Filed Per Rule 497(c)
File No. 33-62221
QUEST FOR VALUE FAMILY OF FUNDS
U.S. GOVERNMENT INCOME FUND
One World Financial Center, New York, New York 10281
1-800-232-FUND
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
To Be Held November 16, 1995
To the Shareholders of U.S. Government Income Fund:
Notice is hereby given that a Special Meeting of the Shareholders of
U.S. Government Income Fund (the "Fund"), a series of Quest for Value
Family of Funds (the "Trust"), an open-end, management investment
company, will be held at One World Financial Center, New York, New York
10281 on the 40th Floor, at 9:00 A.M., New York time, on November 16,
1995, and any adjournments thereof (the "Meeting"), for the following
purposes:
1. To consider and vote upon approval of the Agreement and Plan of
Reorganization dated as of September 26, 1995 (the "Reorganization
Agreement") by and among Oppenheimer U.S. Government Trust
("USGT"), the Trust, on behalf of the Fund, and Quest for Value
Advisors, investment adviser to the Fund, and the transactions
contemplated thereby (the "Reorganization"), including (i) the
transfer of substantially all the assets of the Fund to USGT in
exchange for Class A, Class B and Class C shares of USGT and the
assumption by USGT of certain liabilities of the Fund, (ii) the
distribution of such shares of USGT to shareholders of the Fund in
complete liquidation of the Fund (excluding a cash reserve), and
(iii) the cancellation of the outstanding shares of the Fund (the
"Proposal"); and
2. To act upon such other matters as may properly come before the
Meeting.
The Reorganization is more fully described in the accompanying Proxy
Statement and Prospectus and a copy of the Reorganization Agreement is
attached as Exhibit A thereto. Class A, Class B and Class C
shareholders of record at the close of business on September 25, 1995
are entitled to notice of, and to vote at, the Meeting. Please read
the Proxy Statement and Prospectus carefully before telling us, through
your proxy or in person, how you wish your shares to be voted. The
Board of Trustees of the Trust recommends a vote in favor of the
Reorganization. WE URGE YOU TO SIGN, DATE AND MAIL THE ENCLOSED PROXY
PROMPTLY.
By Order of the Board of Trustees,
Deborah Kaback, Secretary
September 29, 1995
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.
<PAGE>
QUESTIONS AND ANSWERS ABOUT THE PROPOSED REORGANIZATION
1.What is the Reorganization?
The proposed Reorganization provides for the transfer of substantially
all the assets of the Quest for Value U.S. Government Income Fund (the
"Fund") to Oppenheimer U.S. Government Trust ("USGT"), in exchange for
Class A, Class B and Class C shares of USGT and the assumption by USGT
of certain liabilities of the Fund, the distribution of such shares of
USGT to shareholders of the Fund in liquidation of the Fund and the
cancellation of the outstanding shares of the Fund.
The number of shares of USGT that will be issued to shareholders of the
Fund will be determined on the basis of the relative net asset values
of USGT and the Fund. Although the number of shares of USGT issued to
a shareholder of the Fund may be more or less than the shareholder's
holdings of Fund shares, the value of the shares of USGT issued in the
Reorganization will be equal to the value of the shares previously held
in the Fund. Holders of Class A, Class B and Class C shares of the
Fund will receive Class A, Class B and Class C shares of USGT,
respectively, in the Reorganization.
The Reorganization has been proposed in connection with a proposed
acquisition by Oppenheimer Management Corporation ("OMC") of the assets
of Quest for Value Advisors, Quest for Value Distributors and
Oppenheimer Capital relating to twelve Quest for Value mutual funds
(including the Fund) and the assumption by OMC of certain liabilities.
OMC is discussed in greater detail below.
Shareholders are directed to read the accompanying Proxy Statement and
Prospectus for further information about the Reorganization and related
matters. Additional information about USGT is set forth in its
accompanying Prospectus.
2.What are the reasons for the Reorganization?
After an intensive examination of the mutual fund industry, Quest for
Value Advisors and Distributors concluded that smaller fund
distributors would find it increasingly difficult to compete with
larger distributors with greater resources. Based on that conclusion,
Quest for Value has chosen to sell certain of its mutual fund related
assets to OMC. OMC, the purchaser, is seeking to merge certain of the
Quest for Value funds into certain of its funds.
3.What benefits to shareholders may result from this transaction?
The Board of Trustees of the Fund determined that, among other things,
the Reorganization would afford the shareholders of the Fund: 1) the
capabilities and resources of OMC and its affiliates in the area of
fixed income investment management, distribution, shareholder services
and marketing; and 2) the ability to exchange their shares for a wider
variety of portfolios within the OppenheimerFunds family than are
currently available to the shareholders of the Fund.
4.Who is paying the expenses of the Reorganization?
All expenses of the Reorganization will be paid by Quest for Value
Advisors and OMC and not the Fund or USGT shareholders.
5.Who is Oppenheimer Management Corporation?
OMC and its subsidiaries are engaged principally in the business of
managing, distributing and servicing registered investment companies.
OMC has operated as an investment adviser since 1959. OMC is
indirectly controlled by Massachusetts Mutual Life Insurance Company.
As of August 31, 1995, Oppenheimer Management Corporation and its
affiliates had assets of more than $38 billion under management in more
than 45 mutual funds.
6.Do the Oppenheimer funds have a sales charge?
Yes, other than their money market funds. However, there will be no
commission or initial sales charge of any kind charged on USGT shares
received in the Reorganization. The full value of your shares in the
Fund will be exchanged for shares of USGT. However, any contingent
deferred sales charge which is applicable to a Fund shareholder's
investment will continue to apply. Also, purchases of Class A shares
of USGT in addition to those received in the Reorganization will be
assessed any applicable sales charge. See the accompany documents for
further details.
USGT has undertaken that any Fund shareholders entitled to a waiver of
or exemption from sales charges pursuant to the policy stated in the
Fund's current prospectus will continue to be entitled to such waiver
or exemption as a shareholder of USGT after the Reorganization so long
as they continue to meet the applicable eligibility criteria. Other
Oppenheimer funds will also provide such waivers and exemptions upon
implementation of appropriate prospectus disclosure. For example,
those shareholders who, because they were shareholders of the AMA
Family of Funds or the Unified Funds were eligible to purchase shares
of any Quest for Value fund without a sales charge, after the
Reorganization will be eligible to purchase shares of such Oppenheimer
funds without a sales charge.
7.May I exchange between other Oppenheimer funds without charge?
Yes. As a shareholder of an Oppenheimer fund, you will be able to make
exchanges into any of the other Oppenheimer funds without charge. The
Fund currently imposes a fee of $5 for every exchange into another
Quest for Value fund.
8.Where can I get prospectuses and other information on the Oppenheimer
funds?
Call OppenheimerFunds at 1-(800) 255-2755. They will be pleased to
supply you with additional information, including other prospectuses.
9.After the Reorganization, who do I contact about my new USGT account
or to initiate a transaction in that account?
Once the reorganization is approved and effected, you will become a
shareholder of USGT. For information about your new USGT account or to
initiate a transaction in that account, you may continue to contact
your registered representative at your broker/dealer or, in the
alternative, Shareholder Services, Inc. at 1-(800) 525-7048 .
10.Will this Reorganization result in any tax liability to the Fund,
USGT or to me as a shareholder?
The Reorganization is intended to qualify for Federal income tax
purposes as a tax-free reorganization. Accordingly, no gain or loss
will be recognized by Fund shareholders upon the exchange of Fund
shares for shares of USGT. The aggregate tax basis of USGT shares
received by you will be the same as the aggregate tax basis of your
Fund shares immediately prior to the Reorganization. The holding
period of the shares of the USGT to be received by you will include the
period during which the Fund shares surrendered in exchange therefore
were held.
Shareholders of the Fund should consult their tax advisors regarding
the effect, if any, of the Reorganization in light of their individual
circumstances. Since the foregoing only relates to the Federal income
tax consequences of the Reorganization, shareholders of the Fund should
also consult their tax advisors as to state and local tax consequences,
if any, of the Reorganization.
QUEST FOR VALUE FAMILY OF FUNDS
U.S. GOVERNMENT INCOME FUND
One World Financial Center, New York, New York 10281
1-800-232-FUND
PROXY STATEMENT
- --------------------------
OPPENHEIMER U.S. GOVERNMENT TRUST
Two World Trade Center, New York, New York 10048-0203
1-800-525-7048
PROSPECTUS
This Proxy Statement and Prospectus is being furnished to shareholders
of U.S. Government Income Fund (the "Fund"), a series of Quest for
Value Family of Funds (the "Trust"), an open-end, 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 the Fund, to be held at One World Financial Center,
New York, New York 10281 on the 40th Floor at 9:00 A.M., New York time,
on November 16, 1995, and any adjournments thereof (the "Meeting"). It
is expected that this Proxy Statement and Prospectus will be mailed to
shareholders on or about October 5, 1995.
At the Meeting, shareholders of the Fund will be asked to consider and
vote upon approval of the Agreement and Plan of Reorganization, dated
as of September 26, 1995 (the "Reorganization Agreement"), by and among
Oppenheimer U.S. Government Trust ("USGT"), an open-end management
investment company, the Trust, on behalf of the Fund, and Quest for
Value Advisors ("QVA"), investment adviser to the Fund, and the
transactions contemplated by the Reorganization Agreement (the
"Reorganization"). The Reorganization Agreement provides for the
transfer of substantially all the assets of the Fund to USGT in
exchange for Class A, Class B and Class C shares of USGT and the
assumption by USGT of certain liabilities of the Fund, the distribution
of such shares of USGT to shareholders of the Fund in complete
liquidation of the Fund (excluding the Cash Reserve (as hereinafter
defined)) and the cancellation of the outstanding shares of the 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 Class A, Class B and Class C shareholder of the
Fund will receive that number of Class A, Class B and Class C shares,
respectively, of USGT having an aggregate net asset value equal to the
net asset value of such shareholder's shares of the Fund of that class.
This transaction is being structured as a tax-free reorganization. See
"Approval of the Reorganization."
USGT currently offers Class A, Class B and Class C shares. Class A
shares are sold with a sales charge imposed at the time of purchase
(certain purchases aggregating $1.0 million or more ($500,000 as to
purchases by OppenheimerFunds prototype 401(k) plans) are not subject
to a sales charge, but may be subject to a contingent deferred sales
charge ("CDSC") if redeemed within 18 months 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;
and Class C shares are sold without a front end sales charge but may be
subject to a CDSC if not held for one year. Holders of Class A shares
in the Fund will receive Class A shares of USGT and no initial sales
charge will be imposed on the Class A shares received by the Fund Class
A shareholders. Holders of Class B and Class C shares in the Fund will
receive Class B and Class C shares, respectively, of USGT. Any Class B
or Class C CDSC which is applicable to a shareholder's investment will
continue to apply; the duration of any CDSC applicable to Class A
shares may be reduced as described below in "Comparative Fee Tables -
Transaction Charges." In calculating the applicable CDSC payable upon
the subsequent redemption of shares of USGT the period during which a
Fund shareholder held shares of the Fund will be counted.
USGT is a mutual fund that seeks high current income, preservation of
capital and maintenance of liquidity primarily through investments in
debt instruments issued or guaranteed by the U.S. Government or its
agencies or instrumentalities and repurchase agreements on such
securities. The Fund seeks to provide shareholders with a high level
of current income together with protection of capital by investing
exclusively in such securities, and in related futures, options and
repurchase agreements.
USGT has filed with the Securities and Exchange Commission (the "SEC")
a Registration Statement on Form N-14 (the "Registration Statement")
relating to the registration of shares of USGT to be offered to the
shareholders of the Fund pursuant to the Reorganization Agreement.
This Proxy Statement and Prospectus relating to the Reorganization
also constitutes a Prospectus of USGT filed as part of such
Registration Statement. Information contained or incorporated by
reference herein relating to USGT has been prepared by and is the
responsibility of USGT.
Information contained or incorporated by reference herein relating to
the Fund has been prepared by and is the responsibility of the Fund.
This Proxy Statement and Prospectus sets forth concisely information
about USGT that a prospective investor should know before voting on the
Reorganization. The following documents have been filed with the SEC
and are available without charge upon written request to Quest for
Value Distributors ("QVD"), the general distributor for the Fund, at
P.O. Box 3567, Church Street Station, New York, New York 10277-1296, or
by calling the toll-free number for the Fund shown above: (i) a
Prospectus for the Fund, dated March 1, 1995, as revised June 30, 1995
(information about the Fund is incorporated herein by reference from
the Fund's Prospectus); and (ii) a Statement of Additional Information
about the Fund, dated March 1, 1995 (the "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 and shareholder servicing agent for USGT,
Oppenheimer Shareholder Services ("OSS"), P.O. Box 5270, Denver,
Colorado 80217, or by calling the toll-free number for USGT shown
above: (i) a Prospectus for USGT, dated May 30, 1995, as supplemented
July 14, 1995; and (ii) a Statement of Additional Information relating
to the Reorganization described in this Proxy Statement and Prospectus
(the "Additional Statement"), dated September 29, 1995 and filed as
part of the Registration Statement, which Additional Statement
includes, among other things, the Prospectus for the Fund, the Fund
Additional Statement and a Statement of Additional Information about
USGT, dated May 30, 1995, as supplemented July 14, 1995 (the "USGT
Additional Statement"), which contains more detailed information about
USGT and its management
Investors are advised to read and retain this Proxy Statement and
Prospectus for future reference.
Shares of USGT are not deposits or obligations of any bank, are not
guaranteed by any bank, and are not insured by the F.D.I.C. or any
other agency, and involve investment risks, including the possible loss
of the principal amount invested.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION,
NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED ON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
This Proxy Statement and Prospectus is dated September 29, 1995.
<PAGE>
TABLE OF CONTENTS
PROXY STATEMENT AND PROSPECTUS
COMPARATIVE FEE TABLES
SYNOPSIS
Parties to the Reorganization
The Reorganization
Tax Consequences of the Reorganization
Investment Objectives and Policies
Investment Advisory and Distribution Plan Fees
Purchases, Exchanges and Redemptions
PRINCIPAL RISK FACTORS
APPROVAL OF THE REORGANIZATION (The Proposal)
Background
Acquisition Agreement
Board Approval of the Reorganization
The Reorganization
Tax Aspects of the Reorganization
Capitalization Table (Unaudited)
COMPARISON BETWEEN USGT AND THE FUND
Comparison of Investment Objectives, Policies and Restrictions
Special Investment Methods
Investment Restrictions
USGT Performance
Additional Comparative Information
INFORMATION CONCERNING THE MEETING
The Meeting
Record Date; Vote Required; Share Information
Proxies
Costs of the Solicitation and the Reorganization
MISCELLANEOUS
Financial Information
Public Information
OTHER BUSINESS
EXHIBIT A - Agreement and Plan of Reorganization, dated as of September
26, 1995, by and among Oppenheimer U.S. Government Trust,
Quest for Value Family of Funds, on behalf of U.S.
Government Income Fund, and Quest for Value Advisors A-1
EXHIBIT B - Purchase Price Formula Pursuant to the Acquisition
Agreement B-1
<PAGE>
COMPARATIVE FEE TABLES
Transaction Charges
Shareholders pay certain expenses directly, such as sales charges and
account transaction charges. The schedule of such charges for both
USGT and the Fund (collectively, the "funds") is substantially the
same, except as noted below.
Oppenheimer
U.S.Government Trust
Class A Class B Class C
Maximum Sales Charge on Purchases 4.75% None None
(as a % of offering price)
Sales Charge on Reinvested Dividends None None None
Deferred Sales Charge None(1) 5.0%(2) 1.0%(3)
(as a % of the lower of the original
purchase price or redemption proceeds)
Exchange Fee None None None
U.S. Government Income Fund
Class A Class B Class C
Maximum Sales Charge on Purchases 4.75% None None
(as a % of offering price)
Sales Charge on Reinvested Dividends None None None
Deferred Sales Charge None(1) 5.0%(2) 1.0%(3)
(as a % of the lower of the original
purchase price or redemption proceeds)
Exchange Fee $5.00 $5.00 $5.00
(1)If you invest $1 million or more (as to USGT, $500,000 for purchases
by OppenheimerFunds prototype 401(k) plans) in Class A shares, although
you will generally not pay an initial sales charge, you may have to pay
a sales charge of up to 1.0% if you sell your shares within 18 calendar
months (as to USGT) or 12 calendar months (as to the Fund, with a
charge of 0.50 of 1.0% assessed for redemptions in the subsequent 12-
month period), in each case from the end of the calendar month during
which you purchased those shares. After the Reorganization, the
maximum duration of sales charges as to USGT Class A shares issued in
the Reorganization to former shareholders of the Fund will be 18
months, and the charge assessed will be 1.0% for the first twelve
months and 0.50 of 1.0% in the subsequent six months.
(2)If you redeem Class B shares within six years of their purchase, you
may have to pay a contingent deferred sales charge starting at 5.0% in
the first year and declining thereafter.
(3)If you redeem Class C shares within 12 months of their purchase, you
may have to pay a 1.0% contingent deferred sales charge.
<PAGE>
Expenses of USGT and the Fund; Pro Forma Expenses
The funds each pay a variety of expenses directly for management of
their assets, administration, distribution of their shares and other
services, and those expenses are reflected in the net asset value per
share of each of USGT and the Fund. The following calculations are
based on the expenses of USGT and the Fund for the 12 months ended June
30, 1995. These amounts are shown as a percentage of the average net
assets of each class of shares of the Fund and of USGT for that 12
month period. The pro forma fees reflect what the fee schedule would
have been at June 30, 1995, if the Reorganization had occurred 12
months prior to that date.
<TABLE>
<CAPTION>
Oppenheimer U.S. Government Trust(1)U.S. Government Income Fund
Class A Class B(2) Class C Class A Class B Class C
<S> <C> <C> <C> <C> <C> <C>
Management Fees 0.63% 0.63% 0.63% 0.60% 0.60% 0.60%
12b-1 Fees 0.24% 1.00% 1.00% 0.30% 1.00% 1.00%
Other Expenses 0.22% 0.26% 0.26% 0.36% 0.35% 0.56%
Total Fund Operating
Expenses 1.09% 1.89% 1.89% 1.26% 1.95% 2.16%
Pro Forma Combined Fund(1)
Class A Class B(2) Class C
Management Fees 0.62% 0.62% 0.62%
12b-1 Fees 0.24% 1.00% 1.00%
Other Expenses 0.22% 0.22% 0.25%
Total Fund Operating
Expenses 1.08% 1.84% 1.87%
</TABLE>
(1)Management fees for USGT have been restated in the fee table above
to reflect the reduced management fee rates paid by USGT to its
investment adviser, pursuant to a new investment advisory agreement
approved by shareholders of USGT at a meeting held May 25, 1995. Had
this management fee rate not changed, "Management Fees" would have been
0.73%, 0.73% and 0.73% of Class A, Class B and Class C average annual
net assets, and Total Fund Operating Expenses would have been 1.19%,
1.99% and 1.99% of Class A, Class B and Class C average annual net
assets. See "Investment Advisory and Distribution Plan Fees" below.
(2)Class B shares of USGT were first publicly offered on July 21, 1995.
"Other Expenses" shown for Class B shares of USGT are estimates based
on amounts that would have been payable if Class B shares of USGT had
been outstanding for the 12 months ended June 30, 1995.
Example
To attempt to show the effect of these expenses on an investment over
time, the example shown below has been created. Assume that you make a
$1,000 investment in either the Fund or USGT or the new combined 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 U.S.
Government Trust
Class A Shares $58 $81 $105 $174
Class B Shares $69 $89 $122 $181(1)
Class C Shares $29 $59 $102 $221(2)
U.S. Government
Income Fund
Class A Shares $60 $86 $113 $193
Class B Shares $70 $91 $125 $210(1)
Class C Shares $32 $68 $116 $249(2)
Pro Forma Combined
Fund
Class A Shares $58 $80 $104 $173
Class B Shares $69 $88 $120 $178(1)
Class C Shares $29 $59 $101 $219(2)
If you did not redeem your investment, it would incur the following
expenses:
1 year 3 years 5 years 10 years
Oppenheimer U.S.
Government Trust
Class A Shares $58 $81 $105 $174
Class B Shares $19 $59 $102 $181(1)
Class C Shares $19 $59 $102 $221(2)
U.S. Government
Income Fund
Class A Shares $60 $86 $113 $193
Class B Shares $20 $61 $105 $210(1)
Class C Shares $22 $68 $116 $249(2)
Pro Forma Combined
Fund
Class A Shares $58 $80 $104 $173
Class B Shares $19 $58 $100 $178(1)
Class C Shares $19 $59 $101 $219(2)
(1)The Class B expenses in years seven through ten for USGT and year
nine and ten for the Fund are based on the Class A expenses shown
above, because USGT and the Fund automatically convert Class B shares
into Class A shares after six years and eight years, respectively.
Long-term Class B shareholders could pay the economic equivalent of
more than the maximum front-end sales charge allowed under applicable
regulatory requirements, because of the effect of the asset-based sales
charge and contingent deferred sales charge. The automatic conversion
of Class B shares to Class A shares is designed to minimize the
likelihood that this will occur.
(2)Because of the asset-based sales charge imposed on Class C shares of
USGT and the Fund, long-term shareholders of Class C shares could bear
expenses that would be the economic equivalent of an amount greater
than the maximum front-end sales charges permitted under applicable
regulatory requirements.
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 the 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 the Exhibits hereto. Shareholders should
carefully review this Proxy Statement and Prospectus and the Exhibits
hereto in their entirety and, in particular, the current Prospectus of
USGT which accompanies this Proxy Statement and Prospectus and is
incorporated by reference herein.
Parties to the Reorganization
USGT is a diversified, open-end, management investment company which
was organized as a Massachusetts business trust in 1982. USGT is
located at Two World Trade Center, New York, New York 10048-0203.
Oppenheimer Management Corporation ("OMC") acts as investment adviser
to USGT. Oppenheimer Funds Distributor, Inc. ("OFDI"), a subsidiary of
OMC, acts as the distributor of USGT's shares. Additional information
about USGT is set forth below.
The Fund, a diversified fund, is a series of Quest for Value Family of
Funds (the "Trust"), an open-end, management investment company
organized as a Massachusetts business trust in 1987. The Fund is
located at One World Financial Center, New York, New York 10281. QVA
acts as investment adviser to the Fund. QVD acts as the distributor of
the Fund's shares. QVA and QVD are majority-owned subsidiaries of
Oppenheimer Capital, an institutional investment manager. OMC is not
related to Oppenheimer Capital nor its affiliate, the brokerage firm
Oppenheimer & Co., Inc. Additional information about the Fund is set
forth below.
The Reorganization
The Reorganization Agreement provides for the transfer of substantially
all the assets of the Fund to USGT in exchange for Class A, Class B and
Class C shares of USGT and the assumption by USGT of certain
liabilities of the Fund. The Reorganization Agreement also provides
for the distribution of shares of USGT to the Fund shareholders in
complete liquidation of the Fund (excluding the Cash Reserve). As a
result of the Reorganization, each Fund shareholder will receive that
number of full and fractional USGT shares equal in value to such
shareholder's pro rata interest in the net assets transferred to USGT
as of the Valuation Date (as hereinafter defined). Holders of Class A,
Class B and Class C shares of the Fund will receive Class A, Class B
and Class C shares, respectively, of USGT. For further information
about the Reorganization see "Approval of the Reorganization" below.
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 (the "Independent Trustees"),
as that term is defined in the Investment Company Act of 1940, as
amended (the "1940 Act"), has concluded that the Reorganization is in
the best interests of the Fund and its shareholders and that the
interests of existing Fund shareholders will not be diluted as a result
of the Reorganization, and recommends approval of the Reorganization by
Fund shareholders. The Board of Trustees of USGT has also approved the
Reorganization and determined that the interests of existing USGT
shareholders will not be diluted as a result of the Reorganization. If
the Reorganization is not approved, the Fund will continue in existence
and the Board will determine whether to pursue alternative actions.
"Approval of the Reorganization" sets forth certain information with
respect to the background of the Reorganization, including other
transactions and agreements entered into, or contemplated to be entered
into, by OMC, QVA and their respective affiliates.
Approval of the Reorganization will require the affirmative vote of a
majority of each of the Class A, Class B and Class C shares of the
Fund, voting separately as a class, represented in person or by proxy
at the Meeting and entitled to vote at the Meeting. See "Information
Concerning the Meeting - Record Date; Vote Required; Share
Information."
Tax Consequences of the Reorganization
As a condition to the closing of the Reorganization, the Fund and USGT
will have received an opinion to the effect that the Reorganization
will qualify as a tax-free reorganization for Federal income tax
purposes. As a result of such tax-free reorganization, no gain or loss
would be recognized by the Fund, USGT, or the shareholders of either
fund for Federal income tax purposes. For further information about
the tax consequences of the Reorganization, see "Approval of the
Reorganization -Tax Aspects of the Reorganization" below.
Investment Objectives and Policies
The investment objectives of USGT and the Fund are similar. USGT seeks
high current income, preservation of capital and maintenance of
liquidity. The Fund seeks a high level of current income together with
protection of capital.
USGT seeks its investment objective by investing primarily in debt
instruments issued or guaranteed by the U.S. Government or its agencies
or instrumentalities ("U.S. Government Securities"), and repurchase
agreements on such securities. It is expected that investments by USGT
in debt securities other than U.S. Government Securities will be
limited to securities that are rated investment grade, or, if unrated,
judged by OMC to be of comparable quality to debt securities rated
within such grades. The Fund seeks its investment objective by
investing exclusively in U.S. Government Securities and in related
futures, options and repurchase agreements.
Each of the funds may also write covered calls (and, as to the Fund,
covered puts) to enhance income and USGT may use other derivative
investments for such purpose. The funds may use hedging instruments to
try to manage investment risks.
Although the respective investment objectives and policies of the Fund
and USGT are generally similar, shareholders of the Fund should
consider certain differences in such objectives and policies. See
"Comparison Between USGT and the Fund - Comparison of Investment
Objectives, Policies and Restrictions."
Investment Advisory and Distribution Plan Fees
The funds obtain investment management services from their investment
advisers pursuant to the terms of their respective investment advisory
agreements. The management fee is payable to the investment advisers
monthly and is computed on the net asset value of each fund as of the
close of business each day. USGT pays a management fee which declines
on additional assets as USGT increases its asset base, at the annual
rate of 0.65% of the first $200 million of net assets, 0.60% of the
next $100 million, 0.57% of the next $100 million, 0.55% of the next
$400 million, and 0.50% of net assets over $800 million. The Fund pays
QVA a management fee at the annual rate of 0.60% of net assets. QVA
pays 20% of its fee to New Castle Advisers, Inc. for advice and
assistance in connection with options and financial futures investments
of the Fund.
Both USGT and the Fund have adopted separate service and/or
distribution plans pursuant to Rule 12b-1 under the 1940 Act for their
respective Class A, Class B and Class C shares. Pursuant to the plans,
Class A, Class B and Class C shares of USGT and the Fund are authorized
to pay OFDI and QVD, respectively, in connection with the distribution
of shares and the servicing of shareholder accounts that hold the
fund's shares. The plans for USGT and the Fund provide for payments at
a fixed rate to compensate OFDI and QVD, respectively, except for
USGT's Class A service plan, which provides for reimbursement of OFDI's
expenses at a rate not to exceed a fixed rate. The current maximum
annual fee payable by shares of USGT and the Fund pursuant to their
service and/or distribution plans is (i) as to Class A shares, 0.25%
(as a service fee), (ii) as to Class B shares, 1.00% (consisting of a
0.25% service fee and a 0.75% "asset-based sales charge") and (iii) as
to Class C shares, 1.00% (consisting of a 0.25% service fee and a 0.75%
"asset-based sales charge") respectively, of average annual net assets.
Class A shares of the Fund also pay QVD an asset-based sales charge at
an annual rate of 0.05%. Class B shares of USGT automatically convert
to Class A shares of USGT six years after purchase. Class B shares of
the Fund automatically convert to Class A shares of the Fund eight
years after purchase. Accordingly, Class B shareholders of the Fund
pay the asset-based sales charge on their shares for a longer period
than USGT Class B shareholders.
Purchases, Exchanges and Redemptions
Purchases. Purchases of shares of USGT and the Fund may be made
directly through the distributor for USGT or the transfer agent for the
Fund, respectively, or through any dealer, broker or financial
institution that has a sales agreement with the distributor for such
fund (initial purchases of Fund shares must be made through such
dealer, broker or institution). In addition, a shareholder of USGT may
purchase shares automatically from an account at a domestic bank or
other financial institution under the "OppenheimerFunds AccountLink"
service. Class A shares of both USGT and the Fund generally are sold
subject to an initial sales charge and Class B and Class C shares
generally are sold without a front-end sales charge but may be subject
to a CDSC upon redemption. See "Comparative Fee Tables -- Transaction
Charges" above for a complete description of such sales charges.
The Class A USGT shares to be issued under the Reorganization Agreement
will be issued by USGT at net asset value without a sales charge. The
sales charge on Class A shares of USGT will only affect shareholders of
the Fund to the extent that they desire to make additional purchases of
Class A shares of USGT in addition to the shares which they will
receive as a result of the Reorganization. Future dividends and
capital gain distributions of USGT, if any, may be reinvested without
sales charge. The Class B and Class C shares of USGT to be issued under
the Reorganization Agreement will be issued at net asset value and,
along with the Class A shares of USGT to be issued under the
Reorganization Agreement, will be deemed aged to the same level as the
shareholder's existing Fund Class A, Class B and Class C shares. USGT
has undertaken that any Fund shareholders entitled to a waiver of or
exemption from sales charges pursuant to the policy stated in the
Fund's prospectus dated March 1, 1995, as revised June 30, 1995, shall
continue to be entitled to such waiver or exemption as a shareholder of
USGT after the Reorganization so long as they continue to meet the
applicable eligibility criteria. Other Oppenheimer funds shall also
provide such waivers and exemptions upon implementation of appropriate
prospectus disclosure.
Exchanges. Shareholders of USGT and the Fund may exchange their shares
at net asset value for shares of the same class of mutual funds
distributed by OFDI and QVD, respectively, subject to certain
conditions. USGT offers an automatic exchange plan providing for
systematic exchanges from USGT of a specified amount for shares of the
same class of other funds within the OppenheimerFunds family.
Redemptions. 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, certain large
investments in Class A shares that were exempt from the front-end sales
charge upon purchase may be subject to a CDSC upon redemption. See
"Comparative Fee Tables -- Transaction Charges" above. Class B shares
of the funds may be redeemed at their net asset value per share,
subject to a maximum CDSC of 5.0% for redemptions occurring within six
years of purchase. Class C shares of both funds may be redeemed at
their net asset value per share, subject to a CDSC of 1.00% if such
shares are redeemed during the first 12 months following their
purchase.
Shareholders of USGT may reinvest redemption proceeds of Class A shares
on which an initial sales charge was paid, or Class A or Class B shares
on which a CDSC was paid, within six months of a redemption at net
asset value in Class A shares of USGT or any of numerous mutual funds
within the OppenheimerFunds family. This privilege is not applicable
to Class C USGT shares. Shareholders of the Fund that reinvest
redemption proceeds of Class A, Class B or Class C shares in another
fund in the Quest Funds family within 60 days will be reinstated as a
shareholder with the same privileges regarding the non-payment of sales
charges that apply to exchanges. Shareholders of the funds may redeem
their shares by written request or by telephone request in certain
stated amounts, or they may arrange to have share redemption proceeds
wired, for a fee, to a pre-designated account at a U.S. bank or other
financial institution that is an automated clearing house ("ACH")
member. Checkwriting privileges on Class A shares are also available.
The funds offer automatic withdrawal plans providing for systematic
withdrawals of a specified amount from the fund account.
PRINCIPAL RISK FACTORS
In evaluating whether to approve the Reorganization and invest in USGT,
shareholders should carefully consider the following summary of risk
factors, relating to both USGT and the Fund, in addition to the other
information set forth in this Proxy Statement and Prospectus. A
complete description of risk factors for each fund is set forth in the
Prospectuses of the funds and their respective Statements of Additional
Information. As a general matter, USGT and the Fund are intended for
investors seeking high current income and not for investors seeking
capital appreciation. There is no assurance that either USGT or the
Fund will achieve its investment objective and investment in the funds
is subject to investment risks, including the possible loss of the
principal invested.
Investment in U.S. Government Securities and Other Debt Obligations
The funds both seek their investment objective through investments in
U.S. Government Securities and, as set forth below, in related futures,
options and repurchase agreements. The Fund invests exclusively in such
securities. As a matter of fundamental policy, USGT will invest at
least 80% of its total assets in U.S. Government Securities, under
normal market conditions. Although U.S. Government Securities involve
little credit risk, their values will fluctuate depending on prevailing
interest rates. When prevailing interest rates fall, the values 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 securities. While each fund's
respective investment adviser seeks to reduce risks by diversifying
investments, by carefully researching securities before they are
purchased for the portfolio, and in some cases by using hedging
techniques, there is no guarantee of success in achieving the fund's
objective.
USGT expects that as a non-fundamental policy any investments in debt
securities other than U.S. Government Securities will be limited to
debt securities rated within the four highest rating categories of
Moody's Investors Service, Inc. ("Moody's") or Standard & Poor's
Corporation ("S&P") or, if unrated, judged by OMC to be of comparable
quality to debt securities rated within such grades. Such ratings are
known as "investment grade" ratings. USGT is not obligated to dispose
of securities if the rating is reduced below investment grade. There
is a credit risk that issuers, particularly those other than the U.S.
Government or its agencies or instrumentalities, may not be able to
make interest or principal payments as they become due.
Both funds may invest in mortgage-backed securities, which are
guaranteed as to timely payment of interest and principal by the full
faith and credit of the U.S. Government or agencies and
instrumentalities of the U.S. Government. The effective maturity of a
mortgage-backed security may be shortened by unscheduled or early
payment of principal and interest on the underlying mortgages. This
may result in greater price and yield volatility than traditional
fixed-income securities that have a fixed maturity and interest rate.
The principal that is returned may be invested in instruments having a
higher or lower yield than the prepaid instruments depending on then-
current market conditions. Such securities therefore may be less
effective as a means of "locking in" attractive long-term interest
rates and may have less potential for appreciation during periods of
declining interest rates than conventional bonds with comparable stated
maturities. If the funds buy mortgage-backed securities at a premium,
prepayments of principal and foreclosures of mortgages may result in
some loss of the fund's principal investment to the extent of the
premium paid. The value of mortgage-backed securities may also be
affected by changes in the market's perception of the creditworthiness
of the entity issuing or guaranteeing them or by changes in government
regulations and tax policies.
Each fund may invest (although the Fund currently does not) in
collateralized mortgage obligations ("CMOs") that may be issued or
guaranteed by the U.S. Government or its agencies or instrumentalities
and USGT may also invest in CMOs that are collateralized by a portfolio
of mortgages or mortgage-related securities guaranteed by such an
agency or instrumentality. In the latter case, USGT looks only to the
issuer of the CMO for payments of principal and interest. CMOs may be
issued in a variety of classes or series ("tranches") that have
different maturities. The principal value of certain CMO tranches may
be more volatile and less liquid than other types of mortgage-related
securities, because of the possibility that the principal value of the
CMOs may be prepaid earlier than the maturity of the CMOs as a result
of prepayments of the underlying mortgage loans by the borrowers.
USGT may invest in "stripped" mortgage-backed securities of CMOs or
other securities issued by agencies or instrumentalities of the U.S.
Government. Stripped mortgage-backed securities usually have at least
two classes. The classes receive different proportions of the interest
and principal distributions on the pool of mortgage assets that act as
collateral for the security. In certain cases, one class will receive
all of the interest payments (and is known as an "I/O"), while the
other class will receive all of the principal payments (and is known as
a "P/O"). The yield to maturity on the class that receives only
interest is extremely sensitive to the rate of payment of the principal
on the underlying mortgages. Principal prepayments increase that
sensitivity. Stripped securities that pay "interest only" are
therefore subject to greater price volatility when interest rates
change, and they have the additional risk that if the underlying
mortgages are prepaid, the fund will lose the anticipated cash flow
from the interest on the prepaid mortgages. That risk is increased
when general interest rates fall, and in times of rapidly falling
interest rates, the fund might receive back less than its investment in
such I/Os. The value of "principal only" securities generally
increases as interest rates decline and prepayment rates rise. The
price of these securities is typically more volatile than that of
coupon-bearing bonds of the same maturity.
Mortgage-Backed Security Rolls
USGT may enter into "forward roll" transactions with respect to
mortgage-backed securities in which it can invest. The Fund may enter
into forward roll transactions with respect to any eligible portfolio
security although it currently does not engage in such transactions.
In a forward roll transaction, the fund will sell a security to
selected banks or other entities and simultaneously agree to repurchase
a similar security (same type, coupon and maturity) from the
institution at a specified later date at an agreed upon price. The
securities that are repurchased will bear the same interest rate as
those sold, but as to mortgage securities generally will be
collateralized by different pools of mortgages with different
prepayment histories than those sold. Forward roll transactions
require the funds to secure their obligations in the transaction by
segregating assets with a custodian bank equal in amount to obligations
under the roll. The principal risk of forward rolls is the possibility
that the market value of the securities sold by the fund may decline
below the price at which the fund is obligated to purchase the
securities. In addition, mortgage-backed security rolls present the
risks typically associated with mortgage-backed securities, including
the risk of early prepayments. Prior to repurchase of portfolio
securities, the fund may not be entitled to receive interest and
principal payments on the securities sold and that the proceeds of the
sale may have to be invested in money market instruments (typically
repurchase agreements) maturing not later than the expiration of the
roll.
Repurchase Agreements
The funds may enter into repurchase agreements of seven days or less
without limit and may cause up to 10% of their respective net assets to
be subject to repurchase agreements having a maturity beyond seven
days. Repurchase agreements must be fully collateralized. However, if
the vendor fails to pay the resale price on the delivery date, the
funds may experience costs or delays in disposing of the collateral and
may experience losses to the extent that the proceeds from the sale of
the collateral is less than the repurchase price.
Options, Futures and Interest Rate Swaps; Derivatives
The funds may purchase and sell certain kinds of futures contracts, put
and call options, and options on interest rate futures for hedging
purposes. In addition, USGT may utilize options on broadly-based
securities indices and enter into interest rate swap agreements. The
foregoing instruments, referred to as "hedging instruments," may be
considered derivative investments. USGT may also invest in certain
derivative investments to enhance income. The Fund may write covered
put and call options on U.S. Government Securities to generate
additional income. Hedging instruments and derivative investments and
their special risks are described below in "Comparison Between USGT and
the Fund."
<PAGE>
APPROVAL OF THE REORGANIZATION
(The Proposal)
Background
Oppenheimer Capital, in the course of a review of its business,
recently concluded that it should concentrate on its core investment
management business and not continue in the retail distribution of
mutual funds. Oppenheimer Capital is the parent of QVA. The retail
mutual fund market requires significant assets per fund and in the
aggregate for a mutual fund family to cover normal costs, significant
capital investment in new products and services, financing for Class B
and Class C shares and sales support. Consequently, it has become
increasingly difficult for a relatively small mutual fund operation
with assets under $10 billion, to compete. Sometime after this
determination was made, representatives of OMC approached Oppenheimer
Capital about acquiring certain of its mutual fund assets.
Representatives of OMC, Oppenheimer Capital, QVD and QVA held meetings
beginning in April 1995. Following the negotiation of the terms of an
acquisition agreement and related agreements, an acquisition agreement
(the "Acquisition Agreement") was executed by OMC, Oppenheimer Capital,
QVD and QVA on August 17, 1995.
The Reorganization described in this Proxy Statement and Prospectus is
one aspect of the overall Acquisition (as hereinafter defined)
contemplated by the Acquisition Agreement described below. The
consummation of the Acquisition is one condition, among others, to the
closing of the Reorganization. Accordingly, unless the parties
otherwise agree, the Reorganization may not be effected, despite
shareholder approval, if the Acquisition does not close. In such case,
the Fund will continue in existence and the Board will take such
further action as it, in its discretion, deems necessary or advisable.
The description of the Acquisition Agreement set forth below is a
summary only.
Acquisition Agreement
The Acquisition Agreement contemplates the sale to OMC of substantially
all the assets (the "Purchased Assets") of QVA, QVD and Oppenheimer
Capital (collectively, the "Companies") relating to twelve Quest For
Value mutual funds (the "Acquired Funds") and the assumption by OMC of
certain liabilities of the Companies with respect to the Acquired Funds
(the foregoing, the "Acquisition"). The Acquisition Agreement
contemplates that six of the Acquired Funds (including the Fund) will
be reorganized with certain mutual funds currently advised by OMC (the
"Reorganized Funds") and the remaining six Acquired Funds will enter
into investment advisory agreements with OMC (or its designee) and OMC
(or its designee) will thereupon enter into subadvisory agreements with
QVA for the benefit of each such fund (the "Continuing Funds").
The purchase price for the Purchased Assets will be calculated pursuant
to the formula set forth on Exhibit B hereto. If the Acquisition had
been consummated on July 31, 1995, QVA estimates that the purchase
price (which includes the initial purchase payment payable at closing,
certain commissions and a deferred cash payment) would have been
approximately $50 million. The actual purchase price may be lower
depending upon changes in the net asset value of the Acquired Funds.
A condition to the obligation of OMC to close under the Acquisition
Agreement (the "Acquisition Closing") is the approval of the
reorganizations of the Reorganized Funds (including the Reorganization
described in this Proxy Statement and Prospectus) and the approval of
the investment advisory agreements and subadvisory agreements with the
Continuing Funds by shareholders that have in the aggregate at least
75% of the closing net assets of all Acquired Funds. A condition to
the obligation of the Companies to close under the Acquisition
Agreement (which condition has been satisfied) is that the directors or
trustees of the Continuing Funds and the Reorganized Funds have adopted
a resolution that for a period of three years after the Acquisition
Closing, at least 75% of the members of the board of each such fund
will not be "interested persons" (as defined in the 1940 Act) of the
investment adviser or subadviser for such fund or "interested persons"
(as defined in the 1940 Act) of QVA, the predecessor investment adviser
as to the Continuing Funds. The Acquisition Agreement sets forth
certain other conditions to each party's obligation to close.
The Companies have each agreed pursuant to an Agreement Not To Compete
not to sponsor, manage or distribute any open end or closed end
management investment company registered under the 1940 Act or any
similar law in Canada (except for certain identified investment
companies or types of investment companies) and not to sell, underwrite
or assist in the distribution of shares of any such funds for a period
to end on the earlier of (i) the third anniversary of the date on which
there is no effective sub-advisory agreement between OMC and QVA or
(ii) the eighth anniversary of the Acquisition Closing. OMC and the
Companies have agreed to indemnify the other for certain liabilities.
Board Approval of the Reorganization
At its meeting on June 22, 1995 the Board, including the Independent
Trustees, unanimously approved the Reorganization and the
Reorganization Agreement, determined that the Reorganization is in the
best interests of the Fund and its shareholders and resolved to
recommend that Fund shareholders vote for approval of the
Reorganization. The Board further determined that the Reorganization
would not result in dilution of the Fund's shareholders' interests.
In evaluating the Reorganization, the Board requested and reviewed,
with the assistance of independent legal counsel, materials furnished
by OMC and QVA. These materials included financial statements as well
as other written information regarding OMC and its personnel,
operations and financial condition. The Board also reviewed the same
type of information about QVA. Consideration was given to comparative
information concerning other mutual funds with similar investment
objectives to the Fund and USGT, including information prepared by
Lipper Analytical Services, Inc. and Management Practice Inc. The
Board also considered information with respect to the relative
historical performance of the funds. The Board also reviewed and
discussed the terms and provisions of the investment advisory agreement
pursuant to which OMC provides investment management services to USGT
and compared them to the existing management arrangements for the Fund
as well as the management arrangements of other mutual funds,
particularly with respect to the allocation of various types of
expenses, levels of fees and resulting expense ratios.
In reaching its determination, the Board gave careful consideration to
the following factors, among others: the Reorganization would afford
the shareholders of the Fund the capabilities and resources of OMC and
its affiliates in the area of investment management, distribution,
shareholder servicing and marketing; the ability of the shareholders of
the Fund to exchange their shares for a wider variety of portfolios
within the OppenheimerFunds family with differing investment objectives
than are currently available to shareholders of the Fund; the terms and
conditions of the Reorganization (including that there would be no
sales charge imposed in effecting the Reorganization, the
Reorganization was intended to qualify as a tax-free exchange and all
expenses of the Reorganization would be paid by QVA and OMC in the
amounts incurred by them and the respective fund); and the substantial
similarity of the investment objectives, policies and methods of the
Fund and USGT.
The Board also considered that the annual operating expenses of USGT
are lower, as a percentage of assets, and would be lower on a pro forma
basis after giving effect to the Reorganization, than the operating
expenses of the Fund, resulting in a savings to Fund shareholders. For
operating expenses and other expense information relating to USGT and
the Fund, see "Comparative Fee Tables - Expenses of USGT and the Fund;
Pro Forma Expenses." Further, since Class B shares of USGT
automatically convert to Class A shares after six years, as compared to
a conversion of Class B shares of the Fund after eight years, Class B
Fund shareholders would benefit from the earlier conversion to a Class
that does not bear an annual asset-based sales charge. In addition, the
Board determined that the purchase, exchange and redemption procedures
and privileges provided by USGT are comparable to those of the Fund and
that Fund shareholders currently exempt from payment of certain
transaction-based sales charges will continue to be so exempt as
shareholders of USGT.
The USGT Board of Trustees, including the trustees who are not
"interested persons" of USGT, unanimously approved the Reorganization
and the Reorganization Agreement and determined that the Reorganization
is in the best interests of USGT and its shareholders. The USGT Board
further determined that the Reorganization would not result in dilution
of the USGT shareholders' interests. The USGT Board considered, among
other things, that an increase in USGT's asset base as a result of the
Reorganization could benefit USGT shareholders due to the economies of
scale available to a larger fund. These economies of scale should
result in slightly lower costs per account for each USGT shareholder
through lower operating expenses and transfer agency expenses.
The Reorganization
The following summary of the Reorganization Agreement is qualified in
its entirety by reference to the Reorganization Agreement (a copy of
which is set forth in full as Exhibit A to this Proxy Statement and
Prospectus). The Reorganization Agreement contemplates a
reorganization under which (i) substantially all of the assets of the
Fund would be transferred to USGT in exchange for Class A, Class B and
Class C shares of USGT and the assumption by USGT of certain
liabilities of the Fund, (ii) the Class A, Class B and Class C shares
would be distributed among the respective Class A, Class B and Class C
shareholders of the Fund in liquidation of the Fund and (iii) the
outstanding shares of the Fund would be cancelled. Prior to the
Closing Date (as hereinafter defined), the Fund will endeavor to
discharge all of its liabilities and obligations when and as due prior
to such date. USGT will not assume any liabilities or obligations of
the Fund other than those reflected on an unaudited statement of assets
and liabilities of the Fund prepared as of the Valuation Date and that
are agreed to by USGT. In this regard, the Fund will retain a cash
reserve (the "Cash Reserve") in an amount which is deemed sufficient in
the discretion of the Board for the payment of (a) the Fund's expenses
of liquidation and (b) the Fund's liabilities, other than those assumed
by USGT. The number of full and fractional Class A, Class B and Class
C shares of USGT to be issued to the Fund will be determined on the
basis of USGT's and the Fund's relative net asset values per Class A,
Class B and Class C shares, respectively, computed as of the close of
business of the New York Stock Exchange, Inc. on the business day
preceding the Closing Date (the "Valuation Date"). The Closing Date
for the Reorganization will be the date of the closing of the
Acquisition under the Acquisition Agreement (or such other day and time
as may be mutually agreed upon in writing).
OMC will utilize the valuation procedures set forth in the USGT
Prospectus and USGT Additional Statement to determine the value of the
Fund's assets to be transferred to USGT pursuant to the Reorganization,
the value of USGT's assets and the net asset value of each class of
shares of USGT. Such values will be computed by OMC as of the
Valuation Date in a manner consistent with its regular practice in
pricing USGT.
The Reorganization Agreement provides for coordination between the
funds as to their respective portfolios so that, on and after the
Closing Date, USGT will be in compliance with all of its investment
policies and restrictions. The Fund will recognize capital gain or
loss on any sales made pursuant to this condition. As noted in "Tax
Aspects of the Reorganization" below, if the Fund realizes net gain
from the sale of securities, such gain, to the extent not offset by
capital loss carry-forwards, will be distributed to shareholders prior
to the Closing Date and will be taxable to shareholders as capital
gain.
Contemporaneously with the closing, the Fund will be liquidated (except
for the Cash Reserve) and the Fund will distribute or cause to be
distributed pro rata to Fund shareholders of record as of the close of
business on the Valuation Date the full and fractional USGT shares of
each class received by the Fund. Upon such liquidation, all issued and
outstanding shares of the Fund will be cancelled on the Fund's books
and Fund shareholders will have no further rights as shareholders of
the Fund. To assist the Fund in the distribution of USGT shares, USGT
will, in accordance with a shareholder list supplied by the Fund, cause
USGT's transfer agent to credit and confirm an appropriate number of
shares of USGT to each shareholder of the Fund. Certificates for
shares of USGT will be issued upon written request of a former
shareholder of the Fund but only for whole shares with fractional
shares credited to the name of the shareholder on the books of USGT.
Former Class A shareholders of the Fund who wish certificates
representing their Class A shares of USGT must, after receipt of their
confirmations, make a written request to Oppenheimer Shareholder
Services, P.O. Box 5270, Denver, Colorado 80217. Share certificates are
not available for Class B or Class C USGT shares. Shareholders of the
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 USGT. After the
closing of the Reorganization, the Fund will not conduct any business
except in connection with the winding up of its affairs. Under the
Reorganization Agreement, within one year after the Closing Date, the
Fund shall: either (i) transfer any remaining amount of the Cash
Reserve to USGT, if such remaining amount is not material (as defined
below) or (ii) distribute such remaining amount to the shareholders of
the 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 Fund shares outstanding on the
Valuation Date.
The consummation of the Reorganization is subject to the conditions set
forth in the Reorganization Agreement, including, without limitation,
approval of the Reorganization by the Fund's shareholders.
Notwithstanding approval of the Fund's shareholders, the Reorganization
may be terminated at any time at or prior to the Closing Date (i) by
mutual written consent of the Trust, on behalf of the Fund, and USGT,
(ii) by the Trust, on behalf of the Fund, or USGT if the closing shall
not have occurred on or before February 29, 1996 or (iii) by the Trust,
on behalf of the Fund, or USGT upon a material breach by the other
(and, with respect to USGT, a material breach by QVA) of any
representation, warranty, covenant or agreement contained therein to be
performed on or prior to the Closing Date, if a condition therein
expressed to be precedent to the obligations of the terminating party
has not been met and it reasonably appears that it will not or cannot
be met prior to the Closing Date, or the Acquisition is not
consummated. Termination of the Reorganization Agreement will
terminate all obligations of the parties thereto (other than a
confidentiality obligation of USGT with respect to information relating
to the Fund and the obligation of USGT to return certain books and
records to the Fund) without liability except, in the event of a
termination pursuant to (iii) above, any party in breach (other than a
breach due to the Fund shareholders not approving the Reorganization)
of the Reorganization Agreement (or the Acquisition Agreement, if
applicable) will, upon demand, reimburse the non-breaching party for
all reasonable out-of-pocket fees and expenses incurred in connection
with the transactions contemplated by the Reorganization Agreement.
Approval of the Reorganization will require the vote specified below in
"Information Concerning the Meeting - Record Date; Vote Required; Share
Information." If the Reorganization is not approved by the
shareholders of the Fund, the trustees of the Trust will consider other
possible courses of action.
Tax Aspects of the Reorganization
At or prior to the Closing Date, the Fund will declare a dividend in an
amount large enough so that it will have declared a dividend of all of
its investment company taxable income and net capital gain, if any, for
the taxable period ending with its dissolution (determined without
regard to any deduction for dividends paid). Such dividends will be
included in the taxable income of the Fund's shareholders as ordinary
income and capital gain, respectively.
The exchange of the assets of the Fund for Class A, Class B and Class C
shares of USGT and the assumption by USGT of certain liabilities of the
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"). The Fund has represented to
Price Waterhouse LLP, tax adviser to the Fund, that, to the Fund's best
knowledge, there is no plan or intention by any Fund shareholder who
owns 5% or more of the Fund's outstanding shares, and, to the Fund's
best knowledge, there is no plan or intention on the part of the
remaining Fund shareholders, to redeem, sell, exchange or otherwise
dispose of a number of USGT shares received in the transaction that
would reduce the Fund shareholders' ownership of USGT Class A, Class B
and Class C 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 Fund shares as of the same date. The Fund and USGT have
each further represented to Price Waterhouse LLP the fact that, as of
the Closing Date, the Fund and USGT will qualify as regulated
investment companies 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, USGT and the Fund
will receive the opinion of Price Waterhouse LLP to the effect that,
based on the Reorganization Agreement, the above representations and
other representations as such firm shall reasonably request, existing
provisions of the Code, Treasury Regulations issued thereunder, current
Revenue Rulings, Revenue Procedures and court decisions, for Federal
income tax purposes:
1. The transfer of substantially all of the Fund's assets in
exchange for Class A, Class B and Class C shares of USGT and the
assumption by USGT of certain identified liabilities of the Fund
followed by the distribution by the Fund of Class A, Class B and
Class C shares of USGT to the Fund shareholders in exchange for
their Fund shares will constitute a "reorganization" within the
meaning of Section 368(a)(1) of the Code and the Fund and USGT
will each be a "party to the reorganization" within the meaning of
Section 368(b) of the Code.
2. Pursuant to Section 1032 of the Code, no gain or loss will be
recognized by USGT upon the receipt of the assets of the Fund
solely in exchange for Class A, Class B and Class C shares of USGT
and the assumption by USGT of the identified liabilities of the
Fund.
3. Pursuant to Section 361(a) of the Code, no gain or loss will
be recognized by the Fund upon the transfer of the assets of the
Fund to USGT in exchange for Class A, Class B and Class C shares
of USGT and the assumption by USGT of the identified liabilities
of the Fund or upon the distribution of Class A, Class B and Class
C shares of USGT to the Fund shareholders in exchange for the Fund
shares.
4. Pursuant to Section 354(a) of the Code, no gain or loss will
be recognized by the Fund shareholders upon the exchange of the
Fund shares for the Class A, Class B and Class C shares of USGT.
5. Pursuant to Section 358 of the Code, the aggregate tax basis
for Class A, Class B and Class C shares of USGT received by each
Fund shareholder pursuant to the Reorganization will be the same
as the aggregate tax basis of the Fund shares held by each such
Fund shareholder immediately prior to the Reorganization.
6. Pursuant to Section 1223 of the Code, the holding period of
Class A, Class B and Class C shares of USGT to be received by each
Fund shareholder will include the period during which the Fund
shares surrendered in exchange therefor were held (provided such
Fund shares were held as capital assets on the date of the
Reorganization).
7. Pursuant to Section 362(b) of the Code, the tax basis of the
assets of the Fund acquired by USGT will be the same as the tax
basis of such assets of the Fund immediately prior to the
Reorganization.
8. Pursuant to Section 1223 of the Code, the holding period of
the assets of the Fund in the hands of USGT will include the
period during which those assets were held by the Fund; and
9. USGT will succeed to and take into account the items of the
Fund described in Section 381(c) of the Code, including the
earnings and profits, or deficit in earnings and profits, of the
Fund as of the date of the transaction. USGT will take these
items into account subject to the conditions and limitations
specified in Sections 381, 382, 383 and 384 of the Code and
applicable regulations thereunder.
Shareholders of the Fund should consult their tax advisors regarding
the effect, if any, of the Reorganization in light of their individual
circumstances. Since the foregoing discussion only relates to the
Federal income tax consequences of the Reorganization, shareholders of
the 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 USGT and the Fund and
indicates the pro forma combined capitalization as of June 30, 1995 as
if the Reorganization had occurred on that date.
Net Asset
Shares Value
Net Assets Outstanding Per Share
Oppenheimer U.S.
Government Trust*
Class A Shares $312,606,704 32,870,814 $9.51
Class C Shares 11,018,821 1,159,733 9.50
U.S. Government
Income Fund
Class A Shares 114,475,587 10,197,943 11.23
Class B Shares 9,817,999 874,786 11.22
Class C Shares 2,023,185 180,268 11.22
Pro Forma Combined
Fund**
Class A Shares 427,082,291 44,908,205 9.51
Class B Shares 9,817,999 1,032,387 9.51
Class C Shares 13,042,006 1,372,700 9.50
- ------------------
* Class B shares of USGT were first publicly offered on July 21, 1995.
Accordingly, information with respect to Class B shares of USGT is
not reflected in this part of the table above.
** Reflects issuance of 12,037,391 Class A shares, 1,032,387 Class B
shares and 212,967 Class C shares of USGT in a tax-free exchange for
the net assets of the Fund, aggregating $114,475,587, $9,817,999 and
$2,023,185 for Class A, Class B and Class C shares, respectively, of
the Fund.
The pro forma ratio of expenses to average annual net assets of the
combined funds at June 30, 1995 would have been 1.08% with respect to
Class A shares, 1.84% with respect to Class B shares and 1.87% with
respect to Class C shares.
COMPARISON BETWEEN USGT AND THE FUND
Comparative information about USGT and the Fund is presented below.
More complete information about USGT and the Fund is set forth in their
respective Prospectuses (which, as to USGT, accompanies this Proxy
Statement and Prospectus and is incorporated herein by reference) and
Statements of Additional Information. To obtain copies, see
"Miscellaneous - Public Information."
Comparison of Investment Objectives, Policies and Restrictions
As its investment objective, USGT seeks high current income,
preservation of capital and maintenance of liquidity. As its
investment objective, the Fund seeks a high level of current income
together with protection of capital. In seeking their investment
objectives, which are fundamental policies, USGT and the Fund employ
similar investment policies as described in detail below.
USGT seeks its investment objective primarily through investments in
U.S. Government Securities and repurchase agreements on such
securities. As a matter of fundamental policy, at least 80% of USGT's
total assets will be invested under normal conditions in U.S.
Government Securities. USGT expects that any investments in debt
securities other than U.S. Government Securities will be limited to
debt securities rated within the four highest rating categories
("investment grade") of Moody's or S&P or, if unrated, judged by OMC to
be of comparable quality to debt securities rated within such grades,
although it is not a fundamental policy that it do so. USGT is not
obligated to dispose of securities if the rating is reduced below
investment grade. The Fund seeks its investment objective by investing
exclusively in U.S. Government Securities and in related futures,
options and repurchase agreements. U.S. Government Securities include
(i) U.S. Treasury obligations and (ii) obligations issued or guaranteed
by U.S. Government agencies or instrumentalities, including mortgage-
backed securities. The current estimated average dollar weighted
maturity of USGT is approximately five years and that of the Fund
between five and ten years. The funds' respective portfolio holdings
will vary based on market conditions which, in turn, could change such
average maturity amounts.
U.S. Treasury obligations include Treasury bills (which have maturities
of one year or less when issued), Treasury notes (which have maturities
of two to ten years when issued) and Treasury bonds (which have
maturities generally greater than ten years when issued). U.S.
Treasury obligations are backed by the full faith and credit of the
United States.
Obligations issued or guaranteed by U.S. Government agencies or
instrumentalities are obligations supported by any of the following:
(a) the full faith and credit of the U.S. Government, such as
Government National Mortgage Association ("Ginnie Mae") modified pass-
through certificates, (b) the right of the issuer to borrow an amount
limited to a specific line of credit from the U.S. Government such as
bonds issued by Federal National Mortgage Association ("Fannie Mae"),
(c) the discretionary authority of the U.S. Government to purchase the
obligations of the agency or instrumentality, or (d) the credit of the
instrumentality, such as obligations of Federal Home Loan Mortgage
Corporation ("Freddie Mac"). The agencies and instrumentalities under
(c) above include Federal Land Banks, Farmers Home Administration,
Central Bank for Cooperatives and Federal Intermediate Credit Banks.
Mortgage-backed securities, also known as pass-through securities, are
characterized by the homeowner's principal and interest payments
passing from the originating bank or savings and loan through the
appropriate governmental agency to investors, net of service charges.
These pass-through securities include participation certificates of
Ginnie Mae, that are guaranteed as to timely payment of interest and
principal by the full faith and credit of the U.S. Government, and
Freddie Mac and Fannie Mae, that are guaranteed and issued,
respectively, by these agencies and instrumentalities of the U.S.
Government.
In addition to securities issued by Ginnie Mae, Fannie Mae and Freddie
Mac, another type of mortgage-backed security the funds may invest in
(although the Fund currently does not) are collateralized mortgage
obligations ("CMOs") that are issued or guaranteed by the U.S.
Government or its agencies or instrumentalities, and USGT may also
invest in CMOs that are collateralized by a portfolio of mortgages or
mortgage-related securities guaranteed by such an agency or
instrumentality. Payment of the interest and principal generated by
the pool of mortgages is passed through to the holders as the payments
are received by the issuer of the CMO. CMOs may be issued in a variety
of classes or series ("tranches") that have different maturities.
USGT may invest in "stripped" mortgage-backed securities of CMOs or
other securities issued by agencies or instrumentalities of the U.S.
Government. Stripped mortgage-backed securities usually have two
classes. The classes receive different proportions of the interest and
principal distributions on the pool of mortgage assets that act as
collateral for the security. In certain cases, one class will receive
all of the interest payments (and is known as an "I/O"), while the
other class will receive all of the principal value (and is known as a
"P/O").
The funds may also enter into "forward roll" transactions with banks
and dealers with respect to the mortgage-related securities (as to
USGT) or portfolio securities (as to the Fund) in which it can invest.
The Fund currently does not engage in such transactions. These require
the funds to secure their obligations in the transaction by segregating
assets with a custodian bank equal in amount to obligations under the
roll.
Special Investment Methods
USGT and the Fund may use the special investment methods summarized
below.
Loans of Portfolio Securities. Both USGT and the Fund may lend their
portfolio securities to brokers, dealers and other financial
institutions, subject to certain conditions. As to USGT, these loans
are limited to not more than 25% of USGT's total assets although it is
not expected that such loans will exceed 5% of the value of the total
assets of USGT in the coming year. The Fund may commit up to 33 1/3 %
of the value of its total assets to such loans, but has not entered
into any to date.
Repurchase Agreements. Both USGT and the Fund may enter into repurchase
agreements. There is no limit on the amount of either fund's net assets
that may be subject to repurchase agreements of seven days or less.
Neither fund will enter into a repurchase agreement that will cause
more than 10% of its net assets to be subject to repurchase agreements
having a maturity beyond seven days.
Hedging. As described below, both USGT and the Fund may purchase and
sell certain kinds of futures contracts, put and call options, and
options on interest rate futures. USGT may (but the Fund cannot) also
utilize options on broadly-based securities indices and enter into
interest rate swap agreements. These are all referred to as "hedging
instruments." The funds do not use hedging instruments for speculative
purposes. USGT may only purchase a call or put if, after such
purchase, the value of all call and put options held by USGT would not
exceed 5% of USGT's total assets. Other limits on the use of hedging
instruments are described in the funds' Prospectuses and Statements of
Additional Information.
Both funds may buy and sell options and futures to try to manage their
exposure to the possibility that the prices of their portfolio
securities may decline, or to establish a position in the market as a
temporary substitute for purchasing individual securities, or to try to
manage their exposure to changing interest rates. Some of these
strategies, such as selling futures, buying puts and writing covered
calls, hedge the funds' portfolio against price fluctuations. Other
hedging strategies, such as buying futures and call options and writing
put options, tend to increase the funds' exposure to the securities
market. USGT may purchase interest rate swaps where USGT and another
party exchange their right to receive or their obligation to pay
interest on a security. USGT may not enter into swaps with respect to
more than 25% of its total assets.
The use of hedging instruments requires special skills and knowledge of
investment techniques that are different than those required for normal
portfolio management. If the investment adviser to the fund 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. Interest rate swaps are subject to credit risks
(if the other party fails to meet its obligations) and also to interest
rate risks. USGT could be obligated to pay more under its swap
agreements than it receives under them, as a result of interest rate
changes.
Derivative Investments. USGT can invest in a number of different kinds
of "derivative investments." Some types of derivatives may be used for
hedging purposes, as described above. USGT may invest in others
because they offer the potential for increased income and principal
value. The Fund may write covered put and call options on U.S.
Government Securities to generate additional income. In general, a
"derivative investment" is a specially-designed investment the
performance of which is linked to the performance of another investment
or security, such as an option, future or index. In the broadest
sense, derivative investments include the hedging instruments in which
the funds may invest, such as options and futures contracts.
One risk of investing in derivative investments is that the company
issuing the instrument might not pay the amount due on the maturity of
the instrument. There is also the risk that the underlying investment
or security might not perform the way the investment adviser expected
it to perform. The performance of derivative investments may also be
influenced by interest rate changes in the U.S. and abroad. All of
these risks can mean that the fund will realize less income than
expected from its investments, or that it can lose part of the value of
its investments, which will affect the fund's share price.
Investment Restrictions
Both USGT and Fund have certain investment restrictions that, together
with their respective investment objectives, are fundamental policies
changeable only by shareholder approval. The investment restrictions
of USGT and the Fund are substantially the same except as set forth
below.
USGT cannot invest in securities (except those of the U.S. Government
or any of its agencies or instrumentalities) of any issuer if
immediately thereafter, either (a) more than 5% of USGT's total assets
would be invested in securities of that issuer, or (b) USGT would then
own more than 10% of that issuer's voting securities.
The Fund cannot: (1) purchase more than 10% of the voting securities of
any one issuer; (2) 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; (3) invest more
than 5% of the Fund's total assets in securities of issuers having a
record, together with predecessors, of less than three years of
continuous operation; (4) invest in physical commodities or physical
commodity contracts or speculate in financial commodity contracts, but
the Fund is authorized to purchase and sell financial futures contracts
and options on such futures contracts exclusively for hedging and other
non-speculative purposes to the extent specified in its Prospectus; (5)
purchase warrants if as a result the Fund would then have either more
than 5% of its total assets (determined at the time of investment)
invested in warrants or more than 2% of its total assets invested in
warrants not listed on the New York or American Stock Exchange; (6)
invest in securities of any issuer if to the knowledge of the Trust,
any officer or trustee of the Trust or any officer or director of QVA
owns more than 1/2 of 1% of the outstanding securities of such issuer,
and such officers, trustees and directors who own more than 1/2 of 1%
own in the aggregate more than 5% of the outstanding securities of such
issuer; (7) invest for the purpose of exercising control or management
of another company (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); (8) issue senior securities as defined in the 1940 Act
except insofar as the Fund may be deemed to have issued a senior
security by reason of: (a) entering into any repurchase agreement; (b)
borrowing money in accordance with restrictions described in the Fund's
Prospectus; or (c) lending portfolio securities; and (9) with respect
to 75% of its assets, invest more than 5% of the value of its total
assets in the securities of any one issuer (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).
USGT Performance
USGT does not maintain a fixed dividend rate and there can be no
assurance as to the payment of any dividends or the realization of any
capital gains.
During USGT's fiscal year ended June 30, 1995, as a result of periodic
U.S. short-term interest rate increases by the Federal Reserve, the
economy slowed to a moderate growth rate. In anticipation of a decline
in interest rates, OMC attempted to increase short-term yields by
including adjustable rate mortgages in USGT's portfolio. Due to what
OMC perceived as an uncertain interest rate environment, OMC included a
combination of short-term and long-term Treasury securities in USGT's
portfolio and reduced its position in fixed-rate mortgage-backed
securities. USGT's investment performance will vary over time,
depending on market conditions, the composition of the portfolio,
expenses and which class of shares an investor owns. Past performance
should not be considered a prediction of future performance.
The chart below shows the performance of a hypothetical $10,000
investment in each Class of shares of USGT held until June 30, 1995; in
the case of Class A shares, since August 16, 1985 (the date on which
USGT's investment objective was changed), and in the case of Class C
shares, from the inception of the Class on December 1, 1993, with all
dividends and capital gains distributions reinvested in additional
shares. The graph reflects the deduction of the 4.75% maximum initial
sales charge on Class A shares and the 1.0% contingent deferred sales
charge on Class C shares. Class B shares were not offered during
USGT's fiscal year ended June 30, 1995. Accordingly, no information on
Class B shares is reflected below.
Comparison of Change in Value
of a $10,000 Hypothetical Investment in
Oppenheimer U.S. Government Trust
and the Lehman Brothers U.S. Government Bond Index
(Graph With Class A Shares Of USGT)
(Graph With Class C Shares Of USGT)
Past performance is not predictive of future performance.
Average Annual Total Returns of Class A Shares Of USGT at 6/30/95(1)
1-Year 5-Year Life
5.94% 7.27% 8.00%
Average Annual Total Return of Class C Shares Of USGT at 6/30/95(2)
1-Year Life
9.31% 4.22%
- -------------------
(1) The inception date of USGT (Class A shares) was 8/16/85. The
average annual total returns and the ending account value in the graph
reflect reinvestment of all dividends and capital gains distributions
and are shown net of the applicable 4.75% maximum initial sales charge.
(2) Class C shares of USGT were first publicly offered on 12/1/93.
USGT's performance is compared to the performance of the Lehman
Brothers U.S. Government Bond Index, an unmanaged index including all
U.S. Treasury issues, publicly-issued debt of U.S. Government agencies
and quasi-public corporations and U.S. Government guaranteed corporate
debt, and is widely regarded as a measure of the performance of the
U.S. Government bond 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 above shows the effect
of taxes. Also, USGT's performance reflects the effect of USGT
business and operating expenses. While index comparisons may be
useful to provide a benchmark for USGT's performance, it should be
noted that USGT's investments are not limited to the securities in any
one index and the index data does not reflect any assessment of the
risk of the investments included in the index.
Information on Fund performance is set forth in the Fund's Annual
Report as of October 31, 1994 which may be obtained without charge as
set forth in "Miscellaneous - Public Information." Such information is
incorporated herein by reference.
Additional Comparative Information
General
For a discussion of the organization and operation of USGT, including
brokerage practices, see "Investment Objective and Policies" and "How
the Fund is Managed" in the USGT current Prospectus and "Brokerage
Policies of the Fund" in the USGT Additional Statement. For a
discussion of the organization and operation of the Fund, including
brokerage practices, see "Investment Objectives of the Fund,"
"Investment Restrictions and Techniques," "Investment Management
Agreement" and "Additional Information" in the Fund current Prospectus.
Financial Information
For certain financial information about USGT and the Fund, see (as to
USGT) "Financial Highlights" and "Performance of the Fund" in the USGT
current Prospectus and (as to the Fund) "Financial Highlights," in the
Fund current Prospectus.
Management of USGT and the Fund
For information about the management of USGT and the Fund, including
their respective Boards of Trustees, investment advisers, portfolio
managers and distributors, see (as to USGT) "Expenses" and "How the
Fund is Managed" in the USGT current Prospectus and "How the Fund is
Managed," "Trustees and Officers of the Fund" and "The Manager and Its
Affiliates" in the USGT Additional Statement and (as to the Fund)
"Investment Management Agreement," Distribution Plan," "Portfolio
Transactions and Turnover" and "Additional Information" in the Fund
current Prospectus and "Trustees and Officers" in the Fund Additional
Statement.
Description of Shares of USGT and the Fund
Each share of USGT represents an interest in USGT 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 a vote at shareholder meetings. Shares
of USGT vote together in the aggregate on certain matters at
shareholder 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 are not affected by that
matter are not entitled to vote on the proposal. USGT is not required
to hold, and does not plan to hold, regular annual meetings of
shareholders. Shareholders of USGT have the right, under certain
circumstances, to remove a Trustee and will be assisted in
communicating with other shareholders for such purpose.
USGT is authorized to issue an unlimited number of shares of beneficial
interest. Shares are freely transferrable and do not have cumulative
voting rights or preemptive or subscription rights. USGT is governed
by a Board of Trustees that has the power, without shareholder
approval, to establish and designate one or more series and to divide
unissued shares into two or more classes. The Board of Trustees of
USGT has established three classes of shares, Class A, Class B and
Class C. Each class invests 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. Under
certain circumstances, a shareholder of USGT may be held personally
liable as a partner for the obligations of USGT, and under the
Declaration of Trust for USGT, such a shareholder is entitled to
indemnification rights by USGT; the risk of a shareholder incurring any
such loss is limited to the remote circumstances in which USGT is
unable to meet its obligations.
For further information about the shares of USGT, and for a description
of the classes of shares of the Fund, including voting rights,
restrictions on disposition and potential liability associated with
their ownership, see (as to USGT) "How the Fund is Managed" in the USGT
current Prospectus and USGT Additional Statement and (as to the Fund)
"Additional Information" in the Fund current Prospectus.
Dividends, Distributions and Taxes
Both funds declare dividends from net investment income each regular
business day, distribute dividends monthly and distribute net long-term
capital gains annually. USGT distributes net short-term capital gains
annually and the Fund distributes such gains quarterly. For a
discussion of the policies of USGT and the Fund with respect to
dividends and distributions, and a discussion of the tax consequences
of an investment in USGT and the Fund, see (as to USGT) "Dividends,
Capital Gains and Taxes" in the USGT current Prospectus and (as to the
Fund) "Dividends and Distributions" and "Tax Status" in the Fund
current Prospectus.
Purchases, Redemptions and Exchanges of Shares
For a discussion of how shares of USGT and the Fund may be purchased,
redeemed and exchanged, see (as to USGT) "How to Buy Shares," "How to
Sell Shares," "Exchanges of Shares," "Special Investor Services,"
"Service Plan for Class A Shares," "Distribution and Service Plan for
Class B Shares" and "Distribution and Service Plan for Class C Shares"
in the USGT current Prospectus; and see "How to Buy Shares," "How to
Redeem Shares," "Exchanging Shares" and "Additional Information" in the
Fund current Prospectus.
Shareholder Inquiries
For a description of how shareholder inquiries should be made, see (as
to USGT) "How the Fund is Managed" in the USGT current Prospectus and
(as to the Fund) "Additional Information" in the Fund current
Prospectus.
INFORMATION CONCERNING THE MEETING
The Meeting
The Meeting will be held at One World Financial Center, New York, New
York 10281 on the 40th Floor at 9:00 A.M., New York time, on November
16, 1995 and any adjournments thereof. At the Meeting, shareholders of
the Fund will be asked to consider and vote upon approval of the
Reorganization Agreement, and the transactions contemplated thereby,
including the transfer of substantially all the assets of the Fund in
exchange for Class A, Class B and Class C shares of USGT and the
assumption by USGT of certain liabilities of the Fund, the distribution
of such shares to the shareholders of the Fund in liquidation of the
Fund and the cancellation of the outstanding shares of the Fund.
Record Date; Vote Required; Share Information
The Board has fixed the close of business on September 25, 1995 as the
record date (the "Record Date") for the determination of shareholders
entitled to notice of, and to vote at, the Meeting. The affirmative
vote of a majority of each of the Class A, Class B and Class C shares
of the Fund, voting separately as a class, represented in person or by
proxy at the Meeting and entitled to vote at the Meeting is required
for approval of the Proposal. 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 the Fund will vote on the Reorganization. The vote of
shareholders of USGT is not being solicited to approve the
Reorganization Agreement.
At the close of business on the Record Date, there were approximately
10,070,149.747 Class A, 876,788.807 Class B and 200,212.279 Class C
shares of the Fund issued and outstanding. The presence in person or
by proxy of the holders of a majority of each of Class A, Class B and
Class C shares constitutes a quorum for the transaction of business at
the Meeting. As of the close of business on the Record Date, there
were approximately 41,979,994.968 Class A, 969,841.070 Class B and
1,297,074.046 Class C shares of USGT issued and outstanding. To the
knowledge of the Fund, as of the Record Date, no person owned of record
or beneficially more than 5% of the outstanding Class A, Class B or
Class C Fund shares or more than 5% of the outstanding shares of the
Fund except for: (i) Unified Management Corp. Omnibus Account, 429 N.
Pennsylvania Street, Indianapolis, Indiana 46204, which held of record
but not beneficially for the benefit of clients 2,734,541.208 Class A
shares of the Fund (approximately 27.15% of such outstanding shares);
(ii) Donaldson Lufkin Jenrette Securities Corporation Inc., P.O. Box
2052, Jersey City, New Jersey 07303, which held of record but not
beneficially for the benefit of clients 16,374.916 Class C shares of
the Fund (approximately 8.18% of such outstanding shares); (iii) State
Street Bank and Trust as Custodian for the IRA of Robert B. Delano,
Route 3 Box 1955, Warsaw, Virginia 22572, which held of record and
beneficially 10,584.221 Class C shares of the Fund (approximately 5.29%
of such outstanding shares); (iv) Allan W. Adams Profit Sharing Plan,
Route 1 Box 61, Wendell, Minneapolis 56590, which held of record and
beneficially 12,846.078 Class C shares of the Fund (approximately 6.42%
of such outstanding shares); (v) David B. Landers M.D. P.C. Profit
Sharing Plan, 3364 East Slauson Avenue, Vernon, California 90058, which
held of record and beneficially 13, 584.262 Class C shares of the Fund
(approximately 6.78% of such outstanding shares); and (vi) Bank of
America Trustee FBO American Medical Association, 231 S. LaSalle
Street, Chicago, Illinois, 60697, which held of record and beneficially
13,353.140 Class C shares of the Fund (approximately 6.67% of such
outstanding shares). As to shares of the Fund held of record, but not
beneficially, by the foregoing entities, to the knowledge of the Fund
no beneficial owner on whose behalf such shares are held owned more
than 5% of the outstanding shares of the specified class as of the
Record Date.
To the knowledge of USGT, as of the Record Date, no person owned of
record or beneficially more than 5% of the outstanding Class A, Class B
or Class C USGT shares or more than 5% of the outstanding shares of
USGT except for Merrill Lynch Pierce Fenner & Smith Inc., 4800 Deer
Lake Drive, Jacksonville, Florida 32246-6484, which held of record but
not beneficially for the benefit of certain brokerage clients (none of
whom owned more than 5% of the outstanding Class C shares of USGT)
217,503 Class C shares of USGT (approximately 17% of such outstanding
shares). The foregoing percentages are based on shares of the indicated
class outstanding as of the Record Date. As of the Record Date, the
officers and Trustees of USGT, and the officers and Trustees of the
Trust, beneficially owned as a group less than 1% of the outstanding
shares of each class of USGT and the Fund, respectively, and of USGT
and the Fund, respectively.
In the event a quorum does not exist as to one or more classes of
shares of the Fund on the date originally scheduled for the Meeting,
or, subject to approval of the Board, for other reasons, one or more
adjournments of the Meeting may be sought by the Board. Any adjournment
would require a vote in favor of the adjournment by the holders of a
majority of the shares present at the Meeting (or any adjournment
thereof) in person or by proxy. The persons named as proxies will vote
all shares represented by proxies which they are required to vote in
favor of the Proposal, in favor of an adjournment, and will vote all
shares which they are required to vote against the Proposal, against an
adjournment. In the event that a quorum of each class is present at
the Meeting but one or more classes does not approve the
Reorganization, the Reorganization will be deemed to have not been
approved and the Board will consider what further action, if any, to
take.
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. 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.
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, the broker-dealer may (if permitted under applicable
stock exchange rules), as record holder, vote such shares on the
Proposal in the same proportion as that broker-dealer votes street
account shares for which voting instructions were received in time to
be voted ("broker non-votes"). Abstentions and broker non-votes will
be counted as present for purposes of determining a quorum and will
have the same effect as a vote against the Proposal. The proxy may be
revoked at any time prior to the voting thereof by: (i) writing to the
Secretary of the Trust at One World Financial Center, New York, New
York 10281; (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 evenly apportioned
between QVA and OMC. 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 and employees of QVA, the
Trust's investment adviser, or QVA's affiliates, personally or by
telephone or telegraph. In addition, QVA has retained D.F. King & Co.,
Inc., 77 Water Street, New York, New York 10005 to assist in the
solicitation of proxies for the Meeting and the other shareholder
meetings contemplated by the Acquisition primarily by contacting
shareholders by telephone and telegram for a fee not to exceed $25,000,
plus reasonable out-of-pocket expenses. With respect to a telephone
solicitation by such firm, additional expenses would include the
following; $5.00 per telephone vote transacted, $2.75 per outbound
telephone contact and costs related to obtaining shareholder telephone
numbers. The cost for such proxy solicitor will be shared by QVA and
OMC. D.F. King & Co., Inc. may call shareholders to ask if they would
be willing to have their votes recorded by telephone. The telephone
voting procedure is designed to authenticate shareholders' identities,
to allow shareholders to authorize the voting of their shares in
accordance with their instructions and to confirm that their
instructions have been recorded properly. The Trust has been advised
by counsel that these procedures are consistent with the requirements
of applicable law. Shareholders voting by telephone would be asked for
their social security number or other identifying information and would
be given an opportunity to authorize proxies to vote their shares in
accordance with their instructions. To ensure that the shareholders'
instructions have been recorded correctly they will receive a
confirmation of their instructions in the mail. A special toll-free
number will be available in case the information contained in the
confirmation is incorrect. Although a shareholder's vote may be taken
by telephone, each shareholder will receive a copy of this Proxy
Statement and Prospectus and may vote by mail using the enclosed proxy
cared. Brokerage houses, banks and other fiduciaries may be requested
to forward soliciting material to the beneficial owners of shares of
the Fund and to obtain authorization for the execution of proxies. For
those services, if any, they will be reimbursed by the Trust for their
reasonable out-of-pocket expenses.
Expenses of the Reorganization will be paid as set forth in the
Reorganization Agreement. With respect to the Reorganization, OMC and
QVA will share the cost of the tax opinion. Any other out-of-pocket
expenses of USGT and the Fund associated with the Reorganization,
including fund, accounting and transfer agent expenses, will be borne
by OMC and QVA, respectively, in the amounts so incurred by the
respective fund.
MISCELLANEOUS
Financial Information
The Reorganization will be accounted for by USGT in its financial
statements similar to a pooling without restatement. Further financial
information as to the Fund is contained in its current Prospectus,
which is available without charge upon written request to Quest for
Value Distributors, at P.O. Box 3567, Church Street Station, New York,
New York 10277-1296, and in its audited financial statements as of
October 31, 1994 and unaudited financial statements as of April 30,
1995, all of which are included in the Additional Statement. Financial
information for USGT is contained in its current Prospectus
accompanying this Proxy Statement and Prospectus and incorporated
herein, and in its audited financial statements as of June 30, 1995
which are included in the Additional Statement.
Public Information
Additional information about USGT and the Fund is available, as
applicable, in the following documents: (i) USGT's Prospectus dated
May 30, 1995, supplemented July 14, 1995, accompanying this Proxy
Statement and Prospectus and incorporated herein by reference; (ii) the
Fund's Prospectus dated March 1, 1995, revised June 30, 1995, which may
be obtained without charge by writing to QVD at the address indicated
above; (iii) USGT's Annual Report as of June 30, 1995, which may be
obtained without charge by writing to OSS at the address indicated on
the cover of this Proxy Statement and Prospectus; and (iv) the Fund's
Annual Report as of October 31, 1994, and Semi-Annual Report as of
April 30, 1995 which may be obtained without charge by writing to QVD.
All of the foregoing documents and the Statements of Additional
Information referred to below may be obtained by calling the toll-free
number for USGT or the Fund, as applicable, on the cover of this Proxy
Statement and Prospectus.
Additional information about the following matters is contained in the
Additional Statement, which is incorporated herein by reference and
includes the USGT Additional Statement, the Fund's Prospectus dated
March 1, 1995, revised June 30, 1995, the Fund Additional Statement and
the Annual and Semi-Annual Reports described in the preceding
paragraph: the organization and operation of USGT and the Fund; more
information on investment policies, practices and risks; information
about USGT's and the Fund's respective Boards of Trustees and their
responsibilities; a further description of the services provided by
USGT's and the Fund's investment 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 of USGT and the Fund; purchase, redemption and exchange
programs; and distribution arrangements.
USGT and the 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 USGT and the 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 the 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 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
Deborah Kaback, Secretary
September 29, 1995220
MERGE/220PROXY.8
<PAGE>
EXHIBIT A
AGREEMENT AND PLAN OF REORGANIZATION
This AGREEMENT AND PLAN OF REORGANIZATION ("Agreement") is made as
of this 26th day of September, 1995, by and among Oppenheimer U.S.
Government Trust, a Massachusetts business trust ("Oppenheimer Fund"),
Quest for Value Family of Funds, a Massachusetts business trust ("Quest
For Value"), on behalf of U.S. Government Income Fund ("Quest
Portfolio"), a series of Quest For Value and Quest for Value Advisors
("Quest Advisors"), a Delaware general partnership which serves as
investment adviser to the Quest Portfolio.
This Agreement is intended to be and is adopted as a "plan of
reorganization", within the meaning of Treas. Reg. Section 1.368-2(g),
for a reorganization under Section 368(a)(1) of the Internal Revenue
Code of 1986, as amended ("Code"). The reorganization
("Reorganization") will consist of the transfer to the Oppenheimer Fund
of substantially all of the assets of the Quest Portfolio in exchange
for the assumption by the Oppenheimer Fund of such stated liabilities
of the Quest Portfolio as shall be agreed to by the Oppenheimer Fund
and the issuance by the Oppenheimer Fund of shares of beneficial
interest of the Oppenheimer Fund ("shares") of Class A, Class B and
Class C to be distributed contemporaneously with the Closing Date (as
defined in Section 3.1 below), to the shareholders of the Quest
Portfolio in liquidation of the Quest Portfolio as provided herein, all
upon the terms and conditions hereinafter set forth in this Agreement.
To the extent necessary to effectuate the transactions contemplated by
this Agreement, or as the context of representations, warranties,
covenants and other agreements set forth in this Agreement may require,
all references in this Agreement to the Quest Portfolio shall include
Quest For Value.
In consideration of the premises and of the covenants and agreements
hereinafter set forth, the parties hereto covenant and agree as
follows:
1. THE REORGANIZATION AND LIQUIDATION OF THE QUEST PORTFOLIO
1.1 Subject to the terms and conditions herein set forth and on the
basis of the representations and warranties contained herein, on the
Closing Date, the Quest Portfolio will assign, deliver and otherwise
transfer its assets as set forth in paragraph 1.2 ("Quest Portfolio
Assets") to the Oppenheimer Fund, and the Oppenheimer Fund will in
exchange therefor assume Quest Portfolio's stated liabilities on the
Closing Date as set forth in paragraph 1.3 and deliver to the Quest
Portfolio the number of each class of shares of the Oppenheimer Fund,
including fractional Oppenheimer Fund shares, determined by dividing
the value of the Quest Portfolio Assets, net of such stated
liabilities, represented by shares of each class of the Quest Portfolio
computed in the manner and as of the time and date set forth in
paragraph 2.1, by the net asset value of each class of shares of the
Oppenheimer Fund, computed in the manner and as of the time and date
set forth in paragraph 2.2. Such transactions shall take place at the
closing provided for in paragraph 3.1 ("Closing").
1.2 (a) The Quest Portfolio Assets shall consist of all property
and rights, including without limitation all cash, cash equivalents,
securities and dividend and interest receivables owned by the Quest
Portfolio, and any deferred or prepaid expenses shown as an asset on
the Quest Portfolio's books on the Closing Date. Notwithstanding the
foregoing, the Quest Portfolio Assets shall exclude a cash reserve (the
"Cash Reserve") to be retained by the Quest Portfolio sufficient in its
discretion for the payment of the expenses of the Quest Portfolio's
dissolution and its liabilities, but not in excess of the amount
contemplated by paragraph 7.11.
(b) Promptly following the signing of this Agreement, the
Quest Portfolio will provide the Oppenheimer Fund with a list of its
assets as of the most reasonably practical date. On the Closing Date,
the Quest Portfolio will provide the Oppenheimer Fund with a list of
the Quest Portfolio Assets to be assigned, delivered and otherwise
transferred to the Oppenheimer Fund and of the stated liabilities to be
assumed by the Oppenheimer Fund pursuant to this Agreement.
1.3 The Quest Portfolio will endeavor to discharge all of its
liabilities and obligations when and as due prior to the Closing Date.
An unaudited Statement of Assets and Liabilities of the Quest Portfolio
will be prepared by the Treasurer of the Quest Portfolio, as of the
Valuation Date (as defined in Section 2.1 below), which Statement shall
be prepared in conformity with generally accepted accounting principles
consistently applied from the prior audited period. On the Closing
Date, the Oppenheimer Fund shall assume such stated liabilities,
expenses, costs, charges and reserves set forth on such Statement as
shall be agreed to by the Oppenheimer Fund.
1.4 In order for the Quest Portfolio to comply with Section
852(a)(1) of the Code and to avoid having any investment company
taxable income or net capital gain (as defined in Section 852(b)(2) and
1222(11) of the Code, respectively) in the short taxable year ending
with its dissolution, the Quest Portfolio will on or before the
Valuation Date (a) declare a dividend in an amount large enough so that
it will have declared dividends of all of its investment company
taxable income and net capital gain, if any, for such taxable year
(determined without regard to any deduction for dividends paid) and (b)
distribute such dividend.
1.5 Contemporaneously with the Closing, the Quest Portfolio will be
liquidated (except for the Cash Reserve) and the Quest Portfolio will
distribute or cause to be distributed the Oppenheimer Fund shares of
each class received by the Quest Portfolio pursuant to paragraph 1.1
pro rata to the appropriate shareholders of record of each class
determined as of the close of business on the Valuation Date as defined
in paragraph 2.1. Upon such liquidation all issued and outstanding
shares of the Quest Portfolio will be cancelled on the Quest
Portfolio's books and the Quest Portfolio Shareholders will have no
further rights as such Shareholders. The Oppenheimer Fund will not
issue certificates representing the shares of the Oppenheimer Fund in
connection with such exchange.
1.6 After the Closing, the Quest Portfolio shall not conduct any
business except in connection with the winding up of its affairs and
shall file, or make provision for filing of, all reports it is required
by law to file. After the Closing, Quest For Value may be dissolved
and deregistered as an investment company under the Investment Company
Act of 1940, as amended (the "1940 Act"). Within one year after the
Closing, the Quest Portfolio 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 the Oppenheimer
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 the Quest
Portfolio 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 the Quest Portfolio outstanding on the Valuation Date.
1.7 Copies of all books and records of or pertaining to the Quest
Portfolio, including those in connection with its obligations under the
1940 Act, the Code, State blue sky laws or otherwise in connection with
this Agreement, will promptly after the Closing be delivered to
officers of the Oppenheimer Fund or their designee. Quest For Value
and Quest Advisors shall have access to such books and records upon
reasonable request during normal business hours.
2. THE CALCULATION
2.1 The value of the Quest Portfolio Assets shall be the value of
such assets computed as of the close of business of the New York Stock
Exchange on the business day preceding the Closing Date (such time and
date being hereinafter called the "Valuation Date"), using the
valuation procedures set forth in the Oppenheimer Fund's then current
prospectus and statement of additional information.
2.2 The net asset value of each class of shares of the Oppenheimer
Fund shall be the net asset value per share computed on the Valuation
Date, using the valuation procedures set forth in the Oppenheimer
Fund's then current prospectus and statement of additional information.
2.3 The number of each class of Oppenheimer Fund shares (including
fractional shares, if any) to be issued hereunder shall be determined
by dividing the value of the Quest Portfolio Assets, net of the
liabilities assumed by the Oppenheimer Fund pursuant to paragraph 1.1
attributable to that class, determined in accordance with paragraph
2.1, by the net asset value of an Oppenheimer Fund share of a similar
class determined in accordance with paragraph 2.2.
2.4 All computations of value shall be made by Oppenheimer
Management Corporation in accordance with its regular practice in
pricing the Oppenheimer Fund. The Oppenheimer Fund shall cause
Oppenheimer Management Corporation to deliver to the Quest Portfolio a
copy of its valuation report at the Closing.
3. CLOSING AND CLOSING DATE
3.1 The Closing Date hereunder (the "Closing Date") shall be the
date of the closing of the acquisition contemplated by that certain
Acquisition Agreement (the "Acquisition Agreement") dated August 17,
1995 between Oppenheimer Management Corporation, Quest Advisors, Quest
for Value Distributors and Oppenheimer Capital (or such other day and
time as may be mutually agreed upon in writing). The Closing shall be
held in a location mutually agreeable to all the parties hereto. All
acts taking place at the Closing shall be deemed to take place
simultaneously as of 9:00 a.m. Eastern time on the Closing Date unless
otherwise agreed by the parties.
3.2 Portfolio securities held by the Quest Portfolio and
represented by a certificate or written instrument shall be presented
by it or on its behalf to Citibank, N.A. (the "Custodian"), custodian
for the Oppenheimer Fund, for examination no later than five business
days preceding the Valuation Date. Such portfolio securities
(together with any cash or other assets) shall be delivered by the
Quest Portfolio to the Custodian for the account of the Oppenheimer
Fund on or before the Closing Date in conformity with applicable
custody provisions under the 1940 Act and duly endorsed in proper form
for transfer in such condition as to constitute good delivery thereof
in accordance with the custom of brokers. The portfolio securities
shall be accompanied by all necessary federal and state stock transfer
stamps or a check for the appropriate purchase price of such stamps.
Portfolio securities and instruments deposited with a securities
depository, as defined in Rule 17f-4 under the 1940 Act, or with a
qualified foreign custodian under Rule 17f-5 of the 1940 Act shall be
delivered on or before the Closing Date by book entry in accordance
with customary practices of such depositories and the Custodian. The
cash delivered shall be in the form of a Federal Funds wire, payable to
the order of "Citibank, N.A., Custodian for Oppenheimer U.S. Government
Trust."
3.3 In the event that on the Valuation Date (a) the New York Stock
Exchange shall be closed to trading or trading thereon shall be
restricted or (b) trading or the reporting of trading on such Exchange
or elsewhere shall be disrupted so that, in the judgment of both the
Oppenheimer Fund and the Quest Portfolio, accurate appraisal of the
value of the net assets of the Oppenheimer Fund or the Quest Portfolio
Assets is impracticable, the Valuation Date shall be postponed until
the first business day after the day when trading shall have been fully
resumed without restriction or disruption and reporting shall have been
restored.
3.4 The Quest Portfolio shall deliver to the Oppenheimer Fund or
its designee (a) at the Closing a list, certified by its Secretary, of
the names, addresses and taxpayer identification numbers of the Quest
Portfolio Shareholders (as hereinafter defined) and the number of each
class of outstanding Quest Portfolio shares owned by each such
shareholder, all as of the Valuation Date (the "Quest Portfolio
Shareholders"), and (b) as soon as practicable after the Closing all
original documentation (including Internal Revenue Service forms,
certificates, certifications and correspondence) relating to the Quest
Portfolio Shareholders' taxpayer identification numbers and their
liability for or exemption from back-up withholding. The Oppenheimer
Fund shall issue and deliver to Quest Portfolio a confirmation
evidencing delivery of each class of Oppenheimer Fund shares to be
credited on the Closing Date to the Quest Portfolio or provide evidence
reasonably satisfactory to the Quest Portfolio that such Oppenheimer
Fund shares have been credited to Quest Portfolio's account on the
books of the Oppenheimer Fund. At the Closing each party shall deliver
to the other such bills of sale, assignments, assumption agreements,
receipts or other documents as such other party or its counsel may
reasonably request to effect the consummation of the transactions
contemplated by the Agreement.
4. COVENANTS OF THE OPPENHEIMER FUND AND THE QUEST PORTFOLIO
4.1 The Oppenheimer Fund will operate its business in the ordinary
course between the date hereof and the Closing Date, it being
understood that such ordinary course of business will include customary
dividends and other distributions and such changes that have been
approved by shareholders of the Oppenheimer Fund at a shareholders
meeting prior to the Closing of which Quest Portfolio has been advised.
4.2 The Oppenheimer Fund has prepared and filed with the Securities
and Exchange Commission ("Commission") a registration statement on Form
N-14 under the Securities Act of 1933, as amended ("1933 Act"), and
will prepare and file with the Commission any amendments thereto,
relating to the Oppenheimer Fund shares to be issued to the Quest
Portfolio Shareholders pursuant to the Reorganization ("Registration
Statement"). The Quest Portfolio will provide the Oppenheimer Fund
with the Proxy Materials as described in paragraph 4.3 below, for
inclusion in the Registration Statement. The Quest Portfolio will
further provide the Oppenheimer Fund with such other information and
documents relating to the Quest Portfolio as are reasonably necessary
for the preparation of the Registration Statement.
4.3 The Quest Portfolio will call a meeting of its shareholders to
consider and act upon the Reorganization, including this Agreement, and
take all other action necessary to obtain approval of the transactions
contemplated herein. The Quest Portfolio will prepare, with such
assistance from the Oppenheimer Fund as may be mutually agreed to, the
notice of meeting, form of proxy and proxy statement and prospectus
(collectively "Proxy Materials") to be used in connection with such
meeting provided that the Oppenheimer Fund will furnish the Quest
Portfolio with a current effective prospectus relating to the
Oppenheimer Fund shares for inclusion in the Proxy Materials and with
such other information relating to the Oppenheimer Fund as is
reasonably necessary for the preparation of the Proxy Materials.
4.4 Prior to the Closing Date, the Quest Portfolio will assist the
Oppenheimer Fund in obtaining such information as the Oppenheimer Fund
reasonably requests concerning the beneficial ownership of the shares
of the Quest Portfolio.
4.5 Subject to the provisions of this Agreement, the Oppenheimer
Fund and the Quest Portfolio will each take, or cause to be taken, all
action, and do or cause to be done, all things reasonably necessary,
proper or advisable to consummate and make effective the transactions
contemplated by this Agreement.
4.6 As promptly as practicable, but in any case within 60 days
after the Closing Date, the Quest Portfolio shall furnish or cause to
be furnished to the Oppenheimer Fund, such information as the
Oppenheimer Fund reasonably requests to enable the Oppenheimer Fund to
determine the Quest Portfolio's earnings and profits for federal income
tax purposes that will be carried over to the Oppenheimer Fund pursuant
to Section 381 of the Code.
4.7 As soon after the Closing Date as is reasonably practicable,
Quest for Value shall prepare and file all federal and other tax
returns and reports of the Quest Portfolio required by law to be filed
with respect to all periods ending through and after the Closing Date
but not theretofore filed.
4.8 The Oppenheimer Fund agrees to use all reasonable efforts to
obtain the approvals and authorizations required by the 1933 Act, the
1940 Act and such of the state Blue Sky and securities laws as it may
deem appropriate in order to continue its operations after the Closing
Date.
4.9 Until the third anniversary of the Closing Date, the
Oppenheimer Fund will use its best efforts to assure that at least 75%
of the Trustees of the Oppenheimer Fund will not be "interested
persons" of the investment adviser for the Oppenheimer Fund or Quest
Advisors, as the term "interested person" is defined by the 1940 Act.
5. REPRESENTATIONS AND WARRANTIES
5.1 Oppenheimer Fund represents and warrants to the Quest Portfolio
as follows:
(a) The Oppenheimer Fund is an unincorporated voluntary
association validly existing and in good standing under the laws of the
Commonwealth of Massachusetts, and has the power and authority to own
its properties and to carry on its business as it is now conducted;
(b) Oppenheimer Fund is a duly registered, open-end, management
investment company, and its registration with the Commission as an
investment company under the 1940 Act and the registration of its
shares under the 1933 Act are in full force and effect;
(c) All of the issued and outstanding shares of each class of the
Oppenheimer Fund have been offered and sold in compliance in all
material respects with applicable registration requirements of the 1933
Act and state securities laws. Shares of each class of the Oppenheimer
Fund are registered in all jurisdictions in which they are required to
be registered under state securities laws and other laws, and said
registrations, including any periodic reports or supplemental filings,
are complete and current, all fees required to be paid have been paid,
and the Oppenheimer Fund is not subject to any stop order and is fully
qualified to sell its shares in each state in which its shares have
been registered;
(d) The current prospectus and statement of additional information
of the Oppenheimer Fund conform in all material respects to the
applicable requirements of the 1933 Act and the 1940 Act and the
regulations thereunder and do not include any untrue statement of a
material fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading;
(e) At the Closing Date, the Oppenheimer Fund will have title to
the Oppenheimer Fund's assets, subject to no liens, security interests
or other encumbrances except those incurred in the ordinary course of
business.
(f) The Oppenheimer Fund is not, and the execution, delivery and
performance of this Agreement will not result, in a material violation
of any provision of the Oppenheimer Fund's Declaration of Trust or By-
Laws or of any material agreement, indenture, instrument, contract,
lease or other undertakings to which the Oppenheimer Fund is a party or
by which it is bound;
(g) No material litigation or administrative proceeding or
investigation of or before any court or governmental body is presently
pending or, to its knowledge, threatened against the Oppenheimer Fund
or any of its properties or assets, except as previously disclosed in
writing to the Quest Portfolio. The Oppenheimer Fund knows of no facts
that might form the basis for the institution of such proceedings and
is not a party to or subject to the provisions of any order, decree or
judgment of any court or governmental body which materially and
adversely affects, or is reasonably likely to materially and adversely
affect, its business or its ability to consummate the transactions
contemplated herein;
(h) The Statement of Assets and Liabilities, Statement of
Operations and Statement of Changes in Net Assets as of June 30, 1995
(audited) of the Oppenheimer Fund examined by KPMG Peat Marwick LLP (a
copy of which has been furnished to the Quest Portfolio), fairly
present, in all material respects, the financial condition of the
Oppenheimer Fund as of such date in conformity with generally accepted
accounting principles consistently applied, and as of such date there
were no known liabilities of the Oppenheimer Fund (contingent or
otherwise) not disclosed therein that would be required in conformity
with generally accepted accounting principles to be disclosed therein;
(i) All issued and outstanding Oppenheimer Fund shares of each
class are, and at the Closing Date will be, duly and validly issued and
outstanding, fully paid and non-assessable with no personal liability
attaching to the ownership thereof except as otherwise set forth in the
current statement of additional information for the Oppenheimer Fund
under "How the Fund is Managed - Organization and History;"
(j) Oppenheimer Fund has the power to enter into this Agreement and
carry out its obligations hereunder. The execution, delivery and
performance of this Agreement have been duly authorized by all
necessary corporate action on the part of Oppenheimer Fund, and this
Agreement constitutes a valid and binding obligation of the Oppenheimer
Fund enforceable in accordance with its terms, subject as to
enforcement, to bankruptcy, insolvency, reorganization, moratorium and
other laws relating to or affecting creditors rights and to general
equity principles;
(k) The Oppenheimer Fund shares of each class to be issued and
delivered to the Quest Portfolio, for the account of the Quest
Portfolio Shareholders, pursuant to the terms of this Agreement will at
the Closing Date have been duly authorized and, when so issued and
delivered, will be duly and validly issued Oppenheimer Fund shares, and
will be fully paid and non-assessable with no personal liability
attaching to the ownership thereof except as otherwise set forth in the
current statement of additional information for the Oppenheimer Fund
under "How the Fund is Managed - Organization and History," and no
shareholder of Oppenheimer Fund will have any preemptive right or right
of subscription or purchase in respect thereof;
(l) Since June 30, 1995, there has not been (i) any material
adverse change in the Oppenheimer Fund's financial condition, assets,
liabilities or business other than changes occurring in the ordinary
course of business, or that have been approved by shareholders of the
Oppenheimer Fund or (ii) any incurrence by the Oppenheimer Fund of any
indebtedness except indebtedness incurred in the ordinary course of
business. For the purposes of this subparagraph, neither a decline in
net asset value per share of any class of the Oppenheimer Fund nor the
redemption of Oppenheimer Fund shares by Oppenheimer Fund shareholders,
shall constitute a material adverse change;
(m) All material Federal and other tax returns and reports of the
Oppenheimer Fund required by law to have been filed, have been filed,
and all Federal and other taxes shown as due or required to be shown as
due on said returns and reports have been paid or provision has been
made for the payment thereof, and to the best of the Oppenheimer Fund's
knowledge no such return is currently under audit and no assessment has
been asserted with respect to such returns;
(n) For each taxable year of its operation, the Oppenheimer Fund
has met the requirements of Subchapter M of the Code for qualification
and treatment as a regulated investment company and neither the
execution or delivery of nor the performance of its obligations under
this Agreement will adversely affect, and no other events are
reasonably likely to occur which will adversely affect the ability of
the Oppenheimer Fund to continue to meet the requirements of Subchapter
M of the Code;
(o) Since June 30, 1995, there has been no change by the
Oppenheimer Fund in accounting methods, principles, or practices,
including those required by generally accepted accounting principles,
except as disclosed in writing to the Quest Portfolio or as set forth
in the financial statements of the Oppenheimer Fund covering such
period;
(p) The information furnished or to be furnished by the Oppenheimer
Fund for use in registration statements, proxy materials and other
documents which may be necessary in connection with the transactions
contemplated hereby shall be accurate and complete in all material
respects and shall comply in all material respects with Federal
securities and other laws and regulations applicable thereto; and
(q) The Proxy Statement and Prospectus to be included in the
Registration Statement (only insofar as it relates to the Oppenheimer
Fund) will, on the effective date of the Registration Statement and on
the Closing Date, 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, in light of the circumstances
under which such statements were made, not materially misleading.
5.2 Quest for Value, on behalf of the Quest Portfolio, represents
and warrants to the Oppenheimer Fund as follows:
(a) The Quest Portfolio is a series of Quest For Value, an
unincorporated voluntary association validly existing and in good
standing under the laws of the Commonwealth of Massachusetts;
(b) Quest For Value is a duly registered, open-end, management
investment company, its registration with the Commission as an
investment company under the 1940 Act is in full force and effect and
its current Prospectus and Statement of Additional Information conform
in all material respects to the requirements of the 1933 Act and the
1940 Act and the regulations thereunder and do not include any untrue
statement of a material fact or omit to state any material fact
required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading;
(c) All of the issued and outstanding shares of each class of the
Quest Portfolio have been offered and sold in compliance in all
material respects with applicable registration requirements of the 1933
Act and state securities laws. Shares of each class of the Quest
Portfolio are registered in all jurisdictions in which they are
required to be registered under state securities laws and other laws,
and said registrations, including any periodic reports or supplemental
filings, are complete and current, all fees required to be paid have
been paid, and the Quest Portfolio is not subject to any stop order and
is fully qualified to sell its shares in each state in which its shares
have been registered;
(d) The Quest Portfolio is not, and the execution, delivery and
performance of this Agreement will not result, in a violation of (i)
any provision of Quest For Value's Declaration of Trust or By-Laws or
(ii) of any agreement, indenture, instrument, contract, lease or other
undertaking to which the Quest Portfolio is a party or by which it is
bound (other than any violations that individually or in the aggregate
would not have a material adverse effect on the Quest Portfolio);
(e) The Quest Portfolio has no material contracts or other
commitments (other than this Agreement) that will be terminated with
liability to it prior to or as of the Closing Date;
(f) Except as otherwise disclosed in writing to and acknowledged by
the Oppenheimer Fund prior to the date of this Agreement, no
litigation, administrative proceeding, investigation, examination or
inquiry of or before any court or governmental body is presently
pending, or to its knowledge, threatened relating to the Quest
Portfolio or any of its properties or assets which, if adversely
determined, would materially and adversely affect its financial
condition or the conduct of its business. The Quest Portfolio knows of
no facts that might form the basis for the institution of such
proceedings and is not a party to or subject to the provisions of any
order, decree or judgment of any court or governmental body that
materially and adversely affects, or is likely to materially and
adversely affect, its business or its ability to consummate the
transactions herein contemplated;
(g) The Statements of Assets and Liabilities, Statements of
Operations and Statements of Changes in Net Assets of the Quest
Portfolio as of October 31, 1994 (audited), examined by Price
Waterhouse LLP, and April 30, 1995 (unaudited) (copies of each of which
have been furnished to the Oppenheimer Fund) fairly present, in all
material respects, the Quest Portfolio's financial condition as of such
dates, its results of operations for such periods and changes in its
net assets for such periods in conformity with generally accepted
accounting principles consistently applied, and as of such dates there
were no known liabilities of the Quest Portfolio (contingent or
otherwise) not disclosed therein that would be required in conformity
with generally accepted accounting principles to be disclosed therein.
All liabilities (contingent and otherwise) as of the Closing Date known
to the Quest Portfolio will be set forth on the unaudited Statement of
Assets and Liabilities referred to in paragraph 1.3.
(h) Since the date of the most recent audited financial statements,
there has not been any material adverse change in the Quest Portfolio's
financial condition, assets, liabilities or business, other than
changes occurring in the ordinary course of business, or any incurrence
by the Quest Portfolio of indebtedness maturing more than one year from
the date such indebtedness was incurred, except as otherwise disclosed
in writing to and acknowledged by the Oppenheimer Fund prior to the
date of this Agreement and prior to the Closing Date. All liabilities
of the Quest Portfolio (contingent and otherwise) are reflected in the
unaudited statement described in paragraph 1.3 above. For the purpose
of this subparagraph (h), neither a decline in the Quest Portfolio's
net asset value per share nor a decrease in the Quest Portfolio's size
due to redemptions by Quest Portfolio shareholders shall constitute a
material adverse change;
(i) All federal and other tax returns and reports of the Quest
Portfolio required by law to be filed shall have been filed, there are
no claims, levies, liabilities or amounts due for corporate, excise,
income or other federal, state or local taxes outstanding or threatened
against Quest Portfolio (other than those reflected on its most recent
financial statements) and to the best of Quest For Value's knowledge
there are no facts that might form the basis for such proceedings, no
such return is currently under audit and no assessment has been
asserted with respect to any such return and to the extent such tax
returns with respect to the taxable year of the Quest Portfolio ended
October 31, 1995 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;
(j) For each taxable year since its inception, the Quest Portfolio
has met all the requirements of Subchapter M of the Code for
qualification and treatment as a "regulated investment company" as
defined therein and will be in compliance with said requirements at and
as of the Closing Date;
(k) All issued and outstanding shares of each class of the Quest
Portfolio are, and at the Closing Date will be, duly and validly issued
and outstanding, fully paid and non-assessable with no personal
liability attaching to the ownership thereof. All such shares of each
class will, at the time of Closing, be held by the persons and in the
amounts set forth in the list of shareholders submitted to the
Oppenheimer Fund pursuant to paragraph 3.4. The Quest Portfolio does
not have outstanding any options, warrants or other rights to subscribe
for or purchase any of its shares of any class, nor is there
outstanding any security convertible into any of its shares of any
class except for class B shares of the Quest Portfolio which convert
into class A shares of the Quest Portfolio as described in the current
prospectus of the Quest Portfolio.
(l) At the Closing Date, the Quest Portfolio will have good and
valid title to the Quest Portfolio Assets, subject to no liens,
security interests or other encumbrances, and full right, power and
authority to assign, deliver and otherwise transfer the Quest Portfolio
Assets hereunder, and upon delivery and payment for the Quest Portfolio
Assets, the Oppenheimer Fund will acquire title thereto, subject to no
restrictions on the full transfer thereof, including such restrictions
as might arise under the 1933 Act;
(m) Quest For Value has the power to enter into this Agreement and
carry out its obligations hereunder. The execution, delivery and
performance of this Agreement will have been duly authorized prior to
the Closing Date by all necessary action on the part of Quest For
Value, and subject to the approval of Quest Portfolio's shareholders,
this Agreement constitutes a valid and binding obligation of Quest For
Value, enforceable in accordance with its terms, subject as to
enforcement, to bankruptcy, insolvency, reorganization, moratorium and
other laws relating to or affecting creditors rights and to general
equity principles. No other consents, authorizations or approvals are
necessary in connection with the performance of this Agreement.
(n) On the effective date of the Registration Statement, at the
time of the meeting of Quest Portfolio's shareholders and on the
Closing Date, the Proxy Materials (exclusive of the currently effective
Oppenheimer Fund prospectus and statement of additional information
incorporated therein) will (i) comply in all material respects with the
provisions of the 1933 Act, the Securities Exchange Act of 1934 ("1934
Act") and the 1940 Act and the regulations thereunder and (ii) 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
statement therein, in light of the circumstances under which such
statements were made, not misleading. Any other information furnished
or to be furnished by Quest Portfolio for use in the Registration
Statement or in any other manner that may be necessary in connection
with the transactions contemplated hereby shall be accurate and
complete and shall comply in all material respects with applicable
federal securities and other laws and all regulations thereunder;
(o) Quest Portfolio will, on or prior to the Closing Date, declare
one or more dividends or other distributions to shareholders that,
together with all previous dividends and other distributions to
shareholders, shall have the effect of distributing to the shareholders
all of its investment company taxable income and net capital gain, if
any, through the Closing Date (computed without regard to any deduction
for dividends paid);
(p) Quest Portfolio has maintained or has caused to be maintained
on its behalf all books and accounts as required of a registered
investment company in compliance with the requirements of Section 31 of
the 1940 Act and the Rules thereunder;
(q) Quest Portfolio is not acquiring Oppenheimer Fund shares to be
issued hereunder for the purpose of making any distribution thereof
other than in accordance with the terms of this Agreement;
(r) As of the Closing Date no violation of applicable federal,
state and local statute, law or regulation, exists that individually,
or in the aggregate, would have a material adverse effect on the
business or operations of Quest Portfolio;
(s) As of the Closing Date the Quest Portfolio is in compliance
with its investment objective(s), policies and restrictions as
described in its current prospectus and statement of additional
information;
(t) There are no unresolved or outstanding shareholder claims or
complaints related to Quest Portfolio and there will be no such claims
or complaints as of the Closing Date other than as disclosed by Quest
Advisors in writing to Oppenheimer Fund prior to the Closing Date;
(u) Except as previously disclosed to Oppenheimer Fund in writing,
and except as have been fully corrected, there have been no
miscalculations of the net asset value of Quest Portfolio during the
twelve-month period preceding the Closing Date and all such
calculations have been done in accordance with the provisions of Rule
2a-4 under the 1940 Act.
5.3 Quest Advisors represents and warrants to the Oppenheimer Fund
as follows:
(a) To the best knowledge of Quest Advisors after due inquiry, as
of the Closing Date no violation of applicable federal, state and local
statute, law or regulation, exists that individually, or in the
aggregate, would have a material adverse effect on the business or
operations of Quest Portfolio.
(b) To the best knowledge of Quest Advisors after due inquiry,
assuming fulfillment of the conditions precedent to the consummation of
the Reorganization, Quest Portfolio has the right, power, legal
capacity and authority to enter into the Reorganization contemplated by
this Agreement.
(c) To the best knowledge of Quest Advisors after due inquiry, as
of the Closing Date Quest Portfolio is in compliance with its
investment objective(s), policies and restrictions as described in its
current prospectus and statement of additional information.
(d) To the best knowledge of Quest Advisors after due inquiry, as
of the Closing Date there are no outstanding breaches by Quest
Portfolio of any agreement, indenture, instrument, contract, lease or
other undertaking to which it is a party, or by which it is bound
(other than any breaches that individually or in the aggregate would
not have a material adverse effect on the Quest Portfolio).
(e) To the best knowledge of Quest Advisors upon due inquiry, there
are no unresolved or outstanding shareholder claims or inquiries
related to Quest Portfolio and there will be no such claims or
inquiries as of the Closing Date other than as disclosed by Quest
Advisors in writing to Oppenheimer Fund prior to the Closing Date.
(f) Quest Advisors is not aware of any threatened or pending
litigation, administrative proceeding, investigation, examination or
inquiry of or before any court or governmental body relating to the
Quest Portfolio or any of its properties or assets which, if adversely
determined, would materially and adversely affect the Quest Portfolio's
business or its ability to consummate the transactions herein
contemplated.
(g) Quest Advisors is not aware of any outstanding or threatened
private claims or litigation relating to Quest Portfolio. Quest
Advisors knows of no facts that might form the basis for such
proceedings.
(h) Except as previously disclosed to Oppenheimer Fund in writing,
and except as have been fully corrected, there have been no
miscalculations of the net asset value of Quest Portfolio during the
twelve-month period preceding the Closing Date and all such
calculations have been done in accordance with the provisions of Rule
2a-4 under the 1940 Act.
(i) There are no claims, levies or liabilities for corporate,
excise, income or other federal, state or local taxes outstanding or
threatened against Quest Portfolio, other than those reflected in its
most recent audited financial statements. Quest Advisors knows of no
facts that might form the basis for such proceedings.
(j) To the best knowledge of Quest Advisors after due inquiry,
there have been no material adverse changes in Quest Portfolio's
financial condition, assets, liabilities or business, other than those
reflected in its most recent audited financial statements and all
liabilities of Quest Portfolio (contingent and otherwise) known to
Quest Advisors have been reported in writing to the Oppenheimer Fund
prior to the date of this Agreement and prior to the Closing Date. A
reduction in net assets due to shareowner redemptions will not be
deemed to be a material adverse change.
6. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE QUEST PORTFOLIO
The obligations of Quest Portfolio to consummate the transactions
provided for herein shall be subject, at its election, to the
performance by Oppenheimer Fund of all the obligations to be performed
by it hereunder on or before the Closing Date and, in addition thereto,
the following conditions:
6.1 All representations and warranties of Oppenheimer Fund
contained in this Agreement shall be true and correct in all material
respects as of the date hereof and, except as they may be affected by
the transactions contemplated by this Agreement, as of the Closing Date
with the same force and effect as if made on and as of the Closing
Date.
6.2 Oppenheimer Fund shall have delivered to Quest Portfolio a
certificate executed in Oppenheimer Fund's name by Oppenheimer Fund's
President, Vice President or Secretary and, Treasurer or Assistant
Treasurer, in a form reasonably satisfactory to Quest Portfolio and
dated as of the Closing Date, to the effect that the representations
and warranties of Oppenheimer Fund made in this Agreement are true and
correct at and as of the Closing Date, except as they may be affected
by the transactions contemplated by this Agreement, and as to such
other matters as Quest Portfolio shall reasonably request;
6.3 Quest Portfolio shall have received a favorable opinion from
Gordon Altman Butowsky Weitzen Shalov & Wein, counsel to the
Oppenheimer Fund, dated as of the Closing Date, in a form reasonably
satisfactory to Gordon Altman Butowsky Weitzen Shalov & Wein, counsel
to Quest Portfolio, covering the following points:
That (a) Oppenheimer Fund is an unincorporated voluntary association
duly organized, validly existing and in good standing under the laws
of the Commonwealth of Massachusetts, and has the power to own all
of its properties and assets and to carry on its business as
presently conducted (Massachusetts counsel may be relied upon in
delivering such opinion); (b) Oppenheimer Fund is a duly registered,
open-end, management investment company and, to the knowledge of
such counsel, its registration with the Commission as an investment
company under the 1940 Act is in full force and effect; (c) this
Agreement has been duly authorized, executed and delivered by the
Oppenheimer Fund, and assuming due authorization, execution and
delivery of this Agreement by Quest Portfolio, is a valid and
binding obligation of Oppenheimer Fund enforceable against
Oppenheimer Fund in accordance with its terms, subject as to
enforcement, to bankruptcy, insolvency, reorganization, moratorium
and other laws relating to or affecting creditors rights and to
general equity principles; (d) Oppenheimer Fund shares to be issued
to Quest Portfolio shareholders as provided by this Agreement are
duly authorized and upon delivery of such shares to Quest Portfolio
will be validly issued and outstanding and fully paid and non-
assessable (except as otherwise set forth in the current statement
of additional information for the Oppenheimer Fund under "How the
Fund is Managed - Organization and History") and no shareholder of
Oppenheimer Fund has any preemptive rights to subscription or
purchase in respect thereof (Massachusetts counsel may be relied
upon in delivering such opinion); (e) the execution and delivery of
this Agreement did not, and the consummation of the transactions
contemplated hereby will not, violate Oppenheimer Fund's Declaration
of Trust and By-Laws or any provision of any material agreement
(known to such counsel) to which Oppenheimer Fund is a party or by
which it is bound or, to the knowledge of such counsel, result in
the acceleration of any material obligation or the imposition of any
material penalty under any agreement, judgment or decree to which
Oppenheimer Fund is a party or by which it is bound; (f) to the
knowledge of such counsel, no consent, approval, authorization or
order of any court or governmental authority of the United States or
any state is required for the consummation by Oppenheimer Fund of
the transactions contemplated herein, except such as have been
obtained under the 1933 Act , the 1934 Act and the 1940 Act and such
as may be required under state securities laws; (g) only insofar as
they relate to Oppenheimer Fund, the descriptions in the Proxy
Materials of statutes, legal and governmental proceedings and
contracts and other documents, if any, are accurate in all material
respects and fairly present the information required to be shown;
(h) such counsel does not know of any legal or governmental
proceedings, only insofar as they relate to Oppenheimer Fund,
existing on or before the date of mailing of the Proxy Materials or
the Closing Date that are required to be described in the
Registration Statement or in any documents that are required to be
filed as exhibits to the Registration Statement that are not
described as required; and (i) to the best knowledge of such
counsel, no material litigation or administrative proceedings or
investigation of or before any court or governmental body is
presently pending or overtly threatened as to Oppenheimer Fund or
any of its properties or assets and Oppenheimer Fund is not a party
to or subject to the provisions of any order, decree or judgment of
any court or governmental body that materially and adversely affects
its business, other than as previously disclosed in the Registration
Statement.
6.4 All actions taken by Oppenheimer Fund in connection with the
transactions contemplated by this Agreement and all documents
incidental thereto shall be satisfactory in form and substance to Quest
Portfolio and its counsel, Gordon Altman Butowsky Weitzen Shalov &
Wein.
6.5 As of the Closing Date, there shall be no material change in
the investment objective, policies and restrictions nor any increase in
the investment management fees, fees payable pursuant to Oppenheimer
Fund's 12b-1 plans of distribution or sales loads of Oppenheimer Fund
from those described in the Prospectus and Statement of Additional
Information of Oppenheimer Fund dated May 30, 1995 as supplemented July
14, 1995, except as may have been approved by shareholders of the
Oppenheimer Fund.
6.6 The Cash Reserve shall not exceed 10% of the value of the net
assets, nor 30% in value of the gross assets, of the Quest Portfolio at
the close of business on the Valuation Date.
7. CONDITIONS PRECEDENT TO OBLIGATIONS OF OPPENHEIMER FUND
The obligations of Oppenheimer Fund to complete the transactions
provided for herein shall be subject, at its election, to the
performance by Quest Portfolio of all the obligations to be performed
by it hereunder on or before the Closing Date and, in addition thereto,
the following conditions:
7.1 All representations and warranties of Quest For Value, on
behalf of Quest Portfolio, and Quest Advisors contained in this
Agreement shall be true and correct in all material respects as of the
date hereof and, except as they may be affected by the transactions
contemplated by this Agreement, as of the Closing Date with the same
force and effect as if made on and as of the Closing Date;
7.2 Quest Portfolio shall have delivered to Oppenheimer Fund a
statement of Quest Portfolio Assets and its liabilities, together with
a list of Quest Portfolio's securities and other assets showing the
respective adjusted bases and holding periods thereof for income tax
purposes, as of the Closing Date, certified by the Treasurer of Quest
Portfolio;
7.3 Quest Portfolio shall have delivered to Oppenheimer Fund at the
Closing a certificate executed in Quest For Value's name by the
President, Vice President or Secretary and the Treasurer or Assistant
Treasurer of Quest For Value, in form and substance satisfactory to
Oppenheimer Fund and dated as of the Closing Date, to the effect that
the representations and warranties of Quest for Value, on behalf of
Quest Portfolio, made in this Agreement are true and correct at and as
of the Closing Date, except as they may be affected by the transactions
contemplated by this Agreement, and as to such other matters as
Oppenheimer Fund shall reasonably request. Such a certificate shall
also be delivered to Oppenheimer Fund as executed by Quest Advisors
with respect to its representations and warranties made in paragraph
5.3.
7.4 Oppenheimer Fund shall have received at the Closing a favorable
opinion dated as of the Closing Date of Gordon Altman Butowsky Weitzen
Shalov & Wein, counsel to Quest For Value, in a form satisfactory to
Gordon Altman Butowsky Weitzen Shalov & Wein, counsel to Oppenheimer
Fund covering the following points:
That (a) Quest Portfolio is a series of Quest For Value, an
unincorporated voluntary association duly organized, validly
existing and in good standing under the laws of the Commonwealth of
Massachusetts and has the power to own all of its properties and
assets and to carry on its business as presently conducted
(Massachusetts counsel may be relied upon in delivering such
opinion); (b) Quest For Value is registered as an investment company
under the 1940 Act, and, to the knowledge of such counsel, its
registration with the Commission as an investment company under the
1940 Act is in full force and effect; (c) this Agreement has been
duly authorized, executed and delivered by Quest For Value on behalf
of Quest Portfolio and, assuming due authorization, execution and
delivery of this Agreement by Oppenheimer Fund, is a valid and
binding obligation of Quest For Value enforceable against Quest For
Value in accordance with its terms, subject as to enforcement, to
bankruptcy, insolvency, reorganization, moratorium and other laws
relating to or affecting creditors rights and to general equity
principles; (d) the execution and delivery of this Agreement did
not, and the consummation of the transactions contemplated hereby
will not, violate Quest For Value's Declaration of Trust or By-Laws
or any provision of any material agreement (known to such counsel)
to which Quest For Value is a party or by which it is bound or, to
the knowledge of such counsel, result in the acceleration of any
material obligation or the imposition of any material penalty under
any agreement, judgment or decree to which Quest For Value is a
party or by which it is bound; (e) to the knowledge of such counsel,
no consent, approval, authorization or order of any court or
governmental authority of the United States or any state is required
for the consummation by Quest For Value of the transactions
contemplated herein, except such as have been obtained under the
1933 Act, the 1934 Act and the 1940 Act and such as may be required
under state securities laws; (f) only insofar as they relate to
Quest For Value, the descriptions in the Proxy Materials of
statutes, legal and governmental proceedings and contracts and other
documents, if any, are accurate in all material respects and fairly
present the information required to be shown; (g) such counsel does
not know of any legal or governmental proceedings, only insofar as
they relate to Quest For Value, existing on or before the date of
mailing the Proxy Materials or the Closing Date that are required to
be described in the Registration Statement or in any documents that
are required to be filed as exhibits to the Registration Statement
that are not described as required; and (h) to the best knowledge of
such counsel, no material litigation or administrative proceedings
or investigation of or before any court or governmental body is
presently pending or overtly threatened as to Quest For Value or any
of its properties or assets and Quest Portfolio is not a party to or
subject to the provisions of any order, decree or judgment of any
court or governmental body that materially and adversely affects its
business, other than as previously disclosed in the Registration
Statement.
7.5 Between the date hereof and the Closing Date, Quest For Value
shall provide Oppenheimer Fund and its representatives reasonable
access during regular business hours and upon reasonable notice to the
books and records of or relating to Quest Portfolio, including without
limitation the books and records of Quest For Value, as Oppenheimer
Fund may reasonably request. All such information obtained by
Oppenheimer Fund and its representatives shall be held in confidence
and may not be used for any purpose other than in connection with the
transaction contemplated hereby. In the event that the transaction
contemplated by this Agreement is not consummated, Oppenheimer Fund
and its representatives will promptly return to Quest For Value all
documents and copies thereof with respect to Quest Portfolio obtained
from Quest For Value during the course of such investigation.
7.6 Quest For Value, on behalf of Quest Portfolio shall have
delivered to Oppenheimer Fund, pursuant to paragraph 5.2(g), copies of
the most recent financial statements of Quest Portfolio certified by
Price Waterhouse LLP.
7.7 On the Closing Date, the Quest Portfolio Assets shall include
no assets that Oppenheimer Fund, by reason of charter limitations or
otherwise, may not properly acquire.
7.8 All actions taken by Quest For Value and Quest Portfolio in
connection with the transactions contemplated by the Agreement and all
documents incidental thereto shall be reasonably satisfactory in form
and substance to Oppenheimer Fund and its counsel, Gordon Altman
Butowsky Weitzen Shalov & Wein.
7.9 The stated liabilities, expenses, costs, charges and reserves
reflected on the unaudited Statement of Assets and Liabilities of the
Quest Portfolio referred to in paragraph 1.3 shall have been agreed to
by the Oppenheimer Fund.
7.10 The filing of the Registration Statement shall have been
approved by the Board of Trustees of the Oppenheimer Fund.
7.11 The Cash Reserve shall not exceed 10% of the value of the net
assets, nor 30% in value of the gross assets, of the Quest Portfolio at
the close of business on the Valuation Date.
8. FURTHER CONDITIONS PRECEDENT TO OBLIGATIONS OF OPPENHEIMER FUND AND
QUEST PORTFOLIO
The obligations of Quest Portfolio and Oppenheimer Fund hereunder
are each subject to the further conditions that on or before the
Closing Date:
8.1 This Agreement and the transactions contemplated herein shall
have been approved by the requisite vote of the holders of the
outstanding shares of Quest Portfolio and certified copies of the
resolutions evidencing such approval shall have been delivered to
Oppenheimer Fund;
8.2 On the Closing Date, no action, suit or other proceeding shall
be pending before any court or governmental agency in which it is
sought to restrain or prohibit, or obtain damages or other relief in
connection with, this Agreement or the transactions contemplated
herein;
8.3 All consents of other parties and all other consents, orders
and permits of federal, state and local regulatory authorities
(including those of the Commission and of state Blue Sky and securities
authorities, including "no-action" positions or any exemptive orders
from such federal and state authorities) deemed necessary by
Oppenheimer Fund or Quest For Value on behalf of Quest Portfolio to
permit consummation, in all material respects, of the transactions
contemplated herein shall have been obtained, except where failure to
obtain any such consent, order or permit would not involve risk of a
material adverse effect on the assets or properties of Oppenheimer Fund
or Quest Portfolio.
8.4 The Registration Statement on Form N-14 shall have become
effective under the 1933 Act, no stop orders suspending the
effectiveness thereof shall have been issued and, to the best knowledge
of the parties hereto, no investigation or proceeding for that purpose
shall have been instituted or be pending, threatened or contemplated
under the 1933 Act;
8.5 Quest Portfolio shall have declared and paid a dividend or
dividends and/or other distributions that, together with all previous
such dividends or distributions, shall have the effect of distributing
to the Quest Portfolio Shareholders all of Quest Portfolio's investment
company taxable income (computed without regard to any deduction for
dividends paid) and all of its net capital gain (after reduction for
any capital loss carry-forward and computed without regard to any
deduction for dividends paid) for all taxable years ending on or before
the Closing Date; and
8.6 The parties shall have received a favorable opinion from Price
Waterhouse LLP (based on such representations as such firm shall
reasonably request), addressed to Oppenheimer Fund and Quest Portfolio,
which opinion may be relied upon by the shareholders of Oppenheimer
Fund and Quest Portfolio, substantially to the effect that, for federal
income tax purposes:
(a) The transfer of substantially all of Quest Portfolio's assets in
exchange for Oppenheimer Fund shares and the assumption by
Oppenheimer Fund of certain identified liabilities of Quest
Portfolio followed by the distribution by Quest Portfolio of
Oppenheimer Fund shares to the Quest Portfolio Shareholders in
exchange for their Quest Portfolio shares will constitute a
"reorganization" within the meaning of Section 368(a)(1) of the Code
and Quest Portfolio and Oppenheimer Fund will each be a "party to
the reorganization" within the meaning of Section 368(b) of the
Code;
(b) Pursuant to Section 1032 of the Code, no gain or loss will be
recognized by Oppenheimer Fund upon the receipt of the assets of
Quest Portfolio solely in exchange for Oppenheimer Fund shares and
the assumption by Oppenheimer Fund of the identified liabilities of
Quest Portfolio;
(c) Pursuant to Section 361(a) of the Code, no gain or loss will be
recognized by Quest Portfolio upon the transfer of the assets of
Quest Portfolio to Oppenheimer Fund in exchange for Oppenheimer Fund
shares and the assumption by Oppenheimer Fund of the identified
liabilities of Quest Portfolio, or upon the distribution of
Oppenheimer Fund shares to the Quest Portfolio Shareholders in
exchange for the Quest Portfolio shares;
(d) Pursuant to Section 354(a) of the Code, no gain or loss will be
recognized by the Quest Portfolio Shareholders upon the exchange of
the Quest Portfolio shares for the Oppenheimer Fund shares;
(e) Pursuant to Section 358 of the Code, the aggregate tax basis for
Oppenheimer Fund shares received by each Quest Portfolio Shareholder
pursuant to the Reorganization will be the same as the aggregate tax
basis of the Quest Portfolio shares held by each such Quest
Portfolio Shareholder immediately prior to the Reorganization;
(f) Pursuant to Section 1223 of the Code, the holding period of
Oppenheimer Fund shares to be received by each Quest Portfolio
Shareholder will include the period during which the Quest Portfolio
shares surrendered in exchange therefor were held (provided such
Quest Portfolio shares were held as capital assets on the date of
the Reorganization);
(g) Pursuant to Section 362(b) of the Code, the tax basis of the
assets of Quest Portfolio acquired by Oppenheimer Fund will be the
same as the tax basis of such assets to Quest Portfolio immediately
prior to the Reorganization;
(h) Pursuant to Section 1223 of the Code, the holding period of the
assets of Quest Portfolio in the hands of Oppenheimer Fund will
include the period during which those assets were held by Quest
Portfolio; and
(i) Oppenheimer Fund will succeed to and take into account the items
of Quest Portfolio described in Section 381(c) of the Code,
including the earnings and profits, or deficit in earnings and
profits, of Quest Portfolio as of the date of the transaction.
Oppenheimer Fund will take those items into account subject to the
conditions and limitations specified in Sections 381, 382, 383 and
384 of the Code and applicable regulations thereunder.
Notwithstanding anything herein to the contrary, neither Oppenheimer
Fund nor Quest Portfolio may waive the material conditions set forth in
this paragraph 8.6 although the actual wording of such opinion may
differ to the extent agreed to by Oppenheimer Fund and Quest Portfolio.
9. BROKERAGE FEES AND EXPENSES
9.1 Oppenheimer Fund and Quest For Value on behalf of Quest
Portfolio each represents and warrants to the other that there are no
brokers or finders entitled to receive any payments in connection with
the transactions provided for herein.
9.2 (a) Oppenheimer Management Corporation shall bear the expenses
of Oppenheimer Fund incurred in connection with entering into and
carrying out the provisions of this Agreement, including legal,
accounting and Commission registration fees and Blue Sky expenses.
Quest Advisors (or a party other than Oppenheimer Fund) shall bear
Quest Portfolio's expenses incurred in connection with entering into
and carrying out the provisions of this Agreement, including legal and
accounting fees, and portfolio transfer taxes (if any) incurred in
connection with the consummation of the transactions contemplated
herein. Notwithstanding the foregoing, expenses incurred with respect
to the tax opinion referenced in paragraph 8.6 and expenses of the
proxy solicitation, including the cost of printing and mailing the
Proxy Materials, will be evenly apportioned between Quest Advisors and
Oppenheimer Management Corporation.
(b) In the event the transactions contemplated herein are not
consummated by reason of Quest Portfolio's being either unwilling or
unable to go forward (other than by reason of the nonfulfillment or
failure of any condition to Quest Portfolio's obligations specified in
this Agreement), Quest Advisors' (or a party other than Oppenheimer
Fund) only obligation hereunder shall be to reimburse Oppenheimer Fund
(or Oppenheimer Management Corporation) for all reasonable out-of-
pocket fees and expenses incurred by Oppenheimer Fund (or Oppenheimer
Management Corporation) in connection with those transactions,
including legal, accounting and filing fees.
(c) In the event the transactions contemplated herein are not
consummated by reason of Oppenheimer Fund's being either unwilling or
unable to go forward (other than by reason of the nonfulfillment or
failure of any condition to Oppenheimer Fund's obligations specified in
the Agreement), Oppenheimer Fund's only obligations hereunder shall be
to reimburse Quest Portfolio (or Quest Advisors) for all reasonable
out-of-pocket fees and expenses incurred by Quest Portfolio (or Quest
Advisors) in connection with those transactions, including legal,
accounting and filing fees, and to comply with the provisions of
paragraph 7.5 hereof.
10. ENTIRE AGREEMENT: SURVIVAL OF WARRANTIES
10.1 Oppenheimer Fund, Quest For Value, on behalf of Quest Portfolio
and Quest Advisors agree that no party has made any representation,
warranty or covenant not set forth herein and that this Agreement
constitutes the entire agreement between the parties.
10.2 The representations, warranties and covenants contained in
this Agreement or in any document delivered pursuant hereto or in
connection herewith shall survive the consummation of the transactions
contemplated herein.
11. TERMINATION
11.1 This Agreement may be terminated and the transactions
contemplated hereby may be abandoned at any time prior to the Closing:
(a) by the mutual written consent of Quest For Value, on behalf of
Quest Portfolio, and Oppenheimer Fund;
(b) by either Oppenheimer Fund or Quest For Value, on behalf of
Quest Portfolio, by notice to the other, without liability to the
terminating party on account of such termination (providing the
termination party is not otherwise in default or in breach of this
Agreement) if the Closing shall not have occurred on or before February
29, 1996; or
(c) by either Oppenheimer Fund or Quest For Value, on behalf of
Quest Portfolio, in writing without liability of the terminating party
on account of such termination (provided the terminating party is not
otherwise in material default or breach of the Agreement), if (i) the
other party shall fail to perform in any material respect its
agreements contained herein required to be performed on or prior to the
Closing Date, (ii) Quest Advisors, Quest For Value or the Quest
Portfolio, or the Oppenheimer Fund, respectively, materially breaches
or shall have breached any of its representations, warranties or
covenants contained herein, (iii) the Quest Portfolio Shareholders fail
to approve the Agreement, (iv) any other condition herein expressed to
be precedent to the obligations of the terminating party has not been
met and it reasonably appears that it will not or cannot be met or (v)
the acquisition contemplated by the Acquisition Agreement is not
consummated.
11.2 (a) Termination of this Agreement pursuant to paragraphs
11.1(a) or (b) shall terminate all obligations of the parties hereunder
(other than Oppenheimer Fund's obligations under paragraph 7.5) and
there shall be no liability for damages on the part of the Oppenheimer
Fund, Quest Portfolio or Quest Advisors or the trustees, directors or
officers of Oppenheimer Fund, Quest Portfolio or Quest Advisors, to any
other party or its trustees, directors or officers.
(b) Termination of this Agreement pursuant to paragraph 11.1(c)
shall terminate all obligations of the parties hereunder (other than
Oppenheimer Fund's obligations under paragraph 7.5) and there shall be
no liability for damages on the part of Oppenheimer Fund, Quest
Portfolio or Quest Advisors or the trustees, directors or officers of
Oppenheimer Fund, Quest Portfolio or Quest Advisors, to any other party
or its trustees, directors or officers, except that any party in breach
of this Agreement (or, as to a termination pursuant to paragraph
11.1(c)(v), in breach of the Acquisition Agreement) shall, upon demand,
reimburse the non-breaching party or parties for all reasonable out-of-
pocket fees and expenses incurred in connection with the transactions
contemplated by this Agreement, including legal, accounting and filing
fees. For the purposes of this paragraph 11.2(b), the non-fulfillment
of the condition set forth in paragraph 8.1 shall not be deemed a
breach entitling a party to reimbursement of expenses and fees.
12. AMENDMENTS
This Agreement may be amended, modified or supplemented in such
manner as may be mutually agreed upon in writing by the authorized
officers of Quest For Value, Oppenheimer Fund and Quest Advisors;
provided, however, that following the meeting of Quest Portfolio's
shareholders called by Quest Portfolio pursuant to paragraph 4.2, no
such amendment may have the effect of changing the provisions for
determining the number of Oppenheimer Fund Shares to be issued to the
Quest Portfolio Shareholders under this Agreement to the detriment of
such Shareholders without their further approval.
13. INDEMNIFICATION
13.1 Oppenheimer Management Corporation will indemnify and hold
harmless, Quest For Value, Quest Portfolio and Quest Advisors, and
their respective trustees, directors, officers and shareholders against
any and all claims to the extent such claims are based upon, arise out
of or relate to any untruthful or inaccurate representations made by
Oppenheimer Fund on behalf of Oppenheimer Fund in this Agreement or any
breach by Oppenheimer Fund of any warranty or any failure to perform or
comply with any of its obligations, covenants, conditions or agreements
set forth in this Agreement, including those set forth in paragraph
1.3.
13.2 Quest Advisors will indemnify and hold harmless Quest For
Value, Oppenheimer Fund, and their respective trustees, officers and
shareholders against any and all claims to the extent such claims are
based upon, arise out of or relate to any untruthful or inaccurate
representation made by Quest For Value on behalf of Quest Portfolio or
Quest Advisors in this Agreement or any breach by Quest Portfolio or
Quest Advisors of any warranty or any failure by Quest Portfolio to
perform or comply with any of its obligations, covenants, conditions or
agreements set forth in this Agreement.
13.3 As used in this section 13, the word "claim" means any and all
liabilities, obligations, losses, damages, deficiencies, demands,
claims, penalties, assessments, judgments, actions, proceedings and
suits of whatever kind and nature and all costs and expenses
(including, without limitation, reasonable attorneys' fees).
13.4 Promptly after the receipt by any party (the "Indemnified
Party"), of notice of any claim by a third party which may give rise to
indemnification hereunder, the Indemnified Party shall notify the party
against whom a claim for indemnification may be made hereunder (the
"Indemnifying Party"), in reasonable detail of the nature and amount of
the claim. The Indemnifying Party shall be entitled to assume, at its
sole cost and expense (unless it is subsequently determined that the
Indemnifying Party did not have the obligation to indemnify the
Indemnified Party under such circumstances), and shall have sole
control of the defense and settlement of such action or claim;
provided, however, that:
(a) the Indemnified Party shall be entitled to participate in the
defense of such claim and, in connection therewith, to employ counsel
at its own expense; and
(b) without the prior written consent of the Indemnified Party which
shall not be unreasonably withheld, the Indemnifying Party shall not
consent to the entry of any judgment or enter into any settlement that
requires any action other than the payment of money.
In the event the Indemnifying Party elects to assume control of the
defense of any such action in accordance with the foregoing provisions,
(i) the Indemnifying Party shall not be liable to Indemnified Party
for any legal fees, costs and expenses incurred by the Indemnified
Party in connection with the defense thereof arising after the date the
Indemnifying Party elects to assume control of such defense and (ii)
Indemnified Party shall fully cooperate with the Indemnifying Party in
such defense. If the Indemnifying Party does not assume control of
the defense of such claim in accordance with the foregoing provisions,
the Indemnified Party shall have the right to defend such claim, in
which case the Indemnifying Party shall pay all reasonable costs and
expenses of such defense plus interest on the cost of defense from the
date paid at a rate equal to the prime commercial rate of interest as
in effect from time to time at Citibank, N.A. The Indemnified Party
shall conduct such defense in good faith and shall have the right to
settle the matter with the prior written consent of the Indemnifying
Party which shall not be reasonably withheld.
14. NOTICES
Any notice, report, statement or demand required or permitted by any
provisions of this Agreement shall be in writing and shall be given by
prepaid telegraph, telecopy, certified mail or overnight express
courier addressed to Oppenheimer Fund at Two World Trade Center, 34th
Floor, New York, New York 10048-0203 Attention: Andrew J. Donohue with
a copy to Ronald Feiman, Esq. at Gordon Altman Butowsky Weitzen Shalov
& Wein, 114 West 47th Street, New York, New York 10036; to Quest For
Value at One World Financial Center, New York, New York 10281
Attention: Thomas Duggan, with a copy to Stuart Strauss, Esq. at Gordon
Altman Butowsky Weitzen Shalov & Wein, 114 West 47th Street, New York,
New York 10036.
15. HEADINGS; COUNTERPARTS; GOVERNING LAW; ASSIGNMENT; LIMITATION
OF LIABILITY
15.1 The article and paragraph headings contained in this Agreement
are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement.
15.2 This Agreement may be executed in any number of counterparts,
each of which shall be deemed an original.
15.3 This Agreement shall be governed by and construed in accordance
with the laws of the State of New York.
15.4 This Agreement shall bind and inure to the benefit of the
parties hereto and their respective successors and assigns, but no
assignment or transfer hereof or of any rights or obligations hereunder
shall be made by any party without the written consent of the other
parties. Except as provided in the following sentence, nothing herein
expressed or implied is intended or shall be construed to confer upon
or give any person, firm or corporation, other than the parties hereto
and their respective successors and assigns, any rights or remedies
under or by reason of this Agreement. A shareholder of Quest Portfolio
who becomes a shareholder of Oppenheimer Fund on the Closing Date and
continues to be a shareholder of Oppenheimer Fund, shall be entitled to
the benefits and may enforce the provisions of paragraph 4.9 hereof
except insofar as paragraph 4.9 relates to the election of trustees;
and the persons designated in paragraphs 13.1 and 13.2 hereof shall be
entitled to the benefits and may enforce the provisions of section 13
hereof.
15.5 The obligations and liabilities of Oppenheimer Fund hereunder
are solely those of Oppenheimer Fund. It is expressly agreed that
shareholders, trustees, nominees, officers, agents or employees of
Oppenheimer Fund shall not be personally liable hereunder. Quest For
Value and Quest Advisors acknowledge that each has notice of the
provisions of Oppenheimer Fund's Declaration of Trust disclaiming
shareholder and trustee liability for acts and obligations of the
Oppenheimer Fund. The execution and delivery of this Agreement have
been authorized by the trustees of Oppenheimer Fund and signed by the
officers of Oppenheimer Fund acting as such, and neither such
authorization by such trustees nor such execution and delivery by such
officers shall be deemed to have been made by any of the, individually
or to impose any liability on any of them personally.
15.6 The obligations and liabilities of the Quest For Value on
behalf of Quest Portfolio hereunder are solely those of the Quest
Portfolio and not of any other series of Quest For Value. It is
expressly agreed that shareholders, trustees, nominees, officers,
agents, or employees of Quest For Value and Quest Portfolio shall not
be personally liable hereunder. Oppenheimer Fund acknowledges that it
has notice of the provisions of Quest For Value's Declaration of Trust
disclaiming shareholder and trustee liability for acts and obligations
of Quest For Value. The execution and delivery of this Agreement have
been authorized by the trustees of Quest For Value and signed by
officers of Quest For Value acting as such, and neither such
authorization by such trustees nor such execution and delivery by such
officers shall be deemed to have been made by any of them individually
or to impose any liability on any of them personally.
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be executed by its duly authorized officer.
OPPENHEIMER U.S. GOVERNMENT TRUST
By: /s/ Andrew J. Donohue
Andrew J. Donohue
Secretary
QUEST FOR VALUE FAMILY OF FUNDS
By: /s/ Bernard H. Garil
Bernard H. Garil
Vice President
QUEST FOR VALUE ADVISORS
By: Bernard H. Garil
Bernard H. Garil
President
<PAGE>
EXHIBIT B
The aggregate purchase price for the Purchased Assets will be an amount
equal to the sum of (i) the Initial Purchase Payment (as hereinafter
defined) payable in cash at the Acquisition Closing, (ii) the aggregate
amount of all unamortized prepaid commissions as of the business day
immediately preceding the Acquisition Closing which relate to the
Acquired Funds (excluding those with respect to Citibank, N.A.) payable
in cash at the Acquisition Closing, (iii) the amount payable by OMC in
respect of the right, title and interest of Citibank, N.A. to certain
commissions, and (iv) the Deferred Purchase Payment (as hereinafter
defined).
The "Initial Purchase Payment" shall be an amount equal to the sum of
(x) 225% of the Annualized Fee Amount (as hereinafter defined) of each
Reorganized Fund and (y) 270% of the Annualized Fee Amount of each
Continuing Fund (excluding the Quest for Value Officers Fund). The
"Annualized Fee Amount" of an Acquired Fund shall equal the product of
(i) such Acquired Fund's Closing Net Assets (as hereinafter defined)
and (ii) the annual advisory fee payable to QVA by such Acquired Fund
at the rate indicated in the most recent prospectus for such Acquired
Fund at the Acquisition Closing (plus any applicable annual
administrative fee). "Closing Net Assets" for an Acquired Fund shall
mean the aggregate net asset value of such Acquired Fund as of the
close of business on the last business date preceding the Acquisition
Closing.
The "Deferred Purchase Payment" shall be an amount equal to the
aggregate amounts determined for all Reorganized Funds pursuant to the
following formula: the Closing Payment (as hereinafter defined) times
the Applicable Percentage (as hereinafter defined). The "Closing
Payment" shall be the aggregate amount calculated for all Reorganized
Funds pursuant to clause (x) of the Initial Purchase Payment formula.
The "Applicable Percentage" shall be 100% if the Continuing Net Asset
Percentage (as hereinafter defined) is 75% or more, 0% if the
Continuing Net Asset Percentage is 50% or less and the percentage
determined in accordance with the following formula if the Continuing
Net Asset Percentage is between 75% and 50%: 100% - (4) (75% -
Continuing Net Asset Percentage). The "Continuing Net Asset
Percentage" shall equal the percentage obtained by dividing the
Anniversary Net Assets (as hereinafter defined) by the Closing Net
Assets. The "Anniversary Net Assets" shall mean the most recently
determined aggregate net asset values of all Reorganized Funds as of
8:00 p.m. on the first anniversary of the Acquisition Closing of each
account of the Reorganized Funds which are eligible to be included in
Anniversary Net Assets in accordance with the principles set forth in
the Acquisition Agreement.
<PAGE>
QUEST FOR VALUE FAMILY OF FUNDS
U.S. GOVERNMENT INCOME FUND- CLASS A SHARES
PROXY FOR SPECIAL SHAREHOLDERS MEETING
TO BE HELD November 16, 1995
The undersigned shareholder of U.S. Government Income Fund (the
"Fund"), a series of Quest for Value Family of Funds (the "Trust"),
does hereby appoint Thomas E. Duggan and Maria Camacho 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
the Fund to be held on November 16, 1995, at One World Financial
Center, New York, New York 10281 on the 40th Floor at 9:00 A.M., New
York 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 IF 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 dated as of
September 26, 1995 by and among Oppenheimer U.S. Government Trust,
the Trust, on behalf of the Fund, and Quest for Value Advisors, and
the transactions contemplated thereby, including the transfer of
substantially all the assets of the Fund in exchange for Class A,
Class B and Class C shares of Oppenheimer U.S. Government Trust and
the assumption by Oppenheimer U.S. Government Trust of certain
liabilities of the Fund, the distribution of such shares to the
shareholders of the Fund in liquidation of the Fund and the
cancellation of the outstanding shares of the Fund.
FOR____ AGAINST____ ABSTAIN____
Dated:________________________, 1995
(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.
<PAGE>
QUEST FOR VALUE FAMILY OF FUNDS
U.S. GOVERNMENT INCOME FUND- CLASS B SHARES
PROXY FOR SPECIAL SHAREHOLDERS MEETING
TO BE HELD November 16, 1995
The undersigned shareholder of U.S. Government Income Fund (the
"Fund"), a series of Quest for Value Family of Funds (the "Trust"),
does hereby appoint Thomas E. Duggan and Maria Camacho, 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
the Fund to be held on November 16, 1995, at One World Financial
Center, New York, New York 10281 on the 40th Floor at 9:00 A.M., New
York 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 IF 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 dated as of
September 26, 1995 by and among Oppenheimer U.S. Government Trust,
the Trust, on behalf of the Fund, and Quest for Value Advisors, and
the transactions contemplated thereby, including the transfer of
substantially all the assets of the Fund in exchange for Class A,
Class B and Class C shares of Oppenheimer U.S. Government Trust and
the assumption by Oppenheimer U.S. Government Trust of certain
liabilities of the Fund, the distribution of such shares to the
shareholders of the Fund in liquidation of the Fund and the
cancellation of the outstanding shares of the Fund.
FOR____ AGAINST____ ABSTAIN____
Dated:________________________, 1995
(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.
<PAGE>
QUEST FOR VALUE FAMILY OF FUNDS
U.S. GOVERNMENT INCOME FUND- CLASS C SHARES
PROXY FOR SPECIAL SHAREHOLDERS MEETING
TO BE HELD November 16, 1995
The undersigned shareholder of U.S. Government Income Fund (the
"Fund"), a series of Quest for Value Family of Funds (the "Trust"),
does hereby appoint Thomas E. Duggan and Maria Camacho 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
the Fund to be held on November 16, 1995, at One World Financial
Center, New York, New York 10281 on the 40th Floor at 9:00 A.M., New
York 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 IF 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 dated as of
September 26, 1995 by and among Oppenheimer U.S. Government Trust,
the Trust, on behalf of the Fund, and Quest for Value Advisors, and
the transactions contemplated thereby, including the transfer of
substantially all the assets of the Fund in exchange for Class A,
Class B and Class C shares of Oppenheimer U.S. Government Trust and
the assumption by Oppenheimer U.S. Government Trust of certain
liabilities of the Fund, the distribution of such shares to the
shareholders of the Fund in liquidation of the Fund and the
cancellation of the outstanding shares of the Fund.
FOR____ AGAINST____ ABSTAIN____
Dated:________________________, 1995
(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.
<PAGE>
APPENDIX TO PROXY STATEMENT AND PROSPECTUS OF
OPPENHEIMER U.S. GOVERNMENT TRUST
Graphic material included in Proxy Statement and Prospectus of
Oppenheimer U.S. Government Trust: "Comparison of Total Return of
Oppenheimer U.S. Government Trust and the Lehman Brothers Government
Bond Index - Change in Value of a $10,000 Hypothetical Investment."
A linear graph will be included in the Proxy Statement and Prospectus
of Oppenheimer U.S. Government Trust (the "Fund") depicting the initial
account value and subsequent account value of a hypothetical $10,000
investment in each Class of shares of the Funds held until June 30,
1995, in the case of Class A shares, since August 16, 1985, and in the
case of Class C shares, from the inception of the Class on December 1,
1993, and comparing such values with the same investments over the same
time periods in the Lehman Brothers Government Bond Index. No
performance information is set forth on the Fund's Class B shares
because they were not publicly offered during the fiscal year ended
June 30, 1995. 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 Lehman Brothers Government
Bond Index, is set forth in the Proxy Statement and Prospectus.
Oppenheimer Lehman Brothers
Fiscal Year U.S. Government Government
(Period) Ended Trust - A Bond Index
08/16/85 $ 9,525 $10,000
06/30/86 $10,824 $11,887
06/30/87 $11,371 $12,376
06/30/88 $12,267 $13,266
06/30/89 $13,431 $14,869
06/30/90 $14,282 $15,899
06/30/91 $15,645 $17,510
06/30/92 $17,688 $19,920
06/30/93 $19,403 $22,487
06/30/94 $19,218 $22,187
06/30/95 $21,375 $24,862
Oppenheimer Lehman Brothers
Fiscal U.S. Government Government
Period Ended Trust - C Bond Index
12/1/93(1) $10,000 $10,000
06/30/94 $ 9,678 $ 9,625
06/30/95 $10,675 $10,786
- -----------
(1)Class C shares of the Fund were first publicly offered on December
1, 1993.
