rule the Fund also must
use short future and options on futures positions solely for bona fide hedging
purposes within the meaning and intent of applicable provisions of the Commodity
Exchange Act.
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.
o 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
mark-to-market value of any OTC option held by it unless the option is subject
to a buy-back agreement by the executing broker. The 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 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.
o TAX ASPECTS OF COVERED CALLS AND HEDGING INSTRUMENTS. The Fund intends to
qualify as a "regulated investment company" although there is no guarantee that
it will qualify under the Internal Revenue Code. That qualification enables the
Fund to "pass through" its income and realized capital gains to shareholders
without 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).
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 and timing of gains (or losses) recognized 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 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.
o ADDITIONAL RISK FACTORS IN HEDGING. 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:
o 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;
o 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);
o Mortgage, hypothecate or pledge any of its assets;
o Invest or hold securities of any issuer if the Officers and Trustees of
the Fund or its Manager or Sub-Adviser owning individually more then 1/2 of 1%
of the securities of such issuer together own more than 5% of the securities of
such issuer; or
o 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);
o invest in physical commodities or physical commodity contracts; however,
the Fund may: (i) buy and sell hedging instruments to the extent specified in
its Prospectus from time to time, and (ii) buy and sell options, futures,
securities or other instruments backed by, or the investment return from which
is linked to changes in the price of, physical commodities; or
o 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.
NON-FUNDAMENTAL INVESTMENT RESTRICTIONS. The following operating policies of the
Fund are not fundamental policies and, as such, may be changed by vote of a
majority of the Board of Trustees without shareholder approval. These additional
restrictions provide that the Fund cannot:
o purchase securities on margin, or make short sales of securities;
o make loans to any person or individual (except that portfolio securities
may be loaned within the limitations set forth in the Prospectus); or
o 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 A to this Statement of Additional Information. The percentage
restrictions described above and in the Prospectus apply only at the time of
investment and require no action by the Fund as a result of subsequent changes
in relative values.
-2-
<PAGE>
HOW THE FUND IS MANAGED
ORGANIZATION AND HISTORY. The Fund is one of four portfolios of the Trust, a
Massachusetts business trust named Oppenheimer Quest For Value Funds. This
Statement of Additional Information may be used with the Fund's Prospectus only
to offer shares of the Fund.
The Trustees are authorized to create new series and classes of series.
The Trustees may
reclassify unissued shares of the Trust or its series or classes into additional
series or classes of shares. The Trustees 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 Massachusetts business trust, 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 Trustees or upon
proper request of the shareholders. Shareholders have the right, upon the
declaration in writing or vote of two-thirds of the outstanding shares of the
Fund, to remove a Trustee. The Trustees will call a meeting of shareholders to
vote on the removal of a Trustee upon the written request of the record holders
of 10% of its outstanding shares. In addition, if the Trustees receive a request
from at least 10 shareholders (who have been shareholders for at least six
months) holding shares of the Fund valued at $25,000 or more or holding at least
1% of the Fund's outstanding shares, whichever is less, stating that they wish
to communicate with other shareholders to request a meeting to remove a Trustee,
the Trustees will then either make the Fund's shareholder list available to the
applicants or mail their communication to all other shareholders at the
applicants' expense, or the Trustees may take such other action as set forth
under Section 16(c) of the Investment Company Act.
The Trust's Declaration of Trust contains an express disclaimer of
shareholder or Trustee liability for the Fund's obligations, and provides for
indemnification and reimbursement of expenses out of its property for any
shareholder held personally liable for its obligations. The Declaration of Trust
also provides that the Fund shall, upon request, assume the defense of any claim
made against any shareholder for any act or obligation of the Fund and satisfy
any judgment thereon. Thus, while Massachusetts law permits a shareholder of a
business trust (such as the Fund) to be held personally liable as a "partner"
under certain circumstances, the risk of a Fund shareholder incurring financial
loss on account of shareholder liability is limited to the relatively remote
circumstances in which the Fund would be unable to meet its obligations
described above. Any person doing business with the Trust, and any shareholder
of the Trust, agrees under the Trust's Declaration of Trust to look solely to
the assets of the Trust for satisfaction of any claim or demand which may arise
out of any dealings with the Trust, and the Trustees shall have no personal
liability to any such person, to the extent permitted by law.
TRUSTEES AND OFFICERS OF THE TRUST. The Trust's Trustees 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 Trustees are directors or trustees of Oppenheimer Quest For
Value Funds (Oppenheimer Quest Opportunity Value Fund, Oppenheimer Quest Growth
& Income Value Fund, Oppenheimer Quest Small Cap Value Fund and Oppenheimer
Quest Officers Value Fund), Oppenheimer Quest Value Fund, Inc., Oppenheimer
Quest Global Value Fund, Inc. and Oppenheimer Quest Capital Value Fund, Inc.
(collectively, the "Oppenheimer Quest Funds"), Rochester Portfolio Series -
Limited-Term New York Municipal Fund, Bond Fund Series -Oppenheimer Bond Fund
For Growth and Rochester Fund Municipals (collectively, the "Oppenheimer
Rochester Funds") and Oppenheimer MidCap Fund. As of January 2, 1998, the
Trustees and officers of the Trust as a group owned less than 1% of the
outstanding 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 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 TRUSTEES AND PRESIDENT(1); Age: 49
President (since June 1991), Chief Executive Officer (since September 1995) and
a Director (since December 1994) of the Manager; President and director (since
June 1991) of HarbourView Asset Management Corporation ("HarbourView"), a
subsidiary of the Manager; Chairman and a director of Shareholder Services, Inc.
("SSI") (since August 1994) and Shareholder Financial Services, Inc. ("SFSI")
(September 1995), transfer agent subsidiaries of the Manager; President (since
September 1995) and a director (since October 1990) of Oppenheimer Acquisition
Corp. ("OAC"), the Manager's parent holding company; President (since September
1995) and a director (since November 1989) of Oppenheimer Partnership Holdings,
Inc., a holding company subsidiary of the Manager; a director of Oppenheimer
Real Asset Management, Inc. (since July 1996); President and a director (since
October 1997) of OppenheimerFunds International Ltd. ("OFIL"), an offshore fund
manager subsidiary of the Manager and Oppenheimer Millennium Funds plc (since
October 1997); President and a director of other Oppenheimer funds; a director
of the NASDAQ Stock Market, Inc. and of Hillsdown Holdings plc (a U.K. food
company); formerly an Executive Vice President of the Manager.
PAUL Y. CLINTON, TRUSTEE; AGE: 66
39 Blossom Avenue, Osterville, Massachusetts 02655
Principal of Clinton Management Associates (financial and venture capital
consulting firm); Trustee of Capital Cash Management Trust (money-market fund)
and Narragansett Tax-Free Fund (tax-exempt bond fund); Director of OCC Cash
Reserves, Inc. and Trustee of OCC Accumulation Trust, (both open-end investment
companies). Formerly: Director, External Affairs, Kravco Corporation, ( national
real estate owner and property management corporation); President of Essex
Management Corporation (management consulting company); a general partner of
Capital Growth Fund (venture capital partnership); a general partner of Essex
Limited Partnership ( investment partnership); President of Geneve Corp.
(venture capital fund); Chairman of Woodland Capital Corp. (small business
investment company); and Vice President of W.R. Grace & Co.
- -------------------
1Trustee who is an "interested person" (as deined in the Investment Company Act)
of the Fund and the Trust.
THOMAS W. COURTNEY, TRUSTEE; AGE: 64
833 Wyndemere Way, Naples, Florida 34105
Principal of Courtney Associates, Inc. (venture capital firm); former General
Partner of Trivest Venture Fund (private venture capital fund); Trustee of Cash
Assets Trust, (money market fund); Director of OCC Cash Reserves, Inc., and
Trustee of OCC Accumulation Trust, both open-end investment companies); Trustee
of Hawaiian Tax-Free Trust and Tax Free Trust of Arizona, (both tax-exempt bond
funds); Director of several privately owned corporations. Formerly President of
Investment Counseling Federated Investors, Inc.; former President of Boston
Company Institutional Investors; Director of Financial Analysts Federation.
LACY B. HERRMANN, TRUSTEE; AGE: 68
380 Madison Avenue, Suite 2300, New York, New York 10017
Chairman and Chief Executive Officer of Aquila Management Corporation
(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, Aquila Cascadia Equity Fund,
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 OCC Cash Reserves, Inc.,
and Trustee of OCC Accumulation Trust (both open-end investment companies);
Trustee Emeritus of Brown University.
GEORGE LOFT, TRUSTEE; AGE: 82
51 Herrick Road, Sharon, Connecticut 06069
Private Investor; Director of OCC Cash Reserves, Inc. and Trustee of OCC
Accumulation Trust (both open-end investment companies).
ROBERT C. DOLL, JR., VICE PRESIDENT; AGE: 43
Executive Vice President and Director of the Manager (since January 1993) ;
Executive Vice President of HarbourView (since January 1993); Vice President and
a director of OAC (since September 1995); an officer of other Oppenheimer funds.
JEFFREY C. WHITTINGTON, PORTFOLIO MANAGER; AGE 40
One World Financial Center, 200 Liberty Street, New York, New York 10281 Senior
Vice President of Oppenheimer Capital; formerly a portfolio manager at Neuberger
& Berman and prior thereto, a portfolio manager at Oppenheimer & Co., Inc.
ANDREW J. DONOHUE, SECRETARY; AGE: 47
Executive Vice President (since January 1993), General Counsel (since October
1991) and a Director (since September 1995) of the Manager; Executive Vice
President (since September 1993), and a director (since January 1992) of
OppenheimerFunds Distributor, Inc. (the "Distributor"); Executive Vice
President, General Counsel and a director of HarbourView, SSI, SFSI and
Oppenheimer Partnership Holdings, Inc. since (September 1995) and MultiSource
Services, Inc. (a broker-dealer) (since December 1995); President and a director
of Centennial Asset Management Corporation ("Centennial") (since September
1995); President and a director of Oppenheimer Real Asset Management, Inc.
(since July 1996); General Counsel (since May 1996) and Secretary (since April
1997) of OAC; Vice President of OFIL and Oppenheimer Millennium Funds plc (since
October 1997); an officer of other Oppenheimer funds.
GEORGE C. BOWEN, TREASURER; AGE: 61
6803 South Tucson Way, Englewood, Colorado 80112
Senior Vice President (since September 1987) and Treasurer (since March 1985) of
the Manager; Vice President (since June 1983) and Treasurer (since March 1985)
of the Distributor; Vice President (since October 1989) and Treasurer (since
April 1986) of HarbourView; Senior Vice President (since February 1992),
Treasurer (since July 1991) and a director (since December 1991) of Centennial;
President, Treasurer and a director of Centennial Capital Corporation (since
June 1989); Vice President and Treasurer (since August 1978) and Secretary
(since April 1981) of SSI; Vice President, Treasurer and Secretary of SFSI
(since November 1989); Treasurer of OAC (since June 1990); Treasurer of
Oppenheimer Partnership Holdings, Inc. (since November 1989); Vice President and
Treasurer of Oppenheimer Real Asset Management, Inc. (since July 1996); Chief
Executive Officer, Treasurer and a director of MultiSource Services, Inc., a
broker-dealer (since December 1995); an officer of other Oppenheimer funds.
ROBERT BISHOP, ASSISTANT TREASURER; AGE: 39
6803 South Tucson Way, Englewood, Colorado 80112
Vice President of the Manager/Mutual Fund Accounting (since May 1996); an
officer of other Oppenheimer funds; formerly an Assistant Vice President of the
Manager/Mutual Fund Accounting (April 1994-May 1996), and a Fund Controller for
the Manager.
SCOTT T. FARRAR, ASSISTANT TREASURER; AGE: 32
6803 South Tucson Way, Englewood, Colorado 80112
Vice President of the Manager/Mutual Fund Accounting (since May 1996);
Assistant Treasurer of Oppenheimer Millennium Funds plc (since October 1997);
an officer of other Oppenheimer funds;
formerly an Assistant Vice President of the Manager/Mutual Fund Accounting
(April 1994-May 1996), and a Fund Controller for the Manager.
ROBERT G. ZACK, ASSISTANT SECRETARY; AGE: 49
Senior Vice President (since May 1985) and Associate General Counsel (since May
1981) of the Manager, Assistant Secretary of SSI (since May 1985), and SFSI
(since November 1989); Assistant Secretary of Oppenheimer Millennium Funds plc
(since October 1997); an officer of other Oppenheimer funds.
o REMUNERATION OF TRUSTEES. All officers of the Trust and Ms. Macaskill, a
Trustee, are officers or directors of the Manager and receive no salary or fee
from the Fund. The remaining Trustees of the Trust received the total amounts
shown below from (i) the Fund during its fiscal year ended October 31, 1997 and
(ii) other investment companies (or series thereof) managed by the Manager
and/or the Sub-Adviser paid during the calendar year ended December 31, 1997.
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 $2,767 None None $68,379
Thomas W. Courtney $2,767 None None $68,379
Lacy B. Herrmann $2,491 None None $63,154
George Loft $2,767 None None $68,379
(1) For the purpose of the chart above, "Fund Complex" includes the Oppenheimer
Quest Funds (including the Fund), the Oppenheimer Rochester
Funds, Oppenheimer MidCap Fund and three other
funds advised by the Sub-Adviser (the "Sub-Adviser Funds"). For these purposes,
each series constitutes a separate fund. Messrs. Clinton and Courtney served as
directors or trustees of two Sub- Adviser Funds, for which they are to receive
$49,250 and $49,250, respectively, and Messrs. Herrmann and Loft served as a
directors or trustees of three Sub-Adviser Funds, for which they are to receive
$45,388 and $50,688, respectively. Effective April 1997, Messrs. Herrmann and
Loft resigned as trustees from the third Sub-Adviser fund.
DEFERRED COMPENSATION PLAN. The Board of Trustees has adopted a Deferred
Compensation plan for disinterested Trustees that enables Trustees to elect to
defer receipt of all or a portion of the annual fees they are entitled to
receive from the Fund. Under the plan, the compensation deferred by a Trustee is
periodically adjusted as though an equivalent amount had been invested in shares
of one or more Oppenheimer funds selected by the Trustee. The amount paid to the
Trustee under the plan will be determined based upon the performance of the
selected funds. Deferral of Trustees' fees under the plan will not materially
affect the Fund's assets, liabilities or net income per share. The plan will not
obligate the Fund to retain the services of any Trustee or to pay any particular
level of compensation to any Trustee. Pursuant to an Order issued by the
Securities and Exchange Commission, the Fund may, without shareholder approval,
invest in the funds selected by the Trustee under the plan for the limited
purpose of determining the value of the Trustee's deferred fee account.
o MAJOR SHAREHOLDERS. Although the Fund is authorized to issue three classes of
shares, currently only Class A shares have been issued and are outstanding. As
of January 2, 1998, no person owned of record or was known by the Fund to own
beneficially 5% or more of the Fund's Class A shares except: CIBC Oppenheimer
Capital (Accumulation Plan Omnibus Account), Oppenheimer Tower, 1 World
Financial Center, New York, New York 10281-1003 which owned of record
204,284.917 Class A shares (approximately 38.03% of the Class A shares then
outstanding).
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 Trust and one
of whom (Ms. Macaskill) also serves as an officer and a Trustee of the Trust.
The Manager and the Trust 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 Fund's portfolio
transactions. Compliance with the Code of Ethics is carefully monitored and
strictly enforced by the Manager.
o PORTFOLIO MANAGEMENT. The Portfolio Manager of the Fund is Jeffrey C.
Whittington, who is principally responsible for the day-to-day management of the
Fund's portfolio. Mr. Whittington's background is described in the Prospectus
under "Portfolio Manager".
o THE INVESTMENT ADVISORY AGREEMENT. The Manager acts as investment
adviser to the Fund pursuant to the terms of an Investment Advisory Agreement
dated May 27, 1997, as amended on October 22, 1997, which replaced the
investment advisory agreement dated as of November 22, 1995. The Investment
Advisory Agreement was approved by the Board of Trustees, including a majority
of the Trustees who are not "interested persons" of the Trust (as defined in the
Investment Company Act) and who have no direct or indirect financial interest in
such agreement on February 4, 1997 and by the shareholders of the Fund at a
meeting held for that purpose on May 6, 1997. The Sub-Adviser previously served
as the Fund's investment adviser from the Fund's inception (November 8, 1994) 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 Trust. The
administrative services to be provided by the Manager under the Investment
Advisory Agreement will be at its own expense, except that the Fund will pay the
Manager an annual fee for calculating the Fund's daily net asset value at an
annual rate of $6,000, 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. Expenses with respect to the Trust's four portfolios,
including the Fund, are allocated in proportion to the net assets of the
respective portfolio, except where allocations of direct expenses could be made.
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 Trustees, 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 22,
1995 (when the Manager became the investment adviser to the Fund) to October 31,
1996 (the "Fiscal Period") and the fiscal year ended October 31, 1997, the Fund
paid to the Manager $58,216 and $60,074 respectively, in management fees. During
the Fiscal Period and the fiscal year ended October 31, 1997, the Fund also paid
or accrued accounting service fees to the Manager in the amount of $5,633 and
$5,987, respectively.
The Investment Advisory Agreement contains no expense limitation. However,
independently of the Agreement, effective August 1, 1996, the Manager
voluntarily agreed to waive that portion of its management fee equal to what the
Manager would have been required to pay the Sub-Adviser under the Subadvisory
Agreement described below. As a result of this fee waiver, the effective
management fee rates for the Fiscal Period and the fiscal year ended October 31,
1997 were 0.87% and 0.66%, respectively.
Pursuant to this undertaking, the Manager's fee at the end of any month
will be reduced or eliminated such that there will not be any accrued but unpaid
liability under this fee waiver. The Manager reserves the right to terminate or
amend the undertaking at any time. The Fund's overall expense ratio would be
reduced and its total return increased during any period in which fees were
waived.
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" or
"Quest For Value" 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" or "Quest For Value" 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 5, 1997, with respect to the Fund,
described below, which replaced the Subadvisory Agreement dated as of November
22, 1995.
o FEES PAID UNDER THE PRIOR INVESTMENT ADVISORY AGREEMENT. The Sub-Adviser
served as investment adviser to the Fund from its inception until November 22,
1995. Under the prior Investment Advisory Agreement, the total advisory fees
accrued or paid by the Fund were $28,182 for the fiscal period from November 8,
1994 to October 31 1995, and $2,324 for the fiscal period November 1, 1995 to
November 22, 1995 (the "Interim PeNo amounts were payable by the Fund for the
period from November 8, 1994 to October 31, 1995 and the Interim Period for
accounting services fees.
o 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 Trustees, including a
majority of the Trustees who are not "interested persons" of the Trust (as
defined in the Investment Company Act) and who have no direct or indirect
financial interest in such agreement, on February 28, 1997 and by the
shareholders of the Fund at a meeting held for that purpose on May 6, 1997.
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 November 22, 1995 (the
"Base Amount") plus 30% of the investment advisory fee collected by the Manager
based on the total net assets of the Fund that exceed the Base Amount. Effective
August 1, 1996, the Sub-Adviser voluntarily agreed to waive its subadvisory fee.
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 Sub-Adviser is a majority owned subsidiary of Oppenheimer
Capital, a registered investment advisor, whose employees perform all investment
advisory services provided to the Fund by the Sub-Adviser. On November 4, 1997,
PIMCO Advisors L.P. ("PIMCO Advisors"), a registered investment adviser with
$125 billion in assets under management through various subsidiaries and
affiliates, acquired control of Oppenheimer Capital and the Sub-Adviser. On
November 5, 1997, the new Sub-advisory Agreement between the Sub-Adviser and the
Manager became effective. On November 30, 1997, Oppenheimer Capital merged with
a subsidiary of PIMCO Advisors and, as a result, Oppenheimer Capital and the
Sub-Adviser became indirect wholly-owned subsidiaries of PIMCO Advisors. PIMCO
Advisors has two general partners: PIMCO Partners, G.P., a California general
partnership ("PIMCO GP"), and PIMCO Advisors Holdings L.P. (formerly Oppenheimer
Capital, L.P.), an NYSE-listed Delaware limited partnership of which PIMCO GP is
the sole general partner.
PIMCO GP beneficially owns or controls (through its general partner
interest in Oppenheimer Capital, L.P.) greater than 80% of the units of limited
partnership ("Units") of PIMCO Advisors. PIMCO GP has two general partners. The
first of these is Pacific Investment Management Company, a wholly-owned
subsidiary of Pacific Financial Asset Management Company, which is a direct
subsidiary of Pacific Life Insurance Company ("Pacific Life").
The managing general partner of PIMCO GP is PIMCO Partners L.L.C.
("PPLLC"), a California limited liability company. PPLLC's members are the
Managing Directors (the "PIMCO Managers") of Pacific Investment Management
Company, a subsidiary of PIMCO Advisors (the "PIMCO Subpartnership"). The PIMCO
Managers are: William H. Gross, Dean S. Meiling, James F. Muzzy, William F.
Podlich, III, Brent R. Harris, John L. Hague, William S. Thompson Jr., William
C. Powers, David H. Edington, Benjamin Trosky, William R. Benz, II and Lee R.
Thomas, III.
PIMCO Advisors is governed by a Management Board, which consists of
sixteen members, pursuant to a delegation by its general partners. PIMCO GP has
the power to designate up to nine members of the Management Board and the PIMCO
Subpartnership, of which the PIMCO Managers are the Managing Directors, has the
power to designate up to two members. In addition, PIMCO GP, as the controlling
general partner of PIMCO Advisors, has the power to revoke the delegation to the
Management Board and exercise control of PIMCO Advisors. As a result, Pacific
Life and/or the PIMCO Managers may be deemed to control PIMCO Advisors. Pacific
Life and the PIMCO Managers disclaim such control.
o THE DISTRIBUTOR. Under a General Distributor's Agreement with the Trust
dated as of November 22, 1995, the Distributor acts as the Fund's principal
underwriter in the continuous public offering of Class A, Class B and Class C
shares of the Fund but is not obligated to sell a specific number of shares. To
date, Class B and Class C shares have not been issued. 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, 1997,
the aggregate amount of sales charges on sales of the Fund's Class A shares was
$1,822, of which the Distributor and affiliated brokers retained. 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.
o 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.
o 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 Trust's Board of
Trustees under applicable rules of the 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 Trust 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 consid eration 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 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 period from November 8, 1994
(commencement of operations) to October 31, 1995 and the fiscal years ended
October 31, 1996 and 1997. Prior to
November 3, 1997,
Oppenheimer & Co., Inc. ("OpCo"), a broker-dealer, was an affiliate of the
Sub-Adviser.
<TABLE>
<CAPTION>
Total Amount
of
Total Transactions Where
For the Fiscal Brokerage Brokerage Commissions Brokerage
Commissionsr Commissions Paid to Opco PAID TO OPCO
Period/Year
ENDED OCTOBER 31 PAID DOLLAR AMOUNT % DOLLAR AMOUNT %
- ---------------- ---- -------------- ------------
<S> <C> <C> <C> <C> <C> <C>
1995 $11,593 $ 4,461 38.5% $2,153,416 39.8%
1996 $34,368 $13,921 40.5% $8,359,426 34.3%
1997 $39,359 $13,558 34.4 % $4,535,870 20.2%
</TABLE>
During the Fund's fiscal year ended October 31, 1997, $3,255 was paid by
the Fund to brokers as commissions in return for research services; the
aggregate dollar amount of those transactions was $1,589,791.
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.
The Fund's advertisements of its performance data must, under applicable
SEC rules 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. To date, Class B and Class C shares have not been issued;
accordingly, performance information for such classes of shares is not set forth
below.
Total returns for the Fund for the period November 8, 1994 (commencement
of operations) to October 31, 1997 and the one year period ended October 31,
1997 reflect the waiver of management fees and distribution expenses as
described herein. Without such waivers, the total returns for the Fund for such
periods would have been lower. These waivers became effective on August 1, 1996.
O 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 year period ended
October 31, 1997 and for the period from November 8, 1994 (commencement of
operations) to October 31, 1997 were (4.28%) and 17.01%, respectively.
o 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 (5.0% for the first year, 4.0% for the second
year, 3.0% for the third and fourth years, 2.0% for the fifth year, 1.0% 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). 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
November 8, 1994 (commencement of operations) to October 31, 1997 was 59.71%.
O 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 or Class C 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 cumulative total return at net asset value on the Fund's Class A
shares for the period from November 8, 1994 (commencement of operations) to
October 31, 1997 was 69.46%.
The average annual total returns at net asset value for Class A shares for the
one year period ended October 31, 1997 and for the period from November 8, 1994
through October 31, 1997 were 1.56% and 19.36%, respectively.
OTHER PERFORMANCE COMPARISONS. From time to time the Fund may publish the
ranking of its Class A, Class B or Class C 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 would be ranked
against (i) all other funds and (ii) all other capital appreciation funds. 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 star ranking of the performance
of its Class A, Class B or Class C shares by Morningstar, Inc. ("Morningstar"),
an independent mutual fund monitoring service. Morningstar ranks mutual funds in
broad investment categories (domestic stock funds, international stock funds,
taxable bond funds, municipal bond funds) based on risk-adjusted total
investment return. The Fund is ranked among domestic equity funds. Investment
return measures a fund's or class's one, three, five and ten-year average annual
total returns (depending on the inception of the fund or class) in excess of
90-day U.S. Treasury bill returns after considering a fund's 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%). The current star rankings is the
fund's or class's 3-year ranking or its combined 3 and 5-year ranking (weighted
60%/40% respectively), or its combined 3-,5-and 10-year ranking (weighted 40%,
30% and 30%, respectively) depending on the inception of the fund or class.
Rankings are subject to change monthly. From time to time, the Fund may include
in 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 Fund may also compare its performance to that of other funds in its
Morningstar category. In addition to its star ranking, Morningstar also
categorizes and compares a fund's 3-year performance based on Morningstar's
classification of the fund's investment objective. Morningstar's four broad
categories are each further subdivided into categories based on types of
investments and investment styles. Those comparisons by Morningstar are based on
the same risk and return measurements as its star rankings but do not consider
the effect of sales charges.
The total return on an investment in the Fund's Class A, Class B or Class
C shares may be compared with performance for the same period of the S&P MidCap
400 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, or Class C 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 or Class C shares. However, when
comparing total return of an investment in Class A, Class B and Class C 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, an
investor may also wish to compare the Fund's Class A, Class B or Class C 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 Trust has adopted separate Amended and Restated Distribution and
Service Plans and Agreements, each dated November 22, 1996, 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. Each Plan has been
approved by (i) a vote of the Board of Trustees of the Trust, including a
majority of the Trustees 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 Trustees"), cast in person at a meeting on February 4, 1997 called
for the purpose, among others, of voting on those plans and (ii) the holders of
a "majority" (as defined in the Investment Company Act) of the shares of such
class. The Class B and Class C Plans are subject to approval by the shareholders
of such classes; as of this date, Class B and Class C shares have not been
issued.
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 Trust's Board of Trustees and its "Independent Trustees"
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 Trustees 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 an SEC 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 Trustees and the
Independent Trustees.
While the Plans are in effect, the Treasurer of the Trust shall provide
separate written reports to the Trust's Board of Trustees at least quarterly
detailing services rendered in connection with the distribution of the shares,
the amount of all payments made pursuant to each Plan and the purpose for which
the payments were made. 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 Trustees in the exercise of their fiduciary duty. Each Plan
further provides that while it is in effect, the selection and nomination of
those Trustees of the Trust who are not "interested persons" of the Trust is
committed to the discretion of the Independent Trustees. 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
Trustees.
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 Trust's Independent Trustees.
Initially, the Board of Trustees 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 shares of that class sold. An exchange of shares
does not entitle the Recipient to an advance service fee payment. In the event
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 Plans 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.
Effective August 1, 1996, the Distributor voluntarily agreed to waive all
fees payable to it under the Class A Plan. Had the waiver not been in effect,
for the fiscal year ended October 31, 1997, payments under the Plan for Class A
shares would have totaled $45,741. 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 Plans, (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).
-3-
<PAGE>
ABOUT YOUR ACCOUNT
HOW TO BUY SHARES
ALTERNATIVE SALES ARRANGEMENTS - CLASS A, CLASS B AND CLASS C SHARES. The Fund
is authorized to issue three different classes of shares. AS STATED IN THE
PROSPECTUS, CURRENTLY THE ONLY CLASS OF SHARES OFFERED TO INVESTORS IS CLASS A
SHARES, AND SUCH CLASS A SHARES ARE ONLY OFFERED TO CERTAIN INDIVIDUALS AND
ENTITIES. The availability of three classes of shares permits the individual
investor to choose the method of purchasing shares that is more beneficial to
the 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.
The three 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 and Class C 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 Trustees, (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 and Service 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 SHARThe net asset values per share of
Class A, Class B and Class C 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, Martin Luther
King Jr. 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 Trust's Board of Trustees 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 the principal exchange
for such security or NASDAQ that day (the "Valuation Date") or, in the absence
of sales that day, at the last reported sale price preceding the Valuation Date
if it is within the spread of the closing "bid" and "asked" prices on the
Valuation Date or, if not, the closing "bid" price on the Valuation Date; (ii)
equity securities traded on a foreign securities exchange are valued generally
at the last sales price available to the pricing service approved by the Trust's
Board of Trustees or to the Manager as reported by the principal exchange on
which the security is traded at its last trading session on or immediately
preceding the Valuation Date, or, if unavailable, 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) a non-money market
fund will value (x) debt instruments that had a maturity of more than 397 days
when issued, (y) debt instruments that had a maturity of 397 days or less when
issued and have a remaining maturity in excess of 60 days, and (z) non-money
market type debt instruments that had a maturity of 397 days or less when issued
and have a remaining maturity of sixty days or less, at the mean between "bid"
and "asked" prices determined by a pricing service approved by the Trust's Board
of Trustees or, if unavailable, obtained by the Manager from two active market
makers in the security on the basis of reasonable inquiry; (iv) money
market-type debt securities held by a non-money market fund that had a maturity
of less than 397 days when issued and have a remaining maturity of 60 days or
less, and debt instruments held by a money market fund that have a remaining
maturity of 397 days or less, shall be valued at cost, adjusted for amortization
of premiums and accretion of discount; and (v) 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) and (iii) 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 "asked" price is available) provided that the Manager is satisfied that
the firm rendering the quotes is reliable and that the quotes reflect the
current market value.
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 and to price U.S. Government
securities or mortgage-backed securities for which last sale information is not
generally available. The Manager will monitor the accuracy of such pricing
services, which may include comparing prices used for portfolio evaluation to
actual sale 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 Trustees 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 Trustees 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 3 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, dealers and brokers making such sales. No sales
charge is imposed in certain other circumstances described in the Prospectus
because the Distributor or dealer or broker incurs little or no selling
expenses. The term "immediate family" refers to one's spouse, children,
grandchildren, parents, grandparents, parents-in- law, sons- and
daughters-in-law, aunt, uncle, niece, nephew, siblings, a sibling's spouse and a
spouse's siblings. Relations by virtue of a remarriage (step-children,
step-parents, etc. ) are included.
o 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 Discovery Fund
Oppenheimer Capital Appreciation Fund
Oppenheimer Growth Fund
Oppenheimer Equity Income Fund
Oppenheimer Multiple Strategies Fund
Oppenheimer Total Return Fund, Inc.
Oppenheimer Main Street Income & Growth Fund
Oppenheimer MidCap 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 Growth & Income Fund
Oppenheimer Gold & Special Minerals Fund
Oppenheimer Strategic Income Fund
Oppenheimer International Bond Fund
Oppenheimer International Small Company Fund
Oppenheimer Enterprise Fund
Oppenheimer Quest Capital Value Fund, Inc.
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.
Oppenheimer Bond Fund For Growth
Limited Term New York Municipal Fund
Rochester Fund Municipals
Oppenheimer Disciplined Value Fund
Oppenheimer Disciplined Allocation Fund
Oppenheimer LifeSpan Balanced Fund
Oppenheimer LifeSpan Income Fund
Oppenheimer LifeSpan Growth Fund
Oppenheimer International Growth Fund
Oppenheimer Developing Markets Fund
Oppenheimer Real Asset 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.
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).
o LETTERS OF INTENT. A Letter of Intent ("Letter") is an investor's
statement in writing to the Distributor of the intention to purchase Class A
shares or 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.
o 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 of other Oppenheimer funds acquired subject to
a contingent deferred sales charge, and (c) Class A or Class B shares acquired
in exchange for either (i) Class A shares sold with a front-end sales charge or
Class B 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 "How to Sell
Shares," 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. If you make payments from your
bank account to purchase shares of the Fund, your bank account will be
automatically debited normally four to five business days prior to the
investment dates selected in the Account Application. Neither the Distributor,
the Transfer Agent nor the Fund shall be responsible for any delays in
purchasing shares resulting from delays in ACH transmissions.
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 other than
public school 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 or association has made special arrangements with the
Distributor and all members of the group or association participating in or who
are eligible to participate in the plan(s) purchase Class A shares of the Fund
through a single investment dealer, broker, or other financial institution
designated by the group. "Group retirement plan" also includes qualified
retirement plans and non-qualified deferred compensation plans and IRAs that
purchase Class A shares of the Fund through a single investment dealer, broker,
or other financial institution, if that broker-dealer has made special
arrangements with the Distributor enabling those plans to purchase Class A
shares of the Fund at net asset value but subject to a contingent deferred sales
charge.
In addition to the discussion in the Prospectus relating to the ability of
Retirement Plans to purchase Class A shares at net asset value in certain
circumstances, there is no initial sales charge on purchases of Class A shares
of any one or more of the Oppenheimer funds by a Retirement Plan in the
following cases: (i) the recordkeeping for the Retirement Plan is performed on a
daily valuation basis by Merrill Lynch Pierce Fenner & Smith, Inc. ("Merrill
Lynch") and, on the date the plan sponsor signs the Merrill Lynch recordkeeping
service agreement, the Retirement Plan has $3 million or more in assets invested
in mutual funds other than those advised or managed by Merrill Lynch Asset
Management, L.P. ("MLAM") that are made available pursuant to a Service
Agreement between Merrill Lynch and the mutual fund's principal underwriter or
distributor and in funds advised or managed by MLAM (collectively, the
"Applicable Investments"); or (ii) the recordkeeping for the Retirement Plan is
performed on a daily valuation basis by an independent record keeper whose
services are provided under a contract or arrangement between the Retirement
Plan and Merrill Lynch. On the date the plan sponsor signs the Merrill Lynch
record keeping service agreement, the Plan must have $3 million or more in
assets, excluding assets held in money market funds, invested in Applicable
Investments; or (iii) the Plan has 500 or more eligible employees, as determined
by the Merrill Lynch plan conversion manager on the date the plan sponsor signs
the Merrill Lynch record keeping service agreement.
If a Retirement Plan's records are maintained on a daily valuation basis
by Merrill Lynch or an independent record keeper under a contract or alliance
arrangement with Merrill Lynch, and if on the date the plan sponsor signs the
Merrill Lynch record keeping service agreement the Retirement Plan has less than
$3 million in assets, excluding money market funds, invested in Applicable
Investments, then the Retirement Plan may purchase only Class B shares of one or
more of the Oppenheimer funds. Otherwise, the Retirement Plan will be permitted
to purchase Class A shares of one or more of the Oppenheimer funds. Any of those
Retirement Plans that currently invest in Class B shares of the Fund will have
their Class B shares be converted to Class A shares of the Fund once the Plan's
Applicable Investments have reached $5 million.
Any redemptions of shares of the Fund held by Retirement Plans whose
records are maintained on a daily valuation basis by Merrill Lynch or an
independent record keeper under a contract with Merrill Lynch that are currently
invested in Class B shares of the Fund shall not be subject to the Class B CDSC.
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.
o INVOLUNTARY REDEMPTIONS. The Trust's Board of Trustees 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 $500 or such lesser
amount as the Board may fix. The Board of Trustees 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, 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 Class A contingent deferred sales charge, or (ii) Class B shares that were
subject to the Class B 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 in
"How to Exchange Shares" 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, 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. Shares are
normally redeemed pursuant to an Automatic Withdrawal Plan three business days
before the date you select in the Account Application. If a contingent deferred
sales charge applies to the redemption, the amount of the check or payment will
be reduced accordingly. 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 and 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 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.
o 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.
o 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 the
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, B and 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. 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 12 months of the end of the calendar
month of the initial purchase of the exchanged Class A shares (18 months if the
shares were initially purchased prior to May 1, 1997), 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
Trustees 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.
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 Trust. 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.
REPORT OF INDEPENDENT ACCOUNTANTS
Oppenheimer Quest Officers Value Fund
To the Board of Trustees and Shareholders of
Oppenheimer Quest for Value Funds
In our opinion, the accompanying statement of assets and liabilities, including
the statement of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of Oppenheimer Quest Officers Value
Fund, (one of the portfolios constituting Oppenheimer Quest for Value Funds,
hereafter referred to as the Fund), at October 31, 1997, the results of its
operations for the year then ended, the changes in its net assets and the
financial highlights for each of the two years in the period then ended, in
conformity with generally accepted accounting principles. These financial
statements and financial highlights (hereafter referred to as financial
statements) are the responsibility of the Fund's management; our responsibility
is to express an opinion on these financial statements based on our audits. We
conducted our audits of these financial statements in accordance with generally
accepted auditing standards which require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits, which included confirmation of securities at October 31, 1997 by
correspondence with the custodian and the application of alternative auditing
procedures where securities purchased had not been received, provide a
reasonable basis for the opinion expressed above. The financial statements of
the Fund for the period 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, 1997
4 Oppenheimer Quest Officers Value Fund
<PAGE>
STATEMENT OF INVESTMENTS OCTOBER 31, 1997
<TABLE>
<CAPTION>
MARKET VALUE
SHARES SEE NOTE 1
============================================================================================================================
COMMON STOCKS - 90.9%
- ----------------------------------------------------------------------------------------------------------------------------
COMPUTER HARDWARE - 5.2%
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Wang Laboratories, Inc. (1) 16,800 $ 388,500
- ---------------------------------------------------------------------------------------------------------------------------
DIVERSIFIED FINANCIAL - 10.1%
- ---------------------------------------------------------------------------------------------------------------------------
Countrywide Credit Industries, Inc. 11,000 377,438
- ---------------------------------------------------------------------------------------------------------------------------
H & R Block, Inc. 10,100 373,700
----------
751,138
- ---------------------------------------------------------------------------------------------------------------------------
ELECTRIC UTILITIES - 5.0%
- ---------------------------------------------------------------------------------------------------------------------------
CalEnergy, Inc. (1) 11,000 376,750
- ---------------------------------------------------------------------------------------------------------------------------
FOOD - 5.5%
- ---------------------------------------------------------------------------------------------------------------------------
Triarc Cos. (1) 18,300 414,038
- ---------------------------------------------------------------------------------------------------------------------------
HEALTHCARE/SUPPLIES & SERVICES - 4.9%
- ---------------------------------------------------------------------------------------------------------------------------
Allegiance Corp. 13,100 363,525
- ---------------------------------------------------------------------------------------------------------------------------
INSURANCE - 15.3%
- ---------------------------------------------------------------------------------------------------------------------------
ACE Ltd. 4,000 371,750
- ---------------------------------------------------------------------------------------------------------------------------
EXEL Ltd. 6,300 380,756
- ---------------------------------------------------------------------------------------------------------------------------
Mid Ocean Ltd. 6,000 389,250
----------
1,141,756
- ---------------------------------------------------------------------------------------------------------------------------
LEISURE & ENTERTAINMENT - 5.1%
- ---------------------------------------------------------------------------------------------------------------------------
Tricon Global Restaurants, Inc. (1) 12,500 378,906
- ---------------------------------------------------------------------------------------------------------------------------
MANUFACTURING - 5.1%
- ---------------------------------------------------------------------------------------------------------------------------
LucasVarity plc, ADR 11,100 378,788
- ---------------------------------------------------------------------------------------------------------------------------
METALS - 4.9%
- ---------------------------------------------------------------------------------------------------------------------------
UCAR International, Inc. (1) 9,700 363,750
- ---------------------------------------------------------------------------------------------------------------------------
OIL-INTEGRATED - 5.1%
- ---------------------------------------------------------------------------------------------------------------------------
Triton Energy Ltd. (1) 9,800 383,425
- ---------------------------------------------------------------------------------------------------------------------------
TELECOMMUNICATIONS-TECHNOLOGY - 19.5%(2)
- ---------------------------------------------------------------------------------------------------------------------------
CommScope, Inc. (1) 29,600 325,600
- ---------------------------------------------------------------------------------------------------------------------------
NextLevel Systems, Inc. (1) 27,900 376,650
- ---------------------------------------------------------------------------------------------------------------------------
Tele-Communications TCI Ventures Group, Cl. A (1) 16,500 380,531
- ---------------------------------------------------------------------------------------------------------------------------
WorldCom, Inc. 11,200 376,600
----------
1,459,381
- ---------------------------------------------------------------------------------------------------------------------------
TRANSPORTATION - 5.2%
- ---------------------------------------------------------------------------------------------------------------------------
Canadian Pacific Ltd. (New) 12,900 384,581
----------
Total Common Stocks (Cost $6,255,367) 6,784,538
FACE
AMOUNT
===========================================================================================================================
SHORT-TERM NOTES - 5.0%
- ---------------------------------------------------------------------------------------------------------------------------
Ford Motor Credit Corp., 5.60%, 11/6/97 (Cost $374,708) (3) $375,000 374,708
- ---------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS, AT VALUE (COST $6,630,075) 95.9% 7,159,246
- ---------------------------------------------------------------------------------------------------------------------------
OTHER ASSETS NET OF LIABILITIES 4.1 306,553
-------- ----------
NET ASSETS 100.0% $7,465,799
======== ==========
</TABLE>
5 Oppenheimer Quest Officers Value Fund
<PAGE>
STATEMENT OF INVESTMENTS (CONTINUED)
- --------------------------------------------------------------------------------
1. Non-income producing security.
2. The Fund may have elements of risk due to concentrated investments in
specific industries. Such concentrations may subject the Fund to additional
risks resulting from future political or economic conditions. 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 Officers Value Fund
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES OCTOBER 31, 1997
<TABLE>
================================================================================================================
ASSETS
<S> <C>
Investments, at value (cost $6,630,075) - see accompanying statement $7,159,246
- ----------------------------------------------------------------------------------------------------------------
Cash 58,067
- ----------------------------------------------------------------------------------------------------------------
Receivables:
Investments sold 535,267
Shares of beneficial interest sold 1,135
- ----------------------------------------------------------------------------------------------------------------
Deferred organization costs - Note 1 2,882
- ----------------------------------------------------------------------------------------------------------------
Other 510
----------
Total assets 7,757,107
================================================================================================================
LIABILITIES Payables and other liabilities:
Shares of beneficial interest redeemed 272,099
Shareholder reports 8,654
Transfer agent and accounting services fees 985
Other 9,570
----------
Total liabilities 291,308
================================================================================================================
NET ASSETS $7,465,799
==========
================================================================================================================
COMPOSITION OF NET ASSETS
Par value of shares of beneficial interest $5,380
- ----------------------------------------------------------------------------------------------------------------
Additional paid-in capital 6,721,187
- ----------------------------------------------------------------------------------------------------------------
Accumulated net investment income 32,360
- ----------------------------------------------------------------------------------------------------------------
Accumulated net realized gain on investment transactions 177,701
- ----------------------------------------------------------------------------------------------------------------
Net unrealized appreciation on investments - Note 3 529,171
----------
Net assets $7,465,799
==========
================================================================================================================
NET ASSET VALUE PER SHARE
Net asset value and redemption price per share (based on
net assets of $7,465,799 and 538,024 shares of beneficial interest outstanding) $13.88
Maximum offering price per share (net asset value plus sales charge
of 5.75% of offering price) $14.73
</TABLE>
See accompanying Notes to Financial Statements.
7 Oppenheimer Quest Officers Value Fund
<PAGE>
STATEMENT OF OPERATIONS FOR THE YEAR ENDED OCTOBER 31, 1997
<TABLE>
================================================================================================================
INVESTMENT INCOME
<S> <C>
Dividends (net of foreign withholding taxes of $3,500) $ 97,231
- ----------------------------------------------------------------------------------------------------------------
Interest 57,030
--------
Total income 154,261
================================================================================================================
EXPENSES
Management fees - Note 4 91,482
- ----------------------------------------------------------------------------------------------------------------
Service plan fees - Note 4 45,741
- ----------------------------------------------------------------------------------------------------------------
Shareholder reports 12,450
- ----------------------------------------------------------------------------------------------------------------
Legal and auditing fees 11,089
- ----------------------------------------------------------------------------------------------------------------
Transfer agent and accounting services fees - Note 4 10,171
- ----------------------------------------------------------------------------------------------------------------
Registration and filing fees 10,006
- ----------------------------------------------------------------------------------------------------------------
Trustees' fees and expenses 9,706
- ----------------------------------------------------------------------------------------------------------------
Custodian fees and expenses
- ----------------------------------------------------------------------------------------------------------------
Other 1,090
--------
Total expenses 197,014
Less expenses paid indirectly - Note 4 (1,640)
Less reimbursement of expenses by OppenheimerFunds, Inc. - Note 4 (77,149)
--------
Net expenses 118,225
================================================================================================================
NET INVESTMENT INCOME 36,036
================================================================================================================
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain on investments 236,859
- ----------------------------------------------------------------------------------------------------------------
Net change in unrealized appreciation or depreciation on investments (335,693)
--------
Net realized and unrealized loss (98,834)
================================================================================================================
NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS $(62,798)
========
</TABLE>
See accompanying Notes to Financial Statements.
8 Oppenheimer Quest Officers Value Fund
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
1997 1996
================================================================================================================
OPERATIONS
<S> <C> <C>
Net investment income (loss) $ 36,036 $ (29,058)
- ----------------------------------------------------------------------------------------------------------------
Net realized gain 236,859 1,103,769
- ----------------------------------------------------------------------------------------------------------------
Net change in unrealized appreciation or depreciation (335,693) 570,237
-----------------------------
Net increase (decrease) in net assets resulting from operations (62,798) 1,644,948
================================================================================================================
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS
Dividends from net investment income -- (84,879)
- ----------------------------------------------------------------------------------------------------------------
Distributions from net realized gain (1,104,047) (267,637)
================================================================================================================
BENEFICIAL INTEREST TRANSACTIONS
Net increase (decrease) in net assets resulting from
beneficial interest transactions - Note 2 (2,796,658) 6,490,302
================================================================================================================
NET ASSETS
Total increase (decrease) (3,963,503) 7,782,734
- ----------------------------------------------------------------------------------------------------------------
Beginning of period 11,429,302 3,646,568
-----------------------------
End of period (including undistributed net investment
income of $32,360 for the year ended 10/31/97) $ 7,465,799 $11,429,302
=============================
</TABLE>
See accompanying Notes to Financial Statements.
9 Oppenheimer Quest Officers Value Fund
<PAGE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
1997 1996(2) 1995(1)
===================================================================================================
PER SHARE OPERATING DATA:
<S> <C> <C> <C>
Net asset value, beginning of period $15.26 $12.30 $10.00
- ---------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income (loss) .07 (.01) .24
Net realized and unrealized gain .03 4.06 2.10
------ ------ ------
Total income from investment
operations .10 4.05 2.34
- ---------------------------------------------------------------------------------------------------
Dividends and distributions to shareholders:
Dividends from net investment income -- (.26) (.04)
Distributions from net realized gain (1.48) (.83) --
------ ------ ------
Total dividends and distributions
to shareholders (1.48) (1.09) (.04)
- ---------------------------------------------------------------------------------------------------
Net asset value, end of period $13.88 $15.26 $12.30
====== ====== ======
===================================================================================================
TOTAL RETURN, AT NET ASSET VALUE(3) 1.56% 35.17% 23.44%
===================================================================================================
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in thousands) $7,466 $11,429 $3,647
- ---------------------------------------------------------------------------------------------------
Average net assets (in thousands) $9,148 $ 6,973 $2,873
- ---------------------------------------------------------------------------------------------------
Ratios to average net assets:
Net investment income (loss) 0.39%(6) (0.42)%(6)% 2.44%(4)(5)
Expenses, before voluntary reimbursement by
the Manager 2.15%(7) 2.24% 1.97%(5)
Expenses, net of voluntary reimbursement by
the Manager 1.29% 1.92% 0.00%
- ---------------------------------------------------------------------------------------------------
Portfolio turnover rate(8) 111.0% 137.4% 108.0%
Average brokerage commission rate(9) $0.0551 $0.0501 --
</TABLE>
1. For the period from November 8, 1994 (commencement of operations) to October
31, 1995. 2. On November 22, 1995, OppenheimerFunds, Inc. became the investment
advisor to the Fund. 3. Assumes a hypothetical initial investment on the
business day before the first day of the fiscal period, with all dividends and
distributions reinvested in additional shares on the reinvestment date, and
redemption at the net asset value calculated on the last business day of the
fiscal period. Sales charges are not reflected in the total returns. Total
returns are not annualized for periods of less than one full year. 4. During the
period noted above, the former Manager voluntarily waived all of its fees and
reimbursed the Fund for all of its operating expenses. If such waivers and
reimbursements had not been in effect, the annualized ratio of net investment
income to average daily net assets would have been 0.47%. 5. Annualized. 6. For
the years ended October 31, 1997 and 1996, the ratio of net investment income to
average net assets would have been (0.47)% and (0.74)%, respectively, absent the
voluntary reimbursement by both the former Manager and the current Manager. 7.
The expense ratio reflects the effect of expenses paid indirectly by the Fund.
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, 1997 were $9,257,710 and $13,205,846, 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.
See accompanying Notes to Financial Statements.
10 Oppenheimer Quest Officers Value Fund
<PAGE>
NOTES TO FINANCIAL STATEMENTS
1. SIGNIFICANT ACCOUNTING POLICIES
Oppenheimer Quest Officers Value Fund (the Fund), a series of Oppenheimer Quest
for Value Funds, is a non-diversified open-end management investment company
registered under the Investment Company Act of 1940, as amended. The Fund's
investment objective is to seek capital appreciation. It is the intention of the
Fund to continue to invest in a non-diversified portfolio of primarily equity
securities believed to be under valued in the market place. The Fund's
investment advisor is OppenheimerFunds, Inc. (the Manager). The Fund is
authorized to issue Class A, Class B and Class C shares. Initially, only shares
of Class A will be offered to officers, trustees and employees of the Fund, the
Manager and its affiliates, their relatives or any trust, pension, profit
sharing or other benefit plan for any of them. The following is a summary of
significant accounting policies consistently followed by the Fund.
INVESTMENT VALUATION. Portfolio securities are valued at the close of the New
York Stock Exchange on each trading day. Listed and unlisted securities for
which such information is regularly reported are valued at the last sale price
of the day or, in the absence of sales, at values based on the closing bid or
the last sale price on the prior trading day. Long-term and short-term
"non-money market" debt securities are valued by a portfolio pricing service
approved by the Board of Trustees. Such securities which cannot be valued by an
approved portfolio pricing service are valued using dealer-supplied valuations
provided the Manager is satisfied that the firm rendering the quotes is reliable
and that the quotes reflect current market value, or are valued under
consistently applied procedures established by the Board of Trustees to
determine fair value in good faith. Short-term "money market type" debt
securities having a remaining maturity of 60 days or less are valued at cost (or
last determined market value) adjusted for amortization to maturity of any
premium or discount.
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.
ORGANIZATION COSTS. The former Manager advanced $7,600 for organization and
start-up costs of the Fund. Such expenses are being amortized over a five-year
period from the date operations commenced.
DISTRIBUTIONS TO SHAREHOLDERS. Dividends and distributions to shareholders are
recorded on the ex-dividend date.
CLASSIFICATION OF DISTRIBUTIONS TO SHAREHOLDERS. Net investment income (loss)
and net realized gain (loss) may differ for financial statement and tax
purposes. The character of the distributions made during the year from net
investment income or net realized gains may differ from their ultimate
characterization for federal income tax purposes due to capital loss
carryforwards. Also, due to timing of dividend distributions, the fiscal year in
which amounts are distributed may differ from the fiscal year in which the
income or realized gain was recorded by the Fund.
The Fund adjusts the classification of distributions to shareholders to reflect
the differences between financial statement amounts and distributions determined
in accordance with income tax regulations. Accordingly, during the year ended
October 31, 1997, amounts have been reclassified to reflect a decrease in
undistributed net investment income of $3,676. 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. Interest income is accrued on a daily basis. Realized gains
and losses on investments and unrealized appreciation and depreciation are
determined on an identified cost basis, which is the same basis used for federal
income tax purposes.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of income and expenses during the reporting period. Actual
results could differ from those estimates.
11 Oppenheimer Quest Officers Value Fund
<PAGE>
NOTES TO FINANCIAL STATEMENTS (Continued)
2. SHARES OF BENEFICIAL INTEREST
The Fund has authorized an unlimited number of $.01 par value shares of
beneficial interest. Transactions in shares of beneficial interest were as
follows:
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
OCTOBER 31, 1997 OCTOBER 31, 1996
--------------------------- ----------------
SHARES AMOUNT SHARES AMOUNT
<S> <C> <C> <C> <C>
Class A:
Sold 131,978 $ 1,769,834 538,510 $ 7,749,424
Dividends and distributions
reinvested 85,094 1,083,250 27,528 337,769
Redeemed (427,833) (5,649,742) (113,652) (1,596,891)
--------- ------------ --------- ------------
Net increase (decrease) (210,761) $(2,796,658) 452,386 $ 6,490,302
========= ============ ========= ============
</TABLE>
3. UNREALIZED GAINS AND LOSSES ON INVESTMENTS
At October 31, 1997, net unrealized appreciation on investments of $529,171 was
composed of gross appreciation of $833,571, and gross depreciation of $304,400.
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. Effective August 1, 1996, the fee was voluntarily reduced from 1.00%
of average annual net assets to 0.60% of the first $4 million of average annual
net assets and 0.70% of net assets in excess of $4 million. Such waivers
amounted to $31,408. The Manager acts as the accounting agent for the Fund at an
annual fee of $6,000, plus out-of-pocket costs and expenses reasonably incurred.
The Manager pays OpCap Advisors (the Sub-Advisor) based on the fee schedule set
forth in the Prospectus. The Sub-Advisor waived all fees under the agreement for
the year ended October 31, 1997. On February 13, 1997 PIMCO Advisors L.P.,
signed a definitive agreement with Oppenheimer Group, Inc. and its subsidiary
Oppenheimer Financial Corp. for PIMCO Advisors L.P. and its affiliate, Thomson
Advisory Group, Inc., to acquire the one-third managing general partner interest
in Oppenheimer Capital (the parent of OpCap Advisors) and the 1.0% general
interest in Oppenheimer Capital L.P.
For the year ended October 31, 1997, commissions (sales charges paid by
investors) on sales of Class A shares totaled $1,822, of which $1,738 was
retained by OppenheimerFunds Distributor, Inc. (OFDI), a subsidiary of the
Manager, as general distributor, and by affiliated broker/dealers.
OppenheimerFunds Services (OFS), a division of the Manager, is the transfer and
shareholder servicing agent for the Fund and for other registered investment
companies. The Fund pays OFS an annual maintenance fee of $14.85 for each Fund
shareholder account and reimburses OFS for its out-of-pocket expenses. During
the year ended October 31, 1997, the Fund paid OFS $3,726.
Expenses paid indirectly represent a reduction of custodian fees for earnings on
cash balances maintained by the Fund.
The Fund has adopted a Distribution and Service Plan for Class A shares to
compensate OppenheimerFunds Distributor, Inc. (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. Effective August 1, 1996, OFDI has voluntarily
waived all fees under this plan. Such waivers amounted to $45,741.
5. BANK BORROWINGS
The Fund may borrow from a bank for temporary or emergency purposes including,
without limitation, funding of shareholder redemptions provided asset coverage
for borrowings exceeds 300%. The Fund has entered into an agreement which
enables it to participate with other Oppenheimer funds in an unsecured line of
credit with a bank, which permits borrowings up to $400 million, collectively.
Interest is charged to each fund, based on its borrowings, at a rate equal to
the Federal Funds Rate plus 0.35%. Borrowings are payable 30 days after such
loan is executed. The Fund also pays a commitment fee equal to its pro rata
share of the average unutilized amount of the credit facility at a rate of
0.0575% per annum.
The Fund had no borrowings outstanding during the year ended October 31, 1997.
12 Oppenheimer Quest Officers Value Fund
<PAGE>
NOTES TO FINANCIAL STATEMENTS (Continued)
6. SUBSEQUENT EVENT
On October 22, 1997, the Board of Trustees approved the reorganization of
Oppenheimer Quest Officers Value Fund with and into Oppenheimer Quest Capital
Value Fund, Inc. Shareholders of the Fund will be asked to approve a
reorganization whereby shareholders would receive shares of Oppenheimer Quest
Capital Value Fund, Inc. If shareholder approval is received, it is expected
that the reorganization will occur during the second quarter of calendar 1998.
<PAGE>
APPENDIX A
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
Food
Gas Utilities
Gold
Health Care/Drugs
Health Care/Supplies & Services
Homebuilders/Real Estate
Hotel/Gaming
Industrial Services
Information Technology
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
Wireless Services
A-1
<PAGE>
OPPENHEIMER QUEST OFFICERS VALUE FUND
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
prosp\229SAI.#5
<PAGE>
[COVER]
Annual Report October 31, 1997
O P P E N H E I M E R
Quest Value
Fund, Inc.
[Graphic of Calculator]
[OppenheimerFunds Logo]
THE RIGHT WAY TO INVEST
<PAGE>
Report highlights
- --------------------------------------------------------------------------------
[bullet] Within the insurance industry we found many highly competitive
companies that dominated niche markets and were able to increase their earnings.
[bullet] We employ a "bottom up" strategy to stock selection, carefully
evaluating each company on its individual merits rather than attempting to
maintain a percentage of holdings in any one sector.
Contents
3 President's Letter
4 Fund Performance
6 An Interview with the Fund's Manager
11 Statement of Investments
14 Statement of Assets & Liabilities
16 Statement of Operations
17 Statements of Changes in Net Assets
18 Financial Highlights
21 Notes to Financial Statements
27 Report of Independent Accountants
28 Federal Income Tax Information
29 Shareholder Meeting
30 Officers & Directors
32 Information & Services
Avg Annual Total Returns
For the 1-year period ended
10/31/97 (without sales charges)(1)
Class A
25.41%
Class B
24.71%
Class C
24.79%
Class Y
(Since inception on 12/16/96)
24.55%
Total returns include changes in share price and reinvestment of dividends and
capital gains distributions in a hypothetical investment for the periods shown.
In reviewing performance and rankings, please remember that past performance
does not guarantee future results. Investment return and principal value of an
investment in the Fund will fluctuate so that an investor's shares, when
redeemed, may be worth more or less than the original cost.
1. Includes changes in net asset value per share without deducting any sales
charges. Such performance would have been lower if sales charges were taken into
account.
2 Oppenheimer Quest Value Fund, Inc.
<PAGE>
[PICTURE OF BRIDGET A. MACASKILL]
Bridget A. Macaskill
President
Oppenheimer Quest Value Fund, Inc.
Dear shareholder,
- --------------------------------------------------------------------------------
As you are no doubt aware, during the end of October and early November many
stock markets around the world recorded their all-time largest point declines,
followed by subsequent gains and continued volatility, leaving investors
uncertain about what would occur next.
To put those events in focus, let's look at a "snapshot" of the two-week
time period. Sharp declines in the overseas stock markets, particularly in Asia,
triggered a series of sell-offs throughout Europe, Latin America and the United
States. In response, the U.S. stock market, as measured by the Dow Jones
Industrial Average, dropped 554 points on October 27, its largest point decline
in history. However, almost as quickly, the U.S. stock market bounced back over
the succeeding few days, regaining nearly all of its losses.
While no one could have predicted the timing or extent of these
fluctuations, many analysts, including our fund managers here at
OppenheimerFunds, had warned of a correction for several months. We believed
that U.S. valuations were too high, stocks were expensive relative to bonds,
recent corporate earnings were somewhat disappointing and that Federal Reserve
Chairman Alan Greenspan could possibly seek a short-term interest rate hike.
While only one short-term interest rate hike occurred in March of 1997, the
other factors have held true.
We'd like to take this opportunity to remind shareholders that stock
market volatility is a normal and expected part of the business cycle. As Alan
Greenspan suggested, in years to come this period will likely be remembered as a
positive change for a market that was growing too quickly.
For frequent market updates, please visit our website at
www.oppenheimerfunds.com or call 1-800-835-3104 to listen to our recorded
messages. In the meantime, thank you for your confidence in OppenheimerFunds,
The Right Way to Invest. We look forward to helping you reach your investment
goals in the future.
/s/ Bridget A. Macaskill
- ------------------------
Bridget A. Macaskill
November 21, 1997
3 Oppenheimer Quest Value Fund, Inc.
<PAGE>
Performance update
- --------------------------------------------------------------------------------
Oppenheimer Quest Value Fund, Inc. has performed very well during the period.
In fact, for the one-year period ended October 31, 1997, its Class A shares
provided an average annual total return of 25.41%, without sales charges.(2)
Growth of $10,000
Over five years
(without sales charges)(3)
Oppenheimer Quest
Value Fund, Inc.
Class A shares S&P 500 Index
10000 10000
10738 10503
11010 10982
11174 11015
11420 11300
11441 11562
11155 11123
11327 11170
11822 11716
11538 11714
12816 12855
14145 14082
15330 15201
15820 16117
17241 16982
17751 17744
18716 18292
19865 19817
20053 20348
22767 23901
24412 25692
Avg Annual Total Returns
For the Period Ended 9/30/97(1)
Class A
1 year 5 year 10 year
22.93% 18.13% 13.29%
Class B
Since
1 year 5 year Inception
24.76% N/A 19.24%
Class C
Since
1 year 5 year Inception
28.84% N/A 19.52%
Class Y
Since
1 year 5 year Inception
N/A N/A 26.30%
Cumulative Total Return
For the Period Ended 9/30/97(1)
Class A
5 year
130.08% $22,886(3)
1. Total returns include changes in share price and reinvestment of dividends
and capital gains distributions in a hypothetical investment for the periods
shown. Class A returns include the current maximum initial sales charge of
5.75%. Class A shares were first publicly offered on 4/30/80. The Fund's maximum
sales charge for Class A shares was lower prior to 11/24/95, so actual
performance may have been higher. Class B returns include the applicable
contingent deferred sales charge of 5% (1-year) and 2% (since inception on
9/1/93). Class C returns for the one-year result include the contingent deferred
sales charge of 1%. Class C shares have an inception date of 9/1/93. Class Y
shares were first publicly offered on 12/16/96 and are not available for sale to
individual shareholders. An explanation of the different performance
calculations is in the Fund's prospectus. Class B and C shares are subject to an
annual 0.75% asset-based sales charge and Class A shares are subject to an
annual 0.25% asset-based sales charge. OppenheimerFunds, Inc. became the Fund's
advisor on 11/22/95. The Fund's subadvisor is OpCap Advisors, which was the
Fund's advisor prior to 11/22/95. The portfolio manager is employed by the
Fund's subadvisor.
4 Oppenheimer Quest Value Fund, Inc.
<PAGE>
Portfolio review
- --------------------------------------------------------------------------------
Oppenheimer Quest Value Fund, Inc. is for investors looking for capital
appreciation.
What We Look For
[bullet] Quality established businesses.
[bullet] Management motivated to work for shareholders.
[bullet] Companies believed to be undervalued.
[bullet] High return on capital vs. high growth.
Top 10 Stock Holdings(4)
..............................................................
ACE Ltd. 8.0% Freddie Mac 3.3%
..............................................................
EXEL Ltd. 7.7 Tenet Healthcare Corp. 3.3
..............................................................
Lockheed Martin Corp. 4.6 Wells Fargo & Co. 3.2
..............................................................
Caterpillar, Inc. 4.3 McDonald's Corp. 3.0
..............................................................
General Re Corp. 3.6 LucasVarity plc, ADR 2.8
..............................................................
Sector Weightings(4)
[PIE CHART]
Financial 41.2%
Industrial 21.8
Consumer Cyclical 13.4
Technology 9.6
Consumer Non-Cyclical 7.5
Basic Materials 6.5
2. Includes changes in net asset value per share without deducting any sales
charges. Such performance would have been lower if sales charges were taken into
account. 3. Results of a hypothetical $10,000 investment in Class A shares on
September 30, 1992. The S&P 500 Index is a broad-based unmanaged stock index
including daily reinvestment of dividends, and cannot be purchased directly by
investors. Past performance does not guarantee future results. 4. Portfolio is
subject to change. Percentages are as of October 31, 1997 and are based on total
market value of stock holdings.
5 Oppenheimer Quest Value Fund, Inc.
<PAGE>
An interview with your Fund's manager
- --------------------------------------------------------------------------------
How has the Fund performed during the 12-month period ended October 31, 1997?
Oppenheimer Quest Value Fund, Inc. Class A shares provided an average annual
total return, without sales charges, of 25.41% for the one-year period ended
October 31, 1997.(1)
Why did stock prices rise and fall so sharply during the period? The stock
market has advanced close to 30% in the one- year period which ended October 31,
1997, and over 90% in the past three years. The two periods of modest decline in
the past year seem to have been inspired by fears of excessive growth which
could lead to inflation, and, later in the year, by fears that the deflation
which occurred in Asia could spread to the United States. Such corrections are a
necessary aspect of allowing economic fundamentals and financial markets to come
more closely into balance. These adjustments now occur more rapidly than they
did a few years ago, but from a longer- term perspective, the market does not
seem significantly more volatile.
It is important to understand, however, that Oppenheimer Quest Value
Fund, Inc. is primarily interested in the fundamental financial attributes of
individual companies, not of the market as a whole, and not even of industry
sectors within the market. The portfolio is constructed one stock at a time,
with an intense focus on identifying companies that can sustain a superior
return on invested capital, yet are selling in the market at modest valuations.
1. Includes changes in net asset value per share without deducting any sales
charges. Such performance would have been lower if sales charges were taken into
account.
[CALLOUT]
"We manage
the portfolio
one stock
at a time."
6 Oppenheimer Quest Value Fund, Inc.
<PAGE>
[PHOTO OF EILEEN ROMINGER, Portfolio Manager]
Portfolio Manager
Eileen Rominger
Did your "bottom-up" approach lead you to companies in certain market sectors?
Yes, we happened to find a number of fundamentally attractive companies in the
insurance industry. This was not because the insurance industry itself was
attractive, but rather because these individual companies are highly competitive
in niche markets that are difficult for others to enter successfully. For
example, as of October 31, the two largest holdings in our portfolio were ACE
Ltd. and EXEL Ltd. Both participate in specialty businesses such as excess
liability insurance, property catastrophe reinsurance, satellite insurance and
political risk insurance. Both companies are number one in their markets,
generate excess cash flow and are well capitalized. In addition, they both made
acquisitions in the past year that will help them increase their earnings.
The Fund also benefited from our holdings in an insurance company that
writes nonstandard automobile insurance, including insurance for drivers that
other companies will not cover. This company has demonstrated that they know how
to manage these risks--they have one of the lowest expense ratios in the
industry, and they can charge a premium price. They recently entered the market
for standard automobile insurance, and we expect them to do quite well.
7 Oppenheimer Quest Value Fund, Inc.
<PAGE>
An interview with your Fund's manager
- --------------------------------------------------------------------------------
What other opportunities have you found over the past year?
Each of the Fund's holdings has its own set of competitive advantages that may
enable it to achieve superior profitability over time. For example, Lockheed
Martin Corp. has built great economies of scale as the defense industry has
consolidated and is now poised to reap the rewards in the form of cost synergies
and cash flow growth. Caterpillar, Inc. is another company in the portfolio
which is generating very strong cash flow as a result of a multi-year program of
cost cutting, new product introduction, and expansion into international
markets.
Among financial companies, General Re Corp.'s competitive advantages are
its loyal customer base, its direct mode of product distribution, and its strong
balance sheet. General Re's cash flow has steadily risen and has been
consistently employed in ways that have enhanced shareholder value.
An important characteristic of all of these companies is that not only
are they powerful business franchises, but their stock prices present compelling
values in the market.
Have you had any disappointing investments in the past year?
Yes, we have. The management of the newly combined LucasVarity plc encountered
some delays in achieving their cost-cutting goals for the firm, which were
compounded by weak trading conditions in some of their European markets. The
shares underperformed the mar-ket as a result. We continue to believe that the
strong market positions enjoyed by the company, the growing cash flow, and the
management's strong record of working for the shareholders will generate better
results in the coming year.
[CALLOUT]
"We look for
investments with
strong prospects
for the long
term . . ."
8 Oppenheimer Quest Value Fund, Inc.
<PAGE>
What do you look for when making new investments?
First, we seek to invest in companies that we believe have solid fundamentals to
support their businesses in good economic times and bad. Second, we pay careful
attention to the price we pay for those companies. We look for situations in
which great companies are selling for less than their fair values.
Perhaps most important, we look for investments with strong prospects
for the long term. That's because we approach these businesses as owners, not as
traders. In our view, being an owner of high-quality businesses represents The
Right Way to Invest.
[CALLOUT]
". . .because we
approach these
businesses
as owners,
not as traders."
9 Oppenheimer Quest Value Fund, Inc.
<PAGE>
Financials
- --------------------------------------------------------------------------------
10 Oppenheimer Quest Value Fund, Inc.
<PAGE>
- -------------------------------------------------------------------------------
Statement of Investments October 31, 1997
- -------------------------------------------------------------------------------
Market Value
Shares See Note 1
=========================================================================
Common Stocks--81.9%
- -------------------------------------------------------------------------
Basic Materials--5.3%
- -------------------------------------------------------------------------
Chemicals--4.5%
Du Pont (E.I.) De Nemours & Co. 370,000 $21,043,750
- -------------------------------------------------------------------------
Hercules, Inc. 241,000 11,055,875
- -------------------------------------------------------------------------
Monsanto Co. 365,000 15,603,750
- -------------------------------------------------------------------------
Solutia, Inc. 43,000 951,375
-----------
48,654,750
- -------------------------------------------------------------------------
Metals-- 0.5%
Freeport-McMoRan Copper & Gold, Inc., Cl. B 229,290 5,474,299
- -------------------------------------------------------------------------
Paper-- 0.3%
Champion International Corp. 60,000 3,311,250
- -------------------------------------------------------------------------
Consumer Cyclicals--10.9%
- -------------------------------------------------------------------------
Autos & Housing -- 0.7%
Security Capital Group, Inc.(1) 5,258 7,887,405
- -------------------------------------------------------------------------
Leisure & Entertainment--6.5%
AMR Corp.(1) 187,000 21,773,812
- -------------------------------------------------------------------------
Carnival Corp., Cl. A 450,000 21,825,000
- -------------------------------------------------------------------------
McDonald's Corp. 600,000 26,887,500
-----------
70,486,312
- -------------------------------------------------------------------------
Media--1.5%
Omnicom Group, Inc. 225,500 15,925,937
- -------------------------------------------------------------------------
Retail: General--2.2%
May Department Stores Cos. 448,000 24,136,000
- -------------------------------------------------------------------------
Consumer Non-Cyclicals--6.2%
- -------------------------------------------------------------------------
Healthcare/Drugs-- 0.7%
Warner-Lambert Co. 55,000 7,875,312
- -------------------------------------------------------------------------
Healthcare/Supplies & Services--4.4%
Becton, Dickinson & Co. 398,000 18,332,875
- -------------------------------------------------------------------------
Tenet Healthcare Corp.(1) 955,500 29,202,469
-----------
47,535,344
- -------------------------------------------------------------------------
Household Goods--1.1%
Avon Products, Inc. 175,600 11,501,800
11 Oppenheimer Quest Value Fund, Inc.
<PAGE>
- -------------------------------------------------------------------------------
Statement of Investments (Continued)
- -------------------------------------------------------------------------------
Market Value
Shares See Note 1
- ------------------------------------------------------------------
Financial--33.8%
- ------------------------------------------------------------------
Banks-- 6.7%
BankBoston Corp. 273,000 $ 22,130,062
- ------------------------------------------------------------------
Citicorp 170,000 21,260,625
- ------------------------------------------------------------------
Wells Fargo & Co. 98,666 28,748,806
------------
72,139,493
- ------------------------------------------------------------------
Diversified Financial--4.7%
Countrywide Credit Industries, Inc. 620,000 21,273,750
- ------------------------------------------------------------------
Freddie Mac 772,000 29,239,500
------------
50,513,250
- ------------------------------------------------------------------
Insurance --22.4%(2)
ACE Ltd. 766,200 71,208,712
- ------------------------------------------------------------------
AFLAC, Inc. 329,050 16,740,419
- ------------------------------------------------------------------
American International Group, Inc. 88,500 9,032,531
- ------------------------------------------------------------------
Everest Reinsurance Holdings, Inc. 400,000 15,050,000
- ------------------------------------------------------------------
EXEL Ltd. 1,131,400 68,378,987
- ------------------------------------------------------------------
General Re Corp. 164,000 32,338,750
- ------------------------------------------------------------------
Mid Ocean Ltd. 259,900 16,861,013
- ------------------------------------------------------------------
Progressive Corp. 127,000 13,239,750
------------
242,850,162
- ------------------------------------------------------------------
Industrial--17.8%
- ------------------------------------------------------------------
Electrical Equipment-- 0.9%
General Electric Co. 150,400 9,710,200
- ------------------------------------------------------------------
Industrial Materials--1.2%
Armstrong World Industries, Inc. 190,000 12,646,875
- ------------------------------------------------------------------
Industrial Services-- 0.8%
Donnelley (R.R.) & Sons Co. 280,000 9,135,000
- ------------------------------------------------------------------
Manufacturing--13.1%
AlliedSignal, Inc. 300,000 10,800,000
- ------------------------------------------------------------------
Caterpillar, Inc. 740,000 37,925,000
- ------------------------------------------------------------------
Dover Corp. 340,000 22,950,000
- ------------------------------------------------------------------
Grand Metropolitan plc, Sponsored ADR 350,000 13,081,250
- ------------------------------------------------------------------
LucasVarity plc, ADR 720,900 24,600,713
- ------------------------------------------------------------------
Tenneco, Inc. 216,000 9,706,500
- ------------------------------------------------------------------
Textron, Inc. 400,000 23,125,000
------------
142,188,463
- ------------------------------------------------------------------
Transportation--1.8%
Canadian Pacific Ltd. (New) 650,000 19,378,125
12 Oppenheimer Quest Value Fund, Inc.
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Market Value
Shares See Note 1
- ----------------------------------------------------------------------------
Technology--7.9%
- ----------------------------------------------------------------------------
Aerospace/Defense --3.8%
Lockheed Martin Corp. 430,000 $ 40,876,875
- ----------------------------------------------------------------------------
Computer Hardware --0.7%
Adaptec, Inc.(1) 150,000 7,265,625
- ----------------------------------------------------------------------------
Electronics--1.8%
Arrow Electronics, Inc.(1) 179,000 5,079,125
- ----------------------------------------------------------------------------
Avnet, Inc. 231,000 14,538,563
--------------
19,617,688
- ----------------------------------------------------------------------------
Telecommunications-Technology--1.6%
Sprint Corp. 285,200 14,830,400
- ----------------------------------------------------------------------------
Tele-Communications TCI Ventures Group, Cl. A(1) 111,177 2,564,020
--------------
17,394,420
--------------
Total Common Stocks (Cost $617,464,138) 886,504,585
<TABLE>
<CAPTION>
Face
Amount
=========================================================================================
Short-Term Notes--19.2%(3)
- -----------------------------------------------------------------------------------------
Beneficial Corp.:
<S> <C> <C>
5.50%, 12/4/97 $ 3,377,000 3,359,974
5.51%, 12/10/97 25,000,000 24,850,771
- -----------------------------------------------------------------------------------------
Deere (John) Capital Corp.:
5.47%, 11/6/97 1,904,000 1,902,554
5.49%, 11/19/97 50,000,000 49,862,750
- -----------------------------------------------------------------------------------------
Ford Motor Credit Corp.:
5.48%, 12/8/97 39,530,000 39,307,358
5.50%, 11/5/97 13,183,000 13,174,947
- -----------------------------------------------------------------------------------------
General Motors Acceptance Corp., 5.51%, 12/1/97 38,590,000 38,412,703
- -----------------------------------------------------------------------------------------
Household Finance Corp., 5.49%, 11/13/97 3,264,000 3,258,027
- -----------------------------------------------------------------------------------------
International Business Machines Corp., 5.48%, 11/10/97 4,112,000 4,106,367
- -----------------------------------------------------------------------------------------
Merrill Lynch & Co., 5.53%, 11/3/97 30,327,000 30,317,688
----------
Total Short-Term Notes (Cost $208,553,139) 208,553,139
- -----------------------------------------------------------------------------------------
Total Investments, at Value (Cost $826,017,277) 101.1% 1,095,057,724
- -----------------------------------------------------------------------------------------
Liabilities in Excess of Other Assets (1.1) (12,294,386)
------------ -------------
Net Assets 100.0% $1,082,763,338
============ ==============
</TABLE>
1. Non-income producing security.
2. The Fund may have elements of risk due to concentrated investments in
specific industries. Such concentrations may subject the Fund to additional
risks resulting from future political or economic conditions. 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.
13 Oppenheimer Quest Value Fund, Inc.
<PAGE>
- -------------------------------------------------------------------------------
Statement of Assets and Liabilities October 31, 1997
- -------------------------------------------------------------------------------
<TABLE>
=========================================================================================
<S> <C>
Assets
Investments, at value (cost $826,017,277)--see accompanying statement $1,095,057,724
- -----------------------------------------------------------------------------------------
Cash 295,542
- -----------------------------------------------------------------------------------------
Receivables:
Shares of capital stock sold 7,810,765
Interest and dividends 519,477
- -----------------------------------------------------------------------------------------
Other 18,189
--------------
Total assets 1,103,701,697
=========================================================================================
Liabilities Payables and other liabilities:
Investments purchased 16,826,880
Shares of capital stock redeemed 3,644,431
Distribution and service plan fees 231,537
Transfer and shareholder servicing agent fees 74,868
Other 160,643
--------------
Total liabilities 20,938,359
=========================================================================================
Net Assets $1,082,763,338
==============
=========================================================================================
Composition of Net Assets
Par value of shares of capital stock $ 53,140,214
- -----------------------------------------------------------------------------------------
Additional paid-in capital 707,981,325
- -----------------------------------------------------------------------------------------
Undistributed net investment income 4,754,927
- -----------------------------------------------------------------------------------------
Accumulated net realized gain on investment transactions 47,846,425
- -----------------------------------------------------------------------------------------
Net unrealized appreciation on investments--Note 3 269,040,447
--------------
Net assets $1,082,763,338
==============
</TABLE>
14 Oppenheimer Quest Value Fund, Inc.
<PAGE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<TABLE>
<S> <C>
Net Asset Value Per Share
Class A Shares:
Net asset value and redemption price per share (based on net assets
of $699,230,322 and 34,130,613 shares of capital stock outstanding) $20.49
Maximum offering price per share (net asset value plus sales charge
of 5.75% of offering price) $21.74
- -------------------------------------------------------------------------------------
Class B Shares:
Net asset value, redemption price (excludes applicable contingent deferred sales
charge) and offering price per share (based on net assets of $298,348,393 and
14,788,764 shares of capital stock outstanding) $20.17
- -------------------------------------------------------------------------------------
Class C Shares:
Net asset value, redemption price (excludes applicable contingent deferred sales
charge) and offering price per share (based on net assets of $82,098,206 and
4,070,613 shares of capital stock outstanding) $20.17
- -------------------------------------------------------------------------------------
Class Y Shares:
Net asset value, redemption price and offering price per share (based on net
assets of $3,086,417 and 150,224 shares of capital stock outstanding) $20.55
</TABLE>
See accompanying Notes to Financial Statements.
15 Oppenheimer Quest Value Fund, Inc.
<PAGE>
- -------------------------------------------------------------------------------
Statement of Operations For the Year Ended October 31, 1997
- -------------------------------------------------------------------------------
<TABLE>
====================================================================================
<S> <C>
Investment Income
Dividends (net of foreign withholding taxes of $69,652) $ 10,022,532
- ------------------------------------------------------------------------------------
Interest 9,123,410
------------
Total income 19,145,942
====================================================================================
Expenses
Management fees--Note 4 7,708,982
- ------------------------------------------------------------------------------------
Distribution and service plan fees--Note 4:
Class A 2,797,969
Class B 2,001,839
Class C 558,092
- ------------------------------------------------------------------------------------
Transfer and shareholder servicing agent fees--Note 4 742,902
- ------------------------------------------------------------------------------------
Shareholder reports 222,784
- ------------------------------------------------------------------------------------
Registration and filing fees:
Class A 115,978
Class B 56,901
Class C 15,512
Class Y 600
- ------------------------------------------------------------------------------------
Custodian fees and expenses 34,544
- ------------------------------------------------------------------------------------
Legal and auditing fees 34,224
- ------------------------------------------------------------------------------------
Directors' fees and expenses 13,184
- ------------------------------------------------------------------------------------
Other 71,008
------------
Total expenses 14,374,519
====================================================================================
Net Investment Income 4,771,423
====================================================================================
Realized and Unrealized Gain
Net realized gain on investments 47,887,290
- ------------------------------------------------------------------------------------
Net change in unrealized appreciation or depreciation on investments 127,277,273
------------
Net realized and unrealized gain 175,164,563
====================================================================================
Net Increase in Net Assets Resulting from Operations $179,935,986
============
</TABLE>
See accompanying Notes to Financial Statements.
16 Oppenheimer Quest Value Fund, Inc.
<PAGE>
- -------------------------------------------------------------------------------
Statements of Changes in Net Assets
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended October 31,
1997 1996
<S> <C> <C>
==========================================================================================
Operations
Net investment income $ 4,771,423 $ 2,018,194
- ------------------------------------------------------------------------------------------
Net realized gain 47,887,290 31,502,109
- ------------------------------------------------------------------------------------------
Net change in unrealized appreciation or depreciation 127,277,273 69,588,617
-------------- ------------
Net increase in net assets resulting from operations 179,935,986 103,108,920
==========================================================================================
Dividends and Distributions to Shareholders Dividends from net investment
income:
Class A (1,801,385) (1,990,608)
Class B (107,344) (187,734)
Class C (27,574) (36,026)
- ------------------------------------------------------------------------------------------
Distributions from net realized gain:
Class A (22,962,861) (18,878,099)
Class B (6,696,217) (2,778,986)
Class C (1,768,806) (689,670)
==========================================================================================
Capital Stock Transactions
Net increase in net assets resulting from capital stock transactions--Note 2:
Class A 186,699,902 67,398,927
Class B 151,470,057 59,694,507
Class C 42,571,844 15,679,507
Class Y 2,817,095 --
==========================================================================================
Net Assets
Total increase 530,130,697 221,320,738
- ------------------------------------------------------------------------------------------
Beginning of period 552,632,641 331,311,903
-------------- ------------
End of period (including undistributed net investment
income of $4,754,927 and $1,919,807, respectively) $1,082,763,338 $552,632,641
============== ============
</TABLE>
See accompanying Notes to Financial Statements.
17 Oppenheimer Quest Value Fund, Inc.
<PAGE>
- -------------------------------------------------------------------------------
Financial Highlights
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Class A
------------------------------------------------------------
Year Ended October 31,
1997 1996(3) 1995 1994 1993
=======================================================================================================
<S> <C> <C> <C> <C> <C>
Per Share Operating Data:
Net asset value, beginning of period $17.30 $14.51 $12.59 $12.51 $11.71
- -------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income (loss) .11 .08 .12(4) .09(4) .05(4)
Net realized and unrealized gain (loss) 4.07 3.79 2.71 .50 1.34
------ ------ ------ ------ ------
Total income (loss) from investment
operations 4.18 3.87 2.83 .59 1.39
- -------------------------------------------------------------------------------------------------------
Dividends and distributions to
shareholders:
Dividends from net investment income (.07) (.10) (.08) (.04) (.05)
Distributions from net realized gain (.92) (.98) (.83) (.47) (.54)
------ ------ ------ ------ ------
Total dividends and distributions to
shareholders (.99) (1.08) (.91) (.51) (.59)
- -------------------------------------------------------------------------------------------------------
Net asset value, end of period $20.49 $17.30 $14.51 $12.59 $12.51
====== ====== ====== ====== ======
=======================================================================================================
Total Return, at Net Asset Value(5) 25.41% 28.39% 24.74% 5.01% 12.27%
=======================================================================================================
Ratios/Supplemental Data:
Net assets, end of period
(in thousands) $699,230 $412,246 $282,615 $238,085 $245,320
- -------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $560,582 $338,429 $257,240 $237,923 $205,074
- -------------------------------------------------------------------------------------------------------
Ratios to average net assets:
Net investment income (loss) 0.74% 0.58% 0.90% 0.72% 0.40%
Expenses 1.60% 1.71% 1.68% 1.71% 1.75%
- -------------------------------------------------------------------------------------------------------
Portfolio turnover rate(7) 19.7% 36.0% 36.0% 49.0% 27.0%
Average brokerage commission rate(8) $0.0573 $0.0559 -- -- --
</TABLE>
1. For the period from December 16, 1996 (inception of offering) to October 31,
1997. 2. For the period from September 1, 1993 (inception of offering) to
October 31, 1993. 3. On November 22, 1995, OppenheimerFunds, Inc. became the
investment advisor to the Fund. 4. Based on average shares outstanding for the
period. 5. 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.
18 Oppenheimer Quest Value Fund, Inc.
<PAGE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Class B Class C
- ----------------------------------------------------------------------- ----------------------
Year Ended October 31, Year Ended October 31,
1997 1996(3) 1995 1994 1993(2) 1997 1996(3)
=================================================================================================
<S> <C> <C> <C> <C> <C> <C>
$17.08 $14.37 $12.53 $12.51 $12.66 $17.07 $14.35
- -------- -------- --------- --------- ------- ------- -------
.05 .05 .05(4) .02(4) (.01)(4) .05 .04
3.97 3.71 2.69 .50 (.14) 3.98 3.71
- -------- -------- --------- --------- ------- ------- -------
4.02 3.76 2.74 .52 (.15) 4.03 3.75
- -------------------------------------------------------------------------------------------------
(.01) (.07) (.07) (.03) -- (.01) (.05)
(.92) (.98) (.83) (.47) -- (.92) (.98)
- -------- -------- --------- --------- ------- ------- -------
(.93) (1.05) (.90) (.50) -- (.93) (1.03)
- -------- -------- --------- --------- ------- ------- -------
$20.17 $17.08 $14.37 $12.53 $12.51 $20.17 $17.07
======== ======== ========= ========= ======= ======== ========
=================================================================================================
24.71% 27.76% 24.08% 4.43% (1.19)% 24.79% 27.73%
=================================================================================================
$298,348 $111,130 $38,557 $14,373 $2,015 $82,098 $29,256
- -------- -------- --------- --------- ------- ------- -------
$200,752 $68,175 $25,393 $8,341 $1,136 $55,969 $18,099
- -------- -------- --------- --------- ------- -------- --------
0.25% 0.06% 0.36% 0.14% (1.19)%(6) 0.25% 0.06%
2.10% 2.26% 2.21% 2.24% 2.27%(6) 2.10% 2.20%
- -------- -------- --------- --------- ------- ------- --------
19.7% 36.0% 36.0% 49.0% 27.0% 19.7% 36.0%
$0.0573 $0.0559 -- -- -- $0.0573 $0.0559
</TABLE>
6. Annualized.
7. The lesser of purchases or sales of portfolio securities for a period,
divided by the monthly average of the market value of portfolio securities owned
during the period. Securities with a maturity or expiration date at the time of
acquisition of one year or less are excluded from the calculation. Purchases and
sales of investment securities (excluding short-term securities) for the period
ended October 31, 1997 were $387,455,107 and $129,795,392, respectively. 8.
Total brokerage commissions paid on applicable purchases and sales of portfolio
securities for the period, divided by the total number of related shares
purchased and sold. See accompanying Notes to Financial Statements.
19 Oppenheimer Quest Value Fund, Inc.
<PAGE>
Financial Highlights (Continued)
<TABLE>
<CAPTION>
Class C Class Y
--------------------------------------------- ------------
Period Ended
Year Ended October 31, October 31,
1995 1994 1993(2) 1997(1)
========================================================================================================
<S> <C> <C> <C> <C>
Per Share Operating Data:
Net asset value, beginning of period $12.52 $12.50 $12.66 $16.50
- --------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income (loss) .04(4) .01(4) (.01)(4) .10
Net realized and unrealized gain (loss) 2.70 .51 (.15) 3.95
------- ------- ------- ------
Total income (loss) from investment
operations 2.74 .52 (.16) 4.05
- --------------------------------------------------------------------------------------------------------
Dividends and distributions to shareholders:
Dividends from net investment income (.08) (.03) -- --
Distributions from net realized gain (.83) (.47) -- --
------- ------- ------- ------
Total dividends and distributions
to shareholders (.91) (.50) -- --
- --------------------------------------------------------------------------------------------------------
Net asset value, end of period $14.35 $12.52 $12.50 $20.55
======= ====== ====== ======
========================================================================================================
Total Return, at Net Asset Value(5) 24.10% 4.45% (1.26)% 24.55%
========================================================================================================
Ratios/Supplemental Data:
Net assets, end of period
(in thousands) $10,140 $3,581 $221 $3,086
- --------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $6,711 $1,725 $169 $1,372
- --------------------------------------------------------------------------------------------------------
Ratios to average net assets:
Net investment income (loss) 0.31% 0.09% (0.90)%(6) 1.20%(6)
Expenses 2.26% 2.28% 2.27%(6) 1.19%(6)
- --------------------------------------------------------------------------------------------------------
Portfolio turnover rate(7) 36.0% 49.0% 27.0% 19.7%
Average brokerage commission rate(8) -- -- -- $0.0573
</TABLE>
20 Oppenheimer Quest Value Fund, Inc.
<PAGE>
- -------------------------------------------------------------------------------
Notes to Financial Statements
- -------------------------------------------------------------------------------
===============================================================================
1. Significant Accounting Policies
Oppenheimer Quest Value Fund, Inc. (the Fund) 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. It is the intention of the Fund to continue to invest in equity
securities of companies believed by the Manager to be undervalued. The Fund's
investment advisor is OppenheimerFunds, Inc. (the Manager). The Fund offers
Class A, Class B, Class C and Class Y shares. Class A shares are sold with a
front-end sales charge. Class B and Class C shares may be subject to a
contingent deferred sales charge. All classes of shares have identical rights to
earnings, assets and voting privileges, except that each class has its own
expenses directly attributable to that class and exclusive voting rights with
respect to matters affecting that class. Classes A, B and C have separate
distribution and/or service plans. No such plan has been adopted for Class Y
shares. Class B shares will automatically convert to Class A shares six years
after the date of purchase. 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
an approved portfolio pricing service are valued using dealer-supplied
valuations provided the Manager is satisfied that the firm rendering the quotes
is reliable and that the quotes reflect current market value, or are valued
under consistently applied procedures established by the Board of 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.
21 Oppenheimer Quest Value Fund, Inc.
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (Continued)
- --------------------------------------------------------------------------------
1. Significant Accounting Policies (continued)
Distributions to Shareholders. Dividends and distributions to shareholders are
recorded on the ex-dividend date.
- --------------------------------------------------------------------------------
Classification of Distributions to Shareholders. Net investment income (loss)
and net realized gain (loss) may differ for financial statement and tax
purposes. The character of the distributions made during the year from net
investment income or net realized gains may differ from 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 fiscal year in which the income or realized gain was recorded by
the Fund.
- --------------------------------------------------------------------------------
Other. Investment transactions are accounted for on the date the investments are
purchased or sold (trade date) and dividend income is recorded on the
ex-dividend date. Interest income is accrued on a daily basis. Realized gains
and losses on investments and unrealized appreciation and depreciation are
determined on an identified cost basis, which is the same basis used for federal
income tax purposes.
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of income and expenses during the reporting
period. Actual results could differ from those estimates.
22 Oppenheimer Quest Value Fund, Inc.
<PAGE>
2. Capital Stock
The Fund has authorized 100 million shares of $1.00 par value capital stock in
the aggregate to be apportioned among each class of shares. Transactions in
shares of capital stock were as follows:
<TABLE>
<CAPTION>
Year Ended October 31, 1997(1) Year Ended October 31, 1996
------------------------------ ---------------------------
Shares Amount Shares Amount
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class A:
Sold 15,030,841 $ 278,180,029 6,823,030 $109,212,436
Dividends and distributions
reinvested 1,380,466 23,316,006 1,381,459 19,409,592
Redeemed (6,112,033) (114,796,133) (3,849,611) (61,223,101)
---------- ------------- ---------- ------------
Net increase 10,299,274 $ 186,699,902 4,354,878 $ 67,398,927
========== ============= ========== ============
- -------------------------------------------------------------------------------------------
Class B:
Sold 9,222,271 $ 169,517,668 4,315,316 $ 67,660,385
Dividends and distributions
reinvested 382,280 6,387,808 196,585 2,738,062
Redeemed (1,323,617) (24,435,419) (686,922) (10,703,940)
---------- ------------- ---------- ------------
Net increase 8,280,934 $ 151,470,057 3,824,979 $ 59,694,507
========== ============= ========== ============
- -------------------------------------------------------------------------------------------
Class C:
Sold 2,955,467 $ 54,066,076 1,267,566 $ 20,075,574
Dividends and distributions
reinvested 105,641 1,764,202 51,443 716,599
Redeemed (704,333) (13,258,434) (311,646) (5,112,666)
---------- ------------- ---------- ------------
Net increase 2,356,775 $ 42,571,844 1,007,363 $ 15,679,507
========== ============= ========== ============
- -------------------------------------------------------------------------------------------
Class Y:
Sold 176,674 $ 3,355,435 -- $ --
Redeemed (26,450) (538,340) -- --
---------- ------------- ---------- ------------
Net increase 150,224 $ 2,817,095 -- $ --
========== ============= ========== ============
</TABLE>
1. For the year ended October 31, 1997 for Class A, B and C and for the period
from December 16, 1996 (inception of offering) to October 31, 1997 for Class Y
shares.
===============================================================================
3. Unrealized Gains and Losses on Investments
At October 31, 1997, net unrealized appreciation on investments of $269,040,447
was composed of gross appreciation of $272,174,847, and gross depreciation of
$3,134,400.
23 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 of
average annual net assets, and 0.85% of average annual net assets over $800
million. Effective October 22, 1997, the investment advisory agreement was
amended to include additional breakpoints for average annual net assets in
excess of $800 million. The new investment advisory agreement provides for a fee
of 1.00% of the first $400 million of average annual net assets, 0.90% of the
next $400 million of average annual net assets, 0.85% of the next $3.2 billion
of average annual net assets, 0.80% of the next $4 billion of average annual net
assets, and 0.75% of average annual net assets over $8 billion. The Manager acts
as the accounting agent for the Fund at an annual fee of $55,000, plus
out-of-pocket costs and expenses reasonably incurred.
The Manager pays OpCap Advisors (the Sub-Advisor) based on the fee
schedule set forth in the Prospectus. For the year ended October 31, 1997, the
Manager paid $2,660,509 to the Sub-Advisor. On February 13, 1997 PIMCO Advisors
L.P. signed a definitive agreement with Oppenheimer Group, Inc. and its
subsidiary Oppenheimer Financial Corp. for PIMCO Advisors L.P. and its
affiliate, Thomson Advisory Group, Inc., to acquire the one-third managing
general partner interest in Oppenheimer Capital (the parent of OpCap Advisors)
and the 1.0% general interest in Oppenheimer Capital L.P.
For the year ended October 31, 1997, commissions (sales charges
paid by investors) on sales of Class A shares totaled $3,638,204, of which
$910,431 was retained by OppenheimerFunds Distributor, Inc. (OFDI), a subsidiary
of the Manager, as general distributor, and by an affiliated broker/dealer.
Sales charges advanced to broker/dealers by OFDI on sales of the Fund's Class B
and Class C shares totaled $5,794,972 and $474,699, respectively, of which
$222,454 and $6,853, respectively, was paid to an affiliated broker/dealer.
During the year ended October 31, 1997, OFDI received contingent deferred sales
charges of $348,684 and $23,932, respectively, upon redemption of Class B and
Class C shares as reimbursement for sales commissions advanced by OFDI at the
time of sale of such shares.
OppenheimerFunds Services (OFS), a division of the Manager, is the
transfer and shareholder servicing agent for the Fund and for other registered
investment companies. The Fund pays OFS an annual maintenance fee of $14.85 for
each Fund shareholder account and reimburses OFS for its out-of-pocket expenses.
During the year ended October 31, 1997, the Fund paid OFS $615,475.
24 Oppenheimer Quest Value Fund, Inc.
<PAGE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
===============================================================================
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 shareholder accounts of their customers that
hold Class A shares. OFDI retains the balance of the asset-based sales charge to
reimburse itself for its other expenditures under the Plan. During the year
ended October 31, 1997, OFDI paid $547,120 to an affiliated broker/dealer as
compensation for Class A personal service and maintenance expenses.
The Fund has adopted Distribution and Service Plans for Class B
and C shares to compensate OFDI for its costs in distributing Class B and Class
C shares and servicing accounts. Under the Plans, the Fund pays OFDI an annual
asset-based sales charge of 0.75% per year on Class B shares and Class C shares
for its services rendered in distributing Class B and Class C shares. OFDI also
receives a service fee of 0.25% per year to compensate dealers for providing
personal services for accounts that hold Class B and C shares. Each fee is
computed on the average annual net assets of Class B and Class C shares,
determined as of the close of each regular business day. During the year ended
October 31, 1997, OFDI paid $44,146 and $35,579, respectively, to an affiliated
broker/dealer as compensation for Class B and Class C personal service and
maintenance expenses and retained $1,751,281 and $350,569, respectively, as
compensation for Class B and Class C sales commissions and service fee advances,
as well as financing costs. If either Plan is terminated by the Fund, the Board
of Directors may allow the Fund to continue payments of the asset-based sales
charge to OFDI for distributing shares before the Plan was terminated. At
October 31, 1997, OFDI had incurred unreimbursed expenses of $7,193,352 for
Class B and $740,978 for Class C.
25 Oppenheimer Quest Value Fund, Inc.
<PAGE>
- -------------------------------------------------------------------------------
Notes to Financial Statements (Continued)
- -------------------------------------------------------------------------------
===============================================================================
5. Bank Borrowings
The Fund may borrow from a bank for temporary or emergency purposes including,
without limitation, funding of shareholder redemptions provided the asset
coverage for borrowings exceeds 300%. The Fund has entered into an agreement
which enables it to participate with other Oppenheimer funds in an unsecured
line of credit with a bank, which permits borrowings up to $400 million,
collectively. Interest is charged to each fund, based on its borrowings, at a
rate equal to the Federal Funds Rate plus 0.35%. Borrowings are payable 30 days
after such loan is executed. The Fund also pays a commitment fee equal to its
pro rata share of the average unutilized amount of the credit facility at a rate
of 0.0575% per annum.
The Fund had no borrowings outstanding during the year ended
October 31, 1997.
26 Oppenheimer Quest Value Fund, Inc.
<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.
(the Fund), at October 31, 1997, the results of its operations for the year then
ended, the changes in its net assets and the financial highlights for each of
the two years in the period then ended, in conformity with generally accepted
accounting principles. These financial statements and financial highlights
(hereafter referred to as financial statements) are the responsibility of the
Fund's management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
financial statements in accordance with generally accepted auditing standards
which require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits, which included
confirmation of securities at October 31, 1997 by correspondence with the
custodian and the application of alternative auditing procedures where
securities purchased had not been received, provide a reasonable basis for the
opinion expressed above. The financial statements 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.
Price Waterhouse LLP
Denver, Colorado
November 21, 1997
27 Oppenheimer Quest Value Fund, Inc.
<PAGE>
- -------------------------------------------------------------------------------
Federal Income Tax Information (Unaudited)
- -------------------------------------------------------------------------------
===============================================================================
In early 1998 shareholders will receive information regarding all dividends and
distributions paid to them by the Fund during calendar year 1997. Regulations of
the U.S. Treasury Department require the Fund to report this information to the
Internal Revenue Service.
Distributions of $0.9945, $0.9370 and $0.9366 per share were paid to
Class A, Class B and Class C shareholders, respectively, on December 11, 1996,
of which $0.8338 was designated as a "capital gain distribution" for federal
income tax purposes. Whether received in stock or in cash, the capital gain
distribution should be treated by shareholders as a gain from the sale of
capital assets held for more than one year (long-term capital gains).
Dividends paid by the Fund during the fiscal year ended October 31,
1997 which are not designated as capital gain distributions should be multiplied
by 70.26% to arrive at the net amount eligible for the corporate
dividend-received deduction.
The foregoing information is presented to assist shareholders in
reporting distributions received from the Fund to the Internal Revenue Service.
Because of the complexity of the federal regulations which may affect your
individual tax return and the many variations in state and local tax
regulations, we recommend that you consult your tax advisor for specific
guidance.
28 Oppenheimer Quest Value Fund, Inc.
<PAGE>
- -------------------------------------------------------------------------------
Shareholder Meeting (Unaudited)
- -------------------------------------------------------------------------------
===============================================================================
On June 2, 1997, a special shareholder meeting was held at which the selection
of Price Waterhouse LLP as the independent accountants and auditors of the Fund
for the fiscal year beginning November 1, 1996 was ratified (Proposal No. 1),
the proposed changes to certain of the Fund's fundamental investment policies,
including changes to the investment objective were approved (Proposal No. 2),
the investment Advisory Agreement between the Fund and OppenheimerFunds, Inc.
was approved (Proposal No. 3), the subadvisory Agreement between
OppenheimerFunds, Inc. and OpCap Advisors was approved (Proposal No. 4), the
Fund's Class A 12b-1 Distribution and Service Plan was approved by Class A
shareholders (Proposal No. 5), the Fund's Class B 12b-1 Distribution and Service
Plan was approved by Class B shareholders (Proposal No. 6), and the Fund's Class
C 12b-1 Distribution and Service Plan was approved by Class C shareholders
(Proposal No. 7) as described in the Fund's proxy statement for that meeting.
The following is a report of the votes cast:
<TABLE>
<CAPTION>
Withheld/ Broker
Proposal For Against Abstain Non-Votes Total
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Proposal No. 1 20,889,092.525 287,701.575 954,970.833 16,579,920 22,131,764.933
Proposal No. 2 19,493,341.968 1,298,010.268 1,357,555.547 16,579,920 22,148,907.783
Proposal No. 3 20,084,238.656 786,542.583 1,278,232.184 16,579,920 22,149,013.423
Proposal No. 4 19,991,516.339 818,803.616 1,340,032.468 16,579,920 22,150,352.423
Proposal No. 5 13,948,867.689 700,107.512 1,050,094.100 11,523,914 15,699,069.301
Proposal No. 6 4,471,016.044 240,150.475 306,841.447 3,970,870 5,018,007.966
Proposal No. 7 1,288,639.000 84,549.036 59,570.281 1,085,198 1,432,758.317
</TABLE>
29 Oppenheimer Quest Value Fund, Inc.
<PAGE>
- --------------------------------------------------------------------------------
Oppenheimer Quest Value Fund, Inc.
- --------------------------------------------------------------------------------
================================================================================
Officers and Directors Bridget A. Macaskill, Chairman of the Board of
Directors and President
Paul Y. Clinton, Director
Thomas W. Courtney, Director
Lacy B. Herrmann, Director
George Loft, Director
Robert C. Doll, Jr., Vice President
George C. Bowen, Treasurer
Robert J. Bishop, Assistant Treasurer
Scott T. Farrar, Assistant Treasurer
Andrew J. Donohue, Secretary
Robert G. Zack, Assistant Secretary
================================================================================
Investment Advisor OppenheimerFunds, Inc.
================================================================================
Sub-Advisor OpCap Advisors
================================================================================
Distributor OppenheimerFunds Distributor, Inc.
================================================================================
Transfer and Shareholder OppenheimerFunds Services
Servicing Agent
================================================================================
Custodian of Portfolio State Street Bank and Trust Company
Securities
================================================================================
Independent Accountants Price Waterhouse LLP
================================================================================
Legal Counsel Gordon Altman Butowsky Weitzen Shalov & Wein
This is a copy of a report to shareholders of
Oppenheimer Quest Value Fund, Inc. This report must be
preceded or accompanied by a Prospectus of Oppenheimer
Quest Value Fund, Inc. For material information
concerning the Fund, see the Prospectus. Shares of
Oppenheimer funds are not deposits or obligations of
any bank, are not guaranteed by any bank, and are not
insured by the FDIC or any other agency, and involve
investment risks, including possible loss of the
principal amount invested.
30 Oppenheimer Quest Value Fund, Inc.
<PAGE>
- -------------------------------------------------------------------------------
OppenheimerFunds Family
- -------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
==========================================================================================
Real Asset Funds
- ------------------------------------------------------------------------------------------
Real Asset Fund Gold & Special Minerals Fund
==========================================================================================
Stock Funds
- ------------------------------------------------------------------------------------------
Developing Markets Fund Capital Appreciation Fund(1) Disciplined Value Fund
Enterprise Fund Quest Capital Value Fund Quest Value Fund
International Growth Fund Growth Fund Mid Cap Fund
Discovery Fund Global Fund International Small
Quest Small Cap Value Fund Quest Global Value Fund Company Fund
==========================================================================================
Stock & Bond Funds
- ------------------------------------------------------------------------------------------
Main Street Income & Quest Growth & Income Disciplined Allocation Fund
Growth Fund Value Fund Multiple Strategies Fund(2)
Quest Opportunity Value Fund Global Growth & Income Fund Bond Fund for Growth
Total Return Fund Equity Income Fund
==========================================================================================
Bond Funds
- ------------------------------------------------------------------------------------------
International Bond Fund Champion Income Fund U.S. Government Trust
High Yield Fund Strategic Income Fund Limited-Term Government Fund
Bond Fund
==========================================================================================
Municipal Funds
- ------------------------------------------------------------------------------------------
California Municipal Fund(3) Pennsylvania Municipal Fund(3) Rochester Division:
Florida Municipal Fund(3) Municipal Bond Fund Rochester Fund Municipals
New Jersey Municipal Fund(3) Insured Municipal Fund Limited Term New York
New York Municipal Fund(3) Intermediate Municipal Fund Municipal Fund
==========================================================================================
Money Market Funds(4)
- ------------------------------------------------------------------------------------------
Money Market Fund Cash Reserves
==========================================================================================
LifeSpan
- ------------------------------------------------------------------------------------------
Growth Fund Balanced Fund Income Fund
</TABLE>
1. On 12/18/96, the Fund's name was changed from "Target Fund." 2. On 3/16/97,
the Fund's name was changed from "Asset Allocation Fund." 3. Available only to
investors in certain states. 4. An investment in money market funds is neither
insured nor guaranteed by the U.S. government and there can be no assurance that
a money market fund will be able to maintain a stable net asset value of $1.00
per share. Oppenheimer funds are distributed by OppenheimerFunds Distributor,
Inc., Two World Trade Center, New York, NY 10048-0203. (C) Copyright 1997
OppenheimerFunds, Inc. All rights reserved.
31 Oppenheimer Quest Value Fund, Inc.
<PAGE>
- --------------------------------------------------------------------------------
Information and services
- --------------------------------------------------------------------------------
Internet
24-hr access to account information
www.oppenheimerfunds.com
General Information
Mon-Fri 8:30am-9pm ET
Sat 10am-4pm ET
1-800-525-7048
Account Transactions
Mon-Fri 8:30am-9pm ET
Sat 10am-4pm ET
1-800-852-8457
PhoneLink
24-hr automated information
and automated transactions
1-800-533-3310
Telecommunication Device
for the Deaf (TDD)
Mon-Fri 8:30am-2pm ET
1-800-843-4461
OppenheimerFunds
Information Hotline
24 hours a day, timely and insightful messages on the economy and issues that
affect your investments 1-800-835-3104
As an Oppenheimer fund shareholder, you have some special privileges. Whether
it's automatic investment plans, informative newsletters and hotlines, or ready
account access, you can benefit from services designed to make investing simple.
And when you need help, our Customer Service Representatives are only a
toll-free phone call away. They can provide information about your account and
handle administrative requests. You can reach them at our General Information
number.
When you want to make a transaction, you can do it easily by calling our
toll-free Telephone Transactions number. And, by enrolling in AccountLink, a
convenient service that "links" your OppenheimerFunds accounts and your bank
checking or savings account, you can use the Telephone Transactions number to
make investments.
For added convenience, you can get automated information with
OppenheimerFunds PhoneLink service, available 24 hours a day, 7 days a week.
PhoneLink gives you access to a variety of fund, account, and market
information. Of course, you can always speak with a Customer Service
Representative during the General Information hours shown at the left.
You can count on us whenever you need assistance. That's why the
International Customer Service Association, an independent, nonprofit
organization made up of over 3,200 customer service management professionals
from around the country, honored the Oppenheimer funds' transfer agent,
OppenheimerFunds Services, with their Award of Excellence in 1993.
So call us today, or visit us at our website at
www.oppenheimerfunds.com--we're here to help.
[OPPENHEIMERFUNDS LOGO]
Distributor, Inc.
RA0225.001.1097 December 30, 1997
<PAGE>
[Cover Page]
OPPENHEIMER QUEST OFFICERS VALUE FUND
Annual Report October 31, 1997
[Logo]OppenheimerFunds sm
THE RIGHT WAY TO INVEST
<PAGE>
Bridget A. Macaskill
President
Oppenheimer
Quest
Officers Value Fund
Dear Shareholder,
As you are no doubt aware, during the end of October and early November many
stock markets around the world recorded their all-time largest point declines,
followed by subsequent gains and continued volatility, leaving investors
uncertain about what would occur next.
To put those events in focus, let's look at a "snapshot" of the two-week time
period. Sharp declines in the overseas stock markets, particularly in Asia,
triggered a series of sell-offs throughout Europe, Latin America and the United
States. In response, the U.S. stock market, as measured by the Dow Jones
Industrial Average, dropped 554 points on October 27, its largest point decline
in history. However, almost as quickly, the U.S. stock market bounced back over
the succeeding few days, regaining nearly all of its losses.
While no one could have predicted the timing or extent of these fluctuations,
many analysts, including our fund managers here at OppenheimerFunds, had warned
of a correction for several months. We believed that U.S. valuations were too
high, stocks were expensive relative to bonds, recent corporate earnings were
somewhat disappointing and that Federal Reserve Chairman Alan Greenspan could
possibly seek a short-term interest rate hike. While only one short-term
interest rate hike occurred in March of 1997, the other factors have held true.
We'd like to take this opportunity to remind shareholders that stock market
volatility is a normal and expected part of the business cycle. As Alan
Greenspan suggested, in years to come this period will likely be remembered as a
positive change for a market that was growing too quickly.
For frequent market updates, please visit our web site at
WWW.OPPENHEIMERFUNDS.COM or call 1-800-835-3104 to listen to our recorded
messages. In the meantime, thank you for your confidence in OppenheimerFunds,
THE RIGHT WAY TO INVEST. We look forward to helping you reach your investment
goals in the future.
/s/Bridget A. Macaskill
Bridget A. Macaskill
November 21, 1997
2 Oppenheimer Quest Officers Value Fund
<PAGE>
JEFFREY C. WHITTINGTON
Portfolio Manager
Q + A
An interview with your Fund's manager.
HOW DID THE FUND PERFORM OVER THE PAST YEAR?
Oppenheimer Quest Officers Value Fund delivered an average annual total return
of 1.56%, without sales charges, for the one-year period ended 10/31/97.(1) This
reflects an improvement over the first half of the fiscal year, when the Fund's
performance was hindered by the poor performance of a few large holdings.
Because the fund had only 18 common stock positions as of October 31, 1997, it
exhibited more volatility--both positively and negatively--than the S&P 500. A
decline in even just one position can impact the entire portfolio. In the first
six-month period of the past year, the poor performance of LucasVarity (the
Fund's largest holding at the time) dramatically affected the Fund's return.
However, limiting the number of stocks in the portfolio can also be
advantageous. In particular, we are able to gain more insight into each
individual holding. We look very closely at the performance of each holding--and
reduce or sell underperforming holdings. This allows us to replace them with the
stocks of companies which we believe offer more favorable returns over the long
term.
WHICH INVESTMENTS CONTRIBUTED THE MOST TO THE FUND'S PERFORMANCE?(2) UCAR
International, a basic materials firm--was also the Fund's strongest performer.
UCAR was able to generate large amounts of free cash flow within the
steel-processing industry. Management wisely allocated these assets to paying
down debt. In addition, they recently announced a share-repurchase program.
The Fund also benefited from major holdings in ACE Ltd. and Mid Ocean Ltd., two
Bermuda-based insurance companies. Since there's not a lot of competition in
their specialty-oriented lines of insurance, these companies generate an
enormous amount of excess capital--which, in turn, allows them to underwrite a
substantial business volume. Operating in Bermuda, these companies have very low
expense structures relative to U.S. and European competitors. Plus, in line with
the Fund's value strategy, in our opinion, these companies are still modestly
valued.
Once again, H&R Block was a valuable contributor to the Fund's
performance--particularly over the past six- month period. That's partly due to
the fact that they recently sold off the CompuServe online service and its
unprofitable consumer operations. In addition to trimming its operations, H&R
Block stock is a model of consistency--they've reported gains in all but one of
the past 20 years.
WHICH INVESTMENTS DIDN'T PERFORM AS WELL AS EXPECTED?
The stocks of oil and gas exploration companies have been particularly volatile
over the past year. That's one of the reasons why the Fund's fifth largest
holding, Triton Energy, has continued to underperform. However, we have
confidence in the company's management and still believe Triton has real
long-term value.
LucasVarity, a British electrical equipment conglomerate, was a disappointment
earlier in the year due to the merger of Lucas Industries and Varity.
1. Includes changes in net asset value per share without deducting any sales
charges. Such performance would have been lower if sales charges were taken into
account. 2. The Fund's portfolio is subject to change. OppenheimerFunds, Inc.
became the Fund's advisor on 11/22/95. The Fund's subadvisor is OpCap Advisors,
which was the Fund's advisor prior to 11/22/95. The portfolio manager is
employed by the Fund's subadvisor.
3 Oppenheimer Quest Officers Value Fund
<PAGE>
However, the new company recently reported stabilized earnings and they're
benefiting from a strong UK market. The investment community likes the fact that
the company is on budget for earnings and cost cutting for the year.
WHAT CHALLENGES DOES THE FUND FACE IN THE COMING MONTHS? Our constant challenge
is to maintain a portfolio of companies which are above-average in their
profitability, growth and stability. We don't try to time the market or invest
based on what we think interest rates, corporate profits or the economy might do
in the near term.
In our view, the biggest risk in any investment is the price that you pay for
it. That's why the Fund employs a "bottom-up" approach to stock selection.
Rather than targeting specific industries or sectors, we identify good, solid
individual companies that we believe are reasonably valued and may deliver a
high return on capital based on above-average growth prospects.
WHAT IS YOUR OUTLOOK FOR THE FUND?
While we like the portfolio of stocks the Fund currently owns, no one knows for
sure what the market or interest rates may do through the end of the year and
into 1998. We believe that, over time, by owning a portfolio of the best
companies with the best management at the best prices, the Fund can outperform
the S&P 500 benchmark in all different economic scenarios.//
4 Oppenheimer Quest Officers Value Fund
<PAGE>
STATEMENT OF INVESTMENTS OCTOBER 31, 1997
<TABLE>
<CAPTION>
MARKET VALUE
SHARES SEE NOTE 1
============================================================================================================================
COMMON STOCKS - 90.9%
- ----------------------------------------------------------------------------------------------------------------------------
COMPUTER HARDWARE - 5.2%
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Wang Laboratories, Inc. (1) 16,800 $ 388,500
- ---------------------------------------------------------------------------------------------------------------------------
DIVERSIFIED FINANCIAL - 10.1%
- ---------------------------------------------------------------------------------------------------------------------------
Countrywide Credit Industries, Inc. 11,000 377,438
- ---------------------------------------------------------------------------------------------------------------------------
H & R Block, Inc. 10,100 373,700
----------
751,138
- ---------------------------------------------------------------------------------------------------------------------------
ELECTRIC UTILITIES - 5.0%
- ---------------------------------------------------------------------------------------------------------------------------
CalEnergy, Inc. (1) 11,000 376,750
- ---------------------------------------------------------------------------------------------------------------------------
FOOD - 5.5%
- ---------------------------------------------------------------------------------------------------------------------------
Triarc Cos. (1) 18,300 414,038
- ---------------------------------------------------------------------------------------------------------------------------
HEALTHCARE/SUPPLIES & SERVICES - 4.9%
- ---------------------------------------------------------------------------------------------------------------------------
Allegiance Corp. 13,100 363,525
- ---------------------------------------------------------------------------------------------------------------------------
INSURANCE - 15.3%
- ---------------------------------------------------------------------------------------------------------------------------
ACE Ltd. 4,000 371,750
- ---------------------------------------------------------------------------------------------------------------------------
EXEL Ltd. 6,300 380,756
- ---------------------------------------------------------------------------------------------------------------------------
Mid Ocean Ltd. 6,000 389,250
----------
1,141,756
- ---------------------------------------------------------------------------------------------------------------------------
LEISURE & ENTERTAINMENT - 5.1%
- ---------------------------------------------------------------------------------------------------------------------------
Tricon Global Restaurants, Inc. (1) 12,500 378,906
- ---------------------------------------------------------------------------------------------------------------------------
MANUFACTURING - 5.1%
- ---------------------------------------------------------------------------------------------------------------------------
LucasVarity plc, ADR 11,100 378,788
- ---------------------------------------------------------------------------------------------------------------------------
METALS - 4.9%
- ---------------------------------------------------------------------------------------------------------------------------
UCAR International, Inc. (1) 9,700 363,750
- ---------------------------------------------------------------------------------------------------------------------------
OIL-INTEGRATED - 5.1%
- ---------------------------------------------------------------------------------------------------------------------------
Triton Energy Ltd. (1) 9,800 383,425
- ---------------------------------------------------------------------------------------------------------------------------
TELECOMMUNICATIONS-TECHNOLOGY - 19.5%(2)
- ---------------------------------------------------------------------------------------------------------------------------
CommScope, Inc. (1) 29,600 325,600
- ---------------------------------------------------------------------------------------------------------------------------
NextLevel Systems, Inc. (1) 27,900 376,650
- ---------------------------------------------------------------------------------------------------------------------------
Tele-Communications TCI Ventures Group, Cl. A (1) 16,500 380,531
- ---------------------------------------------------------------------------------------------------------------------------
WorldCom, Inc. 11,200 376,600
----------
1,459,381
- ---------------------------------------------------------------------------------------------------------------------------
TRANSPORTATION - 5.2%
- ---------------------------------------------------------------------------------------------------------------------------
Canadian Pacific Ltd. (New) 12,900 384,581
----------
Total Common Stocks (Cost $6,255,367) 6,784,538
FACE
AMOUNT
===========================================================================================================================
SHORT-TERM NOTES - 5.0%
- ---------------------------------------------------------------------------------------------------------------------------
Ford Motor Credit Corp., 5.60%, 11/6/97 (Cost $374,708) (3) $375,000 374,708
- ---------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS, AT VALUE (COST $6,630,075) 95.9% 7,159,246
- ---------------------------------------------------------------------------------------------------------------------------
OTHER ASSETS NET OF LIABILITIES 4.1 306,553
-------- ----------
NET ASSETS 100.0% $7,465,799
======== ==========
</TABLE>
5 Oppenheimer Quest Officers Value Fund
<PAGE>
STATEMENT OF INVESTMENTS (CONTINUED)
- --------------------------------------------------------------------------------
1. Non-income producing security.
2. The Fund may have elements of risk due to concentrated investments in
specific industries. Such concentrations may subject the Fund to additional
risks resulting from future political or economic conditions. 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 Officers Value Fund
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES OCTOBER 31, 1997
<TABLE>
================================================================================================================
ASSETS
<S> <C>
Investments, at value (cost $6,630,075) - see accompanying statement $7,159,246
- ----------------------------------------------------------------------------------------------------------------
Cash 58,067
- ----------------------------------------------------------------------------------------------------------------
Receivables:
Investments sold 535,267
Shares of beneficial interest sold 1,135
- ----------------------------------------------------------------------------------------------------------------
Deferred organization costs - Note 1 2,882
- ----------------------------------------------------------------------------------------------------------------
Other 510
----------
Total assets 7,757,107
================================================================================================================
LIABILITIES Payables and other liabilities:
Shares of beneficial interest redeemed 272,099
Shareholder reports 8,654
Transfer agent and accounting services fees 985
Other 9,570
----------
Total liabilities 291,308
================================================================================================================
NET ASSETS $7,465,799
==========
================================================================================================================
COMPOSITION OF NET ASSETS
Par value of shares of beneficial interest $5,380
- ----------------------------------------------------------------------------------------------------------------
Additional paid-in capital 6,721,187
- ----------------------------------------------------------------------------------------------------------------
Accumulated net investment income 32,360
- ----------------------------------------------------------------------------------------------------------------
Accumulated net realized gain on investment transactions 177,701
- ----------------------------------------------------------------------------------------------------------------
Net unrealized appreciation on investments - Note 3 529,171
----------
Net assets $7,465,799
==========
================================================================================================================
NET ASSET VALUE PER SHARE
Net asset value and redemption price per share (based on
net assets of $7,465,799 and 538,024 shares of beneficial interest outstanding) $13.88
Maximum offering price per share (net asset value plus sales charge
of 5.75% of offering price) $14.73
</TABLE>
See accompanying Notes to Financial Statements.
7 Oppenheimer Quest Officers Value Fund
<PAGE>
STATEMENT OF OPERATIONS FOR THE YEAR ENDED OCTOBER 31, 1997
<TABLE>
================================================================================================================
INVESTMENT INCOME
<S> <C>
Dividends (net of foreign withholding taxes of $3,500) $ 97,231
- ----------------------------------------------------------------------------------------------------------------
Interest 57,030
--------
Total income 154,261
================================================================================================================
EXPENSES
Management fees - Note 4 91,482
- ----------------------------------------------------------------------------------------------------------------
Service plan fees - Note 4 45,741
- ----------------------------------------------------------------------------------------------------------------
Shareholder reports 12,450
- ----------------------------------------------------------------------------------------------------------------
Legal and auditing fees 11,089
- ----------------------------------------------------------------------------------------------------------------
Transfer agent and accounting services fees - Note 4 10,171
- ----------------------------------------------------------------------------------------------------------------
Registration and filing fees 10,006
- ----------------------------------------------------------------------------------------------------------------
Trustees' fees and expenses 9,706
- ----------------------------------------------------------------------------------------------------------------
Custodian fees and expenses
- ----------------------------------------------------------------------------------------------------------------
Other 1,090
--------
Total expenses 197,014
Less expenses paid indirectly - Note 4 (1,640)
Less reimbursement of expenses by OppenheimerFunds, Inc. - Note 4 (77,149)
--------
Net expenses 118,225
================================================================================================================
NET INVESTMENT INCOME 36,036
================================================================================================================
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain on investments 236,859
- ----------------------------------------------------------------------------------------------------------------
Net change in unrealized appreciation or depreciation on investments (335,693)
--------
Net realized and unrealized loss (98,834)
================================================================================================================
NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS $(62,798)
========
</TABLE>
See accompanying Notes to Financial Statements.
8 Oppenheimer Quest Officers Value Fund
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
1997 1996
================================================================================================================
OPERATIONS
<S> <C> <C>
Net investment income (loss) $ 36,036 $ (29,058)
- ----------------------------------------------------------------------------------------------------------------
Net realized gain 236,859 1,103,769
- ----------------------------------------------------------------------------------------------------------------
Net change in unrealized appreciation or depreciation (335,693) 570,237
-----------------------------
Net increase (decrease) in net assets resulting from operations (62,798) 1,644,948
================================================================================================================
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS
Dividends from net investment income -- (84,879)
- ----------------------------------------------------------------------------------------------------------------
Distributions from net realized gain (1,104,047) (267,637)
================================================================================================================
BENEFICIAL INTEREST TRANSACTIONS
Net increase (decrease) in net assets resulting from
beneficial interest transactions - Note 2 (2,796,658) 6,490,302
================================================================================================================
NET ASSETS
Total increase (decrease) (3,963,503) 7,782,734
- ----------------------------------------------------------------------------------------------------------------
Beginning of period 11,429,302 3,646,568
-----------------------------
End of period (including undistributed net investment
income of $32,360 for the year ended 10/31/97) $ 7,465,799 $11,429,302
=============================
</TABLE>
See accompanying Notes to Financial Statements.
9 Oppenheimer Quest Officers Value Fund
<PAGE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
1997 1996(2) 1995(1)
===================================================================================================
PER SHARE OPERATING DATA:
<S> <C> <C> <C>
Net asset value, beginning of period $15.26 $12.30 $10.00
- ---------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income (loss) .07 (.01) .24
Net realized and unrealized gain .03 4.06 2.10
------ ------ ------
Total income from investment
operations .10 4.05 2.34
- ---------------------------------------------------------------------------------------------------
Dividends and distributions to shareholders:
Dividends from net investment income -- (.26) (.04)
Distributions from net realized gain (1.48) (.83) --
------ ------ ------
Total dividends and distributions
to shareholders (1.48) (1.09) (.04)
- ---------------------------------------------------------------------------------------------------
Net asset value, end of period $13.88 $15.26 $12.30
====== ====== ======
===================================================================================================
TOTAL RETURN, AT NET ASSET VALUE(3) 1.56% 35.17% 23.44%
===================================================================================================
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in thousands) $7,466 $11,429 $3,647
- ---------------------------------------------------------------------------------------------------
Average net assets (in thousands) $9,148 $ 6,973 $2,873
- ---------------------------------------------------------------------------------------------------
Ratios to average net assets:
Net investment income (loss) 0.39%(6) (0.42)%(6)% 2.44%(4)(5)
Expenses, before voluntary reimbursement by
the Manager 2.15%(7) 2.24% 1.97%(5)
Expenses, net of voluntary reimbursement by
the Manager 1.29% 1.92% 0.00%
- ---------------------------------------------------------------------------------------------------
Portfolio turnover rate(8) 111.0% 137.4% 108.0%
Average brokerage commission rate(9) $0.0551 $0.0501 --
</TABLE>
1. For the period from November 8, 1994 (commencement of operations) to October
31, 1995. 2. On November 22, 1995, OppenheimerFunds, Inc. became the investment
advisor to the Fund. 3. Assumes a hypothetical initial investment on the
business day before the first day of the fiscal period, with all dividends and
distributions reinvested in additional shares on the reinvestment date, and
redemption at the net asset value calculated on the last business day of the
fiscal period. Sales charges are not reflected in the total returns. Total
returns are not annualized for periods of less than one full year. 4. During the
period noted above, the former Manager voluntarily waived all of its fees and
reimbursed the Fund for all of its operating expenses. If such waivers and
reimbursements had not been in effect, the annualized ratio of net investment
income to average daily net assets would have been 0.47%. 5. Annualized. 6. For
the years ended October 31, 1997 and 1996, the ratio of net investment income to
average net assets would have been (0.47)% and (0.74)%, respectively, absent the
voluntary reimbursement by both the former Manager and the current Manager. 7.
The expense ratio reflects the effect of expenses paid indirectly by the Fund.
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, 1997 were $9,257,710 and $13,205,846, 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.
See accompanying Notes to Financial Statements.
10 Oppenheimer Quest Officers Value Fund
<PAGE>
NOTES TO FINANCIAL STATEMENTS
1. SIGNIFICANT ACCOUNTING POLICIES
Oppenheimer Quest Officers Value Fund (the Fund), a series of Oppenheimer Quest
for Value Funds, is a non-diversified open-end management investment company
registered under the Investment Company Act of 1940, as amended. The Fund's
investment objective is to seek capital appreciation. It is the intention of the
Fund to continue to invest in a non-diversified portfolio of primarily equity
securities believed to be under valued in the market place. The Fund's
investment advisor is OppenheimerFunds, Inc. (the Manager). The Fund is
authorized to issue Class A, Class B and Class C shares. Initially, only shares
of Class A will be offered to officers, trustees and employees of the Fund, the
Manager and its affiliates, their relatives or any trust, pension, profit
sharing or other benefit plan for any of them. The following is a summary of
significant accounting policies consistently followed by the Fund.
INVESTMENT VALUATION. Portfolio securities are valued at the close of the New
York Stock Exchange on each trading day. Listed and unlisted securities for
which such information is regularly reported are valued at the last sale price
of the day or, in the absence of sales, at values based on the closing bid or
the last sale price on the prior trading day. Long-term and short-term
"non-money market" debt securities are valued by a portfolio pricing service
approved by the Board of Trustees. Such securities which cannot be valued by an
approved portfolio pricing service are valued using dealer-supplied valuations
provided the Manager is satisfied that the firm rendering the quotes is reliable
and that the quotes reflect current market value, or are valued under
consistently applied procedures established by the Board of Trustees to
determine fair value in good faith. Short-term "money market type" debt
securities having a remaining maturity of 60 days or less are valued at cost (or
last determined market value) adjusted for amortization to maturity of any
premium or discount.
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.
ORGANIZATION COSTS. The former Manager advanced $7,600 for organization and
start-up costs of the Fund. Such expenses are being amortized over a five-year
period from the date operations commenced.
DISTRIBUTIONS TO SHAREHOLDERS. Dividends and distributions to shareholders are
recorded on the ex-dividend date.
CLASSIFICATION OF DISTRIBUTIONS TO SHAREHOLDERS. Net investment income (loss)
and net realized gain (loss) may differ for financial statement and tax
purposes. The character of the distributions made during the year from net
investment income or net realized gains may differ from their ultimate
characterization for federal income tax purposes due to capital loss
carryforwards. Also, due to timing of dividend distributions, the fiscal year in
which amounts are distributed may differ from the fiscal year in which the
income or realized gain was recorded by the Fund.
The Fund adjusts the classification of distributions to shareholders to reflect
the differences between financial statement amounts and distributions determined
in accordance with income tax regulations. Accordingly, during the year ended
October 31, 1997, amounts have been reclassified to reflect a decrease in
undistributed net investment income of $3,676. 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. Interest income is accrued on a daily basis. Realized gains
and losses on investments and unrealized appreciation and depreciation are
determined on an identified cost basis, which is the same basis used for federal
income tax purposes.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of income and expenses during the reporting period. Actual
results could differ from those estimates.
11 Oppenheimer Quest Officers Value Fund
<PAGE>
NOTES TO FINANCIAL STATEMENTS (Continued)
2. SHARES OF BENEFICIAL INTEREST
The Fund has authorized an unlimited number of $.01 par value shares of
beneficial interest. Transactions in shares of beneficial interest were as
follows:
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
OCTOBER 31, 1997 OCTOBER 31, 1996
--------------------------- ----------------
SHARES AMOUNT SHARES AMOUNT
<S> <C> <C> <C> <C>
Class A:
Sold 131,978 $ 1,769,834 538,510 $ 7,749,424
Dividends and distributions
reinvested 85,094 1,083,250 27,528 337,769
Redeemed (427,833) (5,649,742) (113,652) (1,596,891)
--------- ------------ --------- ------------
Net increase (decrease) (210,761) $(2,796,658) 452,386 $ 6,490,302
========= ============ ========= ============
</TABLE>
3. UNREALIZED GAINS AND LOSSES ON INVESTMENTS
At October 31, 1997, net unrealized appreciation on investments of $529,171 was
composed of gross appreciation of $833,571, and gross depreciation of $304,400.
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. Effective August 1, 1996, the fee was voluntarily reduced from 1.00%
of average annual net assets to 0.60% of the first $4 million of average annual
net assets and 0.70% of net assets in excess of $4 million. Such waivers
amounted to $31,408. The Manager acts as the accounting agent for the Fund at an
annual fee of $6,000, plus out-of-pocket costs and expenses reasonably incurred.
The Manager pays OpCap Advisors (the Sub-Advisor) based on the fee schedule set
forth in the Prospectus. The Sub-Advisor waived all fees under the agreement for
the year ended October 31, 1997. On February 13, 1997 PIMCO Advisors L.P.,
signed a definitive agreement with Oppenheimer Group, Inc. and its subsidiary
Oppenheimer Financial Corp. for PIMCO Advisors L.P. and its affiliate, Thomson
Advisory Group, Inc., to acquire the one-third managing general partner interest
in Oppenheimer Capital (the parent of OpCap Advisors) and the 1.0% general
interest in Oppenheimer Capital L.P.
For the year ended October 31, 1997, commissions (sales charges paid by
investors) on sales of Class A shares totaled $1,822, of which $1,738 was
retained by OppenheimerFunds Distributor, Inc. (OFDI), a subsidiary of the
Manager, as general distributor, and by affiliated broker/dealers.
OppenheimerFunds Services (OFS), a division of the Manager, is the transfer and
shareholder servicing agent for the Fund and for other registered investment
companies. The Fund pays OFS an annual maintenance fee of $14.85 for each Fund
shareholder account and reimburses OFS for its out-of-pocket expenses. During
the year ended October 31, 1997, the Fund paid OFS $3,726.
Expenses paid indirectly represent a reduction of custodian fees for earnings on
cash balances maintained by the Fund.
The Fund has adopted a Distribution and Service Plan for Class A shares to
compensate OppenheimerFunds Distributor, Inc. (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. Effective August 1, 1996, OFDI has voluntarily
waived all fees under this plan. Such waivers amounted to $45,741.
5. BANK BORROWINGS
The Fund may borrow from a bank for temporary or emergency purposes including,
without limitation, funding of shareholder redemptions provided asset coverage
for borrowings exceeds 300%. The Fund has entered into an agreement which
enables it to participate with other Oppenheimer funds in an unsecured line of
credit with a bank, which permits borrowings up to $400 million, collectively.
Interest is charged to each fund, based on its borrowings, at a rate equal to
the Federal Funds Rate plus 0.35%. Borrowings are payable 30 days after such
loan is executed. The Fund also pays a commitment fee equal to its pro rata
share of the average unutilized amount of the credit facility at a rate of
0.0575% per annum.
The Fund had no borrowings outstanding during the year ended October 31, 1997.
12 Oppenheimer Quest Officers Value Fund
<PAGE>
NOTES TO FINANCIAL STATEMENTS (Continued)
6. SUBSEQUENT EVENT
On October 22, 1997, the Board of Trustees approved the reorganization of
Oppenheimer Quest Officers Value Fund with and into Oppenheimer Quest Capital
Value Fund, Inc. Shareholders of the Fund will be asked to approve a
reorganization whereby shareholders would receive shares of Oppenheimer Quest
Capital Value Fund, Inc. If shareholder approval is received, it is expected
that the reorganization will occur during the second quarter of calendar 1998.
13 Oppenheimer Quest Officers Value Fund
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
Oppenheimer Quest Officers Value Fund
To the Board of Trustees and Shareholders of
Oppenheimer Quest for Value Funds
In our opinion, the accompanying statement of assets and liabilities, including
the statement of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of Oppenheimer Quest Officers Value
Fund, (one of the portfolios constituting Oppenheimer Quest for Value Funds,
hereafter referred to as the Fund), at October 31, 1997, the results of its
operations for the year then ended, the changes in its net assets and the
financial highlights for each of the two years in the period then ended, in
conformity with generally accepted accounting principles. These financial
statements and financial highlights (hereafter referred to as financial
statements) are the responsibility of the Fund's management; our responsibility
is to express an opinion on these financial statements based on our audits. We
conducted our audits of these financial statements in accordance with generally
accepted auditing standards which require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits, which included confirmation of securities at October 31, 1997 by
correspondence with the custodian and the application of alternative auditing
procedures where securities purchased had not been received, provide a
reasonable basis for the opinion expressed above. The financial statements of
the Fund for the period ended October 31, 1995 were audited by other independent
accountants whose report dated December 20, 1995 expressed an unqualified
opinion on those statements.
Price Waterhouse LLP
Denver, Colorado
November 21, 1997
14 Oppenheimer Quest Officers Value Fund
<PAGE>
FEDERAL INCOME TAX INFORMATION (Unaudited)
In early 1998 shareholders will receive information regarding all dividends and
distributions paid to them by the Fund during calendar year 1997. Regulations of
the U.S. Treasury Department require the Fund to report this information to the
Internal Revenue Service.
Distributions of $1.4838 were paid to shareholders on December 18, 1996, of
which $0.3693 was designated as a "capital gain distribution" for federal income
tax purposes. Whether received in stock or in cash, the capital gain
distribution should be treated by shareholders as a gain from the sale of
capital assets held for more than one year (long-term capital gains).
Dividends paid by the Fund during the fiscal year ended October 31, 1997 which
are not designated as capital gain distributions should be multiplied by 100.00%
to arrive at the net amount eligible for the corporate dividend-received
deduction.
The foregoing information is presented to assist shareholders in reporting
distributions received from the Fund to the Internal Revenue Service. Because of
the complexity of the federal regulations which may affect your individual tax
return and the many variations in state and local tax regulations, we recommend
that you consult your tax advisor for specific guidance.
SHAREHOLDER MEETING (Unaudited)
On May 6, 1997, a special shareholder meeting was held at which the selection of
Price Waterhouse LLP as the independent accountants and auditors of the Fund for
the fiscal year beginning November 1, 1996 was ratified (Proposal No. 1), the
proposed changes to certain of the Fund's fundamental investment policies,
including changes to the investment objective were approved (Proposal No. 2),
the Investment Advisory Agreement between the Fund and OppenheimerFunds, Inc.
was approved (Proposal No. 3), the Subadvisory Agreement between
OppenheimerFunds, Inc. and OpCap Advisors was approved (Proposal No. 4), and the
Fund's Class A 12b-1 Distribution and Service Plan was approved by Class A
shareholders (Proposal No. 5) as described in the Fund's proxy statement for
that meeting. The following is a report of the votes cast:
<TABLE>
<CAPTION>
Withheld/
Proposal For Against Abstain Broker Non-Votes Total
- -------- --- ------- --------- ---------------- -----
<S> <C> <C> <C> <C> <C>
Proposal No. 1 418,214.641 -- -- 293,434 418,214.641
Proposal No. 2 405,402.866 12,811.775 -- 293,434 418,214.641
Proposal No. 3 405,402.866 12,811.775 -- 293,434 418,214.641
Proposal No. 4 404,865.866 12,811.775 537 293,434 418,214.641
Proposal No. 5 404,171.093 14,043.548 -- 293,434 418,214.641
</TABLE>
15 Oppenheimer Quest Officers Value Fund
<PAGE>
OPPENHEIMER QUEST OFFICERS VALUE FUND
A Series of Oppenheimer Quest for Value Funds
OFFICERS AND TRUSTEES Bridget A. Macaskill, Chairman of the Board of
Trustees and President
Paul Y. Clinton, Trustee
Thomas W. Courtney, Trustee
Lacy B. Herrmann, Trustee
George Loft, Trustee
Robert C. Doll, Jr., Vice President
George C. Bowen, Treasurer
Robert J. Bishop, Assistant Treasurer
Scott T. Farrar, Assistant Treasurer
Andrew J. Donohue, Secretary
Robert G. Zack, Assistant Secretary
INVESTMENT ADVISOR OppenheimerFunds, Inc.
SUB-ADVISOR OpCap Advisors
DISTRIBUTOR OppenheimerFunds Distributor, Inc.
TRANSFER AND OppenheimerFunds Services
SHAREHOLDER SERVICING
AGENT
CUSTODIAN OF PORTFOLIO State Street Bank and Trust Company
SECURITIES
INDEPENDENT Price Waterhouse LLP
ACCOUNTANTS
LEGAL COUNSEL Gordon Altman Butowsky Weitzen Shalov & Wein
This is a copy of a report to shareholders of Oppenheimer Quest Officers Value
Fund. This report must be preceded or accompanied by a Prospectus of Oppenheimer
Quest Officers Value Fund. For material information concerning the Fund, see the
Prospectus.
Shares of Oppenheimer funds are not deposits or obligations of any bank, are not
guaranteed by any bank, and are not insured by the FDIC or any other agency, and
involve investment risks, including possible loss of the principal amount
invested.
16 Oppenheimer Quest Officers Value Fund
OPPENHEIMER QUEST VALUE FUND, INC.
FORM N-14
PART C
OTHER INFORMATION
Item 15. Indemnification
Reference is made to the provisions of Article SEVENTH of Registrant's
Articles of Incorporation filed as Exhibit 16(1) to this Registration Statement.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
Registrant pursuant to the foregoing provisions or otherwise, Registrant has
been advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Securities Act of
1933 and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by Registrant
of expenses incurred or paid by a director, officer or controlling person of
Registrant in the successful defense of any action, suit or proceeding) is
asserted by such trustee, officer or controlling person, Registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act of 1933 and will be governed by the final adjudication of such
issue.
Item 16. Exhibits
(1)(a)Articles of Incorporation: Filed as Exhibit 1 to Registrant's
original Registration Statement on Form N-1A filed on August 10, 1979, and
refiled with Post-Effective Amendment No. 37, 2/13/96, pursuant to Item 102 of
Regulation S-T and incorporated herein by reference.
(b) Articles Supplementary to Articles of Incorporation: Filed with
Registrant's Post-
Effective Amendment No. 38 on Form N-1A , 10/16/96, and incorporated herein
by reference.
(c) Articles Supplementary to Articles of Incorporation: Filed with
Registrant's Post-
Effective Amendment No. 39 on Form N-1A , 12/12/96, and incorporated herein
by reference.
(2)(a)By Laws: Filed as Exhibit 2 to Registrant's original Registration
Statement on Form N-1A filed on August 10, 1979, and refiled with Post-Effective
Amendment No. 37 on Form N-1A, 2/13/96, pursuant to Item 102 of Regulation S-T
and incorporated herein by reference.
(b) Amendment No. 1 to By-Laws: Filed with Registrant's
Post-Effective Amendment No.
40 on Form N-1A , 12/18/97, and incorporated herein by reference.
(3) Not Applicable.
(4) Agreement and Plan of Reorganization: See Exhibit A to Part A of this
Registration Statement
(5)(i)Specimen Class A Share Certificate: Filed with Registrant's
Post-Effective
Amendment No. 40 on Form N-1A , 12/18/97, and incorporated herein by
reference.
(ii) Specimen Class B Share Certificate: Filed with Registrant's
Post-Effective Amendment
No. 40, 12/18/97 on Form N-1A, and incorporated herein by reference.
(iii) Specimen Class C Share Certificate: Filed with Registrant's
Post-Effective Amendment No. 40 on Form N-1A, 12/18/97, and incorporated herein
by reference.
(iv) Specimen Class Y Share Certificate: Filed with Registrant's
Post-Effective Amendment No. 40 on Form N-1A, 12/18/97, and incorporated herein
by reference.
(6)(a)(1) Investment Advisory Agreement dated 6/2/97: Filed with
Registrant's Post- Effective Amendment No. 40 on Form N-1A, 12/18/97, and
incorporated herein by reference.
(a)(2) Amendment dated 10/22/97 to Investment Advisory Agreement:
Filed with
Registrant's Post-Effective Amendment No. 40 on Form N-1A, 12/18/97, and
incorporated herein
by reference.
(b)Subadvisory Agreement dated 11/5/97: Filed with Registrant's
Post-Effective
Amendment No. 40, 12/18/97 on Form N-1A, and incorporated herein by reference.
(7)(a) General Distributor's Agreement: Filed with Registrant's
Post-Effective Amendment No. 37 on Form N-1A, 2/13/96, and incorporated herein
by reference.
(b)(1) Form of Dealer Agreement of OppenheimerFunds Distributor,
Inc.: Filed with
Post-Effective Amendment No. 14 of Oppenheimer Main Street Funds, Inc. (Reg.
No. 33-17850),
9/30/94, and incorporated herein by reference.
(2) Form of OppenheimerFunds Distributor, Inc. Broker Agreement:
Filed with Post-
Effective Amendment No. 14 of Oppenheimer Main Street Funds, Inc. (Reg. No.
33-17850), 9/30/94,
and incorporated herein by reference.
(3) Form of OppenheimerFunds Distributor, Inc. Agency Agreement:
Filed with Post-
Effective Amendment No. 14 of Oppenheimer Main Street Funds, Inc. (Reg. No.
33-17850), 9/30/94,
and incorporated herein by reference.
(4) Broker Agreement between OppenheimerFunds Distributor, Inc.
and Newbridge
Securities dated 10/1/86: Filed with Post-Effective Amendment No. 25 of
Oppenheimer Special Fund
(Reg. No. 2-45272), 11/1/86, refiled with Post-Effective Amendment No. 45 of
Oppenheimer Special
Fund (Reg. No. 2-45272), 8/22/94, pursuant to Item 102 of Regulation S-T, and
incorporated herein
by reference.
(8) Not Applicable.
(9) Custody Agreement: Previously filed as Exhibit 8 to Registrant's
Post-Effective Amendment No. 17 on Form N-1A, and refiled with Post-Effective
Amendment No.
37, 2/13/96,
pursuant to Item 102 of Regulations S-T, and incorporated herein by reference.
(10)(a) Amended and Restated Distribution and Service Plan and Agreement
dated 2/3/98 with respect to Class A shares: Filed with Registrant's
Post-Effective Amendment No. 43 on Form
N-1A, 2/23/98, and incorporated herein by reference.
(b) Amended and Restated Distribution and Service Plan and Agreement
dated 2/3/98 with respect to Class B shares: Filed with Registrant's
Post-Effective Amendment No. 43 on Form N-1A, 2/23/98, and incorporated herein
by reference.
(c) Amended and Restated Distribution and Service Plan and Agreement
dated 2/3/98 with respect to Class C shares: Filed with Registrant's
Post-Effective Amendment No. 43, 2/23/98, and incorporated herein by reference.
(11) Opinion and consent of counsel as to the legality of the securities
being registered, indicating whether they will when sold be legally issued,
fully paid and non-assessable: Filed as Exhibit 10 to Registrant's Pre-Effective
Amendment No. 1 on Form N-1A .
(12) Tax Opinion Relating to the Reorganization: Draft Tax Opinion filed
herewith.
(13) Not Applicable.
(14) Consent of Price Waterhouse LLP: Filed herewith.
(15) Not applicable.
(16) Powers of Attorney and Certified Board Resolutions signed by
Registrant's Directors:
Filed with Post-Effective Amendment No. 36 to Registrant's Registration
Statement on Form N-1A,
11/24/95, and incorporated herein by reference.
(17) (i) Financial Data Schedules of Registrant: Filed herewith.
(ii) Financial Data Schedules for Oppenheimer Quest Officers Value
Fund: Filed herewith.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and/or the Investment
Company Act of 1940, the Registrant has duly caused this Registration Statement
to be signed on its behalf by the undersigned, thereunto duly authorized, in the
City of New York and State of New York on the
day of February, 1998.
OPPENHEIMER QUEST VALUE FUND, INC.
By: /s/ Bridget A. Macaskill
Bridget A. Macaskill
Chairman of the Board and President
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement has been signed below by the following persons in the capacities and
on the dates indicated:
Signatures Title Date
/s/ Bridget A Macaskill Chairman of the Board, March 5, 1998
President (Principal
Bridget A. Macaskill Executive Officer) and
Director
/s/ George C. Bowen Treasurer (Principal March 5,1998
Financial and Accounting
George Bowen Officer)
/s/ Paul Y. Clinton Director March 5, 1998
Paul Y. Clinton
/s/ Thomas W. Courtney Director March 5, 1998
Thomas W. Courtney
/s/ Lacy B. Herrmann Director March 5, 1998
Lacy B. Herrmann
/s/ George Loft Director March 5, 1998
George Loft
OPPENHEIMER QUEST VALUE FUND, INC.
Index to Exhibits
Exhibit No. Description
16(12) Draft Tax Opinion Relating to the
Reorganization
16(14) Independent Auditors' Consent
16(17)(i) Financial Data Schedules of Registrant
16(17)(ii) Financial Data Schedules of Oppenheimer Quest
Officers Value Fund
merge\225.ptc
Oppenheimer Quest for Value Funds,
on behalf of Oppenheimer Quest Officers Value Fund
Oppenheimer Quest Value Fund, Inc.
[May 29, 1998]
Page 1
[May 29, 1998]
Oppenheimer Quest for Value Funds,
on behalf of Oppenheimer Quest Officers Value Fund
Two World Trade Center
New York, New York 10048-0203
Oppenheimer Quest Value Fund, Inc.
Two World Trade Center
New York, New York 10048-0203
Ladies and Gentlemen:
You have requested our opinion regarding certain Federal income tax consequences
resulting from several proposed transactions (the "Reorganization") involving
Oppenheimer Quest Officers Value Fund ("Target"), a series of Oppenheimer Quest
for Value Funds (the "Trust"), and Oppenheimer Quest Value Fund, Inc.
("Acquiring"),
pursuant to an Agreement and Plan of Reorganization (the "Agreement")
dated as of
, 1998, by and between the Trust, on
behalf of Target, and Acquiring.
In connection with the rendering of this opinion, we have reviewed (1) the
Registration Statement on Form N-14 filed with the Securities and Exchange
Commission on March
, 1998, by Acquiring (the "Registration Statement"); (2) the Proxy
Statement for Target dated ____________________, 1998 (the "Proxy Statement");
(3) the Prospectus for Acquiring; and (4) the Agreement. In addition, we have
relied upon representations made by Acquiring and Target in their representation
letters dated [May 29, 1998] (the "Representations"). Capitalized terms not
otherwise defined in this letter shall have the meaning set out in the
Registration Statement or the Agreement.
Background
Acquiring is an open-end, diversified management investment company organized as
a Maryland corporation in August 1979. At the Closing Date Acquiring has
authorized and issued four classes of voting common stock. Class A, Class B,
Class C, and Class Y shares are all publicly traded, although Class Y shares are
available for purchase only by certain institutional shareholders. Each class
has its own dividends and distributions and pays certain expenses which may be
different for the different classes. The differences principally relate to the
amount and timing of sales charges in connection with share purchases.
Target is a series of the Trust, an open-end management investment
company organized
<PAGE>
Oppenheimer Quest for Value Funds,
on behalf of Oppenheimer Quest Officers Value Fund
Oppenheimer Quest Value Fund, Inc.
[May 29, 1998]
Page 2
in April 1987 as a multi-series Massachusetts business trust. Target is a
non-diversified investment company, within the meaning of the Investment Company
Act of 1940 (the "1940 Act"), with an unlimited number of authorized shares of
beneficial interest. At the Closing Date Target has authorized three classes of
voting common stock; however, only Class A shares are outstanding and publicly
traded.
Acquiring and Target are each a "regulated investment company" ("RIC") within
the meaning of section 851 of the Internal Revenue Code of 1986, as amended (the
"Code"), for the current and all prior years. It is intended that Acquiring, as
the survivor, will continue to qualify as a RIC for all subsequent years.
The investment objectives of Acquiring and Target are similar. Acquiring and
Target each seek capital appreciation from investment in securities (primarily
equity securities) of companies believed by management to be undervalued in the
marketplace in relation to factors such as the companies' assets, earnings,
growth potential and cash flows. Although Target is "non-diversified" within the
meaning of the 1940 Act, it has satisfied the diversification requirements of
section 851 of the Code for the current and all prior years.
Proposed Reorganization
For what are represented to be valid business reasons, including the potential
reduction of expenses (transfer agency and other non-management and distribution
expenses) due to economies of scale, Acquiring and Target wish to reorganize
Target with and into Acquiring pursuant to the Agreement.
Accordingly, the Board of Trustees of Target, including the independent
trustees, unanimously approved the Reorganization and the Agreement and voted to
recommend its approval to the shareholders of Target. The Board of Directors of
Acquiring has also approved the Reorganization and determined that the interests
of existing Acquiring shareholders will not be diluted as a result of the
Reorganization. It is expected that the Reorganization will have been approved
by a vote of the shareholders of Target on or about May 26, 1998.
As set forth in the Agreement, the following transactions will occur
on the Closing
Date:
<PAGE>
Oppenheimer Quest for Value Funds,
on behalf of Oppenheimer Quest Officers Value Fund
Oppenheimer Quest Value Fund, Inc.
[May 29, 1998]
Page 3
Target will transfer substantially all of its assets to Acquiring in exchange
solely for voting stock of Acquiring, consisting of Class A shares;
Acquiring will assume certain identified and agreed-to liabilities of Target
incurred in the ordinary course of Target's business;
In complete liquidation of Target, Target will distribute on a pro rata basis
to its shareholders the shares of Acquiring received by Target on the Closing
Date in
exchange for its assets.
There will be no right of dissenters and no shares of Target stock will be
exchanged for cash or other property, or exchanged for cash in lieu of
fractional shares.
Representations
The following representations have been made in connection with the
proposed
Reorganization:
1. Each shareholder of Target who exchanges his shares pursuant to the
Reorganization will receive, in exchange therefor, solely voting stock of
Acquiring.
2. Other than as may result from redemption of Target shares in the ordinary
course of its business, there has not been a significant change in the
ownership of Target
prior to the Reorganization.
3. Acquiring has no plan or intention to sell or otherwise dispose of the
assets of Target acquired in the Reorganization, except for dispositions
made in the ordinary course of its business.
The fair market value of the Acquiring stock received by each shareholder of
Target will be approximately equal to the fair market value of the Target stock
surrendered in the exchange.
Any liabilities of Target assumed by Acquiring and the liabilities, if any,
to which the transferred assets of Target are subject were incurred by Target in
the ordinary course of its business.
<PAGE>
Oppenheimer Quest for Value Funds,
on behalf of Oppenheimer Quest Officers Value Fund
Oppenheimer Quest Value Fund, Inc.
[May 29, 1998]
Page 4
To the best knowledge of the management of Target, there is no plan or
intention on the part of the shareholders of Target to sell, exchange, or
otherwise dispose of a number of shares of Acquiring stock received in the
Reorganization that would reduce the ownership by shareholders of Target of the
stock of Acquiring to a number of shares having a value, as of the Closing Date,
of less than 50 percent of the value of all the formerly outstanding stock of
Target as of the same date.
Acquiring will acquire at least 90 percent of the fair market value of the
net assets and at least 70 percent of the fair market value of the gross assets
held by Target immediately prior to the Reorganization. For purposes of this
representation, (1) amounts used by Target to pay its reorganization expenses,
(2) amounts, if any, paid by Target to shareholders, and (3) all redemptions and
distributions (except for redemptions in the ordinary course of Target's
business as an open-end investment company as required by section 22(e) of the
1940 Act pursuant to the demand of a shareholder, and regular, normal dividends)
made by Target immediately preceding the transfer will be included as assets of
Target held immediately prior to the Reorganization.
Acquiring has no plan or intention to reacquire any of its stock issued
pursuant to the Reorganization, except that Acquiring, as an open-end investment
company, will redeem any of its
Oppenheimer Quest for Value Funds,
on behalf of Oppenheimer Quest Officers Value Fund
Oppenheimer Quest Value Fund, Inc.
[May 29, 1998]
Page 5
shares presented to it for redemption in the ordinary course of its
business.
Following the Reorganization, Acquiring will continue the historic business
of Target or use a significant portion of Target's historical business assets in
a business.
Acquiring, Target and the shareholders of Target will each pay their
respective expenses in connection with the Reorganization.
There is no intercorporate indebtedness existing between Acquiring and Target
that was issued, acquired, or will be settled at a discount.
Acquiring and Target meet the requirements of a regulated investment company
or are otherwise described in section 368(a)(2)(F)(i) and (ii) of the Code.
Acquiring does not own, directly or indirectly, nor has it owned during the
past five years, directly or indirectly, any stock of Target.
Target is not under the jurisdiction of a court in a Title 11 or similar case
within the meaning of section 368(a)(3)(A) of the Code.
Target will distribute the stock, securities, and any other property it
receives in the Reorganization, and its other properties, in pursuance of the
Reorganization.
The fair market value of the assets of Target transferred to Acquiring in
pursuance of the Reorganization equals or exceeds the sum of (a) the liabilities
assumed by Acquiring, plus (b) the amount of liabilities, if any, to which the
transferred assets are subject.
Acquiring and Target have, for all of their taxable periods, elected to be
taxed as RICs as defined in section 851 of the Code, and after the
Reorganization, Acquiring intends to continue to elect to be taxed as a RIC.
Opinions
On the basis of the facts and representations set forth above, it is our opinion
that:
The transactions contemplated by the Agreement (the transfer of substantially
all of Target's assets in exchange for Acquiring shares and the assumption by
Acquiring of certain identified liabilities of Target, followed by the
distribution by Target, in complete liquidation, of Acquiring shares to Target
shareholders in exchange for their Target shares) will constitute a
"reorganization" within the meaning of section 368(a)(1)(C) of the Code;
<PAGE>
Oppenheimer Quest for Value Funds,
on behalf of Oppenheimer Quest Officers Value Fund
Oppenheimer Quest Value Fund, Inc.
[May 29, 1998]
Page 6
Target and Acquiring will each be a "party to a reorganization"
within the meaning of section
368(b) of the Code;
Pursuant to section 354(a) of the Code, no gain or loss will be recognized by
Target shareholders upon the receipt of the Acquiring shares distributed in
complete liquidation of Target;
Pursuant to section 361(a) of the Code, no gain or loss will be recognized by
Target upon the transfer of its assets to Acquiring in exchange for Acquiring
shares and the assumption by Acquiring of the identified liabilities of Target,
or upon the distribution by Target of Acquiring shares to Target shareholders in
Target's complete liquidation;
Pursuant to section 1032 of the Code, no gain or loss will be recognized by
Acquiring upon the receipt of the assets of Target solely in exchange for
Acquiring shares and the assumption by Acquiring of the identified liabilities
of Target;
Pursuant to section 358 of the Code, the aggregate tax basis for Acquiring
shares received by each Target shareholder pursuant to the Reorganization will
be the same as the aggregate tax basis of the Target shares held by each such
Target shareholder immediately prior to the Reorganization;
Pursuant to section 1223 of the Code, the holding period of Acquiring shares
received by each Target shareholder as part of the Reorganization will include
the period during which the Target shares surrendered in exchange therefor were
held (provided such Target shares were held as capital assets on the date of the
Reorganization);
Pursuant to section 362(b) of the Code, the tax basis of the assets of Target
acquired by Acquiring will be the same as the tax basis of such assets in the
hands of Target immediately prior to the Reorganization; and
Pursuant to section 1223 of the Code, the holding period of the assets of
Target in the hands of Acquiring will include the period during which those
assets were held by Target.
Substantial Authority
Provided that the facts, assumptions, and representations contained herein are
correct, substantial authority, within the meaning of section 6662 of the Code,
exists for the opinions expressed herein.
<PAGE>
Oppenheimer Quest for Value Funds,
on behalf of Oppenheimer Quest Officers Value Fund
Oppenheimer Quest Value Fund, Inc.
[May 29, 1998]
Page 7
Caveats
Our opinions are not binding on any court or on the Internal Revenue Service
("IRS"). The IRS may examine the transactions discussed above and contemplated
by the Agreement. In doing so, the IRS is not bound by the factual
representations made to us, and may reach conclusions contrary to our opinions.
The conclusions expressed herein are based upon the facts, assumptions and
representations as set forth above. Such conclusions could change if these
facts, assumptions or representations are incorrect, or if any facts have been
omitted.
The conclusions expressed herein are based upon the Code, the Regulations
thereunder, the applicable and currently publicly available administrative
positions of the Internal Revenue Service, and existing court decisions, all as
publicly available on the date of this letter. No assurance can be given that
legislative or administrative changes or court decisions may not be forthcoming
which could significantly modify the conclusions expressed herein. Any such
changes may or may not be retroactive with respect to the Reorganization
described above and, as a result, could adversely affect the tax consequences as
set forth above. Price Waterhouse LLP will have no duty to update this letter
unless so requested.
This opinion is limited solely to the Federal income tax consequences as
expressed above, and no opinion is expressed concerning state, local, or foreign
tax considerations. No opinion is expressed concerning the Federal income tax
treatment under other provisions of the Code and Regulations, or concerning the
tax treatment of any conditions existing at the time of, or effects resulting
from, the Reorganization or the tax consequences of the Reorganization with
respect to any other taxpayers that are not specifically covered by the opinions
expressed in this letter. Therefore, such taxpayers should consult with their
own tax advisers as to the potential tax risks involved.
Very truly yours,
Consent of Independent Accountants
We hereby consent to the use in the Statement of Additional Information
constituting part of this registration statement on Form N-14 (the "Registration
Statement") of our report dated November 21, 1997, relating to the financial
statements and financial highlights appearing in the October 31, 1997 Annual
Report to Shareholders of Oppenheimer Quest Value Fund, Inc. and our report
dated November 21, 1997, relating to the financial statements and financial
highlights appearing in the October 31, 1997 Annual Report to Shareholders of
Oppenheimer Quest Officers Value Fund (one of the portfolios constituting
Oppenheimer Quest for Value Funds), which appear in such Statement of Additional
Information.
We also consent to the incorporation by reference of our report into the
Prospectus of Oppenheimer Quest Value Fund, Inc. dated February 27, 1998, and
the incorporation by reference of our report in the Prospectus of Oppenheimer
Quest Officers Value Fund dated January 26, 1998, which constitute parts of this
Registration Statement. We also consent to the references to us under the
headings "Tax Consequences of the Reorganization", "Tax Aspects of the
Reorganization" and "Agreement and Plan of Reorganization" in the combined Proxy
Statement and Prospectus constituting part of this Registration Statement.
We also consent to the reference to us under the heading "Independent
Accountants" in the Statement of Additional Information of Oppenheimer Quest
Value Fund, Inc. and to the references to us under the headings "Financial
Highlights" and "Independent Accountants" in the Prospectus of Oppenheimer Quest
Value Fund, Inc. both dated February 27, 1998. We also consent to the reference
to us under the heading "Independent Accountants" in the Statement of Additional
Information of Oppenheimer Quest Officers Value Fund and to the references to us
under the headings "Financial Highlights" and "Independent Accountants" in the
Prospectus of Oppenheimer Quest Officers Value Fund both dated January 26, 1998.
We also consent to the use in Part C constituting part of the Registration
Statement of our draft Tax
Opinion.
/s/ Price Waterhouse LLP
Price Waterhouse LLP
Denver, Colorado
March 4, 1998
merge\229con.aud
<PAGE>
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WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
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<NAME> Oppenheimer Quest Officers Value Fund
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<NAME> Oppenheimer Quest for Value Funds
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