OPPENHEIMER U S GOVERNMENT TRUST, N14AE24, 1995-08-30

OPPENHEIMER U S GOVERNMENT TRUST
N14AE24, 1995-08-30

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As filed with the Securities and Exchange Commission on August 29, 1995

Registration No. 2-76645
811-3430

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM N-14

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 / X /

PRE-EFFECTIVE AMENDMENT NO. / /

POST-EFFECTIVE AMENDMENT NO. / /

OPPENHEIMER U.S. GOVERNMENT TRUST
(Exact Name of Registrant as Specified in Charter)

Two World Trade Center, New York, New York 10048-0203
(Address of Principal Executive Offices)

212-323-0200
(Registrant's Telephone Number)

Andrew J. Donohue, Esq.
Executive Vice President & General Counsel
Oppenheimer Management Corporation
Two World Trade Center, New York, New York 10048-0203
(212) 323-0256
(Name and Address of Agent for Service)

As soon as practicable after the Registration Statement becomes
effective.
(Approximate Date of Proposed Public Offering)

It is proposed that this filing will become effective on September 28,
1995, pursuant to Rule 488.

No filing fee is due because the Registrant has previously registered
an indefinite number of shares under Rule 24f-2; a Rule 24f-2 notice
for the year ended June 30, 1995 was filed on August 28, 1995.

<PAGE>

CONTENTS OF REGISTRATION STATEMENT

This Registration Statement contains the following pages and documents:

Front Cover
Contents Page
Cross-Reference Sheet

Part A

Proxy Statement for U.S. Government Income Fund,
a series of Quest for Value Family of Funds
and Prospectus for Oppenheimer U.S. Government Trust

Part B

Statement of Additional Information

Part C

Other Information
Signatures
Exhibits

<PAGE>
FORM N-14
OPPENHEIMER U.S. GOVERNMENT TRUST
Cross Reference Sheet

Part A of
Form N-14
Item No. Proxy Statement and Prospectus Heading and/or Title of
Document
- --------- ------------------------------------------------------------
1 (a) Cross Reference Sheet
(b) Front Cover Page
(c) *
2 (a) *
(b) Table of Contents
3 (a) Comparative Fee Tables
(b) Synopsis
(c) Principal Risk Factors
4 (a) Synopsis; Approval of the Reorganization; Comparison between
USGT and the Fund; Miscellaneous
(b) Approval of the Reorganization - Capitalization Table
5 (a) Registrant's Prospectus; Comparison Between USGT and the Fund
(b) *
(c) *
(d) *
(e) Miscellaneous
(f) Miscellaneous
6 (a) Prospectus of U.S. Government Income Fund; Annual Report of
U.S. Government Income Fund; Comparison Between USGT and the Fund
(b) Miscellaneous
(c) *
(d) *
7 (a) Synopsis; Information Concerning the Meeting
(b) *
(c) Synopsis; Information Concerning the Meeting
8 (a) Proxy Statement
(b) *
9 *

Part B of
Form N-14
Item No. Statement of Additional Information Heading
- --------- -------------------------------------------
10 Cover Page
11 Table of Contents
12 (a) Registrant's Statement of Additional Information
(b) *
(c) *
13 (a) Statement of Additional Information about U.S. Government
Income Fund
(b) *
(c) *
14 Registrant's Statement of Additional Information; Statement
of Additional Information about U.S. Government Income Fund;
Annual Report of U.S. Government Income Fund at 10/31/94;
Semi-Annual Report of U.S. Government Income Fund at 4/30/95;
Registrant's Annual Report at 6/30/95

Part C of
Form N-14
Item No. Other Information Heading
- --------- -------------------------
15 Indemnification
16 Exhibits
17 Undertakings

* Not Applicable or negative answer

<PAGE>

SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )

Filed by the registrant / x /

Filed by a party other than the registrant / /

Check the appropriate box:

/ X / Preliminary proxy statement

/ / Definitive proxy statement

/ / Definitive additional materials

/ / Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12

Oppenheimer U.S. Government Trust
- ------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)

U.S. Government Income Fund,
a series of Quest for Value Family of Funds
- ------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement)

Payment of filing fee (Check the appropriate box):
/ / $125 per Exchange Act Rule 0-11(c)(1)(ii), 14a-6(i)(1) or 14a-
6(j)(2).

/ / $500 per each party to the controversy pursuant to Exchange Act
Rule 14a-6(i)(3).

/ / Fee Computed on table below per Exchange Act Rules 14a-6(i)(4)
and 0-11.

(1) Title of each class of securities to which transaction applies:
- ------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- ------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:(1)
- ------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- ------------------------------------------------------------------
/ / Check box if any part of the fee is offset as provided by
Exchange Act Rule 0-11(a)(2) and identify the filing for which
the offsetting fee was paid previously. Identify the previous
filing by registration statement number, or the form or schedule
and the date of its filing.
- ------------------------------------------------------------------
(1) Amount previously paid:
- ------------------------------------------------------------------
(2) Form, schedule or registration statement no.:
- ------------------------------------------------------------------
(3) Filing Party:
- ------------------------------------------------------------------
(4) Date Filed:

- -----------------------
(1) Set forth the amount on which the filing fee is calculated and
state how it was determined.

<PAGE>

Preliminary Copy

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 3, 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 10:00 A.M., New York time, on November 3,
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 ____, 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, 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 7, 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

_________, 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>
Preliminary Copy

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 10:00 A.M., New York
time, on November 3, 1995, and any adjournments thereof (the
"Meeting"). It is expected that this Proxy Statement and Prospectus
will be mailed to shareholders on or about ____, 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 _____, 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 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 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 CDSC
which is applicable to a shareholder's investment will continue to
apply, and, 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,
are incorporated herein by reference 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; and (ii) a Statement of
Additional Information about the Fund, dated March 1, 1995. 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; (ii) 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; and (iii) a Statement of Additional Information
relating to the Reorganization described in this Proxy Statement and
Prospectus (the "Additional Statement"), dated ____, 1995 and filed as
part of the Registration Statement.

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 _______, 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)
Reasons for 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
General
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 _____,
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.

<TABLE>
<CAPTION>
Oppenheimer
U.S.Government Trust
Class A Class B Class C
<S> <C> <C> <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
</TABLE>

<TABLE>
<CAPTION>
U.S. Government Income Fund
Class A Class B Class C
<S> <C> <C> <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
</TABLE>

(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
duration of sales charges as to such Class A shares of the Fund will be
decreased from 24 months to 18 months, and the 0.50 of 1.0% charge will
be assessed for redemptions in the subsequent six-month period only.

(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 on 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%
</TABLE>

<TABLE>
<CAPTION>
Pro Forma Combined Fund(1)
Class A Class B(2)Class C
<S> <C> <C> <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.

Hypothetical Expenses

To attempt to show the effect of these expenses on an investment over
time, the hypotheticals shown below have been created. Assume that you
make a $1,000 investment in 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 $115 $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 reorganized 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. 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 reimburse (as to Class A shares of USGT only) for costs incurred by,
or to compensate, OFDI and QVD, respectively, in connection with the
distribution of shares and the servicing of shareholder accounts that
hold the fund's shares. 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 a distribution fee at an annual rate
of 0.05%. Class B shares of USGT automatically convert to Class A
shares of USGT six years after the end of the calendar month of their
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 will
be deemed aged to the same level as the shareholder's existing Fund
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 (or any other
OppenheimerFund) after the Reorganization so long as they continue to
meet the applicable eligibility criteria.

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. 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
documents incorporated by reference herein, including 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 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, which is considered to be a borrowing by
the fund, 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. 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 to cover normal
costs, significant capital, investment in new products and services,
financing for Class B and Class C shares and sales support. 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 "Assumed Liabilities") (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").

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 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 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.

The Companies have each agreed 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 should benefit USGT shareholders due to the economies of
scale available to a larger fund. These economies of scale should
result in 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 complete 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 ______________, 1995
or at such time on such earlier or later date as may be mutually agreed
upon in writing (the "Valuation Date"). The Closing Date for the
Reorganization will be the next business day following the Valuation
Date.

OMC will utilize the valuation procedures set forth in the Prospectus
and Statement of Additional Information of USGT 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 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 shareholders of the Fund
who wish certificates representing their shares of USGT must, after
receipt of their confirmations, make a written request to Oppenheimer
Shareholder Services, P.O. Box 5270, Denver, Colorado 80217.
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 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, if later, two
business days after the date of any Fund shareholder's meeting called
for the purpose of approving the Reorganization which was convened
prior to ____ but adjourned to a date after _______, 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 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,
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. 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. 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 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. 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. 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. 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. The tax basis of the assets of the Fund will be the same as
the tax basis of such assets of the Fund immediately prior to the
Reorganization.

8. 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.

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 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. To
obtain additional 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.

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.
Although 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 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 above; 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.

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 is incorporated herein by reference
and may be obtained without charge as set forth in "Miscellaneous -
Public Information."

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 USGT's current Prospectus and "Brokerage
Policies of the Fund" in the USGT current Statement of Additional
Information. 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's current
Prospectus.

Financial Information

For certain financial information about USGT and the Fund, see (as to
USGT) "Financial Highlights" "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 (as to the Fund)
"Investment Management Agreement," Distribution Plan," "Portfolio
Transactions and Turnover" and "Additional Information" in the Fund
current Prospectus.

Description of Shares of USGT and the Fund

For a description of the classes of shares of USGT and 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 Statement of
Additional Information 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 "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 10:00 A.M., New York time, on November
3, 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 complete 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 7, 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
_____________ Class A, ___________ Class B and _____________ 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 _____________ Class A, _______________ Class B and
______________ 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 5% or more of the outstanding Class A, Class B or Class
C Fund shares or 5% or more of the outstanding shares of the Fund.) To
the knowledge of USGT, as of the Record Date, no person owned of record
or beneficially 5% or more of the outstanding Class A, Class B or Class
C USGT shares or 5% or more of the outstanding shares of USGT. (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,
one or more adjournments of the Meeting may be sought by the Board
until such time as a quorum of the particular class or classes is
present. 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. The proxy
will be voted in favor of the Proposal unless a choice is indicated to
vote against or to abstain from voting on the Proposal.

Shares owned of record by broker-dealers for the benefit of their
customers ("street account shares") will be voted by the broker-dealer
based on instructions received from its customers. If no instructions
are received, 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. If a shareholder executes and returns a proxy but fails to
indicate how the votes should be cast, the proxy will be voted in favor
of the Proposal. The proxy may be revoked at any time prior to the
voting thereof by: (i) writing to the Secretary of 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 primarily by contacting shareholders by
telephone and telegram for a fee not to exceed $____, plus reasonable
out-of-pocket expenses. The cost for such proxy solicitor will be
shared by QVA and OMC. 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.

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 the surviving fund 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 is incorporated herein, and in its
audited financial statements as of October 31, 1994, 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 which are incorporated herein
by reference: (i) USGT's Prospectus dated May 30, 1995, supplemented
July 14, 1995, accompanying this Proxy Statement and Prospectus and
incorporated herein; (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 incorporates by reference the USGT
Additional Statement, and the Fund's Prospectus dated March 1, 1995,
revised June 30, 1995, and Statement of Additional Information dated
March 1, 1995: 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

_______, 1995220

<PAGE>

EXHIBIT A

AGREEMENT AND PLAN OF REORGANIZATION

This AGREEMENT AND PLAN OF REORGANIZATION ("Agreement") is made as
of this ____ day of _____, 1995, by and among Oppenheimer U.S.
Government Trust ("Oppenheimer Fund"), a Massachusetts business trust,
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 all stated liabilities of
the Quest Portfolio and the issuance by the Oppenheimer Fund of shares
of beneficial interest of the Oppenheimer Fund ("shares") to be
distributed, after the Closing Date (as hereinafter defined), 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 7.12.

(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 of 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, 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 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 Closing
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 ___________, 1995, or at such time on such earlier or later
date as may be mutually agreed upon in writing (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 (the "Closing Date") shall be the next
business day following the Valuation Date. 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 of 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 will prepare and file with the Securities
and Exchange Commission ("Commission") a registration statement on Form
N-14 under the Securities Act of 1933, as amended ("1933 Act"),
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 on or before 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 The 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) The 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
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) The 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 the 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, and April 30, 1995 examined by Price
Waterhouse LLP (copies 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, 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) At the Closing Date, all federal and other tax returns and
reports of the Quest Portfolio required by law to be filed on or before
the Closing Date 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;

(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 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 and accepted by
Oppenheimer Fund 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 a 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 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 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 proceedings 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 letter from Price Waterhouse LLP dated the Closing Date
stating that (a) such firm has performed a limited review of the
federal and state income tax returns of Quest Portfolio for each of the
last three taxable years and, based on such limited review, nothing
came to their attention that caused them to believe that such returns
did not properly reflect, in all material aspects, the federal and
state income tax liabilities of Quest Portfolio for the periods covered
thereby, (b) for the period ___________, 199__ to and including the
Closing Date, such firm has performed a limited review (based on
unaudited financial data) to ascertain the amount of applicable
federal, state and local taxes and has determined that same either have
been paid or reserves have been established for payment of such taxes,
and, based on such limited review, nothing came to their attention that
caused them to believe that the taxes paid or reserves set aside for
payment of such taxes were not adequate in all material respects for
the satisfaction of all federal, state and local tax liabilities for
the period from ___________, 199___ to and including the Closing Date
and (c) based on such limited reviews, nothing came to their attention
that caused them to believe that Quest Portfolio would not qualify as a
regulated investment company for federal income tax purposes for any
such year or period;

7.4 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.

7.5 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 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 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.

7.6 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.

7.7 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.

7.8 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.

7.9 All proceedings 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.

7.10 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.

7.11 The Registration Statement, including the Proxy Materials filed
as a part thereof, shall have been approved by the Board of Trustees
of the Oppenheimer Fund.

7.12 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) 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) No gain or loss will be recognized by Quest Portfolio or Quest
For Value 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 or upon
the distribution of Oppenheimer Fund Shares to the Quest Portfolio
Shareholders in exchange for the Quest Portfolio shares;

(d) 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) 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) 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) 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; and

(h) 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.

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 Fund shall bear its expenses 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, printing, filing and
proxy solicitation expenses and portfolio transfer taxes (if any)
incurred in connection with the consummation of the transactions
contemplated herein.

(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 Advisor's (or a party other than Oppenheimer
Fund) only obligation hereunder shall be to reimburse Oppenheimer Fund
for all reasonable out-of-pocket fees and expenses incurred by
Oppenheimer Fund 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 for all reasonable out-of-pocket fees and
expenses incurred by Quest Portfolio in connection with those
transactions, including legal, accounting and filing fees, and to
comply with the provisions of paragraph 7.6 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 December
31, 1995, or if later, two business days after the date of any Quest
Portfolio shareowner's meeting called for the purpose of approving the
Agreement which was convened prior to ___________, 199___ but adjourned
to a date after ____________ 199___; or

(c) by either Oppenheimer Fund or Quest For Value, on behalf of
Quest Portfolio, in writing without liability to 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 that certain Acquisition Agreement (the
"Acquisition Agreement") dated August 17, 1995 between Oppenheimer
Management Corporation, Quest Advisors, Quest for Value Distributors
and Oppenheimer Capital 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 7.6) 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 7.6) 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 Fund will indemnify and hold harmless, Quest For
Value, Quest Advisors, their 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 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 Oppenheimer Fund's 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. The
execution and delivery of this Agreement have been authorized by the
trustees of Oppenheimer Fund and signed by authorized 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 Quests 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. The execution and delivery of this
Agreement have been authorized by the trustees of Quest For Value and
signed by authorized 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: ________________________________

QUEST FOR VALUE FAMILY OF FUNDS

By: ____________________________

QUEST FOR VALUE ADVISORS

By: ____________________________

<PAGE>

EXHIBIT B

The aggregate purchase price for the Purchased Assets and Assumed
Liabilities 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, (iv) the
Deferred Purchase Payment (as hereinafter defined) and (v) the
aggregate amount of the Assumed Liabilities.

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>

Preliminary Copy
QUEST FOR VALUE FAMILY OF FUNDS
U.S. GOVERNMENT INCOME FUND- CLASS A SHARES

PROXY FOR SPECIAL SHAREHOLDERS MEETING
TO BE HELD NOVEMBER 3, 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 3, 1995, at One World Financial Center,
New York, New York 10281 on the 40th Floor at 10:00 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
_______________, 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 complete liquidation of the Fund and
the cancellation of the outstanding shares of the Fund.

FOR____ AGAINST____ ABSTAIN____

Dated:________________________, 1995
(Month) (Day)

______________________________
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>

Preliminary Copy
QUEST FOR VALUE FAMILY OF FUNDS
U.S. GOVERNMENT INCOME FUND- CLASS B SHARES

PROXY FOR SPECIAL SHAREHOLDERS MEETING
TO BE HELD NOVEMBER 3, 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 3, 1995, at One World Financial Center,
New York, New York 10281 on the 40th Floor at 10:00 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.

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:

FOR____ AGAINST____ ABSTAIN____

Dated:________________________, 1995
(Month) (Day)

______________________________
Signature(s)

Please read both sides of this ballot.

<PAGE>

Preliminary Copy
QUEST FOR VALUE FAMILY OF FUNDS
U.S. GOVERNMENT INCOME FUND- CLASS C SHARES

PROXY FOR SPECIAL SHAREHOLDERS MEETING
TO BE HELD NOVEMBER 3, 1995

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:

FOR____ AGAINST____ ABSTAIN____

Dated:________________________, 1995
(Month) (Day)

______________________________
Signature(s)

Please read both sides of this ballot.

<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 $10,803 $11,887
06/30/87 $11,371 $12,377
06/30/88 $12,268 $13,267
06/30/89 $13,430 $14,869
06/30/90 $14,282 $15,900
06/30/91 $15,645 $17,512
06/30/92 $17,688 $19,920
06/30/93 $19,403 $22,489
06/30/94 $19,218 $22,187
06/30/95 $ $

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 $ 9,591 $ 9,625
06/30/95 $ $

- -----------
(1)Class C shares of the Fund were first publicly offered on December
1, 1993.

<PAGE>

OPPENHEIMER U.S. GOVERNMENT TRUST
Supplement dated July 14, 1995 to the
Prospectus dated May 30, 1995

The following changes are made to the Prospectus:

1. Effective July 21, 1995, the Prospectus supplement dated May 30,
1995 is no longer in effect.

2. Footnote 1 under the "Shareholder Transaction Expenses" chart in
"Expenses" on page 3 is changed to read as follows:

1. If you invest $1 million or more ($500,000 or more for
purchases by OppenheimerFunds prototype 401(k) plans) in
Class A shares, you may have to pay a sales charge of up to
1% if you sell your shares within 18 calendar months from the
end of the calendar month in which you purchased those
shares. See "How to Buy Shares -- Class A Shares," below.

3. In "How to Buy Shares," the section entitled "Class A Shares" on
page 21 under "Classes of Shares" is changed to read as follows:

If you buy Class A shares, you may pay an initial sales
charge on investments up to $1 million (up to $500,000 for
purchases by OppenheimerFunds prototype 401(k) plans). If you
purchase Class A shares as part of an investment of at least
$1 million ($500,000 for OppenheimerFunds prototype 401(k)
plans) in shares of one or more OppenheimerFunds, you will
not pay an initial sales charge, but if you sell any of those
shares within 18 months of buying them, you may pay a
contingent deferred sales charge. The amount of that sales
charge will vary depending on the amount you invested. Sales
charge rates are described in "Class A Shares" below.

4. In "How to Buy Shares," the section entitled "Which Class of
Shares Should You Choose?" on page 21 is changed by replacing the final
sentence of the second paragraph of that section as follows:

The discussion below of the factors to consider in purchasing
a particular class of shares assumes that you will purchase
only one class of shares and not a combination of shares of
different classes.

5. In "How to Buy Shares," the first paragraph of the section "Class
A Contingent Deferred Sales Charge" on page 25 is amended in its
entirety to read as follows:

There is no initial sales charge on purchases of Class A
shares of any one or more of the OppenheimerFunds in the
following cases:

- purchases aggregating $1 million or more, or
- purchases by an OppenheimerFunds prototype 401(k)
plan that: (1) buys shares costing $500,000 or more
or (2) has, at the time of purchase, 100 or more
eligible participants, or (3) certifies that it
projects to have annual plan purchases of $200,000 or
more.

Shares of any of the OppenheimerFunds that offers only
one class of shares that has no designation are considered
"Class A shares" for this purpose. The Distributor pays
dealers of record commissions on those purchases in an amount
equal to the sum of 1.0% of the first $2.5 million, plus
0.50% of the next $2.5 million, plus 0.25% of purchases over
$5 million. That commission will be paid only on the amount
of those purchases in excess of $1 million ($500,000 for
purchases by OppenheimerFunds 401(k) prototype plans) that
were not previously subject to a front-end sales charge and
dealer commission.

6. In "Reduced Sales Charges for Class A Purchases" on page 26, the
first sentence of the section "Right of Accumulation" is changed to
read as follows:

To qualify for the lower sales charge rates that apply to
larger purchases of Class A shares, you and your spouse can
add together Class A and Class B shares you purchase for your
individual accounts, or jointly, or for trust or custodial
accounts on behalf of your children who are minors.

The first two sentences of the second paragraph of that section
are revised to read as follows:

Additionally, you can add together current purchases of
Class A and Class B shares of the Fund and other
OppenheimerFunds to reduce the sales charge rate that applies
to current purchases of Class A shares. You can also count
Class A and Class B shares of OppenheimerFunds you previously
purchased subject to an initial or contingent deferred sales
charge to reduce the sales charge rate for current purchases
of Class A shares, provided that you still hold that
investment in one of the OppenheimerFunds.

7. The first sentence of the section entitled "Letter of Intent" on
page 26 is revised to read as follows:

Under a Letter of Intent, if you purchase Class A shares or
Class A shares and Class B shares of the Fund and other
OppenheimerFunds during a 13-month period, you can reduce the
sales charge rate that applies to your purchases of Class A
shares. The total amount of your intended purchases of both
Class A and Class B shares will determine the reduced sales
charge rate for the Class A shares purchased during that
period.

8. In the section entitled "Waivers of Class A Sales Charges" on page
27, the following changes are made:

The first sentence of the first paragraph is replaced by a new
introductory paragraph set forth below and the list of circumstances
describing the sales charge waivers follows a new initial sentence:

- Waivers of Class A Sales Charges. The Class A sales charges
are not imposed in the circumstances described below. There
is an explanation of this policy in "Reduced Sales Charges"
in the Statement of Additional Information.

Waivers of Initial and Contingent Deferred Sales Charges
for Certain Purchasers. Class A shares purchased by the
following investors are not subject to any Class A sales
charges:

The introductory phrase preceding the list of sales charge waivers
in the second paragraph and subsection (d) of that paragraph are
replaced by the following:

Waivers of Initial and Contingent Deferred Sales Charges
in Certain Transactions. Class A shares issued or purchased
in the following transactions are not subject to Class A
sales charges:

(d) shares purchased and paid for with the proceeds of shares
redeemed in the prior 12 months from a mutual fund (other than a
fund managed by the Manager or any of its subsidiaries) on which
an initial sales charge or contingent deferred sales charge was
paid (this waiver also applies to shares purchased by exchange of
shares of Oppenheimer Money Market Fund, Inc. that were purchased
and paid for in this manner); this waiver must be requested when
the purchase order is placed for your shares of the Fund, and the
Distributor may require evidence of your qualification for this
waiver.

The third paragraph of that section is revised to read as follows:

Waivers of the Class A Contingent Deferred Sales Charge.
The Class A contingent deferred sales charge does not apply
to purchases of Class A shares at net asset value without
sales charge as described in the two sections above. It is
also waived if shares that would otherwise be subject to the
contingent deferred sales charge are redeemed in the
following cases:

- for retirement distributions or loans to participants
or beneficiaries from qualified retirement plans, deferred
compensation plans or other employee benefit plans, including
OppenheimerFunds prototype 401(k) plans (these are all
referred to as "Retirement Plans"); or
- to return excess contributions made to Retirement Plans; or
- to make Automatic Withdrawal Plan payments that are
limited annually to no more than 12% of the original account
value; or
- involuntary redemptions of shares by operation of law
or involuntary redemptions of small accounts (see
"Shareholder Account Rules and Policies," below); or
- if, at the time a purchase order is placed for Class A
shares that would otherwise be subject to the Class A
contingent deferred sales charge, the dealer agrees to accept
the dealer's portion of the commission payable on the sale in
installments of 1/18th of the commission per month (and no
further commission will be payable if the shares are redeemed
within 18 months of purchase); or
- for distributions from OppenheimerFunds prototype
401(k) plans for any of the following cases or purposes: (1)
following the death or disability (as defined in the Internal
Revenue Code) of the participant or beneficiary (the death or
disability must occur after the participant's account was
established); (2) hardship withdrawals, as defined in the
plan; (3) under a Qualified Domestic Relations Order, as
defined in the Internal Revenue Code; (4) to meet the minimum
distribution requirements of the Internal Revenue Code; (5)
to establish "substantially equal periodic payments" as
described in Section 72(t) of the Internal Revenue Code, or
(6) separation from service.

9. The first paragraph of the section entitled "Waivers of Class B
Sales Charge" on page 29 is amended by replacing the introductory
phrase of that paragraph with the sentences below and adding a new
section at the end of that paragraph as follows:

- Waivers of Class B Sales Charge. The Class B contingent
deferred sales charge will not be applied to shares purchased
in certain types of transactions nor will it apply to Class B
shares redeemed in certain circumstances as described below.
The reasons for this policy are in "Reduced Sales Charges" in
the Statement of Additional Information.

Waivers for Redemptions of Shares in Certain Cases. The
Class B contingent deferred sales charge will be waived for
redemptions of shares in the following cases:

- for distributions from OppenheimerFunds prototype 401(k)
plans (1) for hardship withdrawals; (2) under a Qualified
Domestic Relations Order, as defined in the Internal Revenue
Code; (3) to meet minimum distribution requirements as
defined in the Internal Revenue Code; (4) to make
"substantially equal periodic payments" as described in
Section 72(t) of the Internal Revenue Code; or (5) for
separation from service.

10. In the section entitled "Reinvestment Privilege" on page 33, the
first two sentences are revised to read as follows:

If you redeem some or all of your Class A or B shares of the
Fund, you have up to 6 months to reinvest all or part of the
redemption proceeds in Class A shares of the Fund or other
OppenheimerFunds without paying a sales charge. This
privilege applies to Class A shares that you purchased
subject to an initial sales charge and to Class A or B shares
on which you paid a contingent deferred sales charge when you
redeemed them. It does not apply to Class C shares.

11. In the section entitled "Retirement Plans" on page 33, the
following is added to the list of plans offered by the Distributor:

- 401(k) prototype retirement plans for businesses

July 14, 1995 PS0220.004

<PAGE>

Oppenheimer
U.S. Government Trust
Prospectus dated May 30, 1995

Oppenheimer U.S. Government Trust is a mutual fund with the investment
objective of seeking 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. The securities the Fund invests in are described
more completely in "Investment Objective and Policies," starting on
page ___.

This Prospectus explains concisely what you should know before
investing in the Fund. Please read this Prospectus carefully and keep
it for future reference. You can find more detailed information about
the Fund in the May 30, 1995 Statement of Additional Information. For a
free copy, call Oppenheimer Shareholder Services, the Fund's Transfer
Agent, at 1-800-525-7048, or write to the Transfer Agent at the address
on the back cover. The Statement of Additional Information has been
filed with the Securities and Exchange Commission and is incorporated
into this Prospectus by reference (which means that it is legally part
of this Prospectus).

(OppenheimerFunds logo)

Shares of the Fund are not deposits or obligations of any bank, are not
guaranteed by any bank, are not insured by the F.D.I.C. or any other
agency, and involve investment risks, including the possible loss of
the principal amount invested.

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

<PAGE>

Contents

ABOUT THE FUND

Expenses
Brief Overview of the Fund
Financial Highlights
Investment Objective and Policies
How the Fund is Managed
Performance of the Fund

ABOUT YOUR ACCOUNT

How to Buy Shares
Class A Shares
Class B Shares
Class C Shares
Special Investor Services
AccountLink
Automatic Withdrawal and Exchange Plans
Reinvestment Privilege
Retirement Plans
How to Sell Shares
By Mail
By Telephone
By Checkwriting
How to Exchange Shares
Shareholder Account Rules and Policies
Dividends, Capital Gains and Taxes

<PAGE>

ABOUT THE FUND

Expenses

The Fund pays a variety of expenses directly for management of its
assets, administration, distribution of its shares and other services,
and those expenses are subtracted from the Fund's assets to calculate
the Fund's net asset value per share. All shareholders therefore pay
those expenses indirectly. Shareholders pay other expenses directly,
such as sales charges and account transaction charges. The following
tables are provided to help you understand your direct expenses of
investing in the Fund and your share of the Fund's business operating
expenses that you will bear indirectly. The calculations are based on
the Fund's expenses during its last fiscal year ended June 30, 1994.

- Shareholder Transaction Expenses are charges you pay when you
buy or sell shares of the Fund. Please refer to "About Your Account"
from pages _____ through _____ for an explanation of how and when these
charges apply.

Class A Class B Class C
Shares Shares Shares

Maximum Sales Charge on Purchases
(as a % of offering price) 4.75% None None
- ----------------------------------------------------------------------
Sales Charge on
Reinvested Dividends None None None
- ----------------------------------------------------------------------
Deferred Sales Charge
(as a % of the lower of
the original
purchase price or
redemption proceeds) None(1) 5% in the 1.0%(2)
first year,
declining to
1% in the sixth
year, and elim-
inated there-
after(2)
- ----------------------------------------------------------------------
Exchange Fee None None None

(1) If you invest more than $1 million in Class A shares, you may have
to pay a sales charge of up to 1% if you sell your shares within
18 calendar months from the end of the calendar month during which
you purchased those shares. See "How to Buy Shares - Class A
Shares," below.
(2) See "How to Buy Shares," below, for more information on the
contingent deferred sales charges.
(3) There is a $10 transaction fee for redemptions paid by Federal
Funds wire, but not for redemption proceeds paid by check, or ACH
wire through AccountLink, or, with respect to Class A shares only,
for which checkwriting privileges are used (see "How to Sell
Shares").

- Annual Fund Operating Expenses are paid out of the Fund's
assets and represent the Fund's expenses in operating its business. For
example, the Fund pays management fees to its investment adviser,
Oppenheimer Management Corporation (which is referred to in this
Prospectus as the "Manager"). The rates of the Manager's fees are set
forth in "How the Fund is Managed," below. The Fund has other regular
expenses for services, such as transfer agent fees, custodial fees paid
to the bank that holds the Fund's portfolio securities, audit fees and
legal expenses. Those expenses are detailed in the Fund's Financial
Statements in the Statement of Additional Information.

The numbers in the table below are projections of the Fund's
business expenses based on the Fund's expenses in its last fiscal year.
These amounts are shown as a percentage of the average net assets of
each class of the Fund's shares for that year. The "12b-1 Distribution
Plan Fees" for Class A shares are the Service Plan Fees (which can be
up to a maximum of 0.25% of average annual net assets of that class),
and for Class B and Class C shares, are the Service Plan Fees (which
can be up to maximum of 0.25%) and the asset-based sales charges of
0.75%. These plans are described in greater detail in "How to Buy
Shares."

The actual expenses for each class of shares in future years may
be more or less than the figures in the table, depending on a number of
factors, including the actual value of the Fund's assets represented by
each class of shares. The Annual Fund Operating Expenses shown are net
of a voluntary reduction of the management fees paid by the Fund to
rates that are reflected in the current investment advisory agreement.
Without such reduction, "Management Fees" for each class would have
been 0.71% and "Total Fund Operating Expenses" would have been 1.14%,
1.96% and 1.96% for Class A, Class B and Class C shares, respectively.
Class B shares were not publicly offered during the fiscal year ended
June 30, 1994. Therefore, the Annual Fund Operating Expenses shown for
Class B shares are estimates based on amounts that would have been
payable in that period assuming that Class B shares were outstanding
during such fiscal year. Class C shares were not publicly sold before
December 1, 1993. Therefore, the Annual Fund Operating Expenses shown
for Class C shares are based on expenses for the period from December
1, 1993 through June 30, 1994.

Class A Class B Class C
Shares Shares Shares
- ----------------------------------------------------------------------
Management Fees
(restated) 0.62% 0.62%% 0.62%
- ----------------------------------------------------------------------
12b-1 Distribution
and/or 0.24%(1) 1.00%(2) 1.00%(2)
Service Plan Fees
- ----------------------------------------------------------------------
Other Expenses 0.19% 0.25% 0.25%
- ----------------------------------------------------------------------
Total Fund
Operating Expenses 1.05% 1.87% 1.87%
(restated)

(1) Includes Service Plan Fees only.
(2) Includes Service Plan Fees and asset-based sales charge.

- Examples. To try to show the effect of these expenses on an
investment over time, we have created the hypothetical examples shown
below. Assume that you make a $1,000 investment in each class of shares
of the Fund, and that the Fund's annual return is 5%, and that its
operating expenses for each class are the ones shown in the Annual Fund
Operating Expenses table above (as restated). If you were to redeem
your shares at the end of each period shown below, your investment
would incur the following expenses by the end of 1, 3, 5 and 10 years:

1 year 3 years 5 years 10 years(1)
- ----------------------------------------------------------------------
Class A Shares $58 $79 $103 $170
Class B Shares $69 $89 $121 $178
Class C Shares $29 $59 $101 $219

If you did not redeem your investment, it would incur the
following expenses:

1 year 3 years 5 years 10 years(1)
- ----------------------------------------------------------------------
Class A Shares $58 $79 $103 $170
Class B Shares $19 $59 $101 $178
Class C Shares $19 $59 $101 $219

(1) The Class B expenses in years 7 through 10 are based on the Class A
expenses shown above, because the Fund automatically converts your
Class B shares into Class A shares after 6 years. Because of the effect
of the asset-based sales charge and the contingent deferred sales
charge on Class B and Class C shares, long-term Class B and Class C
shareholders could pay the economic equivalent of an amount greater
than the maximum front-end sales charge allowed under applicable
regulations. The automatic conversion of Class B shares is designed to
minimize the likelihood that this will occur. Please refer to "How to
Buy Shares" for more information.

These examples show the effect of expenses on an investment, but are
not meant to state or predict actual or expected costs or investment
returns of the Fund, all of which will vary.

A Brief Overview of the Fund

Some of the important facts about the Fund are summarized below, with
references to the section of this Prospectus where more complete
information can be found. You should carefully read the entire
Prospectus before making a decision about investing in the Fund. Keep
the Prospectus for reference after you invest, particularly for
information about your account, such as how to sell or exchange shares.

- What is The Fund's Investment Objective? The Fund's investment
objective is to seek high current income, preservation of capital and
maintenance of liquidity.

- What Does the Fund Invest In? The Fund primarily invests in U.S.
Government Securities, and repurchase agreements on such securities.
The Fund may write covered calls and use certain hedging instruments
approved by its Board of Trustees to try to manage investment risks.
U.S. Government Securities that the Fund invests include:
collateralized mortgage obligations ("CMO's") whose payment of
principal and interest generated by the pool of mortgages is passed
through to the Fund. CMO's may be issued in a variety of classes or
series ("tranches") that have different maturities and levels of
volatility. The Fund may also invest in "stripped" CMO's or mortgage-
backed securities. Stripped mortgage-backed securities usually have
two classes that receive different proportions of the interest and
principal payments. In certain cases, one class will receive all of
the interest payments, while the other class will receive all of the
principal value on maturity. These investments are more fully
explained in "Investment Objective and Policies," starting on page ___.

- Who Manages the Fund? The Fund's investment adviser (the
"Manager") is Oppenheimer Management Corporation. The Manager
(including a subsidiary) manages investment company portfolios having
over $30 billion in assets at March 31, 1995. The Fund's portfolio
manager, David A. Rosenberg, is primarily responsible for the selection
of the Fund's securities. The Manager is paid an advisory fee by the
Fund, based on its net assets. The Fund's Board of Trustees, elected
by shareholders, oversees the investment adviser and the portfolio
manager. Please refer to "How the Fund is Managed," starting on page
___ for more information about the Manager and its fees.

- How Risky is the Fund? 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 the Manager
tries to reduce risks by diversifying investments, by carefully
researching securities before they are purchased for the portfolio, and
in some cases by using hedging techniques, there is no guarantee of
success in achieving the Fund's objective and your shares may be worth
more or less than their original cost when you redeem them. Please
refer to "Investment Objective and Policies" starting on page ___ for a
more complete discussion of the Fund's investment risks.

- How Can I Buy Shares? You can buy shares through your dealer or
financial institution, or you can purchase shares directly through the
Distributor by completing an Application or by using an Automatic
Investment Plan under AccountLink. Please refer to "How To Buy Shares"
on page ___ for more details.

- Will I Pay a Sales Charge to Buy Shares? The Fund has three
classes of shares. Each class has the same investment portfolio, but
different expenses. Class A shares are offered with a front-end sales
charge, starting at 4.75% and reduced for larger purchases. Class B
shares and Class C shares are offered without a front-end sales charge,
but may be subject to a contingent deferred sales charge if redeemed
within 6 years or 12 months, respectively, of purchase. There is also
an annual asset-based sales charge on Class B and Class shares. Please
review "How To Buy Shares" starting on page ___ for more details,
including a discussion about factors you and your financial advisor
should consider in determining which class may be appropriate for you.

- How Can I Sell My Shares? Shares can be redeemed by mail or by
telephone call to the Transfer Agent on any business day, or through
your dealer. Please refer to "How To Sell Shares" on page ___. The
Fund also offers exchange privileges to other OppenheimerFunds,
described in "How to Exchange Shares" on page ____.

- How Has the Fund Performed? The Fund measures its performance by
quoting a yield, dividend yield, average annual total return and
cumulative total return, which measure historical performance. Those
returns can be compared to the yields and total returns (over similar
periods) of other funds. Of course, other funds may have different
objectives, investments, and levels of risk. The Fund's performance
can also be compared to U.S. Government bond indices, which we have
done on page___. Please remember that past performance does not
guarantee future results.

Financial Highlights

Effective August 16, 1985, the Fund became a long-term government
securities fund which has a fluctuating net asset value per share.
Prior to that date, the Fund invested only in short-term (maturing in
one year or less) U.S. Government Securities and maintained a fixed net
asset value of $1.00 per share. The table on the following pages
presents selected financial information about the Fund, including per
share data and expense ratios and other data based on the Fund's
average net assets. This information has been audited by KPMG Peat
Marwick LLP, the Fund's independent auditors, whose report on the
Fund's financial statements for the fiscal year ended June 30, 1994, is
included in the Statement of Additional Information, together with the
Fund's unaudited financial statements for the six months ended December
31, 1994. Class C shares were publicly offered only during a portion
of that period, commencing December 1, 1993. Class B shares were not
offered during the periods shown. Accordingly, no information on Class
B shares is reflected in the tables below or in the Fund's other
financial statements.

<TABLE>
<CAPTION>
Class A Class C
-----------------------------------------------------------------------------------------------
Year Period
Ended Ended
June 30, June 30,
1994 1993 1992 1991 1990 1989 1988 1987 1986(3) 1985(2) 1994(1)
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
<C> <C>
Per Share Operating Data:
Net asset value, beginning
of period $9.95 $9.73 $9.25 $9.24 $9.54 $9.59 $9.77 $10.17 $ 10.00 $10.00 $9.83
- -----------------------------------------------------------------------------------------------------------------------------
Income from investment
operations:
Net investment income .67 .68 .69 .83 .90 .91 .90 .84 .94 .77 .33
Net realized and unrealized
gain (loss) on investments,
options written (.74) .22 .48 .02 (.32) (.05) (.18) (.33) .38 -- (.64)
------- ------- ------- ------ ------ ------- ------- ------- ------- ------ ----
Total income (loss) from
investment operations (.07) .90 1.17 .85 .58 .86 .72 .51 1.32 .77 (.31)
- -----------------------------------------------------------------------------------------------------------------------------
Dividends and distributions
to shareholders:
Dividends from net
investment income (.64) (.68) (.69) (.84) (.88) (.91) (.90) (.85) (.93) (.77) (.33)
Dividends in excess of net
investment income (.01) -- -- -- -- -- -- -- -- -- --
Distributions from net
realized gain on investments
and options written -- -- -- -- -- -- -- (.06) (.22) -- --
Tax return of capital
distribuiton (.03) -- -- -- -- -- -- -- -- -- --
------- ------- ------- ------ ------ ------- ------- ------- ------- ------ ----
Total dividends and
distributions to shareholders (.68) (.68) (.69) (.84) (.88) (.91) (.90) (.91) (1.15) (.77) (.33)
- -----------------------------------------------------------------------------------------------------------------------------
Net asset value, end
of period $9.20 $9.95 $9.73 $9.25 $9.24 $9.54 $9.59 $9.77 $ 10.17 $ 10.00 $9.19
======= ======= ======= ====== ====== ========
======= ======= ======= ======= =====

<PAGE>

Investment Objective and Policies

Objective. The Fund's investment objective is to seek high current
income, preservation of capital and maintenance of liquidity through
investments in debt instruments issued or guaranteed by the U.S.
Government or its agencies or instrumentalities ("U.S. Government
Securities").

Investment Policies and Strategies. The Fund seeks its investment
objective by investing primarily in U.S. Government Securities, and
repurchase agreements on such securities. U.S. Government Securities
include the following:

- U.S. Treasury Obligations. These 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. These 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 as described
below, (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").
Securities of agencies and instrumentalities the securities
that are supported by the discretionary authority of the U.S.
Government to purchase such securities and which the Fund may
purchase under (c) above include: Federal Land Banks, Farmers
Home Administration, Central Bank for Cooperatives, Federal
Intermediate Credit Banks, Freddie Mac and Fannie Mae.

- Mortgage-Backed Securities. Also known as pass-through
securities, the homeowner's principal and interest payments
pass 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, Freddie Mac and Fannie Mae, that are
guaranteed and issued, respectively, by these agencies and
instrumentalities of the U.S. Government.

The Statement of Additional Information contains additional
information on U.S. Government Securities. The effective maturity of a
mortgage-backed security may be shortened by unscheduled or early
payment of principal and interest on the underlying mortgages, which
may affect the effective yield of such securities. 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 Fund
buys 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.

As a matter of fundamental policy, the Fund will invest at
least 80% of its total assets in U.S. Government Securities, under
normal market conditions. The Fund 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 of
Moody's Investors Service, Inc. or Standard & Poor's Corporation, or,
if unrated, judged by the Manager to be of comparable quality to debt
securities rated within such grades, although it is not a fundamental
policy that it do so. Such ratings are known as "investment grade"
ratings. The Fund is not obligated to dispose of securities if the
rating is reduced below investment grade. There is the increased
credit risk potential that issuers 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.

The Fund may invest in collateralized mortgage obligations
("CMOs") that are issued or guaranteed by the U.S. Government or its
agencies or instrumentalities, or 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. The principal value of certain CMO tranches may
be more volatile than other types of mortgage-related securities,
because of the possibility that the principal value of the CMO may be
prepaid earlier than the maturity of the CMO as a result of prepayments
of the underlying mortgage loans by the borrowers.

The Fund 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 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.

The Fund may also enter into "forward roll" transactions with
banks and dealers with respect to the mortgage-related securities in
which it can invest. These require the Fund to secure its obligation
in the transaction by segregating assets with its custodian bank equal
in amount to its obligation under the roll.

As with other bond investments, the value of U.S. Government
Securities and mortgage-backed securities will tend to rise when
interest rates fall and to fall when interest rates rise. 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. Because of these factors, the Fund's share value and yield
are not guaranteed and will fluctuate, and there can be no assurance
that the Fund's objective will be achieved. The magnitude of these
fluctuations generally will be greater when the average maturity of the
Fund's portfolio securities is longer. Because the yields on U.S.
Government Securities are generally lower than on corporate debt
securities, the Fund may attempt to increase the income it can earn
from U.S. Government Securities by writing covered call options against
them, when market conditions are appropriate. Writing covered call
options is explained below, under "Other Investment Techniques and
Strategies."

- Portfolio Turnover. A change in the securities held by the
Fund is known as "portfolio turnover." U.S. Government Securities may
be purchased or sold without regard to the length of time they have
been held, to attempt to take advantage of short-term differentials in
yields. While short-term trading increases portfolio turnover, the
Fund incurs little or no brokerage costs for U.S. Government
Securities. High portfolio turnover may affect the ability of the Fund
to qualify as a "regulated investment company" under the Internal
Revenue Code to obtain tax deductions for dividends and distributions
paid to shareholders. The Fund qualified in its last fiscal year and
intends to do so in the coming year, although it reserves the right not
to qualify.

- Can the Fund's Investment Objective and Policies Change?
The Fund has an investment objective, described above, as well as
investment policies it follows to try to achieve its objective.
Additionally, the Fund uses certain investment techniques and
strategies in carrying out those investment policies. The Fund's
investment policies and practices are not "fundamental" unless this
Prospectus or the Statement of Additional Information says that a
particular policy is "fundamental." The Fund's investment objective is
a fundamental policy.

Fundamental policies are those that cannot be changed without
the approval of a "majority" of the Fund's outstanding voting shares.
The term "majority" is defined in the Investment Company Act to be a
particular percentage of outstanding voting shares (and this term is
explained in the Statement of Additional Information). The Fund's Board
of Trustees may change non-fundamental policies without shareholder
approval, although significant changes will be described in amendments
to this Prospectus.

Other Investment Techniques and Strategies. The Fund may also use the
investment techniques and strategies described below. These techniques
involve certain risks. The Statement of Additional Information contains
more detailed information about these practices, including limitations
on their use that may help to reduce some of the risks.

- Loans of Portfolio Securities. To raise cash for liquidity
purposes, the Fund may lend its portfolio securities to brokers,
dealers and other financial institutions. These loans are limited to
not more than 25% of the Fund's total assets and are subject to certain
conditions described in the Statement of Additional Information. The
Fund presently does not intend to lend its portfolio securities, but if
it does, the value of securities loaned is not expected to exceed 5% of
the value of the Fund's total assets in the coming year.

- Repurchase Agreements. The Fund may enter into repurchase
agreements. There is no limit on the amount of the Fund's net assets
that may be subject to repurchase agreements of seven days or less.
The Fund will not 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. Repurchase agreements must be
fully collateralized. However, if the vendor fails to pay the resale
price on the delivery date, the Fund may experience costs in disposing
of the collateral and may experience losses if there is any delay in
doing so.

- Hedging. As described below, the Fund may purchase and sell
certain kinds of futures contracts, put and call options, and options
on futures, or enter into interest rate swap agreements. These are all
referred to as "hedging instruments." The Fund does not use hedging
instruments for speculative purposes, and has limits on the use of
them, described below. The hedging instruments the Fund may use are
described below and in greater detail in "Other Investment Techniques
and Strategies" in the Statement of Additional Information.

The Fund may buy and sell options and futures for a number of
purposes. It may do so to try to manage its exposure to the
possibility that the prices of its portfolio securities may decline, or
to establish a position in the securities market as a temporary
substitute for purchasing individual securities. It may do so to try
to manage its exposure to changing interest rates. Some of these
strategies, such as selling futures, buying puts and writing covered
calls, hedge the Fund's portfolio against price fluctuations.

Other hedging strategies, such as buying futures and call
options and writing put options, tend to increase the Fund's exposure
to the securities market. Writing put options or covered call options
may also provide income to the Fund for liquidity purposes or raise
cash for the Fund to distribute to shareholders.

- Futures. The Fund may buy and sell futures contracts that
relate to interest rates (these are referred to as Interest Rate
Futures). Interest Rate Futures are described in "Hedging With Options
and Futures Contracts" in the Statement of Additional Information.

- Put and Call Options. The Fund may buy and sell certain
kinds of put options (puts) and call options (calls).

The Fund may buy calls only on securities or Interest Rate
Futures, or to terminate its obligation on a call the Fund previously
wrote. The Fund may write (that is, sell) covered call options. When
the Fund writes a call, it receives cash (called a premium). The call
gives the buyer the ability to buy the investment on which the call was
written from the Fund at the call price during the period in which the
call may be exercised. If the value of the investment does not rise
above the call price, it is likely that the call will lapse without
being exercised, while the Fund keeps the cash premium (and the
investment).

The Fund may purchase put options. Buying a put on an
investment gives the Fund the right to sell the investment at a set
price to a seller of a put on that investment. The Fund can buy only
those puts that relate to (1) securities that the Fund owns, or (2)
Interest Rate Futures. The Fund can buy a put on an Interest Rate
Future whether or not the Fund owns the particular Future in its
portfolio. The Fund may write puts on securities or Interest Rate
Futures in an amount up to 50% of its total assets only if such puts
are covered by segregated liquid assets. In writing puts, there is a
risk that the Fund may be required to buy the underlying security at a
disadvantageous price.

The Fund may buy and sell puts and calls only if certain
conditions are met: (1) after the Fund writes a call, the Fund may
write calls on up to 100% of its total assets if the calls are listed
on a domestic securities or commodities exchange or quoted on the
Automated Quotation System of the National Association of Securities
Dealers, Inc. (NASDAQ); the limit is 10% of the Fund's total assets for
calls that are not listed or quoted; (2) calls the Fund buys or sells
must be listed on a securities or commodities exchange, or quoted on
NASDAQ or in the case of debt securities, traded in the over-the-
counter market; (3) each call the Fund writes must be "covered" while
it is outstanding: that means the Fund must own the investment on which
the call was written or it must own other securities that are
acceptable for the escrow arrangements required for calls; (4) the Fund
may write calls on Futures contracts it owns, but these calls must be
covered by securities or other liquid assets the Fund owns and
segregates to enable it to satisfy its obligations if the call is
exercised; (5) a call or put option may not be purchased if the value
of all of the Fund's put and call options would exceed 5% of the Fund's
total assets.

- Interest Rate Swaps. In an interest rate swap, the Fund
and another party exchange their right to receive or their obligation
to pay interest on a security. For example, they may swap a right to
receive floating rate payments for fixed rate payments. The Fund
enters into swaps only on securities it owns. The Fund may not enter
into swaps with respect to more than 25% of its total assets. Also,
the Fund will segregate liquid assets (such as cash or U.S. Government
securities) to cover any amounts it could owe under swaps that exceed
the amounts it is entitled to receive, and it will adjust that amount
daily, as needed. Income from interest rate swaps may be taxable.

- Hedging instruments can be volatile investments and may
involve special risks. In the broadest sense, exchange-traded options
and futures contracts and other hedging instruments the Fund can use
may be defined as "derivative" investments. In general, a derivative
investment is a specially-designed investment whose performance is
linked to the performance of another investment or security. The use
of hedging instruments requires special skills and knowledge of
investment techniques that are different than what is required for
normal portfolio management. If the Manager uses a hedging instrument
at the wrong time or judges market conditions incorrectly, hedging
strategies may reduce the Fund's return. The Fund could also experience
losses if the prices of its futures and options positions were not
correlated with its other investments or if it could not close out a
position because of an illiquid market for the future or option.

Options trading involves the payment of premiums and has
special tax effects on the Fund. There are also special risks in
particular hedging strategies. If a covered call written by the Fund
is exercised on an investment that has increased in value, the Fund
will be required to sell the investment at the call price and will not
be able to realize any profit if the investment has increased in value
above the call price. Interest rate swaps are subject to credit risks
(if the other party fails to meet its obligations) and also to interest
rate risks. The Fund could be obligated to pay more under its swap
agreements than it receives under them, as a result of interest rate
changes. These risks are described in greater detail in the Statement
of Additional Information.

- Derivative Investments. The Fund can invest in a number
of different kinds of "derivative investments." The Fund may use some
types of derivatives for hedging purposes, and may invest in others
because they offer the potential for increased income and principal
value. In general, a "derivative investment" is a specially-designed
investment whose performance is linked to the performance of another
investment or security, such as an option future or index. In the
broadest sense, derivative investments include exchange-traded options
and futures contracts (please refer to "Hedging," above).

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 Manager 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. Certain
derivative investments held by the Fund may trade in the over-the-
counter markets and may be illiquid. If that is the case, the Fund's
investment in them will be limited as discussed in the following
paragraph.

Other Investment Restrictions. The Fund has other investment
restrictions which are fundamental policies. Under these fundamental
policies, the Fund cannot do any of the following: (a) make loans;
however, the purchase of debt securities which the Fund's investment
policies and restrictions permit it to purchase, whether or not subject
to repurchase agreements, is permitted; the Fund may also lend
securities as described under "Loans of Portfolio Securities"; (b)
borrow money in excess of 10% of the value of its assets (and then only
as a temporary measure for extraordinary or emergency purposes) or make
any investment at a time during which such borrowing exceeds 5% of the
value of its assets; no assets of the Fund may be pledged, mortgaged or
hypothecated to secure a debt; the escrow arrangements involved in
options trading are not considered to involve such a mortgage,
hypothecation or pledge; or (c) enter into repurchase agreements
maturing in more than seven days, or invest in securities which are
restricted as to resale, securities which are not readily convertible
to cash ("illiquid securities") or securities for which market
quotations are not readily available if more than 10% of the Fund's
total assets would be invested in such securities.

All of the percentage restrictions described above and
elsewhere in this Prospectus apply only at the time the Fund purchases
a security, and the Fund need not dispose of a security merely because
the Fund's assets have changed or the security has increased in value
relative to the size of the Fund. There are other fundamental policies
discussed in the Statement of Additional Information.

How the Fund is Managed

Organization and History. The Fund was organized in 1982 as a
Massachusetts business trust. The Fund is an open-end, diversified
management investment company, with an unlimited number of authorized
shares of beneficial interest.

The Fund is governed by a Board of Trustees, which is
responsible under Massachusetts law for protecting the interests of
shareholders. The Trustees meet periodically throughout the year to
oversee the Fund's activities, review its performance, and review the
actions of the Manager. "Trustees and Officers of the Fund" in the
Statement of Additional Information names the Trustees and provides
more information about them and the officers of the Fund. Although the
Fund is not required by law to hold annual meetings, it may hold
shareholder meetings from time to time on important matters, and
shareholders have the right to call a meeting to remove a Trustee or to
take other action described in the Fund's Declaration of Trust.

The Board of Trustees has the power, without shareholder
approval, to divide unissued shares of the Fund into two or more
classes. The Board has done so, and the Fund currently has three
classes of shares, Class A, Class B and Class C. Each class has its
own dividends and distributions and pays certain expenses which may be
different for the different classes. Each class may have a different
net asset value. Each share has one vote at shareholder meetings, with
fractional shares voting proportionally. Only shares of a particular
class vote together on matters that affect that class alone. Shares
are freely transferrable.

The Manager and Its Affiliates. The Fund is managed by the Manager,
Oppenheimer Management Corporation, which chooses the Fund's
investments and handles its day-to-day business. The Manager carries
out its duties, subject to the policies established by the Board of
Trustees, under an Investment Advisory Agreement which states the
Manager's responsibilities. The agreement sets forth the fees paid by
the Fund to the Manager and describes the expenses that the Fund pays
to conduct its business.

The Manager has operated as an investment adviser since 1959.
The Manager (including an affiliate) currently manage investment
companies, including other OppenheimerFunds, with assets of more than
$30 billion as of March 31, 1995, and with more than 2.4 million
shareholder accounts. The Manager is owned by Oppenheimer Acquisition
Corp., a holding company that is owned in part by senior officers of
the Manager and controlled by Massachusetts Mutual Life Insurance
Company.

- Portfolio Manager. The Portfolio Manager of the Fund (who
is also a Vice President of the Fund) is David A. Rosenberg, a Vice
President of the Manager. He has been responsible for the day-to-day
management of the Fund's portfolio since January 3, 1994. Mr.
Rosenberg also serves as a portfolio manager of other OppenheimerFunds.
Previously he was an officer and portfolio manager for Delaware
Investment Advisors and for one of its mutual funds.

- Fees and Expenses. Under the investment advisory
agreement, the Fund pays the Manager the following annual fees, which
decline on additional assets as the Fund grows: 0.65% of the first
$200 million of aggregate 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 aggregate net assets over $800 million.

The Fund pays expenses related to its daily operations, such as
custodian fees, Trustees' fees, transfer agency fees, legal and
auditing costs. Those expenses are paid out of the Fund's assets and
are not paid directly by shareholders. However, those expenses reduce
the net asset value of shares, and therefore are indirectly borne by
shareholders through their investment. More information about the
investment advisory agreement and the other expenses paid by the Fund
is contained in the Statement of Additional Information.

There is also information about the Fund's brokerage policies
and practices in "Brokerage Policies of the Fund" in the Statement of
Additional Information. That section discusses how brokers and dealers
are selected for the Fund's portfolio transactions. Because the Fund
purchases most of its portfolio securities directly from the sellers
and not through brokers, it therefore incurs relatively little expenses
for brokerage. From time to time it may use brokers when buying
portfolio securities. When deciding which brokers to use, the Manager
is permitted by the investment advisory agreement to consider whether
brokers have sold shares of the Fund or any other funds for which the
Manager serves as investment adviser.

- The Distributor. The Fund's shares are sold through
dealers and brokers that have a sales agreement with Oppenheimer Funds
Distributor, Inc., a subsidiary of the Manager that acts as the
Distributor. The Distributor also distributes the shares of other
mutual funds managed by the Manager (the "OppenheimerFunds") and is
sub-distributor for funds managed by a subsidiary of the Manager.

- The Transfer Agent. The Fund's transfer agent is
Oppenheimer Shareholder Services, a division of the Manager, which acts
as the shareholder servicing agent for the Fund and the other
OppenheimerFunds on an "at-cost" basis. Shareholders should direct
inquiries about their accounts to the Transfer Agent at the address and
toll-free number shown below in this Prospectus or on the back cover.

Performance of the Fund

Explanation of Performance Terminology. The Fund uses the terms "total
return" and "yield" to illustrate its performance. The performance of
each class of shares is shown separately because each class of shares
will usually have different performance as a result of the different
kinds of expenses each class bears. These returns measure the
performance of a hypothetical account in the Fund over various periods,
and do not show the performance of each shareholder's account (which
will vary if dividends are received in cash, or shares are sold or
purchased). The Fund's performance data may help you see how well your
investment has done over time and to compare it to other funds or
market indices.

It is important to understand that the Fund's yields and total
returns represent past performance and should not be considered to be
predictions of future returns or performance. This performance data is
described below, but more detailed information about how total returns
and yields are calculated is contained in the Statement of Additional
Information, which also contains information about other ways to
measure and compare the Fund's performance. The Fund's investment
performance will vary, depending on market conditions, the composition
of the portfolio, expenses and which class of shares you purchase.

- Total Returns. There are different types of "total
returns" used to measure the Fund's performance. Total return is the
change in value of a hypothetical investment in the Fund over a given
period, assuming that all dividends and capital gains distributions are
reinvested in additional shares. The cumulative total return measures
the change in value over the entire period (for example, ten years). An
average annual total return shows the average rate of return for each
year in a period that would produce the cumulative total return over
the entire period. However, average annual total returns do not show
the Fund's actual year-by-year performance.

When total returns are quoted for Class A shares, they reflect
the payment of the maximum initial sales charge. When total returns
are shown for Class B shares, they reflect the effect of the contingent
deferred sales charge that applies to the period for which total return
is shown. When total returns are shown for a one-year period for Class
C shares, they reflect the effect of the contingent deferred sales
charge. Total returns may also be shown based on the change in net
asset value, without considering the effect of either the front-end or
the contingent deferred sales charge, as applicable, and those returns
would be reduced if sales charges were deducted.

- Yield. Each class of shares calculates its yield by
dividing the annualized net investment income per share on the
portfolio during a 30-day period by the maximum offering price on the
last day of the period. The yield of each class will differ because of
the different expenses of each class of shares. The yield data
represents a hypothetical investment return on the portfolio, and does
not measure an investment return based on dividends actually paid to
shareholders. To show that return, a dividend yield may be calculated.
Dividend yield is calculated by dividing the dividends of a Class
derived from net investment income during a stated period by the
maximum offering price on the last day of the period. Yields and
dividend yields for Class A shares reflect the deduction of the maximum
initial sales charge, but may also be shown based on the Fund's net
asset value per share. Yields for Class B and Class C shares do not
reflect the deduction of the contingent deferred sales charge.

How Has the Fund Performed? Below is a discussion by the Manager of the
Fund's performance during its last fiscal year ended June 30, 1994,
followed by a graphical comparison of the Fund's performance to an
appropriate broad-based market index.

- Management's Discussion of Performance. During the Fund's
fiscal year ended June 30, 1994, the Federal Reserve increased U.S.
short-term interest rates as a pre-emptive strike against inflation.
In the beginning of the Fund's fiscal year the Manager began to
position the Fund's portfolio in response to an expected rise in
interest rates by shortening the maturity of the U.S. Treasury portion
of the portfolio and reducing the Fund's mortgage holdings. During the
latter part of the fiscal year, with the expectation that interest
rates would not rise significantly from rates then in effect, the
Manager added higher yielding bonds to the Fund's portfolio, focusing
on issues that could add yield at attractive prices.

- Comparing the Fund's Performance to the Market. The chart
below shows the performance of a hypothetical $10,000 investment in
each Class of shares of the Fund held until June 30, 1994; in the case
of Class A shares, since August 16, 1985 (the date on which the Fund'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 the Fund's
fiscal year ended June 30, 1994. 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 The Fund)
(Graph With Class C Shares Of The Fund)

Past performance is not predictive of future performance.

Average Annual Total Returns of Class A Shares Of The Fund at
6/30/94(1)

1-Year 5-Year Life
- -5.87% 6.31% 7.64%

Cumulative Total Return of Class C Shares Of The Fund at 6/30/94(2)

Life
- -4.09%
_________________________________________
(1) The inception date of the Fund (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) Reflects cumulative total return from the date that Class C shares
of the Fund were first publicly offered (12/1/93), and is not
annualized.

The Fund'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, the Fund's performance reflects the effect
of Fund business and operating expenses. While index comparisons may
be useful to provide a benchmark for the Fund's performance, it should
be noted that the Fund'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.

ABOUT YOUR ACCOUNT

How to Buy Shares

Classes of Shares. The Fund offers investors three different classes of
shares. The different classes of shares represent investments in the
same portfolio of securities but are subject to different expenses and
will likely have different share prices.

- Class A Shares. When you buy Class A shares, you pay an
initial sales charge (on investments up to $1 million). If you purchase
Class A shares as part of an investment of at least $1 million in
shares of one or more OppenheimerFunds you will not pay an initial
sales charge, but if you sell any of those shares within 18 months
after your purchase, you may pay a contingent deferred sales charge,
which will vary depending on the amount you invested. Sales charges
are described below.

- Class B Shares. If you buy Class B shares, you pay no sales
charge at the time of purchase, but if you sell your shares within six
years of buying them, you will normally pay a contingent deferred sales
charge that varies depending on how long you owned your shares.

- Class C Shares. If you buy Class C shares, you pay no sales
charge at the time of purchase, but if you sell your shares within 12
months of buying them, you will normally pay a contingent deferred
sales charge of 1%.

Which Class of Shares Should You Choose? Once you decide that the Fund
is an appropriate investment for you, the decision as to which class of
shares is best suited to your needs depends on a number of factors
which you should discuss with your financial advisor. The Fund's
operating costs that apply to a class of shares and the effect of the
different types of sales charges on your investment will vary your
investment results over time. The most important factors are how much
you plan to invest, how long you plan to hold your investment, and
whether you anticipate exchanging your shares for shares of other
OppenheimerFunds (not all of which offer Class B or Class C shares). If
your goals and objectives change over time and you plan to purchase
additional shares, you should re-evaluate those factors to see if you
should consider another class of shares.

In the following discussion, to help provide you and your
financial advisor with a framework in which to choose a class, we have
made some assumptions using a hypothetical investment in the Fund. We
used the sales charge rates that apply to each class, and considered
the effect of the asset-based sales charges on Class B and Class C
expenses (which will affect your investment return). For the sake of
comparison, we have assumed that there is a 10% rate of appreciation in
your investment each year. Of course, the actual performance of your
investment cannot be predicted and will vary, based on the Fund's
actual investment returns, and the operating expenses borne by each
class of shares, and which class of shares you invest in. The factors
discussed below are not intended to be investment advice, guidelines or
recommendations, because each investor's financial considerations are
different. The assumptions we have made in assessing the factors to
consider in purchasing a particular class of shares assume that you
will purchase only one class of shares, and not a combination of shares
of different classes.

- How Long Do You Expect to Hold Your Investment? While future
financial needs cannot be predicted with certainty, knowing how long
you expect to hold your investment will assist you in selecting the
appropriate class of shares. The effect of the sales charge over time,
using our assumptions, will generally depend on the amount invested.
The effect of class-based expenses will also depend on how much you
invest.

Investing for the Short Term. If you have a short term
investment horizon (that is, you plan to hold your shares less than six
years), you should probably consider purchasing Class C shares rather
than Class A or Class B shares. This is because there is no initial
sales charge on Class C shares, and the contingent deferred sales
charge does not apply to amounts you sell after holding them one year.

However, if you plan to invest more than $250,000 for a period
of less than six years, Class C shares might not be as advantageous as
Class A shares. This is because the annual asset-based sales charge on
Class C shares (and the contingent deferred sales charge that applies
if you redeem Class C shares within a year of purchase) might have a
greater economic impact on your account during that period than the
initial sales charge that would apply if Class A shares were purchased
instead at the applicable reduced Class A sales charge rate.

And for most investors who invest $500,000 or more, in most
cases Class A shares will be the more advantageous choice than Class B
shares, no matter how long you intend to hold your shares. For that
reason, the Distributor normally will not accept purchase orders of
$500,000 or more of Class B shares from a single investor. For the same
reason, the Distributor will not accept purchase orders of $1 million
or more of Class C shares from a single investor.

Investing for the Longer Term. If you are investing for the
longer term, for example, for retirement, and do not expect to need
access to your money for six years or more, Class A shares will likely
be more advantageous than Class B or Class C shares. This is because
of the effect of expected lower expenses for Class A shares and the
reduced initial sales charges available for larger investments in Class
A shares under the Fund's Right of Accumulation. Class B shares may be
appropriate for smaller investments held for the longer term because
there is no initial sales charge on Class B shares, and Class B shares
held six years following their purchase convert into Class A shares.

Of course all of these examples are based on approximations of
the effect of current sales charges and expenses on a hypothetical
investment over time, using the assumed annual performance return
stated above, and you should analyze your options carefully.

- Are There Differences in Account Features That Matter To You?
Because some features (such as checkwriting) may not be available to
Class B or C shareholders, or other features (such as Automatic
Withdrawal Plans) may not be advisable (because of the effect of the
contingent deferred sales charge in non-retirement accounts) for Class
B or Class C shareholders, you should carefully review how you plan to
use your investment account before deciding which class of shares to
buy. Additionally, dividends payable to Class B and Class C
shareholders will be reduced by the additional expenses borne by those
classes that are not borne by Class A, such as the Class B and Class C
asset-based sales charges described below and in the Statement of
Additional Information.

Also, because not all of the OppenheimerFunds currently offer
Class B and Class C shares, and because exchanges are permitted only to
the same class of shares in another of the OppenheimerFunds, you should
consider how important the exchange privilege is likely to be for you.

- How Does It Affect Payments to My Broker? A salesperson,
such as a broker, or any other person who is entitled to receive
compensation for selling Fund shares, may receive different
compensation for selling one class than for selling another class. It
is important that investors understand that the purpose of the Class B
and Class C contingent deferred sales charges is the same as the
purpose of the front-end sales charge on Class A shares: to reimburse
the Distributor for commissions it pays to dealers and financial
institutions for selling shares.

How Much Must You Invest? You can open a Fund account with a minimum
initial investment of $1,000 and make additional investments at any
time with as little as $25. There are reduced minimum investments under
special investment plans:

With Asset Builder Plans, Automatic Exchange Plans,
403(b)(7) custodial plans and military allotment plans, you can make
initial and subsequent investments for as little as $25; and subsequent
purchases of at least $25 can be made by telephone through AccountLink.

Under pension and profit-sharing plans and Individual
Retirement Accounts (IRAs), you can make an initial investment of as
little as $250 (if your IRA is established under an Asset Builder Plan,
the $25 minimum applies), and subsequent investments may be as little
as $25.

There is no minimum investment requirement if you are
buying shares by reinvesting dividends from the Fund or other
OppenheimerFunds (a list of them appears in the Statement of Additional
Information, or you can ask your dealer or call the Transfer Agent), or
by reinvesting distributions from unit investment trusts that have made
arrangements with the Distributor.

- How Are Shares Purchased? You can buy shares several ways --
through any dealer, broker or financial institution that has a sales
agreement with the Distributor, or directly through the Distributor, or
automatically from your bank account through an Asset Builder Plan
under the OppenheimerFunds AccountLink service. When you buy shares, be
sure to specify Class A, Class B or Class C shares. If you do not
choose, your investment will be made in Class A shares.

- Buying Shares Through Your Dealer. Your dealer will place
your order with the Distributor on your behalf.

- Buying Shares Through the Distributor. Complete an
OppenheimerFunds New Account Application and return it with a check
payable to "Oppenheimer Funds Distributor, Inc." Mail it to P.O. Box
5270, Denver, Colorado 80217. If you don't list a dealer on the
application, the Distributor will act as your agent in buying the
shares. However, we recommend that you discuss your investment first
with a financial advisor, to be sure it is appropriate for you.

- Buying Shares Through OppenheimerFunds AccountLink. You
can use AccountLink to link your Fund account with an account at a U.S.
bank or other financial institution that is an Automated Clearing House
(ACH) member to transmit funds electronically to purchase shares, to
have the transfer agent send redemption proceeds, or to transmit
dividends and distributions.

Shares are purchased for your account on the regular business
day the Distributor is instructed by you to initiate the ACH transfer
to buy shares. You can provide those instructions automatically, under
an Asset Builder Plan, described below, or by telephone instructions
using OppenheimerFunds PhoneLink, also described below. You should
request AccountLink privileges on the application or dealer settlement
instructions used to establish your account. Please refer to
"AccountLink" below for more details.

- Asset Builder Plans. You may purchase shares of the Fund
(and up to four other OppenheimerFunds) automatically each month from
your account at a bank or other financial institution under an Asset
Builder Plan with AccountLink. Details are on the Application and in
the Statement of Additional Information.

- At What Price Are Shares Sold? Shares are sold at the
public offering price based on the net asset value (and any initial
sales charge that applies) that is next determined after the
Distributor receives the purchase order in Denver. In most cases, to
enable you to receive that day's offering price, the Distributor must
receive your order by the time of day The New York Stock Exchange
closes, which is normally 4:00 P.M., New York time, but may be earlier
on some days (all references to time in this Prospectus mean "New York
time"). The net asset value of each class of shares is determined as
of that time on each day The New York Stock Exchange is open (which is
a "regular business day").

If you buy shares through a dealer, the dealer must receive
your order by the close of The New York Stock Exchange on a regular
business day, and transmit it to the Distributor so that it is received
before the Distributor's close of business that day, which is normally
5:00 P.M. The Distributor may reject any purchase order for the Fund's
shares, in its sole discretion.

Class A Shares. Class A shares are sold at their offering price, which
is normally net asset value plus an initial sales charge. However, in
some cases, described below, where purchases are not subject to an
initial sales charge, the offering price may be net asset value. In
some cases, reduced sales charges may be available, as described below.
Out of the amount you invest, the Fund receives the net asset value to
invest for your account. The sales charge varies depending on the
amount of your purchase. A portion of the sales charge may be retained
by the Distributor and allocated to your dealer. The current sales
charge rates and commissions paid to dealers and brokers are as
follows:

_______________________________________________________________________
Front-End Sales Front-End Sales
Charge as a Charge as a Commission as
Percentage of Percentage of Percentage of
Amount of Purchase Offering Price Amount Invested Offering
Price
_______________________________________________________________________
Less than $50,000 4.75% 4.98% 4.00%

$50,000 or more but
less than $100,000 4.50% 4.71% 3.75%

$100,000 or more but
less than $250,000 3.50% 3.63% 2.75%

$250,000 or more but
less than $500,000 2.50% 2.56% 2.00%

$500,000 or more but
less than $1 million 2.00% 2.04% 1.60%

$1 million or more None* None* None*
_______________________________________________________________________

The Distributor reserves the right to reallow the entire commission to
dealers. If that occurs, the dealer may be considered an "underwriter"
under Federal securities laws.

- Class A Contingent Deferred Sales Charge. There is no
initial sales charge on purchases of Class A shares of any one or more
OppenheimerFunds aggregating $1 million or more (shares of any
OppenheimerFunds that offer only one class of shares that has no class
designation are considered "Class A" shares for this purpose). The
Distributor pays dealers of record commissions on such purchases in an
amount equal to the sum of 1.0% of the first $2.5 million, plus 0.50%
of the next $2.5 million, plus 0.25% of share purchases over $5
million. That commission will be paid only on the amount of those
purchases in excess of $1 million that were not previously subject to a
front-end sales charge and dealer commission.

If you redeem any of those shares within 18 months of the end
of the calendar month of their purchase, a contingent deferred sales
charge (called the "Class A contingent deferred sales charge") will be
deducted from the redemption proceeds. That sales charge will be equal
to 1.0% of the aggregate net asset value of either (1) the redeemed
shares (not including shares purchased by reinvestment of dividends or
capital gain distributions) or (2) the original cost of the shares,
whichever is less. However, the Class A contingent deferred sales
charge will not exceed the aggregate commissions the Distributor paid
to your dealer on all Class A shares of all OppenheimerFunds you
purchased subject to the Class A contingent deferred sales charge.

In determining whether a contingent deferred sales charge is
payable, the Fund will first redeem shares that are not subject to the
sales charge, including shares purchased by reinvestment of dividends
and capital gains, and then will redeem other shares in the order that
you purchased them. The Class A contingent deferred sales charge is
waived in certain cases described in "Waivers of Class A Sales Charges"
below.

No Class A contingent deferred sales charge is charged on
exchanges of shares under the Fund's Exchange Privilege (described
below). However, if the shares acquired by exchange are redeemed
within 18 months of the end of the calendar month of the purchase of
the exchanged shares, the sales charge will apply.

- Special Arrangements With Dealers. The Distributor may
advance up to 13 months' commissions to dealers that have established
special arrangements with the Distributor for Asset Builder Plans for
their clients. Dealers whose sales of Class A shares of
OppenheimerFunds (other than money market funds) under
OppenheimerFunds-sponsored 403(b)(7) custodial plans exceed $5 million
per year (calculated per quarter), will receive monthly one-half of the
Distributor's retained commissions on those sales, and if those sales
exceed $10 million per year, those dealers will receive the
Distributor's entire retained commission on those sales.

Reduced Sales Charges for Class A Share Purchases. You may be eligible
to buy Class A shares at reduced sales charge rates in one or more of
the following ways:

- Right of Accumulation. To qualify for the lower sales
charge rates that apply to larger purchases of Class A shares, you and
your spouse can add together Class A shares you purchase for your
individual accounts, or jointly, or on behalf of your children who are
minors, under trust or custodial accounts. A fiduciary can cumulate
shares purchased for a trust, estate or other fiduciary account
(including one or more employee benefit plans of the same employer)
that has multiple accounts.

Additionally, you can add together current purchases of Class A
shares of the Fund and other OppenheimerFunds. To reduce the sales
charge rate for current purchases of Class A shares, you can also
include Class A shares of OppenheimerFunds you previously purchased
subject to a sales charge, provided that you still hold your investment
in one of the OppenheimerFunds. The value of those shares will be based
on the greater of the amount you paid for the shares or their current
value (at offering price). The OppenheimerFunds are listed in "Reduced
Sales Charges" in the Statement of Additional Information, or a list
can be obtained from the Transfer Agent. The reduced sales charge will
apply only to current purchases and must be requested when you buy your
shares.

Shareholders of the Fund who acquired (and still hold) Fund
shares as a result of a reorganization of the Fund with Advance America
Funds, Inc. on October 18, 1991, and who held shares of Advance America
Funds, Inc. on March 30, 1990, may purchase shares of the Fund at a
maximum sales charge of 4.50%

- Letter of Intent. Under a Letter of Intent, you may
purchase Class A shares of the Fund and other OppenheimerFunds during a
13-month period at the reduced sales charge rate that applies to the
aggregate amount of the intended purchases, including purchases made up
to 90 days before the date of the Letter. More information is
contained in the Application and in "Reduced Sales Charges" in the
Statement of Additional Information.

- Waivers of Class A Sales Charges. No sales charge is
imposed on sales of Class A shares to the following investors: (1) the
Manager or its affiliates; (2) present or former officers, directors,
trustees and employees (and their "immediate families" as defined in
"Reduced Sales Charges" in the Statement of Additional Information) of
the Fund, the Manager and its affiliates, and retirement plans
established by them for their employees; (3) registered management
investment companies, or separate accounts of insurance companies
having an agreement with the Manager or the Distributor for that
purpose; (4) dealers or brokers that have a sales agreement with the
Distributor, if they purchase shares for their own accounts or for
retirement plans for their employees; (5) employees and registered
representatives (and their spouses) of dealers or brokers described
above or financial institutions that have entered into sales
arrangements with such dealers or brokers (and are identified to the
Distributor) or with the Distributor; the purchaser must certify to the
Distributor at the time of purchase that the purchase is for the
purchaser's own account (or for the benefit of such employee's spouse
or minor children); (6) dealers, brokers or registered investment
advisers that have entered into an agreement with the Distributor
providing specifically for the use of shares of the Fund in particular
investment products made available to their clients; and (7) dealers,
brokers or registered investment advisers that have entered into an
agreement with the Distributor to sell shares to defined contribution
employee retirement plans for which the dealer, broker or investment
adviser provides administrative services.

Additionally, no sales charge is imposed on shares that are
(a) issued in plans of reorganization, such as mergers, asset
acquisitions and exchange offers, to which the Fund is a party, or (b)
purchased by the reinvestment of loan repayments by a participant in a
retirement plan for which the Manager or its affiliates acts as
sponsor, (c) purchased by the reinvestment of dividends or other
distributions reinvested from the Fund or other OppenheimerFunds (other
than Oppenheimer Cash Reserves) or unit investment trusts for which
reinvestment arrangements have been made with the Distributor, or (d)
purchased and paid for with the proceeds of shares redeemed in the
prior 12 months from a mutual fund on which an initial sales charge or
contingent deferred sales charge was paid (other than a fund managed by
the Manager or any of its affiliates); this waiver must be requested
when the purchase order is placed for your shares of the Fund, and the
Distributor may require evidence of your qualification for this waiver.
There is a further discussion of this policy in "Reduced Sales Charges"
in the Statement of Additional Information.

The Class A contingent deferred sales charge does not apply to
purchases of Class A shares at net asset value as described above and
is also waived if shares are redeemed in the following cases: (1)
retirement distributions or loans to participants or beneficiaries from
qualified retirement plans, deferred compensation plans or other
employee benefit plans ("Retirement Plans"), (2) returns of excess
contributions made to Retirement Plans, (3) Automatic Withdrawal Plan
payments that are limited to no more than 12% of the original account
value annually, (4) involuntary redemptions of shares by operation of
law or under the procedures set forth in the Fund's Declaration of
Trust or adopted by the Board of Trustees and (5) if, at the time an
order is placed for Class A shares that would otherwise be subject to
the Class A contingent deferred sales charge, the dealer agrees to
accept the dealer's portion of the commission payable on the sale in
installments of 1/18th of the commission per month (with no further
commission payable if the shares are redeemed within 18 months of
purchase).

- Service Plan for Class A Shares. The Fund has adopted a
Service Plan for Class A shares to reimburse the Distributor for a
portion of its costs incurred in connection with the personal service
and maintenance of accounts that hold Class A shares. Reimbursement is
made quarterly at an annual rate that may not exceed 0.25% of the
average annual net assets of Class A shares of the Fund. The
Distributor uses all of those fees to compensate dealers, brokers,
banks and other financial institutions quarterly for providing personal
service and maintenance of accounts of their customers that hold Class
A shares and to reimburse itself (if the Fund's Board of Trustees
authorizes such reimbursements, which it has not yet done) for its
other expenditures under the Plan.

Services to be provided include, among others, answering
customer inquiries about the Fund, assisting in establishing and
maintaining accounts in the Fund, making the Fund's investment plans
available and providing other services at the request of the Fund or
the Distributor. Payments are made by the Distributor quarterly at an
annual rate not to exceed 0.25% of the average annual net assets of
Class A shares held in accounts of the dealer or its customers. The
payments under the Plan increase the annual expenses of Class A shares.
For more details, please refer to "Distribution and Service Plans" in
the Statement of Additional Information.

Class B Shares. Class B shares are sold at net asset value per share
without an initial sales charge. However, if Class B shares are
redeemed within 6 years of their purchase, a contingent deferred sales
charge will be deducted from the redemption proceeds. That sales
charge will not apply to shares purchased by the reinvestment of
dividends or capital gains distributions. The charge will be assessed
on the lesser of the net asset value of the shares at the time of
redemption or the original purchase price. The contingent deferred
sales charge is not imposed on the amount of your account value
represented by the increase in net asset value over the initial
purchase price (including increases due to the reinvestment of
dividends and capital gains distributions). The Class B contingent
deferred sales charge is paid to the Distributor to reimburse its
expenses of providing distribution-related services to the Fund in
connection with the sale of Class B shares.

To determine whether the contingent deferred sales charge
applies to a redemption, the Fund redeems shares in the following
order: (1) shares acquired by reinvestment of dividends and capital
gains distributions, (2) shares held for over 6 years, and (3) shares
held the longest during the 6-year period.

The amount of the contingent deferred sales charge will depend
on the number of years since you invested and the dollar amount being
redeemed, according to the following schedule:

Contingent Deferred
Sales Charge
Years Since Beginning of Month In on Redemptions in that Year
Which Purchase Order Was Accepted (As % of Amount Subject to
Charge)
0 - 1 5.0%
1 - 2 4.0%
2 - 3 3.0%
3 - 4 3.0%
4 - 5 2.0%
5 - 6 1.0%
6 and following None

In the table, a "year" is a 12-month period. All purchases are
considered to have been made on the first regular business day of the
month in which the purchase was made.

- Waivers of Class B Sales Charge. The Class B contingent
deferred sales charge will be waived if the shareholder requests it for
any of the following redemptions: (1) distributions to participants or
beneficiaries from Retirement Plans, if the distributions are made (a)
under an Automatic Withdrawal Plan after the participant reaches age
59-1/2, as long as the payments are no more than 10% of the account
value annually (measured from the date the Transfer Agent receives the
request), or (b) following the death or disability (as defined in the
Internal Revenue Code) of the participant or beneficiary; (2)
redemptions from accounts other than Retirement Plans following the
death or disability of the shareholder (the disability must have
occurred after the account was established, and you must provide
evidence of a determination of disability by the Social Security
Administration), (3) returns of excess contributions to Retirement
Plans, and (4) distributions from IRAs including SEP-IRAs and SAR/SEP
accounts before the participant is age 591/2, and distributions from
403(b)(7) custodial plans or pension or profit sharing plans before the
participant is age 591/2 but only after the participant has separated
from service if the distributions are made in substantially equal
periodic payments over the life (or life expectancy) of the participant
or the joint lives (or joint life and last survivor expectancy) of the
participant and the participant's designated beneficiary (and the
distributions must comply with other requirements for such
distributions under the Internal Revenue Code and may not exceed 10% of
the account value annually, measured from the date the Transfer Agent
receives the request).

The contingent deferred sales charge is also waived on Class B
shares in the following cases: (i) shares sold to the Manager or its
affiliates; (ii) shares sold to registered management investment
companies or separate accounts of insurance companies having an
agreement with the Manager or the Distributor for that purpose; (iii)
shares issued in plans of reorganization to which the Fund is a party;
and (iv) shares redeemed in involuntary redemptions as described below.
Further details about this policy are contained in "Reduced Sales
Charges" in the Statement of Additional Information.

- Automatic Conversion of Class B Shares. 72 months after you
purchase Class B shares, those shares will automatically convert to
Class A shares. This conversion feature relieves Class B shareholders
of the asset-based sales charge that applies to Class B shares under
the Class B Distribution and Service Plan, described below. The
conversion is based on the relative net asset value of the two classes,
and no sales load or other charge is imposed. When Class B shares
convert, any other Class B shares that were acquired by the
reinvestment of dividends and distributions on the converted shares
will also convert to Class A shares. The conversion feature is subject
to the continued availability of a tax ruling described in "Alternative
Sales Arrangements - Class A and Class B Shares" in the Statement of
Additional Information.

- Distribution and Service Plan for Class B Shares. The Fund
has adopted a Distribution and Service Plan for Class B shares to
compensate the Distributor for distributing Class B shares and
servicing accounts. Under the Plan, the Fund pays the Distributor an
annual "asset-based sales charge" of 0.75% per year on Class B shares
that are outstanding for 6 years or less. The Distributor also
receives a service fee of 0.25% per year. Both fees are computed on
the average annual net assets of Class B shares, determined as of the
close of each regular business day. The asset-based sales charge allows
investors to buy Class B shares without a front-end sales charge while
allowing the Distributor to compensate dealers that sell Class B
shares.

The Distributor uses the service fee to compensate dealers for
providing personal services for accounts that hold Class B shares.
Those services are similar to those provided under the Class A Service
Plan, described above. The asset-based sales charge and service fees
increase Class B expenses by 1.00% of average net assets per year.

The Distributor pays the 0.25% service fee to dealers in
advance for the first year after Class B shares have been sold by the
dealer. After the shares have been held for a year, the Distributor
pays the fee on a quarterly basis. The Distributor pays sales
commissions of 3.75% of the purchase price to dealers from its own
resources at the time of sale. The total up-front commission paid by
the Distributor to the dealer at the time of sales of Class C shares is
1.00% of the purchase price. The Distributor plans to pay the asset-
based sales charge as an ongoing commission to the dealer on Class C
shares that have been outstanding for a year or more.

The Fund pays the asset-based sales charge to the Distributor
for its services rendered in connection with the distribution of Class
B shares. Those payments are at a fixed rate which is not related to
the Distributor's expenses. The services rendered by the Distributor
include paying and financing the payment of sales commissions, service
fees, and other costs of distributing and selling Class B shares. If
the Plan is terminated by the Fund, the Board of Trustees may allow the
Fund to continue payments of the asset-based sales charge to the
Distributor for distributing Class B shares before the Plan was
terminated.

Class C Shares. Class C shares are sold at net asset value per share
without an initial sales charge. However, if Class C shares are
redeemed within 12 months of their purchase, a contingent deferred
sales charge of 1.0% will be deducted from the redemption proceeds.
That sales charge will not apply to shares purchased by the
reinvestment of dividends or capital gains distributions. The charge
will be assessed on the lesser of the net asset value of the shares at
the time of redemption or the original purchase price. The contingent
deferred sales charge is not imposed on the amount of your account
value represented by the increase in net asset value over the initial
purchase price (including increases due to the reinvestment of
dividends and capital gains distributions). The Class C contingent
deferred sales charge is paid to the Distributor to reimburse its
expenses of providing distribution-related services to the Fund in
connection with the sale of Class C shares.

To determine whether the contingent deferred sales charge
applies to a redemption, the Fund redeems shares in the following
order: (1) shares acquired by reinvestment of dividends and capital
gains distributions, (2) shares held for over 12 months, and (3) shares
held the longest during the 12-month period.

- Waivers of Class C Sales Charge. The Class C contingent
deferred sales charge will be waived if the shareholder requests it for
any of the redemptions or circumstances described above under "Waivers
of Class B Sales Charge."

- Distribution and Service Plan for Class C Shares. The Fund
has adopted a Distribution and Service Plan for Class C shares to
compensate the Distributor for distributing Class C shares and
servicing accounts. Under the Plan, the Fund pays the Distributor an
annual "asset-based sales charge" of 0.75% per year on Class C shares.
The Distributor also receives a service fee of 0.25% per year. Both
fees are computed on the average annual net assets of Class C shares,
determined as of the close of each regular business day. The asset-
based sales charge allows investors to buy Class C shares without a
front-end sales charge while allowing the Distributor to compensate
dealers that sell Class C shares.

The Distributor uses the service fee to compensate dealers for
providing personal services for accounts that hold Class C shares.
Those services are similar to those provided under the Class A Service
Plan, described above. The asset-based sales charge and service fees
increase Class C expenses by 1.00% of average net assets per year.

The Distributor pays the 0.25% service fee to dealers in
advance for the first year after Class C shares have been sold by the
dealer. After the shares have been held for a year, the Distributor
pays the fee on a quarterly basis. The Distributor pays sales
commissions of 0.75% of the purchase price to dealers from its own
resources at the time of sale. The total up-front commission paid by
the Distributor to the dealer at the time of sale of Class C shares is
1.00% of the purchase price. The Distributor plans to pay the asset-
based sales charge as an ongoing commission to the dealer on Class C
shares that have been outstanding for a year or more.

The Fund pays the asset-based sales charge to the Distributor
for its services rendered in connection with the distribution of Class
C shares. Those payments are at a fixed rate which is not related to
the Distributor's expenses. The services rendered by the Distributor
include paying and financing the payment of sales commissions, service
fees, and other costs of distributing and selling Class C shares,
including compensating personnel of the Distributor who support
distribution of Class C shares. If the Plan is terminated by the Fund,
the Board of Trustees may allow the Fund to continue payments of the
asset-based sales charge to the Distributor for distributing Class C
shares before the Plan was terminated.

Special Investor Services

AccountLink. OppenheimerFunds AccountLink links your Fund account to
your account at your bank or other financial institution to enable you
to send money electronically between those accounts to perform a number
of types of account transactions. These include purchases of shares by
telephone (either through a service representative or by PhoneLink,
described below), automatic investments under Asset Builder Plans, and
sending dividends and distributions or Automatic Withdrawal Plan
payments directly to your bank account. Please refer to the Application
for details or call the Transfer Agent for more information.

AccountLink privileges must be requested on the Application you
use to buy shares, or on your dealer's settlement instructions if you
buy your shares through your dealer. After your account is established,
you can request AccountLink privileges on signature-guaranteed
instructions to the Transfer Agent. AccountLink privileges will apply
to each shareholder listed in the registration on your account as well
as to your dealer representative of record unless and until the
Transfer Agent receives written instructions terminating or changing
those privileges. After you establish AccountLink for your account, any
change of bank account information must be made by signature-guaranteed
instructions to the Transfer Agent signed by all shareholders who own
the account.

- Using AccountLink to Buy Shares. Purchases may be made by
telephone only after your account has been established. To purchase
shares in amounts up to $250,000 through a telephone representative,
call the Distributor at 1-800-852-8457. The purchase payment will be
debited from your bank account.

- PhoneLink. PhoneLink is the OppenheimerFunds automated
telephone system that enables shareholders to perform a number of
account transactions automatically using a touch-tone phone. PhoneLink
may be used on already-established Fund accounts after you obtain a
Personal Identification Number (PIN), by calling the special PhoneLink
number: 1-800-533-3310.

- Purchasing Shares. You may purchase shares in amounts up
to $100,000 by phone, by calling 1-800-533-3310. You must have
established AccountLink privileges to link your bank account with the
Fund, to pay for these purchases.

- Exchanging Shares. With the OppenheimerFunds Exchange
Privilege, described below, you can exchange shares automatically by
phone from your Fund account to another OppenheimerFunds account you
have already established by calling the special PhoneLink number.
Please refer to "How to Exchange Shares," below, for details.

- Selling Shares. You can redeem shares by telephone
automatically by calling the PhoneLink number and the Fund will send
the proceeds directly to your AccountLink bank account. Please refer
to "How to Sell Shares," below, for details.

Automatic Withdrawal and Exchange Plans. The Fund has several plans
that enable you to sell shares automatically or exchange them to
another OppenheimerFunds account on a regular basis:

- Automatic Withdrawal Plans. If your Fund account is $5,000
or more, you can establish an Automatic Withdrawal Plan to receive
payments of at least $50 on a monthly, quarterly, semi-annual or annual
basis. The checks may be sent to you or sent automatically to your bank
account on AccountLink. You may even set up certain types of
withdrawals of up to $1,500 per month by telephone. You should consult
the Application and Statement of Additional Information for more
details.

- Automatic Exchange Plans. You can authorize the Transfer
Agent to exchange an amount you establish in advance automatically for
shares of up to five other OppenheimerFunds on a monthly, quarterly,
semi-annual or annual basis under an Automatic Exchange Plan. The
minimum purchase for each other OppenheimerFunds account is $25. These
exchanges are subject to the terms of the Exchange Privilege, described
below.

Reinvestment Privilege. If you redeem some or all of your Class A Fund
shares, you have up to 6 months to reinvest all or part of the
redemption proceeds in Class A shares of the Fund or other
OppenheimerFunds without paying a sales charge. This privilege applies
only to redemptions of Class A shares or Class B shares that you
purchased by reinvesting dividends or distributions or on which you
paid a contingent deferred sales charge when you redeemed them. You
must be sure to ask the Distributor for this privilege when you send
your payment. Please consult the Statement of Additional Information
for more details.

Retirement Plans. Fund shares are available as an investment for your
retirement plans. If you participate in a plan sponsored by your
employer, the plan trustee or administrator must make the purchase of
shares for your retirement plan account. The Distributor offers a
number of different retirement plans that can be used by individuals
and employers:

- Individual Retirement Accounts including rollover IRAs, for
individuals and their spouses

- 403(b)(7) Custodial Plans for employees of eligible tax-
exempt organizations, such as schools, hospitals and charitable
organizations

- SEP-IRAs (Simplified Employee Pension Plans) for small
business owners or people with income from self-employment, including
SAR/SEP-IRAs

- Pension and Profit-Sharing Plans for self-employed persons
and small business owners

Please call the Distributor for the OppenheimerFunds plan
documents, which contain important information and applications.

How to Sell Shares

You can arrange to take money out of your account on any
regular business day by selling (redeeming) some or all of your shares.
Your shares will be sold at the next net asset value calculated after
your order is received and accepted by the Transfer Agent. The Fund
offers you a number of ways to sell your shares: in writing, or by
using the Fund's checkwriting privilege, or by telephone. You can also
set up Automatic Withdrawal Plans to redeem shares on a regular basis,
as described above. If you have questions about any of these
procedures, and especially if you are redeeming shares in a special
situation, such as due to the death of the owner, or from a retirement
plan, please call the Transfer Agent first, at 1-800-525-7048, for
assistance.

- Retirement Accounts. To sell shares in an
OppenheimerFunds retirement account in your name, call the Transfer
Agent for a distribution request form. There are special income tax
withholding requirements for distributions from retirement plans and
you must submit a withholding form with your request to avoid delay. If
your retirement plan account is held for you by your employer, you must
arrange for the distribution request to be sent by the plan
administrator or trustee. There are additional details in the Statement
of Additional Information.

- Certain Requests Require a Signature Guarantee. To protect
you and the Fund from fraud, certain redemption requests must be in
writing and must include a signature guarantee in the following
situations (there may be other situations also requiring a signature
guarantee):

- You wish to redeem more than $50,000 worth of shares and
receive a check
- The check is not payable to all shareholders listed on the
account statement
- The check is not sent to the address of record on your
account statement
- Shares are being transferred to a Fund account with a
different owner or name
- Shares are redeemed by someone other than the owners (such as
an Executor)

- Where Can I Have My Signature Guaranteed? The Transfer
Agent will accept a guarantee of your signature by a number of
financial institutions, including: a U.S. bank, trust company, credit
union or savings association, or by a foreign bank that has a U.S.
correspondent bank, or by a U.S. registered dealer or broker in
securities, municipal securities or government securities, or by a U.S.
national securities exchange, a registered securities association or a
clearing agency. If you are signing as a fiduciary or on behalf of a
corporation, partnership or other business, you must also include your
title in the signature.

Selling Shares by Mail. Write a "letter of instructions" that
includes:

- Your name
- The Fund's name
- Your Fund account number (from your account statement)
- The dollar amount or number of shares to be redeemed
- Any special payment instructions
- Any share certificates for the shares you are selling
- The signatures of all registered owners exactly as the
account is registered, and
- Any special requirements or documents requested by the
Transfer Agent to assure proper authorization of the person asking to
sell shares.

Use the following address for requests by mail: Send courier or Express
Mail requests to:
Oppenheimer Shareholder Services Oppenheimer Shareholder
P.O. Box 5270, Services
Denver, Colorado 80217 10200 E. Girard Avenue,
Building D
Denver, Colorado 80231

Selling Shares by Telephone. You and your dealer representative of
record may also sell your shares by telephone. To receive the
redemption price on a regular
business day, your call must be received by the Transfer Agent by the
close of The New York Stock Exchange that day, which is normally 4:00
P.M., but may be earlier on some days. Shares held in an
OppenheimerFunds retirement plan or under a share certificate may not
be redeemed by telephone.

- To redeem shares through a service representative, call 1-
800-852-8457
- To redeem shares automatically on PhoneLink, call 1-800-
533-3310

Whichever method you use, you may have a check sent to the
address on the account statement, or, if you have linked your Fund
account to your bank account on AccountLink, you may have the proceeds
wired to that bank account.

- Telephone Redemptions Paid by Check. Up to $50,000 may be
redeemed by telephone, in any 7-day period. The check must be payable
to all owners of record of the shares and must be sent to the address
on the account. This service is not available within 30 days of
changing the address on an account.

- Telephone Redemptions Through AccountLink or By Wire. There
are no dollar limits on telephone redemption proceeds sent to a bank
account designated when you establish AccountLink. Normally the ACH
wire to your bank is initiated on the business day after the
redemption. You do not receive dividends on the proceeds of the shares
you redeemed while they are waiting to be wired.

Shareholders may also have the Transfer Agent send redemption
proceeds of $2,500 or more by Federal Funds wire to a designated
commercial bank account. The bank must be a member of the Federal
Reserve wire system. There is a $10 fee for each Federal Funds wire.
To place a wire redemption request, call the Transfer Agent at 1-800-
852-8457. The wire will normally be transmitted on the next bank
business day after the shares are redeemed. There is a possibility that
the wire may be delayed up to seven days to enable the Fund to sell
securities to pay the redemption proceeds. No dividends are accrued or
paid on the proceeds of shares that have been redeemed and are awaiting
transmittal by wire. To establish wire redemption privileges on an
account that is already established, please contact the Transfer Agent
for instructions.

- Checkwriting. To be able to write checks against your Fund
account, you may request that privilege on your account Application or
you can contact the Transfer Agent for signature cards, which must be
signed (with a signature guarantee) by all owners of the account and
returned to the Transfer Agent so that checks can be sent to you to
use. Shareholders with joint accounts can elect in writing to have
checks paid over the signature of one owner.

- Checks can be written to the order of whomever you wish, but
may not be cashed at the Fund's bank or custodian.

- Checkwriting privileges are not available for accounts
holding Class B shares or Class C shares, or Class A shares that are
subject to a contingent deferred sales charge.

- Checks must be written for at least $100.

- Checks cannot be paid if they are written for more than your
account value. Remember: your shares fluctuate in value and you should
not write a check close to the total account value.

- You may not write a check that would require the Fund to
redeem shares that were purchased by check or Asset Builder Plan
payments within the prior 10 days.

- Don't use your checks if you changed your Fund account
number.

How to Exchange Shares

Shares of the Fund may be exchanged for shares of certain
OppenheimerFunds at net asset value per share at the time of exchange,
without sales charge. To exchange shares, you must meet several
conditions:

- Shares of the fund selected for exchange must be available
for sale in your state of residence
- The prospectuses of this Fund and the fund whose shares you
want to buy must offer the exchange privilege
- You must hold the shares you buy when you establish your
account for at least 7 days before you can exchange them; after the
account is open 7 days, you can exchange shares every regular business
day
- You must meet the minimum purchase requirements for the fund
you purchase by exchange
- Before exchanging into a fund, you should obtain and read its
prospectus

Shares of a particular class may be exchanged only for shares
of the same class in the other OppenheimerFunds. For example, you can
exchange Class A shares of this Fund only for Class A shares of another
fund. At present, not all of the OppenheimerFunds offer the same
classes of shares. If a fund has only one class of shares that does not
have a class designation, they are "Class A" shares for exchange
purposes. In some cases, sales charges may be imposed on exchange
transactions. Certain OppenheimerFunds offer Class A shares and either
Class B or Class C shares, and a list can be obtained by calling the
Distributor at 1-800-525-7048. Please refer to "How to Exchange
Shares" in the Statement of Additional Information for more details.

Exchanges may be requested in writing or by telephone:

- Written Exchange Requests. Submit an OppenheimerFunds
Exchange Request form, signed by all owners of the account. Send it to
the Transfer Agent at the addresses listed in "How to Sell Shares."

- Telephone Exchange Requests. Telephone exchange requests may
be made either by calling a service representative at 1-800-852-8457 or
by using PhoneLink for automated exchanges, by calling 1-800-533-3310.
Telephone exchanges may be made only between accounts that are
registered with the same name(s) and address. Shares held under
certificates may not be exchanged by telephone.

You can find a list of OppenheimerFunds currently available for
exchanges in the Statement of Additional Information or by calling a
service representative at 1-800-525-7048. Exchanges of shares involve a
redemption of the shares of the fund you own and a purchase of shares
of the other fund.

There are certain exchange policies you should be aware of:

- Shares are normally redeemed from one fund and purchased
from the other fund in the exchange transaction on the same regular
business day on which the Transfer Agent receives an exchange request
in proper form by the close of The New York Stock Exchange that day,
which is normally 4:00 P.M. but may be earlier on some days. However,
either fund may delay the purchase of shares of the fund you are
exchanging into if it determines it would be disadvantaged by a same-
day transfer of the proceeds to buy shares. For example, the receipt of
multiple exchange requests from a dealer in a "market-timing" strategy
might require the disposition of securities at a time or price
disadvantageous to the Fund.

- Because excessive trading can hurt fund performance and harm
shareholders, the Fund reserves the right to refuse any exchange
request that will disadvantage it, or to refuse multiple exchange
requests submitted by a shareholder or dealer.

- The Fund may amend, suspend or terminate the exchange
privilege at any time. Although the Fund will attempt to provide you
notice whenever it is reasonably able to do so, it may impose these
changes at any time.

- If the Transfer Agent cannot exchange all the shares you
request because of a restriction cited above, only the shares eligible
for exchange will be exchanged.

The Distributor has entered into agreements with certain
dealers and investment advisers permitting them to exchange their
clients' shares by telephone. These privileges are limited under those
agreements and the Distributor has the right to reject or suspend those
privileges. As a result, those exchanges may be subject to notice
requirements, delays and other limitations that do not apply to
shareholders who exchange their shares directly by calling or writing
to the Transfer Agent.

Shareholder Account Rules and Policies

- Net Asset Value Per Share is determined for each class of
shares as of the close of The New York Stock Exchange, which is
normally 4:00 P.M. but may be earlier on some days, on each day the
Exchange is open by dividing the value of the Fund's net assets
attributable to a class by the number of shares of that class that are
outstanding. The Fund's Board of Trustees has established procedures
to value the Fund's securities to determine net asset value. In
general, securities values are based on market value. There are
special procedures for valuing illiquid and restricted securities,
obligations for which market values cannot be readily obtained, and
call options and hedging instruments. These procedures are described
more completely in the Statement of Additional Information.

- The offering of shares may be suspended during any period in
which the determination of net asset value is suspended, and the
offering may be suspended by the Board of Trustees at any time the
Board believes it is in the Fund's best interest to do so.

- Telephone Transaction Privileges for purchases, redemptions
or exchanges may be modified, suspended or terminated by the Fund at
any time. If an account has more than one owner, the Fund and the
Transfer Agent may rely on the instructions of any one owner. Telephone
privileges apply to each owner of the account and the dealer
representative of record for the account unless and until the Transfer
Agent receives cancellation instructions from an owner of the account.

- The Transfer Agent will record any telephone calls to verify
data concerning transactions and has adopted other procedures to
confirm that telephone instructions are genuine, by requiring callers
to provide tax identification numbers and other account data or by
using PINs, and by confirming such transactions in writing. If the
Transfer Agent does not use reasonable procedures it may be liable for
losses due to unauthorized transactions, but otherwise neither the
Transfer Agent nor the Fund will be liable for losses or expenses
arising out of telephone instructions reasonably believed to be
genuine. If you are unable to reach the Transfer Agent during periods
of unusual market activity, you may not be able to complete a telephone
transaction and should consider placing your order by mail.

- Redemption or transfer requests will not be honored until
the Transfer Agent receives all required documents in proper form. From
time to time, the Transfer Agent in its discretion may waive certain of
the requirements for redemptions stated in this Prospectus.

- Dealers that can perform account transactions for their
clients by participating in NETWORKING through the National Securities
Clearing Corporation are responsible for obtaining their clients'
permission to perform those transactions and are responsible to their
clients who are shareholders of the Fund if the dealer performs any
transaction erroneously.

- The redemption price for shares will vary from day to day
because the value of the securities in the Fund's portfolio fluctuates,
and the redemption price, which is the net asset value per share, will
normally be different for Class A, Class B and Class C shares.
Therefore, the redemption value of your shares may be more or less than
their original cost.

- Payment for redeemed shares is made ordinarily in cash and
forwarded by check or through AccountLink (as elected by the
shareholder under the redemption procedures described above) within 7
days after the Transfer Agent receives redemption instructions in
proper form, except under unusual circumstances determined by the
Securities and Exchange Commission delaying or suspending such
payments. Effective June 7, 1995, for accounts registered in the name
of a broker-dealer, payment will be forwarded within 3 business days.
The Transfer Agent may delay forwarding a check or processing a payment
via AccountLink for recently purchased shares, but only until the
purchase payment has cleared. That delay may be as much as 10 days
from the date the shares were purchased. That delay may be avoided if
you purchase shares by certified check or arrange with your bank to
provide telephone or written assurance to the Transfer Agent that your
purchase payment has cleared.

- Involuntary redemptions in some cases may be made to repay
the Distributor for losses from the cancellation of share purchase
orders.

- Under unusual circumstances, shares of the fund may be
redeemed "in kind", which means that the redemption proceeds will be
paid with securities from the Fund's portfolio. Please refer to the
Statement of Additional Information for more details.

- "Backup Withholding" of Federal income tax may be applied at
the rate of 31% from dividends, distributions and redemption proceeds
(including exchanges) if you fail to furnish the Fund a certified
Social Security or taxpayer identification number when you sign your
application, or if you violate Internal Revenue Service regulations on
tax reporting of dividends.

- The Fund does not charge a redemption fee, but if your
dealer or broker handles your redemption, they may charge a fee. That
fee can be avoided by redeeming your Fund shares directly through the
Transfer Agent. Under the circumstances described in "How to Buy
Shares," you may be subject to a contingent deferred sales charges when
redeeming certain Class A, Class B and Class C shares.

- To avoid sending duplicate copies of materials to
households, the Fund will mail only one copy of each annual and semi-
annual report and updated prospectus to shareholders having the same
last name and address on the Fund's records. However, each shareholder
may call the Transfer Agent at 1-800-525-7048 to ask that copies of
those materials be sent personally to that shareholder.

Dividends, Capital Gains and Taxes

Dividends. The Fund declares dividends separately for Class A, Class B
and Class C shares from net investment income each regular business day
and pays those dividends to shareholders monthly. Dividends are
normally paid on the last business day of each month, but the Board of
Trustees can change that date. The Board may also cause the Fund to
declare dividends after the close of the Fund's fiscal year (which ends
June 30th). Normally, distributions paid on Class A shares generally
are expected to be higher than for Class B and Class C shares because
expenses allocable to Class B and Class C shares will generally be
higher. There is no fixed dividend rate and there can be no assurance
as to the payment of any dividends. The amount of a class's dividends
or distributions may vary from time to time depending on market
conditions, the composition of the Fund's portfolio and expenses borne
by that class.

Capital Gains. The Fund may make distributions annually in December out
of any net short-term or long-term capital gains, and the Fund may make
supplemental distributions of dividends and capital gains following the
end of its fiscal year. Long-term capital gains will be separately
identified in the tax information the Fund sends you after the end of
the year. Short-term capital gains are treated as dividends for tax
purposes. There can be no assurance that the Fund will pay any capital
gains distributions in a particular year.

Distribution Options. When you open your account, specify on your
application how you want to receive your distributions. For
OppenheimerFunds retirement accounts, all distributions are reinvested.
For other accounts, you have four options:

- Reinvest All Distributions in the Fund. You can elect to
reinvest all dividends and long-term capital gains distributions in
additional shares of the Fund.
- Reinvest Capital Gains Only. You can elect to reinvest long-
term capital gains in the Fund while receiving dividends by check or
sent to your bank account on AccountLink.
- Receive All Distributions in Cash. You can elect to receive a
check for all dividends and long-term capital gains distributions or
have them sent to your bank on AccountLink.
- Reinvest Your Distributions in Another OppenheimerFunds
Account. You can reinvest all distributions in another OppenheimerFunds
account you have established.

Taxes. If your account is not a tax-deferred retirement account, you
should be aware of the following tax implications of investing in the
Fund. Long-term capital gains are taxable as long-term capital gains
when distributed to shareholders. It does not matter how long you held
your shares. Dividends paid from short-term capital gains and net
investment income are taxable as ordinary income. Distributions are
subject to Federal income tax and may be subject to state or local
taxes. Your distributions are taxable when paid, whether you reinvest
them in additional shares or take them in cash. Every year the Fund
will send you and the IRS a statement showing the amount of each
taxable distribution you received in the previous year.

- "Buying a Dividend": When a fund goes ex-dividend, its share
price is reduced by the amount of the distribution. If you buy shares
on or just before the ex-dividend date, or just before the Fund
declares a capital gains distribution, you will pay the full price for
the shares and then receive a portion of the price back as a taxable
dividend or capital gain.

- Taxes on Transactions: Share redemptions, including
redemptions for exchanges, are subject to capital gains tax. A capital
gain or loss is the difference between the price you paid for the
shares and the price you received when you sold them.

- Returns of Capital: In certain cases if distributions made by
the Fund may be considered a non-taxable return of capital to
shareholders. If that occurs, it will be identified in notices to
shareholders. A non-taxable return of capital may reduce your tax
basis in your Fund shares.

This information is only a summary of certain federal tax
information about your investment. More information is contained in
the Statement of Additional Information, and in addition you should
consult with your tax adviser about the effect of an investment in the
Fund on your particular tax situation.

<PAGE>
APPENDIX TO PROSPECTUS OF
OPPENHEIMER U.S. GOVERNMENT TRUST

Graphic material included in 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 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,
1994, 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, 1994. 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 Prospectus under "Comparing the Fund's
Performance to the Market."

Fiscal Year Oppenheimer Lehman Brothers
(Period) Ended U.S. Government Trust - A Government Bond Index

08/16/85 $9,525 $10,000
06/30/86 $10,803 $11,887
06/30/87 $11,371 $12,377
06/30/88 $12,268 $13,267
06/30/89 $13,430 $14,869
06/30/90 $14,282 $15,900
06/30/91 $15,645 $17,512
06/30/92 $17,688 $19,920
06/30/93 $19,403 $22,489
06/30/94 $19,218 $22,187

Fiscal Oppenheimer Lehman Brothers
Period Ended U.S. Government Trust - C Government Bond Index

12/1/93(1) $10,000 $10,000
06/30/94 $9,591 $9,625

(1) Class C shares of the Fund were first publicly offered on December
1, 1993.

<PAGE>

Oppenheimer U.S. Government Trust
Two World Trade Center
New York, New York 10048-0203
Telephone: 1-800-525-7048

Investment Adviser
Oppenheimer Management Corporation
Two World Trade Center
New York, New York 10048-0203

Distributor
Oppenheimer Funds Distributor, Inc.
Two World Trade Center
New York, New York 10048-0203

Transfer and Shareholder Servicing Agent
Oppenheimer Shareholder Services
P.O. Box 5270
Denver, Colorado 80217
1-800-525-7048

Custodian of Portfolio Securities
Citibank, N.A.
399 Park Avenue
New York, New York 10043

Independent Auditors
KPMG Peat Marwick LLP
707 Seventeenth Street
Denver, Colorado 80202

Legal Counsel
Gordon Altman Butowsky
Weitzen Shalov & Wein
114 West 47th Street
New York, New York 10036

No dealer, broker, salesperson or any other person has been authorized
to give any information or to make any representations other than those
contained in this Prospectus or the Statement of Additional
Information, and if given or made, such information and representations
must not be relied upon as having been authorized by the Fund,
Oppenheimer Management Corporation, Oppenheimer Funds Distributor, Inc.
or any affiliate thereof. This Prospectus does not constitute an offer
to sell or a solicitation of an offer to buy any of the securities
offered hereby in any state to any person to whom it is unlawful to
make such an offer in such state.

PR0220.001.0595 Printed on recycled paper

<PAGE>

OPPENHEIMER U.S. GOVERNMENT TRUST
TWO WORLD TRADE CENTER, NEW YORK, NEW YORK 10048-0203
1-800-525-7048

PART B

STATEMENT OF ADDITIONAL INFORMATION
September __, 1995

___________________________________

This Statement of Additional Information of Oppenheimer U.S.
Government Trust consists of this cover page and the following
documents:

1. Statement of Additional Information of Oppenheimer U.S. Government
Trust dated May 30, 1995, supplemented July 14, 1995, filed herewith
and incorporated herein by reference.

2. Oppenheimer U.S. Government Trust's Annual Report as of June 30,
1995, filed herewith and incorporated herein by reference.

3. Prospectus of U.S. Government Income Fund dated March 1, 1995, as
revised June 30, 1995, filed herewith and incorporated herein by
reference.

4. Statement of Additional Information of U.S. Government Income Fund
dated March 1, 1995, filed herewith and incorporated herein by
reference.

5. U.S. Government Income Fund's Annual Report as of October 31, 1994
and its Semi-Annual Report as of April 30, 1995, filed herewith and
incorporated herein by reference.

6. Pro Forma Financial Statements, filed herewith and incorporated
herein by reference.

This Statement of Additional Information (the "Additional
Statement") is not a Prospectus. This Additional Statement should be
read in conjunction with the Proxy Statement and Prospectus, which may
be obtained by written request to Oppenheimer Shareholder Services
("OSS"), P.O. Box 5270, Denver, Colorado 80217, or by calling OSS at
the toll-free number shown above.

<PAGE>

OPPENHEIMER U.S. GOVERNMENT TRUST
Supplement dated July 14, 1995 to the
Statement of Additional Information dated May 30, 1995

The Statement of Additional Information is amended as follows:

1. Effective July 21, 1995, the supplement dated May 30, 1995 is no
longer in effect.

2. In the section entitled "Letters of Intent" on page 28, the first
three sentences of the first paragraph in that section are replaced by
the following:

A Letter of Intent (referred to as a "Letter") is an investor's
statement in writing to the Distributor of the intention to
purchase Class A shares or Class A and Class B shares of the
Fund (and other OppenheimerFunds) during a 13-month period (the
"Letter of Intent period"), which may, at the investor's
request, include purchases made up to 90 days prior to the date
of the Letter. The Letter states the investor's intention to
make the aggregate amount of purchases of shares which, when
added to the investor's holdings of shares of those funds, will
equal or exceed the amount specified in the Letter. Purchases
made by reinvestment of dividends or distributions of capital
gains and purchases made at net asset value without sales charge
do not count toward satisfying the amount of the Letter. A
Letter enables an investor to count the Class A and Class B
shares purchased under the Letter to obtain the reduced sales
charge rate on purchases of Class A shares of the Fund (and
other OppenheimerFunds) that applies under the Right of
Accumulation to current purchases of Class A shares.

3. In the section entitled "Letters of Intent" on page 28, a new third
paragraph is added as follows:

For purchases of shares of the Fund and other OppenheimerFunds
by OppenheimerFunds prototype 401(k) plans under a Letter of
Intent, the Transfer Agent will not hold shares in escrow. If
the intended purchase amount under the Letter entered into by an
OppenheimerFunds prototype 401(k) plan is not purchased by the
plan by the end of the Letter of Intent period, there will be no
adjustment of commissions paid to the broker-dealer or financial
institution of record for accounts held in the name of that
plan.

4. In the section entitled "Terms of Escrow that Apply to Letters of
Intent" on page 28, item 5 of that section is replaced by the
following:

5. The shares eligible for purchase under the Letter (or the
holding of which may be counted toward completion of a Letter)
include (a) Class A shares sold with a front-end sales charge or
subject to a Class A contingent deferred sales charge, (b) Class
B shares acquired subject to a contingent deferred sales charge,
and (c) Class A or B shares acquired in exchange for either (i)
Class A shares of one of the other OppenheimerFunds that were
acquired subject to a Class A initial or contingent deferred
sales charge or (ii) Class B shares of one of the other
OppenheimerFunds that were acquired subject to a contingent
deferred sales charge.

5. In the section entitled "Distributions from Retirement Plans" on
page 32, the phrase "401(k) plans" is added after "403(b)(7) custodial
plans" in the first sentence, and the third sentence of that section is
revised to read as follows:

Participants (other than self-employed persons maintaining a
plan account in their own name) in OppenheimerFunds-sponsored
prototype pension, profit-sharing or 401(k) plans may not
directly redeem or exchange shares held for their account under
those plans.

6. In the section entitled "Special Arrangements for Repurchase of
Shares from Dealers and Brokers" on page 32, the last sentence of that
section is revised to read as follows:

Ordinarily, for accounts redeemed by a broker-dealer under this
procedure, payment will be made within three business days after
the shares have been redeemed upon the Distributor's receipt the
required redemption documents in proper form, with the
signature(s) of the registered owners guaranteed on the
redemption document as described in the Prospectus.

7. In the section entitled "How To Exchange Shares" on page 36, the
second full paragraph is changed by adding new third and fourth
sentences as follows:

However, shares of Oppenheimer Money Market Fund, Inc. purchased
with the redemption proceeds of shares of other mutual funds
(other than funds managed by the Manager or its subsidiaries)
redeemed within the 12 months prior to that purchase may
subsequently be exchanged for shares of other OppenheimerFunds
without being subject to an initial or contingent deferred sales
charge, whichever is applicable. To qualify for that privilege,
the investor or the investor's dealer must notify the
Distributor of eligibility for this privilege at the time the
shares of Oppenheimer Money Market Fund, Inc. are purchased,
and, if requested, must supply proof of entitlement to this
privilege.

July 14, 1995 PX0220.003
<PAGE>

Oppenheimer U.S. Government Trust

Two World Trade Center, New York, New York 10048-0203
1-800-525-7048

Statement of Additional Information dated May 30, 1995

This Statement of Additional Information of Oppenheimer U.S.
Government Trust is not a Prospectus. This document contains
additional information about the Fund and supplements information in
the Prospectus dated May 30, 1995. It should be read together with the
Prospectus, which may be obtained by writing to the Fund's Transfer
Agent, Oppenheimer Shareholder Services, at P.O. Box 5270, Denver,
Colorado 80217 or by calling the Transfer Agent at the toll-free number
shown above.

Contents
Page
About the Fund
Investment Objective and Policies 2
Investment Policies and Strategies 2
Other Investment Techniques and Strategies 2
Other Investment Restrictions 9
How the Fund is Managed 10
Organization and History 10
Trustees and Officers of the Fund 11
The Manager and Its Affiliates 16
Brokerage Policies of the Fund 17
Performance of the Fund 19
Distribution and Service Plans 23
About Your Account 25
How To Buy Shares 25
How To Sell Shares 31
How To Exchange Shares 35
Dividends, Capital Gains and Taxes 37
Additional Information About the Fund 39
Financial Information About the Fund
Financial Statements 40,50
Independent Auditors' Report 49
Appendix A: Description of Securities Ratings A-1
Appendix B: Industry Classifications B-1

<PAGE>
ABOUT THE FUND

Investment Objective and Policies

Investment Policies and Strategies. The investment objective and
policies of the Fund are described in the Prospectus. Set forth below
is supplemental information about those policies and strategies and
about the types of securities in which the Fund invests, as well as the
strategies the Fund may use to try to achieve its objective. Certain
capitalized terms used in this Statement of Additional Information have
the same meaning as those terms have in the Prospectus.

- U.S. Government Securities. The obligations of U.S. Government
agencies or instrumentalities in which the Fund may invest may or may
not be guaranteed or supported by the "full faith and credit" of the
United States. Some are backed by the right of the issuer to borrow
from the U.S. Treasury; others, by discretionary authority of the U.S.
Government to purchase the agencies' obligations; while others are
supported only by the credit of the instrumentality. All U.S. Treasury
obligations are backed by the full faith and credit of the United
States. If the securities are not backed by the full faith and credit
of the United States, the owner of the securities must look principally
to the agency issuing the obligation for repayment and may not be able
to assert a claim against the United States in the event that the
agency or instrumentality does not meet its commitment. Under normal
market conditions, the Fund will invest at least 80% of its total
assets in "full faith and credit" U.S. Government Securities and in
U.S. Government Securities of such agencies and instrumentalities only
when the Fund's investment manager, Oppenheimer Management Corporation
(the "Manager") is satisfied that the credit risk with respect to such
instrumentality is minimal.

General changes in prevailing interest rates will affect the values
of the Fund's portfolio securities. The value will vary inversely to
changes in such rates. For example, if such rates go up after a
security is purchased, the value of the security will generally
decline. A decrease in interest rates may affect the maturity and
yield of mortgage-backed securities by increasing unscheduled
prepayments of the underlying mortgages. With its objective of seeking
interest income while conserving capital, the Fund may purchase or sell
securities without regard to the length of time the security has been
held, to take advantage of short-term differentials in yields. While
short-term trading increases the portfolio turnover, the execution cost
for U.S. Government Securities is substantially less than for
equivalent dollar values of equity securities (see "Brokerage
Provisions of the Investment Advisory Agreement," below).

Other Investment Techniques and Strategies

- Repurchase Agreements. The Fund may acquire securities that are
subject to repurchase agreements. In a repurchase transaction, the
Fund purchases a U.S. Government security from, and simultaneously
resells it to, an approved vendor for delivery on an agreed-upon future
date. An "approved vendor" is a U.S. commercial bank, the U.S. branch
of a foreign bank or a broker-dealer which has been designated a
primary dealer in government securities which must meet the audit
requirements met by the Fund's Board of Trustees from time to time.
The resale price exceeds the purchase price by an amount that reflects
an agreed-upon interest rate effective for the period during which the
repurchase agreement is in effect. The majority of these transactions
run from day to day, and delivery pursuant to the resale typically will
occur within one to five days of the purchase. Repurchase agreements
are considered "loans" under the Investment Company Act of 1940 (the
"Investment Company Act"), collateralized by the underlying security.
The Fund's repurchase agreements require that at all times while the
repurchase agreement is in effect, the collateral's value must equal or
exceed the repurchase price to fully collateralize the repayment
obligation. Additionally, the Manager will impose creditworthiness
requirements to confirm that the vendor is financially sound and will
continuously monitor the collateral's value.

- Loans of Portfolio Securities. The Fund may lend its portfolio
securities subject to the restrictions stated in the Prospectus. Under
applicable regulatory requirements (which are subject to change), the
loan collateral must, on each business day, at least equal the market
value of the loaned securities and must consist of cash, bank letters
of credit or U.S. Government Securities, or other cash equivalents in
which the Fund is permitted to invest. To be acceptable as collateral,
letters of credit must obligate a bank to pay amounts demanded by the
Fund if the demand meets the terms of the letter. The terms of the
letter and the issuing bank must be satisfactory to the Fund. In a
portfolio securities lending transaction, the Fund receives from the
borrower an amount equal to the interest paid or the dividends declared
on the loaned securities during the term of the loan as well as one or
more of (a) negotiated loan fees, (b) interest on securities used as
collateral, or (c) interest on short-term debt securities purchased
with such loan collateral; either type of interest may be shared with
the borrower. The Fund may also pay reasonable finder's, custodian and
administrative fees and will not lend its portfolio securities to any
officer, trustee, employee or affiliate of the Fund or its Manager.
The terms of the Fund's loans must meet certain tests under the
Internal Revenue Code and permit the Fund to reacquire loaned
securities on five business days' notice or in time to vote on any
important matter.

- Mortgage-Backed Security Rolls. The Fund may enter into
"forward roll" transactions with respect to mortgage-backed securities
in which it can invest. In a forward roll transaction, which is
considered to be a borrowing by the Fund, the Fund will sell a mortgage
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
mortgage securities that are repurchased will bear the same interest
rate as those sold, but generally will be collateralized by different
pools of mortgages with different prepayment histories than those sold.
Risks of mortgage-backed security rolls include: (i) the risk of
prepayment prior to maturity, (ii) the possibility that 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, and (iii) 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. The Fund will enter into only "covered" rolls. Upon
entering into a mortgage-backed security roll, the Fund will be
required to place cash, U.S. Government Securities or other high-grade
debt securities in a segregated account with its Custodian in an amount
equal to its obligation under the roll.

- Hedging. As described in the Prospectus, the Fund may employ one
or more types of Hedging Instruments to manage its exposure to changing
interest rates and securities prices. The Fund's strategy of hedging
with Futures and options on Futures will be incidental to the Fund's
activities in the underlying cash market. Puts and covered calls may
also be written on U.S. Government Securities to attempt to increase
the Fund's income. For hedging purposes, the Fund may use Interest
Rate Futures and call and put options on debt securities and Interest
Rate Futures (all of the foregoing are referred to as "Hedging
Instruments"). Hedging Instruments may be used to attempt to do the
following: (i) protect against possible declines in the market value of
the Fund's portfolio resulting from downward trends in the debt
securities markets (generally due to a rise in interest rates), (ii)
protect unrealized gains in the value of the Fund's debt securities
which have appreciated, (iii) facilitate selling debt securities for
investment reasons, (iv) establish a position in the debt securities
markets as a temporary substitute for purchasing particular debt
securities, or (v) reduce the risk of adverse currency fluctuations. A
call or put may be purchased only if, after such purchase, the value of
all call and put options held by the Fund would not exceed 5% of the
Fund's total assets. The Fund will not use Futures and options on
Futures for speculation. The Hedging Instruments the Fund may use are
described below.

The Fund may use hedging to attempt to protect against declines in
the market value of the Fund's portfolio, to permit the Fund to retain
unrealized gains in the value of portfolio securities which have
appreciated, or to facilitate selling securities for investment
reasons. To do so, the Fund may: (i) sell Interest Rate Futures, (ii)
buy puts on such Futures or U.S. Government Securities, or (iii) write
covered calls on securities held by it or on Futures. When hedging to
attempt to protect against the possibility that portfolio securities
are not fully included in a rise in value of the debt securities
market, the Fund may: (i) purchase Futures, or (ii) purchase calls on
such Futures or on U.S. Government Securities. Covered calls and puts
may also be written on debt securities to attempt to increase the
Fund's income.

The Fund's strategy of hedging with Futures and options on Futures
will be incidental to the Fund's activities in the underlying cash
market. At present, the Fund does not intend to enter into Futures and
options on Futures if, after any such purchase or sale, the sum of
margin deposits on Futures and premiums paid on Futures options exceeds
5% of the value of the Fund's total assets. The Fund may, in the
future, employ Hedging Instruments and strategies that are not
presently contemplated to the extent such investment methods are
consistent with the Fund's investment objective, are legally
permissible, and are adequately disclosed.

- Writing Covered Calls. The Fund may write (i.e. sell) call
options ("calls") on U.S. Government Securities to enhance income
through the receipt of premiums from expired calls and any net profits
from closing purchase transactions, subject to the limitations stated
in the Prospectus. All such calls written by the Fund must be
"covered" while the call is outstanding (i.e. the Fund must own the
securities subject to the call or other securities acceptable for
applicable escrow requirements). Calls on Futures (discussed below)
must be covered by deliverable securities or by liquid assets
segregated to satisfy the Futures contract. When the Fund writes a
call on a security, it receives a premium and agrees to sell the
callable investment to a purchaser of a corresponding call on the same
security during the call period (usually not more than 9 months) at a
fixed exercise price (which may differ from the market price of the
underlying security), regardless of market price changes during the
call period. The Fund has retained the risk of loss should the price
of the underlying security decline during the call period, which may be
offset to some extent by the premium.

To terminate its obligation on a call it has written, the Fund may
purchase a corresponding call in a "closing purchase transaction." A
profit or loss will be realized, depending upon whether the net of the
amount of the option transaction costs and the premium received on the
call written was more or less than the price of the call subsequently
purchased. A profit may also be realized if the call expires
unexercised, because the Fund retains the underlying investment and the
premium received. Any such profits are considered short-term capital
gains for Federal income tax purposes, and when distributed by the Fund
are taxable as ordinary income. If the Fund could not effect a closing
purchase transaction due to lack of a market, it would have to hold the
callable investments until the call lapsed or was exercised.

The Fund may also write calls on Futures without owning a futures
contract or a deliverable bond, provided that at the time the call is
written, the Fund covers the call by segregating in escrow an
equivalent dollar amount of liquid assets. The Fund will segregate
additional liquid assets if the value of the escrowed assets drops
below 100% of the current value of the Future. In no circumstances
would an exercise notice require the Fund to deliver a futures
contract; it would simply put the Fund in a short futures position,
which is permitted by the Fund's hedging policies.

- Writing Put Options. The Fund may write put options on U.S.
Government securities or Interest Rate Futures but only if such puts
are covered by segregated liquid assets. The Fund will not write puts
if, as a result, more than 50% of the Fund's net assets would be
required to be segregated to cover such put obligations. In writing
puts, there is the risk that the Fund may be required to buy the
underlying security at a disadvantageous price. A put option on
securities gives the purchaser the right to sell, and the writer the
obligation to buy, the underlying investment at the exercise price
during the option period. Writing a put covered by segregated liquid
assets equal to the exercise price of the put has the same economic
effect to the Fund as writing a covered call. The premium the Fund
receives from writing a put option represents a profit, as long as the
price of the underlying investment remains above the exercise price.
However, the Fund has also assumed the obligation during the option
period to buy the underlying investment from the buyer of the put at
the exercise price, even though the value of the investment may fall
below the exercise price. If the put expires unexercised, the Fund (as
the writer of the put) realizes a gain in the amount of the premium
less transaction costs. If the put is exercised, the Fund must fulfill
its obligation to purchase the underlying investment at the exercise
price, which will usually exceed the market value of the investment at
that time. In that case, the Fund may incur a loss, equal to the sum
of the current market value of the underlying investment and the
premium received minus the sum of the exercise price and any
transaction costs incurred.

When writing put options on securities, to secure its obligation to
pay for the underlying security, the Fund will deposit in escrow liquid
assets with a value equal to or greater than the exercise price of the
put option. The Fund therefore foregoes the opportunity of investing
the segregated assets or writing calls against those assets. As long
as the obligation of the Fund as the put writer continues, it may be
assigned an exercise notice by the broker-dealer through whom such
option was sold, requiring the Fund to take delivery of the underlying
security against payment of the exercise price. The Fund has no
control over when it may be required to purchase the underlying
security, since it may be assigned an exercise notice at any time prior
to the termination of its obligation as the writer of the put. This
obligation terminates upon expiration of the put, or such earlier time
at which the Fund effects a closing purchase transaction by purchasing
a put of the same series as that previously sold. Once the Fund has
been assigned an exercise notice, it is thereafter not allowed to
effect a closing purchase transaction.

The Fund may effect a closing purchase transaction to realize a
profit on an outstanding put option it has written or to prevent an
underlying security from being put. Furthermore, effecting such a
closing purchase transaction will permit the Fund to write another put
option to the extent that the exercise price thereof is secured by the
deposited assets, or to utilize the proceeds from the sale of such
assets for other investments by the Fund. The Fund will realize a
profit or loss from a closing purchase transaction if the cost of the
transaction is less or more than the premium received from writing the
option. As above for writing covered calls, any and all such profits
described herein from writing puts are considered short-term gains for
Federal tax purposes, and when distributed by the Fund, are taxable as
ordinary income.

- Purchasing Calls and Puts. The Fund may purchase calls on U.S.
Government Securities or on Interest Rate Futures, in order to protect
against the possibility that the Fund's portfolio will not fully
participate in an anticipated rise in value of the long-term debt
securities market. The value of U.S. Government Securities underlying
calls purchased by the Fund will not exceed the value of the portion of
the Fund's portfolio invested in cash or cash equivalents (i.e.
securities with maturities of less than one year). When the Fund
purchases a call (other than in a closing purchase transaction), it
pays a premium and, except as to calls on indices or Futures, has the
right to buy the underlying investment from a seller of a corresponding
call on the same investment during the call period at a fixed exercise
price. When the Fund purchases a call on a Future, it pays a premium,
but settlement is in cash rather than by delivery of the underlying
investment to the Fund. In purchasing a call, the Fund benefits only
if the call is sold at a profit or if, during the call period, the
market price of the underlying investment is above the sum of the
exercise price, transaction costs and the premium paid, and the call is
exercised. If the call is not exercised or sold (whether or not at a
profit), it will become worthless at its expiration date and the Fund
will lose its premium payment and the right to purchase the underlying
investment.

The Fund may purchase put options ("puts") which relate to U.S.
Government Securities (whether or not it holds such securities in its
portfolio) or Futures. When the Fund purchases a put, it pays a
premium and, except as to puts on indices, has the right to sell the
underlying investment to a seller of a corresponding put on the same
investment during the put period at a fixed exercise price. Buying a
put on an investment the Fund owns enables the Fund to protect itself
during the put period against a decline in the value of the underlying
investment below the exercise price by selling such underlying
investment at the exercise price to a seller of a corresponding put.
If the market price of the underlying investment is equal to or above
the exercise price and as a result the put is not exercised or resold,
the put will become worthless at its expiration date, and the Fund will
lose its premium payment and the right to sell the underlying
investment. The put may, however, be sold prior to expiration (whether
or not at a profit).

Buying a put on Interest Rate Futures or U.S. Government Securities
permits the Fund either to resell the put or buy the underlying
investment and sell it at the exercise price. The resale price of the
put will vary inversely with the price of the underlying investment.
If the market price of the underlying investment is above the exercise
price and as a result the put is not exercised, the put will become
worthless on its expiration date. In the event of a decline in the
bond market, the Fund could exercise or sell the put at a profit to
attempt to offset some or all of its loss on its portfolio securities.
When the Fund purchases a put on Interest Rate Futures or U.S.
Government Securities not held by it, the put protects the Fund to the
extent that the prices of the underlying Future or U.S. Government
Security move in a similar pattern to the prices of the U.S. Government
Securities in the Fund's portfolio.

An option position may be closed out only on a market which provides
secondary trading for options of the same series and there is no
assurance that a liquid secondary market will exist for any particular
option. The Fund's option activities may affect its turnover rate and
brokerage commissions. The exercise by the Fund of puts on securities
will cause the sale of related investments, increasing portfolio
turnover. Although such exercise is within the Fund's control, holding
a put might cause the Fund to sell the related investments for reasons
which would not exist in the absence of the put. The Fund may pay a
brokerage commission each time it buys a put or call, sells a call, or
buys or sells an underlying investment in connection with the exercise
of a put or call. Such commissions may be higher than those which
would apply to direct purchases or sales of such underlying
investments. Premiums paid for options are small in relation to the
market value of the related investments, and consequently, put and call
options offer large amounts of leverage. The leverage offered by
trading in options could result in the Fund's net asset value being
more sensitive to changes in the value of the underlying investments.

- Interest Rate Futures. The Fund may buy and sell Interest Rate
Futures. No price is paid or received upon the purchase or sale of an
Interest Rate Future. An Interest Rate Future obligates the seller to
deliver and the purchaser to take a specific type of debt security at a
specific future date for a fixed price. That obligation may be
satisfied by actual delivery of the debt security or by entering into
an offsetting contract.

Upon entering into a Futures transaction, the Fund will be required
to deposit an initial margin payment in cash or U.S. Treasury bills
with the futures commission merchant (the "futures broker"). The
initial margin will be deposited with the Fund's Custodian in an
account registered in the futures broker's name; however the futures
broker can gain access to that account only under specified conditions.
As the Future is marked to market to reflect changes in its market
value, subsequent margin payments, called variation margin, will be
made to or by the futures broker on a daily basis.

At any time prior to expiration of the Future, the Fund may elect to
close out its position by taking an opposite position, at which time a
final determination of variation margin is made and additional cash is
required to be paid by or released to the Fund. Any gain or loss is
then realized. Although Interest Rate Futures by their terms call for
settlement by delivery or acquisition of debt securities, in most cases
the obligation is fulfilled by entering into an offsetting transaction.
All futures transactions are effected through a clearinghouse
associated with the exchange on which the contracts are traded.

- Interest Rate Swap Transactions. Swap agreements entail both
interest rate risk and credit risk. There is a risk that, based on
movements of interest rates in the future, the payments made by the
Fund under a swap agreement will have been greater than those received
by it. Credit risk arises from the possibility that the counterparty
will default. If the counterparty to an interest rate swap defaults,
the Fund's loss will consist of the net amount of contractual interest
payments that the Fund has not yet received. The Manager will monitor
the creditworthiness of counterparties to the Fund's interest rate swap
transactions on an ongoing basis. The Fund may engage in interest rate
swaps only with respect to securities it holds, and not in excess of
25% of its total assets.

The Fund will enter into swap transactions with appropriate
counterparties pursuant to master netting agreements. A master netting
agreement provides that all swaps done between the Fund and that
counterparty under that master agreement shall be regarded as parts of
an integral agreement. If on any date amounts are payable in the same
currency in respect of one or more swap transactions, the net amount
payable on that date in that currency shall be paid. In addition, the
master netting agreement may provide that if one party defaults
generally or on one swap, the counterparty may terminate the swaps with
that party. Under such agreements, if there is a default resulting in
a loss to one party, the measure of that party's damages is calculated
by reference to the average cost of a replacement swap with respect to
each swap (i.e., the mark-to-market value at the time of the
termination of each swap). The gains and losses on all swaps are then
netted, and the result is the counterparty's gain or loss on
termination. The termination of all swaps and the netting of gains and
losses on termination is generally referred to as "aggregation".

- Additional Information About Hedging Instruments and Their Use.
The Fund's Custodian, or a securities depository acting for the
Custodian, will act as the Fund's escrow agent, through the facilities
of the Options Clearing Corporation ("OCC"), as to the investments on
which the Fund has written options traded on exchanges or as to other
acceptable escrow securities, so that no margin will be required for
such transactions. OCC will release the securities covering a call on
the expiration of the calls or upon the Fund entering into a closing
purchase transaction. An option position may be closed out only on a
market which provides secondary trading for options of the same series,
and there is no assurance that a liquid secondary market will exist for
any particular option.

When the Fund writes an over-the-counter ("OTC") option, it will
enter into an arrangement with a primary U.S. Government securities
dealer, which would establish a formula price at which the Fund would
have the absolute right to repurchase that OTC option. That formula
price would generally be based on a multiple of the premium received
for the option, plus the amount by which the option is exercisable
below the market price of the underlying security (that is, the extent
to which the option "is in-the-money"). For any OTC option the Fund
writes, it will treat as illiquid (for purposes of the limit on its
assets that may be invested in illiquid securities, stated in the
Prospectus) the mark-to-market value of any OTC option held by it. The
Securities and Exchange Commission ("SEC") is evaluating whether OTC
options should be considered liquid securities, and the procedure
described above could be affected by the outcome of that evaluation.

- Regulatory Aspects of Hedging Instruments. The Fund is required
to operate within certain guidelines and restrictions with respect to
its use of futures and options thereon as established by the
Commodities Futures Trading Commission ("CFTC"). In particular, the
Fund is excluded from registration as a "commodity pool operator" if it
complies with the requirements of Rule 4.5 adopted by the CFTC. Under
these restrictions, the Fund will not, as to any positions, whether
long, short or a combination thereof, enter into Futures and options
thereon for which the aggregate initial margins and premiums exceed 5%
of the fair market value of its net assets, with certain exclusions as
defined in the CFTC Rule. Under the restrictions, the Fund also must,
as to its short positions, use Futures and options thereon solely for
bona fide hedging purposes within the meaning and intent of the
applicable provisions of the CEA.

Transactions in options by the Fund are subject to limitations
established by each of the exchanges governing the maximum number of
options which may be written or held by a single investor or group of
investors acting in concert, regardless of whether the options were
written or purchased on the same or different exchanges or are held in
one or more accounts or through one or more different exchanges or
through one or more brokers. Thus, the number of options which the
Fund may write or hold may be affected by options written or held by
other entities, including other investment companies having the same or
an affiliated investment adviser. Position limits also apply to
Futures. An exchange may order the liquidation of positions found to
be in violation of those limits and may impose certain other sanctions.
Due to requirements under the Investment Company Act, when the Fund
purchases a Future, the Fund will maintain, in a segregated account or
accounts with its Custodian, cash or readily-marketable, short-term
(maturing in one year or less) debt instruments in an amount equal to
the market value of the securities underlying such Future, less the
margin deposit applicable to it.

- Tax Aspects of Covered Calls and Hedging Instruments. The Fund
intends to qualify as a "regulated investment company" under the
Internal Revenue Code. That qualification enables the Fund to "pass
through" its income and realized capital gains to shareholders without
the Fund having to pay tax on them. This avoids a "double tax" on that
income and capital gains, since shareholders will be taxed on the
dividends and capital gains they receive from the Fund. One of the
tests for the Fund's qualification is that less than 30% of its gross
income (irrespective of losses) must be derived from gains realized on
the sale of securities held for less than three months. To comply with
that 30% cap, the Fund will limit the extent to which it engages in the
following activities, but will not be precluded from them: (i) selling
investments, including Futures, held for less than three months,
whether or not they were purchased on the exercise of a call held by
the Fund; (ii) purchasing calls or puts which expire in less than three
months; (iii) effecting closing transactions with respect to calls or
puts written or purchased less than three months previously; (iv)
exercising puts or calls held by the Fund for less than three months;
or (v) writing calls on investments held for less than three months.

- Risks Of Hedging With Options and Futures. In addition to the
risks with respect to hedging discussed in the Prospectus and above,
there is a risk in using short hedging by selling Futures to attempt to
protect against decline in value of the Fund's portfolio securities
(due to an increase in interest rates) that the prices of such Futures
will correlate imperfectly with the behavior of the cash (i.e., market
value) prices of the Fund's securities. The ordinary spreads between
prices in the cash and futures markets are subject to distortions due
to differences in the natures of those markets. First, all
participants in the futures markets are subject to margin deposit and
maintenance requirements. Rather than meeting additional margin deposit
requirements, investors may close out futures contracts through
offsetting transactions which could distort the normal relationship
between the cash and futures markets. Second, the liquidity of the
futures markets depends on participants entering into offsetting
transactions rather than making or taking delivery. To the extent
participants decide to make or take delivery, liquidity in the futures
markets could be reduced, thus producing distortion. Third, from the
point of view of speculators, the deposit requirements in the futures
markets are less onerous than margin requirements in the securities
markets. Therefore, increased participation by speculators in the
futures markets may cause temporary price distortions.

If the Fund uses Hedging Instruments to establish a position in the
U.S. Government Securities markets as a temporary substitute for the
purchase of individual U.S. Government Securities (long hedging) by
buying Interest Rate Futures and/or calls on such Futures or on U.S.
Government Securities, it is possible that the market may decline; if
the Fund then concludes not to invest in such securities at that time
because of concerns as to possible further market decline or for other
reasons, the Fund will realize a loss on the Hedging Instruments that
is not offset by a reduction in the price of the U.S. Government
Securities purchased.

Other Investment Restrictions

The Fund's most significant investment restrictions are set forth in
the Prospectus. There are additional investment restrictions that the
Fund must follow that are also fundamental policies. Fundamental
policies and the Fund's investment objective cannot be changed without
the vote of a "majority" of the Fund's outstanding voting securities.
Under the Investment Company Act, such a "majority" vote is defined as
the vote of the holders of the lesser of (1) 67% or more of the shares
present or represented by proxy at a shareholder meeting, if the
holders of more than 50% of the outstanding shares are present, or (2)
more than 50% of the outstanding shares.

Under these additional restrictions, the Fund cannot:
(1) invest in interests in oil, gas, or other mineral exploration or
development programs;

(2) invest in real estate;

(3) purchase securities on margin or make short sales of securities;
however, the Fund may make margin deposits in connection with any of
the Hedging Instruments which it may use as permitted by any of its
other fundamental policies;

(4) underwrite securities of other companies; or

(5) invest in securities of other investment companies, except as
they may be acquired as part of a merger, consolidation or acquisition
of assets.

The Fund will not concentrate investments to the extent of 25% of
its assets in any industry; there is no limit on obligations issued by
the U.S. Government or its agencies or instrumentalities. For purposes
of that policy, the Fund has adopted the industry classifications set
forth in Appendix B to this Statement of Additional Information.

The percentage restrictions described above and in the Prospectus
are applicable only at the time of investment and require no action by
the Fund as a result of subsequent changes in value of the investments
or the size of the Fund.

How the Fund is Managed

Organization and History. The Fund was organized in 1982 as a
Massachusetts business trust. Effective August 16, 1985, the Fund
changed its investment objective and became a long-term government
securities fund.

As a Massachusetts business trust, the Fund is not required to hold,
and does not plan to hold, regular annual meetings of shareholders. The
Fund will hold meetings when required to do so by the Investment
Company Act or other applicable law, or when a shareholder meeting is
called by the Trustees or upon proper request of the shareholders.
Shareholders have the right, upon the declaration in writing or vote of
two-thirds of the outstanding shares of the Fund, to remove a Trustee.
The Trustees will call a meeting of shareholders to vote on the removal
of a Trustee upon the written request of the record holders of 10% of
its outstanding shares. In addition, if the Trustees receive a request
from at least 10 shareholders (who have been shareholders for at least
six months) holding shares of the Fund valued at $25,000 or more or
holding at least 1% of the Fund's outstanding shares, whichever is
less, stating that they wish to communicate with other shareholders to
request a meeting to remove a Trustee, the Trustees will then either
make the Fund's shareholder list available to the applicants or mail
their communication to all other shareholders at the applicants'
expense, or the Trustees may take such other action as set forth under
Section 16(c) of the Investment Company Act.

The Fund's Declaration of Trust contains an express disclaimer of
shareholder or Trustee liability for the Fund's obligations, and
provides for indemnification and reimbursement of expenses out of its
property for any shareholder held personally liable for its
obligations. The Declaration of Trust also provides that the Fund
shall, upon request, assume the defense of any claim made against any
shareholder for any act or obligation of the Fund and satisfy any
judgment thereon. Thus, while Massachusetts law permits a shareholder
of a business trust (such as the Fund) to be held personally liable as
a "partner" under certain circumstances, the risk of a Fund shareholder
incurring financial loss on account of shareholder liability is
limited to the relatively remote circumstances in which the Fund would
be unable to meet its obligations described above. Any person doing
business with the Trust, and any shareholder of the Trust, agrees under
the Trust's Declaration of Trust to look solely to the assets of the
Trust for satisfaction of any claim or demand which may arise out of
any dealings with the Trust, and the Trustees shall have no personal
liability to any such person, to the extent permitted by law.

Trustees And Officers of the Fund. The Fund's Trustees and officers
and their principal occupations and business affiliations during the
past five years are listed below. The address of each Trustee and
officer is Two World Trade Center, New York, New York 10048-0203,
unless another address is listed below. All of the Trustees are also
trustees of Oppenheimer Fund, Oppenheimer Global Fund, Oppenheimer Time
Fund, Oppenheimer Growth Fund, Oppenheimer Target Fund, Oppenheimer
Discovery Fund, Oppenheimer Global Growth & Income Fund, Oppenheimer
Global Emerging Growth Fund, Oppenheimer Tax-Free Bond Fund,
Oppenheimer New York Tax-Exempt Fund, Oppenheimer California Tax-Exempt
Fund, Oppenheimer Multi-State Tax-Exempt Trust, Oppenheimer Asset
Allocation Fund, Oppenheimer Mortgage Income Fund, Oppenheimer Global
Growth & Income Fund, Oppenheimer Multi-Sector Income Trust and
Oppenheimer Multi-Government Trust (the "New York-based
OppenheimerFunds"). Messrs. Spiro, Bishop, Bowen, Donohue, Farrar and
Zack respectively hold the same offices with the other New York-based
OppenheimerFunds as with the Fund. As of May 1, 1995, the officers and
Trustees of the Fund as a group owned of record or beneficially less
than 1% of the outstanding shares of each class of the Fund. The
foregoing statement does not reflect ownership of shares held of record
by an employee benefit plan for employees of the Manager (for which
plan one of the officers listed below, Mr. Donohue, is a trustee),
other than the shares beneficially owned under that plan by the
officers of the Fund listed below.

Leon Levy, Chairman of the Board of Trustees; Age: 69
31 West 52nd Street, New York, New York 10019
General Partner of Odyssey Partners, L.P. (investment partnership)
and Chairman of Avatar Holdings, Inc. (real estate development).

Leo Cherne, Trustee; Age: 82
122 East 42nd Street, New York, New York 10168
Chairman Emeritus of the International Rescue Committee
(philanthropic organization); formerly Executive Director of The
Research Institute of America.

Robert G. Galli, Trustee*; Age: 61
Vice Chairman of the Manager and Vice President and Counsel of
Oppenheimer Acquisition Corp., the Manager's parent holding company;
formerly he held the following positions: a director of the Manager
and Oppenheimer Funds Distributor, Inc. (the "Distributor"), Vice
President and a director of HarbourView Asset Management Corporation
("HarbourView") and Centennial Asset Management Corporation
("Centennial"), investment advisory subsidiaries of the Manager, a
director of Shareholder Financial Services, Inc. ("SFSI") and
Shareholder Services, Inc. ("SSI"), transfer agent subsidiaries of
the Manager, an officer of other OppenheimerFunds and Executive Vice
President and General Counsel of the Manager and the Distributor.

Benjamin Lipstein, Trustee; Age: 72
591 Breezy Hill Road, Hillsdale, New York 12529
Professor Emeritus of Marketing, Stern Graduate School of Business
Administration, New York University; Director of Sussex
Publications, Inc. (publishers of Psychology Today and Mother Earth
News); and Director of Spy Magazine, L.P.

Elizabeth B. Moynihan, Trustee; Age: 65
801 Pennsylvania Avenue, N.W., Washington, DC 20004
Author and architectural historian; a trustee of the Freer Gallery
of Art (Smithsonian Institution), the Institute of Fine Arts (New
York University), and the National Building Museum; a member of the
Trustees Council, Preservation League of New York State; a member of
the Indo-U.S. Sub-Commission on Education and Culture.

Kenneth A. Randall, Trustee; Age: 67
6 Whittaker's Mill, Williamsburg, Virginia 23185
A director of Dominion Resources, Inc. (electric utility holding
company), Dominion Energy, Inc. (electric power and oil and gas
producer), Enron-Dominion Cogen Corp. (cogeneration company), Kemper
Corporation (insurance and financial services company) and Fidelity
Life Association (mutual life insurance company); formerly Chairman
of the Board of ICL, Inc. (information systems) and President and
Chief Executive Officer of The Conference Board, Inc. (international
economic and business research).

Edward V. Regan, Trustee; Age: 64
40 Park Avenue, New York, New York 10016
President of Jerome Levy Economics Institute; a member of the U.S.
Competitiveness Policy Council; a director of GranCare, Inc.
(healthcare provider); formerly New York State Comptroller and
trustee of the New York State and Local Retirement Fund.

Russell S. Reynolds, Jr., Trustee; Age: 63
200 Park Avenue, New York, New York 10166
Founder Chairman of Russell Reynolds Associates, Inc. (executive
recruiting); Chairman of Directors Publication, Inc. (consulting and
publishing); a trustee of Mystic Seaport Museum, International
House, Greenwich Hospital and the Greenwich Historical Society.
[FN]
________________________
*A Trustee who is an "interested person" of the Fund as defined in the
Investment Company
Act.
Sidney M. Robbins, Trustee; Age: 83
50 Overlook Road, Ossining, New York 10562
Chase Manhattan Professor Emeritus of Financial Institutions,
Graduate School of Business, Columbia University; Visiting Professor
of Finance, University of Hawaii; a director of The Korea Fund, Inc.
and The Malaysia Fund, Inc. (closed-end investment companies); a
member of the Board of Advisors, Olympus Private Placement Fund,
L.P.; Professor Emeritus of Finance, Adelphi University.

Donald W. Spiro, President and Trustee*; Age: 69
Chairman Emeritus and a director of the Manager; formerly Chairman
of the Manager and the Distributor.

Pauline Trigere, Trustee; Age: 82
498 Seventh Avenue, New York, New York 10018
Chairman and Chief Executive Officer of Trigere, Inc. (design and
sale of women's fashions).

Clayton K. Yeutter, Trustee; Age: 64
1325 Merrie Ridge Road, McLean, Virginia 22101
Of Counsel to Hogan & Hartson (a law firm); a director of B.A.T.
Industries, Ltd. (tobacco and financial services), Caterpillar, Inc.
(machinery), ConAgra, Inc. (food and agricultural products), Farmers
Insurance Company (insurance), FMC Corp. (chemicals and machinery),
Lindsay Manufacturing Co. (irrigation equipment), Texas Instruments,
Inc. (electronics) and The Vigoro Corporation (fertilizer
manufacturer); formerly (in descending chronological order)
Counsellor to the President (Bush) for Domestic Policy, Chairman of
the Republican National Committee, Secretary of the U.S. Department
of Agriculture, and U.S. Trade Representative.

William L. Wilby, Vice President and Portfolio Manager; Age: 51
Vice President of the Manager and HarbourView; an officer of other
OppenheimerFunds; formerly international investment strategist at
Brown Brothers, Harriman & Co., prior to which he was a Managing
Director and Portfolio Manager at AIG Global Investors.

Andrew J. Donohue, Secretary; Age: 44
Executive Vice President and General Counsel of the Manager and the
Distributor; an officer of other OppenheimerFunds; formerly Senior
Vice President and Associate General Counsel of the Manager and the
Distributor, prior to which he was a partner in Kraft & McManimon (a
law firm), an officer of First Investors Corporation (a broker-
dealer) and First Investors Management Company, Inc. (broker-dealer
and investment adviser), and a director and an officer of First
Investors Family of Funds and First Investors Life Insurance
Company.

George C. Bowen, Treasurer; Age: 58
3410 South Galena Street, Denver, Colorado 80231
Senior Vice President and Treasurer of the Manager; Vice President
and Treasurer of the Distributor and HarbourView; Senior Vice
President, Treasurer, Assistant Secretary and a director of
Centennial; Vice President, Treasurer and Secretary of SSI and SFSI;
an officer of other OppenheimerFunds.
[FN]
________________________
*A Trustee who is an "interested person" of the Fund as defined in the
Investment Company
Act.

Robert G. Zack, Assistant Secretary; Age: 46
Senior Vice President and Associate General Counsel of the Manager;
Assistant Secretary of SSI and SFSI; an officer of other
OppenheimerFunds.

Robert Bishop, Assistant Treasurer; Age: 36
3410 South Galena Street, Denver, Colorado 80231
Assistant Vice President of the Manager/Mutual Fund Accounting; an
officer of other OppenheimerFunds; previously a Fund Controller for
the Manager, prior to which he was an Accountant for Yale &
Seffinger, P.C., an accounting firm; and previously an Accountant
and Commissions Supervisor for Stuart James Company Inc., a broker-
dealer.

Scott Farrar, Assistant Treasurer; Age: 29
3410 South Galena Street, Denver, Colorado 80231
Assistant Vice President of the Manager/Mutual Fund Accounting; an
officer of other OppenheimerFunds; previously a Fund Controller for
the Manager, prior to which he was an International Mutual Fund
Supervisor for Brown Brothers Harriman & Co., a bank, and previously
a Senior Fund Accountant for State Street Bank & Trust Company.

- Remuneration of Trustees. The officers of the Fund are
affiliated with the Manager; they and the Trustees of the Fund who are
affiliated with the Manager (Messrs. Galli and Spiro; Mr. Spiro who is
also an officer of the Fund) receive no salary or fee from the Fund.
The Trustees of the Fund (including Mr. Delaney, a former Trustee, but
excluding Messrs. Galli and Spiro) received the total amounts shown
below (i) from the Fund, during its fiscal year ended June 30, 1994,
and (ii) from all of the New York-based OppenheimerFunds (including the
Fund) listed in the first paragraph of this section (and from
Oppenheimer Global Environment Fund, a former New York-based
OppenheimerFund), for services in the positions shown:
<TABLE>
<CAPTION>
Aggregate Retirement BenefitsTotal Compensation
Compensation Accrued as Part From All
Name and from of Fund New York-based
Position Fund Expenses OppenheimerFunds1
<S> <C> <C> <C>
Leon Levy $5,785 3,730 $141,000.00
Chairman and
Trustee

Leo Cherne $2,823 $1,821 $ 68,800.00
Audit Committee
Member and
Trustee

Edmund T. Delaney$3,537 $2,281 $ 86,200.00
Study Committee
Member and Trustee2

Benjamin Lipstein$3,537 $2,281 $ 86,200.00
Study Committee
Member and Trustee

Elizabeth B. Moynihan$2,486 $1,604 $ 60,625.00
Study Committee
Member3 and Trustee

Kenneth A. Randall$3,217 $2,075 $ 78,400.00
Audit Committee
Member and Trustee

Edward V. Regan$2,307 $1,488 $ 56,275.00
Audit Committee
Member and Trustee

Russell S. Reynolds, Jr.$2,140 $1,380 $ 52,100.00
Trustee

Sidney M. Robbins$5,008 $3,230 $122,100.00
Study Committee
Chairman, Audit
Committee Vice-Chairman
and Trustee

Pauline Trigere $2,140 $1,380 $ 52,100.00
Trustee

Clayton K. Yeutter$2,140 $1,380 $ 52,100.00
Trustee
</TABLE>
______________________
1 For the 1994 calendar year.
2 Board and committee positions held during a portion of the period
shown.
3 Committee position held during a portion of the period shown.

The Fund has adopted a retirement plan that provides for payment to
a retired Trustee of up to 80% of the average compensation paid during
that Trustee's five years of service in which the highest compensation
was received. A Trustee must serve in that capacity for any of the New
York-based OppenheimerFunds for at least 15 years to be eligible for
the maximum payment. Because each Trustee's retirement benefits will
depend on the amount of the Trustee's future compensation and length of
service, the amount of those benefits cannot be determined at this
time, nor can it be estimated the number of years of credited service
that will be used to determine these benefits. No payments have been
made by the Fund under the plan as of June 30, 1994.

- Major Shareholders. As May 1, 1995, the only persons who owned
of record or was known by the Fund to own beneficially 5% or more of
the Fund's outstanding shares were (i) R. Duffield & CR Player, Jr.,
CoTr., Char. Ren. Unit Trust for lives of Donor Ruth McCormick
Tankersley & Tiffany Wolfe UA Dec 08 93, P.O. Box 401, Barnesville,
Maryland 20838-0401 who owned 53,418.803 Class C shares of the Fund
(representing approximately 6.55% of the Fund's Class C shares then
outstanding); (ii) R. Duffield & CR Player, Jr., CoTr., Char. Ren. Unit
Trust for lives of Donor Ruth McCormick Tankersley & Kristie Miller UA
Dec 08 93, P.O. Box 401 Barnesville, Maryland 20838-0401, who owned
53,418.803 Class C shares of the Fund (representing approximately 6.55%
of the Fund's Class C shares then outstanding); and (iii) Merrill Lynch
Pierce Fenner & Smith, Inc., 97C22, 4800 Deer Lake Drive East,
Jacksonville, Florida 32246-6484, who owned 44,151.000 Class C shares
of the Fund (representing approximately 5.42% of the Fund's Class C
shares then outstanding).

The Manager and Its Affiliates. The Manager is wholly-owned by
Oppenheimer Acquisition Corp. ("OAC"), a holding company controlled by
Massachusetts Mutual Life Insurance Company. OAC is also owned in part
by certain of the Manager's directors and officers, some of whom also
serve as officers of the Fund, and two of whom (Messrs. Galli and
Spiro) also serve as Trustees of the Fund.

The Manager and the Fund have a Code of Ethics. It is designed to
detect and prevent improper personal trading by certain employees,
including portfolio managers, that would compete with or take advantage
of the Fund's portfolio transactions. Compliance with the Code of
Ethics is carefully monitored and strictly enforced by the Manager.

- The Investment Advisory Agreement. The investment advisory
agreement between the Manager and the Fund requires the Manager, at its
expense, to provide the Fund with adequate office space, facilities and
equipment, and to provide and supervise the activities of all
administrative and clerical personnel required to provide effective
corporate administration for the Fund, including the compilation and
maintenance of records with respect to its operations, the preparation
and filing of specified reports, and composition of proxy materials and
registration statements for continuous public sale of shares of the
Fund. Prior to the adoption of the current investment advisory
agreement, the Manager voluntarily reduced the management fee to the
current rates, described in the Prospectus.

Expenses not expressly assumed by the Manager under the advisory
agreement or by the Distributor under the General Distributor's
Agreement are paid by the Fund. The advisory agreement lists examples
of expenses paid by the Fund, the major categories of which relate to
interest, taxes, brokerage commissions, fees to certain Trustees, legal
and audit expenses, custodian and transfer agent expenses, share
issuance costs, certain printing and registration costs and non-
recurring expenses, including litigation costs. For the Fund's fiscal
years ended June 30, 1992, 1993 and 1994, the management fees paid by
the Fund to the Manager were $2,735,353, $2,911,199 and $2,515,934,
respectively.

The advisory agreement contains no provision limiting the Fund's
expenses. However, independently of the advisory agreement, the
Manager has voluntarily undertaken that the total expenses of the Fund
in any fiscal year (including the management fee but excluding taxes,
interest, brokerage commissions, distribution assistance payments and
extraordinary expenses such as litigation costs) shall not exceed the
most stringent expense limitation imposed under state law applicable to
the Fund. Pursuant to the undertaking, the Manager's fee will be
reduced at the end of a month so that there will not be any accrued but
unpaid liability under this undertaking. Currently, the most stringent
state expense limitation is imposed by California, and limits the
Fund's expenses (with specified exclusions) to 2.5% of the first $30
million of average annual net assets, 2% of the next $70 million of
average annual net assets, and 1.5% of average annual net assets in
excess of $100 million. The Manager reserves the right to terminate or
amend the undertaking at any time. Any assumption of the Fund's
expenses under this limitation would lower the Fund's overall expense
ratio and increase its total return during any period in which expenses
are limited.

The advisory agreement provides that in the absence of willful
misfeasance, bad faith or gross negligence in the performance of its
duties, or reckless disregard for its obligations and duties under the
advisory agreement, the Manager is not liable for any loss resulting by
reason of any investment, or the purchase, sale or retention of any
security, or for any act or omission in performing the services
required by the Agreement. The advisory agreement permits the Manager
to act as investment adviser for any other person, firm or corporation
and to use the name "Oppenheimer" in connection with its other
investment activities. If the Manager shall no longer act as
investment adviser to the Fund, the right of the Fund to use the name
"Oppenheimer" as part of its corporate name may be withdrawn.

- The Distributor. Under its Distribution Agreement with the
Fund, the Distributor acts as the Fund's principal underwriter in the
continuous public offering of the Fund's Class A, Class B and Class C
shares but is not obligated to sell a specific number of shares.
Expenses normally attributable to sales (other than those paid under
the Distribution and Service Plans, but including advertising and the
cost of printing and mailing prospectuses, other than those furnished
to existing shareholders), are borne by the Distributor. During the
Fund's fiscal years ended June 30, 1992, 1993 and 1994, the aggregate
sales charges on sales of the Fund's Class A shares were $1,881,944,
$1,823,585 and $876,525, respectively, of which the Distributor and an
affiliated broker-dealer retained in the aggregate $660,099, $594,110
and $282,424 in those respective years. There were no contingent
deferred sales charges collected by the Distributor on the redemption
of Class B shares for the fiscal year ended June 30, 1994, because
Class B shares were not publicly offered during that fiscal year.
During the Fund's fiscal period from December 1, 1993 through June 30,
1994, the contingent deferred sales charge collected on Class C shares
was $3,250, all of which the Distributor retained. For additional
information about distribution of the Fund's shares and the expenses
connected with such activities, please refer to "Distribution and
Service Plans," below.

- The Transfer Agent. Oppenheimer Shareholder Services, the Fund's
Transfer Agent, is responsible for maintaining the Fund's shareholder
registry and shareholder accounting records, and for shareholder
servicing and administrative functions.

Brokerage Policies of the Fund

Brokerage Provisions of the Investment Advisory Agreement. One of the
duties of the Manager under the advisory agreement is to arrange the
portfolio transactions for the Fund. The advisory agreement contains
provisions relating to the employment of broker-dealers ("brokers") to
effect the Fund's portfolio transactions. In doing so, the Manager is
authorized by the advisory agreement to employ such broker-dealers,
including "affiliated" brokers, as that term is defined in the
Investment Company Act, as may, in its best judgment based on all
relevant factors, implement the policy of the Fund to obtain, at
reasonable expense, the "best execution" (prompt and reliable execution
at the most favorable price obtainable) of such transactions. The
Manager need not seek competitive commission bidding but is expected to
minimize the commissions paid to the extent consistent with the
interest and policies of the Fund as established by its Board of
Trustees.

Under the advisory agreement, the Manager is authorized to select
brokers that provide brokerage and/or research services for the Fund
and/or the other accounts over which the Manager or its affiliates have
investment discretion. The commissions paid to such brokers may be
higher than another qualified broker would have charged if a good faith
determination is made by the Manager and the commission is fair and
reasonable in relation to the services provided. Subject to the
foregoing considerations, the Manager may also consider sales of shares
of the Fund and other investment companies managed by the Manager or
its affiliates as a factor in the selection of brokers for the Fund's
portfolio transactions.

Description of Brokerage Practices Followed by the Manager. Most
purchases made by the Fund are principal transactions at net prices,
and the Fund incurs little or no brokerage costs. Subject to the
provisions of the advisory agreement, the procedures and rules
described above, allocations of brokerage are generally made by the
Manager's portfolio traders based upon recommendations from the
Manager's portfolio managers. In certain instances, portfolio managers
of may directly place trades and allocate brokerage, also subject to
the provisions of the advisory agreement and the procedures and rules
described above. In either case, brokerage is allocated under the
supervision of the Manager's executive officers. Transactions in
securities other than those for which an exchange is the primary market
are generally done with principals or market makers. Brokerage
commissions are paid primarily for effecting transactions in listed
securities and otherwise only if it appears likely that a better price
or execution can be obtained.

When the Fund engages in an option transaction, ordinarily the
same broker will be used for the purchase or sale of the option and any
transaction in the securities to which the option relates. When
possible, concurrent orders to purchase or sell the same security by
more than one of the accounts managed by the Manager and its affiliates
are combined. The transactions effected pursuant to such combined
orders are averaged as to price and allocated in accordance with the
purchase or sale orders actually placed for each account.

The research services provided by a particular broker may be
useful only to one or more of the advisory accounts of the Manager and
its affiliates, and investment research received for the commissions of
those other accounts may be useful both to the Fund and one or more of
such other accounts. Such research, which may be supplied by a third
party at the instance of a broker, includes information and analyses on
particular companies and industries as well as market or economic
trends and portfolio strategy, receipt of market quotations for
portfolio evaluations, information systems, computer hardware and
similar products and services. If a research service also assists the
Manager in a non-research capacity (such as bookkeeping or other
administrative functions), then only the percentage or component that
provides assistance to the Manager in the investment decision-making
process may be paid in commission dollars. The Board of Trustees has
permitted the Manager to use concessions on fixed price offerings to
obtain research in the same manner as is permitted for agency
transactions.

The research services provided by brokers broadens the scope and
supplement the research activities of the Manager, by making available
additional views for consideration and comparisons, and by enabling the
Manager to obtain market information for the valuation of securities
held in the Fund's portfolio or being considered for purchase. The
Board of Trustees, including the "independent" Trustees of the Fund
(those Trustees of the Fund who are not "interested persons" as defined
in the Investment Company Act, and who have no direct or indirect
financial interest in the operation of the advisory agreement or the
Distribution Plans described below) annually reviews information
furnished by the Manager as to the commissions paid to brokers
furnishing such services so that the Board may ascertain whether the
amount of such commissions was reasonably related to the value or
benefit of such services.

Performance of the Fund

Yield and Total Return Information. From time to time the
"standardized yield," "dividend yield," "average annual total return,"
"cumulative total return," "average annual total return at net asset
value" and "total return at net asset value" of an investment in a
class of shares of the Fund may be advertised. An explanation of how
these yields and total returns are calculated for each class and the
components of those calculations is set forth below. No total return
and yield calculations are presented below for Class B shares because
no shares of that class were publicly offered during the fiscal year
ended June 30, 1994.

The Fund's advertisement of its performance must, under applicable
rules of the Securities and Exchange Commission, include the average
annual total returns for each class of shares of the Fund for the 1, 5,
and 10-year periods (or the life of the class, if less) as of the most
recently-ended calendar quarter prior to the publication of the
advertisement. This enables an investor to compare the Fund's
performance to the performance of other funds for the same periods.
However, a number of factors should be considered before using such
information as a basis for comparison with other investments. An
investment in the Fund is not insured; its yields, total returns and
share prices are not guaranteed and normally will fluctuate on a daily
basis. When redeemed, an investor's shares may be worth more or less
than their original cost. Yields and total returns for any given past
period are not a prediction or representation by the Fund of future
yields or rates of return on its shares. The yields and total returns
of Class A, Class B and Class C shares of the Fund are affected by
portfolio quality, the type of investments the Fund holds and its
operating expenses allocated to a particular class.

- Standardized Yields

- Yield. The Fund's "yield" (referred to as "standardized
yield") for a given 30-day period for a class of shares is calculated
using the following formula set forth in rules adopted by the
Securities and Exchange Commission that apply to all funds that quote
yields:

a-b 6
Standardized Yield = 2 ((------ + 1) - 1)
cd

The symbols above represent the following factors:

a = dividends and interest earned during the 30-day period.
b = expenses accrued for the period (net of any expense
reimbursements).
c = the average daily number of shares of that class outstanding
during the 30-day period that were entitled to receive
dividends.
d = the maximum offering price per share of the class on the last
day of the period, using the current maximum sales charge
rate adjusted for undistributed net investment income.

The standardized yield of a class of shares for a 30-day period
may differ from its yield for any other period. The SEC formula
assumes that the standardized yield for a 30-day period occurs at a
constant rate for a six-month period and is annualized at the end of
the six-month period. This standardized yield is not based on actual
distributions paid by the Fund to shareholders in the 30-day period,
but is a hypothetical yield based upon the net investment income from
the Fund's portfolio investments calculated for that period. The
standardized yield may differ from the "dividend yield" of that class,
described below. Additionally, because each class of shares is subject
to different expenses, it is likely that the standardized yields of the
Fund's classes of shares will differ. For the 30-day period ended June
30, 1994, the standardized yields for the Fund's Class A and Class C
shares were 6.14% and 5.57%, respectively.

- Dividend Yield and Distribution Return. From time to time
the Fund may quote a "dividend yield" or a "distribution return" for
each class. Dividend yield is based on the Class A, Class B or Class C
share dividends derived from net investment income during a stated
period. Distribution return includes dividends derived from net
investment income and from realized capital gains declared during a
stated period. Under those calculations, the dividends and/or
distributions for that class declared during a stated period of one
year or less (for example, 30 days) are added together, and the sum is
divided by the maximum offering price per share of that class) on the
last day of the period. When the result is annualized for a period of
less than one year, the "dividend yield" is calculated as follows:

Dividend Yield of the Class =

Dividends of the Class
- ----------------------------------------------------
Max Offering Price of the Class (last day of period)

Divided by number of days (accrual period) x 365

The maximum offering price for Class A shares includes the current
maximum front-end sales charge. For Class B or Class C shares, the
maximum offering price is the net asset value per share, without
considering the effect of contingent deferred sales charges.

From time to time similar yield or distribution return
calculations may also be made using the Class A net asset value
(instead of its respective maximum offering price) at the end of the
period. The dividend yields on Class A shares for the 30-day period
ended June 30, 1994, were 7.13% and 7.48% when calculated at maximum
offering price and at net asset value,

respectively. The dividend yield on Class C shares for the 30-day
period ended June 30, 1994, was 6.63% when calculated at net asset
value.

- Total Return Information

- Average Annual Total Returns. The "average annual total
return" of each class is an average annual compounded rate of return
for each year in a specified number of years. It is the rate of return
based on the change in value of a hypothetical initial investment of
$1,000 ("P" in the formula below) held for a number of years ("n") to
achieve an Ending Redeemable Value ("ERV") of that investment according
to the following formula:

( ERV ) 1/n
(-----) -1 = Average Annual Total Return
( P )

- Cumulative Total Returns. The cumulative "total return"
calculation measures the change in value of a hypothetical investment
of $1,000 over an entire period of years. Its calculation uses some of
the same factors as average annual total return, but it does not
average the rate of return on an annual basis. Cumulative total return
is determined as follows:

ERV - P
- ------- = Total Return
P

In calculating total returns for Class A shares, the current
maximum sales charge of 4.75% (as a percentage of the offering price)
is deducted from the initial investment ("P") (unless the return is
shown at net asset value, as described below). For Class B shares, the
payment of the current contingent deferred sales charge (5.0% for the
first year, 4.0% for the second year, 3.0% for the third and fourth
years, 2.0% in the fifth year, 1.0% in the sixth year and none
thereafter) is applied to the investment result for the time period
shown (unless the total return is shown at net asset value, as
described below). For Class C shares, the 1.0% contingent deferred
sales charge is applied to the investment result for the one-year
period (or less). Total returns also assume that all dividends and
capital gains distributions during the period are reinvested to buy
additional shares at net asset value per share, and that the investment
is redeemed at the end of the period. The "average annual total
returns" on an investment in Class A shares of the Fund for the one and
five year periods ended June 30, 1994 and for the period from August
16, 1985 to June 30, 1994, were -5.87%, 6.31% and 7.64%, respectively.
The cumulative "total return" on Class A shares for the period from
August 16, 1985 to June 30, 1994 was 92.18%. During a portion of the
periods for which total returns are shown for Class A shares, the
Fund's maximum initial sales charge rate was higher; as a result,
performance returns on actual investments during those periods may be
lower than the results shown. The cumulative total return on Class C
shares for the period from December 1, 1993 (the commencement of the
offering of the shares) through June 30, 1994 was -4.09%.

- Total Returns at Net Asset Value. From time to time the Fund may
also quote an average annual total return at net asset value or a
cumulative total return at net asset value for Class A, Class B or
Class C shares. Each is based on the difference in net asset value per
share at the beginning and the end of the period for a hypothetical
investment in that class of shares (without considering front-end or
contingent deferred sales charges) and takes into consideration the
reinvestment of dividends and capital gains distributions.

The cumulative total return at net asset value of the Fund's Class
A shares for the period from August 16, 1985 to June 30, 1994 was
101.76%. The average annual total returns at net asset value for the
one and five year periods ended June 30, 1994 and for the period from
August 16, 1985 to June 30, 1994, for Class A shares were -1.17%, 7.35%
and 8.23%, respectively.

Other Performance Comparisons. From time to time the Fund may publish
the ranking of its Class A, Class B or Class C shares by Lipper
Analytical Services, Inc. ("Lipper"), a widely-recognized independent
mutual fund monitoring service. Lipper monitors the performance of
regulated investment companies, including the Fund, and ranks their
performance for various periods based on categories relating to
investment objectives. The performance of the Fund's classes are
ranked against (i) all other funds (excluding money market funds), (ii)
all other U.S. Government funds and (iii) all other U.S. Government
funds in a specific size category. The Lipper performance rankings are
based on total returns that include the reinvestment of capital gains
distributions and income dividends but does not take sales charges or
taxes into consideration.

From time to time the Fund may publish the ranking of the
performance of its Class A, Class B or Class C shares by Morningstar,
Inc., an independent mutual fund monitoring service that ranks mutual
funds, including the Fund, monthly in broad investment categories
(equity, taxable bond, municipal bond and hybrid) based on risk-
adjusted investment return. Investment return measures a fund's three,
five and ten-year average annual total returns (when available) in
excess of 90-day U.S. Treasury bill returns after considering sales
charges and expenses. Risk reflects fund performance below 90-day U.S.
Treasury bill monthly returns. Risk and return are combined to produce
star rankings reflecting performance relative to the average fund in a
fund's category. Five stars is the "highest" ranking (top 10%), four
stars is "above average" (next 22.5%), three stars is "average" next
35%), two stars is "below average" (next 22.5%) and one star is
"lowest" (bottom 10%). Morningstar ranks the Fund's Class A, Class B
and Class C shares in relation to other U.S. Government funds.
Rankings are subject to change.

The total return on an investment made in Class A, Class B or
Class C shares of the Fund may also be compared with the performance
for the same period 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. The
foregoing bond index includes a factor for the reinvestment of interest
but does not reflect expenses or taxes. Other indices may be used from
time to time.

From time to time the Fund may also include in its advertisements
and sales literature performance information about the Fund or rankings
of the Fund's performance cited in newspapers or periodicals, such as
The New York Times which may include quotations of performance from
other sources, such as Lipper or Morningstar.

From time to time, the Fund's Manager may publish rankings or
ratings of the Manager (or the Transfer Agent), by independent third-
parties, on the investor services provided by them to shareholders of
the OppenheimerFunds, other than the performance rankings of the
OppenheimerFunds themselves. These ratings or rankings of
shareholder/investor services may compare the OppenheimerFunds services
to those of other mutual fund families selected by the rating or
ranking services, and may be based upon the opinions of the rating or
ranking service itself, using its own research or judgment, or based
upon surveys of investors, brokers, shareholders or others.

When comparing yield, total return and investment risk of an
investment in Class A, Class B or Class C shares of the Fund with other
investments, investors should understand that certain other investments
have different risk characteristics than an investment in shares of the
Fund. For example, certificates of deposit may have fixed rates of
return and may be insured as to principal and interest by the FDIC,
while the Fund's returns will fluctuate and its share values and
returns are not guaranteed. U.S. Treasury securities are guaranteed as
to principal and interest by the full faith and credit of the U.S.
government.

Distribution and Service Plans

The Fund has adopted a Service Plan for Class A shares and
Distribution and Service Plans for Class B and Class C shares of the
Fund under Rule 12b-1 of the Investment Company Act, pursuant to which
the Fund makes payments to the Distributor in connection with the
distribution and/or servicing of the shares of that class, as described
in the Prospectus. Each Plan has been approved by a vote of (i) the
Board of Trustees of the Fund, including a majority of the Independent
Trustees, cast in person at a meeting called for the purpose of voting
on that Plan, and (ii) the holders of a "majority" (as defined in the
Investment Company Act) of the shares of each class.

In addition, under the Plans the Manager and the Distributor, in
their sole discretion, from time to time may use their own resources
(which, in the case of the Manager, may include profits from the
advisory fee it receives from the Fund) to make payments to brokers,
dealers or other financial institutions (each is referred to as a
"Recipient" under the Plans) for distribution and administrative
services they perform. The Distributor and the Manager may, in their
sole discretion, increase or decrease the amount of payments they make
to Recipients from their own resources.

Unless terminated as described below, each Plan continues in
effect from year to year but only as long as such continuance is
specifically approved at least annually by the Fund's Board of Trustees
and its Independent Trustees by a vote cast in person at a meeting
called for the purpose of voting on such continuance. Any Plan may be
terminated at any time by the vote of a majority of the Independent
Trustees or by the vote of the holders of a "majority" (as defined in
the Investment Company Act) of the outstanding shares of that class.
No Plan may be amended to increase materially the amount of payments to
be made unless such amendment is approved by shareholders of the class
affected by the amendment. In addition, because Class B shares of the
Fund automatically convert into Class A shares after six years, the
Fund is required to obtain the approval of Class B as well as Class A
shareholders for a proposed amendment to the Class A Plan that would
materially increase the amount to be paid by Class A shareholders under
the Class A Plan. Such approval must be by a "majority" of the Class A
and Class B shares (as defined in the Investment Company Act), voting
separately by class. All material amendments must be approved by the
Independent Trustees.

While the Plans are in effect, the Treasurer of the Fund shall
provide separate written reports to the Fund's Board of Trustees at
least quarterly on the amount of all payments made pursuant to each
Plan, the purpose for which the payment was made and the identity of
each Recipient that received any such payment. Each Plan further
provides that while it is in effect, the selection and nomination of
those Trustees of the Fund who are not "interested persons" of the Fund
is committed to the discretion of the Independent Trustees. This does
not prevent the involvement of others in such selection and nomination
if the final decision on any such selection or nomination is approved
by a majority of the Independent Trustees.

Under the Plans, no payment will be made to any Recipient in any
quarter if the aggregate net asset value of all Fund shares held by the
Recipient for itself and its customers, did not exceed a minimum
amount, if any, that may be determined from time to time by a majority
of the Fund's Independent Trustees. Initially, the Board of Trustees
has set the fee at the maximum rate and set no minimum amount.

Any unreimbursed expenses incurred by the Distributor with respect
to Class A shares for any fiscal year may not be recovered in
subsequent years. Payments received by the Distributor under the Class
A Plan will not be used to pay any interest expense, carrying charges,
or other financial costs, or allocation of overhead by the Distributor.

For the fiscal year ended June 30, 1994, payments under the Class
A Plan totalled $863,331, all of which was paid by the Distributor to
Recipients, including $56,187 paid to MML Investor Services, Inc., an
affiliate of the Distributor. Payments made under the Class C Plan
during that fiscal period totalled $12,509. No payments have been made
under the Class B Plan during that period, as no Class B shares were
outstanding.

The Class B and Class C Plans allow the service fee payments to be
paid by the Distributor to Recipients in advance for the first year
Class B and Class C shares are outstanding, and thereafter on a
quarterly basis, as described in the Prospectus. The advance payment
is based on the net asset value of shares sold. An exchange of shares
does not entitle the Recipient to an advance payment of the service
fee. In the event shares are redeemed during the first year such
shares are outstanding, the Recipient will be obligated to repay a pro
rata portion of the advance of the service fee payment to the
Distributor.

Although the Class B and the Class C Plans permit the Distributor
to retain both the asset-based sales charges and the service fee, or to
pay Recipients the service fee on a quarterly basis, without payment in
advance, the Distributor presently intends to pay the service fee to
Recipients in the manner described above. A minimum holding period may
be established from time to time under the Class B and the Class C Plan
by the Board. Initially, the Board has set no minimum holding period.
All payments under the Class B and the Class C Plan are subject to the
limitations imposed by the Rules of Fair Practice of the National
Association of Securities Dealers, Inc. on payments of asset-based
sales charges and service fees.

Asset-based sales charge payments are designed to permit an
investor to purchase shares of the Fund without the assessment of a
front-end sales load and at the same time permit the Distributor to
compensate brokers and dealers in connection with the sale of Class B
and Class C shares of the Fund. The Class B and Class C Plans provide
for the Distributor to be compensated at a flat rate, whether the
Distributor's distribution expenses are more or less than the amounts
paid by the Fund during that period. Such payments are made in
recognition that the Distributor (i) pays sales commissions to
authorized brokers and dealers at the time of sale, as described in the
Prospectus, (ii) may finance such commissions and/or the advance of the
service fee payment to Recipients under those Plans, (iii) employs
personnel to support distribution of shares, and (iv) may bear the
costs of sales literature, advertising and prospectuses (other than
those furnished to current shareholders) and state "blue sky"
registration fees.

ABOUT YOUR ACCOUNT

How To Buy Shares

Alternative Sales Arrangements - Class A, Class B and Class C Shares.
The availability of three classes of shares permits an investor to
choose the method of purchasing shares that is more beneficial to the
investor depending on the amount of the purchase, the length of time
the investor expects to hold shares and other relevant circumstances.
Investors should understand that the purpose and function of the
deferred sales charge and asset-based sales charge with respect to
Class B and Class C shares are the same as those of the initial sales
charge with respect to Class A shares. Any salesperson or other person
entitled to receive compensation for selling Fund shares may receive
different compensation with respect to one class of shares than the
other. The Distributor will not accept any order for $1 million or
more of Class C shares on behalf of a single investor (not including
dealer "street name" or omnibus accounts) because generally it will be
more advantageous for that investor to purchase Class A shares of the
Fund instead. For the same reason the Distributor will not accept any
order for $500,000 or more of Class B shares on behalf of a single
investor (not including dealer "street name" or omnibus accounts)
because generally it will be more advantageous for that investor to
purchase Class A shares of the Fund instead.

The three classes of shares each represent an interest in the same
portfolio investments of the Fund. However, each class has different
shareholder privileges and features. The net income attributable to
Class B and Class C shares and the dividends payable on Class B and
Class C shares will be reduced by incremental expenses borne solely by
that class, including the asset-based sales charge to which Class B and
Class C shares are subject.

The conversion of Class B shares to Class A shares is subject to
the continuing availability of a private letter ruling from the
Internal Revenue Service, or an opinion of counsel or tax adviser, to
the effect that the conversion of Class B shares does not constitute a
taxable event for the holder under Federal income tax law. If such a
revenue ruling or opinion is no longer available, the automatic
conversion feature may be suspended, in which event no further
conversions of Class B shares would occur while such suspension
remained in effect. Although Class B shares could then be exchanged
for Class A shares on the basis of relative net asset value of the two
classes, without the imposition of a sales charge or fee, such exchange
could constitute a taxable event for the holder, and absent such
exchange, Class B shares might continue to be subject to the asset-
based sales charge for longer than six years.

The methodology for calculating the net asset value, dividends and
distributions of the Fund's Class A, Class B and Class C shares
recognizes two types of expenses. General expenses that do not pertain
specifically to any class are allocated pro rata to the shares of each
class, based on the percentage of the net assets of such class to the
Fund's total assets, and then equally to each outstanding share within
a given class. Such general expenses include (i) management fees, (ii)
legal, bookkeeping and audit fees, (iii) printing and mailing costs of
shareholder reports, Prospectuses, Statements of Additional Information
and other materials for current shareholders, (iv) fees to Independent
Trustees, (v) custodian expenses, (vi) share issuance costs, (vii)
organization and start-up costs, (viii) interest, taxes and brokerage
commissions, and (ix) non-recurring expenses, such as litigation costs.
Other expenses that are directly attributable to a class are allocated
equally to each outstanding share within that class. Such expenses
include (i) Distribution and/or Service Plan fees, (ii) incremental
transfer and shareholder servicing agent fees and expenses, (iii)
registration fees and (iv) shareholder meeting expenses, to the extent
that such expenses pertain to a specific class rather than to the Fund
as a whole.

Determination of Net Asset Values Per Share. The net asset values per
share of Class A, Class B and Class C shares of the Fund are determined
as of the close of business of The New York Stock Exchange on each day
the Exchange is open by dividing the value of the Fund's net assets
attributable to that class by the number of shares of that class
outstanding. The Exchange normally closes at 4:00 P.M., New York time,
but may close earlier on some days (for example, in case of weather
emergencies or on days falling before a holiday). The Exchange's most
recent annual holiday schedule (which is subject to change) states that
it will close New Year's Day, Presidents' Day, Good Friday, Memorial
Day, Independence Day, Labor Day, Thanksgiving Day and Christmas Day.
It may also close on other days. Trading may occur in U.S. Government
Securities at times when the Exchange is closed (including weekends and
holidays or after 4:00 P.M., on a regular business day). Because the
net asset values of the Fund will not be calculated at such times, if
securities held in the Fund's portfolio are traded at such times, the
net asset values per share of Class A, Class B and Class C shares of
the Fund may be significantly affected on such days when shareholders
do not have the ability to purchase or redeem shares.

The Fund's Board of Trustees has established procedures for the
valuation of the Fund's securities, generally, as follows: (i) equity
securities traded on a securities exchange or on NASDAQ for which last
sale information is regularly reported are valued at the last reported
sale price on their primary exchange or NASDAQ that day (or, in the
absence of sales that day, at values based on the last sales prices of
the preceding trading day or closing bid and asked prices); (ii)
securities traded on NASDAQ and other unlisted equity securities for
which last sales prices are not regularly reported but for which over-
the-counter market quotations are readily available are valued at the
highest closing bid price as of the time of valuation, or, if no
closing bid price is reported, on the basis of a closing bid price
obtained from a dealer who maintains an active market in that security;
(iii) securities (including restricted securities) not having readily-
available market quotations are valued at fair value under the Board's
procedures; (iv) debt securities having a maturity in excess of 60
days, are valued at the mean between the asked and bid prices
determined by a portfolio pricing service approved by the Fund's Board
of Trustees or obtained from active market makers in the security on
the basis of reasonable inquiry; and (v) short-term debt securities
having a remaining maturity of 60 days or less are valued at cost,
adjusted for amortization of premiums and accretion of discounts.

In the case of U.S. Government Securities and mortgage-backed
securities, where last sale information is not generally available,
such pricing procedures may include "matrix" comparisons to the prices
for comparable instruments on the basis of quality, yield, maturity and
other special factors involved. The Fund's Board of Trustees has
authorized the Manager to employ a pricing service to price U.S.
Government Securities for which last sale information is not generally
available. The Trustees will monitor the accuracy of such pricing
services by comparing prices used for portfolio evaluation to actual
sales prices of selected securities.

Puts, calls and Futures held by the Fund are valued at the last
sales prices on the principal exchanges on which they are traded or on
NASDAQ, as applicable, or, if there are no sales that day, in
accordance with (i) above. When the Fund writes an option, an amount
equal to the premium received by the Fund is included in the Fund's
Statement of Assets and Liabilities as an asset and an equivalent
deferred credit is included in the liability section. The deferred
credit is "marked-to-market" to reflect the current market value of the
option.

AccountLink. When shares are purchased through AccountLink, each
purchase must be at least $25.00. Shares will be purchased on the
regular business day the Distributor is instructed to initiate the
Automated Clearing House transfer to buy the shares. Dividends will
begin to accrue on shares purchased by the proceeds of ACH transfers on
the business day the Fund receives Federal Funds for such purchase
through the ACH system before the close of The New York Stock Exchange.
The Exchange normally closes at 4:00 P.M., but may close earlier on
certain days. If the Federal Funds are received on a business day
after the close of the Exchange, dividends will begin to accrue on the
next regular business day. The proceeds of ACH transfers are normally
received by the Fund three days after the transfers are initiated. The
Distributor and the Fund are not responsible for any delays in
purchasing shares resulting from delays in ACH transmissions.

Reduced Sales Charges. As discussed in the Prospectus, a reduced sales
charge rate may be obtained for Class A shares under Right of
Accumulation and Letters of Intent because of the economies of sales
efforts and reduction in expenses realized by the Distributor, dealers
and brokers making such sales. No sales charge is imposed in certain
other circumstances described in the Prospectus because the Distributor
or dealer or broker incurs little or no selling expenses. The term
"immediate family" refers to one's spouse, children, grandchildren,
parents, grandparents, parents-in-law, sons- and daughters-in-law,
siblings, and a sibling's spouse and a spouse's siblings.

- The OppenheimerFunds. The OppenheimerFunds are those mutual
funds for which the Distributor acts as the distributor or the sub-
distributor and include the following:

Oppenheimer Tax-Free Bond Fund
Oppenheimer New York Tax-Exempt Fund
Oppenheimer California Tax-Exempt Fund
Oppenheimer Intermediate Tax-Exempt Bond Fund
Oppenheimer Insured Tax-Exempt Bond Fund
Oppenheimer Main Street California Tax-Exempt Fund
Oppenheimer Florida Tax-Exempt Fund
Oppenheimer Pennsylvania Tax-Exempt Fund
Oppenheimer New Jersey Tax-Exempt Fund Oppenheimer Fund
Oppenheimer Discovery Fund
Oppenheimer Time Fund
Oppenheimer Target Fund
Oppenheimer Growth Fund
Oppenheimer Equity Income Fund
Oppenheimer Value Stock Fund
Oppenheimer Asset Allocation Fund
Oppenheimer Total Return Fund, Inc.
Oppenheimer Main Street Income & Growth Fund
<PAGE>
Oppenheimer High Yield Fund
Oppenheimer Champion High Yield Fund
Oppenheimer Investment Grade Bond Fund
Oppenheimer U.S. Government Trust
Oppenheimer Limited-Term Government Fund
Oppenheimer Mortgage Income Fund
Oppenheimer Global Fund
Oppenheimer Global Emerging Growth Fund
Oppenheimer Global Growth & Income Fund
Oppenheimer Gold & Special Minerals Fund
Oppenheimer Strategic Income Fund
Oppenheimer Strategic Investment Grade Bond Fund
Oppenheimer Strategic Short-Term Income Fund
Oppenheimer Strategic Income & Growth Fund
Oppenheimer Strategic Diversified Income Fund

<PAGE>

and the following "Money Market Funds":

Oppenheimer Money Market Fund, Inc.
Oppenheimer Cash Reserves
Centennial Money Market Trust
Centennial Tax Exempt Trust
Centennial Government Trust
Centennial New York Tax Exempt Trust
Centennial California Tax Exempt Trust
Centennial America Fund, L.P.
Daily Cash Accumulation Fund, Inc.

There is an initial sales charge on the purchase of Class A shares
of each of the OppenheimerFunds except Money Market Funds (under
certain circumstances described herein, redemption proceeds of Money
Market Fund shares may be subject to a contingent deferred sales
charge).

- Letters of Intent. A Letter of Intent ("Letter") is the
investor's statement of intention to purchase Class A shares of the
Fund (and other eligible OppenheimerFunds) sold with a front-end sales
charge during the 13-month period from the investor's first purchase
pursuant to the Letter (the "Letter of Intent period"), which may, at
the investor's request, include purchases made up to 90 days prior to
the date of the Letter. The Letter states the investor's intention to
make the aggregate amount of purchases (excluding any purchases made by
reinvestments of dividends or distributions or purchases made at net
asset value without sales charge), which together with the investor's
holdings of such funds (calculated at their respective public offering
prices calculated on the date of the Letter) will equal or exceed the
amount specified in the Letter. This enables the investor to count the
shares to be purchased under the Letter of Intent to obtain the reduced
sales charge rate (as set forth in the Prospectus) applicable to
purchases of shares in that amount (the "intended purchase amount").
Each purchase of Class A shares under the Letter will be made at the
public offering price (including sales charge) applicable to a single
lump-sum purchase of shares intended to be purchased under the Letter.

In submitting a Letter, the investor makes no commitment to
purchase shares, but if the investor's purchases of shares within the
Letter of Intent period, when added to the value (at offering price) of
the investor's holdings of shares on the last day of that period, do
not equal or exceed the intended purchase amount, the investor agrees
to pay the additional amount of sales charge applicable to such
purchases, as set forth in "Terms of Escrow," below (as those terms may
be amended from time to time). The investor agrees that shares equal
in value to 5% of the intended purchase amount will be held in escrow
by the Transfer Agent subject to the Terms of Escrow. Also, the
investor agrees to be bound by the terms of the Prospectus, this
Statement of Additional Information and the Application used for such
Letter of Intent, and if such terms are amended, as they may be from
time to time by the Fund, that those amendments will apply
automatically to existing Letters of Intent.

If the total eligible purchases made during the Letter of Intent
period do not equal or exceed the intended purchase amount, the
commissions previously paid to the dealer of record for the account and
the amount of sales charge retained by the Distributor will be adjusted
to the rates applicable to actual total purchases.

If total eligible purchases during the Letter of Intent period
exceed the intended purchase amount and exceed the amount needed to
qualify for the next sales charge rate reduction set forth in the
applicable prospectus, the sales charges paid will be adjusted to the
lower rate, but only if and when the dealer returns to the Distributor
the excess of the amount of commissions allowed or paid to the dealer
over the amount of commissions that apply to the actual amount of
purchases. The excess commissions returned to the Distributor will be
used to purchase additional shares for the investor's account at the
net asset value per share in effect on the date of such purchase,
promptly after the Distributor's receipt thereof.

In determining the total amount of purchases made under a Letter,
shares redeemed by the investor prior to the termination of the Letter
of Intent period will be deducted. It is the responsibility of the
dealer of record and/or the investor to advise the Distributor about
the Letter in placing any purchase orders for the investor during the
Letter of Intent period. All of such purchases must be made through
the Distributor.

- Terms of Escrow That Apply to Letters of Intent.

1. Out of the initial purchase (or subsequent purchases if
necessary) made pursuant to a Letter, shares of the Fund equal in value
to 5% of the intended purchase amount specified in the Letter shall be
held in escrow by the Transfer Agent. For example, if the intended
purchase amount specified under the Letter is $50,000, the escrow shall
be shares valued in the amount of $2,500 (computed at the public
offering price adjusted for a $50,000 purchase). Any dividends and
capital gains distributions on the escrowed shares will be credited to
the investor's account.

2. If the total minimum investment specified under the Letter is
completed within the thirteen-month Letter of Intent period, the
escrowed shares will be promptly released to the investor.

3. If, at the end of the thirteen-month Letter of Intent period
the total purchases pursuant to the Letter are less than the intended
purchase amount specified in the Letter, the investor must remit to the
Distributor an amount equal to the difference between the dollar amount
of sales charges actually paid and the amount of sales charges which
would have been paid if the total amount purchased had been made at a
single time. Such sales charge adjustment will apply to any shares
redeemed prior to the completion of the Letter. If such difference in
sales charges is not paid within twenty days after a request from the
Distributor or the dealer, the Distributor will, within sixty days of
the expiration of the Letter, redeem the number of escrowed shares
necessary to realize such difference in sales charges. Full and
fractional shares remaining after such redemption will be released from
escrow. If a request is received to redeem escrowed shares prior to
the payment of such additional sales charge, the sales charge will be
withheld from the redemption proceeds.

4.By signing the Letter, the investor irrevocably constitutes and
appoints the Transfer Agent as attorney-in-fact to surrender for
redemption any or all escrowed shares.

5.The shares eligible for purchase under the Letter (or the holding
of which may be counted toward completion of the Letter) do not include
any shares sold without a front-end sales charge or without being
subject to a Class A contingent deferred sales charge unless (for the
purpose of determining completion of the obligation to purchase shares
under the Letter) the shares were acquired in exchange for shares of
one of the OppenheimerFunds whose shares were acquired by payment of a
sales charge.

6. Shares held in escrow hereunder will automatically be
exchanged for shares of another fund to which an exchange is requested,
as described in the section of the Prospectus entitled "Exchange
Privilege," and the escrow will be transferred to that other fund.

Asset Builder Plans. To establish an Asset Builder Plan from a bank
account, a check (minimum $25) for the initial purchase must accompany
the application. Shares purchased by Asset Builder Plan payments from
bank accounts are subject to the redemption restrictions for recent
purchases described in "How To Sell Shares," in the Prospectus. Asset
Builder Plans also enable shareholders of Oppenheimer Cash Reserves to
use those accounts for monthly automatic purchases of shares of up to
four other OppenheimerFunds.

There is a front-end sales charge on the purchase of Class A shares
of certain OppenheimerFunds, or a contingent deferred sales charge may
apply to shares purchased by Asset Builder payments. An application
should be obtained from the Distributor, completed and returned, and a
prospectus of the selected fund(s) should be obtained from the
Distributor or your financial advisor before initiating Asset Builder
payments. The amount of the Asset Builder investment may be changed or
the automatic investments may be terminated at any time by writing to
the Transfer Agent. A reasonable period (approximately 15 days) is
required after the Transfer Agent's receipt of such instructions to
implement them. The Fund reserves the right to amend, suspend, or
discontinue offering such plans at any time without prior notice.

Cancellation of Purchase Orders. Cancellation of purchase orders for
the Fund's shares (for example, when a purchase check is returned to
the Fund unpaid) causes a loss to be incurred when the net asset value
of the Fund's shares on the cancellation date is less than on the
purchase date. That loss is equal to the amount of the decline in the
net asset value per share multiplied by the number of shares in the
purchase order. The investor is responsible for that loss. If the
investor fails to compensate the Fund for the loss, the Distributor
will do so. The Fund may reimburse the Distributor for that amount by
redeeming shares from any account registered in that investor's name,
or the Fund or the Distributor may seek other redress.

How to Sell Shares

Information on how to sell shares of the Fund is stated in the
Prospectus. The information below supplements the terms and conditions
for redemptions set forth in the Prospectus.

Check Writing. When a check is presented to the Bank for clearance,
the Bank will ask the Fund to redeem a sufficient number of full and
fractional shares in the shareholder's account to cover the amount of
the check. This enables the shareholder to continue receiving
dividends on those shares until the check is presented to the Fund.
Checks may not be presented for payment at the offices of the Bank or
the Fund's Custodian. This limitation does not affect the use of
checks for the payment of bills or to obtain cash at other banks. The
Fund reserves the right to amend, suspend or discontinue offering
checkwriting privileges at any time without prior notice.

- Selling Shares by Wire. The wire of redemption proceeds may be
delayed if the Fund's custodian bank is not open for business on a day
when the Fund would normally authorize the wire to be made, which is
usually the Fund's next regular business day following the redemption.
In those circumstances, the wire will not be transmitted until the next
bank business day on which the Fund is open for business. No dividends
will be paid on the proceeds of redeemed shares awaiting transfer by
wire.

- Payments "In Kind". The Prospectus states that payment for shares
tendered for redemption is ordinarily made in cash. However, the Board
of Trustees of the Fund determines that it would be detrimental to the
best interests of the remaining shareholders of the Fund to make
payment of a redemption order wholly or partly in cash. In that case
the Fund may pay the redemption proceeds in whole or in part by a
distribution "in kind" of securities from the portfolio of the Fund, in
lieu of cash, in conformity with applicable rules of the Securities and
Exchange Commission. The Fund has elected to be governed by Rule 18f-1
under the Investment Company Act, pursuant to which the Fund is
obligated to redeem shares solely in cash up to the lesser of $250,000
or 1% of the net assets of the Fund during any 90-day period for any
one shareholder. If shares are redeemed in kind, the redeeming
shareholder might incur brokerage or other costs in selling the
securities for cash. The method of valuing securities used to make
redemptions in kind will be the same as the method the Fund uses to
value it portfolio securities described above under "Determination of
Net Asset Values Per Share" and that valuation will be made as of the
time the redemption price is determined.

Reinvestment Privilege. Within six months of a redemption, a
shareholder may reinvest all or part of the redemption proceeds of (i)
Class A shares, or (ii) Class B shares that were subject to the Class B
contingent deferred sales charge when redeemed. The reinvestment may
be made without sales charge only in Class A shares of the Fund or any
of the other OppenheimerFunds into which shares of the Fund are
exchangeable as described in "How to Exchange Shares" below, at the net
asset value next computed after the Transfer Agent receives the
reinvestment order. The shareholder must ask the Distributor for that
privilege at the time of reinvestment. Any capital gain that was
realized when the shares were redeemed is taxable, and reinvestment
will not alter any capital gains tax payable on that gain. If there
has been a capital loss on the redemption, some or all of the loss may
not be tax deductible, depending on the timing and amount of the
reinvestment. Under the Internal Revenue Code, if the redemption
proceeds of Fund shares on which a sales charge was paid are reinvested
in shares of the Fund or another of the OppenheimerFunds within 90 days
of payment of the sales charge, the shareholder's basis in the shares
of the Fund that were redeemed may not include the amount of the sales
charge paid. That would reduce the loss or increase the gain
recognized from the redemption. However, in that case the sales charge
would be added to the basis of the shares acquired by the reinvestment
of the redemption proceeds. The Fund may amend, suspend or cease
offering this reinvestment privilege at any time as to shares redeemed
after the date of such amendment, suspension or cessation.

Transfers of Shares. Shares are not subject to the payment of a
contingent deferred sales charge of either class at the time of
transfer to the name of another person or entity (whether the transfer
occurs by absolute assignment, gift or bequest, not involving, directly
or indirectly, a public sale). The transferred shares will remain
subject to the contingent deferred sales charge, calculated as if the
transferee shareholder had acquired the transferred shares in the same
manner and at the same time as the transferring shareholder. If less
than all shares held in an account are transferred, and some but not
all shares in the account would be subject to a contingent deferred
sales charge if redeemed at the time of transfer, the priorities
described in the Prospectus under "How to Buy Shares" for the
imposition of the Class B and Class C contingent deferred sales charge
will be followed in determining the order in which shares are
transferred.

Distributions From Retirement Plans. Requests for distributions from
OppenheimerFunds-sponsored IRAs, 403(b)(7) custodial plans, or pension
or profit-sharing plans should be addressed to "Trustee,
OppenheimerFunds Retirement Plans," c/o the Transfer Agent at its
address listed in "How To Sell Shares" in the Prospectus or on the back
cover of this Statement of Additional Information. The request must:
(i) state the reason for the distribution; (ii) state the owner's
awareness of tax penalties if the distribution is premature; and (iii)
conform to the requirements of the plan and the Fund's other redemption
requirements. Participants (other than self-employed persons) in
OppenheimerFunds-sponsored pension or profit-sharing plans may not
directly request redemption of their accounts. The employer or plan
administrator must sign the request. Distributions from pension and
profit sharing plans are subject to special requirements under the
Internal Revenue Code and certain documents (available from the
Transfer Agent) must be completed before the distribution may be made.
Distributions from retirement plans are subject to withholding
requirements under the Internal Revenue Code, and IRS Form W-4P
(available from the Transfer Agent) must be submitted to the Transfer
Agent with the distribution request, or the distribution may be
delayed. Unless the shareholder has provided the Transfer Agent with a
certified tax identification number, the Internal Revenue Code requires
that tax be withheld from any distribution even if the shareholder
elects not to have tax withheld. The Fund, the Manager, the
Distributor, the Trustee and the Transfer Agent assume no
responsibility to determine whether a distribution satisfies the
conditions of applicable tax laws and will not be responsible for any
tax penalties assessed in connection with a distribution.

Special Arrangements for Repurchase of Shares from Dealers and Brokers.
The Distributor is the Fund's agent to repurchase its shares from
authorized dealers or brokers. The repurchase price per share will be
the net asset value next computed after the Distributor receives the
order placed by the dealer or broker, except that if the Distributor
receives a repurchase order after the close of The New York Stock
Exchange on a regular business day, it will be processed at that day's
net asset value if the order was received by the dealer or broker from
its customer prior to the time the Exchange closes (normally, that is
4:00 P.M., but may be earlier on some days) and the order was
transmitted to and received by the Distributor prior to its close of
business that day (normally 5:00 P.M.). Payment ordinarily will be
made within seven days after the Distributor's receipt of the required
documents, with signature(s) guaranteed as described in the Prospectus.

Automatic Withdrawal and Exchange Plans. Investors owning shares of
the Fund valued at $5,000 or more can authorize the Transfer Agent to
redeem shares (minimum $50) automatically on a monthly, quarterly,
semi-annual or annual basis under an Automatic Withdrawal Plan. Shares
will be redeemed three business days prior to the date requested by the
shareholder for receipt of the payment. Automatic withdrawals of up to
$1,500 per month may be requested by telephone if payments are by
check, payable to all shareholders of record, and sent to the address
of record for the account (and if the address has not been changed
within the prior 30 days). Required minimum distributions from
OppenheimerFunds-sponsored retirement plans may not be arranged on this
basis. Payments are normally made by check, but shareholders having
AccountLink privileges (see "How To Buy Shares") may arrange to have
Automatic Withdrawal Plan payments transferred to the bank account
designated on the OppenheimerFunds New Account Application or
signature-guaranteed instructions. The Fund cannot guarantee receipt
of a payment on the date requested and reserves the right to amend,
suspend or discontinue offering such plans at any time without prior
notice. Because of the sales charge assessed on Class A share
purchases, shareholders should not make regular additional Class A
share purchases while participating in an Automatic Withdrawal Plan.
Class B and Class C shareholders should not establish withdrawal plans
because of the imposition of the Class B and Class C contingent
deferred sales charge on such withdrawals (except where the Class B and
Class C contingent deferred sales charge is waived as described in the
Prospectus under "Class B Contingent Deferred Sales Charge" and "Class
C Contingent Deferred Sales Charge").

By requesting an Automatic Withdrawal or Exchange Plan, the
shareholder agrees to the terms and conditions applicable to such
plans, as stated below and in the provisions of the OppenheimerFunds
Application relating to such Plans, as well as the Prospectus. These
provisions may be amended from time to time by the Fund and/or the
Distributor. When adopted, such amendments will automatically apply to
existing Plans.

- Automatic Exchange Plans. Shareholders can authorize the Transfer
Agent (on the OppenheimerFunds Application or signature-guaranteed
instructions) to exchange a pre-determined amount of shares of the Fund
for shares (of the same class) of other OppenheimerFunds automatically
on a monthly, quarterly, semi-annual or annual basis under an Automatic
Exchange Plan. The minimum amount that may be exchanged to each other
fund account is $25. Exchanges made under these plans are subject to
the restrictions that apply to exchanges as set forth in "Exchange
Privilege" in the Prospectus and "How to Exchange Shares" below, in
this Statement of Additional Information.

- Automatic Withdrawal Plans. Fund shares will be redeemed as
necessary to meet withdrawal payments. Shares acquired without a sales
charge will be redeemed first and thereafter shares acquired with
reinvested dividends and capital gains distributions will be redeemed
next, followed by shares acquired with a sales charge, to the extent
necessary to make withdrawal payments. Depending upon the amount
withdrawn, the investor's principal may be depleted. Payments made
under withdrawal plans should not be considered as a yield or income on
your investment.

The Transfer Agent will administer the investor's Automatic
Withdrawal Plan (the "Plan") as agent for the investor (the
"Planholder") who executed the Plan authorization and application
submitted to the Transfer Agent. The Transfer Agent shall incur no
liability to the Planholder for any action taken or omitted by the
Transfer Agent in good faith to administer the Plan. Certificates will
not be issued for shares of the Fund purchased for and held under the
Plan, but the Transfer Agent will credit all such shares to the account
of the Planholder on the records of the Fund. Any share certificates
held by a Planholder may be surrendered unendorsed to the Transfer
Agent with the Plan application so that the shares represented by the
certificate may be held under the Plan.

For accounts subject to Automatic Withdrawal Plans, distributions of
capital gains must be reinvested in shares of the Fund, which will be
done at net asset value without a sales charge. Dividends on shares
held in the account may be paid in cash or reinvested.

Redemptions of shares needed to make withdrawal payments will be
made at the net asset value per share determined on the redemption
date. Checks or AccountLink payments of the proceeds of Plan
withdrawals will normally be transmitted three business days prior to
the date selected for receipt of the payment (receipt of payment on the
date selected cannot be guaranteed), according to the choice specified
in writing by the Planholder.

The amount and the interval of disbursement payments and the address
to which checks are to be mailed or AccountLink payments are to be sent
may be changed at any time by the Planholder by writing to the Transfer
Agent. The Planholder should allow at least two weeks' time in mailing
such notification for the requested change to be put in effect. The
Planholder may, at any time, instruct the Transfer Agent by written
notice (in proper form in accordance with the requirements of the then-
current Prospectus of the Fund) to redeem all, or any part of, the
shares held under the Plan. In that case, the Transfer Agent will
redeem the number of shares requested at the net asset value per share
in effect in accordance with the Fund's usual redemption procedures and
will mail a check for the proceeds to the Planholder.

The Plan may be terminated at any time by the Planholder by writing
to the Transfer Agent. A Plan may also be terminated at any time by
the Transfer Agent upon receiving directions to that effect from the
Fund. The Transfer Agent will also terminate a Plan upon receipt of
evidence satisfactory to it of the death or legal incapacity of the
Planholder. Upon termination of a Plan by the Transfer Agent or the
Fund, shares that have not been redeemed from the account will be held
in uncertificated form in the name of the Planholder, and the account
will continue as a dividend-reinvestment, uncertificated account unless
and until proper instructions are received from the Planholder or his
or her executor or guardian, or other authorized person.

To use shares held under the Plan as collateral for a debt, the
Planholder may request issuance of a portion of the shares in
certificated form. Upon written request from the Planholder, the
Transfer Agent will determine the number of shares for which a
certificate may be issued without causing the withdrawal checks to stop
because of exhaustion of uncertificated shares needed to continue
payments. However, should such uncertificated shares become exhausted,
Plan withdrawals will terminate.

If the Transfer Agent ceases to act as transfer agent for the Fund,
the Planholder will be deemed to have appointed any successor transfer
agent to act as agent in administering the Plan.

How To Exchange Shares

As stated in the Prospectus, shares of a particular class of
OppenheimerFunds having more than one class of shares may be exchanged
only for shares of the same class of other OppenheimerFunds. Shares of
OppenheimerFunds that have a single class without a class designation
are deemed "Class A" shares for this purpose. All of the
OppenheimerFunds offer Class A shares (except for Oppenheimer Strategic
Diversified Income Fund), but only the following other OppenheimerFunds
offer Class B shares:

Oppenheimer Limited-Term Government Fund
Oppenheimer Strategic Income Fund
Oppenheimer Strategic Income & Growth Fund
Oppenheimer Strategic Investment Grade Bond Fund
Oppenheimer Strategic Short-Term Income Fund
Oppenheimer New York Tax-Exempt Fund
Oppenheimer Tax-Free Bond Fund
Oppenheimer California Tax-Exempt Fund
Oppenheimer Pennsylvania Tax-Exempt Fund
Oppenheimer Florida Tax-Exempt Fund
Oppenheimer New Jersey Tax-Exempt Fund
Oppenheimer Insured Tax-Exempt Bond Fund
Oppenheimer Main Street Income & Growth Fund
Oppenheimer Main Street California Tax-Exempt Fund
Oppenheimer Total Return Fund, Inc.
Oppenheimer Value Stock Fund
Oppenheimer Investment Grade Bond Fund
Oppenheimer High Yield Fund
Oppenheimer Mortgage Income Fund
Oppenheimer Cash Reserves (Class B shares are only available by
exchange)
Oppenheimer Growth Fund
Oppenheimer Equity Income Fund
Oppenheimer Global Fund
Oppenheimer Discovery Fund

The following other OppenheimerFunds offer Class C shares:

Oppenheimer Limited-Term Government Fund
Oppenheimer Fund
Oppenheimer Global Growth & Income Fund
Oppenheimer Asset Allocation Fund
Oppenheimer Champion High Yield Fund
Oppenheimer Target Fund
Oppenheimer Intermediate Tax-Exempt Bond Fund
Oppenheimer U.S. Government Trust
Oppenheimer Main Street Income & Growth Fund
Oppenheimer Cash Reserves (Class C shares are available only by
exchange)
Oppenheimer Strategic Diversified Income Fund

Class A shares of OppenheimerFunds may be exchanged at net asset
value for shares of any Money Market Fund. Shares of any Money Market
Fund purchased without a sales charge may be exchanged for shares of
OppenheimerFunds offered with a sales charge upon payment of the sales
charge (or, if applicable, may be used to purchase shares of
OppenheimerFunds subject to a contingent deferred sales charge).

Shares of this Fund acquired by reinvestment of dividends or
distributions from any other of the OppenheimerFunds or from any unit
investment trust for which reinvestment arrangements have been made
with the Distributor may be exchanged at net asset value for shares of
any of the OppenheimerFunds.

No contingent deferred sales charge is imposed on exchanges of
shares of either class purchased subject to a contingent deferred sales
charge. However, when Class A shares acquired by exchange of other
OppenheimerFunds purchased subject to a Class A contingent deferred
sales charge are redeemed within 18 months of the end of the calendar
month of the initial purchase of the exchanged Class A shares, the
Class A contingent deferred sales charge is imposed on the redeemed
shares (see "Class A Contingent Deferred Sales Charge" in the
Prospectus). The Class B contingent deferred sales charge is imposed
on Class B shares redeemed within six years of the exchanged Class B
shares. The Class C contingent deferred sales charge is imposed on
Class C shares acquired by exchange if they are redeemed within 12
months of the initial purchase of the exchanged Class C shares.

When Class B or Class C shares are redeemed to effect an exchange,
the priorities described in "How To Buy Shares" in the Prospectus for
the imposition of the Class B and Class C contingent deferred sales
charge will be followed in determining the order in which the shares
are exchanged. Shareholders should take into account the effect of any
exchange on the applicability and rate of any contingent deferred sales
charge that might be imposed in the subsequent redemption of remaining
shares. Shareholders owning shares of more than one class must specify
whether they intend to exchange Class A, Class B or Class C shares.

The Fund reserves the right to reject telephone or written exchange
requests submitted in bulk by anyone on behalf of 10 or more accounts.
The Fund may accept requests for exchanges of up to 50 accounts per day
from representatives of authorized dealers that qualify for this
privilege. In connection with any exchange request, the number of
shares exchanged may be less than the number requested if the exchange
or the number requested would include shares subject to a restriction
cited in the Prospectus or this Statement of Additional Information or
shares covered by a share certificate that is not tendered with the
request. In those cases, only the shares available for exchange
without restriction will be exchanged.

When exchanging shares by telephone, the shareholder must either
have an existing account in, or acknowledge receipt of a prospectus of,
the fund to which the exchange is to be made. For full or partial
exchanges of an account made by telephone, any special account features
such as Asset Builder Plans, Automatic Withdrawal Plans and retirement
plan contributions will be switched to the new account unless the
Transfer Agent is instructed otherwise. If all telephone lines are
busy (which might occur, for example, during periods of substantial
market fluctuations), shareholders might not be able to request
exchanges by telephone and would have to submit written exchange
requests.

Shares to be exchanged are redeemed on the regular business day the
Transfer Agent receives an exchange request in proper form (the
"Redemption Date"). Normally, shares of the fund to be acquired are
purchased on the Redemption Date, but such purchases may be delayed by
either fund up to five business days if it determines that it would be
disadvantaged by an immediate transfer of the redemption proceeds. The
Fund reserves the right, in its discretion, to refuse any exchange
request that may disadvantage it (for example, if the receipt of
multiple exchange requests from a dealer might require the disposition
of portfolio securities at a time or at a price that might be
disadvantageous to the Fund).

The different OppenheimerFunds available for exchange have different
investment objectives, policies and risks, and a shareholder should
assure that the Fund selected is appropriate for his or her investment
and should be aware of the tax consequences of an exchange. For
Federal tax purposes, an exchange transaction is treated as a
redemption of shares of one fund and a purchase of shares of another.
"Reinvestment Privilege," above, discusses some of the tax consequences
of reinvestment of redemption proceeds in such cases. The Fund, the
Distributor, and the Transfer Agent are unable to provide investment,
tax or legal advice to a shareholder in connection with an exchange
request or any other transaction.

Dividends, Capital Gains and Taxes

Dividends and Distributions. Dividends will be payable on shares held
of record at the time of the previous determination of net asset value,
or as otherwise described in "How to Buy Shares." Daily dividends on
newly purchased shares will not be declared or paid until such time as
Federal Funds (funds credited to a member bank's account at the Federal
Reserve Bank) are available from the purchase payment for such shares.
Normally, purchase checks received from investors are converted to
Federal Funds on the next business day. Dividends will be declared on
shares repurchased by a dealer or broker for four business days
following the trade date (i.e., to and including the day prior to
settlement of the repurchase). If all shares in an account are
redeemed, all dividends accrued on shares of the same class in the
account will be paid together with the redemption proceeds.

Dividends, distributions and the proceeds of the redemption of Fund
shares represented by checks returned to the Transfer Agent by the
Postal Service as undeliverable will be invested in shares of
Oppenheimer Money Market Fund, Inc., as promptly as possible after the
return of such checks to the Transfer Agent, to enable the investor to
earn a return on otherwise idle funds.

The amount of a class's distributions may vary from time to time
depending on market conditions, the composition of the Fund's
portfolio, and expenses borne by the Fund or borne separately by a
class, as described in "Alternative Sales Arrangements -- Class A,
Class B and Class C shares," above. Dividends are calculated in the
same manner, at the same time and on the same day for shares of each
class. However, dividends on Class B and Class C shares are expected
to be lower than dividends on Class A shares as a result of the asset-
based sales charges on Class B and Class C shares, and will also differ
in amount as a consequence of any difference in net asset value between
the classes.

Distributions may be made annually in December out of any net short-
term or long-term capital gains realized from the sale of securities,
premiums from expired calls written by the Fund and net profits from
Hedging Instruments and closing purchase transactions realized in the
twelve months ending on October 31 of the current year. Any difference
between the net asset value of Class A, Class B and Class C shares will
be reflected in such distributions. Distributions from net short-term
capital gains are taxable to shareholders as ordinary income and when
paid by the Fund are considered "dividends." The Fund may make a
supplemental distribution of capital gains and ordinary income
following the end of its fiscal year. Any long-term capital gains
distributions will be identified separately when paid and when tax
information is distributed by the Fund. If prior distributions must be
re-characterized at the end of the fiscal year as a result of the
effect of the Fund's investment policies, shareholders may have a non-
taxable return of capital, which will be identified in notices to
shareholders. There is no fixed dividend rate and there can be no
assurance as to the payment of any dividends or the realization of any
capital gains.

If the Fund qualifies as a "regulated investment company" under the
Internal Revenue Code, it will not be liable for Federal income taxes
on amounts paid by it as dividends and distributions. The Fund
qualified as a regulated investment company in its last fiscal year and
intends to qualify in future years, but reserves the right not to
qualify. The Internal Revenue Code contains a number of complex tests
to determine whether the Fund will qualify, and the Fund might not meet
those tests in a particular year. For example, if the Fund derives 30%
or more of its gross income from the sale of securities held less than
three months, it may fail to qualify (see "Tax Aspects of Covered Calls
and Hedging Instruments," above). If it does not qualify, the Fund will
be treated for tax purposes as an ordinary corporation and will receive
no tax deduction for payments of dividends and distributions made to
shareholders.

Under the Internal Revenue Code, by December 31 each year the Fund
must distribute 98% of its taxable investment income earned from
January 1 through December 31 of that year and 98% of its capital gains
realized in the period from November 1 of the prior year through
October 31 of the current year, or else the Fund must pay an excise tax
on the amounts not distributed. While it is presently anticipated that
the Fund will meet those requirements, the Fund's Board and the Manager
might determine in a particular year that it would be in the best
interest of shareholders for the Fund not to make such distributions at
the required levels and to pay the excise tax on the undistributed
amounts. That would reduce the amount of income or capital gains
available for distribution to shareholders.

Dividend Reinvestment in Another Fund. Shareholders of the Fund may
elect to reinvest all dividends and/or capital gains distributions in
shares of the same class of any of the other OppenheimerFunds listed in
"Reduced Sales Charges" above, at net asset value without sales charge.
Class B and Class C shareholders should be aware that as of the date of
this Statement of Additional Information, not all of the
OppenheimerFunds offer Class B and Class C shares. The names of funds
that do as of the date of this document can be obtained by referring to
"How to Exchange Shares," above or by calling the Distributor at 1-800-
525-7048. To elect this option, the shareholder must notify the
Transfer Agent in writing, and either must have an existing account in
the fund selected for reinvestment or must obtain a prospectus for that
fund and an application from the Distributor to establish an account.
The investment will be made at net asset value per share in effect at
the close of business on the payable date of the dividend or
distribution. Dividends and/or distributions from certain of the
OppenheimerFunds may be invested in shares of this Fund on the same
basis.

Additional Information About the Fund

The Custodian. Citibank, N.A. is the Custodian of the Fund's assets.
The Custodian's responsibilities include safeguarding and controlling
the Fund's portfolio securities, collecting income on the portfolio
securities and handling the delivery of such securities to and from the
Fund. The Manager has represented to the Fund that its banking
relationships between the Manager and the Custodian have been and will
continue to be unrelated to and unaffected by the relationship between
the Fund and the Custodian. It will be the practice of the Fund to
deal with the Custodian in a manner uninfluenced by any banking
relationship the Custodian may have with the Manager and its
affiliates. The Fund's cash balances with the Custodian in excess of
$100,000 are not protected by Federal deposit insurance. Those
uninsured balances at times may be substantial.

Independent Auditors. The independent auditors of the Fund audit the
Fund's financial statements and perform other related audit services.
They also act as auditors for certain other funds advised by the
Manager and its affiliates.

The Board of Trustees and Shareholders of Oppenheimer U.S. Government
Trust:

We have audited the accompanying statements of investments and assets
and
liabilities of Oppenheimer U.S. Government Trust as of June 30, 1994,
and the related statement of operations for the year then ended, the
statements of changes in net assets for each of the years in the
two-year period then ended and the financial highlights for each of the
years in the ten-year period then ended. These financial statements
and financial highlights are the responsibility of the Fund's
management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.

We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial
statements and financial highlights are free of material misstatement.
An audit includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements and financial
highlights. Our procedures included confirmation of securities owned as
of June 30, 1994, by correspondence with the custodian and brokers; and
where confirmations were not received from brokers, we performed other
auditing procedures. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe
that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements and financial
highlights
referred to above present fairly, in all material respects, the
financial
position of Oppenheimer U.S. Government Trust as of June 30, 1994, the
results of its operations for the year then ended, the changes in its
net assets for each of the years in the two-year period then ended, and
the financial highlights for each of the years in the ten-year period
then ended, in conformity with generally accepted accounting
principles.

July 22, 1994

<PAGE>

Statement of Investments June 30, 1994

<TABLE>
<CAPTION>
Face Market Value
Amount See Note 1
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Repurchase Agreements--1.0%

Repurchase agreement with First Chicago Capital Markets, 4.22%, dated 6/30/94,
to be repurchased at $3,300,387 on 7/1/94, collateralized by U.S. Treasury Nts.,
5.125%, 11/30/98, with a value of $3,368,643 (Cost $3,300,000) $3,300,000 $3,300,000

Long-Term U.S. Government Obligations--97.8%

Agency: Full Faith and
Credit--33.2%

Government National Mortgage Assn.:
10.50%, 2/15/13 9,046 9,891
10.50%, 6/15/13 102,908 112,521
10.50%, 7/15/13 80,309 87,811
10.50%, 8/15/13 554,934 606,771
10.50%, 8/15/15 89,296 97,654
10.50%, 9/15/15 92,884 101,580
10.50%, 10/15/15 27,315 29,872
10.50%, 11/15/15 48,711 53,272
10.50%, 12/15/15 35,629 38,965
10.50%, 1/15/16 278,625 304,748
10.50%, 2/15/16 1,693,843 1,852,626
10.50%, 3/15/16 281,765 308,178
10.50%, 4/15/16 44,168 48,309
10.50%, 5/15/16 44,899 49,108
10%, 6/15/16 417,477 449,861
10.50%, 6/15/16 24,636 26,946
10.50%, 8/15/16 81,006 88,601
10.50%, 10/15/16 147,640 161,480
10.50%, 11/15/16 283,844 310,452
10.50%, 6/15/17 194,543 212,819
10.50%, 7/15/17 75,029 82,078
10%, 8/15/17 2,912,386 3,139,378
10.50%, 10/15/17 360,966 394,877
10.50%, 11/15/17 87,691 95,929
10.50%, 12/15/17 2,965,155 3,243,705
10.50%, 1/15/18 200,795 219,711
10.50%, 3/15/18 212,550 232,570
10.50%, 6/15/18 80,783 88,392
10.50%, 8/15/18 14,313 15,661
10.50%, 9/15/18 566,970 620,374
10.50%, 10/15/18 177,428 194,140
10.50%, 12/15/18 45,303 49,571
10.50%, 1/15/19 126,098 138,014
10.50%, 3/15/19 75,645 82,794
10.50%, 4/15/19 1,942 2,126
10.50%, 5/15/19 1,944,123 2,127,827
10.50%, 6/15/19 2,597,478 2,828,723
10.50%, 7/15/19 87,231 95,474
10.50%, 8/15/19 1,025,399 1,122,291
10.50%, 5/15/20 100,206 109,713
11%, 7/20/20 223,450 245,068
10.50%, 10/15/20 24,367 26,679
10.50%, 5/15/21 146,043 159,961
8%, 4/15/22 847,696 836,049

</TABLE>

4 Oppenheimer U.S. Government Trust
<PAGE> 5

8%, 9/15/22 $ 3,949,604 $ 3,895,337
6.50%, 9/15/23 248,312 220,931
6.50%, 10/15/23 14,326,733 14,120,040
6.50%, 12/15/23 207,645 184,748
6.50%, 2/15/24 233,980 207,801
8%, 4/15/24 3,360,157 3,311,839
8%, 5/15/24 8,741,098 8,615,401
8%, 6/15/24 5,567,724 5,487,660
7.50%, 7/15/24(3)(5) 49,500,000 47,241,316
------------
104,387,643

Agency: Government
Sponsored--40.3%

Federal Home Loan Mortgage Corp., Collateralized Mortgage Obligations,
Guaranteed Multiclass Mortgage Participation Certificates:
14%, 1/11/11 785,150 892,394
6.80%, 3/15/16 15,000,000 14,981,250
8.50%, 10/15/19 3,100,000 3,191,481
- ------------------------------------------------------------------------------------------------------------------
Federal National Mortgage Assn., Collateralized Mortgage Obligations,
Guaranteed Real Estate Mortgage Investment Conduit Pass-Through Certificates:
8.50%, 1/25/00 29,617,000 26,180,536
8%, 3/25/01 11,700,000 11,852,918
13%, 11/1/12 330,156 371,462
8%, 7/25/19 18,000,000 18,286,738
8.75%, 12/25/20 22,500,000 23,284,329
9%, 7/1/21 2,030,600 2,105,002
9%, 7/15/21 4,000,000 4,127,079
8%, 12/1/22 3,602,262 3,562,169
7%, 9/25/23 34,296,980 12,630,934
Principal-Only Stripped Mtg-Backed Security, Trust 253, 0%, 11/25/23(1) 1,000,028 475,639
Interest-Only Stripped Mtg-Backed Security, Trust 257, Class 2, 7%, 2/25/24(2) 12,869,043 4,779,643
------------
126,721,574

Treasury--24.3%

U.S. Treasury Bonds:
12%, 8/15/20 22,500,000 30,839,064
11.625%, 11/15/20 7,850,000 9,967,042
- ------------------------------------------------------------------------------------------------------------------
U.S. Treasury Nts.:
9.50%, 11/15/95 5,000,000 5,243,750
8.50%, 5/15/97(4) 28,750,000 30,232,404
------------
76,282,260

Total Long-Term U.S. Government Obligations (Cost $306,338,645) 307,391,477
------------
</TABLE>

5 Oppenheimer U.S. Government Trust

<PAGE> 6
Statement of Investments (Continued)

<TABLE>
<CAPTION>
Shares
Subject Market Value
Date/Price to Call See Note 1
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Call Options Purchased--0.1%
- --------------------------------------------------------------------------------------------------------------------------------
U.S. Treasury Bonds, 7.25%, 5/15/04 (Cost $292,187) Aug./$ 100.4375 22,000 $
140,932
- --------------------------------------------------------------------------------------------------------------------------------
Total Investments, at Value (Cost $309,930,832) 98.9% 310,832,409
- --------------------------------------------------------------------------------------------------------------------------------
Other Assets Net of Liabilities 1.1 3,455,036
------ -------------
Net Assets 100.0 % $ 314,287,445

</TABLE>

1. Principal-Only Strips represent the right to receive the monthly principal
payments on an underlying pool of mortgage loans. The value of these securities
generally increases as prepayment rates rise.
2. Interest-Only Strips represent the right to receive the monthly interest
payments on an underlying pool of mortgage loans. These securities are subject
to the risk of accelerated principal paydowns as interest rates decline. The
principal amount represents the notional amount on which current interest is
calculated.
3. When-issued security to be delivered and settled after June 30, 1994.
4. Securities with an aggregate market value of $10,515,619 are held in escrow
to cover initial margin requirements on open interest rate futures sales
contracts, as follows:

<TABLE>
<CAPTION>
Type of Contract Number of Contracts Face Amount
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
U.S. Treasury Nts., 9/94 100 $10,000,000
</TABLE>

The market value of the open contracts was $10,342,188 at June 30, 1994, with
a net unrealized loss of $84,375.

5. Securities with an aggregate market value of $28,631,101 are held in escrow
to cover outstanding call options, as follows:

<TABLE>
<CAPTION>
Shares Subject Expiration Exercise Premium Market Value
to Call Date Price Received See Note 1
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Government National Mortgage Assn. 30,000 8/94 $99.375 $290,625 $150,000
</TABLE>

See accompanying Notes to Financial Statements.

8 Oppenheimer U.S. Government Trust

<PAGE> 7
Statement of Assets and Liabilities June 30, 1994

<TABLE>
<S> <C>
Assets

Investments, at value (cost $309,930,832)--see accompanying statement $310,832,409
- -----------------------------------------------------------------------------------------------------------------------------
Cash 101,565
Receivables:
Investments sold 50,509,259
Shares of beneficial interest sold 4,039,457
Interest and principal paydowns 3,073,764
- -----------------------------------------------------------------------------------------------------------------------------
Other 37,755
------------
Total assets 368,594,209

Liabilities

Options written, at value (premiums received $290,625)--see accompanying statement--Note 5 150,000

Unrealized depreciation on forward contracts 84,375
Payables and other liabilities:
Investment purchased 47,631,172
Shares of beneficial interest redeemed 6,029,922
Distribution and service plan fees--Note 4 196,867
Other 214,428
------------
Total liabilities 54,306,764

Net Assets $314,287,445
============

Composition of
Net Assets

Paid-in capital $334,477,570
- -----------------------------------------------------------------------------------------------------------------------------
Undistributed net investment income 149,269
- -----------------------------------------------------------------------------------------------------------------------------
Accumulated net realized loss from investment transactions and written option transactions (21,297,221)
- -----------------------------------------------------------------------------------------------------------------------------
Net unrealized appreciation of investments--Note 3 957,827
------------
Net assets $314,287,445
============

Net Asset Value
Per Share

Class A Shares:
Net asset value and redemption price per share (based on net assets of
$310,026,529 and 33,684,502 shares of beneficial interest outstanding) $9.20
Maximum offering price per share (net asset value plus sales charge
of 4.75% of offering price) $9.66

Class C Shares:
Net asset value, redemption price and offering price per share (based on net assets
of $4,260,916 and 463,512 shares of beneficial interest outstanding) $9.19
</TABLE>

See accompanying Notes to Financial Statements.

7 Oppenheimer U.S. Government Trust
<PAGE> 8
Statement of Operations For the Year Ended June 30, 1994

<TABLE>
<S> <C>
Investment Income
Interest $27,701,376

Expenses

Management fees--Note 4 2,515,934
- -----------------------------------------------------------------------------------------------------------------------------
Distribution and service plan fees:
Class A--Note 4 863,331
Class C--Note 4 12,509
- -----------------------------------------------------------------------------------------------------------------------------
Transfer and shareholder servicing agent fees--Note 4 303,755
- -----------------------------------------------------------------------------------------------------------------------------
Shareholder reports 156,383
- -----------------------------------------------------------------------------------------------------------------------------
Custodian fees and expenses 61,792
- -----------------------------------------------------------------------------------------------------------------------------
Trustees' fees and expenses 57,770
- -----------------------------------------------------------------------------------------------------------------------------
Legal and auditing fees 32,424
- -----------------------------------------------------------------------------------------------------------------------------
Registration and filing fees--Class C 1,542
- -----------------------------------------------------------------------------------------------------------------------------
Other 77,714
-----------
Total expenses 4,083,154

Net Investment Income 23,618,222

Realized and Unrealized
Loss on Investments

Net realized loss on investments (11,210,170)
- -----------------------------------------------------------------------------------------------------------------------------
Net change in unrealized depreciation on investments (15,469,786)
Net realized and unrealized loss on investments (26,679,956)
Net Decrease in Net Assets Resulting From Operations $(3,061,734)
===========

</TABLE>

See accompanying Notes to Financial Statements.

8 Oppenheimer U.S. Government Trust
<PAGE> 9
Statements of Changes in Net Assets

<TABLE>
<CAPTION>
Year Ended June 30,
1994 1993
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Operations

Net investment income $ 23,618,222 $ 27,729,894
- ---------------------------------------------------------------------------------------------------------------------------
Net realized gain (loss) on investments and options written (11,210,170) 4,056,978
- ---------------------------------------------------------------------------------------------------------------------------
Net change in unrealized appreciation or depreciation on investments (15,469,786) 5,024,826
------------ -------------
Net increase (decrease) in net assets resulting from operations (3,061,734) 36,811,698

Dividends to
Shareholders

Dividends from net investment income:
Class A ($.634 and .678 per share, respectively) (21,966,741) (27,733,632)
Class C ($.329 per share) (76,280) --
Dividends in excess of net investment income:
Class A ($.012 per share) (418,629) --
Tax return of capital distribution:
Class A ($.034 per share) (1,145,537) --

Beneficial Interest
Transactions

Net decrease in net assets resulting from Class A
beneficial interest transactions--Note 2 (44,398,318) (24,025,195)
- ---------------------------------------------------------------------------------------------------------------------------
Net increase in net assets resulting from Class C
beneficial interest transactions--Note 2 4,438,932 --

Net Assets

Total decrease (66,628,307) (14,947,129)
- ---------------------------------------------------------------------------------------------------------------------------
Beginning of year 380,915,752 395,862,881
------------ ------------
End of year (including undistributed net investment
income of $149,269 and $576,358, respectively) $314,287,445 $380,915,752
============
============
</TABLE>

See accompanying Notes to Financial Statements.

9 Oppenheimer U.S. Government Trust

<PAGE> 10

Financial Highlights
<TABLE>
<CAPTION>
Class A Class C
-----------------------------------------------------------------------------------------------
Year Period
Ended Ended
June 30, June 30,
1994 1993 1992 1991 1990 1989 1988 1987 1986(3) 1985(2) 1994(1)
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
<C> <C>
Per Share Operating Data:
Net asset value, beginning
of period $9.95 $9.73 $9.25 $9.24 $9.54 $9.59 $9.77 $10.17 $ 10.00 $10.00 $9.83
- -----------------------------------------------------------------------------------------------------------------------------
Income from investment
operations:
Net investment income .67 .68 .69 .83 .90 .91 .90 .84 .94 .77 .33
Net realized and unrealized
gain (loss) on investments,
options written (.74) .22 .48 .02 (.32) (.05) (.18) (.33) .38 -- (.64)
------- ------- ------- ------ ------ ------- ------- ------- ------- ------ ----
Total income (loss) from
investment operations (.07) .90 1.17 .85 .58 .86 .72 .51 1.32 .77 (.31)
- -----------------------------------------------------------------------------------------------------------------------------
Dividends and distributions
to shareholders:
Dividends from net
investment income (.64) (.68) (.69) (.84) (.88) (.91) (.90) (.85) (.93) (.77) (.33)
Dividends in excess of net
investment income (.01) -- -- -- -- -- -- -- -- -- --
Distributions from net
realized gain on investments
and options written -- -- -- -- -- -- -- (.06) (.22) -- --
Tax return of capital
distribuiton (.03) -- -- -- -- -- -- -- -- -- --
------- ------- ------- ------ ------ ------- ------- ------- ------- ------ ----
Total dividends and
distributions to shareholders (.68) (.68) (.69) (.84) (.88) (.91) (.90) (.91) (1.15) (.77) (.33)
- -----------------------------------------------------------------------------------------------------------------------------
Net asset value, end
of period $9.20 $9.95 $9.73 $9.25 $9.24 $9.54 $9.59 $9.77 $ 10.17 $ 10.00 $9.19
======= ======= ======= ====== ====== ========
======= ======= ======= ======= =====

Total Return, at Net
Asset Value(4) (1.17)% 9.55% 13.05% 9.53% 6.34% 9.51% 7.78% 5.54% 14.95% --
(3.12)%
- -----------------------------------------------------------------------------------------------------------------------------
Ratios/Supplemental Data:
Net assets, end of period
(in thousands) $310,027 $380,916 $395,863 $342,220 $264,728 $232,593 $203,857 $216,306 $160,389 $7,798
$4,261
- -----------------------------------------------------------------------------------------------------------------------------
Average net assets
(in thousands) $355,698 $401,789 $376,532 $299,144 $253,085 $210,060 $197,834 $207,557 $98,004 $7,724
$2,173
- -----------------------------------------------------------------------------------------------------------------------------
Number of shares outstanding
at end of period
(in thousands) 33,685 38,279 40,697 36,987 28,650 24,393 21,252 22,146 15,767 780 464
- -----------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets:
Net investment income 6.61% 6.90% 7.23% 8.93% 9.60% 9.65% 9.36% 8.73% 9.77% 7.77%
5.97%(6)
Expenses 1.14% 1.17% 1.17% 1.19% 1.16% 1.19% 1.13% .99% .56% 1.47%
1.96%(6)
- -----------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate(5) 139.5% 96.8% 207.8% 133.9% 125.5% 76.9% 141.3% 263.0% 366.9% --
139.5%
</TABLE>
1. For the period from December 1, 1993 (inception of offering) to June 30,
1994.
2. All number of shares and per share data have been restated to reflect a 1
for 10 stock split effective August 16, 1985.
3. For the period from August 16, 1985 to June 30, 1986.
4. Assumes a hypothetical initial investment on the business day before the
first day of the fiscal period, with all dividends and distributions reinvested
in additional shares on the reinvestment date, and redemption at the net asset
value calculated on the last business day of the fiscal period. Sales charges
are not reflected in the total returns.
5. The lesser of purchases or sales of portfolio securities for a period,
divided by the monthly average of the market value of portfolio securities
owned during the period. Securities with a maturity or expiration date at the
time of acquisition of one year or less are excluded from the calculation.
Purchases and sale of investment securities (excluding short-term securities)
for the year ended June 30, 1994 were $495,481,969 and $550,946,645,
respectively.
6. Annualized.

See accompanying Notes to Financial Statements.

10 Oppenheimer U.S. Government Trust
<PAGE> 11
Notes to Financial Statements

1. Significant Accounting Policies

Oppenheimer U.S. Government Trust (the Fund) is registered under the Investment
Company Act of 1940, as amended, as a diversified, open-end management
investment company. The Fund's investment advisor is Oppenheimer Management
Corporation (the Manager). The Fund offers both Class A and Class C shares.
Class A shares are sold with a front-end sales charge. Class C shares may be
subject to a contingent deferred sales charge. Both classes of shares have
identical rights to earnings, assets and voting privileges, except that each
class has its own distribution plan, expenses directly attributable to a
particular class and exclusive voting rights with respect to matters affecting
a single class. The following is a summary of significant accounting policies
consistently followed by the Fund.

Investment Valuation. Portfolio securities are valued at 4:00 p.m. (New York
time) on each trading day. Long-term debt securities are valued by a portfolio
pricing service approved by the Board of Trustees. Long-term debt securities
which cannot be valued by the approved portfolio pricing service are valued by
averaging the mean between the bid and asked prices obtained from two active
market makers in such securities. Short-term debt securities having a remaining
maturity of 60 days or less are valued at cost (or last determined market
value) adjusted for amortization to maturity of any premium or discount.
Securities for which market quotes are not readily available are valued under
procedures established by the Board of Trustees to determine fair value in good
faith. A call option is valued based upon the last sales price on the principal
exchange on which the option is traded or, in the absence of any transactions
that day, the value is based upon the last sale on the prior trading date if it
is within the spread between the closing bid and asked prices. If the last sale
price is outside the spread, the closing bid or asked price closest to the last
reported sale price is used.

Repurchase Agreements. The Fund requires the custodian to take possession, to
have legally segregated in the Federal Reserve Book Entry System or to have
segregated within the custodian's vault, all securities held as collateral for
repurchase agreements. If the seller of the agreement defaults and the value of
the collateral declines, or if the seller enters an insolvency proceeding,
realization of the value of the collateral by the Fund may be delayed or
limited.

Allocation of Income, Expenses and Gains and Losses. Income, expenses (other
than those attributable to a specific class) and gains and losses are allocated
daily to each class of shares based upon the relative proportion of net assets
represented by such class. Operating expenses directly attributable to a
specific class are charged against the operations of that class.

Federal Income Taxes. The Fund intends to continue to comply with provisions of
the Internal Revenue Code applicable to regulated investment companies and to
distribute all of its taxable income, including any net realized gain on
investments not offset by loss carryovers, to shareholders. Therefore, no
federal income tax provision is required. At June 30, 1994, the Fund had
available for federal income tax purposes an unused capital loss carryover of
approximately $11,875,000, $3,330,000 of which will expire in 1998, $7,358,000
in 1999 and $1,187,000 in 2002.

Trustees' Fees and Expenses. The Fund has adopted a nonfunded retirement plan
for the Fund's independent trustees. Benefits are based on years of service and
fees paid to each trustee during the years of service. During the year ended
June 30, 1994, a provision of $22,650 was made for the Fund's projected benefit
obligations, resulting in an accumulated liability of $122,000 at June 30,
1994. No payments have been made under the plan.

Distributions to Shareholders. The Fund intends to declare dividends separately
for Class A and Class C shares from net investment income each day the New York
Stock Exchange is open for business and pay such dividends monthly.
Distributions from net realized gains on investments, if any, will be declared
at least once each year.

Change in Accounting for Distributions to Shareholders. Effective July 1, 1993,
the Fund adopted Statement of Position 93-2: Determination, Disclosure, and
Financial Statement Presentation of Income, Capital Gain, and Return of Capital
Distributions by Investment Companies. As a result, the Fund changed the
classification of distributions to shareholders to better disclose the
differences between financial statement amounts and distributions determined in
accordance with income tax regulations. Accordingly, subsequent to June 30,
1993, amounts have been reclassified to reflect a decrease in paid-in capital
of $171,227, a decrease in undistributed net investment income of $391,297, and
an increase in undistributed capital gain on investments of $562,524. During
the year ended June 30, 1994, in accordance with Statement of Position 93-2,
undistributed net investment income has been decreased by $46,827, paid-in
capital has been decreased by $1,145,537 and undistributed capital gain has
been increased by $1,192,364.

11 Oppenheimer U.S. Government Trust
<PAGE> 12
Notes to Financial Statements (Continued)

1. Significant Accounting Policies (continued)

Other. Investment transactions are accounted for on the date the investments
are purchased or sold (trade date). Discount on securities purchased is
amortized over the life of the respective securities, in accordance with
federal income tax requirements. Realized gains and losses on investments and
unrealized appreciation and depreciation are determined on an identified cost
basis, which is the same basis used for federal income tax purposes.

2. Shares of Beneficial Interest

The Fund has authorized an unlimited number of no par value shares of
beneficial interest of each class. Transactions in shares of beneficial
interest were as follows:

<TABLE>
<CAPTION>
Year Ended June 30, 1994(1) Year Ended June 30, 1993
------------------------------ ----------------------------------
Shares Amount Shares Amount
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class A:
Sold 6,237,904 $ 60,979,282 10,114,092 $ 99,121,952
Dividends reinvested 1,913,674 18,566,281 2,059,182 20,214,713
Redeemed (12,746,027) (123,943,881) (14,590,989) (143,361,860)
----------- ------------- ----------- -------------
Net decrease (4,594,449) $ (44,398,318) (2,417,715) $ (24,025,195)
=========== ============= ===========
=============

- ----------------------------------------------------------------------------------------------------------
Class C:
Sold 531,550 $ 5,070,299 -- $ --
Dividends reinvested 5,284 49,363 -- --
Redeemed (73,322) (680,730) -- --
----------- ------------- ----------- -------------
Net increase 463,512 $ 4,438,932 -- $ --
=========== ============= ===========
=============
</TABLE>

1. For the year ended June 30, 1994 for Class A shares and for the period from
December 1, 1993 (inception of offering) to June 30, 1994 for Class C shares.

3. Unrealized Gains and Losses on Investments and Options Written

At June 30, 1994, net unrealized appreciation on investments and options
written of $957,827 was composed of gross appreciation of $5,714,596, and gross
depreciation of $4,756,769.

4. Management Fees and Other Transactions With Affiliates

Management fees paid to the Manager were in accordance with the investment
advisory agreement with the Fund which provides for an annual fee of .75% on
the first $200 million of net assets, .70% on the next $200 million, .65% on
the next $400 million and .60% on net assets in excess of $800 million.
Effective January 1, 1994, Oppenheimer Management Corporation (the ``Manager'')
voluntarily reduced the management fees to provide for an annual fee of .70% on
the first $200 million of net assets, .65% on the next $200 million, .60% on
the next $400 million and .55% on net assets in excess of $800 million.
Effective July 1, 1994, Oppenheimer Management Corporation (the ``Manager'')
will voluntarily reduce the management fees to provide for an annual fee of
.65% on the first $200 million of net assets, .60% on the next $200 million,
.55% on the next $400 million and .50% on net assets in excess of $800 million.
The Manager has agreed to reimburse the Fund if aggregate expenses (with
specified exceptions) exceed the most stringent applicable regulatory limit on
Fund expenses.

For the year ended June 30, 1994, commissions (sales charges paid by
investors) on sales of Class A shares totaled $876,525, of which $282,424 was
retained by Oppenheimer Funds Distributor, Inc. (OFDI), a subsidiary of the
Manager, as general distributor, and by an affiliated broker/dealer. During the
year ended June 30, 1994, OFDI received contingent deferred sales charges of
$3,250 upon redemption of Class C shares.

Oppenheimer Shareholder Services (OSS), a division of the Manager, is
the transfer and shareholder servicing agent for the Fund, and for other
registered investment companies. OSS's total costs of providing such services
are allocated ratably to these companies.

12 Oppenheimer U.S. Government Trust
<PAGE> 13
Notes to Financial Statements (Continued)

4. Management Fees and Other Transactions With Affiliates (continued)

Under separate approved plans, each class may expend up to .25% of its
net assets annually to reimburse OFDI for costs incurred in connection with the
personal service and maintenance of accounts that hold shares of the Fund,
including amounts paid to brokers, dealers, banks and other institutions. In
addition, Class C shares are subject to an asset-based sales charge of .75% of
net assets annually, to reimburse OFDI for sales commissions paid from its own
resources at the time of sale and associated financing costs. In the event of
termination or discontinuance of the Class C plan, the Board of Trustees may
allow the Fund to continue payment of the asset-based sales charge to OFDI for
distribution expenses incurred on Class C shares sold prior to termination or
discontinuance of the plan. During the year ended June 30, 1994, OFDI paid
$56,187 to an affiliated broker/dealer as reimbursement for Class A personal
service and maintenance expenses and retained $12,509 as reimbursement for
Class C sales commissions and service fee advances, as well as financing costs.

5. Call Option Activity

Call option activity for the year ended June 30, 1994 was as follows:

<TABLE>
<CAPTION>
Number Amount of
Call Option Activity of Options Premiums
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Options outstanding at June 30, 1993 -- $ --
- ---------------------------------------------------------------------------------------------------------------
Options written 30,000 290,625
- ---------------------------------------------------------------------------------------------------------------
Options expired prior to exercise -- --
- ---------------------------------------------------------------------------------------------------------------
Options exercised -- --
------ ---------
Options outstanding at June 30, 1994 30,000 $ 290,625
====== =========
</TABLE>

<PAGE>

Appendix A

Description of Securities Ratings

Description of Standard & Poor's Corporation ("Standard & Poor's") and
Moody's Investors Service, Inc. ("Moody's") bond ratings:

Standard & Poor's describes its four highest ratings for corporate debt
as follows:

AAA: Debt rated "AAA" has the highest rating assigned by Standard &
Poor's. Capacity to pay interest and repay principal is extremely
strong.

AA: Debt rated "AA" has a very strong capacity to pay interest and
repay principal and differ from the higher rated issues only in a
small degree.

A: Debt rated "A" has a strong capacity to pay interest and repay
principal although it is somewhat more susceptible to the adverse
effects of changes in circumstances and economic conditions than debt
in higher rated categories.

BBB: Debt rated "BBB" is regarded as having an adequate capacity to pay
interest and repay principal.

Whereas it normally exhibits adequate protection parameters, adverse
economic conditions or changing circumstances are more likely to lead to
a weakened capacity to pay interest and repay principal for debt in this
category than in higher rated categories.

The ratings from AA to CCC may be modified by the addition of a plus or
minus sign to show relative standing within the major rating categories.

Moody's describes its four highest corporate bond ratings as follows:

Aaa: Bonds which are rated Aaa are judged to be of the best quality.
They carry the smallest degree of investment risk and are generally
referred to as "gilt edge." Interest payments are protected by a
large or by an exceptionally stable margin and principal is secure.
While the various protective elements are likely to change, such
changes as can be visualized are most unlikely to impair the
fundamentally strong position of such issues.

Aa: Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are
generally known as high grade bonds. They are rated lower than the
best bonds because margins of protection may not be as large as in
Aaa securities or fluctuation of protective elements may be of
greater amplitude or there may be other elements present which make
the long term risks appear somewhat larger than in Aaa securities.

<PAGE>

A: Bonds which are rated A possess many favorable investment attributes
and may be considered as upper medium grade obligations. Factors
giving security to principal and interest are considered adequate but
elements may be present which suggest a susceptibility to impairment
sometime in the future.

Baa: Bonds which are rated Baa are considered as medium grade
obligations, i.e., they are neither highly protected nor poorly
secured. Interest payments and principal security appear adequate
for the present but certain protective elements may be lacking or
may be characteristically unreliable over any great length of time.
Such bonds lack outstanding investment characteristics and in fact
have speculative characteristics as well.

Moody's applies numerical modifiers, 1, 2 and 3 in each generic rating
classification from Aa through B in its corporate bond rating system. The
modifier 1 indicates that the security ranks in the
higher end of its generic rating category; the modifier 2 indicates a mid-
range ranking; and the modifier 3 indicates that the issue ranks in the
lower end of its generic rating category.

<PAGE>
Appendix B

Industry Classifications

Aerospace/Defense
Air Transportation
Auto Parts Distribution
Automotive
Bank Holding Companies
Banks
Beverages
Broadcasting
Broker-Dealers
Building Materials
Cable Television
Chemicals
Commercial Finance
Computer Hardware
Computer Software
Conglomerates
Consumer Finance
Containers
Convenience Stores
Department Stores
Diversified Financial
Diversified Media
Drug Stores
Drug Wholesalers
Durable Household Goods
Education
Electric Utilities
Electrical Equipment
Electronics
Energy Services & Producers
Entertainment/Film
Environmental
Food
Gas Utilities
Gold
Health Care/Drugs
Health Care/Supplies & Services
Homebuilders/Real Estate
Hotel/Gaming
Industrial Services
Insurance
Leasing & Factoring
Leisure
Manufacturing
Metals/Mining
Nondurable Household Goods
Oil - Integrated
Paper
Publishing/Printing
Railroads
Restaurants
Savings & Loans
Shipping
Special Purpose Financial
Specialty Retailing
Steel
Supermarkets
Telecommunications - Technology
Telephone - Utility
Textile/Apparel
Tobacco
Toys
Trucking

<PAGE>

Investment Adviser
Oppenheimer Management Corporation
Two World Trade Center
New York, New York 10048

Distributor
Oppenheimer Funds Distributor, Inc.
Two World Trade Center
New York, New York 10048

Transfer and Shareholder Servicing Agent
Oppenheimer Shareholder Services
P.O. Box 5270
Denver, Colorado 80217
1-800-525-7048

Custodian of Portfolio Securities
Citibank, N.A.
399 Park Avenue
New York, New York 10043

Independent Auditors
KPMG Peat Marwick LLP
707 Seventeenth Street
Denver, Colorado 80202

Legal Counsel
Gordon Altman Butowsky Weitzen Shalov & Wein
114 West 47th Street
New York, New York 10036

<PAGE>

OPPENHEIMER U.S. GOVERNMENT TRUST

Annual Report June 30, 1995

[PHOTO OF MAN]

"We need
monthly
INCOME,
and we
need to feel
COMFORTABLE
about how
our money
is invested."

[OPPENHEIMER FUNDS LOGO]

<PAGE>

YIELD

STANDARDIZED YIELD(3)

For the 30 Days Ended 6/30/95:

Class A

6.17%

Class C

5.59%

This Fund is for people who want monthly INCOME and feel SECURE with a
fund
investing primarily in bonds backed by the U.S. government, its agencies
and
instrumentalities.

HOW YOUR FUND IS MANAGED

Oppenheimer U.S. Government Trust seeks high current income and safety of
principal by investing primarily in a portfolio of fixed income securities
issued or guaranteed by the U.S. government, its agencies and
instrumentalities.

While an investment in the Fund is neither insured nor guaranteed and its
shares fluctuate in value, the fact that most of the securities in the
Fund's portfolio are government-backed means investors enjoy superior
credit safety and assurance of timely payment to the Fund of principal and
interest on those securities.

In addition, the Fund is also designed to provide higher income than more
conservative fixed income investments.

PERFORMANCE

Total return at net asset value for the 12 months ended 6/30/95 was 11.22%
for Class A shares and 10.31% for Class C shares.(1)

Your Fund's average annual total returns at maximum offering price for
Class A shares for the 1- and 5-year periods ended 6/30/95 and since
inception of the Class on 8/16/85 were 5.94%, 7.27% and 8.00%,
respectively. For Class C shares, average annual total returns for the
1-year period ended 6/30/95 and since inception of the Class on 12/1/93
were 9.31% and 4.22%, respectively.(2)

OUTLOOK

"Our policy now is to remain defensive, but to carefully watch technical
factors--such as changing relationships between bond yields and
maturities--so we can take advantage of what we believe are the best
relative values in the
market."

David Rosenberg, Portfolio Manager
June 30, 1995

All figures assume reinvestment of dividends and capital gains
distributions.
Past performance is not indicative of future results investment and
principal value on an investment in the Fund will fluctuate so that an
investor's shares, when redeemed, may be worth more or less than the
original cost.

1. Based on the change in net asset value per share for the period shown,
without deducting any sales charges. Such performance would have been
lower if
sales charges were taken into account.

2. Class A returns show results of hypothetical investments on 6/30/94,
6/30/90
and 8/16/85 (inception of class), after deducting the current maximum
initial
sales charge of 4.75%. Class C returns show results of hypothetical
investments
on 6/30/94 and 12/1/93 (inception of class), with the 1% contingent
deferred
sales charge deducted for the 1-year result. The Fund's maximum sales
charge
rate for Class A shares was higher during a portion of some of the periods
shown, and actual investment results will be different as a result of the
change. An explanation of the different performance calculations is in
the
Fund's prospectus.

3. Standardized yield is net investment income calculated on a
yield-to-maturity
basis for the 30-day period ended 6/30/95, divided by the maximum offering
price
at the end of the period, compounded semiannually and then annualized.
Falling
net asset values will tend to artificially raise yields.

2 Oppenheimer U.S. Government Trust

<PAGE>

[PHOTO OF DONALD W. SPIRO]
Donald W. Spiro
President
Oppenheimer
U.S. Government Trust

[PHOTO OF JON S. FOSSEL]
Jon S. Fossel
Chairman and CEO
Oppenheimer
Management
Corporation

DEAR OPPENHEIMERFUNDS SHAREHOLDER,

In contrast to last year, the first half of 1995 has been exceptionally
good for
the bond market. Almost all types of bonds have participated in the
upswing
and, in many cases, have more than made up for last year's declines in the
first
half alone--rewarding investors who were patient through the market's
short-term
difficulties. The strength of the current market adds to evidence
showing,
once again, that profitable investing calls for a long-term perspective.

The single most important factor behind the bond rally was a change
in the
Federal Reserve's monetary policy. Between February 1994 and February
1995, the
Fed raised rates aggressively to preempt possible rising inflation by
slowing
the economy to a more moderate growth rate--thus prolonging the current
cycle of
economic growth. As evidence began to mount that indicated the economy
was
indeed slowing, the Fed stopped raising rates. Indications now are that
the
desired slowdown, or "soft landing" you may have read about, has been
achieved.
This has allowed rates to decline considerably, which in turn pushed bond
prices
up dramatically.

While a near perfect landing is unlikely, our expectation going
forward is
that with the current fundamentals in place, we will continue to
experience
moderate, sustainable growth with relatively low inflation.

We believe the Fed will not feel pressure to tighten monetary policy
in the
near term. Still, until the full extent of the economic slowdown is
known, some
questions remain. Signs of economic pickup later this year could motivate
the
Fed to raise rates again to combat potential inflation. The more likely
scenario, however, is that the Fed might actually lower rates during the
second
half if the economy slows too much.

In light of the uncertainties in the market, your Fund's managers
remain
cautious with an eye toward opportunity, so we're positioning investments
somewhat defensively at this time. The bond markets have performed very
well
and we don't want to give back the gains the Fund has made. Thus, your
Fund's
managers continue to focus on the income potential of bonds, because this
area
has contributed most significantly and predictably to performance over
time.

Oppenheimer Management's fixed income investment team will continue
to
monitor the economy and market conditions going forward to keep ahead of
significant events. We believe a conservative stance and an income
orientation
in addition to this year's strong capital appreciation justify a positive
outlook for fixed income investments across the board.

Your portfolio manager discusses the outlook for your Fund on the
following
pages. Thank you for your confidence in OppenheimerFunds, and we look
forward
to helping you continue to reach your investment goals in the future.

/s/ Donald W. Spiro /s/ Jon S. Fossel

Donald W. Spiro Jon S. Fossel

July 24, 1995

3 Oppenheimer U.S. Government Trust

<PAGE>

Q + A

[PHOTO OF MAN]

Q What contributed to the Fund's superior PERFORMANCE?

An interview with your Fund's manager.

THE BOND MARKET HAS REBOUNDED STRONGLY IN THE FIRST HALF OF 1995 FOLLOWING
A
DIFFICULT PERIOD LAST YEAR. WHAT IMPACT HAS THIS HAD ON YOUR MANAGEMENT
OF
U.S. GOVERNMENT TRUST?

Over the period, the Fund met its objectives of providing attractive
income with
relatively low risk extremely well. And while we're very happy to report
that
the Fund is up 11% for the period, as a defensive investment, it was just
as
important to us to continue meeting our goals of providing competitive
income
with relatively low price volatility as it was to try to take advantage
of the
full extent of the rally.

[PHOTO OF TWO MEN]

LONGER-TERM, THE FUND IS RATED ABOVE MOST OF ITS PEERS. WHAT HAS
CONTRIBUTED TO
U.S. GOVERNMENT TRUST'S SUPERIOR PERFORMANCE?

Our government funds are designed to offer good downside protection and
attractive income on the upside. And over the long run, we've been very
successful. During last year's difficult market, for example, we lost
only 1%.
Compared to competitive funds, our consistent, conservative approach has
placed
us in the top half of government funds measured by Lipper Analytical
Services
for the 3-, 5- and 10-year periods ended June 30, 1995.(1)

YOUR AVERAGE DURATION, OR SENSITIVITY TO INTEREST RATE CHANGES, IS
RELATIVELY
LOW. WHY?

Shareholders typically invest in government funds like this one because
they're
looking for a defensive investment. We feel that we can meet expectations
for
income and stability without taking on additional interest rate risk or
stretching for the highest yields. Although investments with high
duration
appreciated the most during the bond market's recent rally, they are

(1) Source: Lipper Analytical Services. The Lipper total return average
for the
3-, 5- and 10-year periods were for 96, 79 and 23 general U.S. government
funds.
The average is shown for comparative purposes only Oppenheimer U.S.
Government
Trust is characterized by Lipper as a general U.S. government fund. Lipper
performance does not take sales charges into consideration.

4 Oppenheimer U.S. Government Trust

<PAGE>

FACING PAGE
Top left: David Rosenberg
Portfolio Manager

Top right: Art Steinmetz, Senior
VP Fixed Income Investments
Portfolio Management Team

Bottom left: Len Darling, Executive
VP Director of Fixed Income Invest-
ments, consults with Jon Fossel

THIS PAGE:
Right: David Rosenberg with
Gina Palmeri, Mortgage Analyst

Below: Eva Zeff, Assistant VP
Fixed Income Investments
Portfolio Management Team

A Our CONSISTENT conservative approach.

also more exposed to risk should interest rates reverse.

WHAT CHANGES HAVE YOU MADE TO THE PORTFOLIO?

We've added a position in adjustable rate mortgages to the portfolio,
believing
that they offer prospects for increasing short-term yields with low risk.

In addition, we're employing a barbell strategy with
Treasuries--we're
holding a combination of very short and very long Treasuries to get
intermediate
exposure on average, but also to take advantage of the flattening of the
yield
curve.

Finally, we've reduced our fixed-rate mortgage-backed securities and,
with
a level of uncertainty in interest rates, we feel that prepayment risk in
this
market has increased.(1)

[PHOTO OF WOMAN]

WHAT IS YOUR OUTLOOK FOR THE GOVERNMENT BOND MARKET AND HOW WILL YOU
POSITION
THE FUND IN LIGHT OF YOUR VIEWS?

We believe the market is currently priced as though the Fed will lower
rates in
the near future. We feel that with the rally having come as far as it
has, it's
now prudent to be conservative. Any increase in business activity could
push
inflation higher, so we don't want to be overextended.

Our policy now is to remain defensive, but to carefully watch
technical
factors--such as changing relationships between bond yields and
maturities--so
we can take advantage of what we believe are the best relative values in
the
market.

[PHOTO OF MAN]

(1) The Fund's portfolio is subject to change.

5 Oppenheimer U.S. Government Trust

<PAGE>

STATEMENT OF INVESTMENTS JUNE 30, 1995

FACE MARKET VALUE
AMOUNT SEE NOTE 1
- ------------------------------------------------------------------------------------------------------------------------------
MORTGAGE-BACKED OBLIGATIONS--108.8%
- ------------------------------------------------------------------------------------------------------------------------------
GOVERNMENT AGENCY--106.2%
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
FHLMC/FNMA/ Federal Home Loan Mortgage Corp.:
SPONSORED--62.0% Collateralized Mtg. Obligations, Gtd. Multiclass Mtg. Participation
Certificates, 10%, 6/15/20 $ 5,511,000 $ 6,203,456
Collateralized Mtg. Obligations, Gtd. Multiclass Mtg. Participation
Certificates, 14%, 1/1/11 596,715 686,059
Collateralized Mtg. Obligations, Gtd. Multiclass Mtg. Participation
Certificates, 6.65%, 4/15/21 10,750,000 10,544,996
Collateralized Mtg. Obligations, Gtd. Multiclass Mtg. Participation
Certificates, 6.80%, 3/15/16 15,000,000 15,083,400
Collateralized Mtg. Obligations, Gtd. Multiclass Mtg. Participation
Certificates, 8.50%, 10/15/19 2,476,908 2,526,843
Collateralized Mtg. Obligations, Gtd. Multiclass Mtg. Participation
Certificates, 9%, 7/15/21 2,815,075 2,887,676
Gtd. Multiclass Mtg. Participation Certificates, 11.50%, 6/1/20 1,966,543 2,250,463
Gtd. Multiclass Mtg. Participation Certificates, 13%, 8/1/15 3,000,000 3,537,188
Multiclass Gtd. Mtg. Participation Certificates, Series 1455, 7.50%, 12/15/22 5,000,000 5,068,750
-------------------------------------------------------------------------------------------------------------
Federal National Mortgage Assn.: 7%, 7/15/25(1) 20,000,000 19,681,259
Collateralized Mtg. Obligations, Gtd. Real Estate Mtg. Investment Conduit
Pass-Through Certificates, 10.50%, 11/25/20 10,000,000 11,497,800
Collateralized Mtg. Obligations, Gtd. Real Estate Mtg. Investment Conduit
Pass-Through Certificates, 13%, 11/1/12 233,504 266,974
Collateralized Mtg. Obligations, Gtd. Real Estate Mtg. Investment Conduit
Pass-Through Certificates, 7%, 12/25/21 29,617,000 28,827,704
Collateralized Mtg. Obligations, Gtd. Real Estate Mtg. Investment Conduit
Pass-Through Certificates, 8%, 12/1/22 3,361,862 3,440,008
Collateralized Mtg. Obligations, Gtd. Real Estate Mtg. Investment Conduit
Pass-Through Certificates, 8%, 3/25/01 11,567,293 11,602,690
Collateralized Mtg. Obligations, Gtd. Real Estate Mtg. Investment Conduit
Pass-Through Certificates, 8.75%, 11/25/05 4,000,000 4,280,400
Collateralized Mtg. Obligations, Gtd. Real Estate Mtg. Investment Conduit
Pass-Through Certificates, 8.75%, 12/25/20 18,500,000 19,648,665
Collateralized Mtg. Obligations, Gtd. Real Estate Mtg. Investment Conduit
Pass-Through Certificates, 9%, 7/1/21 1,764,448 1,847,950
Gtd. Mtg. Pass-Through Certificates, 12%, 4/1/19 2,000,000 2,305,000
Gtd. Real Estate Mtg. Investment Conduit Pass-Through Certificates, 8%, 7/25/19 18,000,000 18,725,938
Gtd. Real Estate Mtg. Investment Conduit Pass-Through Certificates,
Trust 1992-112, 4%, 12/25/20 3,000,000 2,537,991
Gtd. Real Estate Mtg. Investment Conduit Pass-Through Certificates,
Trust 1993-87, Inverse Floater, 4.933%, 6/25/23 (coupon inversely
indexed to 1-month US LIBOR, multiplied by 1.857)(2) 2,199,998 1,426,905
Interest-Only Stripped Mtg.-Backed Security, Trust 222, 8.19-10.03%, 6/25/23(3) 47,590,613 14,701,038
Interest-Only Stripped Mtg.-Backed Security, Trust 240, 7.84-8.74%, 9/25/23(3) 32,938,214 10,416,711
Principal-Only Stripped Mtg.-Backed Security, Series 1993-253,
Zero Coupon, 10.01% 11/25/23(4) 1,000,028 663,535
------------
200,659,399
</TABLE>

6 Oppenheimer U.S. Government Trust

<PAGE>

FACE MARKET VALUE
AMOUNT SEE NOTE 1
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
GNMA/GUARANTEED--44.2% Government National Mortgage Assn.:
10%, 6/15/16--8/15/17 $ 2,823,084 $ 3,090,242
10.50%, 11/15/16--5/15/21 11,078,973 12,300,278
11%, 7/20/20 221,995 245,120
6.50%, 8/15/25(1) 63,000,000 63,826,875
7.50%, 3/15/23 41,194,649 41,511,228
8%, 4/15/22--8/15/24 21,381,336 21,933,532
------------
142,907,275
- -----------------------------------------------------------------------------------------------------------------------------
PRIVATE--2.6%
- -----------------------------------------------------------------------------------------------------------------------------
MULTI-FAMILY--2.6% Resolution Trust Corp., Commercial Mtg. Pass-Through Certificates,
Series 1991-M5, Cl. A, 9%, 3/25/17 5,001,065 5,233,928
---------------------------------------------------------------------------------------------
Resolution Trust Corp., Commercial Mtg. Pass-Through Certificates,
Series 1995-C1, Cl. D, 6.90%, 2/25/27 3,600,000 3,328,875
------------
8,562,803
------------
Total Mortgage-Backed Obligations (Cost $345,269,392) 352,129,477

- -----------------------------------------------------------------------------------------------------------------------------
U.S. GOVERNMENT OBLIGATIONS--16.8%
- -----------------------------------------------------------------------------------------------------------------------------
TREASURY--16.8% U.S. Treasury Bonds, 7.625%, 11/15/22 12,000,000 13,402,500
---------------------------------------------------------------------------------------------
U.S. Treasury Bonds, 8.125%, 8/15/19 15,643,000 18,253,426
---------------------------------------------------------------------------------------------
U.S. Treasury Bonds, 8.875%, 8/15/17 3,000,000 3,748,125
---------------------------------------------------------------------------------------------
U.S. Treasury Bonds, 11.625%, 11/15/04 3,500,000 4,813,592
---------------------------------------------------------------------------------------------
U.S. Treasury Nts., 8%, 10/15/96 13,610,000 13,980,014
------------
Total U.S. Government Obligations (Cost $51,984,471) 54,197,657

- -----------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS, AT VALUE (COST $397,253,863) 125.6%
406,327,134
- -----------------------------------------------------------------------------------------------------------------------------
LIABILITIES IN EXCESS OF OTHER ASSETS (25.6) (82,701,609)
------------ ------------
NET ASSETS 100.0% $323,625,525
------------ ------------
------------ ------------
<FN>
1. When-issued security to be delivered and settled after June 30, 1995.
2. Represents the current interest rate for a variable rate bond. Variable
rate bonds known as "inverse floaters" pay interest at a rate that varies
inversely with short-term interest rates. As interest rates rise, inverse
floaters produce less current income. Their price may be more volatile than
the price of a comparable fixed-rate security. Inverse floaters amount to
$1,426,905 or 0.4% of the Fund's net assets, at June 30, 1995.
3. Interest-Only Strips represent the right to receive the monthly interest
payments on an underlying pool of mortgage loans. These securities
typically decline in price as interest rates decline. Most other
fixed-income securities increase in price when interest rates decline. The
principal amount of the underlying pool represents the notional amount on
which current interest is calculated. The price of these securities is
typically more sensitive to changes in prepayment rates than traditional
mortgage-backed securities (for example, GNMA pass-throughs). Interest
rates represent effective yield as of June 30, 1995.
4. Principal-Only Strips represent the right to receive the monthly
principal payments on an underlying pool of mortgage loans. The value of
these 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. Interest
rates represent effective yield as of June 30, 1995.
</TABLE>

See accompanying Notes to Financial Statements.

7 Oppenheimer U.S. Government Trust

<PAGE>

STATEMENT OF ASSETS AND LIABILITIES JUNE 30, 1995

- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS Investments, at value (cost $397,253,863)--see accompanying statement $406,327,134
-----------------------------------------------------------------------------------------------------------
Receivables:
Investments sold 346,867
Interest and principal paydowns 3,403,235
Shares of beneficial interest sold 178,525
-----------------------------------------------------------------------------------------------------------
Other 26,571
------------
Total assets 410,282,332
- -----------------------------------------------------------------------------------------------------------------------------
LIABILITIES Bank overdraft 511,740
-----------------------------------------------------------------------------------------------------------
Payables and other liabilities:
Investments purchased on a when-issued basis 84,306,946
Shares of beneficial interest redeemed 985,255
Dividends 480,932
Distribution and service plan fees--Note 4 192,504
Transfer and shareholder servicing agent fees--Note 4 23,977
Trustees' fees 120,007
Other 35,446
------------
Total liabilities 86,656,807

- -----------------------------------------------------------------------------------------------------------------------------
NET ASSETS $323,625,525
------------
------------

- -----------------------------------------------------------------------------------------------------------------------------
COMPOSITION OF Paid-in capital $333,516,056
NET ASSETS -----------------------------------------------------------------------------------------------------------
Undistributed net investment income 87,075
-----------------------------------------------------------------------------------------------------------
Accumulated net realized loss from investment and written option transactions (19,050,877)
-----------------------------------------------------------------------------------------------------------
Net unrealized appreciation on investments--Note 3 9,073,271
------------
Net assets $323,625,525
------------
------------

- -----------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE Class A Shares:
PER SHARE Net asset value and redemption price per share (based on net assets
of $312,606,704 and 32,870,814 shares of beneficial interest outstanding) $9.51
Maximum offering price per share (net asset value plus sales charge
of 4.75% of offering price) $9.98
-----------------------------------------------------------------------------------------------------------
Class C Shares:
Net asset value, redemption price and offering price per share (based on net assets
of $11,018,821 and 1,159,733 shares of beneficial interest outstanding) $9.50
</TABLE>

See accompanying Notes to Financial Statements.

8 Oppenheimer U.S. Government Trust

<PAGE>

STATEMENT OF OPERATIONS FOR THE YEAR ENDED JUNE 30, 1995
<TABLE>
<CAPTION>

- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
INVESTMENT INCOME Interest $26,384,907
- -----------------------------------------------------------------------------------------------------------------------------
EXPENSES Management fees--Note 4 1,980,189
----------------------------------------------------------------------------------------------------
Distribution and service plan fees:
Class A--Note 4 737,801
Class C--Note 4 65,084
----------------------------------------------------------------------------------------------------
Transfer and shareholder servicing agent fees--Note 4 347,882
----------------------------------------------------------------------------------------------------
Shareholder reports 144,824
----------------------------------------------------------------------------------------------------
Legal and auditing fees 53,814
----------------------------------------------------------------------------------------------------
Custodian fees and expenses 47,249
----------------------------------------------------------------------------------------------------
Trustees' fees and expenses 40,121
----------------------------------------------------------------------------------------------------
Registration and filing fees:
Class A 1,587
Class C 2,309
----------------------------------------------------------------------------------------------------
Other 58,846
-----------
Total expenses 3,479,706

- -----------------------------------------------------------------------------------------------------------------------------
NET INVESTMENT INCOME 22,905,201

- -----------------------------------------------------------------------------------------------------------------------------
REALIZED AND UNREALIZED Net realized gain on:
GAIN ON INVESTMENTS Investments 1,903,530
Closing and expiration of option contracts written--Note 5 276,563
-----------
Net realized gain 2,180,093
----------------------------------------------------------------------------------------------------
Net change in unrealized appreciation or depreciation on investments 8,115,444
-----------
Net realized and unrealized gain on investments and options written 10,295,537

- -----------------------------------------------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS
$33,200,738
-----------
</TABLE>

See accompanying Notes to Financial Statements.

9 Oppenheimer U.S. Government Trust

<PAGE>

STATEMENTS OF CHANGES IN NET ASSETS

YEAR ENDED JUNE 30,
1995 1994
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
OPERATIONS Net investment income $ 22,905,201 $ 23,618,222
-----------------------------------------------------------------------------------------------
Net realized gain (loss) on investments and options written 2,180,093 (11,210,170)
-----------------------------------------------------------------------------------------------
Net change in unrealized appreciation or depreciation on investments 8,115,444 (15,469,786)
------------ ------------
Net increase (decrease) in net assets resulting from operations 33,200,738 (3,061,734)
- -----------------------------------------------------------------------------------------------------------------------------
DIVIDENDS AND DISTRIBUTIONS Dividends from net investment income:
TO SHAREHOLDERS Class A ($.676 and $.634 per share, respectively) (22,498,787) (21,966,741)
Class C ($.599 and $.329 per share, respectively) (416,947) (76,280)
- -----------------------------------------------------------------------------------------------------------------------------
Dividends in excess of net investment income:
Class A ($.012 per share) -- (418,629)
-----------------------------------------------------------------------------------------------
Tax return of capital distribution:
Class A ($.034 per share) -- (1,145,537)

- -----------------------------------------------------------------------------------------------------------------------------
BENEFICIAL INTEREST Net decrease in net assets resulting from Class A
TRANSACTIONS beneficial interest transactions--Note 2 (7,455,681) (44,398,318)
-----------------------------------------------------------------------------------------------
Net increase in net assets resulting from Class C
beneficial interest transactions--Note 2 6,508,757 4,438,932
- -----------------------------------------------------------------------------------------------------------------------------
NET ASSETS Total increase (decrease) 9,338,080 (66,628,307)
-----------------------------------------------------------------------------------------------
Beginning of period 314,287,445 380,915,752
------------ ------------
End of period (including undistributed net investment
income of $86,547 and $149,269, respectively) $323,625,525 $314,287,445
------------ ------------
------------ ------------
</TABLE>

See accompanying Notes to Financial Statements.

10 Oppenheimer U.S. Government Trust

<PAGE>

FINANCIAL HIGHLIGHTS

CLASS A
--------------------------------------------------------------------------------------
YEAR ENDED JUNE 30,
1995 1994 1993 1992 1991 1990 1989 1988 1987
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
<C>
PER SHARE OPERATING DATA:
Net asset value, beginning of period $9.20 $9.95 $9.73 $9.25 $9.24 $9.54 $9.59 $9.77 $10.17
- --------------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income .68 .67 .68 .69 .83 .90 .91 .90 .84
Net realized and unrealized gain (loss)
on investments and options written .31 (.74) .22 .48 .02 (.32) (.05) (.18) (.33)
----- ----- ----- ----- ----- ----- ----- ----- ------
Total income (loss) from investment
operations .99 (.07) .90 1.17 .85 .58 .86 .72 .51
- --------------------------------------------------------------------------------------------------------------------------------
Dividends and distributions
to shareholders:
Dividends from net investment income (.68) (.64) (.68) (.69) (.84) (.88) (.91) (.90) (.85)
Dividends in excess of net
investment income -- (.01) -- -- -- -- -- -- --
Distributions from net realized gain
on investments and options written -- -- -- -- -- -- -- -- (.06)
Tax return of capital distribuiton -- (.03) -- -- -- -- -- -- --
----- ----- ----- ----- ----- ----- ----- ----- ------
Total dividends and distributions
to shareholders (.68) (.68) (.68) (.69) (.84) (.88) (.91) (.90) (.91)
- --------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $9.51 $9.20 $9.95 $9.73 $9.25 $9.24 $9.54 $9.59 $9.77
----- ----- ----- ----- ----- ----- ----- ----- ------
----- ----- ----- ----- ----- ----- ----- ----- ------

- --------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE(3) 11.22% (1.17)% 9.55% 13.05% 9.53% 6.34% 9.51%
7.78% 5.54%

- --------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(in thousands) $312,607 $310,027 $380,916 $395,863 $342,220 $264,728 $232,593 $203,857
$216,306
- --------------------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $307,306 $355,698 $401,789 $376,532 $299,144 $253,085 $210,060 $197,834
$207,557
- --------------------------------------------------------------------------------------------------------------------------------
Number of shares outstanding at
end of period (in thousands) 32,871 33,685 38,279 40,697 36,987 28,650 24,393 21,252 22,146
- --------------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets:
Net investment income 7.32% 6.61% 6.90% 7.23% 8.93% 9.60% 9.65% 9.36%
8.73%
Expenses 1.09% 1.14% 1.17% 1.17% 1.19% 1.16% 1.19% 1.13% .99%
- --------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate(5) 303.5% 139.5% 96.8% 207.8% 133.9% 125.5% 76.9% 141.3%
263.0%

<FN>
1. For the period from December 1, 1993 (inception of offering) to June 30,
1994.
2. For the period from August 16, 1985 to June 30, 1986.
3. Assumes a hypothetical initial investment on the business day before the
first day of the fiscal period, with all dividends and distributions
reinvested in additional shares on the reinvestment date, and redemption at
the net asset value calculated on the last business day of the fiscal
period. Sales charges are not reflected in the total returns. Total returns
are not annualized for periods of less than one full year.
4. Annualized.
5. The lesser of purchases or sales of portfolio securities for a period,
divided by the monthly average of the market value of portfolio securities
owned during the period. Securities with a maturity or expiration date at
the time of acquisition of one year or less are excluded from the
calculation. Purchases and sales of investment securities (excluding
short-term securities) for the period ended June 30, 1995 were
$1,035,761,462 and $1,044,224,644, respectively.
</TABLE>

See accompanying Notes to Financial Statements.

11 Oppenheimer U.S. Government Trust

<PAGE>

CLASS A CLASS C
-------- -------------------
YEAR ENDED JUNE 30,
1986(2) 1995 1994(1)
- ----------------------------------------------------- -------------------
<S> <C> <C> <C>
PER SHARE OPERATING DATA:
Net asset value, beginning of period $10.00 $9.19 $9.83
- ----------------------------------------------------- ------------------
Income (loss) from investment operations:
Net investment income 94 61 .33
Net realized and unrealized gain (loss)
on investments and options written .38 .30 (.64)
------ ----- -----
Total income (loss) from investment
operations 1.32 .91 (.31)
- ----------------------------------------------------- ------------------
Dividends and distributions
to shareholders:
Dividends from net investment income (.93) (.60) (.33)
Dividends in excess of net
investment income -- -- --
Distributions from net realized gain
on investments and options written (.22) -- --
Tax return of capital distribuiton -- -- --
------ ----- -----
Total dividends and distributions
to shareholders (1.15) (.60) (.33)
- ------------------------------------------------------ ------------------
Net asset value, end of period $10.17 $9.50 $9.19
------ ----- -----
------ ----- -----

- ----------------------------------------------------- ------------------
TOTAL RETURN, AT NET ASSET VALUE(3) 14.95% 10.31% (3.12)%

- ----------------------------------------------------- ------------------
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(in thousands) $160,389 $11,019 $4,261
- ---------------------------------------------------- --------------------
Average net assets (in thousands) $98,004 $6,503 $2,173
- ---------------------------------------------------- --------------------
Number of shares outstanding at
end of period (in thousands) 15,767 1,160 464
- ---------------------------------------------------- --------------------
Ratios to average net assets:
Net investment income 9.77%(4) 6.44% 5.97%(4)
Expenses .56%(4) 1.89% 1.96%(4)
- ----------------------------------------------------- --------------------
Portfolio turnover rate(5) 366.9% 303.5% 139.5%

</TABLE>

<PAGE>

NOTES TO FINANCIAL STATEMENTS
<TABLE>

<S> <C>
- --------------------------------------------------------------------------------

1. SIGNIFICANT Oppenheimer U.S. Government Trust (the Fund) is
ACCOUNTING POLICIES registered under the Investment Company Act of 1940, as
amended, as a diversified, open-end management
investment company. The Fund's investment advisor is
Oppenheimer Management Corporation (the Manager). The
Fund offers both Class A and Class C shares. Class A
shares are sold with a front-end sales charge. Class C
shares may be subject to a contingent deferred sales
charge. Both classes of shares have identical rights to
earnings, assets and voting privileges, except that
each class has its own distribution and/or service
plan, expenses directly attributable to a particular
class and exclusive voting rights with respect to
matters affecting a single class. The following is a
summary of significant accounting policies consistently
followed by the Fund.
-------------------------------------------------------
INVESTMENT VALUATION. Portfolio securities are valued
at the close of the New York Stock Exchange on each
trading day. Listed and unlisted securities for which
such information is regularly reported are valued at
the last sale price of the day or, in the absence of
sales, at values based on the closing bid or asked
price or the last sale price on the prior trading day.
Long-term and short-term ``non-money market'' debt
securities are valued by a portfolio pricing service
approved by the Board of Trustees. Such securities
which cannot be valued by the approved portfolio
pricing service are valued using dealer-supplied
valuations provided the Manager is satisfied that the
firm rendering the quotes is reliable and that the
quotes reflect current market value, or under
consistently applied procedures established by the
Board of Trustees to determine fair value in good
faith. Short-term "money market type" debt securities
having a remaining maturity of 60 days or less are
valued at cost (or last determined market value)
adjusted for amortization to maturity of any premium or
discount. Options are valued based upon the last sale
price on the principal exchange on which the option is
traded or, in the absence of any transactions that day,
the value is based upon the last sale price on the
prior trading date if it is within the spread between
the closing bid and asked prices. If the last sale
price is outside the spread, the closing bid or asked
price closest to the last reported sale price is used.
-------------------------------------------------------
SECURITIES PURCHASED ON A WHEN-ISSUED BASIS. Delivery
and payment for securities that have been purchased by
the Fund on a forward commitment or when-issued basis
can take place a month or more after the transaction
date. During this period, such securities do not earn
interest, are subject to market fluctuation and may
increase or decrease in value prior to their delivery.
The Fund maintains, in a segregated account with its
custodian, assets with a market value equal to the
amount of its purchase commitments. The purchase of
securities on a when-issued or forward commitment basis
may increase the volatility of the Fund's net asset
value to the extent the Fund makes such purchases while
remaining substantially fully invested. As of June 30,
1995, the Fund had entered into outstanding when-issued
or forward commitments of $84,306,946.
In connection with its ability to purchase
securities on a when-issued or forward commitment
basis, the Fund may enter into mortgage "dollar-rolls"
in which the Fund sells securities for delivery in the
current month and simultaneously contracts with the
same counterparty to repurchase similar (same type,
coupon and maturity) but not identical securities on a
specified future date. The Fund records each
dollar-roll as a sale and a new purchase transaction.
-------------------------------------------------------
ALLOCATION OF INCOME, EXPENSES AND GAINS AND LOSSES.
Income, expenses (other than those attributable to a
specific class) and gains and losses are allocated
daily to each class of shares based upon the relative
proportion of net assets represented by such class.
Operating expenses directly attributable to a specific
class are charged against the operations of that class.
-------------------------------------------------------
FEDERAL TAXES. The Fund intends to continue to comply
with provisions of the Internal Revenue Code applicable
to regulated investment companies and to distribute all
of its taxable income, including any net realized gain
on investments not offset by loss carryovers, to
shareholders. Therefore, no federal income or excise
tax provision is required. At June 30, 1995, the Fund
had available for federal income tax purposes an unused
capital loss carryover of approximately $19,188,000,
$137,000 of which will expire in 1997, $3,193,000 in
1998, $7,358,000 in 1999, $1,187,000 in 2002 and
$7,313,000 in 2003.
-------------------------------------------------------
TRUSTEES' FEES AND EXPENSES. The Fund has adopted a
nonfunded retirement plan for the Fund's independent
trustees. Benefits are based on years of service and
fees paid to each trustee during the years of service.
During the year ended June 30, 1995, the Fund's
projected benefit obligations were reduced by $12,061,
and a payment of $2,026 was made to a retired Trustee,
resulting in an accumulated liability of $107,913 at
June 30, 1995.

12 Oppenheimer U.S. Government Trust
</TABLE>

<PAGE>

<TABLE>

<S> <C>
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING DISTRIBUTIONS TO SHAREHOLDERS. The Fund intends
POLICIES (CONTINUED) intends to declare dividends separately for Class A
and Class C shares from net investment income each
day the New York Stock Exchange is open for business
and pay such dividends monthly. Distributions from
net realized gains on investments, if any, will be
declared at least once each year.
-----------------------------------------------------
CLASSIFICATION OF DISTRIBUTIONS TO SHAREHOLDERS. Net
investment income (loss) and net realized gain (loss)
may differ for financial statement and tax purposes
primarily because of paydown gains and losses. The
character of the distributions made during the year
from net investment income or net realized gains may
differ from their ultimate characterization for
federal income tax purposes. Also, due to timing of
dividend distributions, the fiscal year in which
amounts are distributed may differ from the year that
the income or realized gain (loss) was recorded by
the Fund.
During the year ended June 30, 1995, the Fund
changed the classification of distributions to
shareholders to better disclose the differences
between financial statement amounts and distributions
determined in accordance with income tax regulations.
Accordingly, during the year ended June 30, 1995,
amounts have been reclassified to reflect a decrease
in accumulated net realized loss on investments of
$66,251, a decrease in undistributed net investment
income of $51,661, and a decrease in paid-in capital
of $14,590.
-----------------------------------------------------
OTHER. Investment transactions are accounted for on
the date the investments are purchased or sold (trade
date). Discount on securities purchased is amortized
over the average life of the respective securities.
Realized gains and losses on investments and
unrealized appreciation and depreciation are
determined on an identified cost basis, which is the
same basis used for federal income tax purposes.

- --------------------------------------------------------------------------------
2. SHARES OF The Fund has authorized an unlimited number of no par
BENEFICIAL INTEREST value shares of beneficial interest of each class.
Transactions in shares of beneficial interest were as
follows:
</TABLE>

YEAR ENDED JUNE 30, 1995 YEAR ENDED JUNE 30, 1994(1)
-------------------------------------------------------------------
SHARES AMOUNT SHARES AMOUNT
--------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class A:
Sold 7,076,177 $65,369,039 6,237,904 $ 60,979,282
Dividends reinvested 1,868,269 17,288,287 1,913,674 18,566,281
Redeemed (9,758,134) (90,113,007) (12,746,027) (123,943,881)
---------- ----------- ----------- -------------
Net decrease (813,688) $(7,455,681) (4,594,449) $ (44,398,318)
---------- ----------- ----------- -------------
---------- ----------- ----------- -------------

-----------------------------------------------------------------------------------------------
Class C:
Sold 1,086,358 $10,120,239 531,550 $ 5,070,299
Dividends reinvested 35,316 327,690 5,284 49,363
Redeemed (425,453) (3,939,172) (73,322) (680,730)
---------- ----------- ----------- -------------
Net increase 696,221 $6,508,757 463,512 $ 4,438,932
---------- ----------- ----------- -------------
---------- ----------- ----------- -------------

1. For the year ended June 30, 1994 for Class A shares
and for the period from December 1, 1993 to June 30,
1994 for Class C shares.
</TABLE>

<TABLE>
- ------------------------------------------------------------------------------
<S> <C>
3. UNREALIZED GAINS AND At June 30, 1995, net unrealized appreciation on
LOSSES ON INVESTMENTS investments of $9,073,271 was composed of gross
appreciation of $12,850,496, and gross depreciation of
$3,777,225.

- --------------------------------------------------------------------------------
4. MANAGEMENT FEES AND Management fees paid to the Manager were in accordance
OTHER TRANSACTIONS with the investment advisory agreement with the Fund
WITH AFFILIATES which provides for a fee of .65% of the first $200
million of average annual net assets of the Fund, .60%
of the next $100 million, .57% of the next $100
million, .55% of the next $400 million and .50% of net
assets in excess of $800 million. The Manager
voluntarily reduced the management fees to the current
levels. Prior to January 3, 1995, management fees were
as follows: .75% of the first $200 million of average
annual net assets, .70% of the next $200 million, .65%
of the next $400 million and .60% of net assets in
excess of $800 million. The Manager has agreed to
reimburse the Fund if aggregate expenses (with
specified exceptions) exceed the most stringent state
regulatory limit on Fund expenses.
</TABLE>
13 Oppenheimer U.S. Government Trust
<PAGE>

NOTES TO FINANCIAL STATEMENTS (CONTINUED)
<TABLE>

- --------------------------------------------------------------------------------
<S> <C>
4. MANAGEMENT FEES AND For the year ended June 30, 1995, commissions (sales
OTHER TRANSACTIONS charges paid by investors) on sales of Class A shares
WITH AFFILIATES totaled $582,157, of which $169,246 was retained by
(CONTINUED) Oppenheimer Funds Distributor, Inc. (OFDI), a
subsidiary of the Manager, as general distributor, and
by an affiliated broker/dealer. Sales charges advanced
to broker/dealers by OFDI on sales of the Fund's Class
B shares totaled $76,562, of which $4,633 was paid to
an affiliated broker/dealer. During the period ended
June 30, 1995, OFDI received contingent deferred sales
charges of $9,578 upon redemption of Class C shares.
Oppenheimer Shareholder Services (OSS), a
division of the Manager, is the transfer and
shareholder servicing agent for the Fund, and for other
registered investment companies. OSS's total costs of
providing such services are allocated ratably to these
companies.
Under separate approved plans, each class may
expend up to 25% of its net assets annually to
reimburse OFDI for costs incurred in connection with
the personal service and maintenance of accounts that
hold shares of the Fund, including amounts paid to
brokers, dealers, banks and other financial
institutions. In addition, Class C shares are subject
to an asset-based sales charge of .75% of net assets
annually, to reimburse OFDI for sales commissions paid
from its own resources at the time of sale and
associated financing costs. In the event of termination
or discontinuance of the Class C plan, the Board of
Trustees may allow the Fund to continue payment of the
asset-based sales charge to OFDI for distribution
expenses incurred on Class C shares sold prior to
termination or discontinuance of the plan. During the
year ended June 30, 1995, OFDI paid $53,292 and $2,782
to an affiliated broker/dealer as reimbursement for
Class A and Class C personal service and maintenance
expenses, respectively, and retained $58,050 as
reimbursement for Class C sales commissions and service
fee advances, as well as financing costs.
</TABLE>

<TABLE>
- --------------------------------------------------------------------------------
<S> <C>
5. OPTION ACTIVITY The Fund may buy and sell put and call options, or
write covered put and call options on portfolio
securities in order to produce incremental earnings or
protect against changes in the value of portfolio
securities.
The Fund generally purchases put options or
writes covered call options to hedge against adverse
movements in the value of portfolio holdings. When an
option is written, the Fund receives a premium and
becomes obligated to sell or purchase the underlying
security at a fixed price, upon exercise of the option.
Options are valued daily based upon the last
sale price on the principal exchange on which the
option is traded and unrealized appreciation or
depreciation is recorded. The Fund will realize a gain
or loss upon the expiration or closing of the option
transaction. When an option is exercised, the proceeds
on sales for a written call option, the purchase cost
for a written put option, or the cost of the security
for a purchased put or call option is adjusted by the
amount of premium received or paid.
The risk in writing a call option is that the
Fund gives up the opportunity for profit if the market
price of the security increases and the option is
exercised. The risk in writing a put option is that the
Fund may incur a loss if the market price of the
security decreases and the option is exercised. The
risk in buying an option is that the Fund pays a
premium whether or not the option is exercised. The
Fund also has the additional risk of not being able to
enter into a closing transaction if a liquid secondary
market does not exist.

Written option activity for the year ended June 30,
1995 was as follows:
</TABLE>

<TABLE>
<CAPTION>
CALL OPTIONS PUT OPTIONS
----------------------------- -----------------------------
NUMBER AMOUNT OF NUMBER AMOUNT
OF
OF OPTIONS PREMIUMS OF OPTIONS PREMIUMS
--------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Options outstanding at June 30, 1994 30,000 $290,625 80,000 $248,438
--------------------------------------------------------------------------------------------------------
Options closed (30,000) (290,625) (80,000) (248,438)
------- -------- ------- --------
Options outstanding at June 30, 1995 -- $ -- -- $ --
------- -------- ------- --------
------- -------- ------- --------
</TABLE>
14 Oppenheimer U.S. Government Trust
<PAGE>

- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
6. ACQUISITION OF On July 27, 1995, the Fund acquired all of the net
OPPENHEIMER assets of Oppenheimer Mortgage Income Fund, pursuant
MORTGAGE to an Agreement and Plan of Reorganization approved by
INCOME FUND the Oppenheimer Mortgage Income Fund shareholders on
July 12, 1995. The Fund issued 8,262,838 and 683,099
shares of beneficial interest for Class A and Class B,
respectively, valued at $77,918,563 and $6,434,794 in
exchange for the net assets, resulting in combined
Class A net assets of $385,440,401 and Class B net
assets of $6,806,465 on July 27, 1995. The exchange
qualifies as a tax-free reorganization for federal
income tax purposes.

- --------------------------------------------------------------------------------
7. FUTURES CONTRACTS The Fund may buy and sell interest rate futures
contracts in order to gain exposure to or protect
against changes in interest rates. The Fund may also
buy or write put or call options on these futures
contracts.
The Fund generally sells futures contracts to
hedge against increases in interest rates and the
resulting negative effect on the value of fixed rate
portfolio securities. The Fund may also purchase
futures contracts to gain exposure to changes in
interest rates as it may be more efficient or cost
effective than actually buying fixed income securities.
Upon entering into a futures contract, the
Fund is required to deposit either cash or securities
in an amount (initial margin) equal to a certain
percentage of the contract value. Subsequent payments
(variation margin) are made or received by the Fund
each day. The variation margin payments are equal to
the daily changes in the contract value and are
recorded as unrealized gains and losses. The Fund
recognizes a realized gain or loss when the contract is
closed or expires.
Risks of entering into futures contracts (and
related options) include the possibility that there may
be an illiquid market and that a change in the value of
the contract or option may not correlate with changes
in the value of the underlying securities.

15 Oppenheimer U.S. Government Trust
</TABLE>

<PAGE>

INDEPENDENT AUDITORS' REPORT

- --------------------------------------------------------------------------------
The Board of Trustees and Shareholders of Oppenheimer
U.S. Government Trust:

We have audited the accompanying statements of
investments and assets and liabilities of Oppenheimer
U.S. Government Trust as of June 30, 1995, and the
related statement of operations for the year then
ended, the statements of changes in net assets for each
of the years in the two-year period then ended and the
financial highlights for each of the years in the
ten-year period then ended. These financial statements
and financial highlights are the responsibility of the
Fund's management. Our responsibility is to express an
opinion on these financial statements and financial
highlights based on our audits.
We conducted our audits in accordance with
generally accepted auditing standards. Those standards
require that we plan and perform the audit to obtain
reasonable assurance about whether the financial
statements and financial highlights are free of
material misstatement. An audit includes examining, on
a test basis, evidence supporting the amounts and
disclosures in the financial statements. Our procedures
included confirmation of securities owned as of June
30, 1995, by correspondence with the custodian and
brokers; and where confirmations were not received from
brokers, we performed other auditing procedures. An
audit also includes assessing the accounting principles
used and significant estimates made by management, as
well as evaluating the overall financial statement
presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and
financial highlights referred to above present fairly,
in all material respects, the financial position of
Oppenheimer U.S. Government Trust as of June 30, 1995,
the results of its operations for the year then ended,
the changes in its net assets for each of the years in
the two-year period then ended, and the financial
highlights for each of the years in the ten-year period
then ended, in conformity with generally accepted
accounting principles.

July 27, 1995

16 Oppenheimer U.S. Government Trust

<PAGE>

FEDERAL INCOME TAX INFORMATION (UNAUDITED)

- --------------------------------------------------------------------------------
In early 1996, shareholders will receive information
regarding all dividends and distributions paid to them
by the Fund during calendar year 1995. Regulations of
the U.S. Treasury Department require the Fund to report
this information to the Internal Revenue Service.
None of the dividends paid by the Fund during
the fiscal year ended June 30, 1995 are eligible for
the corporate dividend-received deduction.
The foregoing information is presented to
assist shareholders in reporting distributions received
from the Fund to the Internal Revenue Service. Because
of the complexity of the federal regulations which may
affect your individual tax return and the many
variations in state and local tax regulations, we
recommend that you consult your tax advisor for
specific guidance.

SHAREHOLDER MEETING (UNAUDITED)

- --------------------------------------------------------------------------------
On May 25, 1995, a special shareholder meeting was held
at which the twelve Trustees identified below were
elected, the selection of KPMG Peat Marwick LLP as the
independent certified public accountants and auditors
of the Trust for the fiscal year beginning July 1, 1994
was ratified (Proposal No. 1), the proposed changes in
the Fund's investment policies were approved (Proposal
No. 2), the proposed investment advisory agreement was
approved (Proposal No. 3), as described in the Trust's
proxy statement for that meeting. That meeting was
adjourned until May 31, 1995, with respect to a
proposal voted on only by Class C shareholders, at
which time the Fund's amended Class C 12b-1
Distribution and Service Plan was approved by Class C
shareholders (Proposal No. 4), as described in the
Trust's proxy statement for that meeting. The following
is a report of the votes cast:

NOMINEE FOR AGAINST TOTAL
-------------------------------------------------------------------------------------
<S> <C> <C> <C>
Leon Levy 16,973,280.862 614,808.471 17,588,089.333
Leo Cherne 16,908,564.560 679,524.773 17,588,089.333
Robert G. Galli 17,010,437.287 577,652.046 17,588,089.333
Benjamin Lipstein 16,957,423.234 630,666.099 17,588,089.333
Elizabeth B. Moynihan 16,978,536.882 609,552.451 17,588,089.333
Kenneth A. Randall 17,003,838.944 584,250.389 17,588,089.333
Edward V. Regan 17,035,109.467 552,979.866 17,588,089.333
Russell S. Reynolds, Jr. 17,021,001.092 567,088.241 17,588,089.333
Sidney M. Robbins 16,939,642.358 648,446.975 17,588,089.333
Donald W. Spiro 16,982,499.151 605,590.182 17,588,089.333
Pauline Trigere 16,918,168.305 669,921.028 17,588,089.333
Clayton K. Yeutter 16,978,956.887 609,132.446 17,588,089.333
</TABLE>

WITHHELD/ BROKER
PROPOSAL FOR AGAINST ABSTAIN NON-VOTES TOTAL
-------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Proposal No. 1 16,815,630.021 119,338.528 653,120.783 304.776 17,588,089.333
Proposal No. 2 15,376,316.829 1,264,888.201 946,884.302 304.776 17,588,089.333
Proposal No. 3 16,377,849.880 232,204.595 978,034.857 304.776 17,588,089.333
Proposal No. 4 409,139.482 9,643.677 16,334.983 3.399 435,118.142

</TABLE>

17 Oppenheimer U.S. Government Trust

<PAGE>

OPPENHEIMER U.S. GOVERNMENT TRUST

- --------------------------------------------------------------------------------
OFFICERS AND TRUSTEES Leon Levy, Chairman of the Board of Trustees
Leo Cherne, Trustee
Robert G. Galli, Trustee
Benjamin Lipstein, Trustee
Elizabeth B. Moynihan, Trustee
Kenneth A. Randall, Trustee
Edward V. Regan, Trustee
Russell S. Reynolds, Jr., Trustee
Sidney M. Robbins, Trustee
Donald W. Spiro, Trustee and President
Pauline Trigere, Trustee
Clayton K. Yeutter, Trustee
David Rosenberg, Vice President
George C. Bowen, Treasurer
Robert J. Bishop, Assistant Treasurer
Scott Farrar, Assistant Treasurer
Andrew J. Donohue, Secretary
Robert G. Zack, Assistant Secretary

- --------------------------------------------------------------------------------
INVESTMENT ADVISOR Oppenheimer Management Corporation

- --------------------------------------------------------------------------------
DISTRIBUTOR Oppenheimer Funds Distributor, Inc.

- --------------------------------------------------------------------------------
TRANSFER AND SHAREHOLDER Oppenheimer Shareholder Services
SERVICING AGENT

- --------------------------------------------------------------------------------
CUSTODIAN OF Citibank, N.A.
PORTFOLIO SECURITIES
- --------------------------------------------------------------------------------
INDEPENDENT AUDITORS KPMG Peat Marwick LLP

- --------------------------------------------------------------------------------
LEGAL COUNSEL Gordon Altman Butowsky Weitzen Shalov & Wein

This is a copy of a report to shareholders of
Oppenheimer U.S. Government Trust. This report must be
preceded or accompanied by a Prospectus of Oppenheimer
U.S. Government Trust. For material information
concerning the Fund, see the Prospectus.
Shares of Oppenheimer funds are not deposits or
obligations of any bank, are not guaranteed by any
bank, and are not insured by the FDIC or any other
agency, and involve investment risks, including
possible loss of the principal amount invested.

18 Oppenheimer U.S. Government Trust
<PAGE>

OPPENHEIMERFUNDS FAMILY

- --------------------------------------------------------------------------------

OppenheimerFunds offers over 30 funds designed to fit
virtually every investment goal. Whether you're
investing for retirement, your children's education or
tax-free income, we have the funds to help you seek
your objective.

When you invest with OppenheimerFunds, you can
feel comfortable knowing that you are investing with a
respected financial institution with over 30 years of
experience in helping people just like you reach their
financial goals. And you're investing with a leader in
global, growth stock and flexible fixed income
investments--with over 2.6 million shareholder accounts
and more than $35 billion under Oppenheimer's
management and that of our affiliates.

At OppenheimerFunds, we don't charge a fee to
exchange shares of eligible funds of the same class.
And you can exchange shares easily by mail or by
telephone.(1) For more information on
OppenheimerFunds, please contact your financial advisor
or call us at 1-800-525-7048 for a prospectus. You may
also write us at the address shown on the back cover.
As always, please read the prospectus carefully before
you invest.

- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C>
STOCK FUNDS Discovery Fund Global Fund
Global Emerging Growth Fund(2) Oppenheimer Fund
Target Fund Value Stock Fund
Growth Fund(3) Gold & Special Minerals Fund
- ---------------------------------------------------------------------------------------------------------------
STOCK & BOND Main Street Income & Growth Fund Equity Income Fund
FUNDS Total Return Fund Asset Allocation Fund
Global Growth & Income Fund
- ---------------------------------------------------------------------------------------------------------------
BOND FUNDS High Yield Fund Strategic Short-Term Income Fund
Champion High Yield Fund International Bond Fund
Strategic Income & Growth Fund Bond Fund(4)
Strategic Income Fund U.S. Government Trust
Strategic Investment Grade Bond Limited-Term Government Fund
Fund
- ---------------------------------------------------------------------------------------------------------------
TAX-EXEMPT New York Tax-Exempt Fund(5) New Jersey Tax-Exempt Fund(5)
FUNDS California Tax-Exempt Fund(5) Tax-Free Bond Fund
Pennsylvania Tax-Exempt Fund(5) Insured Tax-Exempt Bond Fund
Florida Tax-Exempt Fund(5) Intermediate Tax-Exempt Bond
Fund
- ---------------------------------------------------------------------------------------------------------------
MONEY-MARKET Money Market Fund Cash Reserves
FUNDS

<FN>
1. Exchange privileges are subject to change or termination.
2. Formerly Global Bio-Tech Fund.
3. Formerly Special Fund.
4. Formerly Investment Grade Bond Fund.
5. Available only to residents of certain states.
OppenheimerFunds are distributed by Oppenheimer Funds Distributor, Inc.,
Two World Trade Center, New York, NY 10048-0203.
-C- Copyright 1995 Oppenheimer Management Corporation. All rights reserved.
</TABLE>

19 Oppenheimer U.S. Government Trust

<PAGE>

INFORMATION

GENERAL INFORMATION
Monday-Friday 8:30 a.m.-8 p.m. ET
Saturday 10 a.m.-2 p.m. ET

1-800-525-7048

TELEPHONE TRANSACTIONS
Monday-Friday 8:30 a.m.-8 p.m. ET

1-800-852-8457

PHONELINK
24 hours a day, automated
information and transactions

1-800-533-3310

TELECOMMUNICATIONS DEVICE
FOR THE DEAF (TDD)
Monday-Friday 8:30 a.m.-8 p.m. ET

1-800-843-4461

OPPENHEIMERFUNDS
INFORMATION HOTLINE
24 hours a day, timely and insightful
messages on the economy and
issues that affect your investments

1-800-835-3104

"HOW MAY I HELP YOU?"

As an OppenheimerFunds shareholder, you have some special privileges. Whether
it's automatic investment plans, informative newsletters and hotlines, or ready
account access, you can benefit from services designed to make investing simple.

And when you need help, our Customer Service Representatives are only a
toll-free phone call away. They can provide information about your account and
handle administrative requests. You can reach them at our General Information
number.

When you want to make a transaction, you can do it easily by calling our
toll-free Telephone Transactions number. And, by enrolling in AccountLink, a
convenient service that "links" your OppenheimerFunds accounts and your bank
checking or savings account, you can use the Telephone Transactions number to
make investments.

For added convenience, you can get automated information with
OppenheimerFunds PhoneLink service, available 24 hours a day, 7 days a week.
PhoneLink gives you access to a variety of fund, account, and market
information. Of course, you can always speak with a Customer Service
Representative during the General Information hours shown at the left.

You can count on us whenever you need assistance. That's why the
International Customer Service Association, an independent, nonprofit
organization made up of over 3,200 customer service management professionals
from around the country, honored the OppenheimerFunds' transfer agent,
Oppenheimer Shareholder Services, with their Award of Excellence in 1993.

So call us today--we're here to help.

[PHOTO]
Jennifer Leonard, Customer Service Representative
Oppenheimer Shareholder Services

- --------------------------------------------------------------------------------
-------------------
[OPPENHEIMER FUNDS LOGO] Bulk Rate
Oppenheimer Funds Distributor, Inc. U.S. Postage
P.O. Box 5270 PAID
Denver, CO 80217-5270 Permit No. 469
Denver, CO

<PAGE>

QUEST FOR VALUE-SM-

FUNDS

Quest for Value Funds is a family of mutual funds (the "Funds") managed by Quest
for Value Advisors ("Quest Advisors"). The Global Income Fund is a
non-diversified fund. The other Funds covered by this Prospectus are
diversified funds. Total assets under the management of Quest Advisors and its
parent, Oppenheimer Capital, amounted to approximately $33 billion on May 31,
1995. The Funds covered by this prospectus are:

Equity: QUEST FOR VALUE FUND, INC.
SMALL CAPITALIZATION FUND
GROWTH AND INCOME FUND
Fixed
Income: U.S. GOVERNMENT INCOME FUND
INVESTMENT QUALITY INCOME FUND
Flexible: OPPORTUNITY FUND
Global:
Equity: QUEST FOR VALUE GLOBAL EQUITY FUND,
INC.
Income: GLOBAL INCOME FUND

This Prospectus sets forth basic information about the Funds, including
applicable sales and distribution fees, that you should understand before
investing. You should read it carefully and retain it for future reference.
Statements of Additional Information dated March 1, 1995 for each of the Quest
for Value Global Equity Fund, Inc., Global Income Fund, Quest for Value Family
of Funds, and Quest for Value Fund, Inc.

(the "SAIs"), have been filed with the Securities and Exchange Commission and
are incorporated by reference in this Prospectus. You can obtain a copy of the
SAIs without charge by contacting Quest for Value Distributors, at the address
or telephone number listed on the back cover. SHARES IN THE FUNDS ARE NOT
DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR ENDORSED BY ANY BANK AND THE SHARES
OF THE FUNDS ARE NOT FEDERALLY INSURED BY THE FEDERAL DEPOSIT INSURANCE
CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER AGENCY AND ARE SUBJECT TO
INVESTMENT RISKS, INCLUDING POSSIBLE LOSS OF THE PRINCIPAL INVESTED.
The Funds offer three separate classes of shares: Class A, B and C shares.
Shares of each Class represent an identical interest in the investment portfolio
of a Fund, and generally have the same rights, but are offered under different
sales charge and distribution fee arrangements. The offering of Class A, B and C
shares presents the investor with the opportunity to choose the sales charge and
distribution fee arrangement which is most beneficial, depending on the amount
of purchase, the length of time the investor expects to hold the shares, and
other circumstances.
Shares of each Class are offered at the net asset value next determined after
receipt of your purchase order plus an initial ("front-end") sales charge for
purchases of Class A shares, or a deferred sales charge for purchases of Class B
or Class C shares. (See "How to Buy Shares," p. 17) Class B and C shares bear a
higher ongoing distribution fee than Class A shares, and investors should
understand that over time the accumulated distribution charges on Class B and C
shares may exceed the amount of the initial sales charge and ongoing
distribution fee on Class A shares. (See "Distribution Plan," p. 35)
MARCH 1, 1995, AS REVISED JUNE 30, 1995

- --------------------------------------------------------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THE PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
- --------------------------------------------------------------------------------
QUEST FOR VALUE is a registered service mark of Oppenheimer Capital
<PAGE>
- --------------------------------------------------------------------------------

SUMMARY OF FUND EXPENSES

<TABLE>
<CAPTION>
QUEST FOR VALUE SMALL CAPITALIZATION U.S. GOVERNMENT
INCOME
FUND
CLASS OF SHARES: A B C A B C A B C
- ----------------------------------- -------- -------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
<C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum Initial Sales Load Imposed
on Purchase (as a % of offering
price)............................ 5.50% none none 5.50% none none 4.75% none none
Maximum Deferred Sales Load(1)..... none 5.00% 1.00% none 5.00% 1.00% none 5.00% 1.00%
Maximum Sales Load Imposed On
Reinvested Dividends.............. none none none none none none none none none
Redemption Fee..................... none none none none none none none none none
Exchange Fee....................... $ 5.00 $ 5.00 $ 5.00 $ 5.00 $ 5.00 $ 5.00 $ 5.00 $ 5.00 $ 5.00
ANNUAL FUND OPERATING EXPENSES (AS
% OF AVERAGE NET ASSETS)
Management Fee (2)................. 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% .60% .60% .60%
12b-1 Fee (including service fees
of .25%) (4)...................... .50% 1.00% 1.00% .50% 1.00% 1.00% .30% 1.00% 1.00%
Other Expenses..................... .21% .24% .28% .38% .48% .59% .33% .33% .35%
-------- -------- -------- -------- -------- -------- -------- -------- --------
TOTAL FUND OPERATING EXPENSES AFTER
WAIVER AND/OR EXPENSE
ASSUMPTIONS(3).................... 1.71% 2.24% 2.28% 1.88% 2.48% 2.59% 1.23% 1.93%
1.95%
-------- -------- -------- -------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- -------- -------- -------- --------
EXAMPLE 1: You would pay the following expense over the indicated periods in each of the Funds on a $1,000 investment
assuming (a) payment of the maximum sales charge, (b) a 5% annual return, and (c) retention of shares at the end of the
time period. 10-year figures for Class B shares assume conversion to Class A shares after eight years.
1 Year............................. 71.43 22.71 23.11 73.04 25.11 26.21 59.44 19.60 19.80
3 Years............................ 105.92 70.03 71.23 110.84 77.25 80.54 84.68 60.62 61.22
5 Years............................ 142.72 119.99 122.01 151.03 132.05 137.52 111.86 104.20 105.21
10 Years........................... 245.84 244.16 261.54 263.00 266.87 292.45 189.29 207.22 227.48
EXAMPLE 2: You would pay the following expenses over the indicated periods in each of the Funds on a $1,000 investment
assuming (a) payment of the maximum sales charge, (b) a 5% annual return, and (c) redemption at the end of the time period.
10-year figures for Class B shares assume conversion to Class A shares after eight years.
1 Year............................. 71.43 72.71 33.11 73.04 75.11 36.21 59.44 69.60 29.80
3 Years............................ 105.92 100.03 71.23 110.84 107.25 80.54 84.68 90.62 61.22
5 Years............................ 142.72 129.99 122.01 151.03 142.05 137.52 111.86 114.20 105.21
10 Years........................... 245.84 244.16 261.54 263.00 266.87 292.45 189.29 207.22 227.48
</TABLE>

THE EXAMPLES SHOULD NOT BE CONSIDERED INDICATIONS OF PAST OR FUTURE EXPENSES OR
PERFORMANCE, AND ACTUAL EXPENSES OR PERFORMANCE MAY VARY FROM THOSE SHOWN.

The purpose of the table is to assist you in understanding the various costs
and expenses that you would bear, whether directly or indirectly. For more
complete descriptions of the various costs and expenses, see "How to Buy
Shares," "Investment Management Agreement" and "Distribution Plan".

Investors should be aware that over time, Class B and C shareholders may pay
more than the equivalent of the maximum front-end sales charges permitted by the
National Association of Securities Dealers Rules of Fair Practice.

(1) Certain purchases of Class A shares of $1 million or more are not
subject to front-end sales charges, but a contingent deferred sales charge
("CDSC") is imposed on the proceeds of such shares equal to 1% if the shares are
redeemed within the first 12 months after the end of the calendar month of their
purchase, and .5 of 1% if redeemed within the next 12 months. Purchases made on
or after July 1, 1994 of the Quest for Value Fund, Inc., the Small
Capitalization Fund, the Growth and Income Fund, the Opportunity Fund and the
Global Equity Fund are subject to a CDSC of 1% if the shares are redeemed within
the first 12 months after the end of the calendar month of their purchase. See
"How to Buy Shares."

(2) Includes an administration fee of .25% of average net assets.

<PAGE>

<TABLE>
<CAPTION>
INVESTMENT QUALITY INCOME OPPORTUNITY GLOBAL EQUITY
A B C A B C A B C
------- ------- ------- ------- ------- ------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
4.75% none none 5.50% none none 5.50% none none
none 5.00% 1.00% none 5.00% 1.00% none 5.00% 1.00%
none none none none none none none none none
none none none none none none none none none
$5.00 $5.00 $5.00 $5.00 $5.00 $5.00 $5.00 $5.00 $5.00

.60% .60% .60% 1.00% 1.00% 1.00% .75% .75% .75%
.40% 1.00% 1.00% .50% 1.00% 1.00% .50% 1.00% 1.00%
.59% .63% .61% .28% .34% .35% .68%(2) .66%(2) .66%(2)
------- ------- ------- ------- ------- ------- ---------- ---------- ----------

1.59% 2.23% 2.21% 1.78% 2.34% 2.35% 1.93% 2.41% 2.41%
------- ------- ------- ------- ------- ------- ---------- ---------- ----------
------- ------- ------- ------- ------- ------- ---------- ---------- ----------

62.90 22.61 22.41 72.09 23.71 23.81 73.52 24.41 24.41
95.30 69.73 69.12 107.94 73.04 73.34 112.28 75.14 75.14
129.94 119.49 118.48 146.14 125.03 125.53 153.46 128.54 128.54
227.44 240.35 254.43 252.93 253.66 268.61 267.98 262.76 274.62

62.90 72.61 32.41 72.09 73.71 33.81 73.52 74.41 34.41
95.30 99.73 69.12 107.94 103.04 73.34 112.28 105.14 75.14
129.94 129.49 118.48 146.14 135.03 125.53 153.46 138.54 128.54
227.44 240.35 254.43 252.93 253.66 268.61 267.98 262.76 274.62

GROWTH AND INCOME GLOBAL INCOME
A B C A B C
------- ------- ------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
4.75% none none 3.00% none none
none 5.00% 1.00% none 5.00% 1.00%
none none none none none none
none none none none none none
$5.00 $5.00 $5.00 $5.00 $5.00 $5.00
.57% .57% .57% .11% .11% .11%
.40% 1.00% 1.00% .25%(4) 1.00% 1.00%
.93% .93% .93% 1.34%(2) 1.34%(2) 1.34%(2)
------- ------- ------- ---------- ---------- ----------
1.90% 2.50% 2.50% 1.70% 2.45% 2.45%
------- ------- ------- ---------- ---------- ----------
------- ------- ------- ---------- ---------- ----------
65.88 25.31 25.31 46.76 24.81 24.81
104.37 77.85 77.85 81.97 76.35 76.35
145.28 133.05 133.05 119.54 130.55 130.55
259.17 268.89 283.59 224.85 260.12 278.62
65.88 75.31 35.31 46.76 74.81 34.81
104.37 107.85 77.85 81.97 106.35 76.35
145.28 143.05 133.05 119.54 140.55 130.55
259.17 268.89 283.59 224.85 260.12 278.62
</TABLE>

(3) The expenses for certain funds have been restated to reflect voluntary
expense limitations currently in effect. Currently, expenses of the Growth and
Income and Global Income Funds are voluntarily limited by Quest Advisors so that
annualized operating Fund Expenses (as defined on p. 33) exclusive of Class
Expenses (as defined on p. 33) do not exceed 1.50% and 1.45%, respectively.
These Fund Expense limitations may be discontinued at any time. Without such
limitations, annual operating expenses as a percentage of average daily net
assets would have been as follows: Growth and Income Fund: Class A: 2.32%, Class
B: 2.93% and Class C: 3.10%; and Global Income Fund: Class A: 2.09%, Class B:
2.88% and Class C: 2.84%. Certain expenses of the Growth and Income Fund were
waived in order to comply with a state's expense limitations. The expenses
stated for the U.S. Government Income, Investment Quality Income and Global
Equity Funds reflect what the expenses of those Funds would have been for their
respective fiscal years if Quest Advisors had not waived a portion of its fee.

(4) See "Distribution Plan." Although the Global Income Fund's Distribution
Plan and Agreement ("Plan") for Class A shares authorizes the Fund to pay a
maximum service fee of .25% of average daily net assets and a distribution fee
of .05% of average daily net assets, the Board of Directors of the Fund has set
a maximum .25% service fee under the Plan.

3
<PAGE>
- --------------------------------------------------------------------------------

FINANCIAL HIGHLIGHTS

The financial information given for the Small Capitalization, U.S. Government
Income, Investment Quality Income, Opportunity, Growth and Income, Global Equity
and Global Income Funds has been audited by Price Waterhouse LLP, independent
accountants, whose unqualified reports thereon appear in the Statements of
Additional Information ("SAI(s)"). The financial information given for Quest for
Value Fund has been audited by KPMG Peat Marwick LLP, independent auditors,
whose unqualified report thereon appears in the SAI. All the following
information should be read in conjunction with the financial statements and
related notes thereto appearing in the SAIs. Further information regarding the
performance of each Fund is available in each Fund's Annual Report. Annual
Reports may be obtained without charge by calling the Fund at (800) 232-FUND.

<TABLE>
<CAPTION>
NET
REALIZED DISTRIBUTION
NET AND DIVIDENDS FROM
INVEST- UNREALIZED TOTAL FROM NET TOTAL
NAV: MENT GAIN FROM NET REALIZED TAX DIVIDENDS
START OF INCOME (LOSS) ON INVESTMENT INVESTMENT GAIN ON RETURN
OF AND
PERIOD (LOSS) INVESTMENTS OPERATIONS INCOME INVESTMENTS CAPITAL
DISTRIBUTIONS
--------- ------- ---------- ------- ------- ------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
<C>
QUEST FOR VALUE - CLASS A
Year ended 10/31/94............. $12.51 $ .09 $ .50 $ .59 $ (.04) $ (.47) -- $ (.51)
...10/31/93..................... 11.71 .05 1.34 1.39 (.05) (.54) -- (.59)
...10/31/92..................... 10.61 .04 1.77 1.81 (.07) (.64) -- (.71)
...10/31/91..................... 7.84 .09 2.84 2.93 (.16) -- -- (.16)
...10/31/90 (9)................. 9.85 .18 (1.38) (1.20) (.26) (.55) -- (.81)
...10/31/89 (9)................. 8.99 .24 1.09 1.33 (.10) (.37) -- (.47)
...10/31/88 (9)................. 7.94 .09 1.38 1.47 (.05) (.37) -- (.42)
5/1/87-10/31/87 (9,10).......... 9.44 .03 (1.14) (1.11) (.09) (.30) -- (.39)
Year ended 4/30/87 (9).......... 9.47 .09 .81 .90 (.07) (.86) -- (.93)
...4/30/86 (9).................. 7.40 .06 2.33 2.39 (.09) (.23) -- (.32)
...4/30/85 (9).................. 7.69 .10 .99 1.09 (.11) (1.27) -- (1.38)
...4/30/84 (9).................. 8.90 .10 .48 .58 (.17) (1.62) -- (1.79)
QUEST FOR VALUE - CLASS B
Year ended 10/31/94............. 12.51 .02 .50 .52 (.03) (.47) -- (.50)
9/2/93(4) - 10/31/93............ 12.66(3) (.01) (.14) (.15) -- -- -- --
QUEST FOR VALUE - CLASS C
Year ended 10/31/94............. 12.50 .01 .51 .52 (.03) (.47) -- (.50)
9/2/93(4) - 10/31/93............ 12.66(3) (.01) (.15) (.16) -- -- -- --
SMALL CAPITALIZATION - CLASS A
Year ended 10/31/94............. $17.68 $ (.03) $ .01 $ (.02) -- $(1.33) -- $(1.33)
...10/31/93..................... 14.60 (.04) 4.26 4.22 -- (1.14) -- (1.14)
...10/31/92..................... 13.52 .00 1.50 1.50 -- (.42) -- (.42)
...10/31/91..................... 8.80 (.05) 4.85 4.80 (.08) -- -- (.08)
...10/31/90..................... 10.91 .07 (2.04) (1.97) (.08) (.06) -- (.14)
...1/1/89(7)-10/31/89........... 10.00(3) .08 .83 .91 -- -- -- --
SMALL CAPITALIZATION - CLASS B
Year ended 10/31/94............. 17.66 (.11) .02 (.09) -- (1.33) -- (1.33)
9/2/93(4)-10/31/93.............. 17.19(3) (.02) .49 .47 -- -- -- --
SMALL CAPITALIZATION - CLASS C
Year ended 10/31/94............. 17.67 (.13) .02 (.11) -- (1.33) -- (1.33)
...9/2/93(4) - 10/31/93......... 17.19(3) (.02) .50 .48 -- -- -- --
OPPORTUNITY - CLASS A
Year ended 10/31/94............. $18.71 $ .18 $ 1.35 $ 1.53 $ (.33) $ (.22) -- $ (.55)
...10/31/93..................... 16.73 .35 2.02 2.37 (.07) (.32) -- (.39)
...10/31/92..................... 14.29 .09 2.93 3.02 (.03) (.55) -- (.58)
...10/31/91..................... 9.74 .03 4.78 4.81 (.23) (.03) -- (.26)
...10/31/90..................... 11.59 .25 (1.64) (1.39) (.22) (.24) -- (.46)
1/1/89(7)-10/31/89.............. 10.00(3) .17 1.42 1.59 -- -- -- --
OPPORTUNITY - CLASS B
Year ended 10/31/94............. 18.70 .08 1.34 1.42 (.31) (.22) -- (.53)
...9/2/93(4)-10/31/93........... 18.73(3) .02 (.05) (.03) -- -- -- --
OPPORTUNITY - CLASS C
Year ended 10/31/94............. 18.70 .08 1.33 1.41 (.31) (.22) -- (.53)
...9/2/93(4)-10/31/93........... 18.73(3) .02 (.05) (.03) -- -- -- --
U.S. GOVERNMENT INCOME - CLASS A
Year ended 10/31/94............. $12.08 $ .59 $(1.08) $ (.49) $ (.59) $ (.21) -- $ (.80)
...10/31/93..................... 11.92 .65 .35 1.00 (.68) (.16) -- (.84)
...10/31/92..................... 11.80 .74 .18 .92 (.74) (.06) -- (.80)
...10/31/91..................... 11.35 .85 .61 1.46 (.86) (.15) -- (1.01)
...10/31/90..................... 11.50 .93 (.06) .87 (.93) (.09) -- (1.02)
...10/31/89..................... 11.50 .94 .08 1.02 (.93) (.09) -- (1.02)
...5/6/88(7)-10/31/88........... 11.46(3) .44 .10 .54 (.44) (.06) -- (.50)
U.S. GOVERNMENT INCOME - CLASS B
Year ended 10/31/94............. 12.08 .51 (1.08) (.57) (.51) (.21) -- (.72)
9/2/93(4)-10/31/93.............. 12.13(3) .08 (.04) .04 (.08) (.01) -- (.09)
U.S. GOVERNMENT INCOME - CLASS C
Year ended 10/31/94............. 12.08 .51 (1.08) (.57) (.51) (.21) -- (.72)
...9/2/93(4)-10/31/93........... 12.13(3) .08 (.04) .04 (.08) (.01) -- (.09)
</TABLE>

NET
ASSETS RATIO OF NET RATIO OF NET
NAV: TOTAL AT END OPERATING INVESTMENT PORT-
END RETURN OF EXPENSES TO INCOME (LOSS) FOLIO
OF FOR PERIOD AVERAGE NET TO AVERAGE TURN-
PERIOD PERIOD(1)* (000) ASSETS NET ASSETS OVER
------- -------- ------- ------------ ------------- -------
<S> <C> <C> <C> <C> <C> <C>
QUEST FOR VALUE - CLASS A
Year ended 10/31/94............. $ 12.59 5.01% $238,085 1.71%(2) .72% 49%
...10/31/93..................... 12.51 12.27% 245,320 1.75% .40% 27%
...10/31/92..................... 11.71 18.45% 142,939 1.75% .53% 41%
...10/31/91..................... 10.61 37.94% 79,914 1.83% 1.06% 48%
...10/31/90 (9)................. 7.84 (13.43%) 49,740 1.82% 1.71% 51%
...10/31/89 (9)................. 9.85 15.68% 77,205 1.81% 2.31% 30%
...10/31/88 (9)................. 8.99 19.54% 83,228 2.21% .94% 15%
5/1/87-10/31/87 (9,10).......... 7.94 (12.19%) 91,255 2.24%(2) .76%(2) 21%
Year ended 4/30/87 (9).......... 9.44 10.25% 104,538 2.17% 1.23% 34%
...4/30/86 (9).................. 9.47 33.66% 64,331 2.18% 1.18% 68%
...4/30/85 (9).................. 7.40 17.86% 28,055 2.34% 1.90% 42%
...4/30/84 (9).................. 7.69 7.45% 13,388 2.29% 1.68% 74%
QUEST FOR VALUE - CLASS B
Year ended 10/31/94............. 12.53 4.43% 14,373 2.24% .14% 49%
9/2/93(4) - 10/31/93............ 12.51 (1.19%) 2,015 2.27%(1) (1.19%)(1) 27%
QUEST FOR VALUE - CLASS C
Year ended 10/31/94............. 12.52 4.45% 3,581 2.28% .09% 49%
9/2/93(4) - 10/31/93............ 12.50 (1.26%) 221 2.27%(1) (.90%)(1) 27%
SMALL CAPITALIZATION - CLASS A
Year ended 10/31/94............. $ 16.33 .04% $120,102 1.88% (.14%) 67%
...10/31/93..................... 17.68 30.21% 104,898 1.89% (.36%) 74%
...10/31/92..................... 14.60 11.60% 39,693 2.11% (.04%) 95%
...10/31/91..................... 13.52 55.01% 20,686 2.25%(5) (.41%)(5) 103%
...10/31/90..................... 8.80 (18.33%) 1,880 2.00%(5) .71%(5) 18%
...1/1/89(7)-10/31/89........... 10.91 9.10% 2,085 1.74%(1,5) 1.34%(1,5) 32%
SMALL CAPITALIZATION - CLASS B
Year ended 10/31/94............. 16.24 (.39%) 16,144 2.48% (.70%) 67%
9/2/93(4)-10/31/93.............. 17.66 2.73% 1,754 2.57%(1) (1.15%)(1) 74%
SMALL CAPITALIZATION - CLASS C
Year ended 10/31/94............. 16.23 (.51%) 3,344 2.59% (.81%) 67%
...9/2/93(4) - 10/31/93......... 17.67 2.79% 235 2.57%(1) (1.20%)(1) 74%
OPPORTUNITY - CLASS A
Year ended 10/31/94............. $ 19.69 8.41% $163,340 1.78% .96% 42%
...10/31/93..................... 18.71 14.34% 127,225 1.83% 2.69% 24%
...10/31/92..................... 16.73 21.93% 40,563 2.27% .72% 32%
...10/31/91..................... 14.29 50.44% 8,446 2.35%(5) .30%(5) 88%
...10/31/90..................... 9.74 (12.62%) 4,570 2.00%(5) 2.30%(5) 206%
1/1/89(7)-10/31/89.............. 11.59 15.90% 3,868 1.84%(1,5) 3.75%(5) 103%
OPPORTUNITY - CLASS B
Year ended 10/31/94............. 19.59 7.84% 43,317 2.34% .43% 42%
...9/2/93(4)-10/31/93........... 18.70 (.16%) 2,115 2.52%(1) 1.32%(1) 24%
OPPORTUNITY - CLASS C
Year ended 10/31/94............. 19.58 7.78% 7,289 2.35% .43% 42%
...9/2/93(4)-10/31/93........... 18.70 (.16%) 313 2.52%(1) 1.13%(1) 24%
U.S. GOVERNMENT INCOME - CLASS A
Year ended 10/31/94............. $ 10.79 (4.15%) $123,257 1.20% 5.19%(6) 126%
...10/31/93..................... 12.08 8.55% 189,091 1.15%(6) 5.33%(6) 315%
...10/31/92..................... 11.92 7.98% 151,197 1.15%(6) 6.26%(6) 207%
...10/31/91..................... 11.80 13.40% 82,400 1.15%(6) 7.24%(6) 309%
...10/31/90..................... 11.35 7.98% 52,742 1.15%(6) 8.21%(6) 101%
...10/31/89..................... 11.50 9.42% 71,139 1.15%(6) 8.37%(6) 255%
...5/6/88(7)-10/31/88........... 11.50 4.78% 82,560 1.15%(6) 7.78%(1,6) 207%
U.S. GOVERNMENT INCOME - CLASS B
Year ended 10/31/94............. 10.79 (4.84%) 6,813 1.92%(6) 4.53%(6) 126%
9/2/93(4)-10/31/93.............. 12.08 .29% 1,286 1.85%(6) 3.07%(1,6) 315%
U.S. GOVERNMENT INCOME - CLASS C
Year ended 10/31/94............. 10.79 (4.84%) 1,224 1.94%(6) 4.57%(6) 126%
...9/2/93(4)-10/31/93........... 12.08 .34% 141 1.85%(1,6) 3.89%(1,6) 315%
</TABLE>

4
<PAGE>
<TABLE>
<CAPTION>
NET
REALIZED DISTRIBUTION
NET AND DIVIDENDS FROM
INVEST- UNREALIZED TOTAL FROM NET TOTAL
NAV: MENT GAIN FROM NET REALIZED TAX DIVIDENDS
START OF INCOME (LOSS) ON INVESTMENT INVESTMENT GAIN ON RETURN
OF AND
PERIOD (LOSS) INVESTMENTS OPERATIONS INCOME INVESTMENTS CAPITAL
DISTRIBUTIONS
--------- ------- ---------- ------- ------- ------- ---------- ----------
INVESTMENT QUALITY INCOME -
CLASS A
<S> <C> <C> <C> <C> <C> <C> <C>
<C>
Year ended 10/31/94............. $11.49 $ .68 $(1.75) $(1.07) $ (.68) $ (.07) -- $ (.75)
...10/31/93..................... 10.36 .68 1.19 1.87 (.68) (.06) -- (.74)
...10/31/92..................... 10.06 .80 .30 1.10 (.80) -- -- (.80)
12/18/90(7) - 10/31/91.......... 10.00(3) .71 .06 .77 (.71) -- -- (.71)
INVESTMENT QUALITY INCOME -
CLASS B
Year ended 10/31/94............. 11.49 .61 (1.75) (1.14) (.61) (.07) -- (.68)
9/2/93(4)-10/31/93.............. 11.52(3) .08 (.03) .05 (.08) -- -- (.08)
INVESTMENT QUALITY INCOME -
CLASS C
Year ended 10/31/94............. 11.49 .61 (1.75) (1.14) (.61) (.07) -- (.68)
9/2/93(4)-10/31/93.............. 11.52(3) .09 (.03) .06 (.09) -- -- (.09)
GLOBAL EQUITY - CLASS A
Year ended 11/30/94............. $13.54 $ .01 $ 1.10(8) $ 1.11 -- $ (.49) -- $ (.49)
...11/30/93..................... 12.30 -- 2.26(8) 2.26 (.12) (.90) -- (1.02)
...11/30/92..................... 11.25 .12 .93(8) 1.05 -- -- -- --
...11/30/91..................... 10.57 (.04) .85(8) .81 (.05) (.08)(8) -- (.13)
7/2/90(7)-11/30/90.............. 12.05(3) .05 (1.53)(8) (1.48) -- -- -- --
GLOBAL EQUITY - CLASS B
Year ended 11/30/94............. 13.52 (.06) 1.10(8) 1.04 -- (.49) -- $ (.49)
9/2/93(4)-11/30/93.............. 13.75(3) (.02) (.21)(8) (.23) -- -- -- --
GLOBAL EQUITY - CLASS C
Year ended 11/30/94............. 13.52 (.08) 1.11(8) 1.03 -- (.49) -- $ (.49)
9/2/93(4)-11/30/93.............. 13.75(3) (.02) (.21)(8) (.23) -- -- -- --
GLOBAL INCOME - CLASS A
Year ended 11/30/94............. $ 9.36 $ 57 $ (.87)(8) $ (.30) $ (.08) -- $ (.49) $ (.57)
...11/30/93..................... 9.14 .63 .27(8) .90 (.17) -- (.51) (.68)
...12/2/91(7) - 11/30/92 10.00(3) .77 (1.00)(8) (.23) (.63) -- -- (.63)
GLOBAL INCOME - CLASS B
Year ended 11/30/94............. 9.36 .50 (.87)(8) (.37) (.07) -- (.43) (.50)
9/2/92(4) - 11/30/93............ 9.42(3) .12 (.06)(8) .06 (.03) -- (.09) (.12)
GLOBAL INCOME - CLASS C
Year ended 11/30/94............. 9.36 .48 (.87)(8) (.39) (.07) -- (.41) (.48)
9/2/93(4) - 11/30/93............ 9.42(3) .13 (.06)(8) .07 (.03) -- (.10) (.13)
GROWTH AND INCOME - CLASS A
Year ended 10/31/94............. $11.24 $ .32 $ .55 $ .87 $ (.32) $(1.70) -- $(2.02)
...10/31/93..................... 10.80 .30 .73 1.03 (.26) (.33) -- (.59)
11/4/91(7) - 10/31/92........... 10.00(3) .28 .80 1.08 (.28) -- -- (.28)
GROWTH AND INCOME - CLASS B
Year ended 10/31/94............. 11.23 .25 .56 .81 (.27) (1.70) -- (1.97)
9/2/93(4) - 10/31/93............ 11.21(3) .04 .05 .09 (.07) -- -- (.07)
GROWTH AND INCOME - CLASS C
Year ended 10/31/94............. 11.23 .24 .56 .80 (.26) (1.70) -- (1.96)
9/2/93(4) - 10/31/93............ 11.21(3) .04 .05 .09 (.07) -- -- (.07)
</TABLE>

NET
ASSETS RATIO OF NET RATIO OF NET
NAV: TOTAL AT END OPERATING INVESTMENT PORT-
END RETURN OF EXPENSES TO INCOME (LOSS) FOLIO
OF FOR PERIOD AVERAGE NET TO AVERAGE TURN-
PERIOD PERIOD(1)* (000) ASSETS NET ASSETS OVER
------- -------- ------- ------------ ------------- -------
INVESTMENT QUALITY INCOME -
CLASS A
<S> <C> <C> <C> <C> <C> <C>
Year ended 10/31/94............. $ 9.67 (9.61%) $46,922 1.29%(5) 6.47%(5) 33%
...10/31/93..................... 11.49 18.64% 61,288 1.20%(5) 6.07%(5) 12%
...10/31/92..................... 10.36 11.21% 29,701 .95%(5) 7.62%(5) 18%
12/18/90(7) - 10/31/91.......... 10.06 8.11% 17,235 .82%(1,5) 8.25%(1,5) 19%
INVESTMENT QUALITY INCOME -
CLASS B
Year ended 10/31/94............. 9.67 (10.22%) 6,605 1.92%(5) 5.85%(5) 33%
9/2/93(4)-10/31/93.............. 11.49 .45% 1,468 1.84%(1,5) 3.68%(1,5) 12%
INVESTMENT QUALITY INCOME -
CLASS C
Year ended 10/31/94............. 9.67 (10.23%) 2,583 1.90%(5) 6.01%(5) 33%
9/2/93(4)-10/31/93.............. 11.49 .55% 101 1.84%(1,5) 4.83%(1,5) 12%
GLOBAL EQUITY - CLASS A
Year ended 11/30/94............. $ 14.16 8.37% $148,044 1.92%(6) .05%(6) 70%
...11/30/93..................... 13.54 19.72% 135,616 1.76%(6) .04%(6) 46%
...11/30/92..................... 12.30 9.33% 111,207 1.76%(6) .72%(6) 62%
...11/30/91..................... 11.25 7.72% 46,937 2.09% (.27%) 41%
7/2/90(7)-11/30/90.............. 10.57 (12.28%) 58,087 2.11% .92% 2%
GLOBAL EQUITY - CLASS B
Year ended 11/30/94............. 14.07 7.84% 10,268 2.50%(6) (.44%)(6) 70%
9/2/93(4)-11/30/93.............. 13.52 (1.67%) 1,676 2.26%(1,6) (.76%)(1,6) 46%
GLOBAL EQUITY - CLASS C
Year ended 11/30/94............. 14.06 7.77% 2,415 2.66%(6) (.59%)(6) 70%
9/2/93(4)-11/30/93.............. 13.52 (1.67%) 244 2.26%(1,6) (.69%)(1,6) 46%
GLOBAL INCOME - CLASS A
Year ended 11/30/94............. $ 8.49 (3.24%) $16,781 1.65% 6.45% 144%
...11/30/93..................... 9.36 10.20% 22,465 1.70%(6) 6.73%(6) 114%
...12/2/91(7) - 11/30/92 9.14 (2.60%) 19,469 1.84%(2,6) 7.93%(1,6) 360%
GLOBAL INCOME - CLASS B
Year ended 11/30/94............. 8.49 (3.99%) 1,176 2.41% 5.71% 144%
9/2/92(4) - 11/30/93............ 9.36 .65% 699 2.45%(1,6) 4.38%(1,6) 114%
GLOBAL INCOME - CLASS C
Year ended 11/30/94............. 8.49 (4.20%) 220 2.70% 5.48% 144%
9/2/93(4) - 11/30/93............ 9.36 .71% 151 2.45%(1,6) 5.16%(1,6) 114%
GROWTH AND INCOME - CLASS A
Year ended 10/31/94............. $ 10.09 8.64% $30,576 1.86%(6) 3.16%(6) 113%
...10/31/93..................... 11.24 9.93% 28,466 1.90%(6) 2.66%(6) 192%
11/4/91(7) - 10/31/92........... 10.80 10.84% 8,057 2.23%(1,6) 2.73%(1,6) 77%
GROWTH AND INCOME - CLASS B
Year ended 10/31/94............. 10.07 7.96% 2,928 2.47(6) 2.53%(6) 113%
9/2/93(4) - 10/31/93............ 11.23 .81% 319 2.49%(1,6) 1.83%(1,6) 192%
GROWTH AND INCOME - CLASS C
Year ended 10/31/94............. 10.07 7.91% 455 2.62%(6) 2.39%(6) 113%
9/2/93(4) - 10/31/93............ 11.23 .81% 102 2.49%(1,6) 2.18%(1,6) 192%
</TABLE>

- ----------------------------------------
(1)Total return shown assumes reinvestment of all dividends and distributions
but does not reflect deductions for sales charges. Aggregate (not
annualized) total return is shown for any period shorter than one year.
(2)Annualized
(3)Offering Price
(4)Initial offering of Class B and C shares
(5)During the periods the Advisor voluntarily waived all or a portion of its
fees and assumed some operating expenses of the Funds. Without such waivers
and assumptions, the ratios of net operating expenses to average net assets
and the ratios of net investment income to average net assets would have
been, respectively: Investment Quality Income Fund: Class A shares - 1.59%
and 6.17% for the year ended October 31, 1994, 1.50% and 5.77% for the year
ended 10/31/93, 1.72% and 6.85% for the year ended 10/31/92, and 2.11% and
6.96% (annualized) for the period 12/18/90 (commencement of operations) to
10/31/91; Class B shares - 2.23% and 5.54% for the year ended October 31,
1994. 2.07% and 3.45% (annualized) for the period 9/2/93 (initial offering)
to October 31, 1993; and Class C shares - 2.21% and 5.70% for the year ended
October 31, 1994 and 2.06% and 4.61% (annualized) for the period 9/2/93
(initial offering) to 10/31/93; Small Capitalization Fund: Class A shares -
3.27% and (1.43%) for the year ended 10/31/91, 5.82% and (3.11%) for the
year ended 10/31/90, and 6.27% and (3.19%) (annualized) for the period
1/1/89 (commencement of operations) to 10/31/89; Opportunity Fund: Class A
shares - 3.33% and (.68%) for the year ended 10/31/91, 3.69% and .61% for
the year ended 10/31/90, and 5.32% and .27% (annualized) for the period
1/1/89 (commencement of operations) to 10/31/89.
(6)During the periods the Advisor voluntarily waived a portion of its fees.
Without such waiver, the ratios of operating expenses to average net assets
and the ratios of net investment income to average net assets would have
been, respectively: U.S. Government Income Fund: Class A shares - 1.23% and
5.16% for the year ended October 31, 1994, 1.20% and 5.28% for the year
ended 10/31/93, 1.17% and 6.24% for the year ended 10/31/92, 1.46% and 6.93%
for the year ended 10/31/91, 1.44% and 7.92% for the year ended 10/31/90,
1.37% and 8.15% for the year ended 10/31/89, and 1.42% and 7.51%
(annualized) for the period from 5/6/88 (commencement of operations) to
10/31/88; Class B shares - 1.93% and 4.52% for the year ended October 31,
1994 and 1.96% and 2.96% (annualized) for the period September 2, 1993
(initial offering) to October 31, 1993 and Class C shares - 1.95% and 4.56%
for the year ended October 31, 1994 and 1.96% and 3.78% (annualized) for the
period September 2, 1993 (initial offering) to October 31, 1993 ; Growth and
Income Fund: Class A shares - 2.32% and 2.70% for the year ended October 31,
1994, 2.18% and 2.38% for the year ended 10/31/93, and 2.98% and 1.98%
(annualized) for the period 11/4/91 (commencement of operations) to
10/31/92, Class B shares - 2.93% and 2.07% for the year ended October 31,
1994 and 2.88% and 1.44% (annualized) for the period September 2, 1993
(initial offering) to October 31, 1993 and Class C shares 3.10% and 1.91%
for the year ended October 31, 1994 and 2.87% and 1.80% (annualized) for the
period 9/2/93 (initial offering) to 10/31/93; Global Equity Fund: Class A
shares - 1.93% and .04% for the year ended 11/30/94, 1.91% and (.11%) for
the year ended 11/30/93 and 1.84% and .64% for the year ended 11/30/92,
Class B shares - 2.51% and (.45%) for the year ended 11/30/94 and 2.32% and
(.82%) (annualized) for the period 9/2/93 (initial offering) to 11/30/93 and
Class C shares - 2.66% and (.59%) for the year ended 11/30/94 and 2.35% and
(.78%) (annualized) for the period 9/2/93 (initial offering) to 11/30/93;
Global Income Fund - Class A shares -2.35% and 5.75% for the year ended
11/30/94, 2.09% and 6.34% for the year ended 11/30/93 and 1.88% and 7.89%
(annualized) for the period 12/2/91 (commencement of operations) to
11/30/92, Class B shares - 3.12% and 5.00% for the year ended 11/30/94 and
2.88% and 3.95% (annualized) for the period 9/2/93 (initial offering) to
11/30/93 and Class C shares - 3.39% and 4.79% for the year ended 11/30/94
and 2.84% and 4.77% (annualized) for the period 9/2/93 (initial offering) to
11/30/93.
(7)Commencement of Operations
(8)Includes net gains (losses) on foreign currency transactions
(9)Per share data has been retroactively restated to reflect a 200% stock
dividend as of July 1, 1991.
(10)Quest for Value Fund, Inc. changed its fiscal year end to October 31 in
1987.

5
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INTRODUCTION

The Quest for Value Funds are a family of open-end mutual funds offering many
different investment objectives to select from ranging from funds that
invest primarily in bonds or other fixed income securities to funds that
invest in common stocks of large or small companies. You can select from all of
these funds in order to meet your long term investment objectives. This
introduction is designed to provide an overview of the funds. More information
and greater detail is provided in the remainder of this Prospectus.

WHAT ARE THE BENEFITS OF INVESTING IN QUEST FOR VALUE FUNDS? Quest for Value
Funds offer the individual investor or qualified retirement plans access to
professional money managers that are normally available only to investors with
several millions to invest. The Quest for Value Funds are managed by Quest for
Value Advisors ("Quest Advisors"), a subsidiary of Oppenheimer Capital, one of
the nation's largest institutional money managers, which has been in business
since 1968.

In addition to professional money management, the Funds offer the benefit of
diversification. Your investment is spread over many different securities in
many different industries. Diversification is so important in reducing risk that
the law requires all qualified retirement plans to diversify their investments.
Professional management and diversification offers you the opportunity to
improve your returns and reduce the risk that you would incur if you
concentrated your investments in just a limited number of securities.

WHAT FUNDS CAN I INVEST IN? There are many Quest for Value Funds that you can
choose from to meet your investment objectives. We have funds that invest in
stocks, bonds or a combination of stocks and bonds, as well as funds that invest
in foreign securities. See "Investment Objectives of the Funds," following this
Introduction, for a description of the specific investment objectives of each of
the Funds:

FUNDS INVESTING IN COMMON STOCKS
Quest for Value Fund
Small Capitalization Fund

FUNDS INVESTING IN STOCKS AND BONDS
Opportunity Fund
Growth and Income Fund

FUNDS INVESTING IN BONDS
U.S. Government Income Fund
Investment Quality Income Fund

FUNDS INVESTING IN FOREIGN SECURITIES
Global Equity Fund
Global Income Fund

In addition, Quest for Value manages and distributes money market funds and
tax-exempt funds. Ask your broker or dealer for a prospectus.

HOW CAN I PURCHASE SHARES? You can purchase shares through your broker or dealer
who has a sales agreement with Quest for Value Distributors ("Quest
Distributors"). The Funds offer Class A, B and C shares. Class A shares have an
initial sales charge that declines for larger orders. Purchases of $1 million or
more of Class A shares of the U.S. Government Income Fund and the Investment
Quality Income Fund have no initial sales charge but are subject to a contingent
deferred sales charge ("CDSC") if held for less than two years. Purchases of $1
million or more of Class A shares of the Quest for Value Fund, Inc., the Small
Capitalization Fund, the Growth and Income Fund, the Opportunity Fund and the
Global Equity Fund made on or after July 1, 1994 have no initial sales charge
but are subject to a CDSC if held for less than one year; if such purchases were
made before July 1, 1994 they are subject to a CDSC if held for less than two
years. Class A shares are also subject to an ongoing distribution fee pursuant
to the

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<PAGE>
Distribution Plan and Agreement for Class A shares ("Plan") at the following
annual rates of each Fund's average daily net assets: U.S. Government Income
Fund--.05%, Investment Quality Income and Growth and Income Fund--.15%, all
other Funds except Global Income Fund--.25%. Each Fund's Class A Shares also pay
a service fee at the annual rate of .25% of average daily net assets. Although
the Global Income Fund is authorized to pay a distribution fee of .05% and a
service fee of .25% under its Plan, the Board of Directors of that Fund has set
a maximum fee under the Plan of .25%.

Class B shares incur no initial sales charge but are subject to a CDSC that
declines over time for shares held less than six years; Class B shares are only
available to investors purchasing less than $250,000. Class B shares are also
subject to an ongoing distribution fee pursuant to the Distribution Plan and
Agreement for Class B shares at the annual rate of .75% of each Fund's average
daily net assets and a service fee at the annual rate of .25% of average daily
net assets. Class B shares will automatically convert to Class A shares of the
same Fund eight years after the end of the calendar month in which the purchase
order for such Class B shares was accepted, on the basis of the relative net
asset values of the two classes, subject to the terms described under
"Conversion of Class B Shares," p. 20.

Class C shares incur no initial sales charge but are subject to a CDSC for
shares held less than one year. Class C shares of each Fund are subject to an
ongoing distribution fee pursuant to the Distribution Plan and Agreement for
Class C shares at the annual rate of .75% of each Fund's average daily net
assets and a service fee at the annual rate of .25% of average daily net assets.

In determining which class of shares to purchase, investors should consider
whether during the anticipated life of their investment in a Fund the
accumulated distribution fees and deferred sales charges on Class B or C shares
would be more or less than the amount of the initial sales charges and
distribution fees paid on Class A shares held for the same amount of time.
Investors who qualify for significantly reduced sales charges for Class A shares
or who expect to hold their investment for an extended period of time might find
the initial sales charge alternative preferable. However, because the initial
sales charge is deducted at the time of purchase, investors should consider the
extent to which any return might otherwise be realized on the additional funds
invested under the deferred sales charge alternative and weigh such
consideration against the higher per share return of Class A shares afforded by
the lower distribution fees of such shares. Other investors might determine it
more advantageous to have all their funds invested initially, although they
would be subject to higher ongoing distribution fees and, possibly, a CDSC.

ARE THERE SPECIAL SALES CHARGES FOR QUALIFIED RETIREMENT PLANS? The Funds offer
qualified retirement plans several different ways of buying shares at reduced
sales charges. Class A shares offer a special lower sales charge structure based
on the number of eligible employees in the plan, and do not have a sales charge
for sales over $1,000,000 or for retirement plans covering at least 50
employees. Class B shares currently are not being offered to non-qualified
retirement plans and qualified retirement plans under Internal Revenue Code
Sections 401(a), 401(k), 403(b) and 457 but are being offered to qualified
retirement plans under Internal Revenue Code Section 408(a). The CDSC is waived
for certain benefit payments from these plans. See "Exemptions from Class A, B
and C CDSC" p. 21. Your broker or dealer can help you establish an IRA, 401(k),
403(b) or pension and profit sharing plan using the Quest for Value Funds.

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<PAGE>
HOW DO I GET MONEY OUT OF A FUND? You can receive periodic income dividends.
Some of our Funds distribute income monthly, some quarterly and some for which
income is not a primary goal, annually. You can establish a withdrawal plan that
will send you a set amount or percentage of your account on a regular basis.

You can redeem shares through your broker or dealer or through Quest
Distributors directly. Some of the Funds offer the ability to redeem shares by
writing a check on the shares in your account. For convenience, you can also
redeem shares by telephone. When you redeem shares you will receive the value of
the shares that are redeemed (less any applicable CDSC). This value can be more
or less than your purchase price depending on the results of the investments
that the fund holds. A check will be mailed to you for your redemption (or the
proceeds wired to your bank) on the day after a redemption request is received.

WHERE CAN I GET INFORMATION ABOUT MY INVESTMENT? The Funds send all shareholders
an annual and semi-annual report. The annual report contains information about
the Funds' investment management strategies and performance; you can receive a
copy of this report from your broker or dealer or from the Fund free of charge.
You will receive a confirmation from the Funds' transfer agent, State Street
Bank and Trust Company, after every transaction (purchase, redemption, exchange
or distribution). The confirmation will show you the number of shares that you
own. You can determine the value of your shares by looking up the price in the
mutual fund pages of most daily newspapers. You can also get current information
from your broker or dealer or by calling the Fund at 800-232-FUND
(800-232-3863).

WHAT ARE THE RISKS OF INVESTING IN MUTUAL FUNDS? The Funds are not fixed
investments and their net asset values will fluctuate because the values of the
securities that they own will fluctuate. On redemption the value of your shares
may be more or less than your investment. See "Risk Factors."

- ---------------------------------------------

INVESTMENT OBJECTIVES OF THE FUNDS

Quest Advisors manages the Funds in accordance with their investment objectives
described below. Quest Advisors' equity investment policy is overseen by
George Long, Managing Director and Chief Investment Officer for
Oppenheimer Capital, the parent of Quest Advisors. Mr. Long has been with
Oppenheimer Capital since 1982. Fixed income investment policy is overseen by
Robert J. Bluestone, Managing Director and Director of Fixed Income Management
for Oppenheimer Capital. Mr. Bluestone has been with the firm since 1986.

QUEST FOR VALUE FUND seeks capital appreciation through investment in securities
(primarily equity securities) of companies believed by Quest Advisors to be
undervalued in the marketplace in relation to factors such as the companies'
assets, earnings, growth potential and cash flows. For the purposes of this
Prospectus the term equity securities is defined as common stocks and preferred
stocks; bonds, debentures and notes convertible into common stocks; and
depository receipts for such securities. Investments of the Quest for Value Fund
are managed by Eileen Rominger, Managing Director of Oppenheimer Capital. She
has been portfolio manager and Vice President of this Fund since 1989. Ms.
Rominger has been an analyst and portfolio manager at Oppenheimer Capital since
1981.

SMALL CAPITALIZATION FUND seeks capital appreciation through investments in a
diversified portfolio which under normal conditions will have at least 65% of
its assets invested in equity securities of companies with market
capitalizations under $1

8
<PAGE>
billion. The Fund's investment approach will attempt to identify securities of
companies whose prices are favorable in relation to their book values and/or
sales and securities of companies which have limited operating leverage
(relatively stable business with below average sensitivity to changes in the
general economy) and/or limited financial leverage (a ratio of debt to assets,
or cost of debt service to income, which is meaningfully below those of their
competitors). The Small Capitalization Fund is managed by Jenny Beth Jones,
Senior Vice President of Oppenheimer Capital, and Louis Goldstein, Vice
President of Oppenheimer Capital . Ms. Jones has been portfolio manager and Vice
President of this Fund since 1990. Previously Ms. Jones was a portfolio manager
and analyst with Mutual of America. Mr. Goldstein has been portfolio manager of
the Fund since January 3, 1995. He has been a security analyst with Oppenheimer
Capital since 1991. From 1988 to 1991 he was a security analyst with David J.
Greene & Co.

U.S. GOVERNMENT INCOME FUND seeks to provide shareholders with a high level of
current income together with protection of capital by investing exclusively in
debt obligations, including mortgage-backed securities, issued or guaranteed by
the United States government, its agencies or instrumentalities ("U.S.
government securities"), and in related futures, options and repurchase
agreements. The Fund will attempt to enhance its income and reduce the impact of
changing interest rates on the value of its shares by engaging in options and
financial futures transactions. Such transactions will tend to limit
opportunities for appreciation during periods of declining interest rates. The
average maturity of the Fund's investments will vary based on market conditions.
It is estimated that the average dollar weighted maturity of the Fund will be
between five and ten years. The U.S. Government Income Fund is managed by Vikki
Hanges, Vice President of Oppenheimer Capital. Ms. Hanges has been portfolio
manager and Vice President of this Fund since 1993. Ms. Hanges assisted with the
management of Quest Cash Reserves, Inc., a money market fund with five
portfolios managed by Quest Advisors, from 1987 through 1992. Ms. Hanges has
been on the fixed income trading desk at Oppenheimer Capital since 1982. Howard
Potter, President and Chief Executive of New Castle Advisers, Inc., advises the
Fund on investment strategies for options and financial futures. From 1986-1991
he was a Vice President in the Fixed Income Department at Oppenheimer & Co.,
Inc. ("Opco") and while Opco acted as subadvisor to this Fund from 1988 to 1991,
Mr. Potter was responsible for advising this Fund regarding options and
financial futures.

INVESTMENT QUALITY INCOME FUND seeks to provide shareholders with as high a
level of current income as is consistent with conservation of principal through
a portfolio consisting primarily of fixed income obligations. Under normal
conditions, at least 80% of the Fund's assets will be invested in corporate
bonds, U.S. government securities and/or mortgage backed debt securities rated A
or better by Moody's Investor Services Inc. (Moody's) or Standard & Poors
Corporation ("S&P"), or, if unrated, considered to be of comparable quality by
Quest Advisors. The Fund may invest up to 20% of its assets in the lowest
category of investment-grade corporate bonds, those which are rated Baa3 by
Moody's or BBB - by S&P or, if unrated, considered to be of comparable quality
by Quest Advisors. The term bonds includes debentures but does not include
bills, commercial paper or notes. The average maturity of the Fund's investments
will vary based on market conditions. It is anticipated, however, that the
average dollar weighted maturity of the Fund will be greater than 20 years. The
Investment Quality Income Fund is managed by George H. Tilghman, Jr., Vice
President of Oppenheimer Capital. Mr. Tilghman has been responsible for the
management of this fund's portfolio since its inception. He was named Vice
President of the

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<PAGE>
Fund in 1993. He was previously a fixed income portfolio manager in
International Investment Management at Brown Brothers Harriman & Co.

OPPORTUNITY FUND seeks growth of capital over time through investments in a
diversified portfolio of common stocks, bonds and cash equivalents, the
proportions of which will vary based upon management's assessment of the
relative values of each investment under prevailing market conditions. The
Fund's portfolio will normally be invested primarily in common stocks and
securities convertible into common stock. During periods when common stocks
appear to be overvalued and when value differentials are such that fixed-income
obligations appear to present meaningful capital growth opportunities relative
to common stocks or pending investment in securities with capital growth
opportunities, up to 50% or more of the Fund's assets may be invested in bonds
and other fixed-income obligations. This may include cash equivalents which do
not generate capital appreciation. The bonds in which the Fund invests will be
limited to U.S. government obligations, mortgage-backed securities,
investment-grade corporate debt obligations and unrated obligations, including
those of foreign issuers, which management believes to be of comparable quality.
The investments of the Opportunity Fund are managed by Richard J. Glasebrook II,
Managing Director of Oppenheimer Capital. Mr. Glasebrook has been portfolio
manager and Vice President of this Fund since 1991. Previously, he was a Partner
with Delafield Asset Management where he served as a portfolio manager and
analyst.

GROWTH AND INCOME FUND seeks to achieve a combination of growth of capital and
investment income with growth of capital as the primary objective, by investing
in securities that are believed by Quest Advisors to be undervalued in the
marketplace and to offer the possibility of increased value. The Fund invests in
marketable securities traded on national securities exchanges and in the
over-the-counter market. Ordinarily, the Fund invests its assets in common
stocks (with emphasis on dividend paying stocks), preferred stocks, securities
convertible into common stock, and debt securities. The Fund may invest in
lower-quality, high-yielding convertible debt securities and other debt
securities and currently intends to limit its investments in these securities to
up to 25% of its assets. See "Risk Factors." By focusing its purchases of equity
securities on those issued by mature companies which it believes to be
under-valued, the Fund seeks to achieve both its objectives of obtaining capital
appreciation as well as income from dividends. The Fund's purchases of
convertible securities similarly affords it the potential of capital growth
through the conversion option and greater investment income prior to conversion.
The Fund's purchases of debt securities furthers the objective of investment
income and offers potential for capital appreciation in an economic environment
of declining interest rates or as a result of improved issuer credit quality. It
is anticipated that the Fund, as a result of its investment approach, will be
less volatile than the market in general. The Growth and Income Fund is managed
by Colin Glinsman, Vice President of Oppenheimer Capital. Mr. Glinsman has been
portfolio manager and Vice President of this Fund since 1992. Since 1991, Mr.
Glinsman has assisted with the management of the Quest for Value Dual Purpose
Fund, Inc., a closed-end mutual fund managed by Quest Advisors, and has been a
securities analyst with Oppenheimer Capital since 1989. He was previously an
investment banker with Prudential Securities and Morgan Grenfell, and qualified
as a certified public accountant while with Coopers & Lybrand.

GLOBAL EQUITY FUND seeks long-term capital appreciation through pursuit of a
global investment strategy primarily involving equity securities. The Fund may
invest anywhere in the world with no requirement that any specific percentage of
its assets be committed to any given country. Under

10
<PAGE>
normal circumstances, at least 65% of the Fund's total assets will be invested
in equity securities in at least three different countries, one of which may be
the United States. Opportunities for capital appreciation may also be presented
by debt securities. The Fund may invest up to 35% of its total assets in debt
obligations with remaining maturities of one year or more of U.S. or foreign
corporate, governmental or bank issuers. It is the present intention of the
Fund, although not a fundamental policy, not to invest more than 5% of its total
assets in debt securities rated below investment-grade. Domestic investments of
this Fund are managed by Richard J. Glasebrook II, Managing Director of
Oppenheimer Capital. Mr. Glasebrook has been portfolio manager and Vice
President and of this Fund since 1991. Effective January 1, 1994, the Fund's
investments in foreign securities are managed by Pierre Daviron, President and
Chief Investment Officer of Oppenheimer Capital International, a division of
Oppenheimer Capital created in 1993. Mr. Daviron was named portfolio manager and
Vice President of this Fund in 1993. Previously, he was Chairman and Chief
Executive Officer at Indosuez Gartmore Asset Management, a division of Banque
Indosuez, Paris, France. Prior thereto he was a Managing Director in Mergers and
Acquisitions at J.P. Morgan.

GLOBAL INCOME FUND seeks investment income as its primary objective, with
capital appreciation as a secondary objective through a non-diversified
portfolio. The Fund invests primarily in investment-grade debt securities of
foreign and domestic corporations and foreign governments, or their agencies and
instrumentalities, and in U.S. government securities. Generally, the debt
securities in which the Global Income Fund will invest will be those believed by
Quest Advisors to offer potential for capital appreciation in addition to
investment income, because of such factors as anticipated changes in the
comparative level of interest rates in different countries or anticipated
improvements in the issuer's credit rating. Under normal circumstances the Fund
will invest at least 65% of its total assets in the securities of issuers
located in not less than three different countries, one of which may be the
United States. The Fund may also invest in preferred stocks, securities
convertible into common stock and short-term money market instruments.
Investments in preferred stocks and securities convertible into common stock
will be limited to 10% of the total assets of the Fund at the time of purchase.
The Fund may invest in lower-quality high-yielding debt securities (also known
as "junk bonds") of foreign issuers which may be located in countries with
"emerging markets" (as defined under "Emerging Market Countries," below). The
Fund's current intention is to limit its investment in these securities to up to
35% of its net assets. See "Risk Factors" and "Investment Restrictions and
Techniques." The Fund also may engage in certain transactions in options and
futures. See "Risk Factors" and "Investment Restrictions and Techniques." The
Fund's limitations respecting options and futures transactions, preferred stock,
convertible securities, lower-rated debt secu-
rities and foreign currency are non-fundamental policies and can be changed
without a vote of shareholders. It is anticipated that the average dollar
weighted maturity of the Fund will be between 5 and 10 years. The Global Income
Fund is managed by Richard A. Gluck, Vice President of Oppenheimer Capital. Mr.
Gluck was named portfolio manager and Vice President of this Fund in 1993. He
was previously a global fixed income portfolio manager with Dean Witter
InterCapital and Clemente Capital.
---------------------

To provide liquidity for the purchase of new instruments and to effect
redemptions of shares, the Funds typically invest a part of their assets in
various types of U.S. government securities and

11
<PAGE>
high quality, short-term debt securities with remaining maturities of one year
or less such as government obligations, certificates of deposit, bankers'
acceptances, commercial paper, short-term corporate securities and repurchase
agreements ("money market instruments"). For temporary defensive purposes, the
Funds may invest up to 100% of their assets in such securities and, in the case
of the Growth and Income Fund, preferred stock. At any time that a Fund for
temporary defensive purposes invests in such securities, to the extent of such
investments, it is not pursuing its investment objectives. In the case of the
Global Equity Fund and Global Income Fund, such money market instruments may be
issued by entities organized in the U.S. or any foreign country, denominated in
dollars or in the currency of any foreign country.

In the future, each of the Quest for Value, U.S. Government Income, Growth and
Income, Global Equity and Global Income Funds may endeavor to achieve its
respective investment objective by investing its assets in a no-load diversified
open-end management investment company which has the same portfolio manager and
substantially the same investment objective as that Fund. This possible
investment has been approved by shareholder vote. Shareholders will receive
prior notice with respect to the commencement of any such investment.

Except as indicated, the investment objectives and policies described above
are fundamental and may not be changed without a vote of the shareholders.

- ---------------------------------------------

RISK FACTORS

The value of the Funds' shares will fluctuate and on redemption the value of
your shares may be more or less than your investment.

There are two types of risk generally associated with owning equity
securities: market risk and financial risk. Market risk is the risk associated
with the movement of the stock market in general. Financial risk is associated
with the financial condition and profitability of the underlying company.
Smaller capitalization companies may experience higher growth rates and higher
failure rates than do larger capitalization companies. The trading volume of
securities of smaller capitalization companies is normally less than that of
larger capitalization companies and, therefore, may disproportionately affect
their market price, tending to make them rise more in response to buying demand
and fall more in response to selling pressure than is the case with larger
capitalization companies.

There are two types of risk associated with owning debt securities: interest
rate risk and credit risk. Interest rate risk relates to fluctuations in market
value arising from changes in interest rates. If interest rates rise, the value
of debt securities will normally decline and if interest rates fall, the value
of debt securities will normally increase. All debt securities, including U.S.
government securities, which are generally considered to be the most
creditworthy of all debt obligations, are subject to interest rate risk.
Securities with longer maturities generally will have a more pronounced reaction
to interest rate changes than shorter term securities.

Credit risk relates to the ability of the issuer to make periodic interest
payments and ultimately repay principal at maturity. Bonds rated Baa3 by Moody's
or BBB- by S&P, which the Quest for Value, Small Capitalization, Investment
Quality Income, Opportunity, Growth and Income, Global Equity and Global Income
Funds may acquire, are described by those rating agencies as having speculative
elements. If a debt security is rated below investment grade by one rating
agency and as investment grade by a different rating agency, Quest Advisors will
make a determination as to the debt security's investment grade quality. It is
the present intention of the Quest for Value, Small

12
<PAGE>
Capitalization and Global Equity Funds to invest no more than 5% of their
respective assets in bonds rated below Baa3 by Moody's or BBB- by S&P (commonly
known as "high yield" or "junk bonds"). In the event that any of those Funds
intends in the future to invest more than 5% of its assets in such bonds,
appropriate disclosures will be made to existing and prospective shareholders.
The Growth and Income Fund may invest up to 25% of the value of net assets in
convertible debt and other debt securities rated not lower than Caa by Moody's
or CCC by S&P, Fitch Investors Service, Inc. ("Fitch") or Duff & Phelps, Inc.
("Duff") or, if unrated, deemed to be of comparable quality by Quest Advisors.
The Global Income Fund may invest up to 35% of its net assets in lower-quality
high-yielding debt securities of government and corporate issuers including
securities of issuers located in emerging market countries. Such securities may
be rated Ca or C by Moody's or CI or D by S&P, or if unrated, deemed to be of
comparable quality in the opinion of Quest Advisors. As used in this Prospectus,
an "emerging market country" is any country considered to be an emerging market
country by the World Bank at the time of the Fund's investment. Such securities
may be subject to higher risks and greater market fluctuations than are
lower-yielding higher-rated securities. Securities rated Ba by Moody's are
judged to have speculative elements; their future cannot be considered as well
assured and often the protection of interest and principal payments may be very
moderate. Securities rated BB by S&P, Fitch or Duff are regarded as having
predominantly speculative characteristics and, while such obligations have less
near-term vulnerability to default than other speculative grade debt, they face
major ongoing uncertainties or exposure to adverse business, financial or
economic conditions which could lead to inadequate capacity to meet timely
interest and principal payment. Securities rated Caa by Moody's or CCC by S&P,
Fitch and Duff are considered to have predominantly speculative characteristics
with respect to capacity to pay interest and repay principal and to be of poor
standing. Securities rated Ca by Moody's are speculative to a high degree; such
issues are often in default or have other marked shortcomings. A security rated
C by Moody's has extremely poor prospects of ever attaining any real investment
standing. Securities rated CI by S&P are income bonds on which no interest is
being paid, and securities rated D by S&P are in payment default. Debt
obligations of issuers outside the United States and its territories are rated
on substantially the same basis as domestic corporate and municipal issues. The
ratings measure the creditworthiness of the issuer but do not take into account
potential actions by the government controlling the currency of denomination
which might have a negative effect on exchange rates. The Growth and Income and
Global Income Funds do not intend to hold such lower-rated securities unless the
opportunities for capital appreciation and income, combined, remain attractive.
See the Appendix in the SAI for a more complete general description of Moody's,
S&P, Fitch and Duff ratings. The ratings of Moody's, S&P, Fitch and Duff
represent their opinions as to the quality of the obligations which they
undertake to rate. It should be emphasized, however, that ratings are relative
and subjective and although ratings may be useful in evaluating the safety of
interest and principal payments, they do not evaluate the market risk of these
securities. Therefore, although these ratings may be an initial criterion for
selection of such investments, Quest Advisors also will evaluate these
securities and the ability of the issuers of such securities to pay interest and
principal. The Growth and Income and Global Income Funds' ability to achieve
their investment objectives may be more dependent on Quest Advisors' credit
analysis than might be the case for a fund that invested in higher rated
securities. Once the rating of a security has been changed, the Growth and
Income and

13
<PAGE>
Global Income Funds will consider all circumstances deemed relevant in
determining whether to continue to hold the security. The market price and yield
of securities rated Ba or lower by Moody's and BB or lower by S&P, Fitch or Duff
are more volatile than those of higher rated securities. Factors adversely
affecting the market price and yield of these securities will adversely affect
the Growth and Income or Global Income Fund's net asset value. In addition, the
retail secondary market for these securities may be less liquid than that of
higher rated securities; adverse market conditions could make it difficult at
times for the Growth and Income and Global Income Funds to sell certain
securities. The market values of certain lower rated debt securities tend to
reflect individual corporate developments to a greater extent than do higher
rated securities, which react primarily to fluctuations in the general level of
interest rates, and tend to be more sensitive to economic conditions than higher
rated securities. Companies that issue such securities are often highly
leveraged and may not have available to them more traditional methods of
financing. Consequently, the risk associated with acquiring the securities of
such issuers is greater than with higher rated securities. The Funds are not
obliged to dispose of securities due to changes by the rating agencies. Although
there is no minimum rating for the investments of the Quest for Value, Small
Capitalization, Global Equity, or Growth and Income Funds, the Funds do not
intend to invest in bonds which are in default. The Global Income Fund may
invest in bonds which are in default, which could result in increased costs
associated with the sale or recovery of such bonds. To the extent the Funds
invest in mortgage-backed securities, they will be subject to prepayment risks.
Prepayments of mortgage principal reduce the stream of future payments and
generate cash which must be reinvested. Prepayments tend to increase following
declines in interest rates, resulting in reinvestment in a lower interest rate
environment. The ability of the Investment Quality Income Fund to generate
income is limited by its policy to invest at least 80% of its assets in
investment-grade securities.

The Global Income Fund is non-diversified as that term is defined in the
Investment Company Act of 1940 but intends to continue to qualify as a
"regulated investment company" for Federal income tax purposes. This means
generally that more than 5% of such Fund's total assets may be invested in any
one issuer, but only if at the close of each fiscal quarter the aggregate amount
of such holdings does not exceed 50% of the value of its total assets and no
more than 25% of the value of its total assets is invested in the securities of
a single issuer. As a non-diversified investment company, the Global Income Fund
may present greater risks than diversified companies because the Fund can invest
in a smaller number of issuers.

The nature and degree of market and financial risk affecting an investment in
each of the Opportunity Fund and Growth and Income Fund will depend on the
relative amounts of the Fund's assets committed to equity, longer-term debt or
money market securities at any particular time.

Higher portfolio turnover can be expected to result in a higher incidence of
short-term capital gains upon which taxes will be payable and will also result
in correspondingly higher transaction costs. Certain of the Funds may have
turnover rates of up to 250%.

ADDITIONAL RISKS OF FOREIGN SECURITIES: All Funds (except the U.S. Government
Income Fund) may purchase foreign securities that are listed on a domestic or
foreign securities exchange, traded in domestic or foreign over-the counter
markets or represented by American Depository Receipts. There is no limit to the
amount of such foreign securities the Funds may acquire. It will be the general
practice of the Global Equity Fund to invest

14
<PAGE>
in foreign equity securities and the general practice of the Global Income Fund
to invest in foreign debt securities. Certain factors and risks are presented by
investment in foreign securities which are in addition to the usual risks
inherent in domestic securities. Foreign companies are not necessarily subject
to uniform accounting, auditing and financial reporting standards or other
regulatory requirements comparable to those applicable to U.S. companies. Thus,
there may be less available information concerning non-U.S. issuers of
securities held by a Fund than is available concerning U.S. companies. In
addition, with respect to some foreign countries, there is the possibility of
nationalization, expropriation or confiscatory taxation; income earned in the
foreign nation being subject to taxation, including withholding taxes on
interest and dividends (see "Tax Status"), or other taxes imposed with respect
to investments in the foreign nation; limitations on the removal of securities,
property or other assets of a fund; difficulties in pursuing legal remedies and
obtaining judgments in foreign courts, or political or social instability or
diplomatic developments which could affect U.S. investments in those countries.
For a description of the risks of possible losses through holding of securities
in foreign custodian banks and depositories, see "Risk Factors and Special
Considerations" in the SAI.

Securities of many non-U.S. companies may be less liquid and their prices more
volatile than securities of comparable U.S. companies. Non-U.S. stock exchanges
and brokers are generally subject to less governmental supervision and
regulation than in the U.S. and commissions on foreign stock exchanges are
generally higher than negotiated commissions on U.S. transactions. In addition,
there may in certain instances be delays in the settlement of non-U.S. stock
exchange transactions. Certain countries restrict foreign investments in their
securities markets. These restrictions may limit or preclude investment in
certain countries, industries or market sectors, or may increase the cost of
investing in securities of particular companies. Purchasing the shares of
investment companies which invest in securities of a given country may be the
only or the most efficient way to invest in that country. This may require the
payment of a premium above the net asset value of such investment companies and
the return will be reduced by the operating expenses of those investment
companies.

A decline in the value of the U.S. dollar against the value of any particular
currency will cause an increase in the U.S. dollar value of a Fund's holdings
denominated in such currency. Conversely, a decline in the value of any
particular currency against the U.S. dollar will cause a decline in the U.S.
dollar value of the Fund's holdings of securities denominated in such currency.
Some foreign currency values may be volatile and there is the possibility of
governmental controls on currency exchange or governmental intervention in
currency markets which could adversely affect a Fund. The Funds do not intend to
speculate in foreign currency in connection with the purchase or sale of
securities on a foreign securities exchange but may enter into foreign currency
contracts to hedge their foreign currency exposure. While those transactions may
minimize the impact of currency appreciation and depreciation, the Funds will
bear a cost for entering into the transaction and such transactions do not
protect against a decline in the security's value relative to other securities
denominated in that currency.

The Global Equity Fund may invest its assets in American Depository Receipts
("ADRs"), European Depository Receipts ("EDRs") or Global Depository Receipts
("GDRs") which are U.S. dollar-denominated receipts that represent and may be
converted into the underlying foreign security. ADRs, GDRs or EDRs are issued by
persons other

15
<PAGE>
than the underlying issuer, typically a domestic bank or trust company. Issuers
of the stock of ADRs, EDRs or GDRs sponsored by banks or trust companies are not
obligated to disclose material information in the United States and therefore,
there may not be a correlation between such information and the market value of
such ADRs, GDRs or EDRs.

EMERGING MARKET COUNTRIES: Certain developing countries may have relatively
unstable governments, economies based on only a few industries that are
dependent upon international trade and reduced secondary market liquidity.
Foreign investment in certain emerging market countries is restricted or
controlled in varying degrees. In the past, securities in these countries have
experienced greater price movement, both positive and negative, than securities
of companies located in developed countries. Lower-rated high-yielding emerging
market securities may be considered to have speculative elements.

SOVEREIGN DEBT OBLIGATIONS: The Global Income Fund and the Global Equity Fund
may purchase sovereign debt instruments issued or guaranteed by foreign
governments or their agencies, including those located in emerging market
countries. Sovereign debt may be in the form of conventional securities or other
types of debt instruments such as loans or loan participations. Sovereign debt
of emerging market countries may involve a high degree of risk and may be in
default or present the risk of default. Certain emerging market countries have
historically experienced, and may continue to experience, high inflation and
interest rates, large fluctuations in exchange rates, large amounts of external
debt, trade difficulties and extreme poverty and unemployment. Governmental
entities responsible for repayment of the debt may be unable or unwilling to
repay principal and interest when due. In the event of a default, the Funds may
have limited legal recourse against the issuer or guarantor. Remedies must in
some cases be pursued in the courts of the defaulting party itself and the
ability of holders of foreign government debt securities to obtain recourse may
depend on the political climate in the relevant country. No assurance can be
given that the holders of commercial bank debt will not contest payments to
holders of other sovereign debt obligations in the event of a default under
their commercial bank loan agreements.

EASTERN EUROPE: The Global Equity Fund presently intends not to invest more than
5% of its net assets in companies located in Eastern European countries, but may
invest in companies located outside of such countries which conduct business in
such countries.

OPTIONS AND FUTURES: Different uses of futures and options have different risk
and return characteristics. Generally, selling futures contracts, purchasing put
options and writing call options are strategies designed to protect against
falling security prices and can limit potential gains if prices rise. Purchasing
futures contracts, purchasing call options and writing put options are
strategies whose returns tend to rise and fall together with securities prices
and can cause losses if prices fall. If securities prices remain unchanged over
time, option writing strategies tend to be profitable while option buying
strategies tend to be unprofitable. The U.S. Government Income Fund will write
covered put and call options on U.S. Government securities to generate
additional income through the receipt of options premiums. CURRENTLY, EACH OF
THE U.S. GOVERNMENT INCOME, INVESTMENT QUALITY INCOME, GLOBAL INCOME, GLOBAL
EQUITY, GROWTH AND INCOME, SMALL CAPITALIZATION AND QUEST FOR VALUE FUNDS INTEND
TO ENGAGE ONLY IN FUTURES CONTRACTS, OPTIONS ON FUTURES CONTRACTS OR OPTIONS ON
STOCK INDEXES FOR BONA FIDE HEDGING OR OTHER NON-SPECULATIVE PURPOSES. The
Global Income Fund may also write covered call options and purchase

16
<PAGE>
put options. The Small Capitalization Fund may write covered call options on
individual securities. The Funds will not enter into any leveraged futures
transactions.

REPURCHASE AGREEMENTS AND REVERSE REPURCHASE AGREEMENTS: All Funds may acquire
securities subject to repurchase agreements. The Global Income Fund may enter
into reverse repurchase agreements. Repurchase agreements and reverse repurchase
agreements involve certain risks.

For a further description of options and futures, repurchase agreements and
reverse repurchase agreements and other investment techniques used by the Funds,
see "Investment Restrictions and Techniques."

- ---------------------------------------------

HOW TO BUY SHARES

The Funds offer Class A, Class B and Class C shares. Class A shares are sold
with an initial sales charge that declines for larger orders. Purchases of
$1 million or more of Class A shares of the U.S. Government Income Fund and
the Investment Quality Income Fund are sold without an initial sales charge but
are subject to a CDSC if held less than two years. Purchases of $1 million or
more of Class A shares of the Quest for Value Fund, Inc., the Small
Capitalization Fund, the Growth and Income Fund, the Opportunity Fund and the
Global Equity Fund made on or after July 1, 1994 are sold without an initial
sales charge but are subject to CDSC if held less than one year; if such
purchases were made prior to July 1, 1994 they are subject to a CDSC if held for
less than two years. Class B shares are sold without an initial sales charge but
are subject to a CDSC if held for less than six years. Class B shares are
available only to investors purchasing less than $250,000 in the aggregate and
currently are not being offered to non-qualified deferred compensation plans and
qualified retirement plans under Internal Revenue Code Sections 401(a), 401(k),
403(b) and 457 but are being offered to qualified retirement plans under
Internal Revenue Code Section 408(a). Class C shares are sold without an initial
sales charge but are subject to a CDSC if held less than one year. Each class is
described below in greater detail. The different classes provide you with
alternative methods of acquiring shares and you should determine which class
best meets your individual needs. Dealers may be compensated at different rates
for selling Class A, Class B or Class C shares.

Your initial purchase of either Class A, B or C shares must be made through a
broker or dealer having a sales agreement with Quest Distributors, an affiliate
of Quest Advisors. Subsequent purchases of shares may also be made through your
broker or dealer by mailing your payment to the Fund's Transfer Agent, State
Street Bank and Trust Company ("State Street"), P.O. Box 8505, Boston, MA 02266.
Your initial investment must be at least $1,000 and subsequent investments must
be at least $250. There are no minimums for shares purchased under an Automatic
Investment Plan or under employee benefit plans.

Some investors may qualify to purchase Class A shares at net asset value
without a sales charge. (See "Reduced Sales Charges--Net Asset Value Purchases,"
and "Additional Information--Purchases by Former Shareholders of AMA Family of
Funds and Unified Funds.") Class B and C shares will not be sold to investors
who qualify to purchase Class A shares at net asset value, as described on pages
20 and 38.

Sales of all classes of shares will be suspended during any period when the
determination of net asset value is suspended, and may be suspended by the Board
of a Fund whenever the Board judges it to be in the best interest of the Fund to
do so. Quest Distributors, in its sole discretion, may accept or reject any
purchase order.

17
<PAGE>
BUYING CLASS A SHARES. Purchases of Class A shares will be processed at the net
asset value next determined after receipt of your purchase order, plus the
applicable front-end sales charge, if any, as set forth in the following tables.
<TABLE>
<CAPTION>
QUEST FOR VALUE, SMALL
CAPITALIZATION, OPPORTUNITY AND U.S. GOVERNMENT INCOME,
INVESTMENT QUALITY INCOME, AND
GLOBAL EQUITY FUNDS GROWTH AND INCOME FUNDS
---------------------------------- ----------------------------------
OFFERING OFFERING
% OF NET PRICE SALES CHARGE TABLES* % OF NET PRICE
AS A % OF ASSET RE-ALLOWED CLASS A SHARES AS A % OF ASSET RE-ALLOWED
OFFERING VALUE PER TO SELLING ----------------------------------- OFFERING VALUE PER TO SELLING
PRICE SHARE DEALER AMOUNT OF PURCHASE PRICE SHARE DEALER
--------- --------- ---------- ----------------------------------- --------- --------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
5.50% 5.82% 4.75% Less than $50,000.................. 4.75% 4.99% 4.25%
4.75% 4.99% 4.25% $50,000 - 99,999................... 4.50% 4.71% 4.00%
4.00% 4.17% 3.50% $100,000 - 249,999................. 3.50% 3.63% 3.15%
3.00% 3.09% 2.75% $250,000 - 499,999................. 2.75% 2.85% 2.50%
2.00% 2.04% 1.75% $500,000 - 999,999................. 2.00% 2.04% 1.75%
** ** ** $1 million or more**............... ** ** **
</TABLE>

<TABLE>
<CAPTION>
GLOBAL INCOME FUND
----------------------------------
OFFERING
% OF NET PRICE
AS A % OF ASSET RE-ALLOWED
OFFERING VALUE PER TO SELLING
AMOUNT OF PURCHASE PRICE SHARE DEALER
----------------------------------- --------- --------- ----------
<S> <C> <C> <C> <C>
Less than $100,000................. 3.00% 3.09% 2.50%
$100,000 - 249,999................. 2.50% 2.56% 2.15%
$250,000 - 499,999................. 2.00% 2.04% 1.75%
$500,000 - 999,999................. 1.50% 1.52% 1.25%
$1 million or more................. .75% .76% .65%
</TABLE>

- -------------
*The entire sales charge may be re-allowed to dealers who achieve certain levels
of sales or who have rendered coordinated sales support efforts. Such dealers
may be deemed to be "underwriters."

**PURCHASES OF CLASS A SHARES OF $1 MILLION OR MORE (all funds except Global
Income Fund)
On purchases by a single purchaser aggregating $1 million or more, the investor
will not pay an initial sales charge, and Quest Distributors will pay authorized
dealers an amount equal to .9 of 1% of the first $2 million of such purchases,
plus .8 of 1% of the next $1 million, plus .50 of 1% of the next $2 million,
plus .35 of 1% on amounts over $6 million. A CDSC will be imposed on the
proceeds of the redemption of shares of the U.S. Government Income Fund and the
Investment Quality Income Fund purchased in amounts aggregating $1 million or
more or of shares of the Quest for Value Fund, Inc., the Small Capitalization
Fund, the Growth and Income Fund, the Opportunity Fund and the Global Equity
Fund purchased prior to July 1, 1994 in amounts aggregating $1 million or more
if they are redeemed within 24 months of the end of the calendar month of their
purchase, in an amount equal to 1% if the redemption occurs within the first 12
months and equal to .5 of 1% if the redemption occurs in the next 12 months, of
the lesser of (a) the net asset value of the shares at the time of purchase or
(b) the net asset value of the shares at the time of redemption. A CDSC will be
imposed on the proceeds of the redemption of shares of the Quest for Value Fund,
the Small Capitalization Fund, the Growth and Income Fund, the Opportunity Fund
and the Global Equity Fund purchased on or after July 1, 1994 in amounts
aggregating $1 million or more if they are redeemed within 12 months of the end
of the calendar month of their purchase in an amount equal to 1% of the lesser
of (a) the net asset value of the shares at the time of purchase or (b) the

18
<PAGE>
net asset value of the shares at the time of redemption. The CDSC will be
deducted from the redemption proceeds otherwise payable to the shareholder and
will be retained by Quest Distributors. For the period of 13 months from the
date of the sales of Class A shares of $1 million or more, the distribution fee
payable by a Fund to Quest Distributors pursuant to the Fund's Distribution Plan
in connection with such shares will be retained by Quest Distributors.

REDUCED SALES CHARGES: There are several ways you may qualify for reduced sales
charges when buying Class A Shares. You should notify the Transfer Agent or your
Dealer if you qualify.

COMBINED PURCHASE: Purchases by related accounts may be combined to determine
the appropriate sales charge. Related accounts are: all accounts in your name
and/or of your spouse or children under 21 years of age, all accounts of a
fiduciary purchasing for a single trust, and all accounts for which a single
person (e.g., investment advisor, trust department, etc.) exercises investment
discretion. Qualified employee benefit trusts of an employer and its
consolidated subsidiaries will be considered a single trust.

RIGHTS OF ACCUMULATION: In determining the applicable level of sales charge, the
value of shares you purchase will be added to the greater of cost or market
value of the Class A, B or C shares you hold of any Quest Fund, provided that
any such Class A shares were purchased with a sales charge, were acquired by
exchange for shares on which a sales charge was paid, or were subject to a CDSC.

LETTER OF INTENT: If you intend to purchase shares valued at $50,000 or more
during a 13-month period, you may make the purchase under a Letter of Intent so
that the initial shares you purchase qualify for the reduced sales charge
applicable to the aggregate amount of your projected purchase. Your initial
purchase must be at least 5% of the intended purchase. An appropriate number of
shares will be held by the Transfer Agent to cover any sales charge due if you
purchase less than the indicated amount during the 13-month period.

GROUP AND ASSOCIATION PURCHASES AND PURCHASES BY QUALIFIED RETIREMENT PLANS: The
following table sets forth the applicable sales charge for purchases of Class A
shares made through a single broker or dealer by qualified retirement plans
including 401(k), 403(b) plans, SEP/IRA and IRA plans of a single employer, and
by members of associations formed for any purpose other than the purchase of
securities:

<TABLE>
<CAPTION>
AS A % OF PERCENT OF
NUMBER OF AS A % OF NET ASSET OFFERING PRICE
ELIGIBLE EMPLOYEES OR OFFERING VALUE PER RE-ALLOWED TO
MEMBERS PRICE SHARE SELLING DEALERS
- ---------------------- ------------- -------------- -------------------
<S> <C> <C> <C>
9 or less............. 3.00% 3.09% 2.60%
Between 10 & 49....... 2.00% 2.04% 1.65%
50 or more............ 0.00% see "Purchases of Class A shares of
$1,000,000 or more," p. 18
</TABLE>

Purchases made under the Group Purchase provision will qualify for the lower
of the sales charge computed according to the table based on the number of
eligible employees in a plan or members of an association or the sales charge
level under the Rights of Accumulation described above. Purchases by retirement
plans covering 50 or more employees or by associations or groups with 50 or more
members shall be entitled to the sales charge waiver applicable to purchases of
$1 million or more described above. In addition, purchases by 401(k) plans can
qualify for this sales charge waiver if, in the opinion of Quest Distributors,
the initial purchase plus projected contributions to be invested in the plan for
the following 12 months will exceed $1,000,000. Individuals who qualify for
reduced sales charges as members of associations,

19
<PAGE>
groups or eligible employees in plans as set forth in the above table may also
purchase shares for their individual or custodial accounts at the same sales
charge level.

NET ASSET VALUE PURCHASES: No sales charge will be applied to the following
transactions in Class A shares: purchases by persons who for the prior 90 days
have been directors, trustees, officers or full-time employees of any of the
Funds distributed by Quest Distributors, or of Quest Advisors, Quest
Distributors, or of their affiliates, their relatives or any trust, pension,
profit sharing or other benefit plan for any of them; purchases by any account
advised by Oppenheimer Capital, the parent of Quest Advisors, or by persons who
are directors or trustees of such accounts; purchases made with the proceeds of
maturing principal of any Quest Unit Investment Laddered Trust Series
("QUILTS"); purchases by an employee of a broker-dealer or bank having a dealer
or agency agreement pertaining to Fund shares; purchases by trust companies and
bank trust departments for funds over which they exercise exclusive
discretionary investment authority and charge an account management fee and
which are held in a fiduciary, agency, advisory, custodial or similar capacity;
purchases by registered investment advisors for their clients for whom they
charge an account management fee; accounts opened for shareholders by dealers
where the amounts invested represent the redemption proceeds from investment
companies distributed by an entity other than Quest Distributors if such
redemption has occurred no more than 60 days prior to the purchase of shares of
the Funds and the shareholder paid an initial sales charge or a contingent
deferred sales charge on the redeemed account. Shares sold at net asset value
will be included in the asset base upon which payments under a Fund's
Distribution Plan and Agreement are determined. The CDSC does not apply to
purchases of Class A shares at net asset value described herein.

BUYING CLASS B SHARES. Purchases of Class B shares will be processed at the net
asset value next determined after receipt of your purchase order for less than
$250,000. While not subject to a front-end sales charge, Class B shares may be
subject to a CDSC upon redemption. Dealers who sell Class B shares are paid a
commission by Quest Distributors equal to 4.00% of the purchase price of the
shares. CLASS B SHARES CURRENTLY ARE NOT BEING OFFERED TO NON-QUALIFIED DEFERRED
COMPENSATION PLANS AND QUALIFIED RETIREMENT PLANS UNDER INTERNAL REVENUE CODE
SECTIONS 401(A), 401(K), 403(B) AND 457 BUT ARE BEING OFFERED TO QUALIFIED
RETIREMENT PLANS UNDER INTERNAL REVENUE CODE SECTION 408(A).

If Class B Shares of any Fund are redeemed within six years after the end of
the calendar month in which a purchase order for Class B shares was accepted, a
CDSC will be imposed by applying the appropriate percentage indicated below to
the lesser of: (1) the net asset value of such shares at the time of purchase or
(2) the net asset value of such shares at the time of redemption. The CDSC will
be deducted from the redemption proceeds otherwise payable to the shareholder
and will be retained by Quest Distributors. The CDSC to be imposed on such share
redemptions will be assessed according to the following schedule:

<TABLE>
<CAPTION>
YEARS SINCE PURCHASE APPLICABLE CLASS B
ORDER OF LESS THAN CONTINGENT DEFERRED
$250,000 WAS ACCEPTED SALES CHARGE
- ----------------------------------- ------------------------
<S> <C>
Up to one year..................... 5.00%
One year or more but less than 2
years............................. 4.00%
Two years or more but less than 4
years............................. 3.00%
Four years or more but less than 5
years............................. 2.00%
Five years or more but less than 6
years............................. 1.00%
6 or more years.................... None
</TABLE>

CONVERSION OF CLASS B SHARES. Class B shares will automatically convert to Class
A shares of the same Fund eight years after the end of the calendar month in
which the purchase order for Class B shares was accepted, on the basis of the
relative net asset values of the two classes and subject to the following terms:
Class B shares acquired through the reinvestment of dividends and distributions
("reinvested Class B shares") will be converted to Class A shares on a pro-rata
basis only when Class B

20
<PAGE>
shares not acquired through reinvestment of dividends or distributions
("purchased Class B shares") are converted. The portion of reinvested Class B
shares to be converted will be determined by the ratio that the purchased Class
B shares eligible for conversion bear to the total amount of purchased Class B
shares in the shareholder's account. For the purposes of calculating the holding
period, Class B shares will be deemed to have been issued on the sooner of: (a)
the date on which the issuance of Class B shares occurred, or (b) for Class B
shares obtained by an exchange or series of exchanges, the date on which the
issuance of the original Class B shares occurred. This conversion to Class A
shares will relieve Class B shares that have been outstanding for at least eight
years (a period of time sufficient for Quest Distributors to have been
compensated for distribution expenses related to such Class B shares) from the
higher ongoing distribution fee paid by Class B shares. Only Class B shares have
this conversion feature. Conversion of Class B shares to Class A shares is
contingent on the continuing availability of a private letter revenue ruling
from the Internal Revenue Service affirming that such conversion does not
constitute a taxable event for the shareholder under the Internal Revenue Code.
If such revenue ruling or an opinion of counsel is no longer available,
conversion of Class B shares to Class A shares would have to be suspended, and
Class B shares would continue to be subject to the Class B distribution fee
until redeemed.

BUYING CLASS C SHARES. Purchases of Class C shares will be processed at the net
asset value next determined after receipt of your purchase order. Class C shares
are not subject to a front-end sales charge, but may be subject to a CDSC upon
redemption. Dealers who sell Class C shares are paid a commission by Quest
Distributors equal to .85% of the purchase price of the shares.

If Class C shares are redeemed within one year after the end of the calendar
month in which a purchase order for Class C shares was accepted, a CDSC of 1.00%
would be imposed on the lesser of (1) the net asset value of such shares at the
time of purchase or (2) the net asset value of such shares at the time of
redemption. The CDSC will be deducted from the redemption proceeds otherwise
payable to the shareholder and will be retained by Quest Distributors.

EXEMPTIONS FROM CLASS A, B AND C CDSC. No CDSC will be imposed when a
shareholder redeems Class A, B or C shares in the following instances: (a)
shares or amounts representing increases in the value of an account above the
net cost of the investment due to increases in the net asset value per share;
(b) shares acquired through reinvestment of income dividends or capital gains
distributions; (c) shares acquired by exchange from any Quest Fund, other than a
money market fund, where the exchanged shares would not have been subject to a
CDSC upon redemption; and (d) Class A shares of the U.S. Government Income Fund
or the Investment Quality Income Fund purchased in the amount of $1 million or
more held for more than 24 months, Class A shares of the Quest for Value Fund,
Inc., the Small Capitalization Fund, the Growth and Income Fund, the Opportunity
Fund and Global Equity Fund purchased in the amount of $1 million or more prior
to July 1, 1994 held for more than 24 months and Class A shares purchased in the
amount of $1 million or more on or after July 1, 1994 if held for more than 12
months, Class B shares held for more than six years or Class C shares held for
more than one year from the end of the calendar month in which the purchase
order was accepted.

PURCHASES PRIOR TO MARCH 6, 1995. The CDSC does not apply to purchases of Class
A shares at net asset value described under "Net Asset Value Purchases" above
and will be waived in the case of redemptions of Class A, B or C shares
purchased prior to March 6, 1995 in connection with (i) distributions to
participants or beneficiaries of

21
<PAGE>
plans qualified under Section 401(a) of the Internal Revenue Code ("IRC") or
from custodial accounts under IRC Section 403(b)(7), individual retirement
accounts under IRC Section 408(a), deferred compensation plans under IRC section
457 and other employee benefit plans ("plans"), and returns of excess
contributions made to these plans, (ii) withdrawals under an automatic
withdrawal plan where the annual withdrawal does not exceed 10% of the opening
value of the account (only for Class B and C shares); and (iii) liquidation of a
shareholder's account if the aggregate net asset value of shares held in the
account is less than the required minimum.

PURCHASES ON OR AFTER MARCH 6, 1995. The CDSC will be waived in the case of
redemptions of Class A, B or C shares purchased on or after March 6, 1995 in
connection with 1) distributions to participants or beneficiaries from
individual retirement accounts under Section 408(a) of the IRC, and retirement
plans under Section 401(a), 401(k), 403(b) and 457 of the IRC, which
distributions are made either (a) to an individual participant as a result of
separation from service or (b) following the death or disability (as defined in
the IRC) of the participant or beneficiary; 2) returns of excess contributions
to such retirement plans; 3) redemptions other than from retirement plans
following the death or disability of the shareholder(s) (as evidenced by a
determination of total disability by the U.S. Social Security Administration);
4) withdrawals under an automatic withdrawal plan where the annual withdrawals
do not exceed 10% of the opening value of the account (only for Class B and C
shares); and 5) liquidation of a shareholder's account if the aggregate net
asset value of shares held in the account is less than the required minimum. A
shareholder will be credited with any CDSC paid in connection with the
redemption of any Class A, B or C shares if within 90 days after such
redemption, the proceeds are invested in the same Class of shares in the same
and/or another Quest Fund.

In determining whether the Class A, B or C CDSC is payable, it will be assumed
that shares not subject to a CDSC are redeemed first and that other shares are
then redeemed in the order purchased. No CDSC will be imposed on exchanges to
purchase shares of another Quest Fund although a CDSC will be imposed on shares
of the acquired Quest Fund purchased by exchange of shares subject to a CDSC if
the acquired shares are then redeemed within 24 months if the exchanged shares
were Class A Shares (12 months with respect to Class A shares of the Quest for
Value Fund, Inc., the Small Capitalization Fund, the Growth and Income Fund, the
Opportunity Fund, or the Global Equity Fund purchased on or after July 1, 1994),
six years if the exchanged shares were Class B Shares or one year if the
exchanged shares were Class C shares of the end of the calendar month in which
the exchanged shares were purchased.

SPECIAL FIDUCIARY RELATIONSHIPS. The CDSC will not apply with respect to
purchases of Class A shares for which the selling dealer is not permitted to
receive a sales load or redemption fee imposed on a shareholder with whom such
dealer has a fiduciary relationship in accordance with provisions of the
Employee Retirement Income Security Act and regulations thereunder. If such
dealer agrees to the reimbursement provision described below, no sales charge
will be imposed on sales of $1,000,000 or more and Quest Distributors will pay
to the selling dealer a commission described above in "Purchases of Class A
Shares of $1 Million or More."

For the period of 13 months from the date of the sales referred to in the
above paragraph, the distribution fee payable by a Fund to Quest Distributors
pursuant to the Fund's Distribution Plan in

22
<PAGE>
connection with such shares will be retained by Quest Distributors. In the event
of a redemption of any such shares within 24 months of purchase, the selling
dealer will reimburse Quest Distributors for the amount of commission paid less
the amount of the distribution fee with respect to such shares.

PURCHASES BY STRATEGIC ALLIANCES. The CDSC will not apply with respect to
purchases of Class A shares by participants in qualified retirement plans that
are part of strategic alliances. No sales charge will be imposed on such
purchases and Quest Distributors will pay to the selling dealer a commission
described above in "Purchases of Class A Shares of $1 Million or More." For the
period of 13 months from the date of such sales, the distribution fee payable by
a Fund to Quest Distributors pursuant to the Fund's Distribution Plan in
connection with such shares will be retained by Quest Distributors.

OTHER DEALER COMPENSATION. Quest Distributors will provide additional
compensation to dealers in connection with sales of shares of the Funds and
other mutual funds distributed by Quest Distributors ("Quest Funds") including
promotional gifts (which may include gift certificates, dinners and other
items), financial assistance to dealers in connection with conferences, sales or
training programs for their employees, seminars for the public and advertising
campaigns. In some instances, these incentives may be made available only to
dealers whose representatives have sold or are expected to sell significant
amounts of shares. If a registered representative of a securities dealer sells
more than $500,000 or $1 million (net of redemptions) of any open-end investment
company distributed by Quest Distributors and managed by Quest Advisors other
than Quest Cash Reserves, Inc. in the 1995 calendar year, the dealer firm is
eligible to send the representative and a guest to a sales conference at a
luxury resort; individual sales of Class A shares in the amount of $1 million or
more that are purchased at net asset value and sales of Class C shares will
count as one-half their amount for determining eligibility.

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DETERMINING NET ASSET VALUE

The value of shares is determined by adding up the value of all security
holdings and other assets of the Fund, deducting the value of the
liabilities, and dividing the result by the number of shares outstanding.
The value of a Fund's portfolio securities and other assets is based on market
values determined by procedures established by the Board of the Fund. Securities
listed on a national securities exchange or designated as national market system
securities are valued at the last sale price or, if there has been no sale that
day, at the last bid price. Debt and equity securities actively traded in the
over-the-counter market but not designated as national market system securities
are valued at the most recent bid price. Valuations may be provided by a pricing
service or from independent securities dealers. Short-term investments with
remaining maturities of less than 60 days are valued at amortized cost so long
as the Board determines in good faith that such method reflects fair value.
Other securities are valued by methods that the Board of a Fund believes
accurately reflect fair value. The calculation is made at the close of the
regular trading session ("Close") of the New York Stock Exchange ("NYSE")
(currently 4:00 p.m. Eastern Time) each day the NYSE is open. The value that is
calculated is known as the net asset value per share, which will fluctuate
daily. Although the legal rights of Class A, B and C shares are identical, the
different expenses borne by each class may result in differing net asset values
and dividends for each Class.

Generally, trading in foreign securities is substantially completed each day
at various times prior to the Close of the NYSE. The values of such securities

23
<PAGE>
used in computing the net asset value of a Fund's shares are determined as of
such times. Foreign currency exchange rates are also generally determined prior
to the Close of the NYSE. If events materially affecting the value of such
securities and exchange rates occur between the time of such determination
and/or the Close of the NYSE, then these securities will be valued at their fair
value as determined in good faith under procedures established by and under the
supervision of the Fund's Board. See "Determination of Net Asset Value" in the
SAIs.
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HOW TO REDEEM SHARES

You may redeem shares on any day the Funds are open for business--normally when
the New York Stock Exchange ("NYSE") is open-- using the Procedures
described below. See "Determination of Net Asset Value" in the SAI for the
days on which the NYSE will be closed.

DEALER REDEMPTION: Your redemption requests may be handled by your securities
dealer who is responsible for providing the necessary documentation to the
Transfer Agent and who may impose a charge for its services. Requests received
by your dealer prior to the Close of the NYSE and transmitted to the Transfer
Agent by its close of business that day will receive that day's net asset value
per share.

REGULAR REDEMPTION: You may send a redemption request by mail to the Transfer
Agent and will receive the net asset value of the shares being redeemed which is
next determined after your request is received in "good form". "Good form" means
the request is signed in the name in which the account is registered and the
signature is guaranteed by an eligible guarantor. Eligible guarantors include
member firms of a national securities exchange, banks, savings associations and
credit unions, as defined by the Federal Deposit Insurance Act. Special
requirements may exist for corporations, trusts and similar accounts. If you
hold stock certificates, you should call the Transfer Agent for instructions on
the appropriate redemption procedure.

EXPEDITED REDEMPTIONS: You and your account representative will automatically
receive the ability to redeem or exchange shares by telephone unless you
indicate otherwise on the application. You may also authorize certain other
expedited redemption procedures. BY TELEPHONE (minimum $1,000). The proceeds of
redemption will either be mailed to you or wired to the account of any bank that
is a member of the Federal Reserve wire system. This account must be designated
on your application. If you change the bank account, you must let us know in
writing with a signature guarantee. BY AUTOMATIC WITHDRAWAL PLAN (minimum $50).
If your account has a value of at least $5,000 you may arrange an automatic
withdrawal plan so that the amount you specify (minimum $50) will be sent to you
on a monthly or quarterly basis. Dividends and distributions on your shares must
be reinvested. BY CHECK DRAFT (U.S. Government Income Fund only--$250 minimum).
A service fee of $10 is imposed for drafts under $250. Your checks are drafts
drawn on State Street. When your draft is presented, State Street as your agent
redeems a sufficient number of whole and fractional shares to cover the amount
of the draft. You cannot close out your account by check redemption, because
your shares continue to earn dividends and fluctuate in value until the draft is
presented.

Your redemption proceeds, from which any applicable CDSC will have been
deducted, will normally be mailed or wired the day after your redemption is
processed. Payments for redemption of shares that you purchased by check may be
delayed until the

24
<PAGE>
check has cleared, which may take up to 15 days. To avoid this collection
period, you can wire federal funds to pay for purchases.

REINSTATEMENT PRIVILEGE: If you reinvest in a Quest Fund within 60 days of
redemption, you will be reinstated as a shareholder with the same privileges
regarding the non-payment of sales charges that apply to exchanges. You may
exercise this privilege only once each calendar year. The redemption may produce
a gain or loss for tax purposes.

The Funds may suspend redemption procedures and postpone redemption payments
during any period when the NYSE is closed other than for customary weekend or
holiday closing or the SEC has determined an emergency exists or has otherwise
permitted such suspension or postponement. The Funds reserve the right to redeem
your account if its value is less than $500 due to redemptions. Your Fund will
give you 30 days' notice to increase your account value to at least $500.
Redemption proceeds will be mailed.
- ---------------------------------------------

EXCHANGING SHARES

An exchange represents the sale of shares of one fund and the purchase of shares
of another, which may produce a gain or loss for tax purposes.

Your exchange will be processed at the net asset value next determined after
the Transfer Agent receives your exchange request. A service fee (currently $5)
will be charged for administrative services in connection with an exchange. You
will receive a prospectus along with your confirmation if you exchange into a
Fund not offered in this Prospectus. The exchange feature may be modified or
discontinued at any time, upon notice to shareholders in accordance with
applicable rules adopted by the Securities and Exchange Commission ("SEC"). Your
exchange may be processed only if the shares of the fund to be acquired are
eligible for sale in your state and if the amount of your transaction meets the
minimum requirements for that fund. The exchange privilege is only available in
states in which it may be legally offered.

EXCHANGES OF CLASS A SHARES: You may exchange your Class A shares for Class A
shares of any mutual fund (except as described below with respect to exchanges
from the Global Income Fund) distributed by Quest Distributors ("Quest Fund")
and for shares of Quest Cash Reserves, Inc. ("QCR"), a single-class money market
fund with five different portfolios. You need not pay any sales charge
differential between Quest Funds on the exchange of Class A shares purchased
with a front-end sales charge if:
1. You have held the shares being exchanged for
at least 31 days;
2. The shares being exchanged were acquired
through the reinvestment of dividends or distributions; or
3. The shares being exchanged were themselves
the proceeds of an exchange from a fund with the same or higher sales
charge.

If you exchange Class A shares of the Global Income Fund into another Quest
Fund within six months of your purchase of Class A shares of the Global Income
Fund, you will have to pay the difference between the sales charge paid on your
purchase of Class A shares of the Global Income Fund and the sales charge that
would have been charged if you had originally purchased Class A shares of the
Fund into which you are exchanging.

EXCHANGES OF CLASS B SHARES: Class B shares of all Quest Funds are exchangeable
for Class B shares of any other Quest Fund. Class B shares of any Quest Fund
cannot be exchanged for Class A or C shares of any Quest Fund.

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<PAGE>
EXCHANGES OF CLASS C SHARES: Class C shares of all Quest Funds are exchangeable
for Class C shares of any other Quest Fund. Class C shares of any Quest Fund
cannot be exchanged for Class A or B shares of any Quest Fund.

Because excessive trading (including short-term "market timing" trading) can
hurt a Fund's performance, each Fund may refuse any exchange orders (1) if they
appear to be market-timing transactions involving significant portions of a
Fund's assets or (2) from any shareholder account if the shareholder or his or
her broker-dealer has been advised that previous use of the exchange privilege
is considered excessive. Accounts under common ownership or control, including
those with the same taxpayer ID number and those administered so as to redeem or
purchase shares based upon certain predetermined market indicators, will be
considered one account for this purpose.

---------------------

Quest Distributors and the Fund's transfer agent will employ reasonable
procedures for telephone redemptions and exchanges to confirm that the
instructions received from shareholders or their account representatives are
genuine, and if they do not, Quest Distributors or the transfer agent may be
liable for any losses due to unauthorized or fraudulent instructions.
Shareholders will be required to provide their name, address, social security
number and other identifying information. Account representatives must identify
themselves and their firm and Quest Distributors will confirm that such firm has
a valid selling agreement with Quest Distributors and that the representative is
authorized to act on behalf of the firm.

IF YOU HAVE ANY QUESTIONS ON EXCHANGE OR REDEMPTION PROCEDURES, CALL YOUR
DEALER OR OUR TRANSFER AGENT.

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INVESTMENT RESTRICTIONS AND TECHNIQUES

The Funds are subject to certain investment restrictions which are fundamental
policies changeable only by shareholder vote. The restrictions in a, b and
c below do not apply to U.S. government securities. The restrictions apply
to each Fund unless otherwise noted. A Fund may not (except that in the future
the Quest for Value, U.S. Government Income, the Growth and Income, the Global
Income and the Global Equity Funds may invest all or part of their respective
assets in an open-end management investment company with substantially the same
respective investment objective and restrictions): (a) Purchase more than 10% of
the voting securities of any one issuer (for Global Equity, Global Income and
Growth and Income only with respect to 75% of their respective total assets;
except that to comply with a state's securities laws, Global Income has adopted
this restriction with respect to 100% of its total assets, although this
restriction is not a fundamental policy of the Global Income Fund); (b) Purchase
more than 10% of any class of security of any issuer, with all outstanding debt
securities and all preferred stock of an issuer each being considered as one
class (all Funds except Global Equity, Global Income and Growth and Income); (c)
Concentrate its investments in any particular industry, but if deemed
appropriate for attaining its investment objective, a Fund may invest up to 25%
of its total assets (valued at the time of investment) in any one industry
classification used by the Fund for investment purposes (for this purpose, a
foreign government is considered an industry). Concentration of investment in
securities of one issuer may tend to increase a Fund's financial risk (See "Risk
Factors," p. 12);(d) Borrow money in excess of: 10% of the value of the Fund's
total assets in the case of the Small Capitalization, U.S. Government Income,
Investment Quality Income and Opportunity Funds;

26
<PAGE>
33 1/3% of the value of the Fund's total assets in the case of the Quest for
Value, Global Equity, Global Income and Growth and Income Funds; each Fund
(except for Quest for Value Fund) may borrow only from banks and only as a
temporary measure for extraordinary or emergency purposes and will make no
additional investments while such borrowings exceed 5% of the total assets;
Quest for Value Fund may, but has no present intention to, borrow for leveraging
purposes; (e) Invest more than 10% of the Fund's total assets in illiquid
securities (15% for Quest for Value Fund, the Growth and Income Fund, the Global
Income Fund and the Global Equity Fund), including securities for which there is
no readily available market, repurchase agreements which have a maturity of
longer than seven days, securities subject to legal or contractual restrictions
and certain over-the-counter options (it is the opinion of the Wisconsin
Securities Commission that investments in restricted securities in excess of 5%
of a Fund's total assets may be considered a speculative activity and therefore
involve greater risk and increase the Fund's expenses; to comply with
Wisconsin's securities laws, all Funds except Global Income have agreed to limit
investments in restricted securities to 5% of their respective total assets,
although the restriction is not a fundamental policy of such Funds); and (f)
Invest more than 5% (15% for Quest for Value Fund) of the Fund's total assets in
securities of issuers having a record, together with predecessors, of less than
three years of continuous operation. (This restriction is not a fundamental
policy of each of the Global Equity, Global Income or Growth and Income Funds,
but was adopted to comply with a state's securities laws). Notwithstanding
investment restriction (e) above, the Funds each may purchase securities which
are not registered under the Securities Act of 1933 ("1933 Act") but which can
be sold to "qualified institutional buyers" in accordance with Rule 144A under
the 1933 Act. Any such security will not be considered illiquid so long as it is
determined by the Board of Directors or Quest Advisors, acting under guidelines
approved and monitored by the Board, which has the ultimate responsibility for
any determination regarding liquidity, that an adequate trading market exists
for that security. This investment practice could have the effect of increasing
the level of illiquidity in each of the Funds during any period that qualified
institutional buyers become uninterested in purchasing these restricted
securities. The ability to sell to qualified institutional buyers under Rule
144A is a relatively recent development and it is not possible to predict how
this market will develop. The Board will carefully monitor any investments by
each of the Funds in these securities. Other investment restrictions are
described in the SAIs.

The investment techniques or instruments described below are used for
investment programs of the Funds.

REPURCHASE AGREEMENTS AND REVERSE REPURCHASE AGREEMENTS: All Funds may acquire
securities subject to repurchase agreements. Under a typical repurchase
agreement, a Fund acquires a debt security for a relatively short period
(usually for one day and very seldom for more than one week) subject to an
obligation of the seller to repurchase (and the Fund's obligation to resell) the
security at an agreed-upon higher price, thereby establishing a fixed investment
return during the holding period. Pending such repurchase, the seller of the
instrument maintains securities as collateral equal in market value to the
repurchase price.

In the event a seller defaulted on its repurchase obligation, a Fund might
suffer a loss to the extent that the proceeds from the sale of the collateral
were less than the repurchase price. In the event of a seller's bankruptcy, a
Fund might be delayed in, or prevented from, selling the collateral for the
Fund's benefit. Each Fund's Board of Directors/ Trustees has established
procedures, which are

27
<PAGE>
periodically reviewed by the Board, pursuant to which Quest Advisors will
monitor the creditworthiness of the dealers and banks with which the Funds enter
into repurchase agreement transactions.

The Global Income Fund may enter into reverse repurchase agreements. Under a
reverse repurchase agreement, a Fund sells securities and agrees to repurchase
them at a mutually agreed date and price. At the time the Global Income Fund
enters into a reverse repurchase agreement, it will establish and maintain a
segregated account with an approved custodian containing liquid high grade
securities having a value not less than the repurchase price (including accrued
interest). Reverse repurchase agreements involve the risk that the market value
of the securities retained in lieu of sale by the Fund may decline more than or
appreciate less than the securities the Fund has sold but is obligated to
repurchase. In the event the buyer of securities under a reverse repurchase
agreement files for bankruptcy or becomes insolvent, such buyer or its trustee
or receiver may receive an extension of time to determine whether to enforce the
Fund's obligation to repurchase the securities and the Fund's use of the
proceeds of the reverse repurchase agreements may effectively be restricted
pending such decisions. Reverse repurchase agreements create leverage, a
speculative factor, and will be considered borrowings for purposes of the Global
Income Fund's limitation on borrowing.

LOANS OF PORTFOLIO SECURITIES: All Funds may lend portfolio securities if
collateral (cash, U.S. Government or agency obligations or letters of credit)
securing such loans is maintained daily in an amount at least equal to the
market value of the securities loaned and if the Funds do not incur any fees
(except transaction fees of the custodian bank) in connection with such loans. A
Fund may call the loan at any time on five days' notice and reacquire the loaned
securities. The Fund would receive the cash equivalent of the interest or
dividends paid by the issuer on the securities loan and would have the right to
receive the interest on investment of the cash collateral in short-term debt
instruments. A portion of either or both kinds of such interest may be paid to
the borrower of such securities. The Fund would continue to retain any voting
rights with respect to the securities. The value of the securities loaned, if
any, is not expected to exceed 10% of the value of the total assets of Quest for
Value, Small Capitalization, Opportunity or Investment Quality Income Funds and
33 1/3% of the value of the total assets of U.S. Government Income, Global
Equity, Global Income or Growth and Income Funds. There is a risk that the
borrower of the securities may default and the Funds may have difficulty in
reacquiring the loaned securities.

BRADY BONDS. The Global Income Fund and the Global Equity Fund may purchase
Brady Bonds and other sovereign debt of countries that have restructured or are
in the process of restructuring their sovereign debt. Brady Bonds are debt
securities issued under the Brady Plan, a mechanism whereby debtor nations can
restructure their indebtedness by negotiating with lenders and exchanging
existing commercial bank debt for Brady Bonds. Brady Bonds may also be issued in
respect of new money being advanced by existing lenders in connection with the
debt restructuring. The Brady Plan only sets forth general guidelines for
economic reform and debt reduction, emphasizing that solutions must be
negotiated on a case-by-case basis between debtor nations and their creditors.
Brady Bonds have been issued only recently and consequently do not have a long
payment history. The principal of certain Brady Bonds has been collateralized by
Treasury zero coupon bonds with maturities equal to the final maturity of such
Brady Bonds. In addition, the first two or three interest payments on certain
Brady Bonds may be collateralized by cash

28
<PAGE>
or securities agreed upon by creditors. See "Risk Factors and Special
Considerations" in the SAI for a more complete description of Brady Bonds.

MORTGAGE-BACKED SECURITIES: The U.S. Government Income, Investment Quality
Income, Opportunity, Growth and Income and Global Income Funds may invest in a
type of mortgage-backed security known as modified pass-through certificates.
Each certificate evidences an interest in a specific pool of mortgages that have
been grouped together for sale and provides investors with payments of interest
and principal. The issuer of modified pass-through certificates guarantees the
payment of the principal and interest whether or not the issuer has collected
such amounts on the underlying mortgage.

The average life of these securities varies with the maturities of the
underlying mortgage instruments (generally up to 30 years) and with the extent
of prepayments or the mortgages themselves. Any such prepayments are passed
through to the certificate holder, reducing the stream of future payments.
Prepayments tend to rise in periods of falling interest rates, decreasing the
average life of the certificate and generating cash which must be invested in a
lower interest rate environment. This could also limit the appreciation
potential of the certificates when compared to similar debt obligations which
may not be paid down at will, and could cause losses on certificates purchased
at a premium or gains on certificates purchased at a discount. Government
National Mortgage Association ("Ginnie Mae") certificates represent pools of
mortgages insured by the Federal Housing Administration or the Farmers Home
Administration or guaranteed by the Veteran's Administration. The guarantee of
payments under these certificates is backed by the full faith and credit of the
United States. Federal National Mortgage Association ("Fannie Mae") is a
government-sponsored corporation owned entirely by private stockholders. The
guarantee of payments under these instruments is that of Fannie Mae only. They
are not backed by the full faith and credit of the United States but the U.S.
Treasury may extend credit to Fannie Mae through discretionary purchases of its
securities. The U.S. Government has no obligation to assume the liabilities of
Fannie Mae. Federal Home Loan Mortgage Corp. ("Freddie Mac") is a corporate
instrumentality of the United States government whose stock is owned by the
Federal Home Loan Banks. Certificates issued by Freddie Mac represent interest
in mortgages from its portfolio. Freddie Mac guarantees payments under its
certificates but this guarantee is not backed by the full faith and credit of
the United States and Freddie Mac does not have authority to borrow from the
U.S. Treasury.

The coupon rate of these instruments is lower than the interest rate on the
underlying mortgages by the amount of fees paid to the issuing agencies, usually
approximately 1/2 of 1%. It is not anticipated that the Funds' investments will
have any particular maturity. Mortgage-backed securities, due to the scheduled
periodic repayment of principal, and the possibility of accelerated repayment of
underlying mortgage obligations, fluctuate in value in a different manner than
other, non-redeemable debt securities. The U.S. Government Income, Investment
Quality Income, Opportunity, Growth and Income and Global Income Funds also may
invest in "collateralized mortgage obligations" ("CMO's") which are debt
obligations secured by mortgage-backed securities where the investor looks only
to the issuer of the security for payment of principal and interest.

OPTIONS AND FUTURES: The U.S. Government Income Fund may buy and sell futures
contracts and options, write covered put and call options on U.S. government
securities to generate additional income, purchase put and call options to
close-out or off-set options it has written and to hedge its investments against
changes in value or as a temporary substitute for purchases or sales of actual

29
<PAGE>
securities. The U.S. Government Income Fund also may purchase put and call
options on financial futures and write put and call options on such contracts.
The Global Income Fund may write covered call options and the Global Equity and
Global Income Funds may purchase and sell financial futures contracts (including
bond futures contracts and index futures contracts), foreign currency forward
contracts, foreign currency futures contracts, options on futures contracts and
options on currencies. In addition, the Global Income Fund is authorized to
write covered put options but does not presently intend to do so. The Quest for
Value, Small Capitalization and Growth and Income Funds may buy and sell options
on stock indexes, futures contracts and options on futures to hedge their
investments against changes in value or as a temporary substitute for purchases
or sales of actual securities. The Small Capitalization Fund may write covered
call options on individual securities. The Investment Quality Income Fund may
purchase or sell financial futures contracts and options on such contracts for
similar purposes. When each such Fund anticipates a significant market or market
sector advance, the purchase of a futures contract affords a hedge against not
participating in the advance at a time when the Fund is not fully invested
("anticipatory hedge"). Such a purchase of a futures contract would serve as a
temporary substitute for the purchase of individual securities, which may be
purchased in an orderly fashion once the market has stabilized. As individual
securities are purchased, an equivalent amount of futures contracts could be
terminated by offsetting sales. A Fund may sell futures contracts in
anticipation of or in a general market or market sector decline or increase in
interest rates that may adversely affect the market value of the Fund's
securities ("defensive hedge"). To the extent that a Fund's portfolio of
securities changes in value in correlation with the underlying security or
index, the sale of futures contracts would substantially reduce the risk to the
Fund of a market decline and by so doing, provide an alternative to the
liquidation of securities positions in the Fund with attendant transaction
costs. All options purchased or sold by a Fund will be traded on a U.S. or
foreign commodities exchange or will result from separate, privately negotiated
transactions with a primary government securities dealer recognized by the Board
of Governors of the Federal Reserve System or with other broker-dealers approved
by the Fund's Board. Options on securities, futures contracts and options on
futures contracts that are traded on foreign exchanges are subject to the risk
of governmental action affecting trading in or the prices of foreign currencies
or securities. The value of such positions also could be adversely affected by
(i) other complex foreign political and economic factors, (ii) lesser
availability than in the United States of data on which to make trading
decisions (iii) delays in a Fund's ability to act upon economic events occurring
in foreign markets during nonbusiness hours in the United States, (iv) the
imposition of different exercise and settlement terms and procedures and margin
requirements than in the United States, (v) lesser trading volume and (vi) in
certain circumstances, currency fluctuations. In addition, the Small
Capitalization Fund may write covered call options on individual securities.

So long as Commodities Futures Trading Commission rules so require, a Fund
will not enter into any financial futures or options contract unless such
transactions are for bona-fide hedging purposes or for other purposes only if
the aggregate initial margins and premiums required to establish such
non-hedging positions would not exceed 5% of the liquidation value of the Fund's
total assets. A call option written by a Fund is "covered" if the Fund owns the
underlying security covered by the call or has an absolute and immediate right
to acquire that security without additional cash consideration (or

30
<PAGE>
for additional cash consideration held in a segregated account by its custodian)
upon conversion or exchange of other securities held in its portfolio. A call
option is also covered if the Fund holds a call on the same security and in the
same principal amount as the call written where the exercise price of the call
held (a) is equal to or less than the exercise price of the call written or (b)
is greater than the exercise price of the call written if the difference is
maintained by the Fund in cash, U.S. Government Securities or other liquid
high-grade debt securities in a segregated account with its custodian. A put
option written by a Fund is "covered" if the Fund maintains cash, U.S.
Government securities or other liquid high-grade debt securities with a value
equal to the exercise price in a segregated account with its custodian, or else
holds a put on the same security and in the same principal amount as the put
written where the exercise price of the put held is equal to or greater than the
exercise price of the put written. As a result, the Fund forgoes the opportunity
of trading the segregated assets or writing calls against those assets. There
may not be a complete correlation between the price of options or futures and
the market prices of the underlying securities. The Fund may lose the ability to
profit from an increase in the market value of the underlying securities or may
lose its premium payment. If due to a lack of a market the Fund could not effect
a closing purchase transaction with respect to an OTC option, it would have to
hold the callable securities until the call lapsed or was exercised.

WHEN-ISSUED AND DELAYED DELIVERY SECURITIES AND FIRM COMMITMENTS: All Funds may
purchase securities on a "when-issued" or "delayed delivery" basis or may either
purchase or sell securities on a "firm commitment basis", whereby the price is
fixed at the time of commitment but delivery and payment may be as much as a
month or more later. The underlying securities are subject to market
fluctuations and no interest accrues prior to delivery of the securities.

RIGHTS AND WARRANTS (GLOBAL EQUITY, GLOBAL INCOME AND GROWTH AND INCOME
FUNDS): Each of these Funds may invest up to 5% of its total assets in rights or
warrants which entitle the holder to buy equity securities at a specific price
for a specific period of time. The 5% limitation is not a fundamental policy for
the Global Equity and Global Income Funds.

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DIVIDENDS AND DISTRIBUTIONS

The U.S. Government Income, Investment Quality Income and Global Income Funds
declare dividends of their net investment income, consisting of interest
earned less estimated expenses, on a daily basis. These dividends are paid
monthly. You are entitled to receive the dividend declared on the day after the
Transfer Agent receives payment for your shares of these funds. Dividends from
net investment income are declared and paid quarterly for the Growth and Income
Fund. The Quest for Value, Small Capitalization, Opportunity and Global Equity
Funds declare and pay dividends from net investment income on an annual basis
following the end of their fiscal years (October 31, except for the Global
Equity and Global Income Funds, which is November 30). The Funds may at times
make payments from sources other than income or net capital gains. Payments from
such sources would, in effect, represent a return of each shareholder's
investment. All or a portion of such payments would not be taxable to
shareholders.

Distributions from net long-term capital gains, if any, for all Funds normally
are declared and paid annually, subsequent to the end of their respective

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<PAGE>
fiscal years. Distributions from net short-term capital gains, if any, for the
U.S. Government Income Fund will be made quarterly and for all other Funds will
be made annually. Short-term capital gains include the gains from the
disposition of securities held less than one year, a portion of the premiums
from expired put and call options written by a Fund and net gains from closing
transactions with respect to such options. If required by tax laws to avoid
excise or other taxes, dividends and/or capital gains distributions may be made
more frequently.

Dividends paid by any Fund with respect to Class A, B and C shares, to the
extent any dividends are paid, will be calculated in the same manner at the same
time on the same day, with each class bearing its own distribution and other
class-related expenses. Accordingly, the higher distribution fees paid by Class
B and C shares and the higher resulting expense ratio will cause such shares to
be paid lower per share dividends than those paid on Class A shares. However, a
Class B or C shareholder will receive more shares at the time of purchase than a
Class A shareholder investing the same dollar amount since no sales charge is
deducted from the amount invested in Class B or C shares.

REINVESTMENT OPTIONS: You can receive your dividends and capital gains
distributions either in cash or in additional Fund shares without a sales
charge. You will be subject to tax on such distributions. See the SAI for a
description of how to change your election.
- ---------------------------------------------

TAX STATUS

The Funds intend to qualify for taxation as regulated investment companies under
the provisions of Subchapter M of the Internal Revenue Code. As such, the
Funds will not be taxed on their net investment income or net realized
capital gains, if any, to the extent they have been distributed to their
shareholders. Distributions from the Funds' income and short-term capital gains
are taxed as ordinary income while long-term capital gains distributions by the
Fund are taxed to you as long-term capital gains, regardless of how long you
have held your shares. While tax treatment varies from state to state, some
portion of the dividends of the U.S. Government Income Fund should be exempt
from income taxes in most states depending, in part, on the percentage of income
that is derived from direct U.S. Government obligations. The U.S. Government
Income Fund will send you its best information on the tax status of dividends
under the laws of each state and will provide information regarding the source
(including the percentage of income derived from direct U.S. Government
obligations) of all its dividends and distributions. For purposes of Federal
income tax, futures contracts and certain options, if any, held by the Funds at
the end of their respective fiscal years generally will be treated as having
been sold at market value. As a general rule any gain or loss on such contracts
will be treated as 60% long-term and 40% short-term. See the SAI for more detail
on the tax aspects of Hedging Instruments. Dividends will qualify for the
dividends received deduction for corporations only to the extent of a Fund's
qualifying dividend income. Since the income received by the U.S. Government
Income, Investment Quality Income and Global Income Funds will be derived from
interest income rather than dividend income, their dividends normally will not
qualify for this deduction. Shortly after the end of each calendar year, the
Funds will send you a statement of the amount and nature of net income and
capital gains. Dividends, interest and gains on foreign securities may give rise
to withholding and other taxes imposed by foreign countries, reducing the amount
distributable to you. Tax conventions between certain countries and the United
States may reduce or eliminate such taxes. The Global Equity and Global Income
Funds may each qualify to make an election

32
<PAGE>
to allow you either to claim United States foreign tax credits with respect to
such foreign taxes withheld or paid, or to deduct such amounts as an itemized
deduction on your tax return. This would increase your taxable income (in
addition to income you actually received) by the amount of such taxes and these
Funds would not be able to deduct such taxes in computing their taxable income.

The above information is a summary of the tax treatment that will be applied
to a Fund and its distributions. You should contact your tax adviser,
particularly in connection with state and local taxes.
- ---------------------------------------------

INVESTMENT MANAGEMENT AGREEMENT

The day-to-day management of the Funds is the responsibility of Quest Advisors,
operating under the supervision of the Board of Directors or Trustees of
each Fund. Quest Advisors is a majority-owned subsidiary of Oppenheimer
Capital, a registered investment advisor, whose employees perform all investment
advisory services provided to the Funds by Quest Advisors. For its services each
Fund is authorized to pay Quest Advisors a monthly fee at the following annual
rates, based on each Fund's daily net assets: Quest for Value, Small
Capitalization and Opportunity--1.00%; Growth and Income--.85%; Global
Equity--.75%; U.S. Government Income and Investment Quality Income--.60%; and
Global Income-- .50%. The fees paid by the Quest for Value, Small
Capitalization, Opportunity and Growth and Income Funds are higher than that
paid by most other investment companies. The fee of the Global Equity Fund
combined with the administration fee described below, is also higher than that
paid by most other investment companies. Each of the Funds except Quest for
Value, Global Income and Global Equity also reimburses Quest Advisors on a cost
basis for bookkeeping and accounting services performed on behalf of each Fund.
The U.S. Government Income Fund, the Small Capitalization Fund, the Opportunity
Fund, the Investment Quality Income Fund and the Growth and Income Fund have
retained State Street Bank and Trust Company ("State Street"), the custodian of
each of the Funds, to calculate the net asset value of each class of the Fund's
shares and prepare the Fund's books and records. State Street also performs such
services for the Quest for Value Fund, the Global Income Fund and the Global
Equity Fund but the fees for such services are paid by Quest Advisors.

Pursuant to Administration Agreements with the Global Equity and Global Income
Funds, Quest Advisors provides administrative services and manages the business
affairs of each Fund. Such services include maintenance of the Fund's books and
records, monitoring the activities of entities providing services to the Fund,
furnishing office space, facilities, equipment, clerical help and bookkeeping
and legal services required in the conduct of the Fund's business, including the
preparation of proxy statements and reports filed with federal and state
securities commissions (except to the extent that the participation of
independent accountants and attorneys is, in the opinion of Quest Advisors,
necessary or desirable). Quest Advisors bears the cost of telephone service,
heat, light, power and other utilities provided to the Fund. For these services,
the Fund pays Quest Advisors a fee at the annual rate of .25% of average daily
net assets of the respective Fund.

Each Fund is responsible for bearing certain expenses attributable to the Fund
but not to a particular class ("Fund Expenses"), including deferred organization
expenses; taxes; registration fees; typesetting of prospectuses and financial
reports required for distribution to shareholders; brokerage commissions; fees
and related expenses of trustees or directors who are not interested persons;
legal, accounting and audit expenses;

33
<PAGE>
custodian fees; insurance premiums; and trade association dues. Fund Expenses
will be allocated based on the total net assets of each class.

Each class of shares of each Fund will also be responsible for certain
expenses attributable only to that class ("Class Expenses"). These Class
Expenses may include distribution and service fees, transfer and shareholder
servicing agent fees, professional fees, printing and postage expenses for
materials distributed to current shareholders, state registration fees and
shareholder meeting expenses. Such items are considered Class Expenses provided
such fees and expenses relate solely to such Class.

A portion of printing expenses, such as typesetting costs, will be divided
equally among the Funds, while other printing expenses, such as the number of
copies printed, will be considered Class Expenses.

Quest Advisors will assume expenses of each class of the Funds in the event
that aggregate ordinary operating expenses incurred in any fiscal year exceed
the most restrictive expense limitations imposed upon the Funds in states in
which shares are then eligible for sale. Currently the most restrictive expense
limitation, which excludes certain distribution fees from operating expenses, is
2 1/2% of the first $30 million of average net assets, 2% of the next $70
million of average net assets and 1 1/2% of the remaining average net assets.
Quest Advisors has agreed to limit Fund Expenses (as defined above) of the
Growth and Income and Global Income Funds so that annualized operating Fund
Expenses, exclusive of Class Expenses (as defined above), do not exceed 1.50%
and 1.45%, respectively, of each Fund's average daily net assets; this expense
limitations are voluntary and may be discontinued at any time. Quest Advisors
may make additional waivers of its management fee and/or assume Fund expenses on
a voluntary basis.

Quest Advisors has retained New Castle Advisers Inc. ("New Castle") as the
Subadvisor for the U.S. Government Income Fund pursuant to an agreement with
Quest Advisors whereby New Castle provides advice and assistance in connection
with the options and financial futures investments of the U.S. Government Income
Fund. New Castle, a registered investment advisor, maintains an office at 1
Barker Avenue, White Plains, New York, and has been in business since 1991.
Howard Potter is the President and Chief Executive Officer of New Castle and is
the sole stockholder. Prior to establishing New Castle, Mr. Potter was the
individual responsible for developing investment strategies for options and
financial futures for Oppenheimer & Co., Inc, subadvisor to the U.S. Government
Income Fund from April 29, 1988 to November 1, 1991. Quest Advisors will pay New
Castle 20% of the advisory fee paid by the U.S. Government Income Fund to the
Advisor, subject to certain reimbursements. There is no additional cost to the
U.S. Government Income Fund from this agreement.

Prior to January 1, 1994, Quest Advisors had retained Clay Finlay Inc.
(formerly Globe Finlay Inc.) as the Subadvisor for the Global Equity Fund
pursuant to an agreement with Quest Advisors whereby Clay Finlay had the primary
responsibility for selecting non-U.S. securities, subject to the overall review
of Quest Advisors. This agreement was terminated effective December 31, 1993 and
management of the non-U.S. portion of the Fund's portfolio was assumed by Quest
Advisors.

Oppenheimer Financial Corp., a holding company holds a 33% interest in
Oppenheimer Capital, a registered investment advisor, and Oppenheimer Capital,
L.P., a Delaware limited partnership whose units are traded on the New York
Stock Exchange and of which Oppenheimer Financial Corp. is the sole general
partner, owns the remaining 67% interest. Oppenheimer Capital has operated as an
investment advisor since 1968.

34
<PAGE>
- ---------------------------------------------

DISTRIBUTION PLAN

Each Class of shares of each Fund has adopted a Distribution Plan and Agreement
(the "Plan(s)") pursuant to Rule 12b-1 adopted under the Investment Company
Act of 1940. Under the Plans, Class A, B and C shares of each of the Funds
are authorized to pay Quest Distributors a distribution fee for expenses
incurred in connection with the distribution of shares of the Fund and for
shareholder servicing.

CLASS A SHARES. Class A shares of each Fund pay Quest Distributors a
distribution fee at the following annual rates of each Fund's average daily net
assets: U.S. Government Income Fund--.05%, Investment Quality Income and Growth
and Income Fund--.15%, all other Funds except Global Income Fund --.25%. Each
Fund's Class A Shares also pay a service fee at the annual rate of .25% of
average daily net assets. Although the Global Income Fund is authorized under
its Plan to pay a distribution fee of .05% and a service fee of .25%, the Board
of Directors of the Global Income Fund has set a maximum fee under the Plan of
.25%.

CLASS B AND C SHARES. Class B and C shares of each Fund pay Quest Distributors a
distribution fee at the annual rate of .75% of each Fund's average daily net
assets. Class B and C shares of each Fund will also pay a service fee at the
annual rate of .25% of each Fund's average daily net assets. The Class B Plans
were amended and restated in December 1994, without changing the fees each Fund
pays to Quest Distributors under such Plans, to reflect the intention of Quest
Distributors to assign its right to payments under the Plans in order to finance
Quest Distributors' costs in distributing Plan B Shares.

USE OF DISTRIBUTION AND SERVICE FEES. All or a portion of the distribution fees
paid by either Class A, B or C shares may be used by Quest Distributors to pay
costs of printing reports and prospectuses for potential investors and all or a
portion of the distribution and/or service fees may be paid to broker-dealers or
others for the provision of personal continuing services to shareholders,
including such matters as responding to shareholder inquiries concerning the
status of their accounts and assistance in account maintenance matters such as
changes in address. Payments under the Plan are not limited to amounts actually
paid or expenses actually incurred by Quest Distributors but cannot exceed the
maximum rate set by the Plan or by the Board. It is, therefore, possible that
Quest Distributors may realize a profit in a particular year as a result of
these payments. The Plans have the effect of increasing the Funds' expenses from
what they otherwise would be. The Board of each Fund reviews that Fund's
distribution payments and may reduce or eliminate the fee at any time without
further obligation of the Fund. Investors should understand that the purpose and
function of the distribution fee and CDSC applicable to Class B and C shares are
the same as the sales charge and distribution fee applicable to Class A shares,
i.e., to compensate Quest Distributors for expenses incurred in distributing
shares of the Funds. The SAIs contain more information about the Investment
Management Agreement and the Plans.

- ---------------------------------------------

PORTFOLIO TRANSACTIONS AND TURNOVER

Quest Advisors may select its affiliate Oppenheimer & Co., Inc. ("Opco"), a
registered broker-dealer to execute transactions for the Funds, provided
that the commissions, fees or other remuneration received by Opco are
reasonable and fair compared to those paid to other brokers in connection with
comparable transactions. When selecting broker-dealers other than Opco,

35
<PAGE>
Quest Advisors may consider their record of sales of shares of the Funds. (For a
further discussion of portfolio trading, see the SAIs, "Investment Objectives,
Policies and Restrictions"). Although Quest Advisors cannot accurately predict a
Fund's annual turnover rate, it is anticipated that the Small Capitalization,
Global Equity and Growth and Income Funds each will have an annual turnover rate
(excluding turnover of securities having a maturity of one year or less) of 100%
or less and that the U.S. Government Income, Opportunity, Investment Quality
Income and Global Income Funds each will have an annual turnover rate of 250% or
less. For the year ended October 31, 1994, the annual turnover rate of the
Growth and Income Fund was 113%, which was higher than anticipated, as a result
of asset allocation shifts made in reaction to interest rate changes and the
overall market outlook. To the extent that higher portfolio turnover increases
capital gains, more taxes will be payable. See "Tax Status".
- ---------------------------------------------

ADDITIONAL INFORMATION

ORGANIZATION OF THE FUNDS. The Small Capitalization, U.S. Government Income,
Investment Quality Income, Opportunity and Growth and Income Funds are
portfolios of Quest for Value Family of Funds (the "Trust"), an open-end
management investment company organized as a Massachusetts business trust on
April 17, 1987. The Trust's other portfolios are National Tax-Exempt, California
Tax-Exempt and New York Tax-Exempt Funds and the Officers Fund. The Trust may
establish additional portfolios which may have different investment objectives
from those stated in this prospectus. Quest for Value Fund, Inc. and Quest for
Value Global Equity Fund, Inc. are each open-end diversified management
investment companies organized as Maryland corporations. Global Income Fund, an
open-end non-diversified management investment company, is a portfolio of Quest
for Value Global Funds, Inc., a company organized as a Maryland corporation.

None of the Funds is required to hold annual shareholder meetings, although
special meetings may be called for a specific Fund or group of Funds as a whole
as required by applicable law or as requested in writing by holders of 10% or
more of the outstanding shares of the Fund for the purpose of voting upon the
question of removal of a director or trustee. Each Fund will assist shareholders
in communicating with one another in connection with such a meeting. For matters
affecting only one portfolio of Quest for Value Family of Funds or Quest for
Value Global Funds, Inc., only the shareholders of that portfolio are entitled
to vote. For matters affecting all the portfolios, but affecting them
differently, separate votes by portfolio are required. No stock certificates
will be issued unless specifically requested in writing.

Under Massachusetts law shareholders of the Trust could, in certain
circumstances, be held personally liable as partners for obligations of the
Trust. The Declaration of Trust contains an express disclaimer of shareholder
liability for acts or obligations of the Trust and its portfolios and requires
that notice of such disclaimer be given in each instrument entered into or
executed by the Trust on behalf of its portfolios. The Declaration of Trust also
provides indemnification out of the Trust's property for any shareholder held
personally liable for any of the obligations of the Trust. Thus, the risk of
loss to a shareholder from being held personally liable for the obligations of
the Trust is limited to the unlikely circumstance in which the Trust would be
unable to meet its obligations. There is a remote possibility that one Fund
might become liable for a misstatement in this Prospectus about another Fund.

36
<PAGE>
Each class of shares represents identical interests in the applicable Fund's
investment portfolio. As such, they have the same rights, privileges and
preferences, except with respect to the: (a) designation of each class, (b)
effect of the respective sales charges, if any, for each class, (c) distribution
fees borne by each class, (d) expenses allocable exclusively to each class, (e)
voting rights on matters exclusively affecting a single class and (f) exchange
privilege of each class.

PERFORMANCE INFORMATION: From time to time the Funds may advertise yield and
total return figures, based on historical earnings. The figures are not intended
to indicate future performance. "Yield" is calculated by dividing the net
investment income for the stated period (exclusive of gains, if any, from
options and financial futures transactions) by the value, at maximum offering
price on the last day of the period, of the average number of shares entitled to
receive dividends during the period. The yield formula assumes that net
investment income is earned at a constant rate and reinvested semi-annually.
"Total Return" refers to the average annual compounded rates of return over some
representative period that would equate an initial amount invested at the
beginning of a stated period to the ending redeemable value of the investment,
after giving effect to the reinvestment of all dividends and distributions and
deductions of expenses during the period. A Fund also may advertise its total
return over different periods of time by means of aggregate, average, year by
year or other types of total return figures. In addition, reference in
advertisements may be made to ratings and rankings among similar funds by
independent evaluators such as Lipper Analytical Services, Inc. or Morningstar
and the performance of the Funds may be compared to recognized indices of market
performance. Performance data will be computed separately for each Class of
shares in accordance with formulas specified by the SEC.

POSSIBLE CONFLICTS OF INTEREST BETWEEN CLASSES. The Boards of the Funds have
determined that currently no conflict of interest exists between Class A, B
and/or C shares of any Fund. On an ongoing basis, the Boards shall monitor the
Funds for the existence of any material conflicts between the interests of the
classes of outstanding shares. The Boards shall take such action as is
reasonably necessary to eliminate any such conflicts that may develop, up to and
including establishing a new Fund.

CUSTODIAN, TRANSFER AGENT AND SHAREHOLDER SERVICING AGENT. The custodian of the
assets, transfer agent and shareholder servicing agent for the Funds is State
Street Bank and Trust Company, whose principal business address is P.O. Box
8505, Boston, MA 02266. Cash balances of the Funds with the Custodian in excess
of $100,000 are unprotected by Federal deposit insurance. Such uninsured
balances may at times be substantial.

SHAREHOLDER INQUIRIES. You may telephone 1-800-232-FUND for inquiries concerning
the Funds, including purchase and sale of shares of the Funds, as well as
inquiries concerning dividends and account statements. If you prefer, you may
write to Quest for Value Shareholder Services, P.O. Box 3567, Church Street
Station, New York, NY, 10277-1296. Written inquiries concerning management and
investment policies of the Funds may be directed to Quest for Value Advisors,
One World Financial Center, New York, New York 10281.

SHAREHOLDER REPORTS. To reduce expenses, only one copy of financial reports will
be mailed to your household, even if you have more than one account in the
particular fund. If you wish to receive additional copies of financial reports,
please call 1-800-232-FUND.

SHAREHOLDER SERVICING AGENT FOR CERTAIN SHAREHOLDERS. Unified Management
Corporation (1-800-346-4601) is the shareholder servicing agent

37
<PAGE>
for former shareholders of the AMA Family of Funds and clients of AMA Investment
Advisers, L.P. who acquire shares of any Quest Fund, and for former shareholders
of the Unified Funds and Liquid Green Trusts, accounts which participated or
participate in a retirement plan for which Unified Investment Advisers, Inc. or
an affiliate acts as custodian or trustee, accounts which have a Money Manager
brokerage account, and other accounts for which Unified Management Corporation
is the dealer of record.

SPECIAL ARRANGEMENTS FOR FORMER SHAREHOLDERS OF AMA FAMILY OF FUNDS AND UNIFIED
FUNDS:

PURCHASES BY FORMER SHAREHOLDERS OF AMA FAMILY OF FUNDS. All shareholders of the
AMA Family of Funds who acquired shares of any Quest Funds pursuant to the
combination of a Quest Fund with a portfolio of the AMA Family of Funds who were
shareholders of the AMA Family of Funds on February 28, 1991, are able to make
future purchases of any of the Funds at net asset value without a sales charge,
provided they continuously own shares of a Quest Fund.

PURCHASES BY FORMER SHAREHOLDERS OF THE UNIFIED FUNDS. Shareholders who acquired
shares of any Quest Fund pursuant to the combination of several Quest Funds
(including the Growth and Income and Quest for Value Funds) with portfolios of
the Unified Funds are able to make future purchases of any Quest Fund at net
asset value without a sales charge, provided that such shareholders continuously
own shares of a Quest Fund subsequent to their acquisition of shares of a Quest
Fund in the above described transactions.

REDEMPTIONS BY FORMER SHAREHOLDERS OF AMA FAMILY OF FUNDS AND UNIFIED
FUNDS. While they have no present intention to do so, in the event that Quest
Distributors imposes a redemption fee in the future, no redemption fees will be
imposed upon redemption of shares of any Quest Fund by former shareholders of
the Unified Funds who are entitled to purchase shares of Quest Funds at net
asset value (see Purchases by Former Shareholders of the Unified Funds, above).

EXCHANGES BY FORMER SHAREHOLDERS OF AMA FAMILY OF FUNDS AND UNIFIED FUNDS. All
former shareholders of the AMA Family of Funds who acquired shares of any Quest
Fund pursuant to the combination of a Quest Fund with a portfolio of the AMA
Family of Funds who were shareholders of the AMA Family of Funds on February 28,
1991 and former shareholders of the Unified Funds who qualify to purchase shares
of Quest Funds at net asset value (see Purchases by Former Shareholders of the
Unified Funds), will be able to make exchanges into any other Quest Fund without
a sales charge provided they continuously own shares of a Quest Fund. They will
pay a service fee (currently $5) for administrative services in connection with
an exchange into a non-money market fund.

38
<PAGE>
APPENDIX

The average distribution of investments in bonds by ratings as a percentage of
average net assets for the Growth and Income Fund and the Global Income Fund for
the fiscal year ended October 31, 1994 and November 30, 1994, respectively,
calculated monthly on a dollar-weighted basis was as follows:

RATED BONDS

<TABLE>
<CAPTION>
MOODY'S STANDARD &
INVESTORS POOR'S
SERVICE, INC. CORPORATION PERCENTAGE
- --------------- --------------- -------------------------------------
GROWTH AND GLOBAL
INCOME FUND INCOME FUND
-------------- --------------
<S> <C> <C> <C>
Aaa AAA -- 10.2%
Aa AA -- 6.5%
A A -- --
Baa BBB 6.2% 2.6%
Ba BB -- 17.7%
B B 6.8% 5.2%
Caa CCC 4.4% --
</TABLE>

UNRATED BONDS DEEMED COMPARABLE TO THE INDICATED RATING

<TABLE>
<CAPTION>
MOODY'S STANDARD &
INVESTORS POOR'S
SERVICE, INC. CORPORATION PERCENTAGE
- --------------- --------------- -------------------------------------
GROWTH AND GLOBAL
INCOME FUND INCOME FUND
-------------- --------------
<S> <C> <C> <C>
Aaa AAA 0% 15.2%
Aa AA 0% 32.2%
A A 0% 0%
Baa BBB 0% 0%
Ba BB 0% 5.6%
B B 0% 2.2%
Caa CCC 0% 0%
</TABLE>

The actual distribution of a Fund's corporate bond investments by rating will
vary on any given date. The distribution of a Fund's investments by rating as
set forth above should not be considered representative of the future
composition of the Fund's portfolio.

41
<PAGE>
(This page has been left blank intentionally.)
<PAGE>
(This page has been left blank intentionally.)
<PAGE>
QUEST FOR VALUE-SM- FUNDS
TWO WORLD FINANCIAL CENTER
NEW YORK, NEW YORK 10080
QUEST FOR VALUE-SM-
FUNDS

TABLE OF CONTENTS

<TABLE>
<S> <C>
Summary of Fund Expenses.................. 2
Financial Highlights...................... 4
Introduction.............................. 6
Investment Objectives of the Funds........ 8
Risk Factors.............................. 12
How to Buy Shares......................... 17
Determining Net Asset Value............... 23
How to Redeem Shares...................... 24
Exchanging Shares......................... 25
Investment Restrictions and Techniques.... 26
Dividends and Distributions............... 31
Tax Status................................ 32
Investment Management Agreement........... 33
Distribution Plan......................... 35
Portfolio Transactions and Turnover....... 35
Additional Information.................... 36
Application Terms and Conditions.......... 39
</TABLE>

INVESTMENT ADVISOR:
QUEST FOR VALUE ADVISORS
ONE WORLD FINANCIAL CENTER
NEW YORK, NEW YORK 10281
(800) 232-FUND

TRANSFER AGENT:
STATE STREET BANK AND TRUST COMPANY
BOSTON, MA 02266-8505

GENERAL DISTRIBUTOR:
QUEST FOR VALUE DISTRIBUTORS
P.O. BOX 3567
CHURCH STREET STATION
NEW YORK, NY 10277-1296
(800) 232-FUND

QUEST FOR
VALUE FUNDS

/ / GROWTH AND INCOME FUND

/ / INVESTMENT QUALITY INCOME FUND

/ / OPPORTUNITY FUND

/ / SMALL CAPITALIZATION FUND

/ / U.S. GOVERNMENT INCOME FUND
(THE ABOVE FUNDS ARE SERIES OF QUEST FOR VALUE FAMILY OF FUNDS)

/ / QUEST FOR VALUE FUND, INC.

/ / QUEST FOR VALUE GLOBAL EQUITY FUND, INC.

/ / GLOBAL INCOME FUND
(A SERIES OF QUEST FOR VALUE GLOBAL FUNDS, INC.)

MARCH 1, 1995, AS
REVISED JUNE 30, 1995

PROSPECTUS

<PAGE>

Statement of Additional Information

QUEST FOR VALUE GLOBAL EQUITY FUND, INC.

QUEST FOR VALUE GLOBAL INCOME FUND
(A Series of Quest for Value Global Funds, Inc.)

One World Financial Center
New York, New York 10281
(800) 232-FUND

This Statement of Additional Information (the "Additional Statement") is
not a Prospectus. Investors should understand that this Additional Statement
should be read in conjunction with the Prospectus dated March 1, 1995 (the
"Prospectus") of the Quest for Value Global Equity Fund, Inc. and the Quest for
Value Global Income Fund (the "Fund(s)") which may be obtained by written
request to State Street Bank and Trust Company ("State Street"), P.O. Box 8505,
Boston, MA 02266-8505 or by calling State Street at (800) 232-FUND.

The date of this Additional Statement is March 1, 1995.

QUEST FOR VALUE is a registered service mark of Oppenheimer Capital

<PAGE>

TABLE OF CONTENTS

Page
----

INVESTMENT OF THE FUNDS' ASSETS. . . . . . . . . . . . . . . . . . . . . . . . 3

OTHER RISK FACTORS AND SPECIAL CONSIDERATIONS. . . . . . . . . . . . . . . . .16

INVESTMENT RESTRICTIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . .20

DIRECTORS AND OFFICERS . . . . . . . . . . . . . . . . . . . . . . . . . . . .22

INVESTMENT MANAGEMENT AND OTHER SERVICES . . . . . . . . . . . . . . . . . . .26

DETERMINATION OF NET ASSET VALUE . . . . . . . . . . . . . . . . . . . . . . .31

PERFORMANCE INFORMATION. . . . . . . . . . . . . . . . . . . . . . . . . . . .32

DISTRIBUTION EXPENSE PLAN. . . . . . . . . . . . . . . . . . . . . . . . . . .36

ADDITIONAL INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . .38

Appendix A -- Ratings. . . . . . . . . . . . . . . . . . . . . . . . . . . . A-1

Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-1

<PAGE>

INVESTMENT OF THE FUNDS' ASSETS

The investment objective and policies of the Funds are described in the
Prospectus. A further description of the Funds' investments and investment
methods appears below.

TYPE OF SECURITIES IN WHICH THE FUNDS MAY INVEST. As discussed in the
Prospectus, the Funds seek to achieve their investment objectives through
investment primarily in equity securities in the case of the Global Equity Fund
and investment grade debt securities in the case of the Global Income Fund. In
addition to investing directly in equity securities, the Funds may invest in
American Depository Receipts ("ADRs") and European Depository Receipts ("EDRs").
Generally, ADRs in registered form are U.S. dollar denominated securities
designed for use in the U.S. securities markets, which represent and may be
converted into the underlying foreign security. EDRs are typically issued in
bearer form and are designed for use in the European securities markets. No
more than 5% of the Global Equity Fund's assets will be invested in ADRs or EDRs
sponsored by persons other than the underlying issuers. Issuers of the stock of
such unsponsored ADRs are not obligated to disclose material information in the
United States and, therefore, there may not be a correlation between such
information and the market value of such ADRs. Each Fund also may purchase
shares of investment companies or trusts which invest principally in securities
in which the Fund is authorized to invest. The return on a Fund's investments
in investment companies will be reduced by the operating expenses, including
investment advisory and administrative fees, of such companies. A Fund's
investment in an investment company may require the payment of a premium above
the net asset value of the investment company's shares, and the market price of
the investment company thereafter may decline without any change in the value of
the investment company's assets. Neither Fund, however, will invest in any
investment company or trust unless it is believed that the potential benefits of
such investment are sufficient to warrant the payment of any such premium.
Under the Investment Company Act of 1940, neither Fund may invest more than 10%
of its assets in investment companies or more than 5% of its total assets in the
securities of any one investment company, nor may it own more than 3% of the
outstanding voting securities of any such company. To the extent a Fund invests
in securities in bearer form it may be more difficult to recover securities in
the event such securities are lost or stolen.

If a Fund invests in an entity which is classified as a "passive foreign
investment company" ("PFIC") for U.S. tax purposes, the application of certain
technical tax provisions applying to such companies could result in the
imposition of federal income tax with respect to such investments at the Fund
level which could not be eliminated by distributions to shareholders. The U.S.
Treasury has issued proposed regulations which establish a mark-to-market regime
that allows a regulated investment company ("RIC") to avoid most, if not all, of
the difficulties posed by the PFIC rules. In any event, it is not anticipated
that any taxes on a Fund with respect to investments in PFIC's would be
significant.

PRIVATE PLACEMENTS. The Funds may invest in securities which are subject
to restriction on resale because they have not been registered under the
Securities Act of 1933, or which are otherwise not readily marketable. These
securities are generally referred to as private placements or restricted

<PAGE>

securities. Limitations on the resale of such securities may have an adverse
effect on their marketability, and may prevent the Fund from disposing of them
promptly at reasonable prices. The Fund may have to bear the expense of
registering such securities for resale and risk the substantive delays in
effecting such registration. However, as described in the Prospectus, the Funds
may avail themselves of recently adopted regulatory changes to the Securities
Act of 1933 ("Rule 144A") which permit the Funds to purchase securities which
have been privately placed and resell such securities to certain qualified
institutional buyers without restriction. Since it is not possible to predict
with assurance exactly how this market for restricted securities sold and
offered under Rule 144A will develop, the Boards of Directors will carefully
monitor the Funds' investments in these securities, focusing on such important
factors, among others, as valuation, liquidity and availability of information.
This investment practice could have the effect of increasing the level of
illiquidity in the Funds to the extent that qualified institutional buyers
become, for a time, uninterested in purchasing these restricted securities.

Securities of foreign issuers often have not been registered in the U.S.
Accordingly, if a Fund wishes to sell unregistered foreign securities in the
U.S. it will avail itself of Rule 144A.

CONVERTIBLE SECURITIES. The Funds may invest in fixed-income securities
which are convertible into common stock. Convertible securities rank senior to
common stocks in a corporation's capital structure and, therefore, entail less
risk than the corporation's common stock. The value of a convertible security
is a function of its "investment value" (its value as if it did not have a
conversion privilege), and its "conversion value" (the security's worth if it
were to be exchanged for the underlying security, at market value, pursuant to
its conversion privilege).

To the extent that a convertible security's investment value is greater
than its conversion value, its price will be primarily a reflection of such
investment value and its price will be likely to increase when interest rates
fall and decrease when interest rates rise, as with a fixed-income security (the
credit standing of the issuer and other factors may also have an effect on the
convertible security's value). If the conversion value exceeds the investment
value, the price of the convertible security will rise above its investment
value and, in addition, will sell at some premium over its conversion value.
(This premium represents the price investors are willing to pay for the
privilege of purchasing a fixed-income security with a possibility of capital
appreciation due to the conversion privilege.) At such times the price of the
convertible security will tend to fluctuate directly with the price of the
underlying equity security. Convertible securities may be purchased by the
Funds at varying price levels above their investment values and/or their
conversion values in keeping with the Funds' objectives.

FOREIGN CURRENCY TRANSACTIONS. When a Fund agrees to purchase or sell a
security in a foreign market it will generally be obligated to pay or entitled
to receive a specified amount of foreign currency and will then generally
convert dollars to that currency in the case of a purchase or that currency to
dollars in the case of a sale. The Funds will conduct their foreign currency
exchange transactions either on a spot basis (i.e., cash) at the spot rate
prevailing in the foreign currency exchange market, or through entering into
forward foreign currency contracts ("forward contracts") to

<PAGE>

purchase or sell foreign currencies. A Fund may enter into forward contracts in
order to lock in the U.S. dollar amount it must pay or expects to receive for a
security it has agreed to buy or sell. A Fund may also enter into forward
currency contracts with respect to the Fund's portfolio positions when it
believes that a particular currency may change unfavorably compared to the U.S.
dollar. A forward contract involves an obligation to purchase or sell a
specific currency at a future date, which may be any fixed number of days from
the date of the contract agreed upon by the parties, at a price set at the time
of the contract. These contracts are traded in the interbank market conducted
directly between currency traders (usually large, commercial banks) and their
customers. A forward contract generally has no deposit requirement, and no
commissions are charged at any stage for trades.

The Fund's custodian bank will place cash, U.S. Government securities or
debt securities in a separate account of the Fund in an amount equal to the
value of the Fund's total assets committed to the consummation of any such
contract in such account and if the value of the securities placed in the
separate account declines, additional cash or securities will be placed in the
account on a daily basis so that the value of the account will equal the amount
of the Fund's commitments with respect to such forward contracts. If, rather
than cash, portfolio securities are used to secure such a forward contract, on
the settlement of the forward contract for delivery by the Fund of a foreign
currency, the Fund may either sell the portfolio security and make delivery of
the foreign currency, or it may retain the security and terminate its
contractual obligation to deliver the foreign currency by purchasing an
"offsetting" contract obligating it to purchase, on the same settlement date,
the same amount of foreign currency.

The Funds may effect currency hedging transactions in foreign currency
futures contracts, exchange-listed and over-the-counter call and put options on
foreign currency futures contracts and on foreign currencies. The use of
forward futures or options contracts will not eliminate fluctuations in the
underlying prices of the securities which the Funds own or intend to purchase or
sell. They simply establish a rate of exchange for a future point in time.
Additionally, while these techniques tend to minimize the risk of loss due to a
decline in the value of the hedged currency, their use tends to limit any
potential gain which might result from the increase in value of such currency.
In addition, such transactions involve costs and may result in losses.

Although each Fund values its assets daily in terms of U.S. dollars, it
does not intend to convert its holdings of foreign currencies into U.S. dollars
on a daily basis. It will, however, do so from time to time, and investors
should be aware of the costs of currency conversion. Although foreign exchange
dealers do not charge a fee for conversion, they do realize a profit based on
the spread between the prices at which they are buying and selling various
currencies. Thus, a dealer may offer to sell a foreign currency to the Fund at
one rate, while offering a lesser rate of exchange should the Fund desire to
resell that currency to the dealer.

Under Internal Revenue Code Section 988, special rules are provided for
certain transactions in a currency other than the taxpayer's functional currency
(i.e., unless certain special rules apply, currencies other than the U.S.
dollar). In general, foreign currency gains or losses from forward contracts,
futures contracts that are not "regulated futures contracts", and from unlisted
options will be

<PAGE>

treated as ordinary income or loss under Code Section 988. Also, certain
foreign exchange gains or losses derived with respect to fixed-income securities
are also subject to Section 988 treatment. In general, therefore, Code Section
988 gains or losses will increase or decrease the amount of the Fund's
investment company taxable income available to be distributed to shareholders as
ordinary income, rather than increasing or decreasing the amount of the Fund's
net capital gain. Additionally, if Code Section 988 losses exceed other
investment company taxable income during a taxable year, the Fund would not be
able to make any ordinary income distributions.

COLLATERALIZED MORTGAGE OBLIGATIONS. The Global Income Fund may invest in
mortgage-backed securities. In addition to securities issued by Ginnie Mae,
Fannie Mae and Freddie Mac, another type of mortgage-backed security is the
"collateralized mortgage obligation", which is secured by groups of individual
mortgages but is similar to a conventional bond where the investor looks only to
the issuer for payment of principal and interest. Although the obligations are
recourse obligations to the issuer, the issuer typically has no significant
assets, other than assets pledged as collateral for the obligations, and the
market value of the collateral, which is sensitive to interest rate movements,
may affect the market value of the obligations. A public market for a
particular collateralized mortgage obligation may or may not develop and thus,
there can be no guarantee of liquidity of an investment in such obligations.

TIME DEPOSITS AND VARIABLE RATE NOTES. The Global Income Fund may invest
in fixed time deposits, whether or not subject to withdrawal penalties; however,
investment in such deposits which are subject to withdrawal penalties, other
than overnight deposits, are subject to the 15% limit on investments in illiquid
securities set forth in the Prospectus.

The commercial paper obligations which the Global Income Fund may buy may
include variable rate notes. The nature and terms of a variable rate note
(i.e., a "Master Note") permit a fund to invest fluctuating amounts at varying
rates of interest pursuant to a direct arrangement between a fund as lender, and
the issuer, as borrower. It permits daily changes in the amounts borrowed. The
fund has the right at any time to increase, up to the full amount stated in the
note agreement, or to decrease the amount outstanding under the note. The
issuer may prepay at any time and without penalty any part of or the full amount
of the note. The note may or may not be backed by one or more bank letters of
credit. Because these notes are direct lending arrangements between the fund
and the issuer, it is not generally contemplated that they will be traded;
moreover, there is currently no secondary market for them. Except as
specifically provided in the Prospectus, there is no limitation on the type of
issuer from whom these notes will be purchased; however, in connection with such
purchase and on an ongoing basis, Quest for Value Advisors ("Quest Advisors")
will consider the earning power, cash flow and other liquidity ratios of the
issuer, and its ability to pay principal and interest on demand, including in a
situation in which all holders of such notes made demand simultaneously. The
Global Income Fund will not invest more than 5% of its total assets in variable
rate notes. Variable rate notes are subject to the Global Income Fund's
investment restriction on illiquid securities unless such notes can be put back
to the issuer on demand within seven days.

<PAGE>

PORTFOLIO TRADING. It is anticipated that the Global Equity Fund's
portfolio turnover rate will not exceed 100% in any one year and the Global
Income Fund's portfolio turnover rate will not exceed 250% in any one year.
However, as it is difficult to anticipate actual portfolio turnover, no
guarantee can be given that the actual portfolio turnover rates of the Funds
will not be greater or less than these predictions. A 100% turnover rate would
occur, for example, if 100% of the securities held in the Fund's portfolio
(excluding all securities whose maturities at acquisition were one year or less)
were sold and replaced within one year.

SECURITY LOANS. Consistent with applicable regulatory requirements and
procedures adopted by the Board of Directors, each Fund may lend its portfolio
securities to brokers, dealers and other financial institutions, provided that
such loans are callable at any time by the Fund (subject to notice provisions
described below), and are at all times secured by cash or cash equivalents,
which are maintained in a segregated account pursuant to applicable regulations
and that are equal to at least the market value, determined daily, of the loaned
securities. The advantage of such loans is that the Fund continues to receive
the income on the loaned securities while at the same time earning interest on
the cash amounts deposited as collateral, which will be invested in short-term
obligations.

A loan may be terminated by the borrower on one business day's notice, or
by the Fund on five business days' notice. If the borrower fails to deliver the
loaned securities within five days after receipt of notice, the Fund could use
the collateral to replace the securities while holding the borrower liable for
any excess of replacement cost over collateral. As with any extensions of
credit, there are risks of delay in recovery and in some cases, even loss of
rights in the collateral should the borrower of the securities fail financially.
However, these loans of portfolio securities will only be made to firms deemed
by the Fund's management to be creditworthy and when the income which can be
earned from such loans justifies the attendant risks. Upon termination of the
loan, the borrower is required to return the securities to the Fund. Any gain
or loss in the market price during the loan period would inure to the Fund. A
Fund will pay reasonable finder's, administrative and custodial fees in
connection with a loan of its securities. The creditworthiness of firms to
which each Fund lends its portfolio securities will be monitored on an ongoing
basis by its Board of Directors.

When voting or consent rights which accompany loaned securities pass to the
borrower, each Fund will follow the policy of calling the loaned securities, to
be delivered within one day after notice, to permit the exercise of such rights
if the matters involved would have a material effect on the Fund's investment in
such loaned securities. Neither Fund will lend portfolio securities with a
value in excess of one-third of its total assets at the time of the loan.

REPURCHASE AGREEMENTS. When cash may be available for only a few days, it
may be invested by each Fund in repurchase agreements until such time as it may
otherwise be invested or used for payments of obligations of the Fund.
Repurchase agreements, which may be viewed as a type of secured lending by a
Fund, typically involve the acquisition by the Fund of government securities or
other securities from a selling financial institution such as a bank, savings
and loan association or broker-dealer. The agreement provides that the Fund
will sell back to the institution, and that the

<PAGE>

institution will repurchase, the underlying security ("collateral") at a
specified price and at a fixed time in the future, usually not more than seven
days from the date of purchase. The Fund will accrue interest from the
institution until the time when the repurchase is to occur. Although such date
is deemed by the Fund to be the maturity date of a repurchase agreement, the
maturities of securities subject to repurchase agreements are not subject to any
limits and may exceed one year.

While repurchase agreements involve certain risks not associated with
direct investments in debt securities, the Funds follow procedures designed to
minimize such risks. These procedures include effecting repurchase transactions
only with large, well capitalized and well established financial institutions
under guidelines established and monitored by the Directors of the Fund. In
addition, the collateral will be maintained in a segregated account and will be
marked-to-market daily to determine that the full value of the collateral, as
specified in the agreement, does not decrease below the purchase price plus
accrued interest. If such decrease occurs, additional collateral will be
requested and, when received, added to maintain full collateralization. In the
event of a default or bankruptcy by a selling financial institution, the Fund
will seek to liquidate such collateral. However, the exercise of the Fund's
right to liquidate such collateral could involve certain costs or delays and, to
the extent that proceeds from any sale upon a default of the obligation to
repurchase were less than the repurchase price, the Fund could suffer a loss.
It is the current policy of each Fund not to invest in repurchase agreements
that do not mature within seven days if any such investment, together with any
other illiquid assets held by the Fund, amount to more than 15% of its total
assets. The Funds' investments in repurchase agreements may at times be
substantial when, in the view of Quest Advisors, liquidity or other
considerations warrant.

WHEN-ISSUED AND DELAYED DELIVERY SECURITIES AND FORWARD COMMITMENTS. As
discussed in the Prospectus, from time to time, in the ordinary course of
business, the Funds may purchase securities on a when-issued or delayed delivery
basis and may purchase or sell securities on a forward commitment basis. When
such transactions are negotiated, the price is fixed at the time of the
commitment, but delivery and payment can take place a month or more after the
date of the commitment. The securities so purchased are subject to market
fluctuation and no interest accrues to the purchaser during this period. While
each Fund will only purchase securities on a when-issued, delayed delivery or
forward commitment basis with the intention of acquiring the securities, the
Fund may sell the securities before the settlement date, if it is deemed
advisable. At the time a Fund makes the commitment to purchase securities on a
when-issued or delayed delivery basis, the Fund will record the transaction and
thereafter reflect the value, each day, of such security in determining the net
asset value of the Fund. At the time of delivery of the securities, the value
may be more or less than the purchase price. Each Fund will also establish a
segregated account with the Fund's custodian bank in which it will continuously
maintain cash or U.S. Government securities or other high grade debt portfolio
securities equal in value to commitments for such when-issued or delayed
delivery securities; subject to this requirement, each Fund may purchase
securities on such basis without limit. An increase in the percentage of a
Fund's assets committed to the purchase of securities on a when-issued or
delayed delivery basis may increase the volatility of the Fund's net asset
value. Each Fund's

<PAGE>

management and Directors do not believe that such Fund's net asset value or
income will be adversely affected by its purchases of securities on such basis.

SECURITY SELECTION PROCESS. The allocation of assets of each Fund between
U.S. and foreign markets will vary from time to time as deemed appropriate by
Quest Advisors. It is a dynamic process based on an on-going analysis of
economic and political conditions, the growth potential of the securities
markets throughout the world, currency exchange considerations and the
availability of attractively priced securities within the respective markets.
In all markets, security selection is designed to reduce risk through a value
oriented approach in which emphasis is placed on identifying well-managed
companies which, in the case of the Global Equity Fund, represent exceptional
values in terms of such factors as assets, earnings and growth potential.

While the U.S. securities markets represented more than 50% of the
capitalization of the global securities markets in the late 1970s, a combination
of factors reduced that percentage to approximately 33% as of December 31, 1994.
Moreover, the relative performance of the securities markets of different
countries, expressed in terms of United States dollars, varies widely. A global
portfolio provides U.S. investors with the opportunity to participate in these
markets, diversifying their domestic portfolios so that their investments will
not be influenced solely by the political, economic and fiscal events affecting
the U.S.

HEDGING. As stated in the Prospectus, the Global Equity and Global Income
Funds may engage in transactions in options and futures. Information about the
options and futures transactions the Funds may enter into is set forth below.

FINANCIAL FUTURES. The Global Equity and Global Income Funds may purchase
and sell futures contracts that are currently traded, or may in the future be
traded, on U.S. and foreign commodity exchanges on common stocks, such
underlying fixed-income securities as U.S. Treasury bonds, notes, and bills
and/or any foreign government fixed-income security ("interest rate" futures),
on various currencies ("currency" futures) and on such indexes of U.S. or
foreign equity and fixed-income securities as may exist or come into being, such
as the Standard & Poor's 500 Index or the Financial Times Equity Index ("index"
futures). No price is paid or received upon the purchase of a financial future.
Upon entering into a futures transaction, a Fund will be required to deposit an
initial margin payment equal to a specified percentage of the contract value.
Initial margin payments will be deposited with the Fund's custodian bank in an
account registered in the futures commission merchant's name; however, the
futures commission merchant can gain access to that account only under specified
conditions. As the future is marked to market to reflect changes in its market
value, subsequent payments, called variation margin, will be made to or from the
futures commission merchant on a daily basis. Prior to expiration of the
future, if the Fund elects to close out its position by taking an opposite
position, a final determination of variation margin is made, additional cash is
required to be paid by or released to the Fund, and any loss or gain is realized
for tax purposes. Although financial futures by their terms call for the actual
delivery or acquisition of the specified debt security, in most cases the
obligation is fulfilled by closing out the position.

<PAGE>

INFORMATION ON PUTS AND CALLS. Each Fund is authorized to write covered
put and call options and purchase put and call options on the securities in
which it may invest. When a Fund writes a call, it receives a premium and
agrees to sell the callable securities to a purchaser of a corresponding call
during the call period (usually not more than 9 months) at a fixed exercise
price (which may differ from the market price of the underlying securities)
regardless of market price changes during the call period. If the call is
exercised, the fund forgoes any possible profit from an increase in market price
over the exercise price. The Fund may, in the case of listed options, purchase
calls in "closing purchase transactions" to terminate a call obligation. A
profit or loss will be realized, depending upon whether the net of the amount of
option transaction costs and the premium received on the call written is more or
less than the price of the call subsequently purchased. A profit may be
realized if the call lapses unexercised, because the Fund retains the underlying
security and the premium received. Sixty percent of any such profits are
considered long-term gains and forty percent are considered short-term gains for
tax purposes. If, due to a lack of a market, the Fund could not effect a
closing purchase transaction, it would have to hold the callable securities
until the call lapsed or was exercised. The Funds' custodian, or a securities
depository acting for the custodian, will act as the Funds' escrow agent,
through the facilities of the Options Clearing Corporation ("OCC") in connection
with listed calls, as to the securities on which the Funds have written calls,
or as to other acceptable escrow securities, so that no margin will be required
for such transaction. OCC will release the securities on the expiration of the
calls or upon the Fund's entering into a closing purchase transaction.

When a Fund purchases a call (other than in a closing purchase
transaction), it pays a premium and has the right to buy the underlying
investment from a seller of a corresponding call on the same investment during
the call period (or on a certain date for OTC options) at a fixed exercise
price. A Fund benefits only if the call is sold at a profit or if, during the
call period, the market price of the underlying investment is above the call
price plus the transaction costs and the premium paid for the call and the call
is exercised. If a call is not exercised or sold (whether or not at a profit),
it will become worthless at its expiration date and the Fund will lose its
premium payment and the right to purchase the underlying investment.

With OTC options, such variables as expiration date, exercise price and
premium will be agreed upon between a Fund and the transacting dealer, without
the intermediation of a third party such as the OCC. If a transacting dealer
fails to make delivery on the securities underlying an option it has written, in
accordance with the terms of the option as written, the Fund could lose the
premium paid for the option as well as any anticipated benefit of the
transaction. The Global Equity Fund will engage in OTC option transactions only
with primary U.S. Government securities dealers recognized by the Federal
Reserve Bank of New York. In the event that any OTC option transaction is not
subject to a forward price at which the Fund has the absolute right to
repurchase the OTC option which it has sold, the value of the OTC option
purchased and of the Fund assets used to "cover" the OTC option will be
considered "illiquid securities" and will be subject to the 10% limit on
illiquid securities. The "formula" on which the forward price will be based may
vary among contracts with different primary dealers, but it will be based on a
multiple of the premium received by the Fund for

<PAGE>

writing the option plus the amount, if any, of the option's intrinsic value,
i.e., current market value of the underlying securities minus the option's
strike price.

A put option gives the purchaser the right to sell, and the writer the
obligation to buy, the underlying investment at the exercise price during the
option period (or on a certain date for OTC options). The investment
characteristics of writing a put covered by segregated liquid assets equal to
the exercise price of the put are similar to those of writing a covered call.
The premium paid on a put written by a Fund represents a profit, as long as the
price of the underlying investment remains above the exercise price. However,
the Fund has also assumed the obligation during the option period to buy the
underlying investment from the buyer of the put at the exercise price, even
though the value of the investment may fall below the exercise price. If the
put expires unexercised, the Fund (as writer) realizes a gain in the amount of
the premium. If the put is exercised, the Fund must fulfill its obligation to
purchase the underlying investment at the exercise price, which will usually
exceed the market value of the investment at that time. In that case, the Fund
may incur a loss upon disposition, equal to the sum of the sale price of the
underlying investment and the premium received minus the sum of the exercise
price and any transaction costs incurred.

When writing put options, to secure its obligation to pay for the
underlying security, the Fund will deposit in escrow liquid assets with a value
equal to at least the exercise price of the option. As a result, the Fund
forgoes the opportunity of investing the segregated assets or writing calls
against those assets. As long as the Fund's obligation as a put writer
continues, the Fund may be assigned an exercise notice by the broker-dealer
through whom such option was sold, requiring the Fund to purchase the underlying
security at the exercise price. The Fund has no control over when it may be
required to purchase the underlying security, since it may be assigned an
exercise notice at any time prior to the termination of its obligation as the
writer of the put. This obligation terminates upon the earlier of the
expiration of the put, or the consummation by the Fund of a closing purchase
transaction by purchasing a put of the same series as that previously sold.
Once the Fund has been assigned an exercise notice, it is thereafter not allowed
to effect a closing purchase transaction.

A Fund may effect a closing purchase transaction to realize a profit on an
outstanding put option it has written or to prevent an underlying security from
being put to it. Furthermore, effecting such a closing purchase transaction
will permit the Fund to write another put option to the extent that the exercise
price thereof is secured by the deposited assets, or to utilize the proceeds
from the sale of such assets for other investments by the Fund. The Fund will
realize a profit or loss from a closing purchase transaction if the cost of the
transaction is less or more than the premium received from writing the option.

When a Fund purchases a put, it pays a premium and has a right to sell the
underlying investment at a fixed exercise price to a seller of a corresponding
put on the same investment during the put period if it is a listed option (or on
a certain date if it is an OTC option). Buying a put on securities or futures
held by it permits the Fund to attempt to protect itself during the put period
against a decline in the value of the underlying investment below the exercise
price. In the event of a decline in

<PAGE>

the market, the Fund could exercise, or sell the put option at a profit that
would offset some or all of its loss on the portfolio securities. If the market
price of the underlying investment is above the exercise price and as a result,
the put is not exercised, the put will become worthless at its expiration date
and the purchasing Fund will lose the premium paid and the right to sell the
underlying securities; the put may, however, be sold prior to expiration
(whether or not at a profit). Purchasing a put on futures or securities not
held by it permits the Fund to protect its portfolio securities against a
decline in the market to the extent that the prices of the future or securities
underlying the put move in a similar pattern to the prices of the securities in
the Fund's portfolio.

An option position may be closed out only on a market which provides
secondary trading for options of the same series, and there is no assurance that
a liquid secondary market will exist for any particular option. A Fund's option
activities may affect its turnover rate and brokerage commissions. The exercise
of calls written by a Fund may cause that Fund to sell from its portfolio
securities to cover the call, thus increasing its turnover rate in a manner
beyond the Fund's control. The exercise of puts on securities or futures will
increase portfolio turnover. Although such exercise is within a Fund's control,
holding a put might cause that Fund to sell the underlying investment for
reasons which would not exist in the absence of the put. The Fund will pay a
brokerage commission every time it purchases and sells a put or a call or
purchases or sells a related investment in connection with the exercise of a put
or a call.

Each Fund may purchase and write call and put options on futures contracts
which are traded on an exchange and enter into closing transactions with respect
to such options to terminate an existing position. An option on a futures
contract gives the purchaser the right (in return for the premium paid) to
assume a position in a futures contract (a long position if the option is a call
and a short position if the option is a put) at a specified exercise price at
any time during the term of the option. Upon exercise of the option, the
delivery of the futures position by the writer of the option to the holder of
the option is accompanied by delivery of the accumulated balance in the writer's
futures margin account, which represents the amount by which the market price of
the futures contract at the time of exercise exceeds, in the case of a call, or
is less than, in the case of a put, the exercise price of the option on the
futures contract.

A Fund may purchase and write options on futures contracts for hedging
purposes. The purchase of a call option on a futures contract is similar in
some respects to the purchase of a call option on an individual security.
Depending on the pricing of the option compared to either the price of the
futures contract upon which it is based or the price of the underlying
securities, it may or may not be less risky than ownership of the futures
contract or underlying securities. As with the purchase of futures contracts,
when a Fund is not fully invested it may purchase a call option on a futures
contract to hedge against an anticipated increase in securities prices.

The writing of a call option on a futures contract constitutes a partial
hedge against declining prices of the security which is deliverable upon
exercise of the futures contract. If the futures price at expiration of the
option is below the exercise price, the Fund will retain the full amount of the
option

<PAGE>

premium which provides a partial hedge against any decline that may have
occurred in the Fund's portfolio holdings. The writing of a put option on a
futures contract constitutes a partial hedge against increasing prices of the
security which is deliverable upon exercise of the futures contract. If the
futures price at expiration of the option is higher than the exercise price, the
Fund will retain the full amount of the option premium which provides a partial
hedge against any increase in the price of securities which the Fund intends to
purchase. If a put or call option the Fund has written is exercised, the Fund
will incur a loss which will be reduced by the amount of the premium it
receives. Depending on the degree of correlation between changes in the value
of its portfolio securities and changes in the value of its futures positions,
the Fund's losses from existing options may to some extent be reduced or
increased by changes in the value of portfolio securities.

The purchase of a put option on a futures contract is similar in some
respects to the purchase of protective put options on portfolio securities. For
example, a Fund may purchase a put option on a futures contract to hedge the
Fund's portfolio against the risk of a decline in securities prices.

The amount of risk a Fund assumes when it purchases an option on a futures
contract is the premium paid for the option plus related transaction costs. In
addition to the correlation risks discussed above, the purchase of an option
also entails the risk that changes in the value of the underlying futures
contract will not be fully reflected in the value of the option purchased

REGULATORY ASPECTS OF HEDGING INSTRUMENTS. Transactions in options by a
Fund are subject to limitations established (and changed from time to time) by
each of the exchanges governing the maximum number of options which may be
written or held by a single investor or group of investors acting in concert,
regardless of whether the options were written or purchased on the same or
different exchanges or are held in one or more accounts or through one or more
different exchanges or through one or more brokers. Thus, the number of options
which a fund may write or hold may be affected by options written or held by
other investment companies and discretionary accounts of the manager, including
other investment companies having the same or an affiliated investment advisor.
An exchange may order the liquidation of positions found to be in violation of
those limits and may impose certain other sanctions.

Due to requirements under the Investment Company Act of 1940 (the "1940
Act"), when a Fund sells a future, it will maintain in a segregated account or
accounts with its custodian bank, cash or readily marketable short-term
(maturing in one year or less) debt instruments in an amount equal to the market
value of such future, less the margin deposit applicable to it unless the Fund
holds an offsetting position.

Each Fund must operate within certain restrictions as to its long and short
positions in futures and options thereon under a rule ("CFTC Rule") adopted by
the Commodity Futures Trading Commission ("CFTC") under the Commodity Exchange
Act (the "CEA"), which excludes the Fund from registration with the CFTC as a
"commodity pool operator" (as defined under the CEA). Under those restrictions
a fund may not enter into any financial futures or options contract unless such

<PAGE>

transactions are for bona fide hedging purposes, or for other purposes only if
the aggregate initial margins and premiums required to establish such non-
hedging positions would not exceed 5% of the liquidation value of its assets. A
fund may use futures and options thereon for bona fide hedging or for other
purposes within the meaning and intent of the applicable provisions of the CEA.

TAX ASPECTS OF HEDGING INSTRUMENTS. Each Fund intends to qualify as a
"regulated investment company" under the Internal Revenue Code. One of the
tests for such qualification is that at least 90% of its gross income must be
derived from dividends, interest and gains from the sale or other disposition of
securities. Another test is that less than 30% of its gross income must be
derived from gains realized on the sale of securities held for less than three
months. In connection with the 90% test, the Internal Revenue Code specifies
that income from options, futures and other gains derived from investments in
securities is qualifying income under the 90% test. Due to the 30% limitation,
each Fund will limit the extent to which it engages in the following activities,
but, except as otherwise set forth herein or in the Prospectus, will not be
precluded from them: (i) selling investments, including futures, held for less
than three months, whether or not they were purchased on the exercise of a call
held by the Fund; (ii) writing or purchasing calls on investments held less than
three months; (iii) purchasing calls or puts which expire in less than three
months; (iv) effecting closing transactions with respect to calls or puts
purchased less than three months previously; and (v) exercising put or calls
held by the Fund for less than three months.

Regulated futures contracts, options on certain broad-based stock indices,
options on stock index futures, certain other futures contracts and options
thereon (collectively, "Section 1256 contracts") held by a fund at the end of
each taxable year may be required to be "marked to market" for federal income
tax purposes (that is, treated as having been sold at that time at market
value). Any unrealized gain or loss taxed pursuant to this rule will be added
to realized gains or losses recognized on Section 1256 contracts sold by a fund
during the year, and the resulting gain or loss will be deemed to consist of 60%
long-term capital gain or loss and 40% short-term capital gain or loss. A fund
may elect to exclude certain transactions from the mark-to-market rule although
doing so may have the effect of increasing the relative proportion of short-term
capital gain (taxable as ordinary income) and/or increasing the amount of
dividends that must be distributed annually to meet income distribution
requirements.

It should also be noted that under certain circumstances, the acquisition
of positions in hedging instruments may result in the elimination or suspension
of the holding period for tax purposes of other assets held by a Fund with the
result that the relative proportion of short-term capital gains (taxable as
ordinary income) could increase.

POSSIBLE RISK FACTORS IN HEDGING. There is a risk in selling futures that
the prices of futures will correlate imperfectly with the behavior of the cash
(i.e., market value) prices of a fund's securities. The ordinary spreads
between prices in the cash and futures markets are subject to distortions due to
differences in the natures of those markets. First, all participants in the
futures market are subject to margin deposit and maintenance requirements.
Rather than meeting additional margin deposit

<PAGE>

requirements, investors may close out futures contracts through offsetting
transactions which could distort the normal relationship between the cash and
futures markets. Second, the liquidity of the futures market depends on
participants entering into offsetting transactions rather than making or taking
delivery. To the extent participants decide to make or take delivery, liquidity
in the futures market could be reduced, thus producing distortion. Third, from
the point of view of speculators, the deposit requirements in the futures market
are less onerous than margin requirements in the securities market. Therefore,
increased participation by speculators in the futures market may cause temporary
price distortions.

If Quest Advisors' investment judgment about the general direction of
securities prices is incorrect, a Fund's overall performance would be poorer
than if it had not entered into a Hedging Transaction. For example, if a Fund
has hedged against the possibility of a decrease in securities prices which
would adversely affect the price of securities held in its portfolio and
securities prices increase instead, the Fund will lose part or all of the
benefit of the increased value of its securities which it has hedged because it
will have offsetting losses in its futures positions. In addition, in such
situations, if the Fund has insufficient cash, it may have to sell securities
from its portfolio to meet daily variation margin requirements. Such sales of
securities may be, but will not necessarily be, at increased prices which
reflect the rising market. The Fund may have to sell securities at a time when
it may be disadvantageous to do so. Also when an options or futures position is
a temporary substitute for the purchase of individual securities (long hedging)
by buying futures and/or calls on such futures or on a particular security, it
is possible that the market may decline. If the Fund then concludes not to
invest in such securities at that time because of concerns as to possible
further market decline or for other reasons, it will realize a loss on the
position that is not offset by a reduction in the price of the securities
purchased.

OTHER RISK FACTORS AND SPECIAL CONSIDERATIONS

INVESTMENTS IN EASTERN EUROPE. Both the Global Equity Fund and the Global
Income Fund are authorized to invest in Eastern European countries; however, the
Global Equity Fund presently intends not to invest more than 5% of its assets in
such securities. Investments in Eastern Europe are speculative and involve a
high degree of risk of loss. The emergence of Eastern European capital markets
is in part a function of the policies of the former Gorbachev administration.
With the recent change in power and restructuring of the Soviet Union there is
no assurance that such markets will continue to constitute a viable investment
opportunity for the Funds and there may be a high degree of risk of
expropriation without compensation. The governments of a number of Eastern
European countries previously expropriated large quantities of private property.
The claims of many property owners against those governments were never finally
settled. There is no assurance that such expropriation will not occur again.
If such expropriation were to recur, the Funds could lose all or a substantial
portion of its investments in such countries. Further, no accounting standards
comparable to those in the U.S. exist in Eastern European countries. Finally,
even though certain Eastern European currencies may be convertible into United
States dollars, the conversion rates may be artificial to the actual market
values and may be adverse to the shareholders of the Funds.

<PAGE>

The governments of certain Eastern European countries may require that a
governmental or quasi-governmental authority act as custodian of the Fund's
assets invested in such countries. These authorities may not be qualified to
act as foreign custodians under the 1940 Act and as a result, the Fund would not
be able to invest in the countries in the absence of exemptive relief from the
Securities and Exchange Commission. In addition, the risk of loss through
government confiscation may be increased in such countries.

RISKS OF DEBT SECURITIES. Each of the Funds is authorized to invest, to
the extent specified in the Prospectus, in bonds rated below Baa by Moody's
Investor Service Inc. ("Moody's) or BBB by Standard & Poor's Corporation ("S&P")
("high yield bonds," commonly known as "junk bonds"). Securities rated less
than Baa by Moody's or BBB by S&P are classified as non-investment grade
securities and are considered speculative by those rating agencies. Such bonds
may be issued as a consequence of corporate restructurings, such as leveraged
buyouts, mergers, acquisitions, debt recapitalizations, or similar events or by
smaller or highly leveraged companies. Although the growth of the high yield
securities market in the 1980s had paralleled a long economic expansion,
recently many issuers have been affected by adverse economic and market
conditions. It should be recognized that an economic downturn or increase in
interest rates is likely to have a negative effect on (i) the high yield bond
market, (ii) the value of high yield securities and (iii) the ability of the
securities' issuers to service their principal and interest payment obligations,
to meet their projected business goals or to obtain additional financing. When
economic conditions appear to be deteriorating, these bonds may decline in
market value regardless of prevailing interest rates due to heightened investor
concerns over credit quality. In such periods the ability of highly leveraged
issuers to service principal and interest payments, to meet their business goals
or obtain additional financing could be adversely affected. These bonds may
also be affected by legislative and regulatory developments. The market for
these bonds may, therefore, be less liquid than for investment grade bonds and
their prices more volatile. In addition, there may at times be significant
disparities in the prices quoted for such bonds by various dealers, making it
difficult for the Funds to rely on such quotes. Also, prices for high yield
bonds may be affected by legislative and regulatory developments. For example,
new federal rules require that savings and loans gradually reduce their holding
of high-yield securities. Also, from time to time, Congress has considered
legislation to restrict or eliminate the corporate tax deduction for interest
payments or to regulate corporate restructurings such as takeovers, mergers or
leveraged buyouts. Such legislation, if enacted, may depress the prices of
outstanding high yield bonds. Debt securities rated in the lowest category by
Moody's are of poor standing and there may be present elements of danger with
respect to principal or interest. Debt securities rated in the lowest category
by S&P have a currently identifiable vulnerability to default and are dependent
upon favorable business, financial and economic conditions to meet timely
payment of interest and repayment of principal. In the event of adverse
business conditions they are not likely to have the capacity to pay interest and
repay principal.

BRADY BONDS. The Global Income Fund may invest in Brady Bonds and other
sovereign debt securities of countries that have restructured or are in the
process of restructuring sovereign debt pursuant to the Brady Plan. Brady Bonds
are debt securities issued under the framework of the Brady

<PAGE>

Plan, an initiative introduced by former Treasury Secretary Nicholas F. Brady in
1989 as a mechanism for debtor nations to restructure their outstanding external
commercial bank indebtedness. In restructuring its external debt under the
Brady Plan, a debtor nation negotiates with its existing bank lenders as well as
multilateral institutions such as the World Bank or International Money Fund
("IMF"). As it has developed, the Brady Plan contemplates the exchange of
commercial bank debt for newly issued Brady Bonds. Brady Bonds may also be
issued in respect of new money being advanced by existing lenders in connection
with the debt restructuring. The World Bank and/or the IMF support the
restructuring by providing funds pursuant to loan agreements or other
arrangements which enable the debtor nation to collateralize the new Brady Bonds
or to repurchase outstanding bank debt at a discount. Under these arrangements
with the World Bank and/or IMF, debtor nations have been required to agree to
implement certain domestic monetary and fiscal reforms. Such reforms have
included the liberalization of trade and foreign investment, the privatization
of state-owned enterprises and the setting of targets for public spending and
borrowing. These policies and programs seek to promote the debtor country's
ability to service its external obligations and promote its economic growth and
development. Investors should be aware that the Brady Plan only sets forth
general guidelines for economic reform and debt reduction, emphasizing that
solutions must be negotiated on a case-by-case basis between debtor nations and
their creditors. Quest Advisors believes that economic reforms undertaken by
countries in connection with the issuance of Brady Bonds make the debt of
countries which have issued or have announced plans to issue Brady Bonds an
attractive opportunity for investment.

Investors should recognize that Brady Bonds have been issued only recently
and, accordingly, do not have a long payment history. Agreements implemented
under the Brady Plan to date are designed to achieve debt and debt-service
reduction through specific options negotiated by a debtor nation with its
creditors. As a result, the financial packages offered by each country differ.
Variations have included but are not limited to the exchange of outstanding
commercial bank debt for: (1) bonds issued at 100% of the face value of such
debt, which carry a below-market stated rate of interest (generally known as par
bonds); (2) bonds issued at a discount from the face value of such debt
(generally known as discount bonds); (3) bonds bearing an interest rate which
increases over time; and (4) bonds issued in exchange for the advancement of new
money by existing lenders. Regardless of the stated face amount and stated
interest rate of the various types of Brady Bonds, the Global Income Fund may
purchase Brady Bonds in secondary markets in which the price and yield to the
investor reflect market conditions at the time of purchase. (Brady Bonds issued
to date are purchased and sold in secondary markets through U.S. securities
dealers and other financial institutions and are generally maintained through
European transnational securities depositories.) Certain Brady Bonds have been
collateralized as to principal due at maturity by U.S. Treasury zero coupon
bonds with a maturity equal to the final maturity of such Brady Bonds, although
the collateral is not available to investors until the final maturity of the
Brady Bonds. Collateral purchases are financed by the IMF, the World Bank and
the debtor nations' reserves. Interest payments on certain types of Brady Bonds
may be collateralized by cash or high-grade securities in amounts that typically
represent between twelve and eighteen months of interest accruals on these
instruments with the balance of the interest accruals being uncollateralized.
The Global Income Fund may purchase Brady Bonds with limited or no

<PAGE>

collateralization and will be relying primarily on the willingness and ability
of the foreign government to make payment of interest and principal (except in
the case of principal collateralized Brady Bonds) in accordance with the terms
of the Brady Bonds.

A substantial portion of the Brady Bonds and other sovereign debt
securities in which the Global Income Fund invests are likely to be acquired at
a discount. Pursuant to the Internal Revenue Code, the Fund is required to
accrue a portion of any original issue or market discount with respect to such
securities as income each year even though the Fund does not receive interest
payments in cash during the year which reflect the discount so accrued. As a
result, the Fund may make distributions of net investment income in excess of
the total amount of cash interest actually received.

SOVEREIGN DEBT. The Global Income Fund may purchase sovereign debt
instruments issued or guaranteed by foreign governments, their political
subdivisions, agencies, instrumentalities or central banks. Sovereign debt may
be in the form of conventional securities or other types of debt instruments
such as loans or loan participations. Governmental entities responsible for
repayment of the debt may be unable or unwilling to repay principal and interest
when due, and may require renegotiation or rescheduling of debt payments.
Prospects for repayment of principal and interest may depend on the political
climate in the relevant country as well as economic factors. A governmental
entity's willingness or ability to repay principal and interest in a timely
manner may be affected by, among other things, its cash flow situation, the
extent of its foreign reserves, the availability of sufficient foreign exchange
on the date a payment is due, the relative size of the debt service burden to
the economy as a whole, the governmental entity's policy toward the IMF, and the
political constraints to which a governmental entity may be subject. Such
entities may also be dependent on expected disbursements from foreign
governments, multilateral agencies and others abroad to reduce principal and
interest arrearage on their debt. The commitment on the part of these
governments, agencies and others to make such disbursements may be conditioned
on a governmental entity's implementation of economic reforms and/or economic
performance and the timely service of such debtor's obligations. Failure to
implement such reforms, achieve such levels of performance or repay principal or
interest when due may result in the cancellation of such third parties'
commitments to lend funds to the governmental entity, which may further impair
such debtor's ability or willingness to service its debts in a timely manner.
Consequently, governmental entities may default on government securities.
Holders of foreign government securities, including the Fund, may be requested
to participate in the rescheduling of such debt and to extend further loans to
governmental entities. There is no bankruptcy proceeding by which defaulted
foreign government securities may be collected in whole or in part.

RIGHTS AND WARRANTS. As mentioned in the Prospectus, each of the Funds may
invest in rights and warrants which entitle the holder to buy equity securities
at a specified price for a specific period of time. Such securities do not
entitle a holder to dividends or voting rights with respect to the securities
which may be purchased, nor do they represent any rights to the assets of the
issuing company. The value of a right or warrant may be more volatile than the
value of the underlying securities. Also, their value does not necessarily
change with the value of the underlying securities and

<PAGE>

a right or warrant ceases to have value if it is not exercised prior to the
expiration date. Rights and warrants purchased by a Fund which expire without
being exercised will result in a loss to the Fund.

FOREIGN CUSTODY. Rules adopted under the 1940 Act permit each Fund to
maintain its securities and cash in the custody of certain eligible banks and
securities depositories. The Funds' portfolios of securities of issuers located
outside of the U.S. will be held by their sub-custodians who will be approved by
the directors in accordance with such Rules. Such determination will be made
pursuant to such Rules following a consideration of a number of factors,
including, but not limited to, the reliability and financial stability of the
institution; the ability of the institution to perform custodial services for
the Fund; the reputation of the institution in its national market; the
political and economic stability of the country in which the institution is
located; and the risks of potential nationalization or expropriation of the
Fund's assets. However, no assurances can be given that the directors'
appraisal of the risks in connection with foreign custodial arrangements will
always be correct or that expropriation, nationalization, freezes (including
currency blockage), or confiscations of assets that would affect assets of the
Fund will not occur, and shareholders bear the risk of losses arising from those
or other similar events.

BORROWING. As discussed in the Prospectus, the Funds will not borrow money
except as a temporary measure for extraordinary or emergency purposes. Such
borrowing shall not exceed 33 1/3% of the value of a Fund's assets, provided
that a Fund will make no additional investments while such borrowing exceeds 5%
of its assets. Borrowing may exaggerate the effect of any increase or decrease
in the value of the portfolio securities on a Fund's net asset value and money
borrowed will be subject to interest and other costs (which may include
commitment fees and/or the cost of maintaining average balances) which may or
may not exceed the income received from the securities purchased with borrowed
funds.

ADDITIONAL RISKS. Securities in which the Funds may invest are subject to
the provisions of bankruptcy, insolvency or other laws affecting the rights and
remedies of creditors, such as the federal Bankruptcy Code, and laws, if any,
which may be enacted by Congress or the state legislatures extending the time
for payment of principal or interest, or both or imposing other constraints upon
enforcement of such obligations.

INVESTMENT RESTRICTIONS

The Funds' significant investment restrictions are described in the
Prospectus. The following are also fundamental policies and, together with the
restrictions and other fundamental policies described in the Prospectus, cannot
be changed without the vote of a majority of the outstanding voting securities
of the Fund, as defined in the 1940 Act. Such a majority is defined as the
lesser of (a) 67% or more of the shares of the Fund present at a meeting of
shareholders of the Fund, if the holders of more than 50% of the outstanding
shares of the Fund are present or represented by Proxy or (b) more than 50% of
the outstanding shares of the Fund. For purposes of the following restrictions
and those contained in the Prospectus: (i) all percentage limitations apply
immediately after a purchase or

<PAGE>

initial investment; (ii) any subsequent change in any applicable percentage
resulting from market fluctuations or other changes in the amount of total
assets does not require elimination of any security from the Fund; and (iii) the
term "industry" does not include the U.S. Government and agencies and
instrumentalities of the U.S. Government, although a foreign government is
deemed to be an "industry." Unless otherwise noted, the restrictions apply to
both Funds.

Under these additional restrictions, the Funds cannot: (a) Invest in
physical commodities or physical commodity contracts or speculate in financial
commodity contracts, but may purchase and sell financial futures contracts and
options on such futures contracts exclusively for hedging and other non-
speculative purposes; (b) Invest in real estate; however, the Funds may purchase
securities of issuers which engage in real estate operations and securities
which are secured by real estate or interests therein; (c) Purchase securities
on margin (except for such short-term loans as are necessary for the clearance
of purchases of portfolio securities) or make short sales of securities.
(Collateral arrangements in connection with transactions in futures and options
are not deemed to be margin transactions.) (d) Underwrite securities of other
companies except insofar as the Fund may be deemed to be an underwriter under
the Securities Act of 1933 in disposing of a security (except that each 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 respective Fund); (e) Invest more than 10% of its assets in
securities of other investment companies or more than 5% of its assets in the
securities of one investment company or more than 3% of the outstanding voting
securities of such company, provided that the foregoing restrictions on
investment company purchases and holdings by both Funds are inapplicable to
acquisitions in connection with a merger, consolidation, reorganization or
acquisition of assets (except that each 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 respective
Fund); (f) Invest in interests in oil, gas or other mineral exploration or
development programs; (g) Invest in securities of any issuer if, to the
knowledge of the Fund, any officer or director of the Fund or any officer or
director of Quest Advisors owns more than 1/2 of 1% of the outstanding
securities of such issuer, and such officers and directors who own more than 1/2
of 1% own in the aggregate more than 5% of the outstanding securities of such
issuer; (h) Pledge its assets or assign or otherwise encumber its assets in
excess of 33 1/3% of its net assets (taken at market value at the time of
pledging) and then only to secure borrowings effected within the limitations set
forth in the Prospectus; (i) Invest for the purpose of exercising control or
management of another company (except that each 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 respective
Fund); and (j) 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:
(1) entering into any repurchase agreement; (2) borrowing money in accordance
with restrictions described in the Prospectus; or (3) lending portfolio
securities. In addition, the Global Equity Fund may not with respect to 75% of
its assets, invest more than 5% of the value of its total assets in the
securities of any one issuer (except that each 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 respective
Fund). In addition, as a non-fundamental investment restriction, the Funds (i)
may not purchase

<PAGE>

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; (ii) may not invest in real estate limited partnership
programs; (iii) may not invest in oil, gas or mineral leases; (iv) may not
invest more than 15% of its assets in restricted securities, foreign equity
securities not listed on an exchange, illiquid securities, securities for which
market quotations are not readily available and repurchase agreements in excess
of seven days; and (v) more than 5% of its assets in unseasoned issues. In
addition, to comply with a state's securities laws, the Funds may not make loans
to any person or individual (except that portfolio securities may be loaned
within the limitations set forth in the Prospectus).

DIRECTORS AND OFFICERS

The directors and officers of the Funds, and their principal occupations
during the past five years, are set forth below. Directors who are "interested
persons", as defined in the 1940 Act, are denoted by an asterisk. The address
of each is One World Financial Center, New York, New York 10281, except as
noted. As of January 31, 1995 all of the Directors and Officers of the Funds as
a group owned less than 1% of the outstanding shares of each of the Global
Equity Fund and Global Income Fund.

JOSEPH M. LA MOTTA, CHAIRMAN OF THE BOARD OF DIRECTORS AND PRESIDENT*

President of Oppenheimer Capitaland Chairman of Quest for Value Advisors,
registered investment advisers; Chairman of the Board and President of Quest
Cash Reserves, Inc., Quest for Value Accumulation Trust, Quest for Value Family
of Funds, and Quest for Value Fund, Inc., and Chairman of the Board of The
Saratoga Advantage Trust, open-end investment companies, and Quest for Value
Dual Purpose Fund, Inc., a closed-end investment company.

PAUL Y. CLINTON, DIRECTOR
946 Morris Avenue
Bryn Mawr, Pennsylvania 19010

Director, External Affairs, Kravco Corporation, a national real estate owner and
property management corporation; formerly President of Essex Management
Corporation, a management consulting company; Trustee of Capital Cash Management
Trust, Prime Cash Fund and Short Term Asset Reserves, each of which is a money-
market fund; Director of Quest Cash Reserves, Inc., Quest for Value Global
Equity Fund, Inc. and Quest for Value Global Funds, Inc., Trustee of Quest for
Value Accumulation Trust and Quest for Value Family of Funds, all of which are
open-end investment companies. Formerly a general partner of Capital Growth
Fund, a venture capital partnership; formerly a general partner of Essex Limited
Partnership, an investment partnership; formerly President of Geneve Corp., a
venture capital fund; formerly Chairman of Woodland Capital Corp., a small
business investment company; formerly Vice President of W.R. Grace & Co.

<PAGE>

THOMAS W, COURTNEY, C.F.A., DIRECTOR
P.O. Box 580
Sewickley, Pennsylvania 15143

Principal of Courtney Associates, Inc., a venture capital firm; former General
Partner of Trivest Venture Fund, a private venture capital fund; former
President of Investment Counseling Federated Investors, Inc.; Trustee of Cash
Assets Trust, a money market fund; Director of Quest for Value Fund, Inc. and
Quest Cash Reserves, Inc., Trustee of Quest for Value Accumulation Trust and
Quest for Value Family of Funds, all of which are open-end investment companies;
former President of Boston Company Institutional Investors; Trustee of Hawaiian
Tax-Free Trust and Tax Free Trust of Arizona, tax-exempt bond funds; Director of
several privately owned corporations; former Director of Financial Analysts
Federation.

LACY B. HERRMANN, DIRECTOR
380 Madison Avenue, Suite 2300
New York, New York 10017

President and Chairman of the Board of Aquila Management Corporation (since
1984) and of Incap Management Corporation (since 1982), the sponsoring
organizations and Administrator and/or Sub-Advisor to the following open-end
investment companies, and Chairman of the Board of Trustees and President of
each; Churchill Cash Reserves Trust (since 1985), Short Term Asset Reserves
(since 1984), Cash Assets Trust (since 1984), U.S. Treasuries Cash Assets Trust
(since 1988), Tax-Free Cash Assets Trust (since 1988), Prime Cash Fund (since
1982), Oxford Cash Management Fund (1982-1988) and Trinity Liquid Assets Trust
(1982-1985), each of which is a money market fund, and of Churchill Tax-Free
Fund of Kentucky (since 1986), Tax-Free Fund of Colorado (since 1986), Tax-Free
Trust of Oregon (since 1985), Tax-Free Trust of Arizona (since 1985), and
Hawaiian Tax-Free Trust (since 1984), each of which is a tax-free municipal bond
fund; Vice President, Director, Secretary, and formerly Treasurer of Aquila
Distributors, Inc. (since 1981), distributor of most of the above funds;
President and Chairman of the Board of Trustees of Capital Cash Management Trust
("CCMT") a money market fund (since 1981) and an Officer and Trustee/Director of
its predecessors (since 1974); President and Director of STCM Management
Company, Inc., sponsor and Sub-Advisor to CCMT; General Partner of Tamarack
Associates (1966-1984), a private investment partnership and Chairman of the
Board and President of various of its subsidiaries through 1986. Director of
the Quest for Value Fund, Inc. and Quest Cash Reserves, Inc., and Trustee of the
Quest for Value Accumulation Trust, Quest for Value Family of Funds and The
Saratoga Advantage Trust, each of which is an open-end investment company.

<PAGE>

GEORGE LOFT, DIRECTOR
51 Herrick Road
Sharon, Connecticut 06069

Private Investor; Director of Quest for Value Fund, Inc. and Quest Cash
Reserves, Inc., Trustee of Quest for Value Accumulation Trust, Quest for Value
Family of Funds and The Saratoga Advantage Trust, all of which are open-end
investment companies, and Director of the Quest for Value Dual Purpose Fund,
Inc., a closed-end investment company.

ROBERT J. BLUESTONE, VICE PRESIDENT, GLOBAL INCOME FUND

Managing Director, Oppenheimer Capital; Vice President, Quest for Value
Accumulation Trust, Quest Cash Reserves, Inc., and Quest for Value Family of
Funds, open-end investment companies.

MARIA CAMACHO, ASSISTANT SECRETARY

Assistant Vice President of Oppenheimer Capital since 1994 and Registrations
Department Administrator with Oppenheimer Capital since 1989; Assistant
Secretary of Quest For Value Fund, Inc., Quest Cash Reserves, Inc., Quest For
Value Global Equity Fund, Inc., Quest For Value Global Funds, Inc. and The
Saratoga Advantage Trust, open-end investment companies.

PIERRE DAVIRON, VICE PRESIDENT AND PORTFOLIO MANAGER, GLOBAL EQUITY FUND

Senior Vice President, Oppenheimer Capital; President and Chief Investment
Officer, Oppenheimer Capital International, a division of Oppenheimer Capital.
Previously Chairman and Chief Executive Officer at Indosuez Gartmore Asset
Management, a division of Banque Indosuez, Paris, France. Previously Managing
Director in Mergers and Acquisitions at J.P. Morgan.

BERNARD H. GARIL, VICE PRESIDENT

President and Chief Operating Officer of Quest for Value Advisors; Vice
President of Quest for Value Accumulation Trust, Quest Cash Reserves, Inc. and
Quest for Value Family of Funds, open-end investment companies, and Vice
President of Quest for Value Dual Purpose Fund, Inc., a closed-end investment
company.

RICHARD J. GLASEBROOK, II, VICE PRESIDENT AND PORTFOLIO MANAGER, GLOBAL EQUITY
FUND

Managing Director, Oppenheimer Capital; Vice President and Portfolio Manager,
Quest for Value Family of Funds and Quest for Value Accumulation Trust, open-end
investment companies; formerly Vice President and Director of Delafield Asset
Management.

<PAGE>

RICHARD A. GLUCK, VICE PRESIDENT AND PORTFOLIO MANAGER, GLOBAL INCOME FUND

Vice President, Oppenheimer Capital; previously a Global Fixed Income Portfolio
Manager with Dean Witter InterCapital and Clemente Capital.

THOMAS E. DUGGAN, ASSISTANT SECRETARY

General Counsel and Secretary, Oppenheimer Capital and Quest for Value Advisors,
Secretary of Quest for Value Dual Purpose Fund, Inc., a closed-end investment
company; Assistant Secretary of Quest Cash Reserves, Inc., , Quest for Value
Family of Funds, Quest for Value Global Equity Fund, Inc., Quest for Value
Global Funds, Inc. And The Saratoga Advantage Trust, open-end investment
companies.

DEBORAH KABACK, SECRETARY

Senior Vice President, Oppenheimer Capital; Secretary of Quest for Value
Accumulation Trust, Quest Cash Reserves, Inc., Quest for Value Family of Funds,
Quest for Value Fund, Inc. and The Saratoga Advantage Trust, open-end investment
companies, and Assistant Secretary of Quest for Value Dual Purpose Fund, Inc., a
closed-end investment company.

LESLIE KLEIN, ASSISTANT TREASURER

Vice President of Oppenheimer Capital; Assistant Treasurer of Quest for Value
Accumulation Trust, Quest Cash Reserves, Inc., Quest for Value Family of Funds,
Quest for Value Fund, Inc. and The Saratoga Advantage Trust, open-end investment
companies, and Quest for Value Dual Purpose Fund, Inc., a closed-end investment
company.

SHELDON M. SIEGEL, TREASURER

Managing Director of Oppenheimer Capital; Treasurer of Quest for Value Advisors;
Treasurer of Quest for Value Accumulation Trust, Quest Cash Reserves, Inc.,
Quest for Value Family of Funds, Quest for Value Fund, Inc. and The Saratoga
Advantage Trust, open-end investment companies, and Quest for Value Dual Purpose
Fund, Inc., a closed-end investment company.

REMUNERATION OF OFFICERS AND DIRECTORS. All officers of the Fund are
officers or directors of Oppenheimer Capital and receive no salary or fee from
the Fund. The Directors, other than Mr. La Motta, are paid an annual fee of
$3000 plus $250 for each directors' meeting attended and $100 for each committee
meeting attended. During the fiscal year ended October 31, 1994 the Fund
accrued or paid a directors' fee of $4,200 to each independent Director. The
independent directors also serve as directors/trustees for other funds in the
Advisor's Fund Complex. During the last fiscal year of such funds, Mr. Clinton
earned aggregate directors fees of $_68,100 with respect to 18 investment
companies in the Advisor's Fund Complex; Mr. Courtney earned aggregate directors
fees of $66,600

<PAGE>

with respect to 18 investment companies in the Advisor's Fund Complex; Mr.
Herrmann earned aggregate directors fees of $67,350 with respect to 18
investment companies in the Advisor's Fund Complex; and Mr. Loft earned
aggregate directors fees of $74,800 with respect to 19 investment companies in
the Advisor's Fund Complex. During such periods the independent Directors
received fees from three investment companies for which they no longer serve as
directors and which are no longer part of the Advisor's Fund Complex but for
which the Advisor currently serves as subadviser. In addition during such
periods, Mr. Clinton and Mr. Courtney each served as director with respect to
three investment companies in the Advisor's Fund Complex for which they received
no fees; Mr. Loft and Mr. Herrmann each served as director with respect to 10
investment companies for which they received no fees. For the purpose of this
paragraph, a portfolio of an investment company organized in series form is
considered to be an investment company.

AMA FAMILY OF FUNDS INDEMNIFICATION. In connection with the combination of
each of the Global Equity Fund and Global Income Fund with a portfolio of the
AMA Family of Funds, Inc., each Fund has agreed to assume the obligation of such
portfolio of AMA Family of Funds, Inc. to indemnify the directors of the AMA
Family of Funds, Inc. to the fullest extent permitted by law and the By-Laws of
the AMA Family of Funds, Inc.

INVESTMENT MANAGEMENT AND OTHER SERVICES

THE INVESTMENT ADVISORY AGREEMENTS. Under an Investment Advisory Agreement
with each Fund (the "Advisory Agreements"), Quest Advisors is required to,
through consultation with its own portfolio management staff: (i) regularly
provide investment advice and recommendations to each Fund with respect to its
investments, investment policies and the purchase and sale of securities; (ii)
supervise continuously the securities purchased or sold by each Fund and the
portion, if any, of the Fund's assets to be held uninvested; and (iii) arrange
for the purchase of securities and other investments by the Funds and the sale
of securities and other investments held by the Funds.

The Advisory Agreements provide that in the absence of willful misfeasance,
bad faith, gross negligence or reckless disregard for its obligations
thereunder, Quest Advisors is not liable for any act or omission in the course
of, or in connection with, the rendition of services thereunder. The Agreements
permit Quest Advisors to act as investment adviser for any person, firm or
corporation and to use the name "Quest for Value" in connection with other
investment companies for which it may act as investment adviser or general
distributor. If Quest Advisors shall no longer act as investment adviser to a
Fund, the right of the Fund to use the name "Quest for Value" as part of its
name may be withdrawn.

The Advisory Agreements provide that Quest Advisors may enter into sub-
advisory agreements with other affiliated or unaffiliated investment advisors in
order to obtain specialized services for the Fund provided that the Fund is not
required to pay any additional fees for such services. Pursuant to a Sub-
Advisory Agreement, Clay Finlay, in the case of the Global Equity Fund,

<PAGE>

had been retained, subject to the overall supervision of Quest Advisors and the
Directors of the Global Equity Fund, to continuously furnish investment advice
concerning individual security selections, asset allocations and overall
economic trends outside of the U.S., to, jointly with Quest Advisors, allocate
the Global Equity Fund's assets among geographic regions, and manage the portion
of the Global Equity Fund's portfolio invested in securities of issuers located
outside of the U.S. This agreement was terminated December 31, 1993, and the
responsibility for management of all assets of the Global Equity Fund was
assumed by Quest Advisors effective January 1, 1994.

The Advisory Agreements were initially approved by the Boards of Directors,
including a majority of the Directors who are not "interested persons" of the
Funds (as defined in the 1940 Act) and who have no direct or indirect financial
interest in such Agreements, and by Oppenheimer Capital as the sole shareholder
of each Fund on June 21, 1990 with respect to the Global Equity Fund and on July
29, 1991 with respect to the Global Income Fund. The shareholders of the Global
Equity Fund approved its Advisory Agreement on January 13, 1992. Each Agreement
may be terminated by a Fund at any time without penalty on sixty days notice by
the Directors of the Fund or by the holders of a majority (as defined in the
1940 Act) of the outstanding shares of the Fund and terminates in the event of
its assignment (as defined in the 1940 Act).

For the fiscal year ended November 30, 1992, the total advisory fees
accrued or paid by the Global Equity Fund were $943,392, of which $103,795 was
waived by Quest Advisors. For the fiscal year ended November 30, 1993, the
total advisory fees accrued or paid by the Global Equity Fund were $940,930, of
which $187,345 was waived by Quest Advisors. For the fiscal year ended November
30, 1994, the total advisory fees accrued or paid by the Global Equity Fund were
$1,166,949, of which $15,349 was waived by Quest Advisors. Quest Advisors has
informed the Global Equity Fund that the total subadvisory fees paid by Quest
Advisors to Clay Finlay with respect to the Global Equity Fund were, $257,648,
$376,794 and $25,534 (net of reimbursements), respectively, for each of the
aforementioned periods. For the period December 2, 1991 (commencement of
operations) to November 30, 1992, the total investment advisory fees accrued or
paid by the Global Income Fund were $97,609, of which $7,616 was waived by Quest
Advisors. For the fiscal year ended November 30, 1993, the total investment
advisory fees accrued or paid by the Global Income Fund were $106,028, of which
$83,745 was waived by Quest Advisors. For the fiscal year ended November 30,
1994, the total advisory fees accrued or paid by the Global Income Fund were
$99,506, all of which was waived by Quest Advisors. In addition, Quest Advisors
reimbursed the Global Income Fund for $40,330 of other operating expenses.

Under their terms, the Agreements will continue in effect for two years
from the date of their execution and from year to year thereafter, provided
continuance of the agreements is approved at least annually by the vote of the
holders of a majority, as defined in the 1940 Act, of the outstanding shares of
the Fund, or by the Directors of the Fund; provided that in either event such
continuances are approved annually by the vote of a majority of the Directors of
the Fund who are not parties to the Agreement or "interested persons" (as
defined in the 1940 Act) of any such party (the "Independent

<PAGE>

Directors"), which votes must be cast in person at a meeting called for the
purpose of voting on such approval.

THE ADMINISTRATION AGREEMENT. Quest Advisors acts as each Fund's
administrator pursuant to Administration Agreements between Quest Advisors and
the Funds. The Administration Agreements were approved by the Global Equity
Fund's directors and its initial shareholder on June 21, 1990 and by the Global
Income Fund's directors and its initial shareholder on July 29, 1991. The
shareholders of the Global Equity Fund approved the Administration Agreement on
January 13, 1992. Each Administration Agreement will remain in effect for two
years from the date of its execution and may be continued annually thereafter if
approved by a majority vote of the Directors who are neither interested persons
of the Fund nor have any direct or indirect financial interest in the
Administration Agreement, cast in person at a meeting called for the purpose of
voting on such approval. For the fiscal years ended November 30, 1992, 1993 and
1994, the total administrative fees accrued or paid by the Global Equity Fund
were $314,464, 313,644 and $388,983, respectively. For the period December 2,
1991 (commencement of operations) to November 30, 1992, the fiscal years ended
November 30, 1993 and 1994, the total administrative fees accrued or paid by the
Global Income Fund were $48,804, $53,014 and $49,753, respectively.

FUND EXPENSES. Expenses of each Fund not expressly assumed by Quest
Advisors under the Advisory Agreements or Administration Agreements or by Quest
for Value Distributors (the "Distributor") are paid by each respective Fund.
Each Fund is responsible for bearing certain expenses attributable to the Fund
but not to a particular class ("Fund Expenses"), including deferred organization
expenses; taxes; registration fees; typesetting of prospectuses and financial
reports required for distribution to shareholders; brokerage commissions; fees
and related expenses of trustees or directors who are not interested persons;
legal, accounting and audit expenses; custodian fees; insurance premiums; and
trade association dues. Fund Expenses will be allocated based on the total net
assets of each class. Each class of shares of each Fund will also be
responsible for certain expenses attributable only to that class ("Class
Expenses"). These Class Expenses may include distribution and service fees,
transfer and shareholder servicing agent fees, professional fees, printing and
postage expenses for materials distributed to current shareholders, state
registration fees and shareholder meeting expenses. Such items are considered
Class Expenses provided such fees and expenses relate solely to such Class. A
portion of printing expenses, such as typesetting costs, will be divided equally
among the Funds, while other printing expenses, such as the number of copies
printed, will be considered Class Expenses. Under the Advisory Agreement, Quest
Advisors guarantees that the expenses of each Fund in any fiscal year, exclusive
of taxes, interest, brokerage fees and distribution expenses, shall not exceed,
and Quest Advisors undertakes to pay or refund to the Fund any amount by which
such expenses do exceed, the most restrictive state law provisions in effect in
states where shares of the Fund are qualified to be sold and under such
circumstances the payment of the management fee at the end of any month will be
reduced. Quest Advisors will comply with the applicable state regulations which
may require Quest Advisors to assume expenses of a Fund in the event that the
Fund's aggregate operating expenses incurred in any fiscal year exceed the most
restrictive state law provisions in effect in states where shares of the Fund
are qualified to be sold. Quest Advisors has agreed to limit Fund Expenses

<PAGE>

(as defined above) so that annualized operating Fund Expenses, exclusive of
Class Expenses (as defined above) of the Global Income Fund do not exceed 1.45%
of average daily net assets.

PORTFOLIO TRANSACTIONS. Portfolio decisions are based upon recommendations
of Quest Advisors. Purchases and sales of securities on a stock exchange are
effected through brokers who charge a commission for their services.
Transactions in debt obligations and in equity securities in the over-the-
counter market are generally effected on a net basis with non-affiliated dealers
acting as principal for their own accounts without a stated commission although
the price usually includes a profit to the dealer. Prices of portfolio
securities purchased from underwriters of new issues include a commission or
concession paid by the issuer to the underwriter, and prices of debt securities
purchased from dealers include a spread between the bid and asked prices.

Quest Advisors seeks to obtain prompt execution of orders at the most
favorable net price. If Quest Advisors believes such prices and execution are
obtainable from more than one broker or dealer, it may give consideration to
placing portfolio transactions with those brokers and dealers who furnish
brokerage and research services to the Funds and/or Quest Advisors. In
addition, transactions may be directed to dealers during the course of an
underwriting in return for their execution and research services. Such services
are intangible and no dollar value can be placed thereon. The information may
or may not be useful to the Funds and/or other accounts of Quest Advisors. Such
information may be in written or oral form and includes information on
particular companies and industries as well as market, economic or institutional
activity areas. It serves to broaden the scope and supplement the research
activities of Quest Advisors, to make available additional views for
consideration and comparison, and to enable Quest Advisors to obtain market
information for the valuation of securities held in the Funds' assets. Such
services and information may be used by Quest Advisors in servicing all of their
accounts, but all such services and information may not be used for each Fund.

Sales of shares of the Funds, subject to applicable rules covering the
Distributor's activities in this area, will also be considered as a factor in
the direction of portfolio transactions to dealers, but only in conformity with
the price, execution and other considerations and practices discussed above.
The Funds will not purchase any securities from or sell any securities to
Oppenheimer & Co., Inc. ("Opco"), an affiliate of Quest Advisors, acting as
principal for its own account.

Quest Advisors currently serves as investment manager to a number of
clients including other investment companies, and may in the future act as
investment manager or adviser to others. It is the practice of Quest Advisors
to cause purchase or sale transactions to be allocated among the Funds and
others whose assets it manages in such manner as it deems equitable. In making
such allocations among the Funds and other client accounts, the main factors
considered are the respective investment objectives, the relative size of
portfolio holdings of the same or comparable securities, the availability of
cash for investment, the size of investment commitments generally held and the
opinions of the persons responsible for managing the portfolios of the Funds and
other client accounts. When orders to purchase or sell the same security on
identical terms are placed by more than one of the Funds and/or other advisory
accounts managed by Quest Advisors or its affiliates, the transactions are
generally

<PAGE>

executed as received, although a Fund or advisory account that does not direct
trades to a specific broker ("free trades") usually will have its order executed
first. Purchases are combined where possible for the purpose of negotiating
brokerage commissions, which in some cases might have a detrimental effect on
the price or volume of the security in a particular transaction as far as the
Funds are concerned. Orders placed by accounts that direct trades to a specific
broker will generally be executed after the free trades. All orders placed on
behalf of the Funds are considered free trades. However, having an order placed
first in the market does not necessarily guarantee the most favorable price.

Consistent with the policy described above, brokerage transactions may be
effected through Opco. The commissions, fees or other remuneration received by
Opco must be reasonable and fair compared to the commissions, fees or other
remuneration paid to other brokers in connection with comparable transactions
involving similar securities being purchased or sold on an exchange during a
comparable period of time. The Board of Directors of each Fund, including a
majority of the Directors who are not "interested" persons of the Fund, (as
defined in the 1940 Act) have adopted procedures which are reasonably designed
to provide that any commissions, fees or other remuneration paid to Opco is
consistent with the foregoing standard. Opco may be paid for effecting the
Funds' portfolio transactions on an exchange of which it is a member only if the
floor execution is by a broker which is not an associated person of Opco and if
(as is the case) there is a contract with the Funds permitting Opco to be paid
for such transactions.

The following table presents information as to the allocation of brokerage
commissions paid by the Global Equity Fund for the fiscal years ended November
30, 1992, 1993 and 1994:

-------------------------------------------------------------------------------------------------
Fiscal year ended Total Brokerage Brokerage Commissions Total Amount of Transactions
Commissions Paid Paid to Opco Where Brokerage Commissions
Paid to Opco (1)
-------------------------------------------------------------------------------------------------
Dollar Amounts % Dollar Amounts %
-------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
11/30/92 275,868 85,751 31.08 57,807,717 40.90
-------------------------------------------------------------------------------------------------
11/30/93 200,029 18,503 9.25 102,916,572 15.91
-------------------------------------------------------------------------------------------------
11/30/94 566,615 16,402 2.89 13,811,383 8.3
-------------------------------------------------------------------------------------------------
<FN>
(1) The Global Equity Fund does not effect principal transactions with Opco.
When the Fund effects principal transactions with other broker-dealers,
commissions are imputed.

During the fiscal year ended November 30, 1994, the Global Equity Fund
directed $65,558,341 of brokerage transactions to brokers because of
research services provided. The commissions related to such transactions
were $234,399.
</TABLE>

<PAGE>

The following table presents information as to the allocation of brokerage
commissions paid by the Global Income Fund for the period from 12/2/91
(commencement of operations) to 11/30/92 and for the fiscal years ended
November 30, 1993 and November 30, 1994:

<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------------
For the period Total Brokerage Brokerage Commissions Total Amount of Transactions
Commissions Paid Paid to Opco Where Brokerage Commissions
Paid to Opco (1)
--------------------------------------------------------------------------------------------------------------------
Dollar Amounts % Dollar Amounts %
--------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
12/2/91 (commencement of 2,629 0 0 0 0
operations) to 11/30/92
--------------------------------------------------------------------------------------------------------------------
Fisca year ended 11/30/93 0 0 0 0 0
--------------------------------------------------------------------------------------------------------------------
Fiscal year ended 11/30/94 0 0 0 0 0
--------------------------------------------------------------------------------------------------------------------
<FN>
(1) The Global Income Fund does not effect principal transactions with Opco.
When the Fund effects principal transactions with other broker-dealers,
commissions are imputed.
</TABLE>

DETERMINATION OF NET ASSET VALUE

The net asset value per share of each Fund is determined each day the New
York Stock Exchange (the "Exchange") is open, as of the close of the regular
trading session of the Exchange that day (currently 4:00 p.m. Eastern Time), by
dividing the value of the Fund's net assets by the number of its shares
outstanding. Although the legal rights of Class A, B and C shares are
identical, the different expenses borne by each class may result in differing
net asset values and dividends for each class.

The Exchange's most recent annual announcement (which is subject to change)
states that it will close on New Year's Day, Presidents' Day, Good Friday,
Memorial Day, July 4, Labor Day, Thanksgiving and Christmas Day. It may also
close on other days.

Securities listed on a national securities exchange or on the national
market system are valued at the last reported sale price on that day. If there
has been no sale on such day or on the previous day on which the Exchange was
open (if a week has not elapsed between such days), then the value of such
security is taken to be the reported bid price at the time as of which the value
is being ascertained. Securities traded in the over-the-counter market but not
listed on the national market system are valued at their last quoted bid price.
Any securities or other assets for which current market quotations are not
readily available are valued at their fair value as determined in good faith
under procedures established by and under the general supervision and
responsibility of each Fund's Board of Directors. The value of a foreign
security is determined in its national currency and that value is then converted
into its U.S. dollar equivalent at the foreign exchange rate in effect on the
date of valuation.

<PAGE>

Each Fund's Board of Directors has approved the use of nationally
recognized bond pricing services for the valuation of the Fund's debt
securities. The service selected by Quest Advisors creates and maintains price
matrices of U.S. Government and other securities from which individual holdings
are valued shortly after the close of business each trading day. Debt
securities not covered by the pricing service are valued based upon bid prices
obtained from dealers who maintain an active market therein or, if no readily
available market quotations are available from dealers, such securities
(including restricted securities and OTC options) are valued at fair value under
the Board's procedures. Short-term (having a maturity of 60 days or less) debt
securities are valued at amortized cost.

Puts and calls are valued at the last sales price thereof, or, if there are
no transactions, at the last reported sales price that is within the spread
between the closing bid and asked prices on the valuation date. Futures are
valued based on their daily settlement value. When a Fund writes a call, an
amount equal to the premium received is included in the Fund's statement of
Assets and Liabilities as an asset, and an equivalent deferred credit is
included in the liability section. The deferred credit is adjusted ("marked-to-
market") to reflect the current market value of the call. If a call written by
a Fund is exercised, the proceeds on the sale of the underlying securities are
increased by the premium received. If a call or put written by a Fund expires
on its stipulated expiration date or if a Fund enters into a closing
transaction, it will realize a gain or loss depending on whether the premium was
more or less than the transaction costs, without regard to unrealized
appreciation or depreciation on the underlying securities. If a put held by a
Fund is exercised by it, the amount the Fund receives on its sale of the
underlying investment is reduced by the amount of the premium paid by the Fund.

PERFORMANCE INFORMATION

As discussed in the Prospectus, from time to time the Global Income Fund
may quote its yield and each Fund may quote its total return in advertisements
and sales literature.

YIELDS. Yield information may be useful to investors in reviewing the
Global Income Fund's performance. However, a number of factors should be
considered before using yield information as a basis for comparison with other
investments. An investment in the Fund is not insured; yield is not guaranteed
and normally will fluctuate on a daily basis. The yield for any given past
period is not an indication or representation of future yields or rates of
return. Yield is affected by portfolio quality, portfolio maturity, type of
instruments held and operating expenses. When comparing the Fund's yield with
that of other investments, investors should understand that certain other
investment alternatives such as money-market instruments or bank accounts
provide fixed yields and also that bank accounts may be insured.

Current yield is calculated according to the following formula:

x
YIELD = 2(--- + 1)TO THE POWER OF 6 - 1
cd

<PAGE>

Where:

x = daily net investment income, based upon the subtraction of daily accrued
expenses from daily accrued income of the portfolio. Income is accrued
daily for each day of the indicated period based upon yield-to-maturity of
each obligation held in the portfolio as of the day before the beginning of
any thirty-day period or as of contractual settlement date for securities
acquired during the period. Mortgage and other receivables-backed
securities calculate income using coupon rate and outstanding principal
amount.

c = the average daily number of shares outstanding during the period that were
entitled to receive dividends.

d = the maximum offering price per share on the last day of the period.

Yield may also be calculated by substituting the net asset value or lower
offering price per share for the maximum offering price per share in
representing the yield to those persons or groups who are entitled to purchase
shares at lower than offering prices or net asset value without sales charge.

Yield does not reflect capital gains or losses, non-recurring or irregular
income. Gain or loss attributable to actual monthly paydowns on mortgage or
other receivables-backed obligations purchased at a discount or premium is
reflected as an increase or decrease in interest income during the period.

A Funds' average annual total return represents an annualization of the
Fund's total return ("T" in the formula below), over a particular period and is
computed by finding the current percentage rate which will result in the ending
redeemable value ("ERV" in the formula below). Of a $1,000 investment, ("P" in
the formula below) made at the beginning of a one, five or ten year period, or
for the period from the date of commencement of the Fund's operation, if shorter
("N" in the formula below). The following formula will be used to compute the
average annual total return for each Fund:

P (1 + T)TO THE POWER OF N = ERV

<PAGE>

AVERAGE ANNUAL TOTAL RETURN

From commencement of
operations* to For the Fiscal Year Ended
November 30, 1994 November 30, 1994
----------------- -----------------
Reflecting Without Reflecting Without
Deduction of Deduction of Deduction of Deduction of
Maximum Maximum Maximum Maximum
Sales Charge Sales Charge Sales Charge Sales Charge
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Global Equity (1)

Class A 5.49% 6.85% 2.41% 8.37%

Class B 1.63 4.82 2.84 7.84

Class C 4.76 4.76 6.77 7.77

Global Income (1)

Class A (1, 2) .24% 1.27% -6.15% -3.24%

Class B -5.63 -2.71 -8.52 -3.99

Class C -2.84 -2.84 -5.11 -4.20
<FN>
* The Global Equity Fund commenced operations on July 2, 1990; the Global
Income Fund on December 2, 1991. Class B and C shares of the Funds were
initially offered on September 2, 1993.

(1) Reflects the waiver of certain advisory fees for the Global Equity Fund and
the waiver of advisory fees and reimbursement of certain operating expenses
for the Global Income Fund. Without such waivers and reimbursements, the
average annual total returns would have been lower.

(2) Effective May 4, 1992, the maximum sales load on purchases of shares of
Class A shares the Global Income Fund was changed from 4.75% to 3.00%. In
accordance with SEC guidelines, the performance quoted above was calculated
as if the new sales load had been in effect from the inception of the Fund.
</TABLE>

The preceding table assumes that a $1,000 payment was made at the beginning
of the period shown, that no further payments were made, that any distributions
from the assets of each Fund were reinvested. The table reflects the historical
rates of return and deductions for all charges, expenses and fees of each Fund.

In addition to the foregoing, each Fund may advertise its total return over
different periods of time by means of aggregate, average, year by year or other
types of total return figures.

Total returns quoted in advertising reflect all aspects of a Fund's return,
including the effect of reinvesting dividends and capital gain distributions,
and any change in the Fund's net asset value per share over the period. Average
annual returns are calculated by determining the growth or decline in

<PAGE>

value of a hypothetical investment in a fund over a stated period, and then
calculating the annually compounded percentage rate that would have produced the
same result if the rate of growth or decline in value had been constant over the
period. For example, a cumulative return of 100% over ten years would produce
an average annual return of 7.18%, which is the steady annual return that would
equal 100% growth on a compounded basis in ten years.

In addition to average annual returns, each Fund may quote unaveraged or
cumulative total returns reflecting the simple change in value of an investment
over a stated period. Average annual and cumulative total returns may be quoted
as a percentage or as a dollar amount and may be calculated for a single
investment, a series of investments and/or a series of redemptions over any time
period. Total returns and other performance information may be quoted
numerically or in a table, graph or similar illustration. Total returns may be
quoted with or without taking a Fund's sales charge into account. Excluding a
Fund's sales charge from a total return calculation produces a higher total
return figure.

The total return on an investment made in Class A, B and C shares of the Funds
for the period from commencement of public sale through November 30, 1994 is as
follows:

AGGREGATE TOTAL RETURN

FROM COMMENCEMENT OF OPERATIONS* TO NOVEMBER 30, 1994 (2)

Reflecting Deduction of Without Deduction of
Maximum Sales Charge(1) Maximum Sales Charge
----------------------- --------------------
<S> <C> <C>
Global Equity Fund

Class A 26.66% 34.04%

Class B(3) 2.04% 6.04%

Class C(3) 5.97% 5.97%

Global Income Fund

Class A .73% 3.84%

Class B(3) -6.97% -3.36%

Class C(3) -3.52% -3.52%
<FN>
* The Global Equity Fund commenced operations on 7/2/90; the Global
Income Fund on 12/2/91. Class B and C shares of the Funds were
initially offered on 9/2/93.

(1) Effective May 4, 1992, the maximum sales load on purchases of shares of the
Global Income Fund was changed from 4.75% to 3.00%. In accordance with SEC
guidelines, the performance quoted above was calculated as if the new sales
load had been in effect from the inception of the Fund.

(2) Reflects the waiver of certain advisory fees and the reimbursement of
certain expenses. Without such waiver, the inception to date total return
for the Global Equity and Global Income Funds would have been lower.
</TABLE>

<PAGE>

From time to time the Funds may refer in advertisements to rankings and
performance statistics published by (1) recognized mutual fund performance
rating services including but not limited to Lipper Analytical Services, Inc.
and Morningstar, Inc., (2) recognized indexes including but not limited to the
Standard & Poors Composite Stock Price Index, Dow Jones Industrial Average,
Consumer Price Index, EAFE Index, J.P. Morgan Emerging Markets Bond Index, the
Morgan Stanley World Index, J.P. Morgan Latin Eurobond Index, Lehman Brothers
Global Bond Index, Lehman Brothers Global Intermediate Bond Index, Salomon
Brothers World Government Bond Index and Salomon Brothers Hedged World
Government Bond Index, and (3) Money Magazine and other financial publications
including but not limited to magazines, newspapers and newsletters. Performance
statistics may include total returns, measures of volatility or other methods of
portraying performance based on the method used by the publishers of the
information. In addition, comparisons may be made between yields on
certificates of deposit and U.S. government securities and corporate bonds, and
may refer to current or historic financial or economic trends or conditions.
The Global Income Fund also may publish its distribution rate, which is computed
in the same manner as yield except that actual income dividends declared per
share during the period in question is substituted for net investment income per
share.

The performance of the Funds may be compared to the performance of other
mutual funds in general, or to the performance of particular types of mutual
funds. These comparisons may be expressed as mutual fund rankings prepared by
Lipper Analytical Services, Inc. ("Lipper"), and Morningstar, Inc.
("Morningstar"), independent services located in Summit, New Jersey and Chicago,
Illinois, respectively, that monitor the performance of mutual funds. Lipper
and Morningstar generally rank funds on the basis of total return, assuming
reinvestment of distributions, but do not take sales charges or redemption fees
into consideration, and are prepared without regard to tax consequences. In
addition to the mutual fund rankings, performance may be compared to mutual fund
performance indices prepared by Lipper.

From time to time, a Fund's performance also may be compared to other
mutual funds tracked by financial or business publications and periodicals. For
example, the Fund may quote Morningstar in its advertising materials .
Morningstar rates mutual funds on a one star to five star scale on the basis of
risk-adjusted performance.

Quest For Value Distributors may provide information designed to help
individuals understand their investment goals and explore various financial
strategies such as general principles of investing, such as asset allocation,
diversification, risk tolerance, goal setting, and a questionnaire designed to
help create a personal financial profile.

Ibbotson Associates of Chicago, Illinois (Ibbotson) provides historical
returns of the capital markets in the United States, including common stocks,
small capitalization stocks, long-term corporate bonds, intermediate-term
government bonds, long-term government bonds, Treasury bills,

<PAGE>

the U.S. rate of inflation (based on CPI), and combinations of various capital
markets. The performance of these capital markets is based on the returns of
different indices.

Quest for Value Distributors may use the performance of these capital
markets in order to demonstrate general risk-versus-reward investment scenarios.
Performance comparisons may also include the value of a hypothetical investment
in any of these capital markets. The risks associated with the security types
in any capital market may or may not correspond directly to those of the Funds.
The Funds may also compare performance to that of other compilations or indices
that may be developed and made available in the future.

In advertising materials, Quest For Value Distributors may reference or
discuss its products and services, which may include: other Quest funds;
retirement investing; brokerage products and services; the effects of dollar-
cost averaging and saving for college; and the risk of marketing timing. In
addition, Quest for Value Distributors may quote financial or business
publications and periodicals, including model portfolios or allocations, as they
relate to fund management, investment philosophy, and investment techniques.
Quest for Value Distributors may also reprint, and use as advertising and sales
literature, articles from RE: QUEST, a quarterly magazine provided free of
charge to Quest fund shareholders.

The Funds may present their fund number, Quotron symbol, CUSIP number, and
discuss or quote their current portfolio manager.

VOLATILITY. The Funds may quote various measures of volatility and
benchmark correlation in advertising. In addition, the Funds may compare these
measures to those of other funds. Measures of volatility seek to compare a
fund's historical share price fluctuations or total returns to those of a
benchmark. Measures of benchmark correlation indicate how valid a comparative
benchmark may be. All measures of volatility and correlation are calculated
using averages of historical data.

Momentum Indicators indicate the Fund's price movements over specific
periods of time. Each point on the momentum indicator represents the Fund's
percentage change in price movements over that period.

The Funds may advertise examples of the effects of periodic investment
plans, including the principle of dollar cost averaging. In such a program, an
investor invests a fixed dollar amount in a fund at periodic intervals, thereby
purchasing fewer shares when prices are high and more shares when prices are
low. While such a strategy does not assure a profit or guard against a loss in
a declining market, the investor's average cost per share can be lower than if
fixed numbers of shares are purchased at the same intervals. In evaluating such
a plan, investors should consider their ability to continue purchasing shares
during period of low price levels.

The Fund may be available for purchase through retirement plans or other
programs offering deferral of or exemption from income taxes, which may produce
superior after-tax returns over time.

<PAGE>

For example, a $1,000 investment earning a taxable return of 10% annually would
have an after-tax of $1,949 after ten years, assuming tax was deducted from the
return each year at a 28% rate. An equivalent tax-deferred investment would
have an after-tax value of $2,100 after ten years, assuming tax was deducted at
a 31% rate from the tax-deferred earnings at the end of the ten-year plan.

DISTRIBUTION EXPENSE PLAN

Each class of shares of each Fund has a Plan and Agreement of Distribution
(the "Plan(s)") pursuant to which it is permitted to compensate the Distributor
in connection with the distribution of shares. Each Plan was adopted in
accordance with the requirements of Rule 12b-1 under the 1940 Act, and was
initially approved by the Fund's Board of Directors (who found that there is a
reasonable likelihood that the Plan will benefit the Fund and its shareholders),
including a majority of the Directors who are not "interested persons" of the
Fund as defined in the 1940 Act and who have no direct or indirect financial
interest in the operation of the Plan or in any agreement related to the Plan
("Disinterested Directors") and by Oppenheimer Capital as then sole shareholder
of each Fund on June 21, 1990 with respect to the Global Equity Fund and on July
29, 1991 with respect to the Global Income Fund. The shareholders of the Global
Equity Fund approved the Plan on January 13, 1992.

Under each Plan, each class of shares of each Fund pays the Distributor a
monthly fee for services and expenses in connection with the distribution of the
Fund's shares at the following percentage rates of average daily net assets on
an annual basis: Global Equity Fund, Class A shares - .25%, Class B and C shares
- - .75%; Global Income Fund, Class A shares - .05%, Class B and C shares - .75%.
Each class of shares of each Fund also pays a service fee of .25% of average
daily net assets. For the fiscal year ended November 30, 1994, the total
distribution fee accrued or paid by Class A, B and C shares of the Global Equity
Fund were $742,304, $59,822 and $11,502, respectively. For the fiscal year
ended November 30, 1994, the total distribution fees accrued or paid by the
Class A, B and C shares of Global Income Fund were $46,739, $10,182 and $1,874,
respectively.

The activities, services and expenditures authorized to be provided by the
Distributor under each Plan shall include one or more of the following: (1)
compensation to sales representatives, to the Distributor and other broker-
dealers for activities related to sales of Shares and servicing existing
shareholders; (2) sales incentives and bonuses to the Distributor's sales
representatives and to marketing personnel in connection with promoting sales of
Shares; (3) expenses incurred in connection with promoting sales of Shares and
servicing existing shareholders; (4) printing reports and prospectuses for
potential investors in the Shares; (5) preparing and distributing sales
literature; and (6) providing advertising and promotional activities, including
direct mail solicitation and television, radio, newspaper, magazine and other
media advertisements.

Each Plan states the Treasurer of the Fund shall provide, and that the
Disinterested Directors shall review, quarterly reports setting forth the
amounts expended pursuant to the Plan in connection with the distribution of the
Fund's shares and the purpose for which the amounts were expended. It further
provides that, as long as the Plan remains in effect, the selection and
nomination of Directors of the

<PAGE>

Fund who are not "interested persons" shall be committed to the discretion of
the Directors then in office who are not "interested persons" of the Fund. The
Plans can be terminated at any time, without penalty by the vote of a majority
of the Disinterested Directors or by the vote of the holders of a majority of
the outstanding voting securities of the Fund. Finally, each Plan cannot be
amended to increase materially the amount to be spent by the Fund without
shareholder approval, and all material amendments are required to be approved by
the vote of the Board of Directors of that Fund, including a majority of the
Disinterested Directors, cast in person at a meeting called for that purpose. A
rule of the National Association of Securities Dealers, Inc. limits the total
aggregate asset based, front end and deferred sales charges (excluding service
fees) to 6.25% of a fund's new gross sales.

It is estimated that the Distributor spent approximately the following
amounts with respect to Class A, B and C shares of the Global Equity and Global
Income Funds for the fiscal year ended November 30, 1994.

Printing and
mailing of
Prospectuses to
Sales Material other than
and current Compensation to Compensation to
Advertising shareholders Dealers Sales Personnel Other (1)
----------- ------------ ------- --------------- ---------
<S> <C> <C> <C> <C> <C>
Global Equity Fund

Class A $154,958 $94,017 $590,774 $360,944 $204,049

Class B 40,559 26,237 343,744 97,485 55,223

Class C 28,114 17,762 17,122 66,896 37,844

Global Income Fund

Class A $40,474 $24,666 $47,993 $93,776 $87,219

Class B 26,620 16,253 42,666 62,207 35,177

Class C 24,720 15,196 832 58,143 32,801

<FN>
(1) Includes costs of telephone and overhead.
</TABLE>

During the fiscal year ended November 30, 1994, the Distributor received
the following compensation with repect to the Funds:

PORTION OF SALES COMPENSATION ON
FUND CHARGE ON CLASS A SHARES REDEMPTIONS (CDSC'S)
Global Equity 84,018 $7,300
Global Income 9,504 $ 600

<PAGE>

ADDITIONAL INFORMATION

DESCRIPTION OF THE FUNDS. The Global Equity Fund is a corporation formed
under the laws of Maryland on April 25, 1990. The Global Income Fund is the
only existing series of the Quest for Value Global Funds, Inc., a corporation
formed under the laws of Maryland on June 12, 1991. It is not contemplated that
regular annual meetings of shareholders of either corporation will be held;
however, a meeting will be held if requested by the holders of 10% of each
corporation's voting securities. In addition, 10 shareholders holding the
lesser of shares having a net asset value of at least $25,000 or 1% of a Fund's
outstanding shares may advise the Board of Directors in writing that they wish
to communicate with other shareholders of that Fund for the purpose of
requesting a meeting to remove a director. The Board of Directors will then
either give the applicants access to the Fund's shareholder list or mail the
applicant's communication to all other shareholders at the applicant's expense.

When issued, the shares of each class of the Fund are fully paid and have no
preemptive, conversion, or other subscription rights. Each class of shares
represents identical interests in the applicable Fund's investment portfolio.
As such, they have the same rights, privileges and preferences, except with
respect to: (a) the designation of each class, (b) the effect of the respective
sales charges, if any, for each class, (c) the distribution fees borne by each
class, (d) the expenses allocable exclusively to each class, (e) voting rights
on matters exclusively affecting a single class and (f) the exchange privilege
of each class. Upon liquidation of the Fund, shareholders are entitled to share
pro rata in the net assets available for distribution to shareholders after all
debts and expenses have been paid. The shares do not have cumulative voting
rights.

Each of the Funds may in the future seek to achieve its investment objective
by investing all of its investable assets in a no-load diversified open-end
management investment company with the same portfolio manager, investment
objective and investment restrictions as the respective Fund. The shareholders
of the Funds authorized such investment by approving changes to the investment
restrictions of the Fund at a Special Meeting of Shareholders held in 1994.
Such investment would only be made if the Directors feel that the aggregate per
share expenses of the Fund and such other investment company would be less than
or approximately equal to the expenses which the Fund would incur if the Fund
were to continue its present investment policies. It is expected that such an
investment in another investment company will have no preference, preemptive,
conversion or similar rights, and will be fully-paid and non-assessable. It is
expected that the investment company will not be required to hold annual
meetings, but will hold special meetings of shareholders when, in the judgment
of the Directors, it is necessary or desirable to submit matters for shareholder
vote.

REDUCED SALES CHARGES. Sales are made at reduced sales charges to certain
persons described under "Reduced Sales Charges" in the Prospectus because of
economies of scale and/or because there is little or no sales effort required to
make sales to such persons.

<PAGE>

POSSIBLE ADDITIONAL PORTFOLIO SERIES. The Boards of Directors are empowered
to create additional portfolios of each corporation. If additional portfolios
are created by the Board of Directors, shares of each such portfolio will be
entitled to vote as a class only to the extent permitted by the 1940 Act (see
below) or as permitted by the Board of Directors. Expenses not otherwise
identified with a particular portfolio will be allocated fairly among two or
more portfolios by the Board of Directors.

Under Rule 18f-2 of the 1940 Act, any matter required to be submitted to a
vote of shareholders of any investment company which has two or more series
outstanding is not deemed to have been effectively acted upon unless approved by
the holders of a "majority" (as defined in that Rule) of the voting securities
of each series affected by the matter. Such separate voting requirements do not
apply to the election of directors or the ratification of the selection of
accountants. Approval of an investment management or distribution plan and a
change in fundamental policies would be regarded as matters requiring separate
voting by each portfolio. The Rule contains special provisions for cases in
which an advisory contract is approved by one or more, but not all, series. A
change in investment policy may go into effect as to one or more series whose
holders so approve the change even though the required vote is not obtained as
to the holders of other affected series.

DISTRIBUTION AGREEMENT. Under the Distribution Agreement between each Fund
and the Distributor, the Distributor acts as the Fund's agent in the continuous
public offering of its shares. Expenses normally attributable to sales, other
than those paid under the Distribution Expense Plan, are borne by the
Distributor.

INDEPENDENT ACCOUNTANTS. Price Waterhouse LLP, 1177 Avenue of the Americas,
New York, New York, are the independent accountant of the Funds; their services
include examining the annual financial statements of the Funds as well as other
related services. Price Waterhouse LLP also serves as independent accountants
for Quest Advisors and some of its affiliates.

CUSTODIAN. State Street Bank and Trust Company acts as custodian of the
assets, transfer agent and shareholder servicing agent of the Funds.

DISTRIBUTION OPTIONS. Shareholders may change their distribution options by
giving the Transfer Agent three days prior notice in writing.

SHAREHOLDER SERVICING AGENT FOR CERTAIN SHAREHOLDERS. Unified Management
Corporation (1-800-346-4601) is the shareholder servicing agent for former
shareholders of the AMA Family of Funds and clients of AMA Investment Advisers,
Inc. (which acted as the investment advisor to the AMA Family of Funds) who
acquire shares of any Quest Fund, and for former shareholders of the Unified
Funds and Liquid Green Trusts, accounts which participated or participate in a
retirement plan for which Unified Investment Advisers, Inc. or an affiliate acts
as custodian or trustee, accounts which have a Money Manager brokerage account,
and other accounts for which Unified Management Corporation is the dealer of
record.

<PAGE>

TAX INFORMATION. The Federal tax treatment of the Funds' dividends and
distributions is explained in the Prospectus under the heading "Tax Status."
Each Fund will be subject to a nondeductible 4% excise tax to the extent that it
fails to distribute by the end of any calendar year substantially all of its
ordinary income for that year and capital gains net income for the one year
period ending on October 31 of that year.

CAPITAL LOSS CARRYOVERS. For the year ended November 30, 1994, Global Income
had net capital loss carryovers of $1,077,004, of which $204,539, $214,944 and
$657,521 will be available to offset future net capital gains realized through
fiscal years ending 1998, 2001 and 2002, to the extent provided by regulations.
Capital and currency losses incurred after October 31, 1994 are deemed to arise
on the first business day of the following tax year. Accordingly, for the
fiscal year ended November 30, 1994, Global Income incurred and elected to defer
$52,073 and $127,100 in net capital and net currency losses, respectively.

RETIREMENT PLANS. Quest for Value Distributors may print advertisements and
brochures concerning retirement plans, lump sum distributions and 401-k plans.
These materials may include descriptions of tax rules, strategies for reducing
risk and descriptions of the 401-k program offered by Quest for Value
Distributors. From time to time hypothetical investment programs illustrating
various tax-deferred investment strategies will be used in brochures, sales
literature, and omitting prospectuses. The following examples illustrate the
general approaches that will be followed. These hypotheticals will be modified
with different investment amounts, reflecting the amounts that can be invested
in different types of retirement programs, different assumed tax rates, and
assumed rates of return. They should not be viewed as indicative of past or
future performance of any Quest for Value product.

<PAGE>

EXAMPLES
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------
Benefits of Long Term Tax-Free Compounding - Benefits of Long Term Tax-Free Compounding -
Single Sum Periodic Investment
- ---------------------------------------------------------------------------------------------------
Amount of Contribution: $100,000 Amount Invested Annually: $2,000
- ---------------------------------------------------------------------------------------------------
Rates of Return Rates of Return
Years ----------------------------------------- Years -----------------------------------------
8.00% 10.00% 12.00% 8.00% 10.00% 12.00%
----------------------------------------- -----------------------------------------
Value at End Value at End
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
5 $ 146,933 $ 161,051 $ 176,234 5 $ 12,672 $ 13,431 $ 14,230
- ---------------------------------------------------------------------------------------------------
10 $ 215,892 $ 259,374 $ 310,585 10 $ 31,291 $ 35,062 $ 39,309
- ---------------------------------------------------------------------------------------------------
15 $ 317,217 $ 417,725 $ 547,357 15 $ 58,649 $ 69,899 $ 83,507
- ---------------------------------------------------------------------------------------------------
20 $ 466,096 $ 672,750 $ 964,629 20 $ 98,846 $126,005 $161,397
- ---------------------------------------------------------------------------------------------------
25 $ 684,848 $1,083,471 $1,700,006 25 $157,909 $216,364 $298,668
- ---------------------------------------------------------------------------------------------------
30 $1,006,266 $1,744,940 $2,995,992 30 $244,692 $361,887 $540,585
- ---------------------------------------------------------------------------------------------------

- ---------------------------------------------------------------------------------------------------
Comparison of Taxable and Tax-Free Investing -- Periodic Investments
(Assumed Tax Rate : 28%)
- ---------------------------------------------------------------------------------------------------
Amount of Annual Contribution (Pre-Tax):$2,000 Annual Contribution (After Tax): $1,440
- ---------------------------------------------------------------------------------------------------
Tax Deferred Rates of Return Fully Taxed Rates of Return
Years ----------------------------------------- Years -----------------------------------------
8.00% 10.00% 12.00% 5.76% 7.20% 8.64%
----------------------------------------- -----------------------------------------
Value at End Value at End
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
5 $ 12,672 $ 13,431 $ 14,230 5 $ 8,544 $ 8,913 $ 9,296
- ---------------------------------------------------------------------------------------------------
10 $ 31,291 $ 35,062 $ 39,309 10 $ 19,849 $ 21,531 $ 23,364
- ---------------------------------------------------------------------------------------------------
15 $ 58,649 $ 69,899 $ 83,507 15 $ 34,807 $ 39,394 $ 44,654
- ---------------------------------------------------------------------------------------------------
20 $ 98,846 $126,005 $161,397 20 $ 54,598 $ 64,683 $ 76,874
- ---------------------------------------------------------------------------------------------------
25 $157,909 $216,364 $298,668 25 $ 80,785 $100,485 $125,635
- ---------------------------------------------------------------------------------------------------
30 $244,692 $361,887 $540,585 30 $115,435 $151,171 $199,429
- ---------------------------------------------------------------------------------------------------

- ---------------------------------------------------------
Comparison of Tax Deferred Investing
-- Deducting Taxes at End
(Assumed Tax Rate at End: 28%)
- ---------------------------------------------------------
Amount of Annual Contribution: $2,000
- ---------------------------------------------------------
Tax Deferred Rates of Return
Years -------------------------------------------------
8.00% 10.00% 12.00%
-------------------------------------------------
Value at End
- ---------------------------------------------------------
<S> <C> <C> <C>
5 $ 11,924 $ 12,470 $ 13,046
- ---------------------------------------------------------
10 $ 28,130 $ 30,485 $ 33,903
- ---------------------------------------------------------
15 $ 50,627 $ 58,728 $ 68,525
- ---------------------------------------------------------
20 $ 82,369 $101,924 $127,406
- ---------------------------------------------------------
25 $127,694 $169,782 $229,041
- ---------------------------------------------------------
30 $192,978 $277,359 $406,021
- ---------------------------------------------------------
</TABLE>

<PAGE>

APPENDIX A -- RATINGS

DESCRIPTION OF MOODY'S CORPORATE RATINGS

Aaa. Bonds which are rated Aaa are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred to as
"gilt edged." Interest payments are protected by a large or by an exceptionally
stable margin and principal is secure. While the various protective elements
are likely to change, such changes as can be visualized are most unlikely to
impair the fundamentally strong position of such issues.

Aa. Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally known
as high grade bonds. They are rated lower than the best bonds because margins
of protection may not be as large as in Aaa securities, or fluctuation of
protective elements may be of greater amplitude, or there may be other elements
present which made the long-term risks appear somewhat larger than in Aaa
securities.

A. Bonds which are rated A possess many favorable investment attributes
and are to be considered as upper medium grade obligations. Factors giving
security to principal and interest are considered adequate, but elements may be
present which suggest a susceptibility to impairment sometime in the future.

Baa. Bonds which are rated Baa are considered as medium grade obligations,
(i.e.; they are neither highly protected nor poorly secured). Interest payments
and principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.

Ba. Bonds which are rated Ba are judges to have speculative elements and
their future cannot be considered as well assured. Often the protection of
interest and principal payments may be very moderate, and therefore not well
safeguarded during both good and bad times. Uncertainty of position
characterizes bonds in this class.

B. Bonds which are rated B generally lack the characteristics of a
desirable investment. Assurance of interest and principal payments or of other
terms of the contract over long periods may be small.

Caa. Bonds which are rated Caa are of poor standing. Such issues may be in
default or there may be elements of danger present with respect to principal or
interest.

Ca. Bonds which are rated Ca represent obligations which are speculative
in a high degree. Such issues are often in default or have other marked
shortcomings.

A-1

<PAGE>

C. Bonds which are rated C are the lowest rated class of bonds and issues
so rated can be regarded as having extremely poor prospects of ever attaining
any real investment standing.

DESCRIPTION OF S&P'S CORPORATE RATINGS

AAA. Debt rated AAA has the highest rating assigned by S&P. Capacity to
pay interest and repay principal is extremely strong.

AA. Debt rated AA has a very strong capacity to pay interest and repay
principal and differs from the highest rated issues only in small degree.

A. Debt rated A has a strong capacity to pay interest and repay principal
and differs from the higher rated issues only in small degree.

BBB. Debt rated BBB is regarded as having adequate capacity to pay
interest and repay principal. Whereas it normally exhibits adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
debt in this category.

BB. Debt rated BB has less near-term vulnerability to default than other
speculative grade debt. However, it faces major ongoing uncertainties or
exposure to adverse business, financial or economic conditions which could lead
to inadequate capacity to meet timely interest and principal payment. The BB
rating category is also used for debt subordinated to senior debt that is
assigned an actual or implied BBB- rating.

B. Debt rated B has a greater vulnerability to default but presently has
the capacity to meet interest and principal payments. Adverse business,
financial or economic conditions would likely impair capacity or willingness to
pay interest and repay principal. The B rating category is also used for debt
subordinated to senior debt that is assigned an actual or implied BB or BB-
rating

CCC. Debt rated CCC has a current identifiable vulnerability to default
and is dependent upon favorable business, financial and economic conditions to
meet timely payments of principal. In the event of adverse business, financial
or economic conditions, it is not likely to have the capacity to pay interest
and repay principal. The CCC rating category is also used for debt
subordinated to senior debt that is assigned an actual or implied CCC rating.

CC. The rating CC is typically applied to debt subordinated to senior debt
that is assigned an actual or implied CCC rating.

A-2

<PAGE>

C. The rating C is typically applied to debt subordinated to senior debt
that is assigned an actual or implied CCC- debt rating. The C rating may be
used to cover a situation where a bankruptcy petition has been filed, but debt
service payments are continued.

CI. The rating CI is reserved for income bonds on which no interest is
being paid.

D. Debt rated D is in payment default. The D rating category is used when
interest payments or principal payments are not made on the date due even if the
applicable grace period has not expired, unless S & P believes that such
payments will be made during such grace period. The D rating also will be used
upon the filing of a bankruptcy petition if debt service payments are
jeopardized.

DESCRIPTION OF COMMERCIAL PAPER RATINGS

Commercial paper rated Prime-1 by Moody's are judged by Moody's to be of
the best quality. Their short-term debt obligations carry the smallest degree
of investment risk. Margins of support for current indebtedness are large or
stable with cash flow and asset protection well assured. Current liquidity
provides ample coverage of near-term liabilities and unused alternative
financing arrangements are generally available. While protective elements may
change over the intermediate or longer term, such changes are most unlikely to
impair the fundamentally strong position of short-term obligations.

Issuers (or related supporting institutions) rated Prime-2 have a strong
capacity for repayment of short-term promissory obligations. This will normally
be evidenced by many of the characteristics cited above but to a lesser degree.
Earnings trends and coverage ratios, while sound, will be more subject to
variation. Capitalization characteristics, while still appropriate, may be more
affected by external conditions. Ample alternate liquidity is maintained.

Commercial paper rated A by S&P have the following characteristics.
Liquidity ratios are better than industry average. Long-term debt rating is A
or better. The issuer has access to at least two additional channels of
borrowing. Basic earnings and cash flow are in an upward trend. Typically, the
issuer is a strong company in a well-established industry and has superior
management. Issuers rated A are further refined by use of numbers 1, 2, and 3
to denote relative strength within this highest classification. Those issuers
rated A-1 that are determined by S&P to possess overwhelming safety
characteristics are denoted with a plus (+) sign designation.

Fitch's commercial paper ratings represent Fitch's assessment of the
issuer's ability to meet its obligations in a timely manner. The assessment
places emphasis on the existence of liquidity. Ratings range from F-1+ which
represents exceptionally strong credit quality to F-4 which represents weak
credit quality.

Duff & Phelps' short-term ratings apply to all obligations with maturities
of under one year, including commercial paper, the uninsured portion of
certificates of deposit, unsecured bank loans, master notes, bankers
acceptances, irrevocable letters of credit and current maturities of long-term

A-3

<PAGE>

debt. Emphasis is placed on liquidity. Ratings range from Duff 1+ for the
highest quality to Duff 5 for the lowest, issuers in default. Issues rated Duff
1+ are regarded as having the highest certainty of timely payment. Issues rated
Duff 1 are regarded as having very high certainty of timely payment.

A-4

<PAGE>

NOVEMBER 30, 1994

SCHEDULES OF INVESTMENTS

GLOBAL EQUITY FUND

SHARES VALUE
- --------------------------------------------------------------------------------
<S> <C>

COMMON STOCKS--86.6%
ARGENTINA--1.3%
- --------------------------------------------------------------------------------
ENERGY--0.6%
40,000 YPF Sociedad Anonima ADR . . . . . . . . . $ 905,000
------------
TOBACCO/BEVERAGES/FOOD PRODUCTS--0.7%
46,000 Quilmes Industrial SA ADR. . . . . . . . . 1,216,700
------------
Total Argentinean Common Stocks. . . . . . . . . . . . . . . . . 2,121,700
------------

AUSTRALIA--2.7%
- --------------------------------------------------------------------------------
METALS/MINING--1.9%
405,000 Comalco Ltd. . . . . . . . . . . . . . . . 1,510,381
280,000 Western Mining Corp. Holdings Ltd. . . . . 1,593,233
------------
3,103,614
------------
PUBLIC SERVICES--0.8%
250,000 Mayne Nickless Ltd.. . . . . . . . . . . . 1,207,228
------------

Total Australian Common Stocks . . . . . . . . . . . . . . . . . 4,310,842
------------

AUSTRIA--1.5%
- --------------------------------------------------------------------------------
BUILDING & CONSTRUCTION
35,000 Flughafen Wien AG. . . . . . . . . . . . . 1,503,504
2,800 Wienerberger Baustoffindustrie AG. . . . . 964,522
------------
Total Austrian Common Stocks . . . . . . . . . . . . . . . . . . 2,468,026
------------

DENMARK--2.1%
- --------------------------------------------------------------------------------
CONGLOMERATES--1.1%
20,000 Sophus Berendsen AS. . . . . . . . . . . . 1,667,074
------------
TELECOMMUNICATIONS--1.0%
31,200 Tele Danmark AS (Class B). . . . . . . . . 1,630,476
------------
Total Danish Common Stocks . . . . . . . . . . . . . . . . . . . 3,297,550
------------

FINLAND--2.6%
- --------------------------------------------------------------------------------
EXPORTING--1.7%
20,000 Oy Nokia AB. . . . . . . . . . . . . . . . 2,730,263
------------
RETAIL--0.9%
30,700 Oy Stockmann AB. . . . . . . . . . . . . . 1,439,063
------------
Total Finnish Common Stocks. . . . . . . . . . . . . . . . . . . 4,169,326
------------

FRANCE--4.5%
- --------------------------------------------------------------------------------
AEROSPACE--0.7%
2,410 Sagem. . . . . . . . . . . . . . . . . . . 1,184,394
------------
AUTOMOTIVE--0.6%
27,000 Renault SA . . . . . . . . . . . . . . . . 909,368
------------
ENERGY--1.8%
38,340 Elf Aquitaine, Inc. ADS. . . . . . . . . . 1,303,560
24,710 Total SA . . . . . . . . . . . . . . . . . 1,547,820
------------
2,851,380
------------
MACHINERY & ENGINEERING--1.4%
30,000 Michelin (CGDE). . . . . . . . . . . . . . 1,154,275
15,300 Schneider SA . . . . . . . . . . . . . . . 1,103,420
------------
2,257,695
------------
Total French Common Stocks.. . . . . . . . . . . . . . . . . . . 7,202,837
------------

GERMANY--4.3%
- --------------------------------------------------------------------------------
BANKING--1.6%
4,000 Deutsche Bank AG . . . . . . . . . . . . . 1,889,583
2,700 Dresdner Bank AG . . . . . . . . . . . . . 704,004
------------
2,593,587
------------
COMPUTER SERVICES--0.9%
2,500 SAP AG . . . . . . . . . . . . . . . . . . 1,467,073
------------
HEALTH & PERSONAL CARE--1.1%
2,700 Schering AG. . . . . . . . . . . . . . . . 1,692,018
------------
MACHINERY & ENGINEERING--0.7%
2,000 Linde AG . . . . . . . . . . . . . . . . . 1,142,420
------------
Total German Common Stocks . . . . . . . . . . . . . . . . . . . 6,895,098
------------

INDONESIA--0.9%
- --------------------------------------------------------------------------------
TELECOMMUNICATIONS
37,500 Indonesian Satellite ADR . . . . . . . . . 1,425,000
------------

ITALY--1.9%
- --------------------------------------------------------------------------------
TELECOMMUNICATIONS--0.9%
690,000 Telecom Italia . . . . . . . . . . . . . . 1,430,118
------------
TEXTILES/APPAREL--0.7%
170,000 Marzotto & Figli . . . . . . . . . . . . . 1,167,481
------------
UTILITIES--0.3%
114,000 Edison S.p.A.. . . . . . . . . . . . . . . 476,087
------------
Total Italian Common Stocks. . . . . . . . . . . . . . . . . . . 3,073,686
------------

JAPAN--17.2%
- --------------------------------------------------------------------------------
AEROSPACE--1.1%
250,000 Mitsubishi Heavy Industries Ltd. . . . . . 1,855,597
------------
APPLIANCES & HOUSEHOLD DURABLES--2.0%
101,000 Sharp Corp.. . . . . . . . . . . . . . . . 1,756,699
29,000 Sony Corp. . . . . . . . . . . . . . . . . 1,539,590
------------
3,296,289
------------
AUTOMOTIVE--0.9%
145,000 Mitsubishi Motors. . . . . . . . . . . . . 1,373,900
------------

B-1
<PAGE>

NOVEMBER 30, 1994

SCHEDULES OF INVESTMENTS

GLOBAL EQUITY FUND (CONT'D)

SHARES VALUE
- --------------------------------------------------------------------------------
<S> <C>

JAPAN (CONT'D)
BANKING--1.0%
160,000 The Mitsui Trust & Banking Co., Ltd. . . . $ 1,634,139
------------
BUILDING & CONSTRUCTION--0.8%
114,000 Sekisui House Ltd. . . . . . . . . . . . . 1,325,716
------------
CONSUMER PRODUCTS--0.9%
91,000 Yakult Honsha Co.. . . . . . . . . . . . . 1,407,928
------------
DRUGS & MEDICAL PRODUCTS--1.0%
150,000 Fujisawa Pharmaceutical Co.. . . . . . . . 1,638,184
------------
ELECTRONICS--3.6%
80,000 Hitachi Maxell Co. . . . . . . . . . . . . 1,391,445
24,000 Kyocera Corp.. . . . . . . . . . . . . . . 1,781,373
88,000 NEC Corp.. . . . . . . . . . . . . . . . . 1,023,359
75,000 Nippondenso Co., Ltd.. . . . . . . . . . . 1,532,005
------------
5,728,182
------------
INSURANCE--1.1%
150,000 Tokio Marine & Fire Insurance Co., Ltd.. . 1,729,194
------------
MERCHANDISING--2.1%
45,000 Ito Yokado Co., Ltd. . . . . . . . . . . . 2,389,018
85,400 Simree Co., Ltd. . . . . . . . . . . . . . 1,001,760
------------
3,390,778
------------
MISCELLANEOUS FINANCIAL SERVICES--1.5%
8,000 Japan Associated Finance Co., Ltd. . . . . 1,100,212
85,000 Toyo Tec Co., Ltd. . . . . . . . . . . . . 1,246,334
------------
2,346,546
------------
RECREATION--1.2%
110,000 Canon, Inc.. . . . . . . . . . . . . . . . 1,902,114
------------
Total Japanese Common Stocks . . . . . . . . . . . . . . . . . . 27,628,567
------------

MEXICO--0.9%
- --------------------------------------------------------------------------------
MISCELLANEOUS FINANCIAL SERVICES--0.3%
125,000 Grupo Finance Del Norte (Class B). . . . . 494,330
------------
RETAIL--0.2%
120,000 Cifra SA de CV . . . . . . . . . . . . . . 324,513
------------
TELECOMMUNICATIONS--0.4%
13,000 Telefonos De Mexico SA ADR . . . . . . . . 689,000
------------
Total Mexican Common Stocks. . . . . . . . . . . . . . . . . . . 1,507,843
------------

NETHERLANDS--5.5%
- --------------------------------------------------------------------------------
BUILDING & CONSTRUCTION--1.0%
19,500 Kondor Wessels Groep NV. . . . . . . . . . 505,296
46,000 NBM Amstelland NV. . . . . . . . . . . . . 484,652
22,500 Sphinx Kon Gustavsberg--CVA. . . . . . . . 694,516
------------
1,684,464
------------
ELECTRONICS--1.0%
50,833 Getronics NV . . . . . . . . . . . . . . . 1,676,195
------------
INSURANCE--1.3%
44,127 International Nederlanden. . . . . . . . . 2,075,796
------------
MISCELLANEOUS FINANCIAL SERVICES--1.0%
19,855 Hagemeyer. . . . . . . . . . . . . . . . . 1,566,101
------------
PUBLISHING--1.2%
26,844 Wolters Kluwer . . . . . . . . . . . . . . 1,895,698
------------
Total Netherlands Common Stocks. . . . . . . . . . . . . . . . . 8,898,254
------------

SINGAPORE--0.3%
- --------------------------------------------------------------------------------
ELECTRONICS
700,000 IPC Corp . . . . . . . . . . . . . . . . . 497,268
------------

SPAIN--1.7%
- --------------------------------------------------------------------------------
BUILDING & CONSTRUCTION--1.1%
17,000 Fomento de Construcione Y Contra . . . . . 1,684,082
------------
UTILITIES--0.6%
200,000 Sevillana De Electric. . . . . . . . . . . 970,762
------------
Total Spanish Common Stocks. . . . . . . . . . . . . . . . . . . 2,654,844
------------

SWEDEN--3.8%
- --------------------------------------------------------------------------------
DRUGS & MEDICAL PRODUCTS--1.0%
60,000 ASTRA AB . . . . . . . . . . . . . . . . . 1,616,757
------------
MACHINERY & ENGINEERING--2.8%
20,000 ASEA AB. . . . . . . . . . . . . . . . . . 1,422,958
125,000 Atlas Copco AB . . . . . . . . . . . . . . 1,609,456
130,000 Kalmar Industries. . . . . . . . . . . . . 1,527,158
------------
4,559,572
------------
Total Swedish Common Stocks. . . . . . . . . . . . . . . . . . . 6,176,329
------------

SWITZERLAND--1.9%
- --------------------------------------------------------------------------------
BANKING--0.8%
2,900 Bil GT Gruppe AG . . . . . . . . . . . . . 1,345,023
------------
BUILDING & CONSTRUCTION--1.1%
2,300 Holderbank Financiere Glaris AG. . . . . . 1,784,842
------------
Total Swiss Common Stocks. . . . . . . . . . . . . . . . . . . . 3,129,865
------------

B-2
<PAGE>

SHARES VALUE
- --------------------------------------------------------------------------------
<S> <C>

UNITED KINGDOM--3.1%
- --------------------------------------------------------------------------------
PUBLIC SERVICES--1.2%
240,000 British Airport Authority PLC. . . . . . . $ 1,892,807
------------
TOBACCO/BEVERAGES/FOOD PRODUCTS--1.0%
221,000 Guinness PLC . . . . . . . . . . . . . . . 1,582,777
------------
UTILITIES--0.9%
187,400 National Power PLC . . . . . . . . . . . . 1,456,675
------------
Total United Kingdom Common Stocks . . . . . . . . . . . . . . . 4,932,259
------------

UNITED STATES--30.4%
- --------------------------------------------------------------------------------
AEROSPACE--3.5%
35,000 McDonnell Douglas Corp.. . . . . . . . . . 4,882,500
15,300 Sundstrand Corp. . . . . . . . . . . . . . 654,075
------------
5,536,575
------------
BANKING--6.4%
20,000 First Interstate Bancorp.. . . . . . . . . 1,410,000
169,215 Mellon Bank Corp.. . . . . . . . . . . . . 5,605,247
23,000 Wells Fargo & Co.. . . . . . . . . . . . . 3,320,625
------------
10,335,872
------------
CHEMICALS--2.9%
21,000 Hercules, Inc. . . . . . . . . . . . . . . 2,401,875
31,000 Monsanto Co. . . . . . . . . . . . . . . . 2,232,000
------------
4,633,875
------------
CONGLOMERATES--1.1%
20,000 General Electric Co. . . . . . . . . . . . 920,000
10,000 ITT Corp.. . . . . . . . . . . . . . . . . 796,250
------------
1,716,250
------------
CONSUMER PRODUCTS--1.3%
35,000 Avon Products, Inc.. . . . . . . . . . . . 2,165,625
------------
DRUGS & MEDICAL PRODUCTS--3.7%
70,000 Becton, Dickinson & Co.. . . . . . . . . . 3,307,500
34,000 Warner-Lambert Co. . . . . . . . . . . . . 2,630,750
------------
5,938,250
------------
ENERGY--0.6%
20,000 MAPCO, Inc.. . . . . . . . . . . . . . . . 1,002,500
------------
INSURANCE--3.4%
70,000 EXEL Ltd.. . . . . . . . . . . . . . . . . 2,625,000
61,000 Transamerica Corp. . . . . . . . . . . . . 2,889,875
------------
5,514,875
------------
METALS/MINING--0.8%
875 Freeport McMoRan Copper & Gold
(Class A) . . . . . . . . . . . . . . . . 17,609
70,000 Freeport McMoRan, Inc. . . . . . . . . . . 1,198,750
------------
1,216,359
------------
MISCELLANEOUS FINANCIAL SERVICES--4.7%
110,000 American Express Co. . . . . . . . . . . . 3,258,750
87,000 Federal Home Loan Mortgage Corp. . . . . . 4,339,125
------------
7,597,875
------------
TECHNOLOGY--1.2%
30,000 Intel Corp.. . . . . . . . . . . . . . . . 1,893,750
------------
TELECOMMUNICATIONS--0.8%
44,000 Sprint Corp. . . . . . . . . . . . . . . . 1,314,500
------------
Total United States Common Stocks. . . . . . . . . . . . . . . . 48,866,306
------------

Total Common Stocks (cost--$121,902,041) . . . . . . . . . . . . $139,255,600
------------

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

WARRANTS VALUE
- --------------------------------------------------------------------------------
<S> <C>

WARRANTS--0.0%
SWITZERLAND
- --------------------------------------------------------------------------------
Building & Construction
11,500 Holderbank Financiere Glaris AG,
12/20/94, strike @ CHF 620 *. . . . . . . $ 17,779
------------

B-3
<PAGE>

NOVEMBER 30, 1994

SCHEDULES OF INVESTMENTS

GLOBAL EQUITY FUND (CONT'D)

PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------
<S> <C>

CONVERTIBLE BONDS--0.3%
SWEDEN
- --------------------------------------------------------------------------------
MISCELLANEOUS FINANCIAL SERVICES
2,200,000 SEK Investor AB 8.00%, 6/21/01
(cost--$359,464). . . . . . . . . . . . . $ 385,473
------------

REPURCHASE AGREEMENT--13.0%
20,800,000 US$ Prudential Securities, 5.65%, 12/01/94,
(proceeds at maturity: $20,803,264,
collateralized by $21,445,000 par,
$21,219,828 value, U.S. Treasury Notes
3.875%, 8/31/95) (cost--$20,800,000). . . $ 20,800,000
------------

LOCAL
CURRENCY VALUE
- --------------------------------------------------------------------------------
<S> <C>

FOREIGN CURRENCY
CALL ACCOUNTS**--0.5%
- --------------------------------------------------------------------------------
STATE STREET BANK & TRUST CO.
966,524,112 Italian Lira 7.25% . . . . . . . . . . . . . $ 597,986
159,642 Pound Sterling 4.25% . . . . . . . . . . . . 250,183
9,431 Australian Dollar 5.50%. . . . . . . . . . . 7,252
11,966 Danish Krone 3.50% . . . . . . . . . . . . . 1,948
------------
TOTAL FOREIGN CURRENCY CALL ACCOUNTS (cost--$856,895). . . . . . $ 857,369
------------

TOTAL INVESTMENTS (cost--$143,918,400) . . . . . . 100.4% $161,316,221
OTHER LIABILITIES IN EXCESS OF OTHER ASSETS. . . . (0.4) (589,606)
----- ------------
TOTAL NET ASSETS . . . . . . . . . . . . . . . . . 100.0% $160,726,615
----- ------------
----- ------------

<FN>
* Non-income producing security.
** Variable rate accounts have interest reset twice a week.

</TABLE>

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.

B-4
<PAGE>

GLOBAL INCOME FUND

PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------
<S> <C>

AUSTRALIA--11.3%
- --------------------------------------------------------------------------------
GOVERNMENT NOTES--4.7%
100,000 A$ Queensland Treasury Corp. 8.00%, 5/14/97 . $ 73,673
1,000,000 Western Australia Treasury Corp.
10.00%, 1/15/97 . . . . . . . . . . . . . 769,753
------------
843,426
------------

EURONOTES--6.6%
500,000 Mobil Australia Finance, Ltd.
12.00%, 4/18/97 . . . . . . . . . . . . . 398,164
1,000,000 Unilever Australia, Ltd.
12.00%, 4/08/98 . . . . . . . . . . . . . 802,576
------------
1,200,740
------------
Total Australia. . . . . . . . . . . . . . . . . . . . . . . . . 2,044,166
------------

BELGIUM--3.0%
- --------------------------------------------------------------------------------
GOVERNMENT NOTE
17,000,000 BEL Kingdom of Belgium 9.00%, 6/27/01 (A). . . 551,169
------------

CANADA--4.8%
- --------------------------------------------------------------------------------
GOVERNMENT NOTE
1,200,000 CD$ Government of Canada 8.50%, 3/01/00 (A). . 861,670
------------

DENMARK--7.1%
- --------------------------------------------------------------------------------
GOVERNMENT NOTE
7,750,000 DKK Kingdom of Denmark 9.00%, 11/15/98 (A) . . 1,295,136
------------

GERMANY--5.6%
- --------------------------------------------------------------------------------
Government Notes
1,000,000 DM German Unity Fund 8.50%, 2/20/01 (A) . . . 674,487
500,000 Republic of Germany 8.50%, 8/21/00 (A) . . 337,881
------------
Total Germany. . . . . . . . . . . . . . . . . . . . . . . . . . 1,012,368
------------

IRELAND--2.5%
- --------------------------------------------------------------------------------
GOVERNMENT NOTE
325,000 IEP Irish Treasury Bond 6.25%, 4/01/99 . . . . 460,151
------------

NEW ZEALAND--4.3%
- --------------------------------------------------------------------------------
GOVERNMENT NOTE
1,250,000 NZD Government of New Zealand 9.00%,
11/15/96. . . . . . . . . . . . . . . . . 779,042
------------

PORTUGAL--5.3%
- --------------------------------------------------------------------------------
GOVERNMENT NOTE
950,000 ECU Republic of Portugal 6.00%, 2/16/04. . . . 970,283
------------

SPAIN--9.8%
- --------------------------------------------------------------------------------
GOVERNMENT NOTES
Government of Spain
95,000,000 Pt 9.00%, 2/28/97 (A). . . . . . . . . . . . 709,459
137,000,000 11.85%, 8/30/96 (A) . . . . . . . . . . . 1,076,836
------------
Total Spain. . . . . . . . . . . . . . . . . . . . . . . . . . . 1,786,295
------------

UNITED KINGDOM--4.5%
- --------------------------------------------------------------------------------
GOVERNMENT NOTE
500,000 L U.K. Exchequer 9.50%, 1/15/99 (A). . . . . 813,205
------------

UNITED STATES--39.0%
- --------------------------------------------------------------------------------
CORPORATE NOTES--5.3%
500,000 US$ Healthtrust, Inc. 10.25%, 4/15/04. . . . . 527,500
500,000 Wheeling-Pittsburg Corp. 9.375%,
11/15/03. . . . . . . . . . . . . . . . . 433,750
------------
961,250
------------
GOVERNMENT NOTE--4.7%
900,000 U.S. Treasury Note 4.75%, 2/15/97. . . . . 850,077
------------

EURONOTES--28.0%
500,000 Colombia Financiera Energetica Nacional
6.625%, 12/13/96. . . . . . . . . . . . . 480,500
500,000 Grupo Industrial Durango
12.00%, 7/15/01 . . . . . . . . . . . . . 487,500
500,000 Minas Gerais 7.875%, 2/10/99 . . . . . . . 407,500
500,000 National Power Corp. (Philippines)
7.625%, 11/15/00. . . . . . . . . . . . . 440,000
500,000 Philippine Long Distance Telephone
10.625%, 6/02/04. . . . . . . . . . . . . 496,875

B-5
<PAGE>

NOVEMBER 30, 1994

SCHEDULES OF INVESTMENTS

GLOBAL INCOME FUND (CONT'D)

PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------
<S> <C>

EURONOTES (CONT'D)
1,000,000 US$ Republic of Argentina
6.50%, 3/31/05 (B). . . . . . . . . . . . $ 710,625
490,000 Republic of Brazil (IDU's)
6.0625%, 1/01/01 (B). . . . . . . . . . . 414,050
500,000 Republic of the Philippines
5.25%, 12/01/17 (C) . . . . . . . . . . . 310,625
500,000 Telefonica de Argentina
11.875%, 11/01/04 . . . . . . . . . . . . 486,250
United Mexican States
500,000 5.8125%, 12/31/19 Series D (B). . . . . . 433,125
500,000 6.76563%, 12/31/19 Series B (B) . . . . . 433,125
------------
5,100,175
------------
REPURCHASE AGREEMENT--1.0%
184,000 US$ Prudential Securities, 5.65%, 12/01/94,
(proceeds at maturity: $184,029,
collateralized by $195,000 par,
$191,685 value, U.S. Treasury
Notes, 5.125%, 3/31/96) . . . . . . . . . 184,000
------------
TOTAL UNITED STATES. . . . . . . . . . . . . . . . . . . . . . . 7,095,502
------------

Total Investments (cost--$17,865,440). . . . . . . 97.2% $17,668,987
Other Assets in Excess of Other Liabilities. . . . 2.8 508,032
----- ------------
Total Net Assets . . . . . . . . . . . . . . . . . 100.0% $18,177,019
----- ------------
----- ------------

<FN>
(A) Securities segregated (full or partial) as collateral for open forward
currency contracts. The market value of such segregated securities is
$6,319,844.
(B) Represents a floating interest rate bond, subject to change on respective
semi-annually coupon dates, based on the current six month LIBOR rate plus
81.25 basis points.
(C) Coupon will pay quarterly at 5.25% until 12/94, then will "step-up" and pay
semi-annually at the following annual rates; 5.75% until 12/95, 6.25% until
12/97 and 6.50% until maturity.

</TABLE>

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.

B-6
<PAGE>

NOVEMBER 30, 1994

STATEMENTS OF ASSETS AND LIABILITIES

Global Equity Global Income
Fund Fund
------------- -------------
<S> <C> <C>

ASSETS
Investments, at value (cost--$123,118,400 and $17,865,440, respectively) . . . . . $140,516,221 $ 17,668,987
Repurchase Agreement (cost--$20,800,000 and $0, respectively). . . . . . . . . . . 20,800,000 --
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31,774 467
Receivable for fund shares sold. . . . . . . . . . . . . . . . . . . . . . . . . . 266,353 2,815
Dividends receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 201,011 --
Withholding taxes reclaimable. . . . . . . . . . . . . . . . . . . . . . . . . . . 146,744 7,029
Deferred organization expenses . . . . . . . . . . . . . . . . . . . . . . . . . . 22,859 48,826
Interest receivable. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13,453 537,677
Receivable from adviser. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -- 8,493
Deposits for securities loaned . . . . . . . . . . . . . . . . . . . . . . . . . . 7,186,089 --
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83,662 75,301
------------ ------------
Total Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 169,268,166 18,349,595
------------ ------------

LIABILITIES
Payable for investments purchased. . . . . . . . . . . . . . . . . . . . . . . . . 1,162,467 --
Payable for fund shares redeemed . . . . . . . . . . . . . . . . . . . . . . . . . 96,431 70,515
Investment advisory fee payable... . . . . . . . . . . . . . . . . . . . . . . . . 16,487 --
Withholding taxes payable... . . . . . . . . . . . . . . . . . . . . . . . . . . . 13,929 2,928
Distribution fee payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11,858 763
Administration fee payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,496 620
Net unrealized depreciation on forward currency contracts. . . . . . . . . . . . . -- 34,888
Deposits for securities loaned . . . . . . . . . . . . . . . . . . . . . . . . . . 7,186,089 --
Other payables and accrued expenses. . . . . . . . . . . . . . . . . . . . . . . . 48,794 62,862
------------ ------------
Total Liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,541,551 172,576
------------ ------------

NET ASSETS
Capital stock. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 113,533 21,411
Paid-in-surplus. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 130,055,046 20,502,349
Accumulated undistributed net investment income. . . . . . . . . . . . . . . . . . 44,024 --
Accumulated undistributed net realized gain (loss) on investments. . . . . . . . . 14,611,225 (1,129,077)
Accumulated net realized loss on foreign currency transactions . . . . . . . . . . (1,391,636) (989,174)
Distributions in excess of net realized gains. . . . . . . . . . . . . . . . . . . (110,149) --
Net unrealized appreciation (depreciation) on investments and translation of
other assets and liabilities denominated in foreign currencies. . . . . . . . . . 17,404,572 (228,490)
------------ ------------
Total Net Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $160,726,615 $ 18,177,019
------------ ------------
------------ ------------

CLASS A:
Fund shares outstanding. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,451,819 1,976,697
------------ ------------
Net asset value per share. . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 14.16 $ 8.49
------------ ------------
------------ ------------
Maximum offering price per share*. . . . . . . . . . . . . . . . . . . . . . . . . $ 14.98 $ 8.75
------------ ------------
------------ ------------

CLASS B:
Fund shares outstanding. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 729,671 138,425
------------ ------------
Net asset value and offering price per share . . . . . . . . . . . . . . . . . . . $ 14.07 $ 8.49
------------ ------------
------------ ------------

CLASS C:
Fund shares outstanding. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 171,805 25,963
------------ ------------
Net asset value and offering price per share . . . . . . . . . . . . . . . . . . . $ 14.06 $ 8.49
------------ ------------
------------ ------------

<FN>
* Sales charges decrease on purchases of $50,000 or higher for the Global
Equity Fund and $100,000 or higher for the Global Income Fund.

</TABLE>

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.

B-7
<PAGE>

YEAR ENDED NOVEMBER 30, 1994

STATEMENTS OF OPERATIONS

Global Equity Global Income
Fund Fund
------------- -------------
<S> <C> <C>

INVESTMENT INCOME
Dividends (net of foreign withholding taxes of $123,756 and $0, respectively). . . $ 2,432,732 $ --
Interest (net of foreign withholding taxes of $0 and $5,395, respectively) . . . . 642,446 1,613,541
------------ ------------
Total investment income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,075,178 1,613,541
------------ ------------

OPERATING EXPENSES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Investment advisory fees (note 2a) . . . . . . . . . . . . . . . . . . . . . . . . 1,166,949 99,506
Distribution fees (note 2d). . . . . . . . . . . . . . . . . . . . . . . . . . . . 813,628 58,795
Administration fees (note 2c). . . . . . . . . . . . . . . . . . . . . . . . . . . 388,983 49,753
Transfer and dividend disbursing agent fees (note 1k). . . . . . . . . . . . . . . 215,541 37,527
Custodian fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 186,082 59,220
Registration fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76,349 78,747
Auditing, consulting and tax return preparation fees . . . . . . . . . . . . . . . 58,509 35,551
Reports and notices to shareholders. . . . . . . . . . . . . . . . . . . . . . . . 58,063 21,071
Amortization of deferred organization expenses (note 1c) . . . . . . . . . . . . . 39,179 24,356
Directors' fees and expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . 17,219 --
Legal fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14,973 11,229
Miscellaneous. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11,028 2,400
------------ ------------
Total operating expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,046,503 478,155
Less: Investment advisory fees waived and expense reimbursements (note 2a) . . . (15,349) (139,836)
------------ ------------
Net operating expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,031,154 338,319
------------ ------------
Net investment income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44,024 1,275,222
------------ ------------

REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
AND FOREIGN CURRENCY TRANSACTIONS--NET
Net realized gain (loss) on investments. . . . . . . . . . . . . . . . . . . . . . 14,460,917 (654,971)
Net realized loss on foreign currency transactions . . . . . . . . . . . . . . . . (1,391,636) (989,174)
Net realized gain (loss) on futures transactions . . . . . . . . . . . . . . . . . 150,308 (33,622)
------------ ------------
Net realized gain (loss) on investments and foreign currency transactions. . . .. 13,219,589 (1,677,767)

Net change in unrealized appreciation (depreciation) on investments and translation
of other assets and liabilities denominated in foreign currencies . . . . . . . . . (1,833,491) (267,788)
------------ ------------

Net realized gain (loss) and change in unrealized appreciation (depreciation)
on investments and translation of other assets and liabilities denominated in
foreign currencies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11,386,098 (1,945,555)
------------ ------------

Net increase (decrease) in net assets resulting from operations. . . . . . . . . . $ 11,430,122 $ (670,333)
------------ ------------
------------ ------------

</TABLE>

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.

B-8
<PAGE>

STATEMENTS OF CHANGES IN NET ASSETS

Global Equity Fund Global Income Fund
Year Ended November 30, Year Ended November 30,
--------------------------- --------------------------
1994 1993* 1994 1993
------------ ------------ ----------- -----------
<S> <C> <C> <C> <C>

OPERATIONS
Net investment income. . . . . . . . . . . . . . . . . . . . . $ 44,024 $ 46,115 $ 1,275,222 $ 1,423,757
Net realized gain (loss) on investments. . . . . . . . . . . . 14,611,225 5,952,817 (688,593) 252,205
Net realized loss on foreign currency transactions . . . . . . (1,391,636) (107,988) (989,174) (748,097)
Net change in unrealized appreciation (depreciation) on
investments and translation of other assets and liabilities
denominated in foreign currencies . . . . . . . . . . . . . . (1,833,491) 15,536,595 (267,788) 1,082,353
------------ ------------ ----------- -----------
Net increase (decrease) in net assets resulting from
operations. . . . . . . . . . . . . . . . . . . . . . . . . . 11,430,122 21,427,539 (670,333) 2,010,218
------------ ------------ ----------- -----------

DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS
Net investment income -- Class A . . . . . . . . . . . . . . . -- (1,133,661) (179,857) (378,564)
Net investment income -- Class B . . . . . . . . . . . . . . . -- -- (8,671) (974)
Net investment income -- Class C . . . . . . . . . . . . . . . -- -- (1,531) (372)
Net realized gain -- Class A . . . . . . . . . . . . . . . . . (4,944,320) (7,944,237) -- --
Net realized gain -- Class B . . . . . . . . . . . . . . . . . (66,298) -- -- --
Net realized gain -- Class C . . . . . . . . . . . . . . . . . (10,738) -- -- --
Distributions in excess of net realized gains -- Class A . . . -- (179,902) -- --
Distributions in excess of net realized gains -- Class B . . . -- -- -- --
Distributions in excess of net realized gains -- Class C . . . -- -- -- --
Tax return of capital -- Class A . . . . . . . . . . . . . . . -- -- (1,026,915) (1,158,775)
Tax return of capital -- Class B . . . . . . . . . . . . . . . -- -- (49,507) (2,983)
Tax return of capital -- Class C . . . . . . . . . . . . . . . -- -- (8,741) (1,139)
------------ ------------ ----------- -----------
Total dividends and distributions to shareholders. . . . . . (5,021,356) (9,257,800) (1,275,222) (1,542,807)
------------ ------------ ----------- -----------

FUND SHARE TRANSACTIONS
CLASS A
Net proceeds from sales. . . . . . . . . . . . . . . . . . . . 30,817,260 30,701,048 2,641,672 5,441,056
Reinvestment of dividends and distributions. . . . . . . . . . 4,682,941 8,963,937 1,088,618 1,341,142
Cost of shares redeemed. . . . . . . . . . . . . . . . . . . . (29,503,784) (27,477,571) (7,582,775) (4,259,950)
------------ ------------ ----------- -----------
Net increase (decrease) -- Class A . . . . . . . . . . . . . 5,996,417 12,187,414 (3,852,485) 2,522,248
------------ ------------ ----------- -----------

CLASS B
Net proceeds from sales. . . . . . . . . . . . . . . . . . . . 9,192,969 1,868,775 745,568 762,602
Reinvestment of dividends and distributions. . . . . . . . . . 64,143 -- 45,001 3,572
Cost of shares redeemed. . . . . . . . . . . . . . . . . . . . (659,275) (146,699) (217,068) (61,617)
------------ ------------ ----------- -----------
Net increase -- Class B. . . . . . . . . . . . . . . . . . . 8,597,837 1,722,076 573,501 704,557
------------ ------------ ----------- -----------

CLASS C
Net proceeds from sales. . . . . . . . . . . . . . . . . . . . 2,476,331 249,911 91,369 150,714
Reinvestment of dividends and distributions. . . . . . . . . . 10,736 -- 9,804 1,510
Cost of shares redeemed. . . . . . . . . . . . . . . . . . . . (299,932) -- (15,084) --
------------ ------------ ----------- -----------
Net increase -- Class C. . . . . . . . . . . . . . . . . . . 2,187,135 249,911 86,089 152,224
------------ ------------ ----------- -----------
Total increase (decrease) in net assets from fund share
transactions. . . . . . . . . . . . . . . . . . . . . . . 16,781,389 14,159,401 (3,192,895) 3,379,029
------------ ------------ ----------- -----------
Total increase (decrease) in net assets. . . . . . . . . . . . 23,190,155 26,329,140 (5,138,450) 3,846,440

NET ASSETS
Beginning of year. . . . . . . . . . . . . . . . . . . . . . . 137,536,460 111,207,320 23,315,469 19,469,029
------------ ------------ ----------- -----------
End of year (including undistributed net investment income
(loss) of $44,024, ($344,025), $0 and $1,341,754,
respectively) . . . . . . . . . . . . . . . . . . . . . . . . $160,726,615 $137,536,460 $18,177,019 $23,315,469
------------ ------------ ----------- -----------
------------ ------------ ----------- -----------

<FN>
* Dividends and Distributions to Shareholders has been restated to reflect
Statement of Position 93-2. See note 1e in the notes to financial
statements.

</TABLE>

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.

B-9
<PAGE>

NOVEMBER 30, 1994

NOTES TO FINANCIAL STATEMENTS

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES

Quest for Value Global Funds (collectively, the "Funds") are registered
under the Investment Company Act of 1940 as diversified, open-end management
investment companies. The Quest for Value Global Equity Fund, Inc. ("Global
Equity") commenced investment operations on July 2, 1990. The Global Income Fund
("Global Income"), a series of Quest for Value Global Funds, Inc., commenced
investment operations on December 2, 1991. Quest for Value Advisors (the
"Adviser") serves as the Funds' investment adviser and administrator. Quest for
Value Distributors (the "Distributor") serves as the Funds' distributor. Both
the Adviser and Distributor are majority-owned (99%) subsidiaries of Oppenheimer
Capital. Clay Finlay, Inc. (the "Sub-Adviser") had primary responsibility for
non-U.S. investment decisions for Global Equity through December 31, 1993.
Effective January 1, 1994, the Adviser assumed responsibility for all non-U.S.
investment decisions for Global Equity.

Prior to September 1, 1993, the Funds issued only one class of shares which
were redesignated Class A shares. Subsequent to that date, the Funds were
authorized to issue Class A, Class B and Class C shares. Shares of each Class
represent an identical interest in the investment portfolio of their respective
fund and generally have the same rights, but are offered under different sales
charge and distribution fee arrangements. Furthermore, Class B shares will
automatically convert to Class A shares of the same fund eight years after their
respective purchase.

The following is a summary of significant accounting policies consistently
followed by the Funds in the preparation of their financial statements:

(a) VALUATION OF INVESTMENTS

Investment securities listed on a U.S. or foreign stock exchange and
securities traded in the over-the-counter National Market System are valued at
the last reported sale price on the valuation date; if there are no such sales,
the securities are valued at their last quoted bid price. Other investments
traded over-the-counter and not part of the National Market System are valued at
the last quoted bid price. Investment debt securities (other than short-term
obligations) are valued each day by an independent pricing service (approved by
the Board of Directors) using methods which include current market quotations
from a major market maker in the securities and trader reviewed "matrix" prices.
Short-term debt securities having a remaining maturity of sixty days or less are
valued at amortized cost or amortized value, which approximates market value.
Any security or other asset for which market quotations are not readily
available is valued at its fair value as determined under procedures established
by the Funds' Board of Directors. Investments in countries in which the Funds
may invest may involve certain considerations and risks not typically associated
with domestic investments as a result of, among others, the possibility of
future political and economic developments and the level of governmental
supervision and regulation of foreign securities markets.

(b) FEDERAL INCOME TAXES

It is the Funds' policy to comply with the requirements of the Internal
Revenue Code applicable to regulated investment companies and to distribute
substantially all of their taxable income to their shareholders; accordingly, no
Federal income tax provision is required.

Costs incurred by Global Equity and Global Income in connection with their
organization approximated $194,000 and $122,000, respectively. These costs have
been deferred and are being amortized to expense on a straight line basis over
sixty months from commencement of the Funds' operations.

(d) INVESTMENT TRANSACTIONS AND OTHER INCOME

Investment transactions are accounted for on the trade date. In determining
the gain or loss from the sale of investments, the cost of investments sold is
determined on the basis of identified cost. Dividend income and other
distributions are recorded on the ex-dividend date, except certain dividends or
other distributions from foreign securities which are recorded as soon as the
information is available after the ex-dividend date. Interest income is accrued
as earned. Discounts on debt securities purchased are accreted to interest
income over the lives of the respective securities.

B-10
<PAGE>

(e) DIVIDENDS AND DISTRIBUTIONS

Each fund records dividends and distributions to its shareholders on the
ex-dividend date.The following table summarizes the Funds' income dividend and
capital gain declaration policy:

INCOME SHORT-TERM LONG-TERM
DIVIDENDS CAPITAL GAINS CAPITAL GAINS
--------- ------------- -------------
<S> <C> <C> <C>
Global Equity. . . . annually annually annually
Global Income. . . . daily* annually annually

<FN>
* paid monthly.
</TABLE>

During the fiscal year ended November 30, 1994, the Funds' adopted
Statement of Position 93-2: Determination, Disclosure and Financial Statement
Presentation of Income, Capital Gain and Return of Capital Distributions by
Investment Companies. The amount of dividends and distributions from net
investment income, net realized foreign currency gains and net realized capital
gains are determined in accordance with Federal income tax regulations, which
may differ from generally accepted accounting principles. These "book-tax"
differences are either considered temporary or permanent in nature. To the
extent these differences are permanent in nature, such amounts are reclassified
within the capital accounts based on their Federal tax-basis treatment;
temporary differences do not require reclassification. Dividends and
distributions which exceed net investment income, net realized foreign currency
gains and net realized capital gains for financial reporting purposes but not
for tax purposes are reported as dividends in excess of net investment income,
dividends in excess of net realized foreign currency gains or distributions in
excess of net realized capital gains, respectively. To the extent distributions
exceed current and accumulated earnings and profits for Federal income tax
purposes, they are reported as distributions of paid-in-surplus or tax return of
capital. Accordingly, permanent book-tax differences relating to shareholder
distributions have been reclassified to paid-in-surplus. Net investment
income(loss), net realized foreign currency gain(loss), net realized gain(loss)
and net assets were not affected by this change. The following table discloses
the cumulative effect of such differences reclassified from accumulated
undistributed net investment income(loss), accumulated undistributed net
realized foreign currency gain(loss) and accumulated undistributed net realized
gain(loss) on investments to paid-in-surplus:

ACCUMULATED ACCUMULATED ACCUMULATED
UNDISTRIBUTED NET REALIZED UNDISTRIBUTED PAID
NET INVESTMENT FOREIGN CURRENCY NET REALIZED IN
INCOME LOSS GAIN (LOSS) SURPLUS
-------------- ---------------- ------------- -------
<S> <C> <C> <C> <C>

Global Equity. . . . . . . . . $344,025 $397,015 ($83,763) ($657,277)
Global Income. . . . . . . . . (1,341,754) 1,310,676 -- 31,078

</TABLE>

(f) FOREIGN CURRENCY TRANSLATION

The books and records of the Funds are maintained in U.S. dollars as
follows: (1) the foreign currency market value of investment securities, other
assets and liabilities and forward contracts stated in foreign currencies are
translated at the exchange rates at the end of the period; and (2) purchases,
sales, income and expenses are translated at the rate of exchange prevailing on
the respective dates of such transactions. The resultant exchange gains and
losses are included in the Funds' Statements of Operations. Since the net assets
of the Funds are presented at the foreign exchange rates and market prices at
the close of the period, the Funds do not isolate that portion of the results of
operations arising as a result of changes in the exchange rates from
fluctuations arising from changes in the market prices of securities.

(g) FORWARD CURRENCY CONTRACTS

As part of its investment program, the Funds may utilize forward currency
contracts for hedging purposes. The use of these contracts involves, to varying
degrees, elements of market risk. Risks arise from the possible movements in
foreign exchange rates and security values underlying these instruments. In
addition, credit risk may arise from the potential inability of counterparties
to meet the terms of their contracts. Forward currency contracts are recorded at
market value. Realized gains and losses arising from such transactions are
included in net realized gain or loss on foreign currency transactions in the
results of operations. At November 30, 1994, there were no forward currency
contracts outstanding for Global Equity. Outstanding contracts at November 30,
1994 for Global Income are as follows:

B-11
<PAGE>

NOVEMBER 30, 1994

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

Contract to
Settlement -------------------------------------------------- Unrealized
Date Deliver Receive Gain (Loss)
---------- -------------------- -------------------- --------------------
<S> <C> <C> <C> <C> <C> <C>

12/09/94 DM 1,000,000 US$ 644,870 US$ 7,249
12/14/94 DM 1,300,000 US$ 847,126 US$ 18,135
01/09/95 CD$ 700,000 US$ 515,806 US$ 6,585
01/27/95 DM 1,500,000 US$ 944,912 US$ (4,170)
01/27/95 US$ 653,240 DM 1,000,000 US$ (23,299)
02/06/95 DM 1,000,000 US$ 658,892 US$ 20,450
02/17/95 Ffr 2,900,000 US$ 546,345 US$ 6,638
02/27/95 DM 460,000 US$ 296,315 US$ 2,449
02/28/95 ESP 90,000,000 US$ 685,767 US$ 714
02/28/95 Ffr 4,000,000 US$ 746,129 US$ 1,555
04/20/95 DM 1,140,000 US$ 660,985 US$ (8,455)
04/20/95 US$ 642,550 DM 1,000,000 US$ (62,739)
--------------------
US$ (34,888)
--------------------
--------------------

</TABLE>

Net unrealized depreciation of $34,888 on these contracts at November 30,
1994 is included in the accompanying financial statements.

(h) FUTURES ACCOUNTING POLICIES

Futures contracts are agreements between two parties to buy and sell a
financial instrument at a set price on a future date. Upon entering into such a
contract, a fund is required to pledge to the broker an amount of cash or U.S.
Government securities equal to the minimum "initial margin" requirements of the
exchange. Pursuant to the contract, a fund agrees to receive from or pay to the
broker an amount of cash equal to the daily fluctuation in the value of the
contract. Such receipts or payments are known as "variation margin" and are
recorded by the fund as unrealized appreciation or depreciation. When a contract
is closed, the fund records a realized gain or loss equal to the difference
between the value of the contract at the time it was opened and the value at the
time it was closed and reverses any unrealized appreciation or depreciation
previously recorded.

(i) REPURCHASE AGREEMENTS

The Funds' custodian takes possession of the collateral pledged for
investments in repurchase agreements. The underlying collateral is valued daily
on a mark-to-market basis to ensure that the value, including accrued interest,
is at least equal to the repurchase price. In the event of default of the
obligor to repurchase, the Funds have the right to liquidate the collateral and
apply the proceeds in satisfaction of the obligation. Under certain
circumstances, in the event of default or bankruptcy by the other party to the
agreement, realization and/or retention of the collateral or proceeds may be
subject to legal proceedings.

(j) SECURITY LENDING PROCEDURES

Global Equity periodically lends securities through a lending program run
by its custodian, State Street Bank and Trust Company, for its participating
clients. Under the program, the bank makes available to select qualified
brokerage firms or other borrowing institutions the use of the participants
securities for a period of time. Security loans are collateralized with U.S.
Government securities or cash equal to at least 105% of the market value of the
securities at the time of the loan. The securities loaned are marked-to-market
daily and collateral is adjusted daily to reflect any fluctuations in value.

Global Equity earns income from the borrower which is generally the
difference between the interest earned on the collateral and the rebate paid to
the borrower. Global Equity pays State Street Bank and Trust Company 35% of the
net interest earned as a fee for administering the security lending program. For
the year ended November 30, 1994, Global Equity earned $2,247 from security
lending. At November 30, 1994, Global Equity had the following securities on
loan:
B-12
<PAGE>

MARKET VALUE MARKET VALUE
SECURITY SHARES OF SHARES COLLATERAL OF COLLATERAL
- ----------------------------- -------- ------------ --------------- -------------
<S> <C> <C> <C> <C>

Linde Ag (Germany) 1,960 $1,119,572 U.S. Dollars $1,174,530
Mitsubishi Motors (Japan) 142,000 1,345,474 U.S. Dollars 1,420,000
Nippondenso Co., Ltd. (Japan) 30,000 612,802 U.S. Dollars 645,000
Scheinder SA (France) 14,994 1,081,352 U.S. Dollars 1,135,796
Telecom Italia (Italy) 676,200 1,401,516 U.S. Dollars 1,521,450
Total SA (France) 19,677 1,232,556 U.S. Treasuries 1,289,313
---------- ----------
$6,793,272 $7,186,089
---------- ----------
---------- ----------

</TABLE>

(k) ALLOCATION OF EXPENSES

2. INVESTMENT ADVISORY FEE, SUB-ADVISORY FEE, ADMINISTRATION FEE AND OTHER
TRANSACTIONS WITH AFFILIATES

(a) The investment advisory fee is payable monthly to the Adviser and is
computed as a percentage of each fund's net assets as of the close of business
each day at the following annual rates: .75% for Global Equity and .50% for
Global Income. For the year ended November 30, 1994, the Adviser voluntarily
waived $15,349 and $99,506 in investment advisory fees for Global Equity and
Global Income, respectively. The Adviser also reimbursed Global Income $40,330
in other operating expenses. Effective January 7, 1994, the Adviser discontinued
its voluntary waiver of investment advisory fees for Global Equity.

(b) The Adviser paid the Sub-Adviser fees through December 31, 1993 at an
annual rate of .375% of Global Equity's average net assets.

(c) The administration fees are payable monthly to the Adviser and are
computed on each fund's average daily net assets at the annual rate of .25%.

(d) The Funds have adopted a Plan and Agreement of Distribution (the
"Plan") pursuant to which they are permitted to compensate the Distributor in
connection with the distribution of fund shares. Under the Plan, the Distributor
has entered into agreements with securities dealers and other financial
institutions and organizations to obtain various sales-related services in
rendering distribution assistance. To compensate the Distributor for the
services it and other dealers under the Plan provide and for the expenses they
bear under the Plan, the Funds pay the Distributor compensation, accrued daily
and payable monthly, on the daily net assets for Class A shares at the following
annual rates: .25% for Global Equity and .05% for Global Income. The Funds'
Class A shares also pay a service fee at an annual rate of .25%. Although Global
Income's Plan for Class A shares authorizes it to pay a maximum service fee of
.25% and a distribution fee of .05%, the Board of Directors has set a maximum
.25% total fee under the Plan. Compensation for Class B and Class C shares of
each fund is at an annual rate of .75% of average daily net assets. Each fund's
Class B and Class C shares also pay a service fee at the annual rate of .25% of
average daily net assets. Distribution and service fees may be paid by the
Distributor to broker-dealers or others for providing personal service,
maintenance of accounts and ongoing sales or shareholder support functions in
connection with the distribution of fund shares. While payments under the plan
may not exceed the stated percentage of average daily net assets on an annual
basis, the payments are not limited to the amounts actually paid or expenses
actually incurred by the Distributor. For the year ended November 30, 1994,
distribution and service fees charged to classes A, B and C were $742,304,
$59,822 and $11,502, respectively, for Global Equity, and $46,739, $10,182 and
$1,874, respectively, for Global Income.

B-13
<PAGE>

NOVEMBER 30, 1994

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

(e) Total brokerage commissions paid by Global Equity during the year
ended November 30, 1994 amounted to $566,615, of which $16,402 was paid to
Oppenheimer & Co., Inc., an affiliate of the Adviser.

(f) Oppenheimer & Co., Inc. has informed the Funds that it received
approximately $252,000 and $24,000, from Global Equity and Global Income,
respectively, in connection with the sale of Class A shares for the year ended
November 30, 1994.

(g) The Distributor has informed the funds that it received contingent
deferred sales charges on the redemption of Class B and Class C shares of
approximately $7,300 and $600 for Global Equity and Global Income, respectively,
for the year ended November 30, 1994.

3. FUND SHARE TRANSACTIONS

The following table summarizes the fund share activity for the two years
ended November 30, 1994:

GLOBAL EQUITY FUND GLOBAL INCOME FUND
YEAR ENDED NOVEMBER 30, YEAR ENDED NOVEMBER
30,
--------------------------- --------------------------
1994 1993* 1994 1993
------------ ------------ ----------- -----------
<S> <C> <C> <C> <C>

CLASS A
Issued . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,167,814 2,374,953 290,147 585,048
Dividends and distributions reinvested . . . . . . . . . . . . 344,081 758,804 123,568 144,981
Redeemed . . . . . . . . . . . . . . . . . . . . . . . . . . . (2,079,717) (2,156,199) (837,949) (458,116)
------------ ------------ ----------- -----------
Net increase (decrease)--Class A . . . . . . . . . . . . . . 432,178 977,558 (424,234) 271,913
------------ ------------ ----------- -----------

CLASS B *
Issued . . . . . . . . . . . . . . . . . . . . . . . . . . . . 647,583 134,395 82,174 80,836
Dividends and distributions reinvested . . . . . . . . . . . . 4,716 -- 5,164 381
Redeemed . . . . . . . . . . . . . . . . . . . . . . . . . . . (46,590) (10,433) (23,568) (6,562)
------------ ------------ ----------- -----------
Net increase--Class B. . . . . . . . . . . . . . . . . . . . 605,709 123,962 63,770 74,655
------------ ------------ ----------- -----------

CLASS C *
Issued . . . . . . . . . . . . . . . . . . . . . . . . . . . . 174,051 18,037 10,411 15,993
Dividends and distributions reinvested . . . . . . . . . . . . 789 -- 1,118 161
Redeemed . . . . . . . . . . . . . . . . . . . . . . . . . . . (21,072) -- (1,720) --
------------ ------------ ----------- -----------
Net increase--Class C. . . . . . . . . . . . . . . . . . . . 153,768 18,037 9,809 16,154
------------ ------------ ----------- -----------
Total net increase (decrease). . . . . . . . . . . . . . . 1,191,655 1,119,557 (350,655) 362,722
------------ ------------ ----------- -----------
------------ ------------ ----------- -----------

<FN>
* Initial offering September 2, 1993.

</TABLE>

B-14
<PAGE>

4. DIVIDENDS AND DISTRIBUTIONS

The following table summarizes the per share dividends and distributions
made for the two years ended November 30, 1994:

NET INVESTMENT INCOME:
Class A. . . . . . . . . . . . . . . . . . . . . . . . . . . . . -- $0.119 $0.085 $0.168
Class B *. . . . . . . . . . . . . . . . . . . . . . . . . . . . -- -- 0.075 0.030
Class C *. . . . . . . . . . . . . . . . . . . . . . . . . . . . -- -- 0.072 0.031

NET REALIZED GAINS:
Class A. . . . . . . . . . . . . . . . . . . . . . . . . . . . . $0.494 0.900 -- --
Class B *. . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.494 -- -- --
Class C *. . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.494 -- -- --

TAX RETURN OF CAPITAL:
Class A. . . . . . . . . . . . . . . . . . . . . . . . . . . . . -- -- 0.485 0.513
Class B *. . . . . . . . . . . . . . . . . . . . . . . . . . . . -- -- 0.426 0.091
Class C *. . . . . . . . . . . . . . . . . . . . . . . . . . . . -- -- 0.411 0.095

<FN>
* Initial offering September 2, 1993.

</TABLE>

5. PURCHASES AND SALES OF SECURITIES

For the year ended November 30, 1994, purchases and sales of investment
securities, other than short-term securities, were as follows:

PURCHASES SALES
----------- ------------
<S> <C> <C>

Global Equity. . . . . . . . . . . $97,066,487 $98,504,257
Global Income. . . . . . . . . . . 26,188,485 28,990,912

</TABLE>

6. UNREALIZED APPRECIATION (DEPRECIATION) AND COST OF INVESTMENTS FOR FEDERAL
INCOME TAX PURPOSES

At November 30, 1994, the composition of unrealized appreciation
(depreciation) of investment securities and the cost of investments for Federal
income tax purposes were as follows:

APPRECIATION (DEPRECIATION) NET TAX COST
------------ -------------- ----------- ------------
<S> <C> <C> <C> <C>

Global Equity. . . . . . . . . . . . . . . . . . . . . $20,499,912 ($3,260,543) $17,239,369 $144,076,852
Global Income. . . . . . . . . . . . . . . . . . . . . 178,922 (375,375) (196,453) 17,865,440

</TABLE>

7. AUTHORIZED FUND SHARES AND PAR VALUE PER SHARE

AUTHORIZED PAR VALUE
FUND SHARES PER SHARE
----------- -----------
<S> <C> <C>

Global Equity. . . . . . . . . . . 100,000,000 $0.01
Global Income. . . . . . . . . . . 100,000,000 0.01

</TABLE>

B-15
<PAGE>

NOVEMBER 30, 1994

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

8. CAPITAL LOSS CARRYFORWARDS

For the year ended November 30, 1994, Global Income had net capital loss
carryfowards of $1,077,004, of which $204,539, $214,944 and $657,521 will be
available to offset future net capital gains realized through fiscal years
ending 1998, 2001 and 2002, respectively, to the extent provided by regulations.
Capital and currency losses incurred after October 31, 1994 are deemed to arise
on the first business day of the following tax year. Accordingly, for the fiscal
year ended November 30, 1994, Global Income incurred and elected to defer
$52,073 and $127,100 in net capital and net currency losses, respectively.

9. SUBSEQUENT EVENTS

On December 5, 1994, Global Equity declared net realized short-term and
long-term capital gain distributions of $0.3296 and $0.8985, respectively, per
share, for each class, payable December 5, 1994 to shareholders of record on the
opening of business December 5, 1994.

B-16
<PAGE>

FINANCIAL HIGHLIGHTS (FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)

GLOBAL EQUITY FUND

INCOME FROM
INVESTMENT OPERATIONS
--------------------------------------------------
NET REALIZED
NET ASSET NET AND
VALUE, INVESTMENT UNREALIZED TOTAL FROM
BEGINNING INCOME GAIN (LOSS) INVESTMENT
OF PERIOD (LOSS) ON INVESTMENTS OPERATIONS
<S> <C> <C> <C> <C>

CLASS A
YEAR ENDED
NOVEMBER 30,
1994 $13.54 $0.01 $1.10 $1.11
1993 12.30 -- 2.26 2.26
1992 11.25 0.12 0.93 1.05
1991 10.57 (0.04) 0.85 0.81

JULY 2, 1990 (3)
TO NOV. 30, 1990 12.05 (4) 0.05 (1.53) (1.48)

CLASS B
YEAR ENDED
NOV. 30, 1994 13.52 (0.06) 1.10 1.04

SEPT. 2, 1993 (5)
TO NOV. 30, 1993 13.75 (4) (0.02) (0.21) (0.23)

CLASS C
YEAR ENDED
NOV. 30, 1994 13.52 (0.08) 1.11 1.03
SEPT. 2, 1993 (5)
TO NOV. 30, 1993 13.75 (4) (0.02) (0.21) (0.23)
</TABLE>

DIVIDENDS AND DISTRIBUTIONS
--------------------------------------------------------
DIVIDENDS TO DISTRIBUTIONS TO
SHAREHOLDERS SHAREHOLDERS TAX TOTAL
FROM NET FROM NET RETURN DIVIDENDS
INVESTMENT REALIZED GAIN OF AND
INCOME ON INVESTMENTS CAPITAL DISTRIBUTIONS
<S> <C> <C> <C> <C>

CLASS A
YEAR ENDED
NOVEMBER 30,
1994 -- ($0.49) -- ($0.49)
1993 ($0.12) (0.90) -- (1.02)
1992 -- -- -- --
1991 (0.05) (0.08) -- (0.13)

JULY 2, 1990 (3)
TO NOV. 30, 1990 -- -- -- --

CLASS B
YEAR ENDED
NOV. 30, 1994 -- (0.49) -- (0.49)

SEPT. 2, 1993 (5)
TO NOV. 30, 1993 -- -- -- --

CLASS C
YEAR ENDED
NOV. 30, 1994 -- (0.49) -- (0.49)
SEPT. 2, 1993 (5)
TO NOV. 30, 1993 -- -- -- --
</TABLE>

RATIOS
------------------------------------------
RATIO OF NET RATIO OF NET
NET ASSET NET ASSETS OPERATING INVESTMENT
VALUE, END OF EXPENSES INCOME (LOSS) PORTFOLIO
END OF TOTAL PERIOD TO AVERAGE TO AVERAGE
TURNOVER
PERIOD RETURN* (000'S) NET ASSETS NET ASSETS RATE
<S> <C> <C> <C> <C> <C> <C>

CLASS A
YEAR ENDED
NOVEMBER 30,
1994 $14.16 8.37% $148,044 1.92%(1,2) 0.05%(1,2) 70%
1993 13.54 19.72% 135,616 1.76%(2) 0.04%(2) 46%
1992 12.30 9.33% 111,207 1.76%(2) 0.72%(2) 62%
1991 11.25 7.72% 46,937 2.09% (0.27%) 41%

JULY 2, 1990 (3)
TO NOV. 30, 1990 10.57 (12.28%) 58,087 2.11%(6) 0.92%(6) 2%

CLASS B
YEAR ENDED
NOV. 30, 1994 14.07 7.84% 10,268 2.50%(1,2) (0.44%)(1,2) 70%

SEPT. 2, 1993 (5)
TO NOV. 30, 1993 13.52 (1.67%) 1,676 2.26%(2,6) (0.76%)(2,6) 46%

CLASS C
YEAR ENDED
NOV. 30, 1994 14.06 7.77% 2,415 2.66%(1,2) (0.59%)(1,2) 70%
SEPT. 2, 1993 (5)
TO NOV. 30, 1993 13.52 (1.67%) 244 2.26%(2,6) (0.69%)(2,6) 46%

<FN>
(1) AVERAGE NET ASSETS FOR THE YEAR ENDED NOVEMBER 30, 1994 FOR CLASS A, CLASS
B AND CLASS C WERE $148,460,823, $5,982,186 AND $1,150,224, RESPECTIVELY.
(2) DURING THE PERIODS PRESENTED ABOVE, THE ADVISER VOLUNTARILY WAIVED A
PORTION OF ITS FEES. IF SUCH WAIVERS HAD NOT BEEN IN EFFECT, THE RATIOS OF
NET OPERATING EXPENSES TO AVERAGE NET ASSETS AND THE RATIOS OF NET
INVESTMENT INCOME (LOSS) TO AVERAGE NET ASSETS FOR CLASS A WOULD HAVE BEEN
1.93% AND 0.04%, RESPECTIVELY, FOR THE YEAR ENDED NOVEMBER 30, 1994, 1.91%
AND (0.11%), RESPECTIVELY, FOR THE YEAR ENDED NOVEMBER 30, 1993 AND 1.84%
AND 0.64%, RESPECTIVELY, FOR THE YEAR ENDED NOVEMBER 30, 1992. THE RATIOS
OF NET OPERATING EXPENSES TO AVERAGE NET ASSETS AND THE RATIOS OF NET
INVESTMENT INCOME (LOSS) TO AVERAGE NET ASSETS WOULD HAVE BEEN 2.51% AND
(0.45%), RESPECTIVELY, FOR CLASS B AND 2.66% AND (0.59%), RESPECTIVELY, FOR
CLASS C, FOR THE YEAR ENDED NOVEMBER 30, 1994 AND 2.32% AND (0.82%),
ANNUALIZED, RESPECTIVELY, FOR CLASS B AND 2.35% AND (0.78%), ANNUALIZED,
RESPECTIVELY, FOR CLASS C, FOR THE PERIOD SEPTEMBER 2, 1993 (INITIAL
OFFERING) TO NOVEMBER 30, 1993.
(3) COMMENCEMENT OF OPERATIONS.
(4) INITIAL OFFERING PRICE.
(5) INITIAL OFFERING OF CLASS B AND CLASS C SHARES, RESPECTIVELY.
(6) ANNUALIZED.
- ---------------
* ASSUMES REINVESTMENT OF ALL DIVIDENDS AND DISTRIBUTIONS, BUT DOES NOT
REFLECT DEDUCTIONS FOR SALES CHARGES. AGGREGATE (NOT ANNUALIZED) TOTAL
RETURN IS SHOWN FOR ANY PERIOD SHORTER THAN ONE YEAR.

</TABLE>

B-17
<PAGE>

FINANCIAL HIGHLIGHTS (FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
(CONTINUED)

GLOBAL INCOME FUND

CLASS A
YEAR ENDED
NOVEMBER 30,
1994 $9.36 $0.57 ($0.87) ($0.30)
1993 9.14 0.63 0.27 0.90
DEC. 2, 1991(3)
TO NOV. 30, 1992 10.00(4) 0.77 (1.00) (0.23)
CLASS B
YEAR ENDED
NOV. 30, 1994 9.36 0.50 (0.87) (0.37)
SEPT. 2, 1993 (5)
TO NOV. 30, 1993 9.42(4) 0.12 (0.06) 0.06
CLASS C
YEAR ENDED
NOV. 30, 1994 9.36 0.48 (0.87) (0.39)
SEPT. 2, 1993 (5)
TO NOV. 30, 1993 9.42(4) 0.13 (0.06) 0.07
</TABLE>

CLASS A
YEAR ENDED
NOVEMBER 30,
1994 ($0.08) -- ($0.49) ($0.57)
1993 (0.17) -- (0.51) (0.68)
DEC. 2, 1991(3)
TO NOV. 30, 1992 (0.63) -- -- (0.63)
CLASS B
YEAR ENDED
NOV. 30, 1994 (0.07) -- (0.43) (0.50)
SEPT. 2, 1993 (5)
TO NOV. 30, 1993 (0.03) -- (0.09) (0.12)
CLASS C
YEAR ENDED
NOV. 30, 1994 (0.07) -- (0.41) (0.48)
SEPT. 2, 1993 (5)
TO NOV. 30, 1993 (0.03) -- (0.10) (0.13)
</TABLE>

CLASS A
YEAR ENDED
NOVEMBER 30,
1994 $8.49 (3.24%) $16,781 1.65%(1,2) 6.45%(1,2) 144%
1993 9.36 10.20% 22,465 1.70%(2) 6.73%(2) 114%
DEC. 2, 1991(3)
TO NOV. 30, 1992 9.14 (2.60%) 19,469 1.84%(2,6) 7.93%(2,6) 360%
CLASS B
YEAR ENDED
NOV. 30, 1994 8.49 (3.99%) 1,176 2.41%(1,2) 5.71%(1,2) 144%
SEPT. 2, 1993 (5)
TO NOV. 30, 1993 9.36 0.65% 699 2.45%(2,6) 4.38%(2,6) 114%
CLASS C
YEAR ENDED
NOV. 30, 1994 8.49 (4.20%) 220 2.70%(1,2) 5.48%(1,2) 144%
SEPT. 2, 1993 (5)
TO NOV. 30, 1993 9.36 0.71% 151 2.45%(2,6) 5.16%(2,6) 114%

<FN>
(1) AVERAGE NET ASSETS FOR THE YEAR ENDED NOVEMBER 30, 1994 FOR CLASS A, CLASS
B AND CLASS C WERE $18,695,485, $1,018,251 AND $187,397, RESPECTIVELY.
(2) DURING THE PERIODS PRESENTED ABOVE, THE ADVISER VOLUNTARILY WAIVED ALL OR A
PORTION OF ITS FEES AND REIMBURSED THE FUND FOR A PORTION OF ITS OPERATING
EXPENSES. IF SUCH WAIVERS AND REIMBURSMENTS HAD NOT BEEN IN EFFECT, THE
RATIOS OF NET OPERATING EXPENSES TO AVERAGE NET ASSETS AND THE RATIOS OF
NET INVESTMENT INCOME TO AVERAGE NET ASSETS FOR CLASS A WOULD HAVE BEEN
2.35% AND 5.75%, RESPECTIVELY, FOR THE YEAR ENDED NOVEMBER 30, 1994, 2.09%
AND 6.34%, RESPECTIVELY, FOR THE YEAR ENDED NOVEMBER 30, 1993 AND 1.88% AND
7.89%, ANNUALIZED, RESPECTIVELY, FOR THE PERIOD DECEMBER 2, 1991
(COMMENCEMENT OF OPERATIONS) TO NOVEMBER 30, 1992. THE RATIOS OF NET
OPERATING EXPENSES TO AVERAGE NET ASSETS AND THE RATIOS OF NET INVESTMENT
INCOME TO AVERAGE NET ASSETS WOULD HAVE BEEN 3.12% AND 5.00%, RESPECTIVELY,
FOR CLASS B AND 3.39% AND 4.79%, RESPECTIVELY, FOR CLASS C, FOR YEAR ENDED
NOVEMBER 30, 1994 AND 2.88% AND 3.95%, ANNUALIZED, RESPECTIVELY, FOR CLASS
B AND 2.84% AND 4.77%, ANNUALIZED, RESPECTIVELY, FOR CLASS C, FOR THE
PERIOD SEPTEMBER 2, 1993 (INITIAL OFFERING) TO NOVEMBER 30, 1993.
(3) COMMENCEMENT OF OPERATIONS.
(4) INITIAL OFFERING PRICE.
(5) INITIAL OFFERING OF CLASS B AND CLASS C SHARES, RESPECTIVELY.
(6) ANNUALIZED.
- ---------------
* ASSUMES REINVESTMENT OF ALL DIVIDENDS AND DISTRIBUTIONS, BUT DOES NOT
REFLECT DEDUCTIONS FOR SALES CHARGES. AGGREGATE (NOT ANNUALIZED) TOTAL
RETURN IS SHOWN FOR ANY PERIOD SHORTER THAN ONE YEAR.

</TABLE>

B-18
<PAGE>

REPORT OF INDEPENDENT ACCOUNTANTS

To the Shareholders and Board of Directors
of Quest for Value Global Equity Fund, Inc.:

In our opinion, the accompanying statement of assets and liabilities, including
the schedule of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of Quest for Value Global Equity Fund,
Inc. (the "Fund") at November 30, 1994, the results of its operations for the
year then ended, the changes in its net assets for each of the two years in the
period then ended and the financial highlights for each of the four years in the
period then ended and for the period July 2, 1990 (commencement of operations)
to November 30, 1990, in conformity with generally accepted accounting
principles. These financial statements and financial highlights (hereafter
referred to as "financial statements") are the responsiblilty of the Fund's
management; our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these financial
statements in accordance with generally accepted auditing standards which
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits, which included
confirmation of securities at November 30, 1994 by correspondence with the
custodian and brokers and the application of alternative auditing procedures
where confirmations from brokers were not received, provide a reasonable basis
for the opinion expressed above.

PRICE WATERHOUSE LLP
1177 Avenue of Americas
New York, New York
January 25, 1995

To the Shareholders and Board of Directors
of Global Income Fund:

In our opinion, the accompanying statement of assets and liabilities, including
the schedule of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of Global Income Fund (a series of
Quest for Value Global Funds, Inc. hereafter referred to as the "Fund") at
November 30, 1994, the results of its operations for the year then ended, the
changes in its net assets for each of the two years in the period then ended and
the financial highlights for each of the two years in the period then ended and
for the period December 2, 1991 (commencement of operations) to November 30,
1992, in conformity with generally accepted accounting principles. These
financial statements and financial highlights (hereafter referred to as
"financial statements") are the responsiblilty of the Fund's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these financial statements in accordance
with generally accepted auditing standards which require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits, which included confirmation of securities at
November 30, 1994 by correspondence with the custodian and brokers, provide a
reasonable basis for the opinion expressed above.

PRICE WATERHOUSE LLP
1177 Avenue of Americas
New York, New York
January 25, 1995

B-19
<PAGE>

TAX INFORMATION

We are required by Subchapter M of the Internal Revenue Code of 1986, as
amended, to advise you within 60 days of the Funds' fiscal year end
(November 30, 1994) as to the Federal tax status of dividends and distributions
received by shareholders during such fiscal year. Accordingly, we are advising
you that during the fiscal year ended November 30, 1994, the Funds paid per
share dividends and distributions to shareholders as follows:

TAXABLE AS ORDINARY INCOME
--------------------------------- TAX
NET INVESTMENT SHORT-TERM LONG-TERM RETURN
OF
INCOME CAPITAL GAINS CAPITAL GAINS CAPITAL
-------------- ------------- ------------- ---------
<S> <C> <C> <C> <C>

GLOBAL EQUITY FUND
Class A. . . . . . . . . . . . . . -- $0.0707 $0.4228 --
Class B. . . . . . . . . . . . . . -- 0.0707 0.4228 --
Class C. . . . . . . . . . . . . . -- 0.0707 0.4228 --

GLOBAL INCOME FUND
Class A. . . . . . . . . . . . . . $0.0850 -- -- $0.4853
Class B. . . . . . . . . . . . . . 0.0747 -- -- 0.4264
Class C. . . . . . . . . . . . . . 0.0719 -- -- 0.4106

</TABLE>

Since each fund's fiscal year is not the calendar year, another
notification will be sent in respect to calendar year 1994. In January 1995, you
will be advised on IRS Form 1099 DIV as to the Federal tax status of the
dividends and distributions received by you in calendar 1994. The amounts that
will be reported, will be the amounts to use on your 1994 Federal income tax
return and probably will differ from the amounts which we must report for each
fund's fiscal year ended November 30, 1994. Shareholders are advised to consult
with their own tax advisers as to the Federal, state and local tax status of
each funds' income and realized gain distributions received.

B-20

<PAGE>

QUEST FOR VALUE

ANNUAL REPORT

OCTOBER 31, 1994

<PAGE>
DECEMBER 12, 1994
DEAR SHAREHOLDER:

The fiscal year ended October 31, 1994 was a hectic and unsettled
period in the investment markets, following three years of exceptionally
strong returns. Both the stock and bond markets were affected by rising
interest rates and investor concerns about the outlook for inflation.
Stocks outperformed bonds.

After declining in the first fiscal half, equity prices turned upward
in the second half. The Standard & Poor's 500 Index including dividends (S&P
500) showed a return of 3.9% for the year and 6.3% for the second
fiscal half. This positive performance was quite good, given the jittery
mood which seemed to characterize the stock market much of the year.

As measured by the Lehman Corporate Bond Index, bonds had a negative total
return of 5.2% for the fiscal year and a negative total return of 0.1%
for the second half. By fiscal year end, bond prices appeared to have
stabilized and, in fact, turned upward in the weeks after the end of the
year.

Our equity funds performed well during the fiscal year, in each case
exceeding the returns on relevant market indices, with less portfolio risk.
Our fixed income funds had negative returns, as did virtually all fixed
income investments. We are conservative, long-term investors in both bonds
and stocks and use our value disciplines to control risk. We remain dedicated
to preserving capital and making it grow over time through a variety of
market conditions.

Detailed information on the performance and holdings of each of the funds in
the Quest for Value Family is presented in the Investment Review and
financial statements that follow.

STOCK MARKET CONDITIONS AND OUTLOOK

The bond market peaked in October 1993 and the stock market three
months later, triggered by rising interest rates and investor concerns
about the inflation outlook. By the end of the fiscal year, an expanding
economy was adding to an uncertain near-term investment outlook by
draining liquidity from financial markets. While a further stock
market correction is possible, we do not believe the ingredients are in
place for a major bear market. Neither do we see much upside potential for
the stock market in the near term. The most likely prospect, in our
view, is a continued trading range into the beginning of 1995.

In this environment, we believe we are well positioned with our value
approach to preserve capital and generate above-average returns for
shareholders. As always, we rely on our stock-selection skills to invest
in companies with superior investment characteristics. Moreover, because
of the uncertain near-term market outlook, our equity funds generally
have above-average cash reserves which are available for investment in
quality companies at reasonable prices when market conditions warrant. We
feel comfortable with our conservative portfolio posture and believe it
will serve shareholders well in the weeks and months ahead.

SM- Quest for Value is a registered service mark of
Oppenheimer Capital.

QUEST FOR VALUE FUNDS
ONE WORLD FINANCIAL CENTER
NEW YORK, NY 10281

EQUITY FUNDS
- ------------
QUEST FOR VALUE FUND
GLOBAL EQUITY FUND
OPPORTUNITY FUND
SMALL CAPITALIZATION FUND
GROWTH AND INCOME FUND

FIXED INCOME FUNDS
- ------------------
TAXABLE
U.S. GOVERNMENT INCOME FUND
INVESTMENT QUALITY INCOME FUND
GLOBAL INCOME FUND

TAX-EXEMPT
NATIONAL TAX-EXEMPT FUND
CALIFORNIA TAX-EXEMPT FUND
NEW YORK TAX-EXEMPT FUND

MONEY MARKET FUNDS
- ------------------
QUEST CASH RESERVES:

TAXABLE
PRIMARY PORTFOLIO
GOVERNMENT PORTFOLIO

TAX-EXEMPT
GENERAL MUNICIPAL PORTFOLIO
CALIFORNIA MUNICIPAL PORTFOLIO
NEW YORK MUNICIPAL PORTFOLIO

FOR MORE INFORMATION OR
ASSISTANCE WITH YOUR ACCOUNT
PLEASE CALL:
1-800-232-3863

<PAGE>
BOND MARKET CONDITIONS AND OUTLOOK

Bond prices have been battered during the past year in one of the worst selloffs
in history, driven primarily by a series of short-term rate increases by the
Federal Reserve. Prices have fallen sharply to a point where bonds may now be
oversold and where yields are well in excess of inflation.

Prices of fixed income securities have been hurt during the past year not only
by rising interest rates, but also by an unusually long list of other problems,
including the decline of the U.S. dollar, fears that inflation may increase and
fears that economic improvement will push interest rates still higher. Each of
these concerns is valid. None is new, however, and all are reflected in the
current level of bond rates.

Now that yields on long-term Treasury bonds have climbed to approximately 8%
from 5.8% a year ago, we wonder if the mood pendulum has finally reached the end
of its arc and is ready to change direction. Do today's bond yields offer an
attractive buying opportunity? Is the 15% decline in long-term Treasury prices
enough to satisfy the fears of investors? Obviously, only time will tell. While
our route to success is to identify the best relative values, not to attempt to
predict the future, currently we view the markets as offering good value.

PROPOSED AMERICAN DREAM SAVINGS ACCOUNT

We would like to call your attention to the impending debate in Congress over
tax incentives for savings. The savings rate in the United States remains
dangerously low and is well below that of many other industrial nations. To
address this national problem, the Republican Contract with America contains a
proposal which would create new tax incentives to encourage savings for
retirement, educating one's children and the first-time purchase of a home. This
proposal would establish the American Dream Savings Account, a new type of IRA,
which would be available to millions of families. We at Quest for Value believe
it is important that people be given appropriate incentives to provide for their
own financial security and that of their families. We urge you to contact your
representatives in Congress as well as the White House to voice your support for
this important proposal.

SUMMARY

We remain alert to opportunities to buy quality securities at attractive prices.
The past year has been a challenging one for investors. As long-term investors
know, however, market conditions change and the current unsettled environment
will not last forever. Today's environment is one where we believe our
conservative, value-oriented investment skills can serve investors well. We at
Quest for Value remain dedicated to meeting your investment needs by preserving
capital and delivering superior long-term performance. Thank you for investing
with us.

Sincerely,
Joseph M. La Motta
President

<PAGE>
- --------------------------------------------------------------------------------
INVESTMENT REVIEW
- --------------------------------------------------------------------------------

QUEST FOR VALUE FUND, INC.

OBJECTIVE

Seeks capital appreciation through investment primarily in equity securities of
companies believed to be undervalued in the marketplace in terms of assets,
earnings, growth potential and cash flow.

ANNUAL REVIEW

The Fund, which has consistently been rated A+ by FORBES magazine for down
market performance, continued to perform well in the latest fiscal year. Its
Class A shares provided a total return of 3.8% in the six months ended October
31, 1994 and a total return of 5.0% in the 12 months ended October 31, 1994,
below the performance of the S&P 500 for the six months and above the S&P 500
for the year. The Fund's 12-month results substantially exceeded the average
return of 1.7% for the 580 growth funds monitored by Morningstar, Inc., a
leading independent reporter of mutual fund performance. Since its inception in
April 1980, the Fund has delivered a total return of 1,013.5%, or a compound
annual return of 18.1%, well in excess of the S&P 500.

During the six months ended October 31, 1994, portfolio holdings which
contributed most to the Fund's performance were the common stocks of Becton,
Dickinson & Co., McDonnell Douglas Corp., American Express Co., Alliant
Techsystems, Inc. and Warner-Lambert Co. Underperforming stocks which detracted
most from the Fund's results were MAPCO, Inc., Sprint Corp., Venture Stores,
Inc., John Alden Financial Corp. and EXEL, Ltd.

The Fund seeks to control risk in two ways: by purchasing quality companies that
are less vulnerable to market declines, and by purchasing these superior
companies inexpensively. As of October 31, 1994, the average return on equity of
the Fund's portfolio companies was well in excess of the average return on
equity of the S&P 500 companies (indicating the quality of the Fund's portfolio
companies), while the average price-earnings ratio of the stocks in the Fund's
portfolio was considerably lower than the price-earnings ratio of the S&P 500
(indicating the relative value of the portfolio).

The Fund emphasizes investments in companies which generate substantial free
cash flow and use this cash to create value for shareholders. These companies
create value by investing in operations, making astute acquisitions or returning
capital to their shareholders through dividend payments or the repurchase of
shares. In the stock market today, many companies, with the cash flow
characteristics we like, are buying back their shares, thereby increasing the
inherent value of the shares that continue to be outstanding. Some of the
portfolio companies that are benefiting from significant share repurchase
programs include Avon Products, Inc., Becton, Dickinson & Co., McDonnell Douglas
Corp., Monsanto Co., Morgan Stanley Group, Inc., Sara Lee Corp. and Transamerica
Corp.

As of October 31, 1994, 89.9% of the Fund's portfolio was invested in common
stocks and securities convertible into common stocks and 10.1% in cash and cash
equivalents. During the six months ended October 31, 1994, the Fund increased
its holdings or added new positions in such stocks as AlliedSignal, Inc., Case
Corp., Citicorp, Countrywide Credit Industries, Inc., EXEL, Ltd., Intel Corp.,
John Alden Financial Corp., May Department Stores Co., Pall Corp., Progressive
Corp., Ohio, and Security Capital Realty, Inc. We were diligent about taking
profits in stocks that met our price objectives, reducing or eliminating the
Fund's holdings of common stocks such as Alliant Techsystems, Inc., Johnson &
Johnson Co., Unitrin, Inc. and Warner-Lambert Co.

3
<PAGE>
- --------------------------------------------------------------------------------
INVESTMENT REVIEW (continued)
- --------------------------------------------------------------------------------

QUEST FOR VALUE FUND, INC. (CONT'D)

PORTFOLIO HOLDINGS

Major industry positions as of October 31, 1994 were in the insurance, financial
services, aerospace and consumer products sectors. The Fund's five largest
equity holdings were:

EXEL LTD.
Strongly capitalized specialty insurance company

Becton, Dickinson & Co.
Worldwide producer of medical products and diagnostic test systems

McDonnell Douglas Corp.
Largest manufacturer of military aircraft and an important competitor in
commercial aircraft

Hasbro, Inc.
Well diversified marketer of toys

Federal Home Loan Mortgage Corp. (Freddie Mac)
The second largest insurer of home mortgages

COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT* IN
QUEST FOR VALUE FUND, INC. (CLASS A) FROM INCEPTION (4/30/80)
THROUGH 10/31/94 AND TOTAL RETURN ON S&P 500 INDEX**

EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC

CDSC = contingent deferred sales charge

Performance of B and C classes will differ from
performance of A class shown
above based on differences in loads and fees
paid by shareholders of the
different classes.

4
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

OPPORTUNITY FUND

OBJECTIVE

Seeks capital appreciation by looking for opportunities in the equity and fixed
income markets; the balance between stocks, bonds and cash will vary, based on
an assessment of the best relative opportunities under prevailing market
conditions.

ANNUAL REVIEW

The Opportunity Fund continued as one of the top-performing funds in its
industry category. The Fund's Class A shares provided a total return of 6.0% in
the six months ended October 31, 1994, slightly below the S&P 500, and 8.4% in
the fiscal year ended October 31, 1994, well in excess of the S&P 500. The
Fund's 12-month performance far exceeded the negative average return of 0.2% for
the 87 asset allocation funds in the Morningstar universe. The Fund has provided
a compound annual return of 15.4% since inception in January 1989, exceeding the
S&P 500.

The Fund invests in stocks, bonds and cash equivalents, seeking an appropriate
allocation among each class of assets to preserve capital and generate the best
total return over time. During the six months ended October 31, 1994, the Fund
reduced its holdings of common stocks and increased its cash reserves. At fiscal
year end, the Fund's asset mix was 76.5% common stocks, 1.5% Treasury notes,
1.1% convertible preferred stocks and 20.9% cash and cash equivalents.

As with our other funds, investment in quality securities at reasonable prices
is fundamental to the Opportunity Fund's philosophy. At October 31, 1994, the
average price-earnings ratio of the stocks in the Fund was significantly below
the price-earnings ratio for the S&P 500, while the average annual return on
equity of the portfolio companies was well in excess of the average annual
return on equity of the S&P 500. We believe this combination of low valuation
and high return on equity provides a degree of protection against severe price
declines, as well as an opportunity for significant investment profit.

During the six months ended October 31, 1994, the Fund established new positions
in the common stocks of Collins & Aikman Corp., Countrywide Credit Industries,
Inc. and Intel Corp. The Fund increased its holdings of the common stocks of
such companies as Federal Home Loan Mortgage Corp., Lehman Brothers Holdings,
Inc., McDonnell Douglas Corp., Triton Energy Corp. and Wells Fargo & Co.
Holdings of such stocks as First Interstate Bancorp, General Electric Co. and
MAPCO, Inc. were eliminated.

PORTFOLIO HOLDINGS

Major industry positions as of October 31, 1994 were in the financial services,
banking, aerospace, and drugs and medical products sectors. The Fund's five
largest equity holdings were:

McDonnell Douglas Corp.
Largest manufacturer of military aircraft and an important competitor in
commercial aircraft

Mellon Bank Corp.
Major money center bank

5
<PAGE>
- --------------------------------------------------------------------------------
INVESTMENT REVIEW (continued)
- --------------------------------------------------------------------------------

OPPORTUNITY FUND (CONT'D)

Federal Home Loan Mortgage Corp. (Freddie Mac)
The second largest insurer of home mortgages

Wells Fargo & Co.
Leading West Coast bank

Hercules, Inc.
Specialty chemical producer that is investing in highly profitable core
businesses and divesting non-core operations

COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT* IN
QUEST FOR VALUE OPPORTUNITY FUND (CLASS A) FROM INCEPTION (1/01/89)
THROUGH 10/31/94 AND TOTAL RETURN ON S&P 500 INDEX**

EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC

CDSC = contingent deferred sales charge

Performance of B and C classes will differ
from performance of A class shown above
based on differences in loads and fees paid
by shareholders of the different classes.

6
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

SMALL CAPITALIZATION FUND

OBJECTIVE

Seeks capital appreciation by investing in a diversified portfolio of
undervalued stocks, primarily of companies with market capitalizations under $1
billion.

ANNUAL REVIEW

The Small Capitalization Fund's Class A shares had a total return of 0.6% in the
six months ended October 31, 1994, somewhat below the 1.8% total return of the
Russell 2000 Index, a widely followed benchmark which includes smaller
capitalization stocks. For the 12 months ended October 31, 1994, the Class A
shares had a flat performance (0.0% total return), slightly exceeding the
negative total return of 0.2% for the Russell index. The 12-month results
compare with an average total return of 1.9% for the 201 funds in Morningstar's
small company fund category.

In general, smaller capitalization companies underperformed larger
capitalization stocks in both the six months and the fiscal year. Small cap
stocks have traditionally provided high investment returns over time, although
subject to volatility. The Fund invests conservatively in this sector, seeking
to control volatility and achieve superior long-term capital appreciation by
investing in companies that are well established and have a combination of
strong market positions, shareholder-oriented managements, excellent balance
sheets and cash flow, and above-average returns on equity and assets. The Fund's
portfolio contains an eclectic group of securities selected to meet our value
criteria. For instance, we continue to see a number of opportunities among
niche-oriented financial service companies, such as AmeriCredit Corp. and Cash
America International, Inc., two special situations. As is true of all our
holdings, these companies enjoy high returns on capital and have seasoned,
shareholder-oriented managements. Both companies generate significant recurring
cash because of unique characteristics of their respective businesses, yet sell
at reasonable prices relative to their peers and to the market.

At October 31, 1994, 86.3% of the Fund's portfolio was invested in common
stocks, 1.6% in corporate notes and bonds, 0.2% in convertible preferred stocks
and 11.9% in cash and cash equivalents. During the fiscal year, we added to our
professional team, increasing our research coverage of companies with market
capitalizations in a range of $500 million to $1 billion.

In the six months, we established new or increased positions in the common
stocks of such companies as Aquila Gas Pipeline Corp., Commerce Clearing House,
Inc. (Class B), Community Health Systems, Inc., Foote, Cone & Belding
Communications, Inc., D.R. Horton, Inc., Martin Marietta Materials, Inc.,
Security Capital Industrial Trust, Inc. and Sybron International Corp. We
eliminated or reduced the Fund's holdings of such stocks as Carlisle Plastics,
Inc., Exabyte Corp., Foamex International, Inc., Noel Group, Inc., Penn America
Group, Inc., SPI Holdings, Inc. and United Stationers, Inc.

7
<PAGE>
- --------------------------------------------------------------------------------
INVESTMENT REVIEW (continued)
- --------------------------------------------------------------------------------

SMALL CAPITALIZATION FUND (CONT'D)

PORTFOLIO HOLDINGS

Major industry positions as of October 31, 1994 were in the real estate, energy,
technology and manufacturing sectors. The Fund's five largest equity holdings
were:

Stratus Computer, Inc.
Worldwide leader in fault-tolerant, high-availability computer systems

Foote, Cone & Belding Communications, Inc.
Well-known advertising agency

Nu-Kote Holdings, Inc. (Class A)
Manufacturer and distributor of office printing supplies and other office
supply products

Sybron International Corp.
Manufacturer of laboratory supplies and dental products

Dionex Corp.
Designs and manufactures ion chromatography systems used by chemists in many
industries

COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT* IN
QUEST FOR VALUE SMALL CAPITALIZATION FUND (CLASS A) FROM INCEPTION (1/01/89)
THROUGH 10/31/94 AND TOTAL RETURN ON RUSSELL 2000 INDEX**

EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC

<TABLE>
<CAPTION>
QFV OPP RUSSELL 2000
<S> <C> <C>
Dec-88 $9,450 $10,000
Oct-89 $10,310 $11,504
Oct-90 $8,421 $8,363
Oct-90 $13,053 $13,265
Oct-92 $14,566 $14,523
Oct-93 $18,967 $19,227
Oct-94 18975 19180
</TABLE>

CDSC = contingent deferred sales charge

Performance of B and C classes will differ
from performance of A class shown above
based on differences in loads and fees paid
by shareholders of the different classes.

<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

GROWTH AND INCOME FUND

OBJECTIVE

Seeks total return by investing in a combination of attractively valued quality
stocks and fixed income securities.

ANNUAL REVIEW

The Growth and Income Fund is designed for investors who want to participate in
the equity market for total return with above-average income. Compared with our
other equity funds, it tends to be somewhat more active in selling portfolio
securities when prices rise and buying on price weakness.

The Fund's Class A shares delivered a total return of 5.4% in the six months
ended October 31, 1994, slightly below the S&P 500, and 8.6% in the 12 months
ended October 31, 1994, well above the S&P 500. The Fund's 12-month return
substantially exceeded the average return of 2.0% for the 326 funds in the
Morningstar growth and income category. Income dividends paid in the year ended
October 31, 1994, came to $.3193 per Class A share.

In managing the Fund, we seek to maintain a diversified portfolio that balances
the need for protection of principal with the pursuit of long-term capital
appreciation and income. The portfolio is structured around three broad
segments: common stocks, which provide growth potential and some income;
higher-yielding bonds, which generate relatively more income but are also
selected for their potential for capital appreciation; and fixed income
securities which are convertible into common stocks. By separating the portfolio
into these segments, we can select common stocks based almost exclusively on
their prospects for total return without regard to income.

As of October 31, 1994, 52.6% of the Fund's portfolio was invested in common
stocks, 18.5% in convertible securities, 11.2% in notes and bonds and 17.7% in
cash and cash equivalents, representing a significant increase in cash reserves
since the beginning of the fiscal year. This shift is intended to protect
principal in a potentially adverse market environment and to provide cash for
reinvestment at more favorable prices in the future. The cash reserve was
further increased to approximately 25% shortly after the close of the fiscal
year, primarily through the sale of common stocks.

Significant new common stock positions during the six months included Freeport
McMoRan, Inc., Intel Corp., General Motors Corp. and Countrywide Credit
Industries, Inc. We added significantly to the Fund's existing position in
PepsiCo, Inc. Holdings that were eliminated or significantly reduced included
EXEL, Ltd., General Electric Co., Johnson & Johnson Co., Martin Marietta Corp.,
Transamerica Corp. and VF Corp.

In the higher-yielding segment of the Fund's portfolio, new positions were added
in Alza Corp. and Time Warner, Inc. (zero coupon convertible securities) and
investments in the convertible preferred stocks of Flagstar Companies, Inc. and
Gerrity Oil & Gas Corp. were increased. The Fund's holding of USX Marathon
Group, Inc. convertible preferred stock was sold.

9
<PAGE>
- --------------------------------------------------------------------------------
INVESTMENT REVIEW (continued)
- --------------------------------------------------------------------------------

GROWTH AND INCOME FUND (CONT'D)

PORTFOLIO HOLDINGS

Major industry positions as of October 31, 1994 were in the
tobacco/beverages/food products, financial services, energy and aerospace
sectors. The Fund's five largest equity holdings were:

McDonnell Douglas Corp.
Largest manufacturer of military aircraft and an important competitor in
commercial aviation

Gerrity Oil & Gas Corp. convertible preferred
U.S. oil and gas exploration and production company

Flagstar Companies, Inc. convertible preferred
Operator of Denny's Restaurants with good potential for turnaround

PepsiCo, Inc.
Leading beverage, snack food and convenience restaurant company

Countrywide Credit Industries, Inc.
Leading mortgage company

COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT* IN
QUEST FOR VALUE GROWTH AND INCOME FUND (CLASS A) FROM INCEPTION (11/04/91)
THROUGH 10/31/94 AND TOTAL RETURN ON S&P 500 INDEX**

EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC

<TABLE>
<CAPTION>
QFV Growth S&P 500
<S> <C> <C>
Nov-91 $9,525 $10,000
Oct-92 $10,558 $11,028
Oct-93 $11,605 $12,675
Oct-94 12620 13164
</TABLE>

CDSC = contingent deferred sales charge

Performance of B and C classes will differ
from performance of A class shown above
based on differences in loads and fees paid
by shareholders of the different classes.

10
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

U.S. GOVERNMENT INCOME FUND

OBJECTIVE

Seeks to provide shareholders with a high level of current income together with
protection of capital; invests in debt obligations issued or guaranteed by the
U.S. government, its agencies or intermediaries and in related futures, options
and repurchase agreements.

ANNUAL REVIEW

The Fund paid total dividends of $.593 on its Class A shares in the fiscal year
ended October 31, 1994. The Class A shares had a negative total return of 0.4%
in the six months ended October 31, 1994 and a negative total return of 4.1% in
the 12 months ended October 31, 1994, reflecting the impact of a decline in the
Fund's per-share net asset value (NAV) due to the general weakness of the bond
market. The 12-month results compare with a negative total return of 1.7% for
the Lehman Brothers Intermediate Government Bond Index and negative 4.2% for the
271 funds in the Morningstar general government bond fund category.

Unlike many other government bond funds, the U.S. Government Income Fund invests
primarily in intermediate-term securities and places a high priority on
maintaining a relatively stable net asset value (NAV) per share. The volatility
of the Fund, that is the amount of price movement of the NAV, is similar to the
volatility of a five-year Treasury note. This sector of the bond market was
especially hard hit in the past year's market downturn.

We took a number of steps to improve the Fund's performance without compromising
our dedication to low price volatility and protection of principal. For
instance, we generated record income of $.147 per Class A share during the year
from the Fund's option overwriting program. Because of market volatility, option
premiums increased and we were able to take advantage of this opportunity. In
addition, we continued to reduce the Fund's holdings of mortgage-backed
government agency securities, which were poor performers, and increased its
holdings of Treasury notes and bonds. As of October 31, 1994, 47.5% of the
Fund's portfolio was invested in Treasuries.

We remain dedicated to generating a high cash yield for shareholders from a
conservatively structured portfolio, while protecting principal. The integrity
of the portfolio and the Fund's investment process is demonstrated by a total
return of 57.7%, or 7.3% annualized, from the Fund's inception in May 1988
through October 31, 1994. One way for shareholders to maximize their returns and
reduce the impact of short-term fluctuations in the NAV is by reinvesting
dividends in additional shares, thereby acquiring more shares at low prices in
down markets.

11
<PAGE>
- --------------------------------------------------------------------------------
INVESTMENT REVIEW (continued)
- --------------------------------------------------------------------------------

U.S. GOVERNMENT INCOME FUND (CONT'D)

COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT* IN
QUEST FOR VALUE U.S. GOVERNMENT INCOME FUND (CLASS A) FROM 5/31/88
THROUGH 10/31/94 AND TOTAL RETURN ON LEHMAN INTERMEDIATE GOVERNMENT BOND INDEX

EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC

<TABLE>
<CAPTION>
QFV Govt Lehman
<S> <C> <C>
May-88 $9,525 $10,000
Oct-88 $9,978 $10,464
Oct-89 $10,918 $11,552
Oct-90 $11,789 $12,456
Oct-91 $13,368 $14,115
Oct-92 $14,435 $15,505
Oct-93 $15,670 $16,933
Oct-94 15020 16645
</TABLE>

CDSC = contingent deferred sales charge

Performance of B and C classes will differ
from performance of A class shown above
based on differences in loads and fees paid
by shareholders of the different classes.

12
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

INVESTMENT QUALITY INCOME FUND

OBJECTIVE

Seeks to provide as high a level of current income as possible, consistent with
conservation of principal; invests primarily in fixed income obligations, with
at least 80% of its holdings being rated A or better and none being below
investment grade.

ANNUAL REVIEW

The Investment Quality Income Fund had consistently ranked among the top mutual
funds in its category for nearly three years. However, we were disappointed with
the Fund's performance in the fiscal year ended October 31, 1994. The Fund paid
dividends of $.68 per Class A share during the fiscal year. On an annualized
basis, the monthly distribution yield on the net asset value (NAV) of the Class
A shares was 7.2% at October 31, 1994. However, the Class A shares had a
negative total return of 2.6% in the six months ended October 31, 1994 and
negative 9.6% in the 12 months ended October 31, 1994, reflecting a decline in
the Fund's per-share NAV. The 12-month performance compared with a negative
total return of 5.2% for the Lehman Brothers Corporate Bond Index and a negative
return of 2.5% for the 134 funds in the Morningstar quality corporate bond
category.

The single most important factor in the Fund's recent poor performance was its
portfolio duration of approximately 7.4 years. This relatively long duration
helped the Fund's performance when bond prices were rising, but dampened
performance when bond prices declined. The Fund has been a strong performer over
time and we remain confident of our ability to deliver favorable returns from
quality fixed income securities.

The Fund provides a convenient means to invest in a diversified portfolio of
quality, longer term fixed income securities of corporate America. In addition,
about one-sixth of the portfolio is invested in dollar-denominated bonds of
foreign issuers, including sovereign and high-grade corporate debt, which
provide attractive yields and favorable relative value. We continue to seek the
best relative value in the bond market and have recently been shifting some
assets from industrial issues to utilities. We have also increased the Fund's
investment in callable bonds, which we believe offer better return opportunities
at this time than noncallable securities.

An effective way for shareholders to maximize their returns from the Fund and
minimize the impact of short-term fluctuations in the NAV is by reinvesting
dividends, thus buying more shares at low prices in down markets.

13
<PAGE>
- --------------------------------------------------------------------------------
INVESTMENT REVIEW (continued)
- --------------------------------------------------------------------------------

INVESTMENT QUALITY INCOME FUND (CONT'D)

COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT* IN
QUEST FOR VALUE INVESTMENT QUALITY INCOME FUND (CLASS A) FROM 12/31/90
THROUGH 10/31/94 AND TOTAL RETURN ON LEHMAN BROTHERS CORP. BOND INDEX

EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC

<TABLE>
<CAPTION>
QFV Growth S&P 500
<S> <C> <C>
Dec-90 $9,525 $10,000
Oct-91 $10,273 $11,364
Oct-92 $11,425 $12,627
Oct-93 $13,555 $14,541
Oct-94 12252 13785
</TABLE>

CDSC = contingent deferred sales charge

Performance of B and C classes will differ
from performance of A class shown above
based on differences in loads and fees paid
by shareholders of the different classes.

<PAGE>

OCTOBER 31, 1994
SCHEDULES OF INVESTMENTS

QUEST FOR VALUE FUND, INC.

<TABLE>
<CAPTION>
- -------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
- -------------------------------------------------------
<S> <C> <C>
U.S. TREASURY BILLS -- 0.1%
$ 350,000 5.06%, 4/06/95
(cost -- $342,326) $ 342,031
------------
SHORT-TERM CORPORATE NOTES -- 10.7%
BANKING -- 3.3%
$ 8,632,000 Norwest Financial, Inc.
4.95%, 12/05/94 $ 8,591,645
------------
ENERGY -- 0.8%
2,000,000 Chevron Oil Finance Co.
4.91%, 11/28/94 1,992,635
------------
INSURANCE -- 0.9%
2,300,000 Prudential Funding Corp.
4.85%, 11/14/94 2,295,972
------------
MACHINERY & ENGINEERING -- 3.1%
7,900,000 Deere (John) Capital Corp.
4.92%, 11/07/94 7,893,522
------------
MISCELLANEOUS FINANCIAL SERVICES -- 2.6%
1,470,000 Beneficial Corp.
4.88%, 11/21/94 1,466,015
1,300,000 Commercial Credit Co.
4.85%, 11/21/94 1,296,497
4,000,000 Household Finance Corp.
4.97%, 12/01/94 3,983,433
------------
6,745,945
------------
Total Short-Term Corporate Notes
(cost -- $27,519,719) $ 27,519,719
------------
CONVERTIBLE CORPORATE BONDS -- 0.8%
REAL ESTATE
$ 2,310,156 Security Capital Realty, Inc.
12.00%, 6/30/14
(cost -- $2,177,494) (A) $ 1,997,340
------------
<CAPTION>
- -------------------------------------------------------
SHARES VALUE
- -------------------------------------------------------
<S> <C> <C>
CONVERTIBLE PREFERRED STOCKS -- 1.1%
METALS/MINING
60,000 Freeport McMoRan, Inc.
$4.375 Conv. Pfd.
(cost -- $2,654,325) $ 2,880,000
------------
<CAPTION>
- -------------------------------------------------------
SHARES VALUE
- -------------------------------------------------------
<S> <C> <C>
COMMON STOCKS -- 88.0%
AEROSPACE -- 10.1%
215,000 AlliedSignal, Inc. $ 7,444,375
129,000 Martin Marietta Corp. 5,917,875
59,000 McDonnell Douglas Corp. 8,319,000
90,000 Sundstrand Corp. 4,095,000
------------
25,776,250
------------
BANKING -- 6.1%
75,000 Citicorp 3,581,250
68,000 First Interstate Bancorp 5,440,000
120,810 Mellon Bank Corp. 6,720,056
------------
15,741,306
------------
CHEMICALS -- 3.1%
27,000 Hercules, Inc. 3,152,250
64,000 Monsanto Co. 4,872,000
------------
8,024,250
------------
CONGLOMERATES -- 1.7%
90,200 General Electric Co. 4,408,525
------------
CONSUMER PRODUCTS -- 7.5%
80,000 Avon Products, Inc. 5,060,000
252,000 Hasbro, Inc. 8,316,000
50,000 Unilever N.V. 5,937,500
------------
19,313,500
------------
DRUGS & MEDICAL PRODUCTS -- 5.4%
213,000 Becton, Dickinson & Co. 10,064,250
48,000 Warner-Lambert Co. 3,660,000
------------
13,724,250
------------
ELECTRONICS -- 2.6%
177,000 Arrow Electronics, Inc.* 6,681,750
------------
INSURANCE -- 20.5%
82,000 American International
Group, Inc. 7,677,250
411,000 EXEL Ltd. 16,183,125
38,500 General Reinsurance Corp. 4,312,000
205,000 John Alden Financial Corp. 6,150,000
202,500 Progressive Corp., Ohio 7,695,000
101,000 Transamerica Corp. 4,961,625
121,000 UNUM Corp. 5,550,875
------------
52,529,875
------------
MANUFACTURING -- 4.2%
260,000 Case Corp. 5,460,000
290,000 Pall Corp. 5,256,250
------------
10,716,250
------------
</TABLE>

* Non-income producing security.

15
<PAGE>
OCTOBER 31, 1994
SCHEDULES OF INVESTMENTS
<TABLE>
<CAPTION>
- -------------------------------------------------------
SHARES VALUE
- -------------------------------------------------------
<S> <C> <C>
METALS/MINING -- 1.7%
2,844 Freeport McMoRan, Copper &
Gold (Class A) $ 64,701
227,000 Freeport McMoRan, Inc. 4,171,125
------------
4,235,826
------------
MISCELLANEOUS FINANCIAL SERVICES -- 9.9%
200,000 American Express Co. 6,150,000
340,000 Countrywide Credit
Industries, Inc. 5,015,000
152,000 Federal Home Loan Mortgage
Corp. 8,284,000
90,000 Morgan Stanley Group, Inc. 5,883,750
------------
25,332,750
------------
REAL ESTATE -- 1.1%
3,050 Security Capital Realty,
Inc. (A) 2,758,036
------------
RETAIL -- 3.5%
213,000 May Department Stores Co. 8,014,125
21,000 Mercantile Stores Co., Inc. 955,500
------------
8,969,625
------------
TECHNOLOGY -- 3.1%
127,000 Intel Corp. 7,889,875
------------
TELECOMMUNICATIONS -- 1.9%
344 Bell Atlantic Corp. 18,017
145,200 Sprint Corp. 4,737,150
------------
4,755,167
------------
TEXTILES/APPAREL -- 2.1%
280,600 Warnaco Group, Inc. (Class
A)* 5,296,325
------------
<CAPTION>
- -------------------------------------------------------
SHARES VALUE
- -------------------------------------------------------
<S> <C> <C>
TOBACCO/BEVERAGES/FOOD PRODUCTS -- 3.5%
116,000 Dole Food Co. $ 3,117,500
240,000 Sara Lee Corp. 5,910,000
------------
9,027,500
------------
Total Common Stocks
(cost -- $192,374,371) $225,181,060
------------
Total Investments
(cost -- $225,068,235) 100.7% $257,920,150

Other Liabilities in Excess of
Other Assets (0.7) (1,881,015)
----- -------------
TOTAL NET ASSETS 100.0 % $256,039,135
----- ------------
----- ------------
</TABLE>

OPPORTUNITY FUND

<TABLE>
<CAPTION>
- -------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
- -------------------------------------------------------
<S> <C> <C>
SHORT-TERM CORPORATE NOTES -- 20.6%
AUTOMOTIVE -- 0.7%
$ 1,450,000 Ford Motor Credit Co.
4.91%, 11/28/94 $ 1,444,660
------------
BANKING -- 4.9%
10,600,000 Norwest Financial, Inc.
4.95%, 12/05/94 10,550,445
------------
CONGLOMERATES -- 0.5%
950,000 General Electric Capital Corp.
4.90%, 11/14/94 948,319
------------
ENERGY -- 3.5%
Chevron Oil Finance Co.
6,100,000 4.82%, 11/28/94 6,077,949
1,450,000 4.91%, 11/28/94 1,444,661
------------
7,522,610
------------
INSURANCE -- 0.6%
1,300,000 Prudential Funding Corp.
5.00%, 11/14/94 1,297,653
------------
</TABLE>

* Non-income producing security.

(A) Restricted Securities (the Fund will not bear any costs, including those
involved in registration under the Securities Act of 1933, in connection
with the disposition of these securities.):

<TABLE>
<CAPTION>
Date of Par Valuation as of
Description Acquisition Amount Shares Unit Cost October 31, 1994
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Security Capital Realty, Inc.
12.00%, 6/30/14 9/15/94 $2,310,156 -- $ .94 $ .86
Security Capital Realty, Inc.
Common Stock 9/15/94 -- 3,050 926 904

</TABLE>

16
<PAGE>
<TABLE>
<CAPTION>
- -------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
- -------------------------------------------------------
<S> <C> <C>
MACHINERY & ENGINEERING -- 1.8%
Deere (John) Capital Corp.
$ 800,000 4.83%, 11/21/94 $ 797,853
3,100,000 4.92%, 11/07/94 3,097,458
------------
3,895,311
------------
MISCELLANEOUS FINANCIAL SERVICES -- 8.6%
Beneficial Corp.
4,950,000 4.88%, 11/21/94 4,936,580
1,100,000 5.00%, 11/07/94 1,099,083
1,800,000 CIT Group Holdings, Inc.
5.05%, 11/07/94 1,798,485
1,200,000 Commercial Credit Co.
4.85%, 11/21/94 1,196,767
Household Finance Corp.
2,500,000 4.52%, 11/02/94 2,499,686
6,100,000 4.85%, 11/28/94 6,077,811
800,000 4.88%, 11/14/94 798,590
------------
18,407,002
------------
Total Short-Term Corporate Notes
(cost -- $44,066,000) $ 44,066,000
------------

U.S. TREASURY NOTES -- 1.5%
$ 1,000,000 7.50%, 11/15/01 $ 992,030
1,000,000 7.50%, 5/15/02 990,470
550,000 7.875%, 4/15/98 560,054
550,000 7.875%, 8/15/01 557,304
------------
Total U.S. Treasury Notes
cost -- $3,149,370) $ 3,099,858
------------
<CAPTION>
- -------------------------------------------------------
SHARES VALUE
- -------------------------------------------------------
<S> <C> <C>
CONVERTIBLE PREFERRED STOCKS -- 1.1%
METALS/MINING
50,000 Freeport McMoRan, Inc.
$4.375 Conv. Pfd.
(cost -- $2,211,938) $ 2,400,000
------------
COMMON STOCKS -- 76.5%
AEROSPACE -- 8.9%
115,000 McDonnell Douglas Corp. $ 16,215,000
60,000 Sundstrand Corp. 2,730,000
------------
18,945,000
------------
<CAPTION>
- ------------------------------------------------------
SHARES VALUE
- ------------------------------------------------------
<S> <C> <C>
BANKING -- 15.2%
120,000 Citicorp $ 5,730,000
34,000 First Empire State Corp. 5,108,500
226,000 Mellon Bank Corp. 12,571,250
10,000 U.S. Bancorp 240,000
60,000 Wells Fargo & Co. 8,917,500
------------
32,567,250
------------
CHEMICALS -- 4.7%
75,000 Hercules, Inc. 8,756,250
18,000 Monsanto Co. 1,370,250
------------
10,126,500
------------
CONSUMER PRODUCTS -- 3.8%
60,000 Avon Products, Inc. 3,795,000
50,000 Hasbro, Inc. 1,650,000
92,500 Mattel, Inc. 2,705,625
------------
8,150,625
------------
DRUGS & MEDICAL PRODUCTS -- 5.9%
120,000 Becton, Dickinson & Co. 5,670,000
90,000 Warner-Lambert Co. 6,862,500
------------
12,532,500
------------
ENERGY -- 5.4%
139,200 Tenneco, Inc. 6,159,600
149,300 Triton Energy Corp.* 5,300,150
------------
11,459,750
------------
HEALTHCARE SERVICES -- 2.9%
435,000 National Health
Laboratories, Inc. 6,253,125
------------
INSURANCE -- 5.3%
160,000 EXEL Ltd. 6,300,000
60,000 Transamerica Corp. 2,947,500
60,000 Travelers, Inc. 2,085,000
------------
11,332,500
------------
MANUFACTURING -- 1.3%
160,000 Collins & Aikman Corp.* 1,420,000
100,100 Shaw Industries, Inc. 1,463,962
------------
2,883,962
------------
</TABLE>

* Non-income producing security.

17
<PAGE>
OCTOBER 31, 1994
SCHEDULES OF INVESTMENTS
OPPORTUNITY FUND (CONT'D)
<TABLE>
<CAPTION>
- -------------------------------------------------------
SHARES VALUE
- -------------------------------------------------------
<S> <C> <C>
MISCELLANEOUS FINANCIAL SERVICES -- 16.5%
240,000 American Express Co. $ 7,380,000
321,700 Countrywide Credit
Industries, Inc. 4,745,075
210,000 Federal Home Loan Mortgage
Corp. 11,445,000
55,000 Federal National Mortgage
Assoc. 4,180,000
110,000 Lehman Brothers Holdings,
Inc. 1,705,000
90,000 Morgan Stanley Group, Inc. 5,883,750
------------
35,338,825
------------
TECHNOLOGY -- 4.8%
70,000 Alliant Techsystems, Inc.* 2,406,250
110,000 Intel Corp. 6,833,750
50,500 Unitrode Corp.* 972,125
------------
10,212,125
------------
TELECOMMUNICATIONS -- 1.8%
120,100 Sprint Corp. 3,918,263
------------
Total Common Stocks
(cost -- $149,478,552) $163,720,425
------------
Total Investments
(cost -- $198,905,860) 99.7% $213,286,283

Other Assets in Excess of
Other Liabilities 0.3 659,462
----- ------------
Total Net Assets 100.0% $213,945,745
----- ------------
----- ------------
</TABLE>

SMALL CAPITALIZATION FUND

<TABLE>
<CAPTION>
- -------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
- -------------------------------------------------------
<S> <C> <C>
SHORT-TERM CORPORATE NOTES -- 8.5%
AUTOMOTIVE -- 0.7%
$1,038,000 Ford Motor Credit Co.
4.91%, 11/28/94 $ 1,034,178
------------
BANKING -- 5.0%
7,041,000 Norwest Financial, Inc.
4.95%, 12/05/94 7,008,083
------------
CONGLOMERATES -- 0.7%
930,000 General Electric Capital
Corp.
4.82%, 11/21/94 927,510
------------
<CAPTION>
- -------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
- -------------------------------------------------------
<S> <C> <C>
INSURANCE -- 1.1%
$1,468,000 Prudential Funding Corp.
4.85%, 11/28/94 $ 1,462,660
------------
MISCELLANEOUS FINANCIAL SERVICES -- 1.0%
925,000 Beneficial Corp.
4.88%, 11/21/94 922,492
475,000 Federal National Mortgage
Assoc.
4.75%, 11/01/94 475,000
------------
1,397,492
------------
Total Short-Term Corporate Notes
(cost -- $11,829,923) $ 11,829,923
------------
CORPORATE NOTES & BONDS -- 0.7%
ENERGY -- 0.3%
$ 375,000 Global Marine, Inc.
12.75%, 12/15/99 $ 405,000
------------
PRINTING & PUBLISHING -- 0.4%
700,000 U.S. Banknote Corp.
10.375%, 6/01/02 602,000
------------
Total Corporate Notes & Bonds
(cost -- $1,104,862) $ 1,007,000
------------
CONVERTIBLE CORPORATE BONDS -- 0.9%
REAL ESTATE
$1,363,500 Security Capital Realty, Inc.
12.00%, 6/30/14
(cost -- $1,285,200) (A) $ 1,178,870
------------
</TABLE>
<TABLE>
<CAPTION>
- -------------------------------------------------------
SHARES VALUE
- -------------------------------------------------------
<S> <C> <C>
CONVERTIBLE PREFERRED STOCKS -- 0.2%
RETAIL
36,000 Family Bargain Corp.
$0.95 Conv. Pfd.
(cost -- $360,000) $ 346,500
------------
COMMON STOCKS -- 86.3%
ADVERTISING -- 4.7%
100,000 Foote, Cone & Belding
Communications, Inc. 4,475,000
39,000 Omnicom Group, Inc. 2,076,750
------------
6,551,750
------------
AEROSPACE -- 1.2%
200,000 BE Aerospace, Inc.* 1,737,500
------------
AUTOMOTIVE -- 0.2%
126,000 Collins Industries, Inc.* 283,500
------------
BUILDING & CONSTRUCTION -- 3.9%
146,000 CRSS, Inc. 1,642,500
102,600 D.R. Horton, Inc. 1,346,625
120,000 Martin Marietta Materials,
Inc. 2,475,000
------------
5,464,125
------------
CHEMICALS -- 2.0%
141,400 OM Group, Inc. 2,828,000
------------
</TABLE>

* Non-income producing security.

18
<PAGE>
<TABLE>
<CAPTION>
- -------------------------------------------------------
SHARES VALUE
- -------------------------------------------------------
<S> <C> <C>
COMPUTER SERVICES -- 4.1%
147,700 BancTec, Inc.* $ 2,954,000
34,600 Globalink, Inc.* 484,400
90,000 National Data Corp. 1,867,500
70,000 Sudbury, Inc.* 481,250
------------
5,787,150
------------
DRUGS & MEDICAL PRODUCTS -- 3.6%
40,000 Beckman Instruments, Inc. 1,175,000
108,900 Sybron International Corp.* 3,770,662
------------
4,945,662
------------
ELECTRICAL EQUIPMENT -- 0.7%
80,000 Instrument Systems Corp.* 600,000
16,000 Marshall Industries* 418,000
------------
1,018,000
------------
ENERGY -- 9.5%
136,800 Aquila Gas Pipeline Corp. 1,043,100
195,500 BWIP Holdings, Inc. (Class
A) 3,519,000
330,155 Global Natural Resources,
Inc.* 2,476,162
125,000 Nahama & Weagant
Energy Co.* 54,687
137,500 Noble Drilling Corp.* 1,014,063
72,000 St. Mary Land &
Exploration Co. 967,500
65,000 Triton Energy Corp.* 2,307,500
92,530 UGI Corp. 1,862,166
------------
13,244,178
------------
HEALTHCARE SERVICES -- 1.7%
90,000 Community Health Systems,
Inc.* 2,362,500
------------
INSURANCE -- 3.3%
123,300 Financial Security Assurance
Holdings, Ltd. 2,758,838
112,500 Guaranty National Corp. 1,884,375
------------
4,643,213
------------
LEISURE -- 0.7%
43,700 Club Med, Inc. 977,787
------------
MANUFACTURING -- 6.8%
89,000 Collins & Aikman Corp.* 789,875
97,000 Exabyte Corp.* 2,134,000
50,000 Giddings & Lewis, Inc. 775,000
181,300 Interlake Corp.* 430,587
65,100 Masland Corp. 1,049,738
170,000 North American Watch Co. 2,210,000
85,600 Welbilt Corp.* 2,118,600
------------
9,507,800
------------
MEDIA/BROADCASTING -- 0.6%
25,000 Pulitzer Publishing Co. 893,750
------------
METALS/MINING -- 0.5%
50,000 Olympic Steel, Inc.* 737,500
------------
MISCELLANEOUS FINANCIAL SERVICES -- 3.6%
221,400 SafeCard Services, Inc. 3,542,400
100,800 Union Corp.* 1,499,400
------------
5,041,800
------------
<CAPTION>
- -------------------------------------------------------
SHARES VALUE
- -------------------------------------------------------
<S> <C> <C>
PAPER PRODUCTS -- 0.7%
61,500 CSS Industries, Inc.* $ 1,022,438
------------
PRINTING & PUBLISHING -- 3.8%
72,000 Commerce Clearing House,
Inc. (Class B) 1,206,000
216,300 Nu-Kote Holdings, Inc.
(Class A)* 4,028,588
------------
5,234,588
------------
REAL ESTATE -- 10.6%
151,800 Cousins Properties, Inc. 2,352,900
44,000 Post Properties, Inc. 1,292,500
219,750 Property Trust of America 3,543,469
230,000 Security Capital Industrial
Trust, Inc. 3,507,500
1,800 Security Capital Realty,
Inc. (A) 1,627,848
239,000 Taubman Centers, Inc. 2,479,625
------------
14,803,842
------------
RETAIL -- 4.3%
190,000 AmeriCredit Corp.* 1,258,750
72,700 Brookstone, Inc.* 1,090,500
350,700 Cash America International,
Inc. 2,893,275
15,600 Finish Line, Inc. 113,100
52,500 Fred's, Inc. 603,750
------------
5,959,375
------------
SECURITY/INVESTIGATION SERVICES -- 0.5%
202,910 Automated Security Holdings
PLC ADS 532,639
498,184 Holmes Protection Group,
Inc. 187,409
------------
720,048
------------
TECHNOLOGY -- 8.1%
100,400 Dionex Corp.* 3,714,800
202,000 Rational Software Corp.* 505,000
130,000 Stratus Computer, Inc.* 4,842,500
113,100 Unitrode Corp.* 2,177,175
------------
11,239,475
------------
TEXTILES/APPAREL -- 3.5%
18,000 Blair Corp. 756,000
70,000 Dyersburg Corp. 437,500
42,700 Fab Industries, Inc. 1,318,363
128,000 Warnaco Group, Inc. (Class
A)* 2,416,000
------------
4,927,863
------------
TOBACCO/BEVERAGES/FOOD PRODUCTS -- 2.1%
70,900 Morningstar Group, Inc. 514,025
220,118 Sylvan Food Holdings, Inc.* 2,366,268
------------
2,880,293
------------
TRANSPORTATION -- 2.0%
183,700 Interpool, Inc.* 2,525,875
18,000 MTL, Inc. 279,000
------------
2,804,875
------------
UTILITIES -- 1.7%
221,200 Sithe Energies, Inc.* 2,322,600
------------
</TABLE>
*Non-income producing security.

19
<PAGE>
OCTOBER 31, 1994
SCHEDULES OF INVESTMENTS

SMALL CAPITALIZATION FUND (CONT'D)
<TABLE>
<CAPTION>
- -------------------------------------------------------
SHARES VALUE
- -------------------------------------------------------
<S> <C> <C>

OTHER -- 1.9%
142,000 McGrath RentCorp. $ 2,165,500
89,200 National Education Corp.* 434,850
------------
2,600,350
------------
Total Common Stocks
(cost -- $114,775,894) $120,539,962
------------
Total Investments
(cost -- $129,355,879) 96.6% $134,902,255
Other Assets in Excess of
Other Liabilities 3.4 4,687,545
----- ------------
TOTAL NET ASSETS 100.0% $139,589,800
----- ------------
----- ------------
</TABLE>

GROWTH AND INCOME FUND
<TABLE>
<CAPTION>
- -------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
- -------------------------------------------------------
<S> <C> <C>
SHORT-TERM CORPORATE NOTES -- 13.5%
AUTOMOTIVE -- 3.4%
$ 1,150,000 Ford Motor Credit Co.
4.76%, 11/07/94 $ 1,149,088
------------
CONGLOMERATES -- 2.6%
885,000 General Electric Capital Corp.
4.72%, 11/04/94 884,652
------------
ENERGY -- 4.1%
1,415,000 Chevron Oil Finance Co.
4.70%, 11/01/94 1,415,000
------------
MISCELLANEOUS FINANCIAL SERVICES -- 3.4%
1,150,000 Household Finance Corp.
4.77%, 11/08/94 1,148,933
------------
Total Short-Term Corporate Notes
(cost -- $4,597,673) $ 4,597,673
------------
<CAPTION>
- -------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
- -------------------------------------------------------
<S> <C> <C>
CORPORATE NOTES & BONDS -- 11.2%
CONTAINERS -- 3.0%
$ 1,000,000 Stone Container Corp.
11.875%, 12/01/98 $ 1,030,000
------------
ENERGY -- 3.8%
1,750,000 Triton Energy Corp.
Zero Coupon, 11/01/97 1,279,687
------------
TELECOMMUNICATIONS -- 4.4%
3,000,000 Nextel Communications, Inc.
0.00%/11.50%, 9/01/03** 1,515,000
------------
Total Corporate Notes & Bonds
(cost -- $4,187,052) $ 3,824,687
------------
CONVERTIBLE CORPORATE BONDS -- 6.2%
DRUGS & MEDICAL PRODUCTS -- 1.7%
$ 1,692,000 Alza Corp.
Zero Coupon, 7/14/14 $ 568,935
------------
MEDIA/BROADCASTING -- 4.5%
5,000,000 Time Warner, Inc.
Zero Coupon, 12/17/12 1,525,000
------------
Total Convertible Corporate Bonds
(cost -- $2,173,746) $ 2,093,935
------------
<CAPTION>
- -------------------------------------------------------
SHARES VALUE
- -------------------------------------------------------
<S> <C> <C>
CONVERTIBLE PREFERRED STOCKS -- 12.3%
ENERGY -- 5.4%
130,000 Gerrity Oil & Gas Corp.
$1.50 Conv. Pfd. $ 1,820,000
------------
RETAIL -- 2.2%
20,000 Venture Stores, Inc.
$3.25 Conv. Pfd. 760,000
------------
TOBACCO/BEVERAGES/FOOD PRODUCTS -- 4.7%
80,000 Flagstar Companies, Inc.
$2.25 Conv. Pfd. 1,590,000
------------
Total Convertible Preferred Stocks
(cost -- $4,878,620) $ 4,170,000
------------
COMMON STOCKS -- 52.6%
AEROSPACE -- 6.2%
15,000 McDonnell Douglas Corp. $ 2,115,000
------------
</TABLE>

* Non-income producing security.

** Represents a step-up floater which will receive 0.00% interest until
9/01/98, then will "step-up"to 11.50% until maturity.

(A) Restricted Securities (the Fund will not bear any costs, including those
involved in registration under the Securities Act of 1933, in connection
with the disposition of these securities.):

<TABLE>
<CAPTION>
DATE OF PAR VALUATION AS OF
DESCRIPTION ACQUISITION AMOUNT SHARES UNIT COST OCTOBER 31, 1994
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Security Capital Realty, Inc.
12.00%, 6/30/14 6/16/94 $1,363,500 -- $ .94 $ .86
Security Capital Realty, Inc.
Common Stock 8/02/93 -- 1,800 684 904
</TABLE>

20
<PAGE>
<TABLE>
<CAPTION>
- -------------------------------------------------------
SHARES VALUE
- -------------------------------------------------------
<S> <C> <C>
AUTOMOTIVE -- 3.2%
27,000 General Motors Corp. $ 1,066,500
------------
BANKING -- 2.7%
7,000 Citicorp 334,250
4,000 Wells Fargo & Co. 594,500
------------
928,750
------------
CONGLOMERATES -- 1.0%
20,000 Canadian Pacific Ltd. 320,000
------------
CONSUMER PRODUCTS -- 0.9%
5,000 Avon Products, Inc. 316,250
------------
ENERGY -- 3.1%
5,000 McMoRan Oil & Gas Corp. 18,750
20,000 Triton Energy Corp.* 710,000
15,000 Union Texas Petroleum
Holdings, Inc. 313,125
------------
1,041,875
------------
INSURANCE -- 7.0%
16,000 Equitable Co. 312,000
10,000 Progressive Corp., Ohio 380,000
35,000 TIG Holdings, Inc. 673,750
20,000 Travelers, Inc. 695,000
7,000 UNUM Corp. 321,125
------------
2,381,875
------------
METALS/MINING -- 4.4%
1,562 Freeport McMoRan, Copper &
Gold (Class A) 35,536
80,000 Freeport McMoRan, Inc. 1,470,000
------------
1,505,536
------------
MISCELLANEOUS FINANCIAL SERVICES -- 9.7%
26,000 American Express Co. 799,500
100,000 Countrywide Credit
Industries, Inc. 1,475,000
17,000 Federal Home Loan Mortgage
Corp. 926,500
5,200 Lehman Brothers Holdings,
Inc. 80,600
------------
3,281,600
------------
RETAIL -- 1.1%
10,000 May Department Stores Co. 376,250
------------
TECHNOLOGY -- 3.7%
20,000 Intel Corp. 1,242,500
------------
TELECOMMUNICATIONS -- 1.9%
20,000 Sprint Corp. 652,500
------------
<CAPTION>
- -------------------------------------------------------
SHARES VALUE
- -------------------------------------------------------
<S> <C> <C>
TOBACCO/BEVERAGES/FOOD PRODUCTS -- 7.7%
45,000 PepsiCo, Inc. $ 1,575,000
17,000 Philip Morris Companies,
Inc. 1,041,250
------------
2,616,250
------------
Total Common Stocks
(cost -- $16,287,790) $ 17,844,886
------------
Total Investments
(cost -- $32,124,881) 95.8% $ 32,531,181
Other Assets in Excess of
Other Liabilities 4.2 1,428,001
----- ------------
TOTAL NET ASSETS 100.0 % $ 33,959,182
----- ------------
----- ------------
</TABLE>

U.S. GOVERNMENT INCOME FUND

<TABLE>
<CAPTION>
- -------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
- -------------------------------------------------------
<S> <C> <C>
REPURCHASE AGREEMENT -- 0.1%
$ 100,000 Prudential Bache, 4.70%,
11/01/94 (proceeds at
maturity: $100,013,
collateralized by $105,000
par, $103,373 value, U.S.
Treasury Notes 4.625%,
2/29/96)
(cost -- $100,000) $ 100,000
------------
FEDERAL HOME LOAN MORTGAGE
CORPORATION -- 0.6%
$ 817,404 9.50%, 12/01/02 - 11/01/03
(cost -- $823,662) $ 846,773
------------
GOVERNMENT NATIONAL MORTGAGE
ASSOCIATION I -- 51.6%
$40,573,258 7.00%, 2/15/22 - 11/15/23
(A) $ 36,363,783
16,903,209 7.50%, 2/15/22 - 2/15/24 15,693,446
3,819,011 8.00%, 4/15/02 - 2/15/23 3,711,053
11,354,828 8.50%, 6/15/01 - 9/15/24 (A) 11,222,631
690,831 10.50%, 1/15/98 - 12/15/00 740,481
------------
Total Government National Mortgage
Association I (cost -- $75,692,773) $ 67,731,394
------------
U.S. TREASURY BONDS -- 2.9%
$ 4,000,000 7.625%, 11/15/22
(cost -- $4,740,548) $ 3,804,360
------------
</TABLE>

* Non-income producing security.

(A) Securities segregated (full or partial) as collateral for written options
outstanding. The aggregate market value of such segregated securities is
$20,087,482.

21
<PAGE>
OCTOBER 31, 1994
SCHEDULES OF INVESTMENTS
U.S. GOVERNMENT INCOME FUND (CONT'D)
<TABLE>
<CAPTION>
- -------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
- -------------------------------------------------------
<S> <C> <C>
U.S. TREASURY NOTES -- 44.6%
$60,000,000 6.875%, 8/31/99
(cost -- $58,889,522) $ 58,565,400
------------
Total Investments
(cost -- $140,246,505) 99.8% $131,047,927
----- ------------
<CAPTION>
- -------------------------------------------------------
PRINCIPAL
AMOUNT
SUBJECT
TO CALL VALUE
- -------------------------------------------------------
<S> <C> <C>
WRITTEN CALL OPTIONS OUTSTANDING -- (0.1%)
$10,000,000 Government National
Mortgage Association I,
7.00%, expiring Dec. '94,
strike @ 89.22 $ (115,625)
10,000,000 Government National
Mortgage Association I,
8.50%, expiring Dec. '94,
strike @ 98.78 (75,000)
------------
Total Written Call Options
Outstanding (premiums
received: $142,188) $ (190,625)
------------
Other Assets in Excess of
Other Liabilities 0.3 436,494
----- ------------
Total Net Assets 100.0% $131,293,796
----- ------------
----- ------------
</TABLE>

INVESTMENT QUALITY INCOME FUND

<TABLE>
<CAPTION>
- -------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
- -------------------------------------------------------
<S> <C> <C>
SHORT-TERM CORPORATE NOTES -- 9.4%
CONGLOMERATES -- 3.7%
$ 2,075,000 General Electric Capital Corp.
4.72%, 11/14/94 $ 2,071,463
------------
MISCELLANEOUS FINANCIAL SERVICES -- 5.7%
2,075,000 Amercian Express Credit Corp.
4.75%, 11/07/94 2,073,357
1,150,000 Household Finance Corp.
4.68%, 11/02/94 1,149,851
------------
3,223,208
------------
Total Short-Term Corporate Notes
(cost -- $5,294,671) $ 5,294,671
------------
<CAPTION>
- -------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
- -------------------------------------------------------
<S> <C> <C>
CORPORATE NOTES & BONDS -- 88.2%
AEROSPACE -- 3.6%
$ 2,000,000 United Technologies Corp.
8.875%, 11/15/19 $ 2,007,420
------------
AIRLINES -- 2.6%
1,000,000 American Airlines
9.73%, 9/29/14 916,910
550,000 Delta Air Lines, Inc.
10.375%, 2/01/11 538,351
------------
1,455,261
------------
BANKING -- 6.4%
70,000 NatWest Bancorp, Inc.
9.375%, 11/15/03 74,378
1,300,000 NCNB Corp.
10.20%, 7/15/15 1,439,139
500,000 RBSG Capital Corp.
10.125%, 3/01/04 547,640
1,500,000 Westpac Banking Corp.
9.125%, 8/15/01 1,555,020
------------
3,616,177
------------
CHEMICALS -- 0.9%
500,000 Rohm & Haas Co.
9.50%, 4/01/21 521,470
------------
CONGLOMERATES -- 5.1%
2,000,000 Canadian Pacific Ltd.
9.45%, 8/01/21 2,082,160
1,000,000 ITT Financial Corp.
6.50%, 5/01/11 786,860
------------
2,869,020
------------
ENERGY -- 5.9%
3,000,000 Occidental Petroleum Corp.
11.125%, 6/01/19 3,312,990
------------
ENTERTAINMENT -- 4.8%
3,000,000 Time Warner, Inc.
9.15%, 2/01/23 2,670,390
------------
EQUIPMENT LEASING -- 2.7%
1,600,000 Ryder Systems, Inc.
8.75%, 3/15/17 1,522,832
------------
INSURANCE -- 11.1%
1,000,000 Aetna Life & Casualty Co.
8.00%, 1/15/17 879,780
1,200,000 Capital Holding Corp.
8.75%, 1/15/17 1,172,700
2,000,000 CNA Financial Corp.
7.25%, 11/15/23 1,595,120
3,000,000 Torchmark, Inc.
7.875%, 5/15/23 2,606,610
------------
6,254,210
------------
</TABLE>

22
<PAGE>
<TABLE>
<CAPTION>
- -------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
- -------------------------------------------------------
<S> <C> <C>
MACHINERY & ENGINEERING -- 3.3%
$ 1,750,000 Caterpillar, Inc.
9.75%, 6/01/19 $ 1,825,810
------------
MISCELLANEOUS FINANCIAL SERVICES -- 12.6%
20,000 Beneficial Corp.
12.875%, 8/01/13 23,754
1,500,000 BHP Finance USA Ltd.
8.50%, 12/01/12 1,467,105
Lehman Brothers, Inc.
865,000 9.875%, 10/15/00 910,732
115,000 10.00%, 5/15/99 121,464
205,000 Midland American
Capital Corp.
12.75%, 11/15/03 237,845
800,000 Paine Webber Group, Inc.
9.25%, 12/15/01 816,216
3,000,000 Prudential Funding Corp.
6.75%, 9/15/23 2,274,780
1,250,000 Source One Mortgage Services
Corp.
9.00%, 6/01/12 1,233,887
------------
7,085,783
------------
PAPER PRODUCTS -- 0.2%
100,000 Union Camp Corp.
10.00%, 5/01/19 109,261
------------
RETAIL -- 1.3%
May Department Stores Co.
250,000 9.875%, 6/01/17 246,032
405,000 10.625%, 11/01/10 465,957
------------
711,989
------------
<CAPTION>
- -------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
- -------------------------------------------------------
<S> <C> <C>
TELECOMMUNICATIONS -- 12.2%
$ 420,000 GTE Corp.
10.25%, 11/01/20 $ 464,386
2,500,000 New York Telephone Co.
9.375%, 7/15/31 2,532,600
2,000,000 Pacific Bell
8.50%, 8/15/31 1,894,220
2,000,000 Southern New England
Telephone Co.
8.70%, 8/15/31 1,978,300
------------
6,869,506
------------
TOBACCO/BEVERAGES/FOOD PRODUCTS -- 3.2%
2,000,000 American Brands, Inc.
7.875%, 1/15/23 1,779,260
------------
UTILITIES -- 9.7%
2,000,000 Hydro-Quebec
8.50%, 12/01/29 1,862,400
2,000,000 Southern California Edison
Co.
8.875%, 6/01/24 1,915,060
1,500,000 TransCanada Pipelines Ltd.
9.875%, 1/01/21 1,642,635
------------
5,420,095
------------
OTHER -- 2.6%
1,500,000 Nova Scotia (Province of)
8.875%, 7/01/19 1,431,825
------------
Total Corporate Notes & Bonds
(cost -- $53,153,893) $ 49,463,299
------------

Total Investments
(cost -- $58,448,564) 97.6 % $ 54,757,970
Other Assets in Excess of
Other Liabilities 2.4 1,352,181
----- ------------
TOTAL NET ASSETS 100.0 % $ 56,110,151
----- ------------
----- ------------
</TABLE>

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.

<PAGE>

OCTOBER 31, 1994

- --------------------------------------------------------------------------------
STATEMENTS OF ASSETS AND LIABILITIES
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
------------ ------------ ------------ ------------ ------------ ------------
QUEST FOR SMALL GROWTH U.S. INVESTMENT
VALUE FUND, OPPORTUNITY CAPITALIZATION AND GOVERNMENT
QUALITY
INC. FUND FUND INCOME FUND INCOME FUND INCOME FUND
------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Investments, at value (cost --
$225,068,235, $198,905,860,
$129,355,879, $32,124,881,
$140,246,505 and $58,448,564,
respectively)................ $257,920,150 $213,286,283 $134,902,255 $32,531,181 $131,047,927 $54,757,970
Cash.......................... 490,615 495,564 347,062 8,772 14,763 25,873
Receivable for investments
sold......................... 3,452,070 -- 1,212,440 1,339,806 168,384 --
Receivable for investments
sold to affiliates........... -- -- 3,506,625 -- -- --
Receivable for fund shares
sold......................... 482,019 2,000,491 516,512 637,310 163,696 113,417
Dividends receivable.......... 387,321 470,950 90,453 65,264 -- --
Interest receivable........... 7,084 80,497 103,317 49,276 1,314,298 1,455,316
Deferred organization
expenses..................... -- -- -- 38,509 -- 13,971
Other assets.................. 42,588 18,959 16,622 24,165 34,935 19,197
------------ ------------ ------------ ------------ ------------ ------------
Total Assets................ 262,781,847 216,352,744 140,695,286 34,694,283 132,744,003 56,385,744
------------ ------------ ------------ ------------ ------------ ------------
LIABILITIES
Written options outstanding,
at value (premiums received:
$142,188).................... -- -- -- -- 190,625 --
Payable for investments
purchased.................... 6,159,929 2,049,446 676,409 648,600 6,250 --
Payable for fund shares
redeemed..................... 414,843 207,962 298,489 25,979 1,007,182 108,561
Investment advisory fee
payable...................... 41,691 34,437 22,858 4,563 12,963 632
Distribution fee payable...... 22,304 21,278 13,023 2,509 7,401 4,568
Dividends payable............. -- 7,778 -- -- 117,133 108,198
Other payables and accrued
expenses..................... 103,945 86,098 94,707 53,450 108,653 53,634
------------ ------------ ------------ ------------ ------------ ------------
Total Liabilities........... 6,742,712 2,406,999 1,105,486 735,101 1,450,207 275,593
------------ ------------ ------------ ------------ ------------ ------------
NET ASSETS
Par value..................... 20,348,156 108,790 85,536 33,650 121,636 58,013
Paid-in-surplus............... 184,710,613 191,026,174 130,829,389 31,830,359 145,717,507 60,695,612
Accumulated undistributed net
investment income (loss)..... 1,464,120 1,291,867 (238,336) 127,460 -- --
Accumulated undistributed net
realized gain (loss) on
investments.................. 16,664,331 7,139,720 3,366,835 1,768,686 (5,000,871) (952,880)
Distributions in excess of net
realized gains............... -- (1,229) -- (207,273) (297,461) --
Net unrealized appreciation
(depreciation) on
investments.................. 32,851,915 14,380,423 5,546,376 406,300 (9,247,015) (3,690,594)
------------ ------------ ------------ ------------ ------------ ------------
Total Net Assets............ $256,039,135 $213,945,745 $139,589,800 $33,959,182 $131,293,796 $56,110,151
------------ ------------ ------------ ------------ ------------ ------------
------------ ------------ ------------ ------------ ------------ ------------
CLASS A:
Fund shares outstanding....... 18,914,850 8,295,463 7,353,210 3,029,071 11,418,654 4,851,201
------------ ------------ ------------ ------------ ------------ ------------
Net asset value per share..... $ 12.59 $ 19.69 $ 16.33 $ 10.09 $ 10.79 $ 9.67
------------ ------------ ------------ ------------ ------------ ------------
------------ ------------ ------------ ------------ ------------ ------------
Maximum offering price per
share*....................... $ 13.32 $ 20.84 $ 17.28 $ 10.59 $ 11.33 $ 10.15
------------ ------------ ------------ ------------ ------------ ------------
------------ ------------ ------------ ------------ ------------ ------------
CLASS B:
Fund shares outstanding....... 1,147,382 2,211,377 994,342 290,685 631,471 682,943
------------ ------------ ------------ ------------ ------------ ------------
Net asset value and offering
price per share.............. $ 12.53 $ 19.59 $ 16.24 $ 10.07 $ 10.79 $ 9.67
------------ ------------ ------------ ------------ ------------ ------------
------------ ------------ ------------ ------------ ------------ ------------
CLASS C:
Fund shares outstanding....... 285,924 372,202 206,006 45,206 113,464 267,089
------------ ------------ ------------ ------------ ------------ ------------
Net asset value and offering
price per share.............. $ 12.52 $ 19.58 $ 16.23 $ 10.07 $ 10.79 $ 9.67
------------ ------------ ------------ ------------ ------------ ------------
------------ ------------ ------------ ------------ ------------ ------------
<FN>
*Sales charges decrease on purchases of $50,000 or higher.
</TABLE>

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.

<PAGE>
YEAR ENDED OCTOBER 31, 1994

- --------------------------------------------------------------------------------
STATEMENTS OF OPERATIONS
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
----------- ----------- -------------- ----------- ----------- -----------
QUEST FOR SMALL GROWTH U.S. INVESTMENT
VALUE OPPORTUNITY CAPITALIZATION AND GOVERNMENT QUALITY
FUND, INC. FUND FUND INCOME FUND INCOME FUND INCOME FUND
----------- ----------- -------------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
INVESTMENT INCOME
Dividends.................... $4,621,105 $3,199,658 $ 1,319,209 $ 845,665 $ -- $ --
Interest..................... 1,393,271 1,078,724 874,396 709,375 10,262,496 4,659,644
----------- ----------- -------------- ----------- ----------- -----------
Total investment income.... 6,014,376 4,278,382 2,193,605 1,555,040 10,262,496 4,659,644
----------- ----------- -------------- ----------- ----------- -----------
OPERATING EXPENSES
Investment advisory fee (note
2a)......................... 2,479,887 1,555,477 1,260,578 263,469 962,940 359,792
Distribution fee -- Class A
(note 2c)................... 1,189,613 683,116 576,382 116,449 465,840 215,221
Distribution fee -- Class B
(note 2c)................... 83,411 162,157 94,008 15,858 43,485 41,770
Distribution fee -- Class C
(note 2c)................... 17,249 27,089 13,806 2,983 8,616 19,831
Transfer and dividend
disbursing agent fees --
Class A..................... 247,831 117,250 133,738 41,065 130,793 50,526
Transfer and dividend
disbursing agent fees --
Class B..................... 12,766 23,295 20,668 2,659 4,321 4,992
Transfer and dividend
disbursing agent fees --
Class C..................... 3,313 4,335 4,637 1,253 1,658 2,288
Accounting services fee (note
2b)......................... -- 108,245 122,578 123,117 135,876 119,080
Registration fees............ 84,876 79,103 75,433 66,221 67,461 65,474
Reports and notices to
shareholders................ 60,447 37,637 45,104 27,802 39,689 31,342
Custodian fees............... 42,485 31,578 32,790 17,672 74,885 27,532
Auditing, consulting and tax
return preparation fees..... 23,051 18,100 18,101 14,600 38,501 17,100
Directors' (Trustees') fees
and expenses................ 17,200 17,200 17,200 8,810 17,200 17,200
Legal fees................... 11,120 6,829 7,410 5,355 7,021 5,752
Amortization of deferred
organization expenses (note
1c)......................... -- 2,461 2,394 19,148 -- 12,374
Miscellaneous................ 14,902 7,146 7,114 5,243 10,727 3,951
----------- ----------- -------------- ----------- ----------- -----------
Total operating expenses... 4,288,151 2,881,018 2,431,941 731,704 2,009,013 994,225
Less: Investment advisory
fees waived (note 2a)..... -- -- -- (142,772) (38,486) (180,934)
----------- ----------- -------------- ----------- ----------- -----------
Net operating expenses... 4,288,151 2,881,018 2,431,941 588,932 1,970,527 813,291
----------- ----------- -------------- ----------- ----------- -----------
Net investment income
(loss).................. 1,726,225 1,397,364 (238,336) 966,108 8,291,969 3,846,353
----------- ----------- -------------- ----------- ----------- -----------
REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS -- NET
Net realized gain (loss) on
security transactions....... 16,722,091 7,139,720 3,506,967 1,768,686 (6,439,027) (1,053,662)
Net realized gain on option
transactions (note 1f)...... -- -- 38,999 -- 2,072,188 264,063
Net realized loss on futures
transactions (note 1g)...... (57,760) -- (179,131) -- -- (163,281)
----------- ----------- -------------- ----------- ----------- -----------
Net realized gain (loss) on
investments............... 16,664,331 7,139,720 3,366,835 1,768,686 (4,366,839) (952,880)
Net change in unrealized
appreciation (depreciation)
on investments.............. (6,250,090) 4,721,481 (3,118,979) (189,442) (11,007,688) (9,068,979)
----------- ----------- -------------- ----------- ------------ -----------
Net realized gain (loss)
and change in unrealized
appreciation
(depreciation) on
investments............... 10,414,241 11,861,201 247,856 1,579,244 (15,374,527) (10,021,859)
----------- ----------- -------------- ----------- ----------- -----------
Net increase (decrease) in
net assets resulting from
operations.................. $12,140,466 $13,258,565 $ 9,520 $2,545,352 $(7,082,558) $(6,175,506)
----------- ----------- -------------- ----------- ----------- -----------
----------- ----------- -------------- ----------- ----------- -----------
</TABLE>

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.

<PAGE>
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
---------------------------- ----------------------------
QUEST FOR VALUE FUND, INC. OPPORTUNITY FUND
---------------------------- ----------------------------
YEAR ENDED OCTOBER 31, YEAR ENDED OCTOBER 31,
---------------------------- ----------------------------
1994 1993 1994 1993
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
OPERATIONS
Net investment income (loss).............................. $ 1,726,225 $ 815,957 $ 1,397,364 $ 2,369,084
Net realized gain (loss) on investments................... 16,664,331 9,419,025 7,139,720 1,539,178
Net change in unrealized appreciation (depreciation) on
investments.............................................. (6,250,090) 11,586,419 4,721,481 6,462,200
------------- ------------- ------------- -------------
Net increase (decrease) in net assets................... 12,140,466 21,821,401 13,258,565 10,370,462
------------- ------------- ------------- -------------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS
Net investment income -- Class A.......................... (819,873) (608,320) (2,269,483) (220,172)
Net investment income -- Class B.......................... (11,801) -- (98,258) --
Net investment income -- Class C.......................... (2,040) -- (21,098) --
Net realized gains -- Class A............................. (9,227,704) (6,984,843) (1,497,052) (945,122)
Net realized gains -- Class B............................. (115,604) -- (30,460) --
Net realized gains -- Class C............................. (11,081) -- (11,467) --
Distributions in excess of net realized gains -- Class
A........................................................ -- -- (1,196) --
Distributions in excess of net realized gains -- Class
B........................................................ -- -- (24) --
Distributions in excess of net realized gains -- Class
C........................................................ -- -- (9) --
------------- ------------- ------------- -------------
Total dividends and distributions to shareholders....... (10,188,103) (7,593,163) (3,929,047) (1,165,294)
------------- ------------- ------------- -------------
FUND SHARE TRANSACTIONS
CLASS A
Net proceeds from sales................................... 61,908,256 115,189,954 90,332,759 92,938,735
Net proceeds from Fund acquisitions (note 9).............. -- 8,793,860 -- --
Reinvestment of dividends and distributions............... 9,385,655 7,044,627 3,405,284 1,050,792
Cost of shares redeemed................................... (80,014,950) (42,885,888) (65,200,453) (16,545,512)
------------- ------------- ------------- -------------
Net increase (decrease) -- Class A...................... (8,721,039) 88,142,553 28,537,590 77,444,015
------------- ------------- ------------- -------------
CLASS B
Net proceeds from sales................................... 12,409,864 2,121,588 40,604,196 2,225,538
Reinvestment of dividends and distributions............... 123,599 -- 124,021 --
Cost of shares redeemed................................... (544,061) (97,971) (1,026,439) (99,998)
------------- ------------- ------------- -------------
Net increase -- Class B................................. 11,989,402 2,023,617 39,701,778 2,125,540
------------- ------------- ------------- -------------
CLASS C
Net proceeds from sales................................... 3,521,667 222,635 6,945,412 315,179
Reinvestment of dividends and distributions............... 13,020 -- 32,567 --
Cost of shares redeemed................................... (271,901) -- (254,081) --
------------- ------------- ------------- -------------
Net increase -- Class C................................. 3,262,786 222,635 6,723,898 315,179
------------- ------------- ------------- -------------
Total net increase (decrease) in net assets from fund
share transactions....................................... 6,531,149 90,388,805 74,963,266 79,884,734
------------- ------------- ------------- -------------
Total increase (decrease) in net assets................. 8,483,512 104,617,043 84,292,784 89,089,902
NET ASSETS
Beginning of year......................................... 247,555,623 142,938,580 129,652,961 40,563,059
------------- ------------- ------------- -------------
End of year (including undistributed net investment income
(loss) of $1,464,120, $549,014; $1,291,867, $2,283,342;
($238,336); ($315,524); $127,460, $99,804; $0, ($242,693)
and $0, $0; respectively................................. $ 256,039,135 $ 247,555,623 $ 213,945,745 $ 129,652,961
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------
</TABLE>

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.

26
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
- ----------------------------- ---------------------------- ---------------------------- ----------------------------
SMALL CAPITALIZATION FUND GROWTH AND INCOME FUND U.S. GOVERNMENT INCOME FUND
INVESTMENT QUALITY INCOME FUND
- ----------------------------- ---------------------------- ---------------------------- ----------------------------
YEAR ENDED OCTOBER 31, YEAR ENDED OCTOBER 31, YEAR ENDED OCTOBER 31, YEAR
ENDED OCTOBER 31,
- ----------------------------- ---------------------------- ---------------------------- ----------------------------
1994 1993 1994 1993 1994 1993 1994 1993
- -------------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
<C> <C> <C> <C> <C> <C> <C> <C>
$ (238,336) $ (271,130) $ 966,108 $ 633,084 $ 8,291,969 $ 9,429,304 $ 3,846,353 $ 2,883,555
3,366,835 8,302,299 1,768,686 4,437,702 (4,366,839) 4,231,587 (952,880) 376,772
(3,118,979) 8,854,657 (189,442) (2,998,170) (11,007,688) 520,464 (9,068,979) 4,549,804
- -------------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
9,520 16,885,826 2,545,352 2,072,616 (7,082,558) 14,181,355 (6,175,506) 7,810,131
- -------------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
-- -- (936,128) (536,051) (8,071,564) (9,762,803) (3,482,793) (2,877,023)
-- -- (41,545) (1,573) (196,735) (3,601) (244,424) (5,737)
-- -- (7,305) (631) (39,362) (769) (119,136) (795)
(8,036,736) (3,584,330) (4,079,198) (245,866) (2,925,946) (2,276,286) (367,910) (163,898)
(160,831) -- (145,217) -- (38,935) (956) (10,112) --
(19,543) -- (18,475) -- (6,494) (105) (637) --
-- -- (199,276) -- (292,913) -- -- --
-- -- (7,094) -- (3,898) -- -- --
-- -- (903) -- (650) -- -- --
- -------------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
(8,217,110) (3,584,330) (5,435,141) (784,121) (11,576,497) (12,044,520) (4,225,012) (3,047,453)
- -------------- ------------- ------------- ------------- ------------- ------------- ------------- -------------

127,081,752 71,051,819 5,937,491 9,582,299 17,007,814 95,566,875 12,621,718 36,729,933
-- -- -- 16,543,558 -- -- -- --
7,215,556 3,294,382 5,008,623 741,804 9,588,703 10,124,750 2,758,350 2,116,388
(111,134,238) (22,419,670) (6,040,040) (7,744,229) (74,313,512) (69,938,914) (20,364,228) (12,033,169)
- -------------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
23,163,070 51,926,531 4,906,074 19,123,432 (47,716,995) 35,752,711 (4,984,160) 26,813,152
- -------------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
15,275,222 1,837,990 2,763,975 319,565 6,748,251 1,386,323 6,440,954 1,582,773
148,570 -- 188,513 1,383 187,137 3,658 185,172 3,747
(811,203) (104,955) (260,750) (4,377) (964,994) (99,835) (800,932) (107,360)
- -------------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
14,612,589 1,733,035 2,691,738 316,571 5,970,394 1,290,146 5,825,194 1,479,160
- -------------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
3,345,761 233,009 341,819 101,192 1,424,484 140,626 3,141,700 100,200
18,810 -- 26,593 631 46,127 866 93,436 786
(229,505) -- (4,696) -- (289,465) -- (422,838) --
- -------------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
3,135,066 233,009 363,716 101,823 1,181,146 141,492 2,812,298 100,986
- -------------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
40,910,725 53,892,575 7,961,528 19,541,826 (40,565,455) 37,184,349 3,653,332 28,393,298
- -------------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
32,703,135 67,194,071 5,071,739 20,830,321 (59,224,510) 39,321,184 (6,747,186) 33,155,976
106,886,665 39,692,594 28,887,443 8,057,122 190,518,306 151,197,122 62,857,337 29,701,361
- -------------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
$ 139,589,800 $ 106,886,665 $ 33,959,182 $ 28,887,443 $ 131,293,796 $ 190,518,306 $ 56,110,151 $ 62,857,337
- -------------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
- -------------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
</TABLE>

27
<PAGE>
OCTOBER 31, 1994

- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES

Quest for Value Funds are registered under the Investment Company Act of
1940, as diversified, open-end management investment companies. Quest for Value
Fund, Inc. ("Quest for Value") is a Maryland Corporation. Opportunity Fund
("Opportunity"), Small Capitalization Fund ("Small Capitalization"), Growth and
Income Fund ("Growth and Income"), U.S. Government Income Fund ("U.S.
Government") and Investment Quality Income Fund ("Investment Quality") are five
of eight funds currently offered in the Quest for Value Family of Funds, a
Massachusetts business trust. Quest for Value Advisors (the "Adviser") serves as
investment adviser and provides accounting and administrative services to each
fund. Quest for Value Distributors (the "Distributor") serves as each fund's
distributor. Both the Advisor and Distributor are majority-owned (99%)
subsidiaries of Oppenheimer Capital.

Prior to September 1, 1993, the funds only issued one class of shares which
were redesignated Class A shares. Subsequent to that date all funds were
authorized to issue Class A, Class B and Class C shares. Shares of each Class
represent an identical interest in the investment portfolio of their respective
fund and generally have the same rights, but are offered under different sales
charge and distribution fee arrangements. Furthermore, Class B shares will
automatically convert to Class A shares of the same fund eight years after their
respective purchase.

The following is a summary of significant accounting policies consistently
followed by each fund in the preparation of its financial statements:

(A) VALUATION OF INVESTMENTS

Investment securities listed on a national securities exchange and
securities traded in the over-the-counter National Market System are valued at
the last reported sale price on the valuation date; if there are no such
reported sales, the securites are valued at the last quoted bid price. Other
securities traded over-the-counter and not part of the National Market System
are valued at the last quoted bid price. Investment debt securities (other than
short-term obligations) are valued each day by an independent pricing service
approved by the Board of Directors (Trustees) using methods which include
current market quotations from a major market maker in the securities and
trader-reviewed "matrix" prices. Futures contracts are valued based upon their
daily settlement value as of the close of the exchange upon which they trade.
OTC options are valued based upon a formula which utilizes the market value of
the underlying securities, strike prices and expiration of the options.
Short-term debt securities having a remaining maturity of sixty days or less are
valued at amortized cost or amortized value, which approximates market value.
Any securities or other assets for which market quotations are not readily
available are valued at their fair value as determined in good faith under
procedures established by each fund's Board of Directors (Trustees). The ability
of issuers of debt securities held by the funds to meet their obligations may be
affected by economic or political developments in a specific state, industry or
region.

(B) FEDERAL INCOME TAXES

It is each fund's policy to comply with the requirements of the Internal
Revenue Code applicable to regulated investment companies and to distribute
substantially all of its taxable income to its shareholders; accordingly, no
Federal income tax provision is required.

In connection with each fund's organization, the following approximate costs
were incurred: Opportunity -- $74,000, Small Capitalization -- $72,000, Growth
and Income -- $96,000 and Investment Quality -- $62,000. These costs have been
deferred and are being amortized to expense on a straight-line basis over sixty
months from commencements of each fund's operations.

(D) SECURITY TRANSACTIONS AND OTHER INCOME

Security transactions are accounted for on the trade date. In determining
the gain or loss from the sale of securities, the cost of securities sold is
determined on the basis of identified cost. Dividend income is recorded on the
ex-dividend date and interest income is accrued as earned. Discounts or premiums
on debt securities purchased are accreted or

28
<PAGE>

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

amortized to interest income over the lives of the respective securities. Net
investment income, other than class specific expenses and unrealized gains and
losses are allocated daily to each class of shares based upon the relative
proportion of net assets, as defined, of each class.

(E) DIVIDENDS AND DISTRIBUTIONS

The following table summarizes each fund's dividend and capital gain
declaration policy:

SHORT-TERM LONG-TERM
INCOME CAPITAL CAPITAL
DIVIDENDS GAINS GAINS
--------- ------------ ------------
Quest for Value annually annually annually
Opportunity annually annually annually
Small Capitalizatoin annually annually annually
Growth and Income quarterly annually annually
U.S. Government daily * quarterly annually
Investment Quality daily * annually annually

* paid monthly.

Each fund records dividends and distributions to its shareholders on the
ex-dividend date. The amount of dividends and distributions from net investment
income and net realized capital gains are determined in accordance with federal
income tax regulations, which may differ from generally accepted accounting
principles. These "book-tax" differences are either considered temporary or
permanent in nature. To the extent these differences are permanent in nature,
such amounts are reclassified within the capital accounts based on their federal
tax-basis treatment; temporary differences do not require reclassification.
Dividends and distributions which exceed net investment income and net realized
capital gains for financial reporting purposes but not for tax purposes are
reported as dividends in excess of net investment income or distributions in
excess of net realized capital gains, respectively. To the extent distributions
exceed current and accumulated earnings and profits for federal income tax
purposes, they are reported as distributions of paid-in-surplus or tax return of
capital. Accordingly, permanent book-tax differences relating to shareholder
distributions have been reclassified to paid-in-surplus. Net investment
income(loss), net realized gain(loss) and net assets were not affected by this
change.

During the fiscal year ended October 31, 1994, the Funds adopted Statement
of Position 93-2 Determination, Disclosure, and Financial Statement Presentation
of Income, Capital Gain, and Return of Capital Distributions by Investment
Companies. The following table discloses the cumulative effect of such
differences reclassified from undistributed accumulated net investment
income(loss) and accumulated undistributed capital gain(loss) on investments to
paid-in-surplus:

ACCUMULATED ACCUMULATED
UNDISTRIBUTED UNDISTRIBUTED PAID
NET INVESTMENT NET REALIZED IN
INCOME (LOSS) GAIN (LOSS) SURPLUS
-------------- ------------ ---------
Quest for Value $ 22,595 $ (50,380) $ 27,785
Opportunity -- 4,061 (4,061)
Small Capitalization 315,524 7,934 (323,458)
Growth and Income 46,526 (198,668) 152,142
U.S. Government 258,385 102,016 (360,401)
Investment Quality -- 3,929 (3,929)

(F) OPTIONS ACCOUNTING POLICIES

29
<PAGE>
OCTOBER 31, 1994

- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (continued)
- --------------------------------------------------------------------------------

stipulated expiration date or if a fund enters into a closing purchase
transaction, the fund will realize a gain (or loss if the cost of a closing
purchase transaction exceeds the premium received when the option was written)
without regard to any unrealized gain or loss on the underlying security, and
the liability related to such option will be extinguished. If a call option
which a fund has written is exercised, the fund realizes a gain or loss from the
sale of the underlying security and the proceeds from such sale are increased by
the premium originally received. If a put option which a fund has written is
exercised, the amount of the premium originally received will reduce the cost of
the security which the fund purchases upon exercise of the option.

(G) FUTURES ACCOUNTING POLICIES

(H) REPURCHASE AGREEMENTS

U.S. Government enters into repurchase agreements as part of its investment
program. The fund's custodian takes possession of collateral pledged by the
counterparty. The collateral is marked-to-market daily to ensure that the value,
plus accrued interest, is at least equal to the repurchase price. In the event
of default by the obligor to repurchase, the fund has the right to liquidate the
collateral and apply the proceeds in satisfaction of the obligation. Under
certain circumstances, in the event of default or bankruptcy by the other party
to the agreement, realization and/or retention of the collateral or proceeds may
be subject to legal proceedings.

(I) EXPENSES

2. INVESTMENT ADVISORY FEE, ACCOUNTING SERVICES FEE, DISTRIBUTION FEE AND OTHER
TRANSACTIONS WITH AFFILIATES

(a) The investment advisory fee is payable monthly to the Adviser, and is
computed as a percentage of each fund's net assets as of the close of business
each day at the following annual rates: 1.00% for Quest for Value, Opportunity
and Small Capitalization, respectively; .85% for Growth and Income and .60% for
U.S. Government and Investment Quality, respectively. For the year ended October
31, 1994, the Adviser voluntarily waived $142,772, $38,486 and $180,934 in
investment advisory fees for Growth and Income, U.S. Government and Investment
Quality, respectively.

(b) A portion of the accounting services fee for Opportunity, Small
Capitalization, Growth and Income, U.S. Government and Investment Quality is
payable monthly to the Adviser. Each fund reimburses the Adviser for a portion
of the salaries of officers and employees of Oppenheimer Capital based upon the
amount of time such persons spend in providing services to each fund in
accordance with the provisions of the Investment Advisory Agreement. For the
year ended October 31, 1994, the Adviser received $53,245, $67,578, $68,117,
$70,876 and $64,080, respectively.

30
<PAGE>

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

Distributor has entered into agreements with securities dealers and other
financial institutions and organizations to obtain various sales-related
services in rendering distribution assistance. To compensate the Distributor for
the services it and other dealers under the Plan provide and for the expenses
they bear under the Plan, the funds pay the Distributor compensation, accrued
daily and payable monthly on each fund's average daily net assets for Class A
shares at the following annual rates: .25% for Quest for Value, Opportunity and
Small Capitalization, respectively; .05% for U.S. Government and .15% for
Investment Quality and Growth and Income, respectively. Each fund's Class A
shares also pay a service fee at the annual rate of .25%. Compensation for Class
B and Class C shares of each fund is at an annual rate of .75% of average daily
net assets. Each fund's Class B and Class C shares also pay a service fee at the
annual rate of .25%. Distribution and service fees may be paid by the
Distributor to broker dealers or others for providing personal service,
maintenance of accounts and ongoing sales or shareholder support functions in
connection with the distribution of fund shares. While payments under the Plan
may not exceed the stated percentage of average daily net assets on an annual
basis, the payments are not limited to the amounts actually incurred by the
Distributor.

(d) Total brokerage commissions paid by Quest for Value, Opportunity, Small
Capitalization and Growth and Income were $318,014, $189,860, $300,037 and
$74,334, respectively, of which Oppenheimer & Co., Inc., an affiliate of the
Adviser, received $162,914, $94,589, $143,991 and $55,911, respectively, for the
year ended October 31, 1994.

(e) Oppenheimer & Co., Inc. has informed the funds that it received
approximately $344,000, $441,000, $353,000, $43,000, $237,000 and $114,000 in
connection with the sale of Class A shares for Quest for Value, Opportunity,
Small Capitalization, Growth and Income, U.S. Government and Investment Quality,
respectively, for the year ended October 31, 1994.

The Distributor has informed the funds that it received contingent deferred
sales charges on the redemption of Class B and Class C shares of approximately
$10,000, $21,000, $10,000, $1,000, $10,000, and $18,000 for Quest for Value,
Opportunity, Small Capitalization, Growth and Income, U.S. Government and
Investment Quality, respectively, for the year ended October 31, 1994.

3. PURCHASES AND SALES OF SECURITIES

For the year ended October 31, 1994, purchases and sales of investment
securities, other than short-term securities, were as follows:

<TABLE>
<CAPTION>
QUEST FOR SMALL GROWTH AND U.S. INVESTMENT
VALUE OPPORTUNITY CAPITALIZATION INCOME GOVERNMENT QUALITY
----------- ----------- -------------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Purchases $124,679,001 $96,908,415 $ 101,529,934 $32,706,665 $197,990,061 $26,304,890
Sales 104,609,292 57,124,087 72,829,845 35,060,309 213,763,796 17,448,246
</TABLE>

The following table summarizes activity in written option transactions for
Small Capitalization and U.S. Government for the year ended October 31, 1994:

<TABLE>
<CAPTION>
SMALL CAPITALIZATION U.S. GOVERNMENT
-------------------- -----------------------
CONTRACTS PREMIUMS CONTRACTS PREMIUMS
--------- --------- --------- ------------
<S> <C> <C> <C> <C>
Option contracts written: Outstanding beginning of year 400 $ 38,999 5 $ 263,438
Options written 450 113,460 51 3,941,836
Options terminated in closing purchase transactions -- -- (22) (1,991,406)
Options exercised (450) (113,460) (6) (245,000)
Options expired (400) (38,999) (26) (1,826,680)
--------- -------- ---- -----------
Options contracts written: Outstanding end of year 0 $ 0 2 $ 142,188
--------- -------- ---- -----------
--------- -------- ---- -----------
</TABLE>

31
<PAGE>
OCTOBER 31, 1994

4. FUND SHARE TRANSACTIONS

The following tables summarize the fund share activity for the two years
ended October 31, 1994.

<TABLE>
<CAPTION>
QUEST FOR VALUE OPPORTUNITY SMALL
CAPITALIZATION
------------------------- ------------------------- -------------------------
YEAR ENDED OCTOBER 31, YEAR ENDED OCTOBER 31, YEAR ENDED
OCTOBER 31,
------------------------- ------------------------- -------------------------
1994 1993 1994 1993 1994 1993
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
CLASS A
Issued................................... 5,077,999 9,558,313 4,781,210 5,232,397 7,804,081 4,355,629
Fund acquisitions*....................... -- 754,190 -- -- -- --
Dividends and distributions reinvested... 797,941 605,158 186,714 60,873 450,409 218,171
Redeemed................................. (6,566,112) (3,516,427) (3,470,990) (919,793) (6,835,042) (1,357,953)
----------- ----------- ----------- ----------- ----------- -----------
Net increase (decrease)................ (690,172) 7,401,234 1,496,934 4,373,477 1,419,448 3,215,847
----------- ----------- ----------- ----------- ----------- -----------
CLASS B**
Issued................................... 1,020,362 168,973 2,145,988 118,495 936,328 105,179
Dividends and distributions reinvested... 10,514 -- 6,821 -- 9,286 --
Redeemed................................. (44,566) (7,901) (54,500) (5,427) (50,575) (5,876)
----------- ----------- ----------- ----------- ----------- -----------
Net increase........................... 986,310 161,072 2,098,309 113,068 895,039 99,303
----------- ----------- ----------- ----------- ----------- -----------
CLASS C**
Issued................................... 289,679 17,648 367,367 16,726 205,454 13,299
Dividends and distributions reinvested... 1,106 -- 1,789 -- 1,176 --
Redeemed................................. (22,509) -- (13,680) -- (13,923) --
----------- ----------- ----------- ----------- ----------- -----------
Net increase........................... 268,276 17,648 355,476 16,726 192,707 13,299
----------- ----------- ----------- ----------- ----------- -----------
Total net increase................... 564,414 7,579,954 3,950,719 4,503,271 2,507,194 3,328,449
----------- ----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- ----------- -----------
</TABLE>

<TABLE>
<CAPTION>
GROWTH AND INCOME U.S. GOVERNMENT INVESTMENT
QUALITY
------------------------- ------------------------- -------------------------
YEAR ENDED OCTOBER 31, YEAR ENDED OCTOBER 31, YEAR ENDED
OCTOBER 31,
------------------------- ------------------------- -------------------------
1994 1993 1994 1993 1994 1993
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
CLASS A
Issued................................... 591,037 877,614 1,484,549 7,920,117 1,194,443 3,363,019
Fund acquisitions*....................... -- 1,549,022 -- -- -- --
Dividends and distributions reinvested... 506,743 68,314 839,276 840,464 263,168 192,408
Redeemed................................. (600,435) (709,066) (6,552,668) (5,796,668) (1,940,417) (1,087,300)
----------- ----------- ----------- ----------- ----------- -----------
Net increase (decrease)................ 497,345 1,785,884 (4,228,843) 2,963,913 (482,806) 2,468,127
----------- ----------- ----------- ----------- ----------- -----------
CLASS B**
Issued................................... 269,571 28,678 594,901 114,413 614,495 136,798
Dividends and distributions reinvested... 19,104 125 16,698 302 18,150 327
Redeemed................................. (26,407) (386) (86,599) (8,244) (77,488) (9,339)
----------- ----------- ----------- ----------- ----------- -----------
Net increase........................... 262,268 28,417 525,000 106,471 555,157 127,786
----------- ----------- ----------- ----------- ----------- -----------
CLASS C**
Issued................................... 33,894 9,027 123,553 11,593 290,357 8,698
Dividends and distributions reinvested... 2,697 57 4,123 72 9,047 68
Redeemed................................. (469) -- (25,877) -- (41,081) --
----------- ----------- ----------- ----------- ----------- -----------
Net increase........................... 36,122 9,084 101,799 11,665 258,323 8,766
----------- ----------- ----------- ----------- ----------- -----------
Total net increase (decrease)........ 795,735 1,823,385 (3,602,044) 3,082,049 330,674 2,604,679
----------- ----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- ----------- -----------
<FN>
*See note 9
**Initial offering September 2, 1993.
</TABLE>

32
<PAGE>

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

5. UNREALIZED APPRECIATION (DEPRECIATION) AND COST OF INVESTMENTS FOR FEDERAL
INCOME TAX PURPOSES

At October 31, 1994, the composition of unrealized appreciation
(depreciation) of investment securities and the cost of investments for Federal
income tax purposes were as follows:

APPRECIATION (DEPRECIATION) NET TAX COST
------------ -------------- ------------ ------------
Quest for Value $34,762,698 $ (2,034,414) $ 32,728,284 $225,191,866
Opportunity 16,932,676 (2,553,482) 14,379,194 198,907,089
Small Capitalization 11,588,568 (6,208,644) 5,379,924 129,522,331
Growth and Income 1,808,807 (1,464,506) 344,301 32,186,880
U.S. Government 72,722 (14,977,671) (14,904,949) 145,952,876
Investment Quality 330,434 (4,021,028) (3,690,594) 58,448,564

6. AUTHORIZED FUND SHARES AND PAR VALUE PER SHARE

<TABLE>
<CAPTION>
QUEST SMALL GROWTH U.S. INVESTMENT
FOR VALUE OPPORTUNITY CAPITALIZATION AND INCOME GOVERNMENT QUALITY
---------- ----------- -------------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Authorized fund shares 35,000,000 unlimited unlimited unlimited unlimited unlimited
Par value per share $1.00 $.01 $.01 $.01 $.01 $.01
</TABLE>

7. DIVIDENDS AND DISTRIBUTIONS

The following tables summarize the per share dividends and distributions
made for the two years ended October 31, 1994:

QUEST FOR SMALL
VALUE OPPORTUNITY CAPITALIZATION
-------------- -------------- --------------
YEAR ENDED YEAR ENDED YEAR ENDED
OCTOBER 31, OCTOBER 31, OCTOBER 31,
--------------- -------------- --------------
1994 1993 1994 1993 1994 1993
------- ------ ------ ------ ------ ------
NET INVESTMENT INCOME:
Class A $ 0.040 $ 0.047 $ 0.326 $ 0.069 -- --
Class B* 0.031 -- 0.313 -- -- --
Class C* 0.033 -- 0.312 -- -- --

NET REALIZED GAINS:
Class A $ 0.469 $ 0.545 $ 0.219 $ 0.317 $ 1.331 $ 1.137
Class B* 0.469 -- 0.219 -- 1.331 --
Class C* 0.469 -- 0.219 -- 1.331 --

GROWTH AND U.S. INVESTMENT
INCOME GOVERNMENT QUALITY
-------------- -------------- --------------
YEAR ENDED YEAR ENDED YEAR ENDED
OCTOBER 31, OCTOBER 31, OCTOBER 31,
--------------- -------------- --------------
1994 1993 1994 1993 1994 1993
------- ------ ------ ------ ------ ------
NET INVESTMENT INCOME:
Class A $ 0.319 $ 0.264 $ 0.593 $ 0.676 $ 0.680 $ 0.683
Class B* 0.265 0.070 0.510 0.076 0.609 0.081
Class C* 0.261 0.070 0.509 0.082 0.608 0.092

NET REALIZED GAINS:
Class A $ 1.669 $ 0.333 $ 0.213 $ 0.155 $ 0.069 $ 0.056
Class B* 1.669 -- 0.213 0.009 0.069 --
Class C* 1.669 -- 0.213 0.009 0.069 --

*Initial offering September 2, 1993.

33
<PAGE>
OCTOBER 31, 1994

8. FINANCIAL INSTRUMENTS AND ASSOCIATED RISKS

At October 31, 1994, U.S. Government had written options outstanding.
Written options have elements of risk in excess of the amounts reflected in the
Statement of Assets and Liabilities. The fund, as a writer of an option, has no
control over whether the option is exercised. The underlying security may be
sold and, as a result, the fund bears the market risk of an unfavorable change
in the price of the security underlying the written option.

9. FUND ACQUISITIONS

On December 21, 1992, Growth and Income acquired, in a tax free
reorganization, the net assets of the Unified Income Fund and Unified Mutual
Shares Fund in exchange for 289,151 and 1,259,871 shares, respectively. At that
date, net assets for the Unified Income Fund and Unified Mutual Shares Fund
amounted to $3,088,136 and $13,455,422, respectively, which included $211,357
and $2,822,919, respectively, in unrealized appreciation. These assets were
combined with the net assets of Growth and Income which were $7,881,811,
immediately prior to reorganization. Expenses incurred in connection with this
acquisition approximated $34,000 which include legal costs and independent
accountants' fees. Growth and Income also received $1,168,033 in capital loss
carryovers which can be used as a reduction against future net capital gains.
These carryovers are limited by Section 382 of the Internal Revenue Code to
$188,067 annually as a result of the reorganization.

On December 28, 1992, Quest for Value acquired the net assets of the Unified
Growth Fund in exchange for 754,190 shares. At that date, net assets for Unified
Growth Fund amounted to $8,793,860, which included $486,279 in unrealized
appreciation. These assets were combined with the assets of Quest for Value
which were $157,183,979, immediately prior to reorganization. Expenses incurred
in connection with the acquisition approximated $17,000 which include legal
costs and independent auditors' fees. Quest for Value also received and used
$82,350 in capital loss carryovers to be used as a reduction against future net
capital gains realized before the fiscal year ended 2000.

10. NET CAPITAL LOSS CARRYOVER

For the fiscal year ended October 31, 1994, Growth and Income will utilize
$188,067 of net capital loss carryovers. Growth and Income has net capital loss
carryovers of $791,899 of which $558,150, $177,811 and $55,938 will be available
through the fiscal years ending 1995, 1996 and 2000, respectively, to offset net
capital gains, to the extent provided by regulations. However, due to the
reorganization described in Note 9, the loss carryovers are further limited by
IRC Section 382 to $188,067 annually. To the extent that the capital loss
carryovers are used to offset net capital gains, it is probable that the gains
so offset will not be distributed to shareholders. Also, at October 31, 1994,
Investment Quality had a net capital loss carryover of $952,880 available as a
reduction against future net capital gains realized before the end of fiscal
2002 to the extent provided by regulations.

11. SUBSEQUENT EVENTS

On December 5, 1994, the following funds declared net realized short-term
and long-term capital gain distributions, payable December 5, 1994 to
shareholders of record on the opening of business December 5, 1994 at the
following rates per share, per class:

SHORT-TERM GAIN LONG-TERM GAIN
--------------- ---------------
Quest for Value $0.0924 $0.7355
Opportunity 0.2077 0.4058
Small Capitalization 0.3195 0.0959
Growth and Income 0.2351 0.1864
U.S. Government -- 0.0126

<PAGE>
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS (FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INCOME FROM
INVESTMENT OPERATIONS DIVIDENDS AND DISTRIBUTIONS
---------------------------------------- ------------------------------------------------
NET REALIZED DISTRIBUTIONS
AND DIVIDENDS TO TO
NET ASSET NET UNREALIZED SHAREHOLDERS SHAREHOLDERS
VALUE, INVESTMENT GAIN (LOSS) TOTAL FROM FROM NET FROM NET
TOTAL DIVIDENDS
BEGINNING INCOME ON INVESTMENT INVESTMENT REALIZED GAIN
AND
OF PERIOD (LOSS) INVESTMENTS OPERATIONS INCOME ON INVESTMENTS
DISTRIBUTIONS
<S> <C> <C> <C> <C> <C> <C> <C>
QUEST FOR VALUE FUND, INC.
Class A,
YEAR ENDED OCTOBER 31,
1994 $ 12.51 $ 0.09 $ 0.50 $ 0.59 $ (0.04) $ (0.47) $ (0.51)
1993 11.71 0.05 1.34 1.39 (0.05) (0.54) (0.59)
1992 10.61 0.04 1.77 1.81 (0.07) (0.64) (0.71)
1991 7.84 0.09 2.84 2.93 (0.16) -- (0.16)
1990(2) 9.85 0.18 (1.38) (1.20) (0.26) (0.55) (0.81)
Class B,
YEAR ENDED OCTOBER 31,
1994 12.51 0.02 0.50 0.52 (0.03) (0.47) (0.50)
SEPTEMBER 2, 1993 (4)
TO OCTOBER 31, 1993 12.66(3) (0.01) (0.14) (0.15) -- -- --
Class C,
YEAR ENDED OCTOBER 31,
1994 12.50 0.01 0.51 0.52 (0.03) (0.47) (0.50)
SEPTEMBER 2, 1993 (4)
TO OCTOBER 31, 1993 12.66(3) (0.01) (0.15) (0.16) -- -- --

OPPORTUNITY FUND
<TABLE>
<CAPTION>
INCOME FROM
INVESTMENT OPERATIONS DIVIDENDS AND DISTRIBUTIONS
---------------------------------------- ------------------------------------------------
NET REALIZED DISTRIBUTIONS
AND DIVIDENDS TO TO
NET ASSET NET UNREALIZED SHAREHOLDERS SHAREHOLDERS
VALUE, INVESTMENT GAIN (LOSS) TOTAL FROM FROM NET FROM NET
TOTAL DIVIDENDS
BEGINNING INCOME ON INVESTMENT INVESTMENT REALIZED GAIN
AND
OF PERIOD (LOSS) INVESTMENTS OPERATIONS INCOME ON INVESTMENTS
DISTRIBUTIONS
<S> <C> <C> <C> <C> <C> <C> <C>
Class A,
YEAR ENDED OCTOBER 31,
1994 $ 18.71 $ 0.18 $ 1.35 $ 1.53 $ (0.33) $ (0.22) $ (0.55)
1993 16.73 0.35 2.02 2.37 (0.07) (0.32) (0.39)
1992 14.29 0.09 2.93 3.02 (0.03) (0.55) (0.58)
1991 9.74 0.03 4.78 4.81 (0.23) (0.03) (0.26)
1990 11.59 0.25 (1.64) (1.39) (0.22) (0.24) (0.46)
Class B,
YEAR ENDED OCTOBER 31,
1994 18.70 0.08 1.34 1.42 (0.31) (0.22) (0.53)
SEPTEMBER 2, 1993 (4)
TO OCTOBER 31, 1993 18.73(3) 0.02 (0.05) (0.03) -- -- --
Class C,
YEAR ENDED OCTOBER 31,
1994 18.70 0.08 1.33 1.41 (0.31) (0.22) (0.53)
SEPTEMBER 2, 1993 (4)
TO OCTOBER 31, 1993 18.73(3) 0.02 (0.05) (0.03) -- -- --

<CAPTION>
<CAPTION>
RATIOS
-------------------------------------
RATIO OF
RATIO OF NET
NET INVESTMENT
NET ASSETS OPERATING INCOME
NET ASSET END OF EXPENSES (LOSS) PORTFOLIO
VALUE, END TOTAL PERIOD TO AVERAGE TO AVERAGE TURNOVER
OF PERIOD RETURN* (000'S) NET ASSETS NET ASSETS RATE
<S> <C> <C> <C> <C> <C> <C>
Class A,
YEAR ENDED OCTOBER 31,
1994 $ 19.69 8.41% $ 163,340 1.78%(1) 0.96%(1) 42%
1993 18.71 14.34% 127,225 1.83% 2.69% 24%
1992 16.73 21.93% 40,563 2.27% 0.72% 32%
1991 14.29 50.44% 8,446 2.35%(2) 0.30%(2) 88%
1990 9.74 (12.62%) 4,570 2.00%(2) 2.30%(2) 206%
Class B,
YEAR ENDED OCTOBER 31,
1994 19.59 7.84% 43,317 2.34%(1) 0.43%(1) 42%
SEPTEMBER 2, 1993 (4)
TO OCTOBER 31, 1993 18.70 (0.16%) 2,115 2.52%(5) 1.32%(5) 24%
Class C,
YEAR ENDED OCTOBER 31,
1994 19.58 7.78% 7,289 2.35%(1) 0.43%(1) 42%
SEPTEMBER 2, 1993 (4)
TO OCTOBER 31, 1993 18.70 (0.16%) 313 2.52%(5) 1.13%(5) 24%
<FN>
(1) AVERAGE NET ASSETS FOR THE YEAR ENDED OCTOBER 31, 1994, FOR CLASSES A, B,
AND C WERE $136,623,124, $16,215,716, AND $2,708,865, RESPECTIVELY.
(2) DURING THE PERIODS PRESENTED ABOVE, THE ADVISER VOLUNTARILY WAIVED ITS
FEES AND REIMBURSED THE FUND FOR A PORTION OF ITS OPERATING EXPENSES. IF
SUCH WAIVERS AND REIMBURSEMENTS HAD NOT BEEN IN EFFECT, THE RATIOS OF NET
OPERATING EXPENSES TO AVERAGE NET ASSETS AND THE RATIOS OF NET INVESTMENT
INCOME TO AVERAGE NET ASSETS WOULD HAVE BEEN 3.33% AND (0.68%),
RESPECTIVELY, FOR THE YEAR ENDED OCTOBER 31, 1991 AND 3.69% AND 0.61%,
RESPECTIVELY, FOR THE YEAR ENDED OCTOBER 31, 1990.
(3) OFFERING PRICE.
(4) INITIAL OFFERING OF CLASS B AND CLASS C SHARES.
(5) ANNUALIZED.
- ----------------------------------
* ASSUMES REINVESTMENT OF ALL DIVIDENDS AND DISTRIBUTIONS, BUT DOES NOT
REFLECT DEDUCTIONS FOR SALES CHARGES. AGGREGATE (NOT ANNUALIZED) TOTAL
RETURN IS SHOWN FOR ANY PERIOD SHORTER THAN ONE YEAR.
</TABLE>

<PAGE>

- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS (FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD--CONTINUED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INCOME FROM
INVESTMENT OPERATIONS DIVIDENDS AND DISTRIBUTIONS
---------------------------------------- ------------------------------------------------
NET REALIZED DISTRIBUTIONS
AND DIVIDENDS TO TO
NET ASSET NET UNREALIZED SHAREHOLDERS SHAREHOLDERS
VALUE, INVESTMENT GAIN (LOSS) TOTAL FROM FROM NET FROM NET
TOTAL DIVIDENDS
BEGINNING INCOME ON INVESTMENT INVESTMENT REALIZED GAIN
AND
OF PERIOD (LOSS) INVESTMENTS OPERATIONS INCOME ON INVESTMENTS
DISTRIBUTIONS
<S> <C> <C> <C> <C> <C> <C> <C>
SMALL CAPITALIZATION FUND
Class A,
YEAR ENDED OCTOBER 31,
1994 $ 17.68 $ (0.03) $ 0.01 $ (0.02) $ -- $ (1.33) $ (1.33)
1993 14.60 (0.04) 4.26 4.22 -- (1.14) (1.14)
1992 13.52 0.00 1.50 1.50 -- (0.42) (0.42)
1991 8.80 (0.05) 4.85 4.80 (0.08) -- (0.08)
1990 10.91 0.07 (2.04) (1.97) (0.08) (0.06) (0.14)
Class B,
YEAR ENDED OCTOBER 31,
1994 17.66 (0.11) 0.02 (0.09) -- (1.33) (1.33)
SEPTEMBER 2, 1993 (4)
TO OCTOBER 31, 1993 17.19(3) (0.02) 0.49 0.47 -- -- --
Class C,
YEAR ENDED OCTOBER 31,
1994 17.67 (0.13) 0.02 (0.11) -- (1.33) (1.33)
SEPTEMBER 2, 1993 (4)
TO OCTOBER 31, 1993 17.19(3) (0.02) 0.50 0.48 -- -- --

GROWTH AND INCOME FUND
<TABLE>
<CAPTION>
INCOME FROM
INVESTMENT OPERATIONS DIVIDENDS AND DISTRIBUTIONS
---------------------------------------- ------------------------------------------------
NET REALIZED DISTRIBUTIONS
AND DIVIDENDS TO TO
NET ASSET NET UNREALIZED SHAREHOLDERS SHAREHOLDERS
VALUE, INVESTMENT GAIN (LOSS) TOTAL FROM FROM NET FROM NET
TOTAL DIVIDENDS
BEGINNING INCOME ON INVESTMENT INVESTMENT REALIZED GAIN
AND
OF PERIOD (LOSS) INVESTMENTS OPERATIONS INCOME ON INVESTMENTS
DISTRIBUTIONS
<S> <C> <C> <C> <C> <C> <C> <C>
Class A,
YEAR ENDED OCTOBER 31,
1994 $ 11.24 $ 0.32 $ 0.55 $ 0.87 $ (0.32) $ (1.70) $ (2.02)
1993 10.80 0.30 0.73 1.03 (0.26) (0.33) (0.59)
NOVEMBER 4, 1991 (3)
TO OCTOBER 31, 1992 10.00(4) 0.28 0.80 1.08 (0.28) -- (0.28)
Class B,
YEAR ENDED OCTOBER 31,
1994 11.23 0.25 0.56 0.81 (0.27) (1.70) (1.97)
SEPTEMBER 2, 1993 (5)
TO OCTOBER 31, 1993 11.21(4) 0.04 0.05 0.09 (0.07) -- (0.07)
Class C,
YEAR ENDED OCTOBER 31,
1994 11.23 0.24 0.56 0.80 (0.26) (1.70) (1.96)
SEPTEMBER 2, 1993 (5)
TO OCTOBER 31, 1993 11.21(4) 0.04 0.05 0.09 (0.07) -- (0.07)

<CAPTION>
RATIOS
-------------------------------------
RATIO OF
RATIO OF NET
NET INVESTMENT
NET ASSETS OPERATING INCOME
NET ASSET END OF EXPENSES (LOSS) PORTFOLIO
VALUE, END TOTAL PERIOD TO AVERAGE TO AVERAGE TURNOVER
OF PERIOD RETURN* (000'S) NET ASSETS NET ASSETS RATE
<S> <C> <C> <C> <C> <C> <C>
Class A,
YEAR ENDED OCTOBER 31,
1994 $ 10.09 8.64% $ 30,576 1.86%(1,2) 3.16%(1,2) 113%
1993 11.24 9.93% 28,466 1.90%(2) 2.66%(2) 192%
NOVEMBER 4, 1991 (3)
TO OCTOBER 31, 1992 10.80 10.84% 8,057 2.23%(2,6) 2.73%(2,6) 77%
Class B,
YEAR ENDED OCTOBER 31,
1994 10.07 7.96% 2,928 2.47%(1,2) 2.53%(1,2) 113%
SEPTEMBER 2, 1993 (5)
TO OCTOBER 31, 1993 11.23 0.81% 319 2.49%(2,6) 1.83%(2,6) 192%
Class C,
YEAR ENDED OCTOBER 31,
1994 10.07 7.91% 455 2.62%(1,2) 2.39%(1,2) 113%
SEPTEMBER 2, 1993 (5)
TO OCTOBER 31, 1993 11.23 0.81% 102 2.49%(2,6) 2.18%(2,6) 192%
<FN>
(1) AVERAGE NET ASSETS FOR THE YEAR ENDED OCTOBER 31, 1994, FOR CLASSES A, B,
AND C WERE $29,112,348, $1,585,755, AND $298,294, RESPECTIVELY.
(2) DURING THE PERIODS PRESENTED ABOVE, THE ADVISER VOLUNTARILY WAIVED A
PORTION OF ITS FEE. IF SUCH WAIVER HAD NOT BEEN IN EFFECT, THE RATIOS OF
NET OPERATING EXPENSES TO AVERAGE NET ASSETS AND THE RATIOS OF NET
INVESTMENT INCOME TO AVERAGE NET ASSETS FOR CLASS A WOULD HAVE BEEN 2.32%
AND 2.70%, RESPECTIVELY, FOR THE YEAR ENDED OCTOBER 31, 1994, 2.18% AND
2.38%, RESPECTIVELY, FOR THE YEAR ENDED OCTOBER 31, 1993 AND 2.98% AND
1.98%, ANNUALIZED, RESPECTIVELY, FOR THE PERIOD NOVEMBER 4, 1991
(COMMENCEMENT OF OPERATIONS) TO OCTOBER 31, 1992. THE RATIOS OF NET
OPERATING EXPENSES TO AVERAGE NET ASSETS AND THE RATIOS OF NET INVESTMENT
INCOME TO AVERAGE NET ASSETS WOULD HAVE BEEN 2.93% AND 2.07%,
RESPECTIVELY, FOR CLASS B AND 3.10% AND 1.91%, RESPECTIVELY, FOR CLASS C,
FOR THE YEAR ENDED OCTOBER 31, 1994 AND 2.88% AND 1.44%, ANNUALIZED,
RESPECTIVELY, FOR CLASS B AND 2.87% AND 1.80%, ANNUALIZED, RESPECTIVELY,
FOR CLASS C, FOR THE PERIOD SEPTEMBER 2, 1993 (INITIAL OFFERING) TO
OCTOBER 31, 1993.
(3) COMMENCEMENT OF OPERATIONS.
(4) OFFERING PRICE.
(5) INITIAL OFFERING OF CLASS B AND CLASS C SHARES.
(6) ANNUALIZED.
- ----------------------------------
* ASSUMES REINVESTMENT OF ALL DIVIDENDS AND DISTRIBUTIONS, BUT DOES NOT
REFLECT DEDUCTIONS FOR SALES CHARGES. AGGREGATE (NOT ANNUALIZED) TOTAL
RETURN IS SHOWN FOR ANY PERIOD SHORTER THAN ONE YEAR.
</TABLE>

36
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INCOME FROM
INVESTMENT OPERATIONS DIVIDENDS AND DISTRIBUTIONS
---------------------------------------- ------------------------------------------------
NET REALIZED DISTRIBUTIONS
AND DIVIDENDS TO TO
NET ASSET NET UNREALIZED SHAREHOLDERS SHAREHOLDERS
VALUE, INVESTMENT GAIN (LOSS) TOTAL FROM FROM NET FROM NET
TOTAL DIVIDENDS
BEGINNING INCOME ON INVESTMENT INVESTMENT REALIZED GAIN
AND
OF PERIOD (LOSS) INVESTMENTS OPERATIONS INCOME ON INVESTMENTS
DISTRIBUTIONS
<S> <C> <C> <C> <C> <C> <C> <C>
U.S. GOVERNMENT INCOME FUND
Class A,
YEAR ENDED OCTOBER 31,
1994 $ 12.08 $ 0.59 $ (1.08) $ (0.49) $ (0.59) $ (0.21) $ (0.80)
1993 11.92 0.65 0.35 1.00 (0.68) (0.16) (0.84)
1992 11.80 0.74 0.18 0.92 (0.74) (0.06) (0.80)
1991 11.35 0.85 0.61 1.46 (0.86) (0.15) (1.01)
1990 11.50 0.93 (0.06) 0.87 (0.93) (0.09) (1.02)
Class B,
YEAR ENDED OCTOBER 31,
1994 12.08 0.51 (1.08) (0.57) (0.51) (0.21) (0.72)
SEPTEMBER 2, 1993 (4)
TO OCTOBER 31, 1993 12.13(3) 0.08 (0.04) 0.04 (0.08) (0.01) (0.09)
Class C,
YEAR ENDED OCTOBER 31,
1994 12.08 0.51 (1.08) (0.57) (0.51) (0.21) (0.72)
SEPTEMBER 2, 1993 (4)
TO OCTOBER 31, 1993 12.13(3) 0.08 (0.04) 0.04 (0.08) (0.01) (0.09)

RATIOS
-------------------------------------
RATIO OF
RATIO OF NET
NET INVESTMENT
NET ASSETS OPERATING INCOME
NET ASSET END OF EXPENSES (LOSS) PORTFOLIO
VALUE, END TOTAL PERIOD TO AVERAGE TO AVERAGE TURNOVER
OF PERIOD RETURN* (000'S) NET ASSETS NET ASSETS RATE
<S> <C> <C> <C> <C> <C> <C>
U.S. GOVERNMENT INCOME FUND
Class A,
YEAR ENDED OCTOBER 31,
1994 $ 10.79 (4.15%) $ 123,257 1.20%(1,2) 5.19%(1,2) 126%
1993 12.08 8.55% 189,091 1.15%(2) 5.33%(2) 315%
1992 11.92 7.98% 151,197 1.15%(2) 6.26%(2) 207%
1991 11.80 13.40% 82,400 1.15%(2) 7.24%(2) 309%
1990 11.35 7.98% 52,742 1.15%(2) 8.21%(2) 101%
Class B,
YEAR ENDED OCTOBER 31,
1994 10.79 (4.84%) 6,813 1.92%(1,2) 4.53%(1,2) 126%
SEPTEMBER 2, 1993 (4)
TO OCTOBER 31, 1993 12.08 0.29% 1,286 1.85%(2,5) 3.07%(2,5) 315%
Class C,
YEAR ENDED OCTOBER 31,
1994 10.79 (4.84%) 1,224 1.94%(1,2) 4.57%(1,2) 126%
SEPTEMBER 2, 1993 (4)
TO OCTOBER 31, 1993 12.08 0.34% 141 1.85%(2,5) 3.89%(2,5) 315%
<FN>
(1) AVERAGE NET ASSETS FOR THE YEAR ENDED OCTOBER 31, 1994, FOR CLASSES A, B,
AND C WERE $155,279,927, $4,348,538, AND $861,570, RESPECTIVELY.
(2) DURING THE PERIODS PRESENTED ABOVE, THE ADVISER VOLUNTARILY WAIVED A
PORTION OF ITS FEES. IF SUCH WAIVERS HAD NOT BEEN IN EFFECT, THE RATIOS OF
NET OPERATING EXPENSES TO AVERAGE NET ASSETS AND THE RATIOS OF NET
INVESTMENT INCOME TO AVERAGE NET ASSETS FOR CLASS A WOULD HAVE BEEN 1.23%
AND 5.16%, RESPECTIVELY, FOR THE YEAR ENDED OCTOBER 31, 1994, 1.20% AND
5.28%, RESPECTIVELY, FOR THE YEAR ENDED OCTOBER 31, 1993, 1.17% AND 6.24%,
RESPECTIVELY, FOR THE YEAR ENDED OCTOBER 31, 1992, 1.46% AND 6.93%,
RESPECTIVELY, FOR THE YEAR ENDED OCTOBER 31, 1991 AND 1.44% AND 7.92%,
RESPECTIVELY, FOR THE YEAR ENDED OCTOBER 31, 1990. THE RATIOS OF NET
OPERATING EXPENSES TO AVERAGE NET ASSETS AND THE RATIOS OF NET INVESTMENT
INCOME TO AVERAGE NET ASSETS WOULD HAVE BEEN 1.93% AND 4.52%,
RESPECTIVELY, FOR CLASS B AND 1.95% AND 4.56%, RESPECTIVELY, FOR CLASS C,
FOR THE YEAR ENDED OCTOBER 31, 1994 AND 1.96% AND 2.96%, ANNUALIZED,
RESPECTIVELY, FOR CLASS B AND 1.96% AND 3.78%, ANNUALIZED, RESPECTIVELY,
FOR CLASS C, FOR THE PERIOD SEPTEMBER 2, 1993 (INITIAL OFFERING) TO
OCTOBER 31, 1993.
(3) OFFERING PRICE.
(4) INITIAL OFFERING OF CLASS B AND CLASS C SHARES.
(5) ANNUALIZED.
</TABLE>

INVESTMENT QUALITY INCOME FUND
<TABLE>
<CAPTION>
INCOME FROM
INVESTMENT OPERATIONS DIVIDENDS AND DISTRIBUTIONS
---------------------------------------- ------------------------------------------------
NET REALIZED DISTRIBUTIONS
AND DIVIDENDS TO TO
NET ASSET NET UNREALIZED SHAREHOLDERS SHAREHOLDERS
VALUE, INVESTMENT GAIN (LOSS) TOTAL FROM FROM NET FROM NET
TOTAL DIVIDENDS
BEGINNING INCOME ON INVESTMENT INVESTMENT REALIZED GAIN
AND
OF PERIOD (LOSS) INVESTMENTS OPERATIONS INCOME ON INVESTMENTS
DISTRIBUTIONS
<S> <C> <C> <C> <C> <C> <C> <C>
Class A,
YEAR ENDED OCTOBER 31,
1994 $ 11.49 $ 0.68 $ (1.75) $ (1.07) $ (0.68) $ (0.07) $ (0.75)
1993 10.36 0.68 1.19 1.87 (0.68) (0.06) (0.74)
1992 10.06 0.80 0.30 1.10 (0.80) -- (0.80)
DECEMBER 18, 1990 (3)
TO OCTOBER 31, 1991 10.00(4) 0.71 0.06 0.77 (0.71) -- (0.71)
Class B,
YEAR ENDED OCTOBER 31,
1994 11.49 0.61 (1.75) (1.14) (0.61) (0.07) (0.68)
SEPTEMBER 2, 1993 (5)
TO OCTOBER 31, 1993 11.52(4) 0.08 (0.03) 0.05 (0.08) -- (0.08)
Class C,
YEAR ENDED OCTOBER 31,
1994 11.49 0.61 (1.75) (1.14) (0.61) (0.07) (0.68)
SEPTEMBER 2, 1993 (5)
TO OCTOBER 31, 1993 11.52(4) 0.09 (0.03) 0.06 (0.09) -- (0.09)

<CAPTION>
RATIOS
-------------------------------------
RATIO OF
RATIO OF NET
NET INVESTMENT
NET ASSETS OPERATING INCOME
NET ASSET END OF EXPENSES (LOSS) PORTFOLIO
VALUE, END TOTAL PERIOD TO AVERAGE TO AVERAGE TURNOVER
OF PERIOD RETURN* (000'S) NET ASSETS NET ASSETS RATE
<S> <C> <C> <C> <C> <C> <C>
Class A,
YEAR ENDED OCTOBER 31,
1994 $ 9.67 (9.61%) $ 46,922 1.29%(1,2) 6.47%(1,2) 33%
1993 11.49 18.64% 61,288 1.20%(2) 6.07%(2) 12%
1992 10.36 11.21% 29,701 0.95%(2) 7.62%(2) 18%
DECEMBER 18, 1990 (3)
TO OCTOBER 31, 1991 10.06 8.11% 17,235 0.82%(2,6) 8.25%(2,6) 19%
Class B,
YEAR ENDED OCTOBER 31,
1994 9.67 (10.22%) 6,605 1.92%(1,2) 5.85%(1,2) 33%
SEPTEMBER 2, 1993 (5)
TO OCTOBER 31, 1993 11.49 0.45% 1,468 1.84%(2,6) 3.68%(2,6) 12%
Class C,
YEAR ENDED OCTOBER 31,
1994 9.67 (10.23%) 2,583 1.90%(1,2) 6.01%(1,2) 33%
SEPTEMBER 2, 1993 (5)
TO OCTOBER 31, 1993 11.49 0.55% 101 1.84%(2,6) 4.83%(2,6) 12%
<FN>
(1) AVERAGE NET ASSETS FOR THE YEAR ENDED OCTOBER 31, 1994, FOR CLASSES A, B,
AND C WERE $53,805,286, $4,176,936, AND $1,983,143, RESPECTIVELY.
(2) DURING THE PERIODS PRESENTED ABOVE, THE ADVISER VOLUNTARILY WAIVED ALL OR
A PORTION OF ITS FEES AND REIMBURSED THE FUND FOR A PORTION OF ITS
OPERATING EXPENSES. IF SUCH WAIVERS AND REIMBURSEMENTS HAD NOT BEEN IN
EFFECT, THE RATIOS OF NET OPERATING EXPENSES TO AVERAGE NET ASSETS AND THE
RATIOS OF NET INVESTMENT INCOME TO AVERAGE NET ASSETS FOR CLASS A WOULD
HAVE BEEN 1.59% AND 6.17%, RESPECTIVELY, FOR THE YEAR ENDED OCTOBER 31,
1994, 1.50% AND 5.77%, RESPECTIVELY, FOR THE YEAR ENDED OCTOBER 31, 1993,
1.72% AND 6.85%, RESPECTIVELY, FOR THE YEAR ENDED OCTOBER 31, 1992, AND
2.11% AND 6.96%, ANNUALIZED, RESPECTIVELY, FOR THE PERIOD DECEMBER 18,
1990 (COMMENCEMENT OF OPERATIONS) TO OCTOBER 31, 1991. THE RATIOS OF NET
OPERATING EXPENSES TO AVERAGE NET ASSETS AND THE RATIOS OF NET INVESTMENT
INCOME TO AVERAGE NET ASSETS WOULD HAVE BEEN 2.23% AND 5.54%,
RESPECTIVELY, FOR CLASS B AND 2.21% AND 5.70%, RESPECTIVELY, FOR CLASS C,
FOR THE YEAR ENDED OCTOBER 31, 1994 AND 2.07% AND 3.45%, ANNUALIZED,
RESPECTIVELY, FOR CLASS B AND 2.06% AND 4.61%, ANNUALIZED, RESPECTIVELY,
FOR CLASS C FOR THE PERIOD SEPTEMBER 2, 1993 (INITIAL OFFERING) TO OCTOBER
31, 1993.
(3) COMMENCEMENT OF OPERATIONS.
(4) OFFERING PRICE.
(5) INITIAL OFFERING OF CLASS B AND CLASS C SHARES.
(6) ANNUALIZED.
- ----------------------------------
* ASSUMES REINVESTMENT OF ALL DIVIDENDS AND DISTRIBUTIONS, BUT DOES NOT
REFLECT DEDUCTIONS FOR SALES CHARGES. AGGREGATE (NOT ANNUALIZED) TOTAL
RETURN IS SHOWN FOR ANY PERIOD SHORTER THAN ONE YEAR.
</TABLE>

<PAGE>
- --------------------------------------------------------------------------------
INDEPENDENT AUDITORS' REPORT
- --------------------------------------------------------------------------------

To the Shareholders and Board of Directors
Quest for Value Fund, Inc.:

We have audited the accompanying statement of assets and liabilities of Quest
for Value Fund, Inc. including the schedule of investments as of October 31,
1994 and the related statement of operations for the year then ended, the
statements of changes in net assets for each of the years in the two year period
then ended and the financial highlights for each of the years in the five year
period then ended. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
October 31, 1994 by correspondence with the custodian and brokers. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.

In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of Quest
for Value Fund, Inc. as of October 31, 1994, the results of its operations for
the year then ended, the changes in its net assets for each of the years in the
two year period then ended, and the financial highlights for each of the years
in the five year period then ended in conformity with generally accepted
accounting principles.

KPMG Peat Marwick LLP

New York, New York
December 9, 1994

38
<PAGE>
- --------------------------------------------------------------------------------
REPORT OF INDEPENDENT ACCOUNTANTS
- --------------------------------------------------------------------------------

To the Shareholders and Trustees of
Quest for Value Family of Funds:

In our opinion, the accompanying statements of assets and liabilities, including
the schedules of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of the Opportunity Fund, the Small
Capitalization Fund, the Growth and Income Fund, the U.S. Government Income
Fund, and the Investment Quality Income Fund (constituting part of Quest for
Value Family of Funds, hereafter referred to as the "Fund") at October 31, 1994,
the results of each of their operations for the year then ended, the changes in
each of their net assets for each of the two years in the period then ended and
the financial highlights for each of the periods indicated, in conformity with
generally accepted accounting principles. These financial statements and
financial highlights (hereafter referred to as "financial statements") are the
responsibility of the Fund's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these financial statements in accordance with generally accepted
auditing standards which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits, which included confirmation of securities at October 31, 1994 by
correspondence with the custodian and brokers and the application of alternative
auditing procedures where confirmations from brokers were not received, provide
a reasonable basis for the opinion expressed above.

PRICE WATERHOUSE LLP
1177 Avenue of the Americas
New York, New York 10036
December 16, 1994

39
<PAGE>
- --------------------------------------------------------------------------------
TAX INFORMATION
- --------------------------------------------------------------------------------

We are required by Subchapter M of the Internal Revenue Code of 1986, as
amended, to advise you within 60 days of the funds' fiscal year end (October 31,
1994) as to the Federal tax status of dividends and distributions received by
shareholders during such fiscal year. Accordingly, we are advising you that
during the fiscal year ended October 31, 1994, the funds paid per share
dividends and distributions to shareholders as follows:

<TABLE>
<CAPTION>
TAXABLE AS ORDINARY INCOME
------------------------------
NET INVESTMENT SHORT-TERM LONG-TERM
INCOME CAPITAL GAINS CAPITAL GAINS
--------------- ------------- -------------
<S> <C> <C> <C>
QUEST FOR VALUE FUND, INC.
Class A..................................... $ 0.0404 $ 0.1184 $ 0.3509
Class B..................................... 0.0306 0.1184 0.3509
Class C..................................... 0.0325 0.1184 0.3509

OPPORTUNITY FUND
Class A..................................... 0.3260 0.0630 0.1560
Class B..................................... 0.3127 0.0630 0.1560
Class C..................................... 0.3116 0.0630 0.1560

SMALL CAPITALIZATION FUND
Class A..................................... -- 0.8590 0.4720
Class B..................................... -- 0.8590 0.4720
Class C..................................... -- 0.8590 0.4720

GROWTH AND INCOME FUND
Class A..................................... 0.3193 0.6435 1.0556
Class B..................................... 0.2651 0.6435 1.0556
Class C..................................... 0.2605 0.6435 1.0556

U.S. GOVERNMENT INCOME FUND
Class A..................................... 0.5926 0.1739 0.0395
Class B..................................... 0.5102 0.1739 0.0395
Class C..................................... 0.5094 0.1739 0.0395

INVESTMENT QUALITY INCOME FUND
Class A..................................... 0.6799 0.0560 0.0130
Class B..................................... 0.6094 0.0560 0.0130
Class C..................................... 0.6077 0.0560 0.0130
</TABLE>

Since each funds' fiscal year is not the calendar year, another notification
will be sent in respect to calendar year 1994. In January 1995, you will be
advised on IRS Form 1099 DIV as to the Federal tax status of the dividends and
distributions received by you in calendar 1994. The amounts that will be
reported, will be the amounts to use on your 1994 Federal income tax return and
probably will differ from the amounts which we must report for each funds'
fiscal year ended October 31, 1994. Shareholders are advised to consult with
their own tax advisers as to the Federal, state and local tax status of each
funds' income dividends and realized gain distributions received.

<PAGE>
QUEST FOR VALUE

DIRECTORS (TRUSTEES) AND OFFICERS

Joseph M. La Motta Director (Trustee), President
Paul Y. Clinton Director (Trustee)
Thomas W. Courtney Director (Trustee)
Lacy B. Herrmann Director (Trustee)
George Loft Director (Trustee)
Bernard H. Garil Vice President
Robert J. Bluestone Vice President
Richard J. Glasebrook, Vice President
II
Colin Glinsman Vice President
Vikki Hanges Vice President
Jenny Beth Jones Vice President
Eileen P. Rominger Vice President
George Tilghman Vice President
Sheldon Siegel Treasurer
Deborah Kaback Secretary
Leslie Klein Assistant Treasurer
Thomas E. Duggan Assistant Secretary

INVESTMENT ADVISER

Quest for Value Advisors
One World Financial Center
New York, NY 10281

DISTRIBUTOR

Quest for Value Distributors
Two World Financial Center
New York, NY 10080-6116

TRANSFER AND SHAREHOLDER SERVICING AGENT

State Street Bank and Trust Company
P.O. Box 8505
Boston, MA 02266

CUSTODIAN

State Street Bank and Trust Company
P.O. Box 351
Boston, MA 02101

- --------------------------------------------------
Table of Contents
President's Letter............................ 1
Investment Review............................. 3
Schedules of Investments...................... 15
Statements of Assets and Liabilities.......... 24
Statements of Operations...................... 25
Statements of Changes in Net Assets........... 26
Notes to Financial Statements................. 28
Financial Highlights.......................... 35
Independent Auditors' Report.................. 38
Report of Independent Accountants............. 39
Tax Information............................... 40
- --------------------------------------------------

This report is authorized for distribution only to shareholders and to others
who have received a copy of the prospectus.

<PAGE>

QUEST FOR VALUE SM-

JUNE 21, 1995

DEAR SHAREHOLDER:

As you may have read in the press, Quest for Value Advisors and Oppenheimer
Management Corporation are discussing a transaction that would involve the Quest
for Value funds. Oppenheimer Management Corporation and its affiliates manage
funds with assets of more than $35 billion, held in more than 2.4 million
shareholder accounts. Although at one time Oppenheimer Management Corporation
was affiliated with Oppenheimer Capital, the parent of Quest for Value Advisors,
that is not currently the case.

Under the proposed transaction, the Quest for Value Fund, the Small
Capitalization Fund, the Opportunity Fund and the Growth and Income Fund would
enter into an Investment Advisory Agreement with Oppenheimer Management. Quest
for Value Advisors would continue to provide portfolio management services to
the funds under a Subadvisory Agreement with Oppenheimer Management. Under the
proposal, there would be no change in portfolio managers of the four funds.
Eileen Rominger would continue as portfolio manager for the Quest for Value
Fund, Richard J. Glasebrook II for the Opportunity Fund, Jenny Beth Jones and
Louis Goldstein for the Small Capitalization Fund, and Colin Glinsman for the
Growth and Income Fund.

The Quest for Value U.S. Government Income Fund and Investment Quality Income
Fund would be merged into Oppenheimer Management's U.S. Government Bond Fund and
Investment Grade Bond Fund, respectively.

The transaction is subject to the signing of a definitive agreement by
Oppenheimer Management Corporation and Quest for Value Advisors and approval of
the funds' boards and shareholders.

SIX-MONTH RESULTS

While we are excited about the future, in this report we want to bring you up to
date on the performance of your investment in the six months ended April 30,
1995, an excellent period for investors in both the stock and bond markets. The
results of the funds in the Quest for Value Family were generally gratifying,
with several ranking in the upper echelon of their respective Morningstar
categories. Detailed information on the performance and holdings of each fund is
presented in the Investment Review and financial statements that follow.

FINANCIAL MARKET PERFORMANCE

The stock market, as measured by the Standard & Poor's 500 Index including
dividends (S&P 500), advanced 10.5% in the six months. As usual, there were
significant crosscurrents within the market. In general, technology, health care
and financial services stocks were strong performers, while many cyclical issues
were flat to down. Moreover, stocks of smaller companies generally lagged the
performance of large-capitalization issues, as indicated by the total return of
5.4% on the Russell 2000 Index including dividends. The Russell 2000 is a widely
followed benchmark which includes smaller capitalization stocks.
QUEST FOR VALUE FUNDS
ONE WORLD FINANCIAL
CENTER
NEW YORK, NY 10281
EQUITY FUNDS
QUEST FOR VALUE FUND
GLOBAL EQUITY FUND
OPPORTUNITY FUND
SMALL CAPITALIZATION FUND
GROWTH AND INCOME FUND
FIXED INCOME FUNDS
TAXABLE
U.S. GOVERNMENT
INCOME FUND
INVESTMENT QUALITY
INCOME FUND
GLOBAL INCOME FUND
TAX-EXEMPT
NATIONAL TAX-EXEMPT FUND
CALIFORNIA TAX-EXEMPT FUND
NEW YORK TAX-EXEMPT FUND
MONEY MARKET FUNDS
QUEST CASH RESERVES:
TAXABLE
PRIMARY PORTFOLIO
GOVERNMENT PORTFOLIO
TAX-EXEMPT
GENERAL MUNICIPAL PORTFOLIO
CALIFORNIA MUNICIPAL PORTFOLIO
NEW YORK MUNICIPAL PORTFOLIO
FOR MORE INFORMATION
OR ASSISTANCE
WITH YOUR ACCOUNT
PLEASE CALL:
1-800-232-3863

SM-Quest for Value is a registered service mark of Oppenheimer Capital.
<PAGE>
Our equity philosophy is to preserve capital and make it grow by investing in
superior companies at reasonable prices. Superior companies, in our view,
include those that hold strong competitive positions, earn high returns on
invested capital and use their cash flow to create value for shareholders. These
companies create value by investing in operations, making astute acquisitions or
returning capital to their shareholders through dividend payments or the
repurchase of shares. We think our philosophy makes sense, and it works.

Prices of fixed income securities also increased significantly during the six
months, reversing the sharp declines of the prior year. As measured by the
Lehman Brothers Aggregate Bond Index, the bond market delivered a 7.0% total
return in the six months ended April 30, 1995.

Six months ago, in our fiscal 1994 annual report, we wrote, "Now that yields on
long-term Treasury bonds have climbed to approximately 8% from 5.8% a year ago,
we wonder if the mood pendulum has finally reached the end of its arc and is
ready to change direction. Do today's bond yields offer an attractive buying
opportunity?" The answer, it turned out, was yes. We were well positioned for
this turnaround and remain generally optimistic about the bond market outlook at
this time.

SUMMARY

In our search for value in the markets, we seek to identify quality securities
that are underpriced and offer the potential for superior returns over time. We
are conservative, long-term investors and strive to preserve your capital and
make it grow.

Thank you for your support. Together with Oppenheimer Management Corporation, we
at Quest for Value remain dedicated to meeting your future investment needs.

Sincerely,

[/S/JOSEPH M. LA MOTTA]
Joseph M. La Motta
President
<PAGE>
- --------------------------------------------------------------------------------
INVESTMENT REVIEW

QUEST FOR VALUE FUND, INC.

OBJECTIVE

Seeks capital appreciation through investment primarily in equity securities of
companies believed to be undervalued in the marketplace in terms of assets,
earnings, growth potential and cash flow.

SIX-MONTH REVIEW

The Fund's Class A shares provided a total return of 9.5% in the six months
ended April 30, 1995, well in excess of the average return of 6.3% for the 764
growth funds monitored by Morningstar, Inc., a leading independent reporter of
mutual fund performance, but below the 10.5% return on the S&P 500.

The Fund has been a consistent performer over time, in both up and down markets.
Since its inception in April 1980, the Fund has delivered a total return of
1,119.6%, or a compound annual return of 18.1%, exceeding by a wide margin the
15.4% average return for the S&P 500 over the same period.

The Fund seeks to control risk and generate favorable returns in two ways: by
purchasing superior companies that are less vulnerable to market declines, and
by purchasing these superior companies inexpensively. As of April 30, 1995,
87.0% of the Fund's portfolio was invested in common stocks and securities
convertible into common stocks and 13.0% in cash and cash equivalents. During
the six months, the Fund's performance was driven primarily by its substantial
holdings of financial services companies, including EXEL Ltd., Federal Home Loan
Mortgage Corp. (Freddie Mac), Mellon Bank Corp. and American International
Group, Inc. As prices rose, we took profits in several of our financial service
holdings, reducing the Fund's investments in Countrywide Credit Industries,
Inc., General Reinsurance Corp., Morgan Stanley Group, Inc. and others. We also
reduced the Fund's positions in such stocks as Avon Products, Inc., Becton,
Dickinson & Co. and John Alden Financial Corp. and eliminated its investment in
Pall Corp. We increased the Fund's investments in several retailing companies,
including May Department Stores Co. and Mercantile Stores Co., Inc., and
established a new position in J.C. Penney Co. These high-quality retailing
companies earn attractive returns on investment, and we believe the stocks are
reasonably priced. The Fund added new positions, as well, in Shaw Industries,
Inc. and Temple-Inland, Inc.

PORTFOLIO HOLDINGS

Major industry positions as of April 30, 1995 were in the insurance,
miscellaneous financial services, retail and aerospace sectors. The Fund's five
largest equity holdings were:

EXEL Ltd.
Strongly capitalized specialty insurance company

May Department Stores Co.
Leading retailer

McDonnell Douglas Corp.
Largest manufacturer of military aircraft and an important competitor in
commercial aircraft

Intel Corp.
Major producer of computer chips

Federal Home Loan Mortgage Corp. (Freddie Mac)
The second largest insurer of home mortgages

3
<PAGE>
- --------------------------------------------------------------------------------
INVESTMENT REVIEW (CONTINUED)

OPPORTUNITY FUND

OBJECTIVE

SIX-MONTH REVIEW

The Opportunity Fund continued its excellent performance as one of the top-rated
funds in its industry category. The Fund's Class A shares delivered a total
return of 12.7% in the six months ended April 30, 1995, exceeding both the 5.3%
average return for the 156 asset allocation funds monitored by Morningstar, Inc.
and the 10.5% return of the S&P 500. The Fund has provided a compound annual
return of 16.2% since its inception in January 1989, exceeding the 13.7% annual
return of the S&P 500 for that period.

The Fund's performance in the six months was driven in large measure by its
significant holdings of financial services stocks, one of the market's strongest
sectors during the period. Investments in banking and miscellaneous financial
services stocks accounted for 26.4% of the Fund's net assets as of April 30,
1995. Also contributing to performance were McDonnell Douglas Corp., up more
than 30% in price during the six months, and Intel Corp., up more than 60%.

In managing the Fund, we take a long-term perspective. The Fund's philosophy is
based on the premise that common stocks provide the best returns over time, so
there is a bias in the Fund toward owning common stocks. The Fund also invests
in bonds and cash equivalents, which can be valuable tools for preserving
capital. At April 30, 1995, the Fund's asset mix was 84.1% common stocks, 0.9%
Treasury notes, and 15.0% cash and cash equivalents.

As with our other funds, in managing the Opportunity Fund we seek to buy
companies that generate high cash flow and use it to increase shareholder value
- -- and we want to buy these companies at reasonable prices. During the six
months, the Fund established new positions in the common stocks of Champion
International Corp., Northrop Grumman Corp., Promus Companies, Inc. and Reebok
International Ltd. and increased its holdings of such stocks as Citicorp, EXEL
Ltd., Intel Corp. and Mattel, Inc. The Fund eliminated its positions in Hasbro,
Inc., Lehman Brothers Holdings, Inc., Monsanto Co., Morgan Stanley Group, Inc.
and U.S. Bancorp and reduced its investment in Warner-Lambert Co.

PORTFOLIO HOLDINGS

Major industry positions as of April 30, 1995 were in the banking, miscellaneous
financial services, aerospace and electronics sectors. The Fund's five largest
equity holdings were:

McDonnell Douglas Corp.
Largest manufacturer of military aircraft and an important competitor in
commercial aircraft

Citcorp
Leading banking and financial services company

Intel Corp.
Major producer of computer chips

Mellon Bank Corp.
Major money center bank

Federal Home Loan Mortgage Corp. (Freddie Mac)
The second largest insurer of home mortgages

4
<PAGE>
- --------------------------------------------------------------------------------

SMALL CAPITALIZATION FUND

OBJECTIVE

Seeks capital appreciation by investing in a diversified portfolio of
undervalued stocks, primarily of companies with market capitalizations under $1
billion.

SIX-MONTH REVIEW

During the six months ended April 30, 1995, small capitalization stocks lagged
the performance of large capitalization issues. The total return of the Russell
2000 Index, a widely followed benchmark which includes many small cap issues,
was 5.4%, about half the total return of the S&P 500. The Fund's Class A shares
had a total return of 1.7%, compared with an average return of 5.6% for the 280
small company funds in the Morningstar universe.

There were two main reasons for the Fund's underperformance. First, the Fund was
significantly underweighted in the technology, financial services and health
care sectors, which delivered some of the highest returns in the small cap
market. Second, several individual holdings dragged down the Fund's performance.
These included John Alden Financial Corp., Fingerhut Cos., Inc. and Sithe
Energies, Inc. We remain optimistic about our ability to improve performance and
generate favorable returns for shareholders.

Since its inception in January 1989, the Fund has delivered a compound annual
return of 11.9%, compared with an 11.8% annual return for the Russell 2000
during the same period. The small cap market has traditionally provided high
investment returns over time, subject to short-term volatility. Our strategy is
to capture the market's dynamic returns and control risk by investing in
established smaller companies with sound financial positions and strong market
shares.

We continue our active, in-depth research programs to identify quality smaller
companies that are underpriced in the market. At April 30, 1995, 78.3% of the
Fund's portfolio was invested in common stocks, 1.1% in convertible securities,
0.4% in corporate notes and bonds, and 20.2% in cash and cash equivalents. The
Fund's portfolio contains an eclectic group of securities selected to meet our
value criteria. During the six months, we added new positions in or increased
existing holdings of stocks such as Arrow Electronics, Inc., Crane Co., D.R.
Horton, Inc., Katz Media Group, Inc., Marshall Industries and Sybron
International Corp. We reduced our holdings of B.E. Aerospace, Inc., Brookstone,
Inc. and Dionex Corp. and eliminated our investments in National Data Corp. and
Stratus Computer, Inc., among others.

5
<PAGE>
- --------------------------------------------------------------------------------
INVESTMENT REVIEW (CONTINUED)

SMALL CAPITALIZATION FUND (CONT'D)

PORTFOLIO HOLDINGS

Major industry positions as of April 30, 1995 were in the real estate,
electronics, oil and gas, and machinery and engineering sectors. The Fund's five
largest equity holdings were:

Crane Co.
Manufacturer and/or distributor of numerous products, including aerospace
systems and building products

Marshall Industries
Distributor of electronic components

True North Communications
Well-known advertising agency; formerly called Foote, Cone & Belding
Communications, Inc.

Sybron International Corp.
Manufacturer of laboratory supplies and dental products

Security Capital Industrial Trust, Inc.
Real estate investment trust

GROWTH AND INCOME FUND

OBJECTIVE

Seeks total return by investing in a combination of attractively valued quality
stocks and fixed income securities.

SIX-MONTH REVIEW

The Fund's Class A shares provided a total return of 9.1% in the six months
ended April 30, 1995, exceeding the 7.8% average return of the 403 funds in the
Morningstar growth and income category. Income dividends paid by the Fund during
the six months totaled $.1824 per Class A share.

The Growth and Income Fund is designed for investors who want to participate in
the equity market for total return with above-average income. In managing the
Fund, we seek to maintain a diversified portfolio that balances the need for
protection of principal with the pursuit of long-term capital appreciation and
income. The portfolio is structured around three broad segments: common stocks,
which provide growth potential and some income; higher-yielding bonds, which
generate relatively more income but are also selected for their potential for
capital appreciation; and fixed income securities which are convertible into
common stocks. By participating in these three segments, we can usually select
common stocks based almost exclusively on their prospects for total return while
still delivering a high level of income.

6
<PAGE>
- --------------------------------------------------------------------------------

The Fund performed well in the six months despite a conservative investment
posture in a rising market. As of April 30, 1995, 53.7% of the Fund's portfolio
was invested in common stocks, 9.9% in securities convertible into common
stocks, 8.6% in notes and bonds, and 27.8% in cash and cash equivalents. Because
of its relatively high cash holdings, the Fund is currently generating more
income than normal. The Fund's income level is likely to decline when cash is
reinvested in the stock market.

Portfolio activity during the six months was dominated by sales of common
stocks, as we raised cash to protect principal. We eliminated our investments in
American Express Co., Avon Products, Inc., Equitable Cos., Lehman Brothers
Holdings, Inc., May Department Stores Co., PepsiCo, Inc., Philip Morris
Companies, Inc., TIG Holdings, Inc., UNUM Corp. and Wells Fargo & Co. On the
purchase side, we added new positions in stocks such as AFLAC, Inc., Boeing Co.,
First Interstate Bancorp, Premark International, Inc., Shaw Industries, Inc. and
Temple-Inland, Inc. Existing positions in the common stocks of Canadian Pacific
Ltd., Citicorp and Sprint Corp. were increased, as was our investment in Gerrity
Oil & Gas Corp. convertible preferred stock.

PORTFOLIO HOLDINGS

Major industry positions as of April 30, 1995 were in the miscellaneous
financial services, oil and gas, telecommunications and aerospace sectors. The
Fund's five largest equity holdings were:

Gerrity Oil & Gas Corp. convertible preferred
U.S. oil and gas exploration and production company

Freeport McMoRan Copper & Gold (Class A)
Major copper and gold producer from a mine in Irian Jaya in the South Pacific

Sprint Corp.
Leading long-distance telephone company

Temple-Inland, Inc.
Manufacturer of paperboard and other forest products

McDonnell Douglas Corp.
Largest manufacturer of military aircraft and an important competitor in
commercial aviation

U.S. GOVERNMENT INCOME FUND

OBJECTIVE

Seeks to provide shareholders with a high level of current income together with
protection of capital; invests in debt obligations issued or guaranteed by the
U.S. Government, its agencies or intermediaries and in related futures, options
and repurchase agreements.

7
<PAGE>
- --------------------------------------------------------------------------------
INVESTMENT REVIEW (CONTINUED)

U.S. GOVERNMENT INCOME FUND (CONT'D)

SIX-MONTH REVIEW

The Fund paid total income dividends of $.322 per Class A share in the six
months ended April 30, 1995, up from $.284 in the first six months of the prior
fiscal year. For the six months ended April 30, 1995, the Class A shares
produced a total return of 5.5%. This performance compares with an average total
return of 5.4% for the 352 funds in the Morningstar general government bond fund
category and a total return of 7.5% for the Lehman Brothers Intermediate
Government Bond Index. Since its inception in May 1988, the Fund has provided a
compound annual return of 7.6%.

As of April 30, 1995, the Fund's assets were allocated 34.7% to Treasuries,
48.2% to mortgage-backed government agency securities and 17.3% to net cash and
short-term securities. Call options were written on 0.2% of the Fund's assets.
Although the Fund writes call options, it does not own any of the complex
derivatives that have caused problems for many other bond funds during the past
year.

Because of the Fund's intermediate-term nature, it did not participate fully
during the past six months in the rally of long-term bonds, the market's
strongest sector. To improve performance while maintaining an average maturity
of five years, we adopted a "barbell" strategy: we invested a portion of assets
in short-term securities and a portion in long-term issues. Toward the end of
the six months, we moved back into intermediates.

Going forward, we intend to manage the Fund's portfolio more actively, becoming
more strategic in capturing what the market offers at any given time. Given the
increased volatility of fixed income markets generally, we will be more
opportunistic in seeking to capture the benefits of this volatility without
compromising our dedication to a relatively stable NAV and protection of
principal.

INVESTMENT QUALITY INCOME FUND

OBJECTIVE

Seeks to provide as high a level of current income as possible, consistent with
conservation of principal; invests primarily in fixed income obligations, with
at least 80% of its holdings, at time of their purchase, being rated A or better
and none being below investment grade.

SIX-MONTH REVIEW

The Investment Quality Income Fund enjoyed a strong performance in the six
months ended April 30, 1995. Its Class A shares produced a total return of 9.3%,
exceeding both the 5.0% average return for the 183 funds in the Morningstar
high-quality corporate bond category and the 8.4% return of the Lehman Brothers
Corporate Bond Index.

8
<PAGE>
- --------------------------------------------------------------------------------

The Fund paid income dividends of $.362 per Class A share during the six months,
up from $.332 in the first six months of the prior fiscal year. On an annualized
basis, the monthly distribution yield on the net asset value (NAV) of the Class
A shares was 6.95% at April 30, 1995.

Since its inception in December 1990, the Fund has produced a compound annual
total return of 8.2%. The Fund provides a convenient means to invest in a
diversified portfolio of quality, longer term fixed income securities of
corporate America. The average maturity of the portfolio was 24.3 years as of
April 30, 1995.

Included in the portfolio are the securities of such companies as Boeing Co.,
New York Telephone Company and Occidental Petroleum Corp. In addition, about
one-fifth of the portfolio is invested in dollar-denominated bonds of foreign
issuers, primarily Canadian, which provide attractive yields and favorable
relative value.

9
<PAGE>
APRIL 30, 1995

- --------------------------------------------------------------------------------
SCHEDULES OF INVESTMENTS (UNAUDITED)

QUEST FOR VALUE FUND, INC.
<TABLE>
<CAPTION>
- ------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
- ------------------------------------------------------
SHORT-TERM CORPORATE NOTES -- 12.9%
<S> <C> <C>
AUTOMOTIVE -- 0.7%
Ford Motor Credit Co.
$ 1,300,000 5.98%, 5/01/95 $ 1,300,000
578,000 5.98%, 5/15/95 576,656
------------
1,876,656
------------
BANKING -- 4.6%
13,000,000 Norwest Financial, Inc.
5.94%, 5/30/95 12,937,795
------------
COMPUTERS -- 0.5%
IBM Credit Corp.
800,000 5.95%, 5/30/95 796,165
700,000 5.99%, 5/08/95 699,185
------------
1,495,350
------------
INSURANCE -- 2.1%
6,000,000 Prudential Funding Corp.
5.98%, 5/08/95 5,993,023
------------
MACHINERY & ENGINEERING -- 1.3%
3,800,000 Deere (John) Capital Corp.
5.94%, 5/30/95 3,781,817
------------
MISCELLANEOUS FINANCIAL SERVICES -- 2.9%
4,800,000 Commercial Credit Co. (A)
5.85%, 5/09/95 4,794,447
Household Finance Corp.
487,000 5.97%, 5/15/95 485,869
3,000,000 5.97%, 5/22/95 2,989,553
------------
8,269,869
------------
OIL/GAS -- 0.8%
2,100,000 Chevron Oil Finance Co.
5.97%, 5/01/95 2,100,000
------------
Total Short-Term Corporate Notes
(cost -- $36,454,510) $ 36,454,510
------------
</TABLE>

<TABLE>
<CAPTION>
- ------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
- ------------------------------------------------------
<S> <C> <C>
CONVERTIBLE CORPORATE BONDS -- 0.8%
REAL ESTATE
$ 2,314,448 Security Capital Realty, Inc. (B)
12.00%, 6/30/14
(cost -- $2,181,786) $ 2,314,448
------------
<CAPTION>
- ------------------------------------------------------
SHARES VALUE
- ------------------------------------------------------
<S> <C> <C>
COMMON STOCKS -- 86.2%
AEROSPACE -- 8.7%
215,000 AlliedSignal, Inc. $ 8,519,375
177,000 McDonnell Douglas Corp. 10,974,000
90,000 Sundstrand Corp. 4,995,000
------------
24,488,375
------------
APPAREL -- 2.3%
372,600 Warnaco Group, Inc. (Class A)* 6,380,775
------------
BANKING -- 2.7%
196,215 Mellon Bank Corp. 7,701,439
------------
CHEMICALS -- 3.3%
81,000 Hercules, Inc. 4,039,875
64,000 Monsanto Co. 5,328,000
------------
9,367,875
------------
CONGLOMERATES -- 1.8%
90,200 General Electric Co. 5,051,200
------------
CONTAINERS -- 1.4%
90,700 Temple-Inland, Inc. 3,990,800
------------
COSMETICS/TOILETRIES -- 1.5%
67,800 Avon Products, Inc. 4,288,350
------------
DRUGS & MEDICAL PRODUCTS -- 4.6%
163,000 Becton, Dickinson & Co. 9,087,250
48,000 Warner-Lambert Co. 3,828,000
------------
12,915,250
------------
ELECTRONICS -- 6.4%
177,000 Arrow Electronics, Inc.* 8,230,500
97,000 Intel Corp. 9,930,375
------------
18,160,875
------------
HOUSEHOLD PRODUCTS -- 0.9%
52,100 Premark International, Inc. 2,513,825
------------
</TABLE>

* Non-income producing security.

10
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- ------------------------------------------------------
SHARES VALUE
- ------------------------------------------------------
INSURANCE -- 16.9%
<S> <C> <C>
66,000 American International Group,
Inc. $ 7,045,500
434,200 EXEL Ltd. 19,756,100
30,000 General Reinsurance Corp. 3,821,250
212,000 Progressive Corp., Ohio 8,003,000
101,000 Transamerica Corp. 5,719,125
76,000 UNUM Corp. 3,258,500
------------
47,603,475
------------
MACHINERY & ENGINEERING -- 1.4%
160,000 Case Corp. 4,060,000
------------
METALS/MINING -- 2.5%
8,518 Freeport McMoRan, Copper &
Gold (Class A) 177,813
398,000 Freeport McMoRan, Inc. 7,014,750
------------
7,192,563
------------
MISCELLANEOUS FINANCIAL SERVICES -- 11.4%
200,000 American Express Co. 6,950,000
110,000 Citicorp 5,101,250
270,000 Countrywide Credit Industries,
Inc. 4,961,250
152,000 Federal Home Loan Mortgage
Corp. 9,918,000
50,200 John Alden Financial Corp. 909,875
60,000 Morgan Stanley Group, Inc. 4,170,000
------------
32,010,375
------------
REAL ESTATE -- 1.0%
3,050 Security Capital Realty, Inc.
(B) 2,689,844
------------
RETAIL -- 10.5%
210,000 J.C. Penney Co. 9,187,500
348,000 May Department Stores Co. 12,615,000
175,000 Mercantile Stores Co., Inc. 7,743,750
------------
29,546,250
------------
TELECOMMUNICATIONS -- 1.7%
344 Bell Atlantic Corp. 18,877
145,200 Sprint Corp. 4,791,600
------------
4,810,477
------------
TEXTILES -- 1.4%
300,000 Shaw Industries, Inc. $ 3,937,500
------------
TOBACCO/BEVERAGES/FOOD PRODUCTS -- 3.2%
116,000 Dole Food Co. 3,465,500
200,000 Sara Lee Corp. 5,575,000
------------
9,040,500
</TABLE>

<TABLE>
<CAPTION>
- ------------------------------------------------------
SHARES VALUE
- ------------------------------------------------------
<S> <C>
TOYS/GAMES/HOBBY -- 2.6%
232,000 Hasbro, Inc. 7,366,000
------------
Total Common Stocks
(cost -- $193,143,927) $243,115,748
------------
</TABLE>

<TABLE>
<S> <C> <C>
Total Investments
(cost -- $231,780,223) 99.9 % $ 281,884,706

Other Assets in Excess of
Other Liabilities 0.1 116,210
--------- -------------
TOTAL NET ASSETS 100.0 % $ 282,000,916
--------- -------------
--------- -------------

OPPORTUNITY FUND
- ------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
- ------------------------------------------------------
U.S. GOVERNMENT AGENCY -- 1.1%
$ 4,020,000 Federal Home Loan Bank
5.93%, 5/01/95
(cost -- $4,020,000) $ 4,020,000
------------
SHORT-TERM CORPORATE NOTES -- 13.8%
AUTOMOTIVE -- 0.4%
$ 1,260,000 Ford Motor Credit Co.
5.96%, 5/01/95 $ 1,260,000
------------
BANKING -- 1.1%
Norwest Financial, Inc.
3,630,000 5.96%, 5/22/95 3,617,380
362,000 5.98%, 5/01/95 362,000
------------
3,979,380
------------
</TABLE>

* Non-income producing security.

(A) Security is segregated as collateral for pending purchase of Security
Capital Realty, Inc.

(B) Restricted Securities (the Fund will not bear any costs, including those
involved in registration under the Securities Act of 1933, in connection
with the disposition of these securities):

<TABLE>
<CAPTION>
DATE OF VALUATION AS OF
DESCRIPTION ACQUISITION PAR AMOUNT SHARES UNIT COST APRIL 30, 1995

- ---------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Security Capital
Realty, Inc.
12.00%, 6/30/14 9/15/94 $2,314,448 -- $ 94 $100
Security Capital
Realty, Inc.
Common Stock 9/15/94 -- 3,050 926 882
</TABLE>

11
<PAGE>
APRIL 30, 1995

- --------------------------------------------------------------------------------
SCHEDULES OF INVESTMENTS (UNAUDITED) (CONTINUED)

OPPORTUNITY FUND (CONT'D)
<TABLE>
<CAPTION>
- ------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
- ------------------------------------------------------
<S> <C>
COMPUTERS -- 0.1%
$ 445,000 IBM Credit Corp.
5.99%, 5/08/95 $ 444,482
------------
INSURANCE -- 2.3%
Prudential Funding Corp.
970,000 5.97%, 5/01/95 970,000
7,027,000 5.98%, 5/08/95 7,018,829
------------
7,988,829
------------
MACHINERY & ENGINEERING -- 0.4%
1,465,000 Deere (John) Capital Corp.
5.92%, 5/22/95 1,459,941
------------
MISCELLANEOUS FINANCIAL SERVICES -- 8.4%
4,140,000 Beneficial Corp.
5.95%, 5/08/95 4,135,211
13,690,000 Commercial Credit Co.
5.95%, 5/08/95 13,674,161
11,915,000 Household Finance Corp.
5.97%, 5/15/95 11,887,337
------------
29,696,709
------------
OIL/GAS -- 1.1%
990,000 Chevron Oil Finance Co.
5.97%, 5/01/95 990,000
2,960,000 Texaco, Inc.
5.96%, 5/22/95 2,949,709
------------
3,939,709
------------
Total Short-Term Corporate Notes
(cost -- $48,769,050) $ 48,769,050
------------
U.S. TREASURY NOTES -- 0.9%
$ 1,000,000 7.50%, 11/15/01 $ 1,027,810
1,000,000 7.50%, 5/15/02 1,030,160
550,000 7.875%, 4/15/98 566,588
550,000 7.875%, 8/15/01 575,867
------------
Total U.S. Treasury Notes
(cost -- $3,146,446) $ 3,200,425
------------
</TABLE>

<TABLE>
<CAPTION>
- ------------------------------------------------------
SHARES VALUE
- ------------------------------------------------------
<S> <C>
COMMON STOCKS -- 84.1%
AEROSPACE -- 9.6%
400,000 McDonnell Douglas Corp. $ 24,800,000
120,000 Northrop Grumman Corp. 5,955,000
60,000 Sundstrand Corp. 3,330,000
------------
34,085,000
</TABLE>

<TABLE>
<CAPTION>
- ------------------------------------------------------
SHARES VALUE
- ------------------------------------------------------
<S> <C>
BANKING -- 16.0%
500,000 Citicorp $ 23,187,500
34,000 First Empire State Corp. 5,457,000
420,000 Mellon Bank Corp. 16,485,000
70,000 Wells Fargo & Co. 11,611,250
------------
56,740,750
------------
CASINOS/GAMING -- 1.1%
100,000 Promus Companies, Inc.* 3,850,000
------------
CHEMICALS -- 3.2%
225,000 Hercules, Inc. 11,221,875
------------
CONSUMER PRODUCTS -- 2.6%
300,000 Reebok International Ltd. 9,375,000
------------
COSMETICS/TOILETRIES -- 1.1%
60,000 Avon Products, Inc. 3,795,000
------------
DRUGS & MEDICAL PRODUCTS -- 3.3%
105,000 Becton, Dickinson & Co. 5,853,750
75,000 Warner-Lambert Co. 5,981,250
------------
11,835,000
------------
ELECTRONICS -- 8.6%
190,000 Intel Corp. 19,451,250
50,000 Raychem Corp. 1,781,250
445,000 Unitrode Corp.* 9,233,750
------------
30,466,250
------------
HEALTHCARE SERVICES -- 1.8%
435,000 National Health Laboratories,
Inc.* 6,525,000
------------
INSURANCE -- 5.9%
300,000 EXEL Ltd. 13,650,000
60,000 Transamerica Corp. 3,397,500
90,000 Travelers, Inc. 3,723,750
------------
20,771,250
------------
METALS/MINING -- 2.2%
200,000 Freeport McMoRan, Copper &
Gold (Class A) 4,175,000
202,500 Freeport McMoRan, Inc. 3,569,062
------------
7,744,062
------------
MISCELLANEOUS FINANCIAL SERVICES -- 10.4%
230,000 American Express Co. 7,992,500
480,000 Countrywide Credit Industries,
Inc. 8,820,000
230,000 Federal Home Loan Mortgage
Corp. 15,007,500
55,000 Federal National Mortgage
Assoc. 4,853,750
------------
36,673,750
------------
* Non-income producing security.
</TABLE>

12
<PAGE>
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
- ------------------------------------------------------
SHARES VALUE
- ------------------------------------------------------
OIL/GAS -- 6.0%
<S> <C>
80,000 Mapco, Inc. $ 4,550,000
240,000 Tenneco, Inc. 11,010,000
149,300 Triton Energy Corp.* 5,748,050
------------
21,308,050
------------
PAPER PRODUCTS -- 4.9%
330,000 Champion International Corp. 14,520,000
30,000 Scott Paper Co. 2,673,750
------------
17,193,750
------------
TELECOMMUNICATIONS -- 2.1%
220,000 Sprint Corp. 7,260,000
------------
TEXTILES -- 2.5%
161,500 Collins & Aikman Corp.* 1,211,250
600,000 Shaw Industries, Inc. 7,875,000
------------
9,086,250
------------
TOYS/GAMES/HOBBY -- 2.3%
350,000 Mattel, Inc. 8,312,500
------------
OTHER -- 0.5%
50,000 Alliant Techsystems, Inc.* 1,843,750
------------
Total Common Stocks
(cost -- $250,665,773) $298,087,237
------------
</TABLE>

<TABLE>
<S> <C> <C>
Total Investments
(cost -- $306,601,269) 99.9 % $354,076,712
Other Assets in Excess of
Other Liabilities 0.1 248,508
-------- ------------
TOTAL NET ASSETS 100.0 % $354,325,220
-------- ------------
-------- ------------
</TABLE>

SMALL CAPITALIZATION FUND
<TABLE>
<CAPTION>
- ------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
- ------------------------------------------------------
<S> <C>
SHORT-TERM CORPORATE NOTES -- 18.1%
AUTOMOTIVE -- 0.2%
$ 325,000 Ford Motor Credit Co.
5.96%, 5/01/95 $ 325,000
------------
BANKING -- 1.7%
Norwest Financial, Inc.
1,120,000 5.94%, 5/30/95 1,114,641
1,296,000 5.96%, 5/22/95 1,291,494
------------
2,406,135
</TABLE>

<TABLE> ------------
<CAPTION>
- ------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
- ------------------------------------------------------
<S> <C>
COMPUTERS -- 1.2%
IBM Credit Corp.
$ 1,123,000 5.93%, 5/22/95 $ 1,119,115
550,000 5.95%, 5/30/95 547,364
------------
1,666,479
------------
CONGLOMERATES -- 1.6%
2,335,000 General Electric Capital Corp.
5.96%, 5/22/95 2,326,882
------------
INSURANCE -- 3.6%
Prudential Funding Corp.
400,000 5.93%, 5/30/95 398,089
4,852,000 5.98%, 5/08/95 4,846,358
------------
5,244,447
------------
MACHINERY & ENGINEERING -- 4.8%
6,910,000 Deere (John) Capital Corp.
5.94%, 5/30/95 6,876,936
------------
MISCELLANEOUS FINANCIAL SERVICES -- 3.6%
Beneficial Corp.
386,000 5.95%, 5/08/95 385,554
1,373,000 5.95%, 5/15/95 1,369,823
Commercial Credit Co.
475,000 5.95%, 5/08/95 474,451
1,500,000 5.97%, 5/22/95 1,494,776
1,432,000 Household Finance Corp.
5.97%, 5/15/95 1,428,675
------------
5,153,279
------------
OIL/GAS -- 1.4%
Chevron Oil Finance Co.
875,000 5.94%, 5/30/95 870,813
1,190,000 6.00%, 5/08/95 1,188,612
------------
2,059,425
------------
Total Short-Term Corporate Notes
(cost -- $26,058,583) $ 26,058,583
------------
CORPORATE NOTES & BONDS -- 0.4%
AUTOMOTIVE -- 0.0%
$ 62,950 Collins Industries, Inc.
8.75%, 1/11/00 $ 55,363
------------
OIL/GAS -- 0.4%
500,000 Global Marine, Inc.
12.75%, 12/15/99 546,875
------------
Total Corporate Notes & Bonds
(cost -- $587,196) $ 602,238
------------

* Non-income producing security.
</TABLE>

13
<PAGE>
APRIL 30, 1995

- --------------------------------------------------------------------------------
SCHEDULES OF INVESTMENTS (UNAUDITED) (CONTINUED)

SMALL CAPITALIZATION FUND (CONT'D)

<TABLE>
<CAPTION>
- ------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
- ------------------------------------------------------
CONVERTIBLE CORPORATE BONDS -- 1.0%
<S> <C> <C>
REAL ESTATE
$ 1,385,009 Security Capital Realty, Inc.
(A)
12.00%, 6/30/14
(cost -- $1,306,709) $ 1,385,009
------------
</TABLE>
<TABLE>
<CAPTION>
- ------------------------------------------------------
SHARES VALUE
- ------------------------------------------------------
<S> <C> <C>
CONVERTIBLE PREFERRED STOCKS -- 0.1%
RETAIL
36,000 Family Bargain Corp.
$0.95 Conv. Pfd.
(cost -- $360,000) $ 207,000
------------
COMMON STOCKS -- 78.3%
ADVERTISING -- 5.4%
57,600 Katz Media Group, Inc. $ 928,800
39,000 Omnicom Group, Inc. 2,169,375
246,200 True North Communications 4,677,800
------------
7,775,975
------------
AEROSPACE -- 0.6%
130,000 BE Aerospace, Inc.* 926,250
------------
APPAREL -- 1.5%
128,000 Warnaco Group, Inc. (Class A)* 2,192,000
------------
AUTOMOTIVE -- 1.1%
126,000 Collins Industries, Inc.* 267,750
65,100 Masland Corp. 895,125
70,000 Sudbury, Inc.* 476,875
------------
1,639,750
------------
BUILDING & CONSTRUCTION -- 4.3%
145,000 CRSS, Inc. 1,377,500
132,600 D.R. Horton, Inc. 1,292,850
5,500 Insituform Technologies (Class
A)* 70,812
165,000 Martin Marietta Materials,
Inc. 3,423,750
------------
6,164,912
------------
CHEMICALS -- 2.3%
141,400 OM Group, Inc. 3,375,925
------------
COMPUTER SERVICES -- 2.8%
147,700 BancTec, Inc.* 2,510,900
89,000 Exabyte Corp.* 1,123,625
34,600 Globalink, Inc.* 406,550
------------
4,041,075
</TABLE>

<TABLE> ------------
<CAPTION>
- ------------------------------------------------------
SHARES VALUE
- ------------------------------------------------------
<S> <C> <C>
DRUGS & MEDICAL PRODUCTS -- 3.3%
125,900 Sybron International Corp.* $ 4,674,038
------------
ELECTRONICS -- 6.5%
37,000 Arrow Electronics, Inc.* 1,720,500
37,000 Dionex Corp.* 1,535,500
195,500 Marshall Industries* 5,400,687
35,000 Unitrode Corp.* 726,250
------------
9,382,937
------------
HEALTHCARE SERVICES -- 1.3%
14,000 Community Health Systems,
Inc.* 486,500
54,000 Spacelabs Medical, Inc. 1,323,000
------------
1,809,500
------------
INSURANCE -- 2.1%
55,300 Capsure Holdings Corp. 725,813
23,400 E.W. Blanch Holdings, Inc. 438,750
112,500 Guaranty National Corp. 1,856,250
------------
3,020,813
------------
JEWELRY -- 1.6%
170,000 North American Watch Corp. 2,337,500
------------
LEASING -- 1.3%
121,700 Interpool, Inc.* 1,795,075
------------
MACHINERY & ENGINEERING -- 5.1%
12,700 Baldwin Technologies Co. 74,612
97,100 BWIP Holdings, Inc. (Class A) 1,711,387
160,000 Crane Co. 5,560,000
------------
7,345,999
------------
MANUFACTURING -- 1.4%
50,000 Giddings & Lewis, Inc. 906,250
55,000 Harmon Industries, Inc. 783,750
131,300 Interlake Corp.* 377,488
------------
2,067,488
------------
METALS/MINING -- 0.5%
70,000 Olympic Steel, Inc.* 682,500
------------
MISCELLANEOUS FINANCIAL SERVICES -- 4.2%
150,000 AmeriCredit Corp.* 1,350,000
49,700 John Alden Financial Corp. 900,813
200,000 SafeCard Services, Inc. 3,500,000
24,300 Union Corp.* 337,163
------------
6,087,976
------------

* Non-income producing security.
</TABLE>
14
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- ------------------------------------------------------
SHARES VALUE
- ------------------------------------------------------
<S> <C> <C>
OIL/GAS -- 7.5%
136,800 Aquila Gas Pipeline Corp. $ 1,162,800
300,155 Global Natural Resources,
Inc.* 2,964,031
125,000 Nahama & Weagant Energy Co.* 1,250
137,500 Noble Drilling Corp.* 910,937
165,000 Petroleum Heat & Power, Inc.
(Class A) 1,196,250
74,400 St. Mary Land & Exploration
Co. 948,600
116,200 Tesoro Petroleum Corp. 1,147,475
65,000 Triton Energy Corp.* 2,502,500
------------
10,833,843
------------
PAPER PRODUCTS -- 0.9%
61,500 CSS Industries, Inc.* 1,030,125
40,000 Repap Enterprises, Inc. 281,250
------------
1,311,375
------------
PRINTING/PUBLISHING -- 3.4%
72,000 CCH, Inc. (Class B) 1,161,000
119,100 Nu-Kote Holdings, Inc. (Class
A)* 3,275,250
12,250 Pulitzer Publishing Co. 494,594
------------
4,930,844
------------
REAL ESTATE -- 8.7%
151,800 Cousins Properties, Inc. 2,542,650
44,000 Post Properties, Inc. 1,303,500
231,600 Security Capital Industrial
Trust, Inc. 3,618,750
199,363 Security Capital Pacific Trust 3,488,853
1,800 Security Capital Realty, Inc.
(A) 1,587,600
------------
12,541,353
------------
RETAIL -- 4.0%
18,000 Blair Corp. 623,250
64,700 Brookstone, Inc.* 331,587
304,700 Cash America International,
Inc. 2,323,337
173,700 Fingerhut Companies, Inc. 2,019,262
52,500 Freds, Inc. 511,875
------------
5,809,311
------------
</TABLE>

<TABLE>
<CAPTION>
- ------------------------------------------------------
SHARES VALUE
- ------------------------------------------------------
<S> <C> <C>
SECURITY/INVESTIGATION SERVICES -- 0.3%
202,910 Automated Security Holdings
PLC ADS $ 380,456
------------
TEXTILES -- 4.0%
89,000 Collins & Aikman Corp.* 667,500
15,700 Culp, Inc. 153,075
40,000 Dyersburg Corp. 215,000
42,700 Fab Industries, Inc. 1,286,338
244,900 Mohawk Industries, Inc.* 3,367,375
------------
5,689,288
------------
TOBACCO/BEVERAGES/FOOD PRODUCTS -- 1.0%
55,900 Morningstar Group, Inc. 447,200
89,700 Sylvan Food Holdings, Inc.* 1,031,550
------------
1,478,750
------------
UTILITIES -- 2.0%
221,200 Sithe Energies, Inc.* 1,935,500
46,000 UGI Corp. 891,250
------------
2,826,750
------------
OTHER -- 1.2%
107,500 McGrath RentCorp. 1,679,688
------------
Total Common Stocks
(cost -- $110,337,018) $112,801,371
------------
</TABLE>

<TABLE>
<S> <C> <C>
Total Investments
(cost --
$138,649,506) 97.9 % $141,054,201
Other Assets in
Excess of
Other Liabilities 2.1 3,089,011
--------- -----------
TOTAL NET ASSETS 100.0 % $144,143,212
--------- -----------
--------- -----------

* Non-income producing security.
</TABLE>

(A) Restricted Securities (the Fund will not bear any costs, including those
involved in registration under the Securities Act of 1933, in connection
with the disposition of these securities):

<TABLE>
<CAPTION>
DATE OF VALUATION AS OF
DESCRIPTION ACQUISITION PAR AMOUNT SHARES UNIT COST APRIL 30, 1995
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Security Capital Realty, Inc.
12.00%, 6/30/14 6/16/94 $1,385,009 -- $ 94 $ 100
Security Capital Realty, Inc.
Common Stock 8/02/93 -- 1,800 684 882
</TABLE>

15
<PAGE>
APRIL 30, 1995

- --------------------------------------------------------------------------------
SCHEDULES OF INVESTMENTS (UNAUDITED) (CONTINUED)

GROWTH AND INCOME FUND
<TABLE>
<CAPTION>
- ------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
- ------------------------------------------------------
<S> <C> <C>
U.S. GOVERNMENT AGENCY -- 2.0%
$ 755,000 Federal Home Loan Bank
5.93%, 5/01/95
(cost -- $755,000) $ 755,000
------------
SHORT-TERM CORPORATE NOTES -- 27.2%
AUTOMOTIVE -- 3.4%
$ 1,295,000 Ford Motor Credit Co.
5.94%, 5/12/95 $ 1,292,650
------------
COMPUTERS -- 2.6%
1,000,000 IBM Credit Corp.
5.93%, 5/15/95 997,694
------------
CONGLOMERATES -- 4.7%
General Electric Capital Corp.
860,000 5.93%, 5/05/95 859,433
929,000 5.96%, 5/08/95 927,923
------------
1,787,356
------------
MACHINERY/ENGINEERING -- 3.0%
1,133,000 Deere (John) Capital Corp.
5.90%, 5/03/95 1,132,629
------------
MISCELLANEOUS FINANCIAL SERVICES -- 11.6%
1,729,000 American Express Credit Corp.
5.95%, 5/02/95 1,728,714
CIT Group Holdings, Inc.
715,000 5.89%, 5/08/95 714,181
1,134,000 5.92%, 5/03/95 1,133,627
860,000 Household Finance Corp.
5.94%, 5/05/95 859,432
------------
4,435,954
------------
OIL/GAS -- 1.9%
716,000 Chevron Oil Finance Co.
5.90%, 5/08/95 715,179
------------
Total Short-Term Corporate Notes
(cost -- $10,361,462) $ 10,361,462
------------
CORPORATE NOTES & BONDS -- 8.6%
ENTERTAINMENT -- 4.2%
$ 5,000,000 Time Warner, Inc.
Zero Coupon, 12/17/12 $ 1,618,750
------------
TELECOMMUNICATIONS -- 4.4%
3,000,000 Nextel Communications, Inc.
0.00/11.50%, 9/01/03 ** 1,657,500
------------
Total Corporate Notes & Bonds
(cost -- $3,655,626) $ 3,276,250
------------
</TABLE>

<TABLE>
<CAPTION>
- -----------------------------------------------------
SHARES VALUE
- ------------------------------------------------------
<S> <C> <C>
CONVERTIBLE PREFERRED STOCKS -- 9.9%
OIL/GAS -- 6.0%
180,000 Gerrity Oil & Gas Corp.
$1.50 Conv. Pfd. $ 2,295,000
------------
TOBACCO/BEVERAGES/FOOD PRODUCTS -- 3.9%
80,000 Flagstar Companies, Inc.
$2.25 Conv. Pfd. 1,500,000
------------
Total Convertible Preferred Stocks
(cost -- $4,504,546) $ 3,795,000
------------
COMMON STOCKS -- 53.7%
AEROSPACE -- 7.4%
20,000 Boeing Co. $ 1,100,000
28,000 McDonnell Douglas Corp. 1,736,000
------------
2,836,000
------------
AUTOMOTIVE -- 1.2%
10,000 General Motors Corp. 451,250
------------
BANKING -- 7.4%
35,000 Citicorp 1,623,125
5,000 First Interstate Bancorp 384,375
10,000 Mellon Bank Corp. 392,500
15,000 U.S. Bancorp 414,375
------------
2,814,375
------------
CONGLOMERATES -- 1.6%
40,000 Canadian Pacific Ltd. 610,000
------------
CONTAINERS -- 6.2%
30,000 Stone Container Corp.* 596,250
40,000 Temple-Inland, Inc. 1,760,000
------------
2,356,250
------------
ELECTRONICS -- 4.3%
16,000 Intel Corp. 1,638,000
------------
HEALTHCARE SERVICES -- 1.1%
10,000 Columbia/HCA Healthcare Corp. 420,000
------------
HOUSEHOLD PRODUCTS -- 4.4%
35,000 Premark International, Inc. 1,688,750
------------
</TABLE>

<TABLE>
<S> <C> <C>
INSURANCE -- 4.3%
10,000 AFLAC, Inc. 412,500
10,000 Progressive Corp., Ohio 377,500
20,000 Travelers, Inc. 827,500
------------
1,617,500
------------
METALS/MINING -- 5.1%
93,687 Freeport McMoRan, Copper &
Gold (Class A) 1,955,716
------------

* Non-income producing security.

** Represents a step-up floater which will receive 0.00% interest until 9/01/98,
then will "step-up" to 11.50% until maturity.
</TABLE>

16
<PAGE>
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
- ------------------------------------------------------
SHARES VALUE
- ------------------------------------------------------
METALS/MINING (CONT'D)
<S> <C> <C>
MISCELLANEOUS FINANCIAL SERVICES -- 2.0%
20,000 Countrywide Credit Industries,
Inc. $ 367,500
6,000 Federal Home Loan Mortgage
Corp. 391,500
------------
759,000
------------
OIL/GAS -- 1.9%
5,000 McMoRan Oil & Gas Corp. 13,750
10,000 Triton Energy Corp.* 385,000
15,000 Union Texas Petroleum
Holdings, Inc. 320,625
------------
719,375
------------
TELECOMMUNICATIONS -- 4.8%
55,000 Sprint Corp. 1,815,000
------------
</TABLE>

<TABLE>
<S> <C> <C> <C>
TEXTILES -- 2.0%
20,000 Shaw Industries, Inc. 262,500
20,000 Unifi, Inc. 502,500
-------------
765,000
-------------
Total Common Stocks
(cost -- $17,690,285) $ 20,446,216
-------------
Total Investments
(cost -- $36,966,919) 101.4% $ 38,633,928
Other Liabilities in Excess of
Other Assets (1.4) (536,829)
------- -------------
TOTAL NET ASSETS 100.0 % $ 38,097,099
------- -------------
------- -------------
</TABLE>

U.S. GOVERNMENT INCOME FUND
<TABLE>
<CAPTION>
- ------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
- ------------------------------------------------------
<S> <C> <C>
REPURCHASE AGREEMENT -- 24.1%
$30,850,000 Lehman Brothers, 5.90%,
5/02/95
(proceeds at maturity:
$30,855,056, collateralized
by $19,275,000 and
$10,940,000 par, $20,423,790
and $11,051,588 value, U.S.
Treasury Notes, 7.50%,
10/31/99 and 6.875%,
8/31/99, respectively.)
(cost -- $30,850,000) $ 30,850,000
------------
FEDERAL HOME LOAN MORTGAGE
CORPORATION -- 0.6%
$ 735,108 9.50%, 12/01/02 - 11/01/03
(cost -- $740,736) $ 763,593
------------

<CAPTION>
- ------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
- ------------------------------------------------------
<S> <C> <C>
GOVERNMENT NATIONAL MORTGAGE
ASSOCIATION I -- 47.6%
$20,299,186 7.00%, 10/15/22 - 11/15/23 (A) $ 19,214,398
16,436,078 7.50%, 2/15/22 - 2/15/24 16,030,271
13,594,094 8.00%, 4/15/02 - 2/15/23 (A) 13,617,665
11,189,477 8.50%, 6/15/01 - 9/15/24 (A) 11,412,022
566,178 10.50%, 1/15/98 - 12/15/00 596,961
------------
Total Government National Mortgage
Association I (cost -- $63,765,062) $ 60,871,317
------------
U.S. TREASURY BOND -- 7.8%
$10,000,000 7.50%, 11/15/16 (A)
(cost -- $9,314,127) $ 10,045,300
------------
U.S. TREASURY NOTES -- 26.9%
$20,000,000 6.625%, 3/31/97 (A) $ 20,012,400
14,000,000 7.75%, 11/30/99 14,468,160
------------
(cost -- $34,434,623) $ 34,480,560
------------
</TABLE>

<TABLE>
<S> <C> <C> <C>
Total Investments
(cost -- $139,104,548) 107.0% $137,010,770
----- ------------
- ------------------------------------------------------
PRINCIPAL
AMOUNT
SUBJECT
TO CALL VALUE
- ------------------------------------------------------
WRITTEN CALL OPTIONS OUTSTANDING -- (0.2%)
$10,000,000 Government National
Mortgage Association I,
7.00%, expiring May '95,
strike @ $94.22 $ (68,750)
10,000,000 Government National
Mortgage Association I,
8.00%, expiring May '95,
strike @ $100.06 (31,250)
10,000,000 Government National
Mortgage Association I,
8.50%, expiring May '95,
strike @ $101.56 (59,375)
10,000,000 U.S. Treasury Bonds,
7.50%, expiring May '95,
strike @ $100.67 (78,125)
20,000,000 U.S. Treasury Notes,
6.625%, expiring May '95,
strike @ $100.34 (12,500)
------------
Total Written Call Options
Outstanding (premiums
received: $301,562) $ (250,000)
------------
Other Liabilities in Excess of
Other Assets (6.8 ) (8,710,696)
----- ------------
TOTAL NET ASSETS 100.0 % $128,050,074
----- ------------
----- ------------
* Non-income producing security.

(A) Securities segregated (full or partial) as collateral for written call
options outstanding. The aggregate market value of such segregated
securities is $60,393,531.
</TABLE>

17
<PAGE>
APRIL 30, 1995

- --------------------------------------------------------------------------------
SCHEDULES OF INVESTMENTS (UNAUDITED) (CONTINUED)

INVESTMENT QUALITY INCOME FUND
<TABLE>
<CAPTION>
<S> <C> <C>
- ------------------------------------------------------

<CAPTION>
PRINCIPAL
AMOUNT VALUE
- ------------------------------------------------------
<S> <C> <C>
SHORT-TERM CORPORATE NOTES -- 5.8%
AUTOMOTIVE -- 2.4%
$ 1,430,000 Ford Motor Credit Co.
5.92%, 5/09/95 $ 1,428,119
------------
COMPUTERS -- 0.8%
455,000 IBM Credit Corp.
5.93%, 5/15/95 453,951
------------
OIL/GAS -- 2.6%
1,500,000 Chevron Oil Finance Co.
5.96%, 5/02/95 1,499,751
------------
Total Short-Term Corporate Notes
(cost -- $3,381,821) $ 3,381,821
------------
CORPORATE NOTES & BONDS -- 91.5%
AEROSPACE -- 3.1%
$ 2,000,000 Boeing Co.
7.50%, 8/15/42 $ 1,835,260
------------
AIRLINES -- 2.8%
1,000,000 American Airlines
9.73%, 9/29/14 1,028,920
550,000 Delta Air Lines, Inc.
10.375%, 2/01/11 598,812
------------
1,627,732
------------
BANKING -- 6.4%
70,000 NatWest Bancorp, Inc.
9.375%, 11/15/03 77,305
1,300,000 NCNB Corp.
10.20%, 7/15/15 1,510,223
500,000 RBSG Capital Corp.
10.125%, 3/01/04 568,735
1,500,000 Westpac Banking Corp.
9.125%, 8/15/01 1,603,080
------------
3,759,343
------------
CHEMICALS -- 0.9%
500,000 Rohm & Haas Co.
9.50%, 4/01/21 554,480
------------
CONGLOMERATES -- 3.8%
2,000,000 Canadian Pacific Ltd.
9.45%, 8/01/21 2,241,860
------------
ENTERTAINMENT -- 5.0%
3,000,000 Time Warner, Inc.
9.15%, 2/01/23 2,898,900
------------
<CAPTION>
- ------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
- ------------------------------------------------------
<S> <C> <C>
INSURANCE -- 11.3%
$ 1,000,000 Aetna Life & Casualty Co.
8.00%, 1/15/17 $ 937,090
1,200,000 Capital Holding Corp.
8.75%, 1/15/17 1,247,928
2,000,000 CNA Financial Corp.
7.25%, 11/15/23 1,653,300
3,000,000 Torchmark, Inc.
7.875%, 5/15/23 2,759,130
------------
6,597,448
------------
LEASING -- 2.8%
1,600,000 Ryder Systems, Inc.
8.75%, 3/15/17 1,619,008
------------
MACHINERY & ENGINEERING -- 3.3%
1,750,000 Caterpillar, Inc.
9.75%, 6/01/19 1,940,452
------------
MISCELLANEOUS FINANCIAL SERVICES -- 13.9%
20,000 Beneficial Corp.
12.875%, 8/01/13 23,819
1,500,000 BHP Finance USA Ltd.
8.50%, 12/01/12 1,557,030
1,000,000 ITT Financial Corp.
6.50%, 5/01/11 808,410
Lehman Brothers, Inc.
865,000 9.875%, 10/15/00 919,063
115,000 10.00%, 5/15/99 121,478
205,000 Midland American Capital Corp.
12.75%, 11/15/03 238,251
800,000 Paine Webber Group, Inc.
9.25%, 12/15/01 835,136
3,000,000 Prudential Funding Corp.
6.75%, 9/15/23 2,400,900
1,250,000 Source One Mortgage Services
Corp.
9.00%, 6/01/12 1,212,450
------------
8,116,537
------------
OIL/GAS -- 6.0%
3,000,000 Occidental Petroleum Corp.
11.125%, 6/01/19 3,507,540
------------
PAPER PRODUCTS -- 0.2%
100,000 Union Camp Corp.
10.00%, 5/01/19 111,152
------------
PIPELINES -- 3.0%
1,500,000 TransCanada Pipelines Ltd.
9.875%, 1/01/21 1,747,020
------------
</TABLE>

18
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- ------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
- ------------------------------------------------------
RETAIL -- 1.3%
<S> <C> <C>
May Department Stores Co.
$ 250,000 9.875%, 6/01/17 $ 272,925
405,000 10.625%, 11/01/10 496,137
------------
769,062
------------
TELECOMMUNICATIONS -- 12.5%
420,000 GTE Corp.
10.25%, 11/01/20 472,492
2,500,000 New York Telephone Co.
9.375%, 7/15/31 2,708,775
2,000,000 Pacific Bell
8.50%, 8/15/31 2,015,700
2,000,000 Southern New England Telephone
Co.
8.70%, 8/15/31 2,123,880
------------
7,320,847
------------
TOBACCO/BEVERAGES/FOOD PRODUCTS -- 3.3%
2,000,000 American Brands, Inc.
7.875%, 1/15/23 1,920,560
------------

<CAPTION>
- ------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
- ------------------------------------------------------
<S> <C> <C>

UTILITIES -- 6.9%
$ 2,000,000 Hydro-Quebec
8.50%, 12/01/29 $ 1,987,680
2,000,000 Southern California Edison Co.
8.875%, 6/01/24 2,039,640
------------
4,027,320
------------
OTHER -- 5.0%
1,468,228 DLJ Mortgage Acceptance Corp.
8.75%, 11/25/24 1,408,122
1,500,000 Nova Scotia (Province of)
8.875%, 7/01/19 1,524,345
------------
2,932,467
------------
Total Corporate Notes & Bonds
(cost -- $53,950,659) $ 53,526,988
------------
Total Investments
(cost -- $57,332,480) 97.3 % $ 56,908,809
Other Assets in Excess of
Other Liabilities 2.7 1,549,987
----- ------------
TOTAL NET ASSETS 100.0 % $ 58,458,796
----- ------------
----- ------------
</TABLE>

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.

19
<PAGE>
APRIL 30, 1995

- --------------------------------------------------------------------------------
STATEMENTS OF ASSETS AND LIABILITIES (UNAUDITED)

<TABLE>
<CAPTION>
QUEST FOR SMALL GROWTH U.S. INVESTMENT
VALUE FUND, OPPORTUNITY CAPITALIZATION AND GOVERNMENT
QUALITY
INC. FUND FUND INCOME FUND INCOME FUND INCOME
FUND
------------ ------------ ------------- ----------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Investments, at value (cost --
$231,780,223, $306,601,269,
$138,649,506, $36,966,919,
$108,254,548 and $57,332,480,
respectively)........................ $281,884,706 $354,076,712 $141,054,201 $38,633,928 $106,160,770 $56,908,809
Repurchase agreement (cost --
$30,850,000)......................... -- -- -- -- 30,850,000 --
Cash.................................. 192,917 6,009 7,649 4,785 42,627 7,874
Receivable for investments sold....... 6,121,804 4,960,166 4,386,238 -- -- --
Receivable for fund shares sold....... 1,373,346 7,437,751 530,404 161,403 552,378 344,370
Dividends receivable.................. 490,541 682,550 99,920 106,583 -- --
Interest receivable................... 18,808 80,066 81,628 -- 1,266,952 1,415,841
Receivable for mortgage prepayments... -- -- -- -- 8,659 --
Receivable for options written........ -- -- -- -- 81,250 --
Deferred organization expenses........ -- -- -- 29,014 -- 7,835
Other assets.......................... 43,688 27,106 18,450 22,152 33,006 18,897
------------ ------------ ------------- ----------- ------------ -----------
Total Assets........................ 290,125,810 367,270,360 146,178,490 38,957,865 138,995,642 58,703,626
------------ ------------ ------------- ----------- ------------ -----------
LIABILITIES
Written call options outstanding, at
value (premiums received:
$301,562)............................ -- -- -- -- 250,000 --
Payable for investments purchased..... 7,304,992 11,854,122 1,469,403 773,238 10,006,250 --
Payable for fund shares redeemed...... 637,029 825,136 417,908 19,581 466,636 70,490
Investment advisory fee payable....... 38,549 48,250 19,738 4,507 10,495 4,781
Distribution fee payable.............. 36,734 95,043 24,513 5,223 13,601 10,314
Dividends payable..................... -- -- -- -- 96,618 96,734
Other payables and accrued expenses... 107,590 122,589 103,716 58,217 101,968 62,511
------------ ------------ ------------- ----------- ------------ -----------
Total Liabilities................... 8,124,894 12,945,140 2,035,278 860,766 10,945,568 244,830
------------ ------------ ------------- ----------- ------------ -----------
NET ASSETS
Par value............................. 22,152,829 166,616 89,258 36,874 115,966 57,361
Paid-in-surplus....................... 203,275,875 304,361,426 136,615,872 34,963,133 139,644,958 60,186,256
Accumulated undistributed net
investment income.................... 857,581 1,269,754 89,051 116,490 -- --
Accumulated undistributed net realized
gain (loss) on investments........... 5,610,148 1,053,210 4,944,336 1,520,866 (9,371,173) (1,361,150 )
Distributions in excess of
undistributed net realized gains..... -- (1,229) -- (207,273 ) (297,461) --
Net unrealized appreciation
(depreciation) on investments........ 50,104,483 47,475,443 2,404,695 1,667,009 (2,042,216) (423,671 )
------------ ------------ ------------- ----------- ------------ -----------
Total Net Assets.................... $282,000,916 $354,325,220 $144,143,212 $38,097,099 $128,050,074 $58,458,796
------------ ------------ ------------- ----------- ------------ -----------
------------ ------------ ------------- ----------- ------------ -----------
CLASS A:
Fund shares outstanding............... 19,766,758 10,873,320 7,345,404 3,189,862 10,497,081 4,499,943
------------ ------------ ------------- ----------- ------------ -----------
Net asset value per share............. $ 12.74 $ 21.33 $ 16.18 $ 10.34 $ 11.04 $ 10.19
------------ ------------ ------------- ----------- ------------ -----------
------------ ------------ ------------- ----------- ------------ -----------
Maximum offering price per share*..... $ 13.48 $ 22.57 $ 17.12 $ 10.86 $ 11.59 $ 10.70
------------ ------------ ------------- ----------- ------------ -----------
------------ ------------ ------------- ----------- ------------ -----------
CLASS B:
Fund shares outstanding............... 1,881,688 4,838,180 1,225,644 410,588 930,025 911,890
------------ ------------ ------------- ----------- ------------ -----------
Net asset value and offering price per
share................................ $ 12.65 $ 21.16 $ 16.03 $ 10.31 $ 11.04 $ 10.19
------------ ------------ ------------- ----------- ------------ -----------
------------ ------------ ------------- ----------- ------------ -----------
CLASS C:
Fund shares outstanding............... 504,383 950,086 354,729 86,947 169,500 324,279
------------ ------------ ------------- ----------- ------------ -----------
Net asset value and offering price per
share................................ $ 12.64 $ 21.15 $ 16.03 $ 10.32 $ 11.04 $ 10.19
------------ ------------ ------------- ----------- ------------ -----------
------------ ------------ ------------- ----------- ------------ -----------
<FN>
*Sales charges decrease on purchases of $50,000 or higher.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
</TABLE>

20
<PAGE>
SIX MONTHS ENDED APRIL 30, 1995

- --------------------------------------------------------------------------------
STATEMENTS OF OPERATIONS (UNAUDITED)

<TABLE>
<CAPTION>
QUEST FOR SMALL GROWTH U.S. INVESTMENT
VALUE OPPORTUNITY CAPITALIZATION AND GOVERNMENT
QUALITY
FUND, INC. FUND FUND INCOME FUND INCOME FUND INCOME
FUND
----------- ----------- --------------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
INVESTMENT INCOME
Dividends................... $2,464,480 $2,280,636 $ 1,042,987 $ 460,092 $ -- $ --
Interest.................... 932,852 1,585,855 590,633 507,119 4,558,825 2,416,775
----------- ----------- --------------- ------------ ------------ ------------
Total investment income... 3,397,332 3,866,491 1,633,620 967,211 4,558,825 2,416,775
----------- ----------- --------------- ------------ ------------ ------------
OPERATING EXPENSES
Investment advisory fees
(note 2a).................. 1,277,397 1,301,376 691,364 143,923 377,214 164,771
Distribution fees (note
2c)........................ 695,255 840,342 400,554 79,492 223,379 141,037
Transfer and dividend
disbursing agent fees (note
1i)........................ 145,940 121,890 93,680 31,356 62,635 29,006
Accounting service fees
(note 2b).................. -- 51,874 54,475 56,400 60,655 52,681
Registration fees........... 24,615 54,230 19,488 15,018 17,130 16,605
Reports and notices to
shareholders............... 18,150 14,988 14,257 9,430 13,141 11,207
Custodian fees.............. 16,433 12,971 8,306 9,529 34,387 11,110
Auditing, consulting and tax
return preparation fees.... 11,800 9,188 9,858 7,939 18,160 8,652
Directors'(Trustees') fees
and expenses............... 8,574 8,535 8,535 4,369 8,534 8,530
Legal fees.................. 5,604 3,720 3,720 2,655 3,490 2,852
Amortization of deferred
organization expenses (note
1c)........................ -- -- -- 9,495 -- 6,136
Miscellaneous............... 12,664 10,106 1,996 9,352 13,715 8,818
----------- ----------- --------------- ------------ ------------ ------------
Total operating
expenses................. 2,216,432 2,429,220 1,306,233 378,958 832,440 461,405
Less: Investment advisory
fees waived (note 2a).... -- -- -- (41,225) -- (42,245)
----------- ----------- --------------- ------------ ------------ ------------
Net operating
expenses............... 2,216,432 2,429,220 1,306,233 337,733 832,440 419,160
----------- ----------- --------------- ------------ ------------ ------------
Net investment income... 1,180,900 1,437,271 327,387 629,478 3,726,385 1,997,615
----------- ----------- --------------- ------------ ------------ ------------
REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS -- NET
Net realized gain (loss) on
security transactions...... 5,717,144 1,058,240 5,111,342 1,177,023 (3,993,026) (299,770)
Net realized loss on option
transactions (note 1f)..... -- -- -- -- (227,109) --
Net realized loss on futures
transactions (note 1g)..... -- -- -- -- -- (108,500)
----------- ----------- --------------- ------------ ------------ ------------
Net realized gain (loss)
on investments........... 5,717,144 1,058,240 5,111,342 1,177,023 (4,220,135) (408,270)
Net change in unrealized
appreciation (depreciation)
on investments............. 17,252,568 33,095,020 (3,141,681) 1,260,709 7,204,799 3,266,923
----------- ----------- --------------- ------------ ------------ ------------
Net realized gain (loss)
and change in unrealized
appreciation
(depreciation) on
investments.............. 22,969,712 34,153,260 1,969,661 2,437,732 2,984,664 2,858,653
----------- ----------- --------------- ------------ ------------ ------------
Net increase in net assets
resulting from
operations................. $24,150,612 $35,590,531 $ 2,297,048 $ 3,067,210 $ 6,711,049 $ 4,856,268
----------- ----------- --------------- ------------ ------------ ------------
----------- ----------- --------------- ------------ ------------ ------------

<FN>

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
</TABLE>

21
<PAGE>
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS

<TABLE>
<CAPTION>
QUEST FOR VALUE FUND,
INC. OPPORTUNITY FUND
SIX MONTHS SIX MONTHS
ENDED YEAR ENDED ENDED YEAR ENDED
APRIL 30, OCTOBER 31, APRIL 30, OCTOBER 31,
1995* 1994 1995* 1994
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
OPERATIONS
Net investment income (loss).......... $ 1,180,900 $ 1,726,225 $ 1,437,271 $ 1,397,364
Net realized gain (loss) on
investments.......................... 5,717,144 16,664,331 1,058,240 7,139,720
Net change in unrealized appreciation
(depreciation) on investments........ 17,252,568 (6,250,090) 33,095,020 4,721,481
------------ ------------ ------------ ------------
Net increase (decrease) in net
assets resulting from operations... 24,150,612 12,140,466 35,590,531 13,258,565
------------ ------------ ------------ ------------
DIVIDENDS AND DISTRIBUTIONS TO
SHAREHOLDERS
Net investment income -- Class A...... (1,649,576) (819,873) (1,066,642) (2,269,483)
Net investment income -- Class B...... (108,497) (11,801) (335,822) (98,258)
Net investment income -- Class C...... (29,366) (2,040) (56,920) (21,098)
Net realized gains -- Class A......... (15,501,438) (9,227,704) (5,314,298) (1,497,052)
Net realized gains -- Class B......... (1,014,005) (115,604) (1,562,718) (30,460)
Net realized gains -- Class C......... (255,884) (11,081) (267,734) (11,467)
Distributions in excess of net
realized gains -- Class A............ -- -- -- (1,196)
Distributions in excess of net
realized gains -- Class B............ -- -- -- (24)
Distributions in excess of net
realized gains -- Class C............ -- -- -- (9)
------------ ------------ ------------ ------------
Total dividends and distributions to
shareholders....................... (18,558,766) (10,188,103) (8,604,134) (3,929,047)
------------ ------------ ------------ ------------
FUND SHARE TRANSACTIONS
CLASS A
Net proceeds from sales............... 22,813,206 61,908,256 62,597,373 90,332,759
Reinvestment of dividends and
distributions........................ 16,047,556 9,385,655 6,034,648 3,405,284
Cost of shares redeemed............... (29,730,613) (80,014,950) (18,132,883) (65,200,453)
------------ ------------ ------------ ------------
Net increase (decrease) -- Class
A.................................. 9,130,149 (8,721,039) 50,499,138 28,537,590
------------ ------------ ------------ ------------
CLASS B
Net proceeds from sales............... 8,806,276 12,409,864 53,070,214 40,604,196
Reinvestment of dividends and
distributions........................ 1,045,812 123,599 1,804,130 124,021
Cost of shares redeemed............... (1,208,420) (544,061) (3,356,853) (1,026,439)
------------ ------------ ------------ ------------
Net increase -- Class B............. 8,643,668 11,989,402 51,517,491 39,701,778
------------ ------------ ------------ ------------
CLASS C
Net proceeds from sales............... 2,794,417 3,521,667 11,871,650 6,945,412
Reinvestment of dividends and
distributions........................ 280,898 13,020 314,273 32,567
Cost of shares redeemed............... (479,197) (271,901) (809,474) (254,081)
------------ ------------ ------------ ------------
Net increase -- Class C............. 2,596,118 3,262,786 11,376,449 6,723,898
------------ ------------ ------------ ------------
Total net increase (decrease) in net
assets from fund share
transactions......................... 20,369,935 6,531,149 113,393,078 74,963,266
------------ ------------ ------------ ------------
Total increase (decrease) in net
assets............................. 25,961,781 8,483,512 140,379,475 84,292,784
NET ASSETS
Beginning of period................... 256,039,135 247,555,623 213,945,745 129,652,961
------------ ------------ ------------ ------------
End of period (including undistributed
net investment income (loss) of
$857,581, $1,464,120; $1,269,754,
$1,291,867; $89,051, ($238,336);
$116,490, $127,460; $0, $0 and $0,
$0, respectively..................... $282,000,916 $256,039,135 $354,325,220 $213,945,745
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
<FN>
*Unaudited.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
</TABLE>

22
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SMALL CAPITALIZATION FUND GROWTH AND INCOME FUND
SIX MONTHS SIX MONTHS
ENDED YEAR ENDED ENDED YEAR ENDED
APRIL 30, OCTOBER 31, APRIL 30, OCTOBER 31,
1995* 1994 1995* 1994
------------ ------------ ------------ ------------

<S> <C> <C> <C> <C>
Net investment income (loss).......... $ 327,387 $ (238,336) $ 629,478 $ 966,108
Net realized gain (loss) on
investments............................. 5,111,342 3,366,835 1,177,023 1,768,686
Net change in unrealized appreciation
(depreciation) on investments........... (3,141,681) (3,118,979) 1,260,709 (189,442)
------------ ------------ ------------ ------------
Net increase (decrease) in net
assets resulting from operations........ 2,297,048 9,520 3,067,210 2,545,352
------------ ------------ ------------ ------------
DIVIDENDS AND DISTRIBUTIONS TO
SHAREHOLDERS
Net investment income -- Class A...... -- -- (571,223) (936,128)
Net investment income -- Class B...... -- -- (59,120) (41,545)
Net investment income -- Class C...... -- -- (10,105) (7,305)
Net realized gains -- Class A......... (3,008,172) (8,036,736) (1,274,907) (4,079,198)
Net realized gains -- Class B......... (433,897) (160,831) (129,812) (145,217)
Net realized gains -- Class C......... (91,772) (19,543) (20,124) (18,475)
Distributions in excess of net
realized gains -- Class A............... -- -- -- (199,276)
Distributions in excess of net
realized gains -- Class B............... -- -- -- (7,094)
Distributions in excess of net
realized gains -- Class C............... -- -- -- (903)
------------ ------------ ------------ ------------
Total dividends and distributions to
shareholders............................ (3,533,841) (8,217,110) (2,065,291) (5,435,141)
------------ ------------ ------------ ------------
Fund Share Transactions
CLASS A
Net proceeds from sales............... 18,655,389 127,081,752 2,360,697 5,937,491
Reinvestment of dividends and
distributions........................... 2,840,961 7,215,556 1,765,990 5,008,623
Cost of shares redeemed............... (21,690,503) (111,134,238) (2,560,041) (6,040,040)
------------ ------------ ------------ ------------
Net increase (decrease) -- Class A.. (194,153) 23,163,070 1,566,646 4,906,074
------------ ------------ ------------ ------------

CLASS B
Net proceeds from sales............... 4,874,110 15,275,222 1,175,765 2,763,975
Reinvestment of dividends and
distributions........................ 408,265 148,570 174,643 188,513
Cost of shares redeemed............... (1,631,572) (811,203) (185,264) (260,750)
------------ ------------ ------------ ------------
Net increase -- Class B............... 3,650,803 14,612,589 1,165,144 2,691,738
------------ ------------ ------------ ------------

CLASS C
Net proceeds from sales............... 2,624,975 3,345,761 395,836 341,819
Reinvestment of dividends and
distributions........................... 88,907 18,810 28,952 26,593
Cost of shares redeemed............... (380,327) (229,505) (20,580) (4,696)
------------ ------------ ------------ ------------
Net increase -- Class C............. 2,333,555 3,135,066 404,208 363,716
------------ ------------ ------------ ------------
Total net increase (decrease) in net
assets from fund share transactions..... 5,790,205 40,910,725 3,135,998 7,961,528
------------ ------------ ------------ ------------
Total increase (decrease) in net
assets.................................. 4,553,412 32,703,135 4,137,917 5,071,739
NET ASSETS
Beginning of period................... 139,589,800 106,886,665 33,959,182 28,887,443
------------ ------------ ------------ ------------
End of period (including undistributed
net investment income (loss) of
$857,581, $1,464,120; $1,269,754,
$1,291,867; $89,051, ($238,336);
$116,490, $127,460; $0, $0 and $0, $0,
respectively............................ $144,143,212 $139,589,800 $ 38,097,099 $ 33,959,182
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------

<CAPTION>
INVESTMENT QUALITY INCOME
U.S. GOVERNMENT INCOME FUND FUND
SIX MONTHS SIX MONTHS
ENDED YEAR ENDED ENDED YEAR ENDED
APRIL 30, OCTOBER 31, APRIL 30, OCTOBER 31,
1995* 1994 1995* 1994
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Net investment income (loss).......... $ 3,726,385 $ 8,291,969 $ 1,997,615 $ 3,846,353
Net realized gain (loss) on
investments............................. (4,220,135) (4,366,839) (408,270) (952,880)
Net change in unrealized appreciation
(depreciation) on investments........... 7,204,799 (11,007,688) 3,266,923 (9,068,979)
------------ ------------ ------------ ------------
Net increase (decrease) in net
assets resulting from operations........ 6,711,049 (7,082,558) 4,856,268 (6,175,506)
------------ ------------ ------------ ------------
DIVIDENDS AND DISTRIBUTIONS TO
SHAREHOLDERS
Net investment income -- Class A...... (3,470,735) (8,071,564) (1,649,048) (3,482,793)
Net investment income -- Class B...... (220,601) (196,735) (252,908) (244,424)
Net investment income -- Class C...... (36,512) (39,362) (95,659) (119,136)
Net realized gains -- Class A......... (140,061) (2,925,946) -- (367,910)
Net realized gains -- Class B......... (8,675) (38,935) -- (10,112)
Net realized gains -- Class C......... (1,431) (6,494) -- (637)
Distributions in excess of net
realized gains -- Class A............... -- (292,913) -- --
Distributions in excess of net
realized gains -- Class B............... -- (3,898) -- --
Distributions in excess of net
realized gains -- Class C............... -- (650) -- --
------------ ------------ ------------ ------------
Total dividends and distributions to
shareholders............................ (3,878,015) (11,576,497) (1,997,615) (4,225,012)
------------ ------------ ------------ ------------
Fund Share Transactions
CLASS A
Net proceeds from sales............... 8,337,955 17,007,814 3,437,254 12,621,718
Reinvestment of dividends and
distributions........................... 3,118,963 9,588,703 1,160,982 2,758,350
Cost of shares redeemed............... (21,385,264) (74,313,512) (7,963,295) (20,364,228)
------------ ------------ ------------ ------------
Net increase (decrease) -- Class A.. (9,928,346) (47,716,995) (3,365,059) (4,984,160)
------------ ------------ ------------ ------------
CLASS B
Net proceeds from sales............... 3,810,282 6,748,251 2,929,597 6,440,954
Reinvestment of dividends and
distributions........................ 163,256 187,137 203,461 185,172
Cost of shares redeemed............... (734,031) (964,994) (846,378) (800,932)
------------ ------------ ------------ ------------
Net increase -- Class B............... 3,239,507 5,970,394 2,286,680 5,825,194
------------ ------------ ------------ ------------
CLASS C
Net proceeds from sales............... 668,202 1,424,484 576,084 3,141,700
Reinvestment of dividends and
distributions........................... 36,507 46,127 40,824 93,436
Cost of shares redeemed............... (92,626) (289,465) (48,537) (422,838)
------------ ------------ ------------ ------------
Net increase -- Class C............. 612,083 1,181,146 568,371 2,812,298
------------ ------------ ------------ ------------
Total net increase (decrease) in net
assets from fund share transactions..... (6,076,756) (40,565,455) (510,008) 3,653,332
------------ ------------ ------------ ------------
Total increase (decrease) in net
assets.................................. (3,243,722) (59,224,510) 2,348,645 (6,747,186)
NET ASSETS
Beginning of period................... 131,293,796 190,518,306 56,110,151 62,857,337
------------ ------------ ------------ ------------
End of period (including undistributed
net investment income (loss) of
$857,581, $1,464,120; $1,269,754,
$1,291,867; $89,051, ($238,336);
$116,490, $127,460; $0, $0 and $0, $0,
respectively............................ $128,050,074 $131,293,796 $ 58,458,796 $ 56,110,151
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
</TABLE>

23
<PAGE>
APRIL 30, 1995

- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES

Quest for Value Funds are registered under the Investment Company Act of
1940, as diversified, open-end management investment companies. Quest for Value
Fund, Inc. ("Quest for Value") is a Maryland corporation. Opportunity Fund
("Opportunity"), Small Capitalization Fund ("Small Capitalization"), Growth and
Income Fund ("Growth and Income"), U.S. Government Income Fund ("U.S.
Government") and Investment Quality Income Fund ("Investment Quality") are five
of nine funds currently offered in the Quest for Value Family of Funds, a
Massachusetts business trust. Quest for Value Advisors (the "Adviser") serves as
investment adviser and provides accounting and administrative services to each
fund. Quest for Value Distributors (the "Distributor") serves as each fund's
distributor. Both the Advisor and Distributor are majority-owned (99%)
subsidiaries of Oppenheimer Capital.

Prior to September 1, 1993, the funds issued only one class of shares which
were redesignated Class A shares. Subsequent to that date all funds were
authorized to issue Class A, Class B and Class C shares. Shares of each Class
represent an identical interest in the investment portfolio of their respective
fund and generally have the same rights, but are offered under different sales
charges and distribution fee arrangements. Furthermore, Class B shares will
automatically convert to Class A shares of the same fund eight years after their
respective purchase.

The following is a summary of significant accounting policies consistently
followed by each fund in the preparation of its financial statements:

(A) VALUATION OF INVESTMENTS

Investment securities listed on a national securities exchange and
securities traded in the over-the-counter National Market System are valued at
the last reported sale price on the valuation date; if there are no such
reported sales, the securites are valued at the last quoted bid price. Other
securities traded over-the-counter and not part of the National Market System
are valued at the last quoted bid price. Investment debt securities (other than
short-term obligations) are valued each day by an independent pricing service
approved by the Board of Directors (Trustees) using methods which include
current market quotations from a major market maker in the securities and
trader-reviewed "matrix" prices. Futures contracts are valued based upon their
daily settlement value as of the close of the exchange upon which they trade.
OTC options are valued based upon formulas which utilize the market value of the
underlying securities, strike prices and expiration dates of the options.
Short-term debt securities having a remaining maturity of sixty days or less are
valued at amortized cost or amortized value, which approximates market value.
Any securities or other assets for which market quotations are not readily
available are valued at their fair values as determined in good faith under
procedures established by each fund's Board of Directors (Trustees). The ability
of issuers of debt securities held by the funds to meet their obligations may be
affected by economic or political development in a specific state, industry or
region.

(B) FEDERAL INCOME TAXES

The following approximate costs were incurred in connection with their
organization: Growth and Income -- $96,000 and Investment Quality -- $62,000.
These costs have been deferred and are being amortized to expense on a
straight-line basis over sixty months from commencement of each fund's
operations.

(D) SECURITY TRANSACTIONS AND OTHER INCOME

24
<PAGE>
- --------------------------------------------------------------------------------
amortized to interest income over the lives of the respective securities. Net
investment income, other than class specific expenses and unrealized gains and
losses are allocated daily to each class of shares based upon the relative
proportion of net assets, as defined, of each class.

(E) DIVIDENDS AND DISTRIBUTIONS

The following table summarizes each fund's dividend and capital gain
declaration policy:

<TABLE>
<CAPTION>
SHORT-TERM LONG-TERM
INCOME CAPITAL CAPITAL
DIVIDENDS GAINS GAINS
--------- ------------ ------------
<S> <C> <C> <C>
Quest for Value annually annually annually
Opportunity annually annually annually
Small
Capitalization annually annually annually
Growth and
Income quarterly annually annually
U.S. Government daily * quarterly annually
Investment
Quality daily * annually annually
* paid monthly.
</TABLE>

(F) WRITTEN OPTIONS ACCOUNTING POLICIES

When a fund writes a call option or a put option, an amount equal to the
premium received by the fund is included in the fund's Statement of Assets and
Liabilities as an asset and an equivalent liability. The amount of the liability
is subsequently marked-to-market to reflect the current market value of the
option written. If the option expires on its stipulated expiration date or if a
fund enters into a closing purchase transaction, the fund will realize a gain
(or loss if the cost of a closing purchase tranaction exceeds the premium
received when the option was written) without regard to any unrealized gain or
loss on the underlying security, and the liability related to such option will
be extinguished. If a call option which a fund has written is exercised, the
fund realizes a gain or loss from the sale of the underlying security and the
proceeds from such sale are increased by the premium originally received. If a
put option which a fund has written is exercised, the amount of the premium
originally received will reduce the cost of the security which the fund
purchases upon exercise of the option.

(G) FUTURES ACCOUNTING POLICIES

25
<PAGE>
APRIL 30, 1995

- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
depreciation. When a contract is closed, the fund records a realized gain or
loss equal to the difference between the value of the contract at the time it
was opened and the value at the time it was closed and reverses any unrealized
appreciation or depreciation previously recorded.

(H) REPURCHASE AGREEMENTS

(I) ALLOCATION OF EXPENSES

Expenses specifically identifiable to a particular fund or class are borne
by that fund or class. Other expenses are allocated to each fund or class based
on its net assets in relation to the total net assets of all applicable funds or
classes or on another reasonable basis. For the six months ended April 30, 1995,
transfer and dividend disbursing agent fees accrued to classes A, B and C were
$129,947, $12,171 and $3,822, respectively, for Quest for Value; $75,445,
$38,525 and $7,920, respectively, for Opportunity; $68,052, $19,412 and $6,216,
respectively, for Small Capitalization; $27,244, $3,447 and $665, respectively,
for Growth and Income; $55,832, $4,401 and $2,402, respectively, for U.S.
Government and $22,873, $4,242 and $1,891, respectively, for Investment Quality
Income.

2. INVESTMENT ADVISORY FEE, ACCOUNTING SERVICES FEE, DISTRIBUTION FEE AND OTHER
TRANSACTIONS WITH AFFILIATES

(a) The investment advisory fee is payable monthly to the Adviser, and is
computed as a percentage of each fund's net assets as of the close of business
each day at the following annual rates: 1.00% for Quest for Value, Opportunity
and Small Capitalization, respectively; .85% for Growth and Income and .60% for
U.S. Government and Investment Quality, respectively. For the six months ended
April 30, 1995, the Adviser voluntarily waived $41,225 and $42,245 in investment
advisory fees for Growth and Income and Investment Quality, respectively.

(b) A portion of the accounting services fee for Opportunity, Small
Capitalization, Growth and Income, U.S. Government and Investment Quality is
payable monthly to the Adviser. These funds reimburse the Adviser for a portion
of the salaries of officers and employees of Oppenheimer Capital based upon the
amount of time such persons spend in providing services to each fund in
accordance with the provisions of the Investment Advisory Agreement. For the six
months ended April 30, 1995, the Adviser received $24,374, $26,976, $28,900,
$28,155 and $25,181, respectively.

(c) The funds have adopted a Plan and Agreement of Distribution (the
"Plan") pursuant to which each fund is permitted to compensate the Distributor
in connection with the distribution of fund shares. Under the Plan, the
Distributor has entered into agreements with securities dealers and other
financial institutions and organizations to obtain various sales-related
services in rendering distribution assistance. To compensate the Distributor for
the services it and other dealers under the Plan provide and for the expenses
they bear under the Plan, the funds pay the Distributor compensation, accrued
daily and payable monthly on each fund's average daily net assets for Class A
shares at the following annual rates: .25% for Quest for Value, Opportunity and
Small Capitalization, respectively, .05% for U.S. Government and .15% for
Investment Quality and Growth and Income, respectively. Each fund's Class A
shares also pay a service fee at the annual rate of .25%. Compensation for Class
B and Class C shares of each fund is at an annual rate of .75% of average daily
net assets. Each fund's Class B and Class C shares also pay a service fee at the
annual rate of .25%. Distribution and service fees may be paid by the
Distributor to broker dealers or others for providing personal service,
maintenance of accounts and ongoing sales or shareholder support functions in
connection with the distribution of fund shares. While payments under the plan
may not exceed the stated percentage of average daily net assets on an annual
basis, the payments are not limited to the amounts actually incurred by the
Distributor.

26
<PAGE>
- --------------------------------------------------------------------------------

For the six months ended April 30, 1995, distribution and service fees
charged to classes A, B and C were $582,142, $90,112 and $23,001, respectively,
for Quest for Value; $461,034, $320,958 and $58,350, respectively, for
Opportunity; $290,811, $87,657 and $22,086, respectively, for Small
Capitalization; $59,886, $16,582 and $3,024, respectively, for Growth and
Income; $173,704, $42,572 and $7,103, respectively, for for U.S. Government and
$89,054, $37,698 and $14,285, respectively, for Investment Quality Income.

(d) Total brokerage commissions paid by Quest for Value, Opportunity, Small
Capitalization and Growth and Income were $133,585, $220,756, $192,780 and
$56,481, respectively, of which Oppenheimer & Co., Inc., an affiliate of the
Adviser, received $72,545, $95,213, $87,012 and $37,521, respectively, for the
six months ended April 30, 1995.

(e) Oppenheimer & Co., Inc. has informed the funds that it received
approximately $175,000, $324,000, $122,000, $15,000, $88,000 and $39,000 in
connection with the sale of Class A shares for Quest for Value, Opportunity,
Small Capitalization, Growth and Income, U.S. Government and Investment Quality,
respectively, for the six months ended April 30, 1995.

The Distributor has informed the funds that it received contingent deferred
sales charges on the redemption of Class C shares of approximately $200, $1,800,
$700, $200, and $200 for Quest for Value, Opportunity, Small Capitalization,
U.S. Government and Investment Quality, respectively, for the six months ended
April 30, 1995.

(f) The Distributor has assigned the right to receive the compensation and
contingent deferred sales charge on the Class B shares to a bank in return for
the banks reimbursement to the Distributor of commissions paid by the
Distributor to broker/dealers on Class B shares.

3. PURCHASES AND SALES OF SECURITIES

For the six months ended April 30, 1995, purchases and sales of investment
securities, other than short-term securities, were as follows:

<TABLE>
<CAPTION>
QUEST FOR SMALL GROWTH AND U.S. INVESTMENT
VALUE OPPORTUNITY CAPITALIZATION INCOME GOVERNMENT QUALITY
----------- ----------- -------------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Purchases $38,600,646 $118,902,351 $ 36,306,804 $15,994,318 $220,176,718 $3,096,231
Sales 46,184,287 20,875,977 46,436,460 19,114,061 246,008,186 1,990,980
</TABLE>

The following table summarizes activity in written option transactions for
U.S. Government for the six months ended April 30, 1995:

<TABLE>
<CAPTION>
CONTRACTS PREMIUMS
---------- ------------
<S> <C> <C>
Option contracts written: Outstanding beginning of period 2 $ 142,188
Options written 34 2,465,702
Options terminated in closing purchase transaction (20) (1,501,640)
Options exercised (7) (503,125)
Options expired (4) (301,563)
--
------------
Option contracts written: Outstanding end of period 5 $ 301,562
--
--
------------
------------
</TABLE>

27
<PAGE>
APRIL 30, 1995

- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)

4. FUND SHARE TRANSACTIONS

The following tables summarize the fund share activity for the six months
ended April 30, 1995 and the year ended October 31, 1994:

<TABLE>
<CAPTION>
QUEST FOR VALUE OPPORTUNITY SMALL CAPITALIZATION
---------------------------- ---------------------------- ----------------------------
SIX MONTHS SIX MONTHS SIX MONTHS
ENDED YEAR ENDED ENDED YEAR ENDED ENDED YEAR
ENDED
APRIL 30, OCTOBER 31, APRIL 30, OCTOBER 31, APRIL 30, OCTOBER 31,
1995* 1994 1995* 1994 1995* 1994
------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
CLASS A
Issued.................... 1,887,076 5,077,999 3,177,603 4,781,210 1,168,097 7,804,081
Dividends and
distributions
reinvested............... 1,440,961 797,941 328,864 186,714 181,647 450,409
Redeemed.................. (2,476,129) (6,566,112) (928,610) (3,470,990) (1,357,550) (6,835,042)
------------ ------------ ------------ ------------ ------------ ------------
Net increase
(decrease)............. 851,908 (690,172) 2,577,857 1,496,934 (7,806) 1,419,448
------------ ------------ ------------ ------------ ------------ ------------
CLASS B
Issued.................... 740,489 1,020,362 2,702,721 2,145,988 308,792 936,328
Dividends and
distributions
reinvested............... 94,418 10,514 98,923 6,821 26,272 9,286
Redeemed.................. (100,601) (44,566) (174,841) (54,500) (103,762) (50,575)
------------ ------------ ------------ ------------ ------------ ------------
Net increase............ 734,306 986,310 2,626,803 2,098,309 231,302 895,039
------------ ------------ ------------ ------------ ------------ ------------
CLASS C
Issued.................... 231,783 289,679 600,865 367,367 166,967 205,454
Dividends and
distributions
reinvested............... 25,381 1,106 17,240 1,789 5,721 1,176
Redeemed.................. (38,705) (22,509) (40,221) (13,680) (23,965) (13,923)
------------ ------------ ------------ ------------ ------------ ------------
Net increase............ 218,459 268,276 577,884 355,476 148,723 192,707
------------ ------------ ------------ ------------ ------------ ------------
Total net increase.... 1,804,673 564,414 5,782,544 3,950,719 372,219 2,507,194
------------ ------------ ------------ ------------ ------------ ------------
------------ ------------ ------------ ------------ ------------ ------------
</TABLE>

<TABLE>
<CAPTION>
GROWTH AND INCOME U.S. GOVERNMENT INVESTMENT
QUALITY
---------------------------- ---------------------------- ----------------------------
SIX MONTHS SIX MONTHS SIX MONTHS
ENDED YEAR ENDED ENDED YEAR ENDED ENDED YEAR
ENDED
APRIL 30, OCTOBER 31, APRIL 30, OCTOBER 31, APRIL 30, OCTOBER 31,
1995* 1994 1995* 1994 1995* 1994
------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
CLASS A
Issued.................... 240,232 591,037 764,507 1,484,549 347,221 1,194,443
Dividends and
distributions
reinvested............... 186,609 506,743 286,809 839,276 116,979 263,168
Redeemed.................. (266,050) (600,435) (1,972,889) (6,552,668) (815,458) (1,940,417)
------------ ------------ ------------ ------------ ------------ ------------
Net increase
(decrease)............. 160,791 497,345 (921,573) (4,228,843) (351,258) (482,806)
------------ ------------ ------------ ------------ ------------ ------------
CLASS B
Issued.................... 121,157 269,571 350,917 594,901 294,053 614,495
Dividends and
distributions
reinvested............... 18,473 19,104 15,011 16,698 20,468 18,150
Redeemed.................. (19,727) (26,407) (67,374) (86,599) (85,574) (77,488)
------------ ------------ ------------ ------------ ------------ ------------
Net increase............ 119,903 262,268 298,554 525,000 228,947 555,157
------------ ------------ ------------ ------------ ------------ ------------
CLASS C
Issued.................... 40,779 33,894 61,226 123,553 58,013 290,357
Dividends and
distributions
reinvested............... 3,054 2,697 3,354 4,123 4,105 9,047
Redeemed.................. (2,092) (469) (8,544) (25,877) (4,928) (41,081)
------------ ------------ ------------ ------------ ------------ ------------
Net increase............ 41,741 36,122 56,036 101,799 57,190 258,323
------------ ------------ ------------ ------------ ------------ ------------
Total net increase
(decrease)........... 322,435 795,735 (566,983) (3,602,044) (65,121) 330,674
------------ ------------ ------------ ------------ ------------ ------------
------------ ------------ ------------ ------------ ------------ ------------
<FN>
*Unaudited.
</TABLE>

28
<PAGE>
- --------------------------------------------------------------------------------

5. UNREALIZED APPRECIATION (DEPRECIATION) AND COST OF INVESTMENTS FOR FEDERAL
INCOME TAX PURPOSES

At April 30, 1995, the composition of unrealized appreciation (depreciation)
of investment securities and the cost of investments for Federal income tax
purposes were as follows:

<TABLE>
<CAPTION>
APPRECIATION (DEPRECIATION) NET TAX COST
------------ ------------- ------------ -------------
<S> <C> <C> <C> <C>
Quest for Value $51,733,096 $ (1,752,244) $ 49,980,852 $ 231,903,854
Opportunity 49,286,577 (1,812,363) 47,474,214 306,602,498
Small Capitalization 10,004,767 (7,766,524) 2,238,243 138,815,958
Growth and Income 2,889,041 (1,284,031) 1,605,010 37,028,918
U.S. Government 966,818 (8,766,967) (7,800,149) 144,810,919
Investment Quality 1,588,495 (2,012,166) (423,671) 57,332,480
</TABLE>

6. AUTHORIZED FUND SHARES AND PAR VALUE PER SHARE

<TABLE>
<CAPTION>
QUEST SMALL GROWTH U.S. INVESTMENT
FOR VALUE OPPORTUNITY CAPITALIZATION AND INCOME GOVERNMENT
QUALITY
----------- ------------ --------------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Authorized fund shares 35,000,000 unlimited unlimited unlimited unlimited unlimited
Par value per share $1.00 $.01 $.01 $.01 $.01 $.01
</TABLE>

7. DIVIDENDS AND DISTRIBUTIONS

The following tables summarize the per share dividends and distributions
made for the six months ended April 30, 1995 and the year ended October 31,
1994:

<TABLE>
<CAPTION>
QUEST FOR VALUE OPPORTUNITY SMALL CAPITALIZATION
------------------------- ------------------------- -------------------------
SIX MONTHS SIX MONTHS SIX MONTHS
ENDED YEAR ENDED ENDED YEAR ENDED ENDED YEAR ENDED
APRIL 30, OCTOBER 31, APRIL 30, OCTOBER 31, APRIL 30, OCTOBER 31,
1995* 1994 1995* 1994 1995* 1994
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
NET INVESTMENT INCOME:
Class A................... $ 0.083 $ 0.040 $ 0.117 $ 0.326 -- --
Class B................... 0.074 0.031 0.117 0.313 -- --
Class C................... 0.081 0.033 0.117 0.312 -- --
NET REALIZED GAINS:
Class A................... $ 0.828 $ 0.469 $ 0.614 $ 0.219 $ 0.415 $ 1.331
Class B................... 0.828 0.469 0.614 0.219 0.415 1.331
Class C................... 0.828 0.469 0.614 0.219 0.415 1.331
</TABLE>

<TABLE>
<CAPTION>
GROWTH AND INCOME U.S. GOVERNMENT INVESTMENT QUALITY
------------------------- ------------------------- -------------------------
SIX MONTHS SIX MONTHS SIX MONTHS
ENDED YEAR ENDED ENDED YEAR ENDED ENDED YEAR ENDED
APRIL 30, OCTOBER 31, APRIL 30, OCTOBER 31, APRIL 30, OCTOBER 31,
1995* 1994 1995* 1994 1995* 1994
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
NET INVESTMENT INCOME:
Class A................... $ 0.182 $ 0.319 $ 0.322 $ 0.593 $ 0.362 $ 0.680
Class B................... 0.162 0.265 0.284 0.510 0.332 0.609
Class C................... 0.142 0.261 0.279 0.509 0.329 0.608
NET REALIZED GAINS:
Class A................... $ 0.422 $ 1.669 $ 0.013 $ 0.213 -- $ 0.069
Class B................... 0.422 1.669 0.013 0.213 -- 0.069
Class C................... 0.422 1.669 0.013 0.213 -- 0.069
<FN>
*Unaudited.
</TABLE>

8. FINANCIAL INSTRUMENTS AND ASSOCIATED RISKS

At April 30, 1995, U.S. Government had written options outstanding. Written
options have elements of risk in excess of the amounts reflected in the
Statement of Assets and Liabilities. The fund, as a writer of an option, has no
control over whether the option is exercised. The underlying security may be
sold and, as a result, the fund bears the market risk of an unfavorable change
in the price of the security underlying the written option.

29
<PAGE>
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS (FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
INCOME FROM
INVESTMENT OPERATIONS DIVIDENDS AND DISTRIBUTIONS
----------------------------------- ---------------------------------------
Net Distributions
Realized Dividends to
and to Shareholders Net
Net Asset Net Unrealized Shareholders from Net Total Asset
Value, Investment Gain Total from from Net Realized Dividends Value,
Beginning Income (Loss) on Investment Investment Gain on and End of Total
of Period (Loss) Investments Operations Income Investments Distributions Period Return*
Quest for Value Fund, Inc.
<S> <C> <C> <C> <C> <C> <C> <C> <C>
<C>
Class A,
SIX MONTHS ENDED
APRIL 30, 1995
(6) $12.59 $ 0.06 $ 1.00 $ 1.06 $(0.08) $(0.83) $(0.91) $12.74 9.52%
YEAR ENDED
OCTOBER 31,
1994 12.51 0.09 0.50 0.59 (0.04) (0.47) (0.51) 12.59 5.01%
1993 11.71 0.05 1.34 1.39 (0.05) (0.54) (0.59) 12.51 12.27%
1992 10.61 0.04 1.77 1.81 (0.07) (0.64) (0.71) 11.71 18.45%
1991 7.84 0.09 2.84 2.93 (0.16) -- (0.16) 10.61 37.94%
1990 (2) 9.85 0.18 (1.38) (1.20) (0.26) (0.55) (0.81) 7.84 (13.43%)
Class B,
SIX MONTHS ENDED
APRIL 30, 1995
(6) 12.53 0.03 0.99 1.02 (0.07) (0.83) (0.90) 12.65 9.23%
YEAR ENDED
OCTOBER 31, 1994 12.51 0.02 0.50 0.52 (0.03) (0.47) (0.50) 12.53 4.43%
SEPTEMBER 2, 1993
(4) TO OCTOBER
31, 1993 12.66(3) (0.01) (0.14) (0.15) -- -- -- 12.51 (1.19%)
Class C,
SIX MONTHS ENDED
APRIL 30, 1995
(6) 12.52 0.03 1.00 1.03 (0.08) (0.83) (0.91) 12.64 9.31%
YEAR ENDED
OCTOBER 31, 1994 12.50 0.01 0.51 0.52 (0.03) (0.47) (0.50) 12.52 4.45%
SEPTEMBER 2, 1993
(4) TO OCTOBER
31, 1993 12.66(3) (0.01) (0.15) (0.16) -- -- -- 12.50 (1.26%)

<CAPTION>
RATIOS
----------------------------------------------
Ratio of Net
Net Ratio of Net Investment
Assets Operating Income
End of Expenses to (Loss) to Portfolio
Period Average Net Average Net Turnover
(000's) Assets Assets Rate
Quest for Value Fund, Inc.
<S> <C> <C> <C> <C>
Class A,
SIX MONTHS ENDED
APRIL 30, 1995
(6) $ 251,821 1.69%(1,5) 0.97%(1,5) 17%
YEAR ENDED
OCTOBER 31,
1994 238,085 1.71% 0.72% 49%
1993 245,320 1.75% 0.40% 27%
1992 142,939 1.75% 0.53% 41%
1991 79,914 1.83% 1.06% 48%
1990 (2) 49,740 1.82% 1.71% 51%
Class B,
SIX MONTHS ENDED
APRIL 30, 1995
(6) 23,805 2.21%(1,5) 0.45%(1,5) 17%
YEAR ENDED
OCTOBER 31, 1994 14,373 2.24% 0.14% 49%
SEPTEMBER 2, 1993
(4) TO OCTOBER
31, 1993 2,015 2.27%(5) (1.19%)(5) 27%
Class C,
SIX MONTHS ENDED
APRIL 30, 1995
(6) 6,375 2.24%(1,5) 0.43%(1,5) 17%
YEAR ENDED
OCTOBER 31, 1994 3,581 2.28% 0.09% 49%
SEPTEMBER 2, 1993
(4) TO OCTOBER
31, 1993 221 2.27%(5) (0.90%)(5) 27%
<FN>
(1) AVERAGE NET ASSETS FOR THE SIX MONTHS ENDED APRIL 30, 1995, FOR CLASSES A,
B, AND C WERE $234,786,678, $18,171,756, $4,638,234, RESPECTIVELY.
(2) SHARE AND PER SHARE DATA HAVE BEEN RETROACTIVELY RESTATED TO REFLECT A 200%
STOCK DIVIDEND AS OF JULY 1, 1991.
</TABLE>
<TABLE>
<CAPTION>
INCOME FROM INVESTMENT OPERATIONS
----------------------------------- DIVIDENDS AND DISTRIBUTIONS
Net ---------------------------------------
Realized Distributions
and Dividends to
Unreal- to Shareholders Net
Net Asset Net In- ized Gain Shareholders from Net Asset
Value, Be- vestment (Loss) on Total from from Net Realized Total Divi- Value, Total
ginning of Income In- Investment Investment Gain on dends and End of Re-
Period (Loss) vestments Operations Income Investments Distributions Period turn*
Opportunity Fund
<S> <C> <C> <C> <C> <C> <C> <C> <C>
<C>
Class A,
SIX MONTHS
ENDED APRIL 30,
1995 (6) $19.69 $ 0.12 $ 2.25 $ 2.37 $(0.12) $(0.61) $(0.73) $ 21.33 12.66%
YEAR ENDED
OCTOBER 31,
1994 18.71 0.18 1.35 1.53 (0.33) (0.22) (0.55) 19.69 8.41%
1993 16.73 0.35 2.02 2.37 (0.07) (0.32) (0.39) 18.71 14.34%
1992 14.29 0.09 2.93 3.02 (0.03) (0.55) (0.58) 16.73 21.93%
1991 9.74 0.03 4.78 4.81 (0.23) (0.03) (0.26) 14.29 50.44%
1990 11.59 0.25 (1.64) (1.39) (0.22) (0.24) (0.46) 9.74 (12.62%)
Class B,
SIX MONTHS
ENDED APRIL 30,
1995 (6) 19.59 0.07 2.23 2.30 (0.12) (0.61) (0.73) 21.16 12.36%
YEAR ENDED
OCTOBER 31,
1994 18.70 0.08 1.34 1.42 (0.31) (0.22) (0.53) 19.59 7.84%
SEPTEMBER 2,
1993 (4) TO
OCTOBER 31,
1993 18.73(3) 0.02 (0.05) (0.03) -- -- -- 18.70 (0.16%)
Class C,
SIX MONTHS
ENDED APRIL 30,
1995 (6) 19.58 0.07 2.23 2.30 (0.12) (0.61) (0.73) 21.15 12.37%
YEAR ENDED
OCTOBER 31,
1994 18.70 0.08 1.33 1.41 (0.31) (0.22) (0.53) 19.58 7.78%
SEPTEMBER 2,
1993 (4) TO
OCTOBER 31,
1993 18.73(3) 0.02 (0.05) (0.03) -- -- -- 18.70 (0.16%)

<CAPTION>
RATIOS
-------------------------------------------
Ratio of
Ratio of Net
Net Net Investment
Assets Operating Income
End of Expenses to (Loss) to Portfolio
Period Average Net Average Net Turnover
Opportunity Fund (000's) Assets Assets Rate
<S> <C> <C> <C> <C>
Class A,
SIX MONTHS
ENDED APRIL 30,
1995 (6) $ 231,881 1.71%(1,5) 1.25%(1,5) 10%
YEAR ENDED
OCTOBER 31,
1994 163,340 1.78% 0.96% 42%
1993 127,225 1.83% 2.69% 24%
1992 40,563 2.27% 0.72% 32%
1991 8,446 2.35%(2) 0.30%(2) 88%
1990 4,570 2.00%(2) 2.30%(2) 206%
Class B,
SIX MONTHS
ENDED APRIL 30,
1995 (6) 102,353 2.24%(1,5) 0.75%(1,5) 10%
YEAR ENDED
OCTOBER 31,
1994 43,317 2.34% 0.43% 42%
SEPTEMBER 2,
1993 (4) TO
OCTOBER 31,
1993 2,115 2.52%(5) 1.32%(5) 24%
Class C,
SIX MONTHS
ENDED APRIL 30,
1995 (6) 20,091 2.26%(1,5) 0.73%(1,5) 10%
YEAR ENDED
OCTOBER 31,
1994 7,289 2.35% 0.43% 42%
SEPTEMBER 2,
1993 (4) TO
OCTOBER 31,
1993 313 2.52%(5) 1.13%(5) 24%
<FN>
(1) AVERAGE NET ASSETS FOR THE SIX MONTHS ENDED APRIL 30, 1995, FOR CLASSES A,
B, AND C WERE $185,941,734, $64,723,666, $11,766,750, RESPECTIVELY.
(2) DURING THE PERIODS PRESENTED ABOVE, THE ADVISER VOLUNTARILY WAIVED ITS FEES
AND REIMBURSED THE FUND FOR A PORTION OF ITS OPERATING EXPENSES. IF SUCH
WAIVERS AND REIMBURSEMENTS HAD NOT BEEN IN EFFECT, THE RATIOS OF NET
OPERATING EXPENSES TO AVERAGE NET ASSETS AND THE RATIOS OF NET INVESTMENT
INCOME (LOSS) TO AVERAGE NET ASSETS WOULD HAVE BEEN 3.33% AND (0.68%),
RESPECTIVELY, FOR THE YEAR ENDED OCTOBER 31, 1991 AND 3.69% AND 0.61%,
RESPECTIVELY, FOR THE YEAR ENDED OCTOBER 31, 1990.
- ------------------------------
(3) OFFERING PRICE.
(4) INITIAL OFFERING OF CLASS B AND CLASS C SHARES.
(5) ANNUALIZED.
(6) UNAUDITED.
* ASSUMES REINVESTMENT OF ALL DIVIDENDS AND DISTRIBUTIONS, BUT DOES NOT
REFLECT DEDUCTIONS FOR SALES CHARGES. AGGREGATE (NOT ANNUALIZED) TOTAL
RETURN IS SHOWN FOR ANY PERIOD SHORTER THAN ONE YEAR.
</TABLE>

30
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INCOME FROM
INVESTMENT OPERATIONS DIVIDENDS AND DISTRIBUTIONS
----------------------------------- ---------------------------------------
Net Distributions
Realized to
and Dividends Shareholders
Unrealized to from Net Net
Net Asset Net Gain Shareholders Realized Total Asset
Value, Investment (Loss) Total from from Net Gain Dividends Value,
Beginning Income on Investment Investment on and End of Total
of Period (Loss) Investments Operations Income Investments Distributions Period Return*
Small Capitalization Fund
<S> <C> <C> <C> <C> <C> <C> <C> <C>
<C>
Class A,
SIX MONTHS ENDED
APRIL 30, 1995
(6) $16.33 $ 0.05 $ 0.22 $ 0.27 $-- $(0.42) $(0.42) $16.18 1.71%
YEAR ENDED
OCTOBER 31,
1994 17.68 (0.03) 0.01 (0.02) -- (1.33) (1.33) 16.33 0.04%
1993 14.60 (0.04) 4.26 4.22 -- (1.14) (1.14) 17.68 30.21%
1992 13.52 0.00 1.50 1.50 -- (0.42) (0.42) 14.60 11.60%
1991 8.80 (0.05) 4.85 4.80 (0.08) -- (0.08) 13.52 55.01%
1990 10.91 0.07 (2.04) (1.97) (0.08) (0.06) (0.14) 8.80 (18.33%)
Class B,
SIX MONTHS ENDED
APRIL 30, 1995
(6) 16.24 (0.01) 0.22 0.21 -- (0.42) (0.42) 16.03 1.35%
YEAR ENDED
OCTOBER 31, 1994 17.66 (0.11) 0.02 (0.09) -- (1.33) (1.33) 16.24 (0.39%)
SEPTEMBER 2, 1993
(4) TO OCTOBER
31, 1993 17.19(3) (0.02) 0.49 0.47 -- -- -- 17.66 2.73%
Class C,
SIX MONTHS ENDED
APRIL 30, 1995
(6) 16.23 0.00 0.22 0.22 -- (0.42) (0.42) 16.03 1.41%
YEAR ENDED
OCTOBER 31, 1994 17.67 (0.13) 0.02 (0.11) -- (1.33) (1.33) 16.23 (0.51%)
SEPTEMBER 2, 1993
(4) TO OCTOBER
31, 1993 17.19(3) (0.02) 0.50 0.48 -- -- -- 17.67 2.79%

Growth and Income Fund
<TABLE>
<CAPTION>
INCOME FROM
INVESTMENT OPERATIONS DIVIDENDS AND DISTRIBUTIONS
----------------------------------- ---------------------------------------
Net Distributions
Realized to
and Dividends Shareholders
Unrealized to from Net Net
Net Asset Net Gain Shareholders Realized Total Asset
Value, Investment (Loss) Total from from Net Gain Dividends Value,
Beginning Income on Investment Investment on and End of Total
of Period (Loss) Investments Operations Income Investments Distributions Period Return*
Growth and Income Fund
<S> <C> <C> <C> <C> <C> <C> <C> <C>
<C>
Class A,
SIX MONTHS ENDED
APRIL 30, 1995
(6) $10.09 $ 0.18 $ 0.67 $ 0.85 $(0.18) $(0.42) $(0.60) $10.34 9.11%
YEAR ENDED
OCTOBER 31,
1994 11.24 0.32 0.55 0.87 (0.32) (1.70) (2.02) 10.09 8.64%
1993 10.80 0.30 0.73 1.03 (0.26) (0.33) (0.59) 11.24 9.93%
NOVEMBER 4, 1991
(7) TO OCTOBER
31, 1992 10.00(3) 0.28 0.80 1.08 (0.28) -- (0.28) 10.80 10.84%
Class B,
SIX MONTHS ENDED
APRIL 30, 1995
(6) 10.07 0.16 0.66 0.82 (0.16) (0.42) (0.58) 10.31 8.79%
YEAR ENDED
OCTOBER 31, 1994 11.23 0.25 0.56 0.81 (0.27) (1.70) (1.97) 10.07 7.96%
SEPTEMBER 2, 1993
(4) TO OCTOBER
31, 1993 11.21(3) 0.04 0.05 0.09 (0.07) -- (0.07) 11.23 0.81%
Class C,
SIX MONTHS ENDED
APRIL 30, 1995
(6) 10.07 0.14 0.67 0.81 (0.14) (0.42) (0.56) 10.32 8.67%
YEAR ENDED
OCTOBER 31, 1994 11.23 0.24 0.56 0.80 (0.26) (1.70) (1.96) 10.07 7.91%
SEPTEMBER 2, 1993
(4) TO OCTOBER
31, 1993 11.21(3) 0.04 0.05 0.09 (0.07) -- (0.07) 11.23 0.81%

<CAPTION>
RATIOS
----------------------------------------------
Ratio of Net
Net Ratio of Net Investment
Assets Operating Income
End of Expenses (Loss) Portfolio
Period to Average to Average Turnover
(000's) Net Assets Net Assets Rate
Growth and Income Fund
<S> <C> <C> <C> <C>
Class A,
SIX MONTHS ENDED
APRIL 30, 1995
(6) $ 32,969 1.92%(1,2,5) 3.78%(1,2,5) 63%
YEAR ENDED
OCTOBER 31,
1994 30,576 1.86%(2) 3.16%(2) 113%
1993 28,466 1.90%(2) 2.66%(2) 192%
NOVEMBER 4, 1991
(7) TO OCTOBER
31, 1992 8,057 2.23%(2,5) 2.73%(2,5) 77%
Class B,
SIX MONTHS ENDED
APRIL 30, 1995
(6) 4,231 2.49%(1,2,5) 3.25%(1,2,5) 63%
YEAR ENDED
OCTOBER 31, 1994 2,928 2.47%(2) 2.53%(2) 113%
SEPTEMBER 2, 1993
(4) TO OCTOBER
31, 1993 319 2.49%(2,5) 1.83%(2,5) 192%
Class C,
SIX MONTHS ENDED
APRIL 30, 1995
(6) 897 2.77%(1,2,5) 3.00%(1,2,5) 63%
YEAR ENDED
OCTOBER 31, 1994 455 2.62%(2) 2.39%(2) 113%
SEPTEMBER 2, 1993
(4) TO OCTOBER
31, 1993 102 2.49%(2,5) 2.18%(2,5) 192%
<FN>
(1) AVERAGE NET ASSETS FOR THE SIX MONTHS ENDED APRIL 30, 1995, FOR CLASSES A,
B, AND C WERE $30,191,320, $3,343,785, $609,761, RESPECTIVELY.
(2) DURING THE PERIODS PRESENTED ABOVE, THE ADVISER VOLUNTARILY WAIVED A
PORTION OF ITS FEES. IF SUCH WAIVER HAD NOT BEEN IN EFFECT, THE RATIOS OF
NET OPERATING EXPENSES TO AVERAGE NET ASSETS AND THE RATIOS OF NET
INVESTMENT INCOME TO AVERAGE NET ASSETS FOR CLASS A WOULD HAVE BEEN 2.17%
AND 3.53%, ANNUALIZED, RESPECTIVELY, FOR THE SIX MONTHS ENDED APRIL 30,
1995, 2.32% AND 2.70%, RESPECTIVELY, FOR THE YEAR ENDED OCTOBER 31, 1994
AND 2.18% AND 2.38%, RESPECTIVELY, FOR THE YEAR ENDED OCTOBER 31, 1993 AND
2.98% AND 1.98%, ANNUALIZED, RESPECTIVELY, FOR THE PERIOD NOVEMBER 4, 1991
(COMMENCEMENT OF OPERATIONS) TO OCTOBER 31, 1992. THE RATIOS OF NET
OPERATING EXPENSES TO AVERAGE NET ASSETS AND THE RATIOS OF NET INVESTMENT
INCOME TO AVERAGE NET ASSETS WOULD HAVE BEEN 2.73% AND 3.01%, ANNUALIZED,
RESPECTIVELY, FOR CLASS B AND 3.00% AND 2.77%, ANNUALIZED, RESPECTIVELY,
FOR CLASS C, FOR THE SIX MONTHS ENDED APRIL 30, 1995, 2.93% AND 2.07%,
RESPECTIVELY, FOR CLASS B AND 3.10% AND 1.91%, RESPECTIVELY, FOR CLASS C,
FOR THE YEAR ENDED OCTOBER 31, 1994 AND 2.88% AND 1.44%, ANNUALIZED,
RESPECTIVELY, FOR CLASS B AND 2.87% AND 1.80%, ANNUALIZED, RESPECTIVELY,
FOR CLASS C, FOR THE PERIOD SEPTEMBER 2, 1993 (INITIAL OFFERING) TO OCTOBER
31, 1993.
- ------------------------------
(3) OFFERING PRICE.
(4) INITIAL OFFERING OF CLASS B AND CLASS C SHARES.
(5) ANNUALIZED.
(6) UNAUDITED.
(7) COMMENCEMENT OF OPERATIONS.
* ASSUMES REINVESTMENT OF ALL DIVIDENDS AND DISTRIBUTIONS, BUT DOES NOT
REFLECT DEDUCTIONS FOR SALES CHARGES. AGGREGATE (NOT ANNUALIZED) TOTAL
RETURN IS SHOWN FOR ANY PERIOD SHORTER THAN ONE YEAR.
</TABLE>

31
<PAGE>
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS (FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
INCOME FROM
INVESTMENT OPERATIONS DIVIDENDS AND DISTRIBUTIONS
----------------------------------- ---------------------------------------
Net Distributions
Realized Dividends to
and to Shareholders Net
Net Asset Net Unrealized Shareholders from Net Total Asset
Value, Investment Gain Total from from Net Realized Dividends Value,
Beginning Income (Loss) on Investment Investment Gain on and End of Total
of Period (Loss) Investments Operations Income Investments Distributions Period Return*
U.S. Government Income F und
<S> <C> <C> <C> <C> <C> <C> <C> <C>
<C>
Class A,
SIX MONTHS ENDED
APRIL 30, 1995
(6) $10.79 $ 0.32 $ 0.26 $ 0.58 $(0.32) $(0.01) $(0.33) $11.04 5.50%
YEAR ENDED
OCTOBER 31,
1994 12.08 0.59 (1.08) (0.49) (0.59) (0.21) (0.80) 10.79 (4.15%)
1993 11.92 0.65 0.35 1.00 (0.68) (0.16) (0.84) 12.08 8.55%
1992 11.80 0.74 0.18 0.92 (0.74) (0.06) (0.80) 11.92 7.98%
1991 11.35 0.85 0.61 1.46 (0.86) (0.15) (1.01) 11.80 13.40%
1990 11.50 0.93 (0.06) 0.87 (0.93) (0.09) (1.02) 11.35 7.98%
Class B,
SIX MONTHS ENDED
APRIL 30, 1995
(6) 10.79 0.28 0.26 0.54 (0.28) (0.01) (0.29) 11.04 5.14%
YEAR ENDED
OCTOBER 31, 1994 12.08 0.51 (1.08) (0.57) (0.51) (0.21) (0.72) 10.79 (4.84%)
SEPTEMBER 2, 1993
(4) TO OCTOBER
31, 1993 12.13(3) 0.08 (0.04) 0.04 (0.08) (0.01) (0.09) 12.08 0.29%
Class C,
SIX MONTHS ENDED
APRIL 30, 1995
(6) 10.79 0.28 0.26 0.54 (0.28) (0.01) (0.29) 11.04 5.09%
YEAR ENDED
OCTOBER 31, 1994 12.08 0.51 (1.08) (0.57) (0.51) (0.21) (0.72) 10.79 (4.84%)
SEPTEMBER 2, 1993
(4) TO OCTOBER
31, 1993 12.13(3) 0.08 (0.04) 0.04 (0.08) (0.01) (0.09) 12.08 0.34%

<CAPTION>
RATIOS
----------------------------------------------
Ratio of Net
Net Ratio of Net Investment
Assets Operating Income
End of Expenses (Loss) Portfolio
Period to Average to Average Turnover
(000's) Net Assets Net Assets Rate
U.S. Government Income Fund
<S> <C> <C> <C> <C>
Class A,
SIX MONTHS ENDED
APRIL 30, 1995
(6) $ 115,898 1.27%(1,5) 5.99%(1,5) 205%
YEAR ENDED
OCTOBER 31,
1994 123,257 1.20%(2) 5.19%(2) 126%
1993 189,091 1.15%(2) 5.33%(2) 315%
1992 151,197 1.15%(2) 6.26%(2) 207%
1991 82,400 1.15%(2) 7.24%(2) 309%
1990 52,742 1.15%(2) 8.21%(2) 101%
Class B,
SIX MONTHS ENDED
APRIL 30, 1995
(6) 10,280 1.93%(1) 5.18%(1) 205%
YEAR ENDED
OCTOBER 31, 1994 6,813 1.92%(2) 4.53%(2) 126%
SEPTEMBER 2, 1993
(4) TO OCTOBER
31, 1993 1,286 1.85%(2,5) 3.07%(2,5) 315%
Class C,
SIX MONTHS ENDED
APRIL 30, 1995
(6) 1,872 2.05%(1) 5.14%(1) 205%
YEAR ENDED
OCTOBER 31, 1994 1,224 1.94%(2) 4.57%(2) 126%
SEPTEMBER 2, 1993
(4) TO OCTOBER
31, 1993 141 1.85%(2,5) 3.89%(2,5) 315%
<FN>
(1) AVERAGE NET ASSETS FOR THE SIX MONTHS ENDED APRIL 30, 1995, FOR CLASSES A,
B, AND C WERE $116,762,622, $8,585,009, $1,432,342, RESPECTIVELY.
(2) DURING THE PERIODS PRESENTED ABOVE, THE ADVISER VOLUNTARILY WAIVED A
PORTION OF ITS FEES. IF SUCH WAIVERS HAD NOT BEEN IN EFFECT, THE RATIOS OF
NET OPERATING EXPENSES TO AVERAGE NET ASSETS AND THE RATIOS OF NET
INVESTMENT INCOME TO AVERAGE NET ASSETS FOR CLASS A WOULD HAVE BEEN 1.23%
AND 5.16%, RESPECTIVELY, FOR THE YEAR ENDED OCTOBER 31, 1994, 1.20% AND
5.28%, RESPECTIVELY, FOR THE YEAR ENDED OCTOBER 31, 1993, 1.17% AND 6.24%,
RESPECTIVELY, FOR THE YEAR ENDED OCTOBER 31, 1992, 1.46% AND 6.93%,
RESPECTIVELY, FOR THE YEAR ENDED OCTOBER 31, 1991 AND 1.44% AND 7.92%,
RESPECTIVELY, FOR THE YEAR ENDED OCTOBER 31, 1990. THE RATIOS OF NET
OPERATING EXPENSES TO AVERAGE NET ASSETS AND THE RATIOS OF NET INVESTMENT
INCOME TO AVERAGE NET ASSETS WOULD HAVE BEEN 1.93% AND 4.52%, RESPECTIVELY,
FOR CLASS B AND 1.95% AND 4.56%, RESPECTIVELY, FOR CLASS C, FOR THE YEAR
ENDED OCTOBER 31, 1994 AND 1.96% AND 2.96%, ANNUALIZED, RESPECTIVELY, FOR
CLASS B AND 1.96% AND 3.78%, ANNUALIZED, RESPECTIVELY, FOR CLASS C, FOR THE
PERIOD SEPTEMBER 2, 1993 (INITIAL OFFERING) TO OCTOBER 31, 1993.
</TABLE>
<TABLE>
<CAPTION>
INCOME FROM
INVESTMENT OPERATIONS DIVIDENDS AND DISTRIBUTIONS
----------------------------------- ---------------------------------------

Net Distributions
Realized Dividends to
and to Shareholders Net
Net Asset Net Unrealized Shareholders from Net Total Asset
Value, Investment Gain Total from from Net Realized Dividends Value,
Beginning Income (Loss) on Investment Investment Gain on and End of Total
of Period (Loss) Investments Operations Income Investments Distributions Period Return*
<S> <C> <C> <C> <C> <C> <C> <C> <C>
<C>
Investment Quality Income Fund
Class A,
SIX MONTHS ENDED
APRIL 30, 1995
(6) $ 9.67 $ 0.36 $ 0.52 $ 0.88 $(0.36) $-- $(0.36) $10.19 9.28%
YEAR ENDED
OCTOBER 31,
1994 11.49 0.68 (1.75) (1.07) (0.68) (0.07) (0.75) 9.67 (9.61%)
1993 10.36 0.68 1.19 1.87 (0.68) (0.06) (0.74) 11.49 18.64%
1992 10.06 0.80 0.30 1.10 (0.80) -- (0.80) 10.36 11.21%
DECEMBER 18, 1990
(7) TO OCTOBER
31, 1991 10.00(3) 0.71 0.06 0.77 (0.71) -- (0.71) 10.06 8.11%
Class B,
SIX MONTHS ENDED
APRIL 30, 1995
(6) 9.67 0.33 0.52 0.85 (0.33) -- (0.33) 10.19 8.96%
YEAR ENDED
OCTOBER 31, 1994 11.49 0.61 (1.75) (1.14) (0.61) (0.07) (0.68) 9.67 (10.22%)
SEPTEMBER 2, 1993
(4) TO OCTOBER
31, 1993 11.52(3) 0.08 (0.03) 0.05 (0.08) -- (0.08) 11.49 0.45%
Class C,
SIX MONTHS ENDED
APRIL 30, 1995
(6) 9.67 0.33 0.52 0.85 (0.33) -- (0.33) 10.19 8.92%
YEAR ENDED
OCTOBER 31, 1994 11.49 0.61 (1.75) (1.14) (0.61) (0.07) (0.68) 9.67 (10.23%)
SEPTEMBER 2, 1993
(4) TO OCTOBER
31, 1993 11.52(3) 0.09 (0.03) 0.06 (0.09) -- (0.09) 11.49 0.55%

<CAPTION>
RATIOS
----------------------------------------------
Ratio of Net
Net Ratio of Net Investment
Assets Operating Income
End of Expenses (Loss) Portfolio
Period to Average to Average Turnover
(000's) Net Assets Net Assets Rate
<S> <C> <C> <C> <C>
Investment Quality Income Fund
Class A,
SIX MONTHS ENDED
APRIL 30, 1995
(6) $ 45,860 1.41%(1,2,5) 7.41%(1,2,5) 4%
YEAR ENDED
OCTOBER 31,
1994 46,922 1.29%(2) 6.47%(2) 33%
1993 61,288 1.20%(2) 6.07%(2) 12%
1992 29,701 0.95%(2) 7.62%(2) 18%
DECEMBER 18, 1990
(7) TO OCTOBER
31, 1991 17,235 0.82%(2,5) 8.25%(2,5) 19%
Class B,
SIX MONTHS ENDED
APRIL 30, 1995
(6) 9,293 2.01%(1,2,5) 6.71%(1,2,5) 4%
YEAR ENDED
OCTOBER 31, 1994 6,605 1.92%(2) 5.85%(2) 33%
SEPTEMBER 2, 1993
(4) TO OCTOBER
31, 1993 1,468 1.84%(2,5) 3.68%(2,5) 12%
Class C,
SIX MONTHS ENDED
APRIL 30, 1995
(6) 3,306 2.07%(1,2,5) 6.70%(1,2,5) 4%
YEAR ENDED
OCTOBER 31, 1994 2,583 1.90%(2) 6.01%(2) 33%
SEPTEMBER 2, 1993
(4) TO OCTOBER
31, 1993 101 1.84%(2,5) 4.83%(2,5) 12%
<FN>
(1) AVERAGE NET ASSETS FOR THE SIX MONTHS ENDED APRIL 30, 1995, FOR CLASSES A,
B, AND C WERE $44,895,780, $7,602,107, $2,880,817, RESPECTIVELY.
(2) DURING THE PERIODS PRESENTED ABOVE, THE ADVISER VOLUNTARILY WAIVED ALL OR A
PORTION OF ITS FEES AND REIMBURSED THE FUND FOR A PORTION OF ITS OPERATING
EXPENSES. IF SUCH WAIVERS AND REIMBURSEMENTS HAD NOT BEEN IN EFFECT, THE
RATIOS OF NET OPERATING EXPENSES TO AVERAGE NET ASSETS AND THE RATIOS OF
NET INVESTMENT INCOME TO AVERAGE NET ASSETS FOR CLASS A WOULD HAVE BEEN
1.26% AND 7.56%, ANNUALIZED, RESPECTIVELY, FOR THE SIX MONTHS ENDED APRIL
30, 1995, 1.59% AND 6.17%, RESPECTIVELY, FOR THE YEAR ENDED OCTOBER 31,
1994, 1.50% AND 5.77%, RESPECTIVELY, FOR THE YEAR ENDED OCTOBER 31, 1993,
1.72% AND 6.85%, RESPECTIVELY, FOR THE YEAR ENDED OCTOBER 31, 1992, AND
2.11% AND 6.96%, ANNUALIZED, RESPECTIVELY, FOR THE PERIOD DECEMBER 18, 1990
(COMMENCEMENT OF OPERATIONS) TO OCTOBER 31, 1991. THE RATIOS OF NET
OPERATING EXPENSES TO AVERAGE NET ASSETS AND THE RATIOS OF NET INVESTMENT
INCOME TO AVERAGE NET ASSETS WOULD HAVE BEEN 1.86% AND 6.86%, ANNUALIZED,
RESPECTIVELY, FOR CLASS B AND 1.92% AND 6.85%, ANNUALIZED, RESPECTIVELY FOR
CLASS C, FOR THE SIX MONTHS ENDED APRIL 30, 1995, 2.23% AND 5.54%,
RESPECTIVELY, FOR CLASS B AND 2.21% AND 5.70%, RESPECTIVELY, FOR CLASS C,
FOR THE YEAR ENDED OCTOBER 31, 1994 AND 2.07% AND 3.45%, ANNUALIZED,
RESPECTIVELY, FOR CLASS B AND 2.06% AND 4.61%, ANNUALIZED, RESPECTIVELY,
FOR CLASS C FOR THE PERIOD SEPTEMBER 2, 1993 (INITIAL OFFERING) TO OCTOBER
31, 1993.
- ------------------------------
(3) OFFERING PRICE.
(4) INITIAL OFFERING OF CLASS B AND CLASS C SHARES.
(5) ANNUALIZED.
(6) UNAUDITED.
(7) COMMENCEMENT OF OPERATIONS.
* ASSUMES REINVESTMENT OF ALL DIVIDENDS AND DISTRIBUTIONS, BUT DOES NOT
REFLECT DEDUCTIONS FOR SALES CHARGES. AGGREGATE (NOT ANNUALIZED) TOTAL
RETURN IS SHOWN FOR ANY PERIOD SHORTER THAN ONE YEAR.
</TABLE>

32
<PAGE>
(This page has been left blank intentionally.)
<PAGE>
THE QUEST FOR VALUE FAMILY OF FUNDS
- --------------------------------------------------------------------------------

EQUITY FUNDS

QUEST FOR VALUE FUND invests primarily in common stocks with an objective of
capital appreciation.

QUEST FOR VALUE OPPORTUNITY FUND seeks capital appreciation by investing through
a mix of stocks, fixed income and money market securities.

QUEST FOR VALUE SMALL CAPITALIZATION FUND seeks capital appreciation by
investing primarily in undervalued stocks of companies with market
capitalizations under $1 billion.

QUEST FOR VALUE GLOBAL EQUITY FUND seeks long term growth through a global
investment strategy primarily involving equity securities.

QUEST FOR VALUE GROWTH AND INCOME FUND seeks total return by investing in a
combination of stocks, U.S. government securities and investment grade bonds.

FIXED-INCOME FUNDS

QUEST FOR VALUE INVESTMENT QUALITY INCOME FUND seeks high monthly income
consistent with conservation of principal through a portfolio of corporate and
U.S. government bonds, 80% of which are rated A or better.

QUEST FOR VALUE GLOBAL INCOME FUND invests in fixed income securities of
domestic and foreign governments and corporations with an objective of high
monthly income.

QUEST FOR VALUE U.S. GOVERNMENT INCOME FUND seeks high current income together
with protection of principal by investing in U.S. government securities.

QUEST FOR VALUE TAX EXEMPT FUNDS are three portfolios investing in investment
grade municipal obligations with the objective of high current income exempt
from federal taxes and, in some cases, state and local income taxes. The three
portfolios are: the National Tax Exempt Fund, the New York Tax Exempt Fund and
the California Tax Exempt Fund.
<PAGE>
- --------------------------------------------------------------------------------
QUEST FOR VALUE QUEST FOR VALUE

DIRECTORS (TRUSTEES) AND OFFICERS

JOSEPH M. LA MOTTA DIRECTOR (TRUSTEE), PRESIDENT
PAUL Y. CLINTON DIRECTOR (TRUSTEE)
THOMAS W. COURTNEY DIRECTOR (TRUSTEE)
LACY B. HERRMANN DIRECTOR (TRUSTEE)
GEORGE LOFT DIRECTOR (TRUSTEE)
BERNARD H. GARIL VICE PRESIDENT
ROBERT J. BLUESTONE VICE PRESIDENT
RICHARD J. GLASEBROOK, II VICE PRESIDENT
COLIN GLINSMAN VICE PRESIDENT
LOUIS GOLDSTEIN VICE PRESIDENT
VIKKI HANGES VICE PRESIDENT
JENNY BETH JONES VICE PRESIDENT
EILEEN P. ROMINGER VICE PRESIDENT
GEORGE TILGHMAN VICE PRESIDENT
SHELDON SIEGEL TREASURER
DEBORAH KABACK SECRETARY
LESLIE KLEIN ASSISTANT TREASURER
THOMAS E. DUGGAN ASSISTANT SECRETARY
MARIA CAMACHO ASSISTANT SECRETARY

INVESTMENT ADVISER

QUEST FOR VALUE ADVISORS
ONE WORLD FINANCIAL CENTER
NEW YORK, NY 10281

DISTRIBUTOR

QUEST FOR VALUE DISTRIBUTORS
TWO WORLD FINANCIAL CENTER
NEW YORK, NY 10080

TRANSFER AND SHAREHOLDER SERVICING AGENT

STATE STREET BANK AND TRUST COMPANY
P.O. BOX 8505
BOSTON, MA 02266

CUSTODIAN

STATE STREET BANK AND TRUST COMPANY
P.O. BOX 351
BOSTON, MA 02101

TABLE OF CONTENTS
PRESIDENT'S LETTER........................... 1
INVESTMENT REVIEW............................ 3
SCHEDULES OF INVESTMENTS..................... 10
STATEMENTS OF ASSETS AND LIABILITIES......... 20
STATEMENTS OF OPERATIONS..................... 21
STATEMENTS OF CHANGES IN NET ASSETS.......... 22
NOTES TO FINANCIAL STATEMENTS................ 24
FINANCIAL HIGHLIGHTS......................... 30

QUEST FOR VALUE FUND, INC.
OPPORTUNITY FUND
SMALL CAPITALIZATION FUND
GROWTH AND INCOME FUND
U.S. GOVERNMENT INCOME FUND
INVESTMENT QUALITY INCOME FUND

SEMI-ANNUAL
REPORT

APRIL 30, 1995
MANAGED BY
QUEST FOR VALUE ADVISORS

THIS REPORT IS AUTHORIZED FOR DISTRIBUTION ONLY TO SHAREHOLDERS AND TO OTHERS
WHO HAVE RECEIVED A COPY OF THE PROSPECTUS.

<PAGE>

PRO FORMA COMBINING STATEMENT OF ASSETS AND LIABILITIES June 30, 1995
(Unaudited) Oppenheimer U.S. Government Trust and Quest for Value U.S.
Government Income Fund

<TABLE>
<CAPTION>
Combined
Quest for ValueOppenheimer U.S.
Oppenheimer U.S.U.S. GovernmentGovernment
Government TrustIncome Fund Trust
Assets
<S> <C> <C> <C>
Investments, at value* $406,327,134 $126,123,769 $532,450,903
Receivables:
Interest and principal paydowns 3,403,235 730,883 4,134,118
Shares of beneficial interest sold178,525 733,992 912,517
Investments sold 346,867 -- 346,867
Other 26,571 40,797 67,368
Total assets 410,282,332 127,629,441 537,911,773
</TABLE>

<TABLE>
<CAPTION>
Liabilities
<S> <C> <C> <C>
Bank overdraft 511,740 (62,316) 449,424
Options written, at value (premiums received
$169,531) -- 196,875 196,875
Payables and other liabilities:
Investments purchased on a when-issued basis84,306,946 -- 84,306,946
Dividends 480,932 99,968 580,900
Shares of beneficial interest redeemed 985,255 952,094 1,937,349
Distribution and service plan fees 192,504 12,283 204,787
Transfer and shareholder servicing agent fees23,977-- 23,977
Trustees' fees 120,007 -- 120,007
Other 35,446 113,766 149,212
Total liabilities 86,656,807 1,312,670 87,969,477

Net Assets $323,625,525 $126,316,771 $449,942,296

</TABLE>

<TABLE>
<CAPTION>
Net Asset Value and Redemption Price Per Share
<S> <C> <C> <C>
Class A Shares:
Net asset value and redemption price per share
(based on net assets of $312,606,704, $114,475,587,
and $427,082,291 and 32,870,814, 10,197,943, and
44,908,205 shares of beneficial interest outstanding
for Oppenheimer U.S. Government Trust, Quest for
Value U.S. Government Income Fund and Combined
Oppenheimer U.S. Government Trust, respectively).$ 9.51$11.23 $ 9.51

Maximum offering price per share (net asset value
plus sales charge of 4.75% of offering price)$ 9.98$11.79 $ 9.98

Class B Shares:
Net asset value and redemption price per share
(based on net assets of $9,817,999 and $9,817,999,
and 874,786 and 1,032,387 shares of beneficial interest
outstanding for Quest for Value U.S. Government
Income Fund and Combined Oppenheimer U.S. Government
Trust, respectively). $ -- $11.22 $ 9.51

</TABLE>
<PAGE>

PRO FORMA COMBINING STATEMENT OF ASSETS AND LIABILITIES June 30, 1995
(Unaudited)
Oppenheimer U.S. Government Trust and Quest for Value U.S. Government
Income Fund

<TABLE>
<CAPTION> Combined
Quest for ValueOppenheimer U.S.
Oppenheimer U.S.U.S. GovernmentGovernment
Government TrustIncome Fund Trust

<S> <C> <C> <C>
Class C Shares:
Net asset value and redemption price per share
(based on net assets of $11,018,821, $2,023,185
and $13,042,006 and 1,159,733, 180,268, and
1,372,700 shares of beneficial interest outstanding
for Oppenheimer U.S. Government Trust, Quest for
Value U.S. Government Income Fund and Combined
Oppenheimer U.S. Government Trust, respectively).$ 9.50$11.22 $ 9.50

*Cost $397,253,863 $126,502,368 $523,756,231

</TABLE>

PRO FORMA COMBINING STATEMENT OF OPERATIONS For The Year Ended June 30, 1995
Government Income Fund (Unaudited)
Oppenheimer U.S. Government Trust and Quest for Value U.S.

<TABLE>
<CAPTION>
Combined
Quest for Value Oppenheimer
Oppenheimer U.S.U.S. GovernmentPro FormaU.S. Government
Government TrustIncome FundAdjustments Trust

Investment Income:
<S> <C> <C> <C> <C>
Interest $26,384,907 $9,354,711 $35,739,618

Expenses:
Management fees 1,980,189 789,629 (20,039)(1)2,749,779
Distribution and service plan fees:
Class A 737,801 366,311 (61,052)(2) 1,043,060
Class B 80,705 80,705
Class C 65,084 14,307 79,391
Transfer agency 347,882 121,777 469,659
Shareholder reports 144,824 35,534 180,358
Legal and audit 53,814 41,705 95,519
Trustees' fees 40,121 17,108 57,229
Custodian fees 47,249 70,276 (72,985)(1)44,540
Registration and filing fees:
Class A 1,587 50,106 51,693
Class C 2,309 -- 2,309
Other 58,846 140,374 (110,137)(1)89,083
Total expenses 3,479,706 1,727,832 (264,213)(1)4,943,325

Net Investment Income 22,905,201 7,626,879 264,213 30,796,293

Realized and Unrealized Gain (Loss) on
Investments:
Net realized gain (loss) on:
Investments 1,903,530 (8,261,234) (6,357,704)
Closing and expiration of option
contracts written 276,563 579,727 856,290
Net realized gain (loss) 2,180,093 (7,681,507) (5,501,414)

Net change in unrealized
appreciation or depreciation on
investments and options written8,115,44410,518,680 18,634,124
Net realized and unrealized gain
on investments and options
written 10,295,537 2,837,173 13,132,710

Net Increase in Net Assets Resulting
from Operations $33,200,738 $10,464,052 $ 264,213 $43,929,003

</TABLE>

(1)Estimated fee for similar size Funds. Adjustments reflect expected
savings when the two funds merge.

(2)Calculated in accordance with existing Distribution and Service Plan
Agreement for Oppenheimer U.S. Government Trust.

<PAGE>

<TABLE>

==========================================================
==========================================================
============
Pro Forma Combining Statement of Investments June 30, 1995(Unaudited)
Oppenheimer U.S. Government Trust and Quest for Value U.S. Government Income Fund

<CAPTION>
Face Amount Market Value
------------------------------------------ --------------------------------------------
Oppenheimer U.S. Quest U.S. Pro Forma Oppenheimer U.S. Quest U.S. Pro Forma
Government Government Combined Government Government Combined

Mortgage-Backed Obligations - 98.6%
- ------------------------------------------------------------------------------------------------------------------------------------
Government Agency - 96.7%
- ------------------------------------------------------------------------------------------------------------------------------------
FHLMC/FNMA/Sponsored - 48.9%
--------------------------------------------------------------------------------------------------------------------------------
Federal Home Loan Bank, 7%, 11/17/97 $ -- $18,500,000 $ 18,500,000 $ -- $ 18,577,700
$18,577,700
--------------------------------------------------------------------------------------------------------------------------------
Federal Home Loan Mortgage Corp.:
Collateralized Mtg. Obligations,
Gtd. Multiclass Mtg.
Participation Certificates, 10%,
6/15/20 5,511,000 -- 5,511,000 6,203,456 -- 6,203,456
Collateralized Mtg. Obligations,
Gtd. Multiclass Mtg.
Participation Certificates, 14%,
1/1/11 596,715 -- 596,715 686,059 -- 686,059
Collateralized Mtg. Obligations,
Gtd. Multiclass Mtg.
Participation Certificates,
6.65%, 4/15/21 10,750,000 -- 10,750,000 10,544,996 -- 10,544,996
Collateralized Mtg. Obligations,
Gtd. Multiclass Mtg.
Participation Certificates,
6.80%, 3/15/16 15,000,000 -- 15,000,000 15,083,400 -- 15,083,400
Collateralized Mtg. Obligations,
Gtd. Multiclass Mtg.
Participation Certificates,
8.50%, 10/15/19 2,476,908 -- 2,476,908 2,526,843 -- 2,526,843
Collateralized Mtg. Obligations,
Gtd. Multiclass Mtg.
Participation Certificates, 9%,
7/15/21 2,815,075 -- 2,815,075 2,887,676 -- 2,887,676
Gtd. Multiclass Mtg. Participation
Certificates, 11.50%, 6/1/20 1,966,543 -- 1,966,543 2,250,463 -- 2,250,463
Gtd. Multiclass Mtg. Participation
Certificates, 13%, 8/1/15 3,000,000 -- 3,000,000 3,537,188 -- 3,537,188
Multiclass Gtd. Mtg.
Participation Certificates,
Series 1455, 7.50%, 12/15/22 5,000,000 -- 5,000,000 5,068,750 -- 5,068,750
9.50%, 12/1/02-11/1/03 -- 708,619 708,619 -- 735,631 735,631
--------------------------------------------------------------------------------------------------------------------------------
Federal National Mortgage Assn.:
7%, 7/15/25 (1) 20,000,000 -- 20,000,000 19,681,259 -- 19,681,259
Collateralized Mtg. Obligations,
Gtd. Real Estate Mtg. Investment
Conduit Pass-Through
Certificates, 10.50%, 11/25/20 10,000,000 -- 10,000,000 11,497,800 -- 11,497,800
Collateralized Mtg. Obligations,
Gtd. Real Estate Mtg.
Investment Conduit Pass-Through
Certificates, 13%, 11/1/12 233,504 -- 233,504 266,974 -- 266,974
Collateralized Mtg. Obligations,
Gtd. Real Estate Mtg.
Investment Conduit Pass-Through
Certificates, 7%, 12/25/21 29,617,000 -- 29,617,000 28,827,704 -- 28,827,704
Collateralized Mtg. Obligations,
Gtd. Real Estate Mtg.
Investment Conduit Pass-Through
Certificates, 8%, 12/1/22 3,361,862 -- 3,361,862 3,440,008 -- 3,440,008
Collateralized Mtg. Obligations,
Gtd. Real Estate Mtg.
Investment Conduit Pass-Through
Certificates, 8%, 3/25/01 11,567,293 -- 11,567,293 11,602,690 -- 11,602,690
Collateralized Mtg. Obligations,
Gtd. Real Estate Mtg. Investment
Conduit Pass-Through
Certificates, 8.75%, 11/25/05 4,000,000 -- 4,000,000 4,280,400 -- 4,280,400
Collateralized Mtg. Obligations,
Gtd. Real Estate Mtg. Investment
Conduit Pass-Through
Certificates, 8.75%, 12/25/20 18,500,000 -- 18,500,000 19,648,665 -- 19,648,665
Collateralized Mtg. Obligations,
Gtd. Real Estate Mtg.
</TABLE>

<PAGE>

Investment Conduit Pass-Through
Certificates, 9%, 7/1/21 1,764,448 -- 1,764,448 1,847,950 -- 1,847,950
Gtd. Mtg. Pass-Through
Certificates, 12%, 4/1/19 2,000,000 -- 2,000,000 2,305,000 -- 2,305,000
Gtd. Real Estate Mtg. Investment
Conduit Pass-Through
Certificates, 8%, 7/25/19 18,000,000 -- 18,000,000 18,725,938 -- 18,725,938
Gtd. Real Estate Mtg. Investment
Conduit Pass-Through
Certificates, Trust 1992-112,
4%, 12/25/20 3,000,000 -- 3,000,000 2,537,991 -- 2,537,991
Gtd. Real Estate Mtg. Investment
Conduit Pass-Through
Certificates, Trust 1993-87,
Inverse Floater, 4.933%, 6/25/23
(coupon inversely indexed to
1-month US LIBOR, multiplied by
1.857) (2) 2,199,998 -- 2,199,998 1,426,905 -- 1,426,905
Interest-Only Stripped
Mtg.-Backed Security, Trust 222,
8.19%-10.03%, 6/25/23 (3) 47,590,613 -- 47,590,613 14,701,038 -- 14,701,038
Interest-Only Stripped
Mtg.-Backed Security, Trust 240,
7.84%-8.74%, 9/25/23 (3) 32,938,214 -- 32,938,214 10,416,711 -- 10,416,711
Principal-Only Stripped
Mtg.-Backed Security, Series
1993-253, Zero Coupon, 10.01%,
11/25/23 (4) 1,000,028 -- 1,000,028 663,535 -- 663,535
------------------------------------------
200,659,399 19,313,331 219,972,730
- ------------------------------------------------------------------------------------------------------------------------------------
GNMA/Guaranteed - 47.8%
--------------------------------------------------------------------------------------------------------------------------------
Government National Mortgage Assn.:
10%, 6/15/16-8/15/17 2,823,084 -- 2,823,084 3,090,242 -- 3,090,242
10.50%, 11/15/16-5/15/21 11,078,973 -- 11,078,973 12,300,278 -- 12,300,278
11%, 7/20/20 221,995 -- 221,995 245,120 -- 245,120
6.50%, 8/15/25 (1) 63,000,000 -- 63,000,000 63,826,875 -- 63,826,875
7.50%, 3/15/23 41,194,649 -- 41,194,649 41,511,228 -- 41,511,228
8%, 4/15/22-8/15/24 21,381,336 -- 21,381,336 21,933,532 -- 21,933,532
7%, 10/15/22-11/15/23 -- 20,178,372 20,178,372 -- 19,856,729 19,856,729
7.50%, 2/15/22-11/15/24 -- 21,301,709 21,301,709 -- 21,408,217 21,408,217
8%, 4/15/02-5/15/25 -- 18,242,664 18,242,664 -- 18,691,243 18,691,243
8.50%, 6/15/01-9/15/24 -- 11,088,326 11,088,326 -- 11,511,453 11,511,453
10.50%, 1/15/98-12/15/00 -- 531,873 531,873 -- 560,956 560,956
------------------------------------------
142,907,275 72,028,598 214,935,873
- ------------------------------------------------------------------------------------------------------------------------------------
Private - 1.9%
- ------------------------------------------------------------------------------------------------------------------------------------
Multi-Family - 1.9%
--------------------------------------------------------------------------------------------------------------------------------
Resolution Trust Corp.,
Commercial Mtg. Pass-Through
Certificates, Series 1991-M5,
Cl. A, 9%, 3/25/17 5,001,065 -- 5,001,065 5,233,928 -- 5,233,928
--------------------------------------------------------------------------------------------------------------------------------
Resolution Trust Corp.,
Commercial Mtg. Pass-Through
Certificates, Series 1995-C1,
Cl. D, 6.90%, 2/25/27 3,600,000 -- 3,600,000 3,328,875 -- 3,328,875
------------------------------------------
8,562,803 -- 8,562,803
------------------------------------------
Total Mortgage-Backed Obligations (Cost $345,269,392, $92,299,608,
Combined $437,569,000) 352,129,477 91,341,929 443,471,406

==========================================================
==========================================================
================
U.S. Government Obligations - 15.3%
- ------------------------------------------------------------------------------------------------------------------------------------
Treasury - 15.3%
- ------------------------------------------------------------------------------------------------------------------------------------
U.S. Treasury Bonds, 7.625%,
11/15/22 12,000,000 -- 12,000,000 13,402,500 -- 13,402,500
--------------------------------------------------------------------------------------------------------------------------------
U.S. Treasury Bonds, 8.125%,
8/15/19 15,643,000 -- 15,643,000 18,253,426 -- 18,253,426
--------------------------------------------------------------------------------------------------------------------------------
U.S. Treasury Bonds, 8.875%,
8/15/17 3,000,000 -- 3,000,000 3,748,125 -- 3,748,125
--------------------------------------------------------------------------------------------------------------------------------
U.S. Treasury Bonds, 11.625%,
11/15/04 3,500,000 -- 3,500,000 4,813,592 -- 4,813,592
--------------------------------------------------------------------------------------------------------------------------------
U.S. Treasury Nts., 8%, 10/15/96 13,610,000 -- 13,610,000 13,980,014 -- 13,980,014
--------------------------------------------------------------------------------------------------------------------------------
U.S. Treasury Nts., 7.75%,
11/30/99 -- 14,000,000 14,000,000 -- 14,931,840 14,931,840
</TABLE>

<PAGE>

------------------------------------------
Total U.S. Government Obligations (Cost $51,984,471,
$14,352,760, Combined $66,337,231) 54,197,657 14,931,840 69,129,497
- ------------------------------------------------------------------------------------------------------------------------------------
Repurchase Agreements - 4.4%
- ------------------------------------------------------------------------------------------------------------------------------------
Lehman Brothers, 6.13%, 7/03/95
(proceeds at maturity:
$19,860,140, collateralized by
$20,820,000 par, $20,249,532
value, U.S. Treasury Bill, 12/28/95)
(Cost $19,850,000) -- 19,850,000 19,850,000 -- 19,850,000 19,850,000
--------------------------------------------------------------------------------------------------------------------------------
Total Investments, at Value (Cost
$397,253,863, $126,502,368, Combined
$523,756,231) 125.6% 99.8% 118.3% 406,327,134 126,123,769 532,450,903
--------------------------------------------------------------------------------------------------------------------------------
Liabilities in Excess of Other
Assets/Other Assets Net of Liabilities (25.6) 0.2 (18.3) (82,701,609) 193,002 (82,508,607)
---------------------------------------- ------------------------------------------
Net Assets 100.0% 100.0% 100.0% $ 323,625,525 $ 126,316,771 $ 449,942,296
========================================
==========================================

<FN>
1. When-issued security to be delivered and settled after June 30, 1995.

2. Represents the current interest rate for a variable rate bond. Variable rate bonds known as "inverse floaters" pay interest
at a rate that varies inversely with short-term interest rates. As interest rates rise, inverse floaters produce less current
income. Their price may be more volatile than the price of a comparable fixed-rate security. Inverse floaters amount to
$1,426,905 or 0.4% (Combined 0.3%) of the Fund's net assets, at June 30, 1995.

3. Interest-Only Strips represent the right to receive the monthly interest payments on an underlying pool of mortgage loans.
These securities typically decline in price as interest rates decline. Most other fixed-income securities increase in price when
interest rates decline. The principal amount of the underlying pool represents the notional amount on which current interest
is
calculated. The price of these securities is typically more sensitive to changes in prepayment rates than traditional
mortgage-backed securities (for example, GNMA pass-throughs). Interest rates represent effective yield as of June 30, 1995.

4. Principal-Only Strips represent the right to receive the monthly principal payments on an underlying pool of mortgage
loans.
The value of these 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. Interest rates represent effective
yield as of June 30, 1995.

</FN>

</TABLE>

OPPENHEIMER U.S. GOVERNMENT TRUST

FORM N-14

PART C

OTHER INFORMATION

Item 15. Indemnification

Reference is made to Article VIII of Registrant's Agreement and
Declaration of Trust filed as Exhibit 24(b)(1) to Registrant's
Registration Statement and incorporated herein by reference.

Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to trustees, officers
and controlling persons of Registrant pursuant to the foregoing
provisions or otherwise, Registrant has been advised that in the
opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the
Securities Act of 1933 and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities
(other than the payment by Registrant of expenses incurred or
paid by a trustee, officer or controlling person of Registrant
in the successful defense of any action, suit or proceeding) is
asserted by such trustee, officer or controlling person,
Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in
the Securities Act of 1933 and will be governed by the final
adjudication of such issue.

Item 16. Exhibits

(1) Amended and Restated Declaration of Trust dated 6/1/92;
Filed with Post-Effective Amendment No. 20, 10/16/92,
refiled with Registrants Post-Effective Amendment No. 24,
8/24/94, pursuant to Item 102 of Regulation S-T, and
incorporated herein by reference.

(2) By-Laws as amended through 8/6/87: Filed with
Registrant's Form SE to its Form N-SAR for the fiscal
year ended 6/30/88, refiled with Registrants Post-
Effective Amendment No. 24, 8/24/94, pursuant to Item 102
of Regulation S-T, and incorporated herein by reference.

(3) Not applicable.

(4) Agreement and Plan of Reorganization: See Annex A to
Part A of this Registration Statement.

(5) (i) Specimen Class A Share Certificate: Previously
filed with Registrant's Post-Effective Amendment No. 24,
8/24/94, and incorporated herein by reference.

(ii) Specimen Class B Share Certificate: Previously
filed with Registrant's Post-Effective Amendment No. 28,
5/26/95, and incorporated herein by reference.

(iii) Specimen Class C Share Certificate: Previously
filed with Registrant's Post-Effective Amendment No. 24,
8/24/94, and incorporated herein by reference.

(6) Investment Advisory Agreement dated 5/25/95: Previously
filed with Post-Effective Amendment No. 28, 5/26/95, and
incorporated herein by reference.

(7) (i) General Distributor's Agreement dated 12/10/92:
Previously filed with Registrant's Post-Effective
Amendment No. 21, 8/20/93, and incorporated herein
by reference.

(ii) Form of Oppenheimer Funds Distributor, Inc. Dealer
Agreement: Previously filed with Post-Effective
Amendment No. 14 to the Registration Statement of
Oppenheimer Main Street Funds, Inc. (Reg. No. 33-
17850), 9/30/94, and incorporated herein by
reference.

(iii) Form of Oppenheimer Funds Distributor, Inc. Broker
Agreement: Previously filed with Post-Effective
Amendment No. 14 of Oppenheimer Main Street Funds,
Inc. (Reg. No. 33-17850), 9/30/94, and
incorporated herein by reference.

(iv) Form of Oppenheimer Funds Distributor, Inc. Agency
Agreement: Previously filed with Post-Effective
Amendment No. 14 of Oppenheimer Main Street Funds,
Inc. (Reg. No. 33-17850), 9/30/94, and
incorporated herein by reference.

(v) Broker Agreement between Oppenheimer Fund
Management, Inc. and Newbridge Securities, dated
10/1/86: Previously filed with Post-Effective
Amendment No. 25 of Oppenheimer Growth Fund (Reg.
No. 2-45272), 11/1/86, refiled with Post-Effective
Amendment No. 45 of Oppenheimer Growth Fund (Reg.
No. 2-45272), 8/22/94, pursuant to Item 102 of
Regulation S-T, and incorporated herein by
reference.

(8) Retirement Plan for Non-Interested Trustees or Directors
(adopted by Registrant - 6/7/90): Previously filed with
Post-Effective Amendment No. 97 of Oppenheimer Fund (Reg.
No. 2-14586), 8/30/90, refiled with Post-Effective
Amendment No 45 of Oppenheimer Growth Fund (Reg. No. 2-
45272), 8/22/94, pursuant to Item 102 of Regulation S-T,
and incorporated herein by reference.

(9) Custody Agreement dated November 12, 1992 between
Registrant and The Bank of New York: Previously filed
with Registrant's Post-Effective Amendment No. 21,
8/20/93, and incorporated herein by reference.

(10) (i) Service Plan and Agreement dated 6/10/93 under Rule
12b-1 of the Investment Company Act of 1940 for Class A
shares: Previously filed with Registrant's Post-Effective
Amendment No. 24, 8/24/94, and incorporated herein by
reference.

(ii)Distribution and Service Plan and Agreement for Class
B Shares under Rule 12b-1 of the Investment Company Act
dated 5/30/95: Previously filed with Registrant's Post-
Effective Amendment No. 28, 5/26/95, and incorporated
herein by reference.

(iii)Distribution and Service Plan and Agreement for
Class C shares under Rule 12b-1 of the Investment Company
Act of 1940 dated 5/30/95: Previously filed with
Registrant's Post-Effective Amendment No. 28, 5/26/95,
and incorporated herein by reference.

(11) Opinion and Consent of Counsel dated 6/24/82: Previously
filed with Registrant's Pre-Effective Amendment No. 5,
8/31/84, refiled with Registrant's Post-Effective
Amendment No. 24, 8/24/94, pursuant to Item 102 of
Regulation S-T, and incorporated herein by reference.

(12) Tax Opinion Relating to the Reorganization: Draft Form of
Opinion filed herewith.

(13) Not applicable.

(14) (i)Consent of KPMG Peat Marwick LLP: To be filed by
amendment.

(ii)Consent of Price Waterhouse LLP: To be filed by
amendment.

(15) Not applicable.

(16) Not applicable

(17) (i)Declaration of Registrant under Rule 24f-2: Filed
herewith.

(ii)Financial Data Schedules: Filed herewith.

Item 17. Undertakings

(1) Not applicable.

(2) Not applicable.

<PAGE>

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933 and/or the
Investment Company Act of 1940, the Registrant has duly caused this
Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of New York and State of New York
on the 22nd day of August, 1995.

OPPENHEIMER U.S. GOVERNMENT TRUST

By: /s/ Donald W. Spiro
----------------------------------------
Donald W. Spiro, President

Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in
the capacities on the dates indicated:

Signatures Title Date
- ---------- ----- ----

/s/ Leon Levy Chairman of the August 22, 1995
- -------------- Board of Trustees
Leon Levy

/s/ Donald W. Spiro Chief Executive August 22, 1995
- -------------------- Officer and
Donald W. Spiro Trustee

/s/ George Bowen Chief Financial August 22, 1995
- ----------------- and Accounting
George Bowen Officer

/s/ Leo Cherne Trustee August 22, 1995
- ---------------
Leo Cherne

/s/ Robert G. Galli Trustee August 22, 1995
- -------------------
Robert G. Galli

/s/ Benjamin Lipstein Trustee August 22, 1995
- ----------------------
Benjamin Lipstein

/s/ Elizabeth B. Moynihan Trustee August 22, 1995
- --------------------------
Elizabeth B. Moynihan

/s/ Kenneth A. Randall Trustee August 22, 1995
- -----------------------
Kenneth A. Randall

/s/ Edward V. Regan Trustee August 22, 1995
- --------------------
Edward V. Regan

/s/ Russell S. Reynolds, Jr. Trustee August 22, 1995
- -----------------------------
Russell S. Reynolds, Jr.

/s/ Sidney M. Robbins Trustee August 22, 1995
- ----------------------
Sidney M. Robbins

/s/ Pauline Trigere Trustee August 22, 1995
- --------------------
Pauline Trigere

Trustee August __, 1995
- -----------------------
Clayton K. Yeutter

<PAGE>

OPPENHEIMER U.S. GOVERNMENT TRUST

EXHIBIT INDEX

Form N-14
Item No.
- --------

16(12) Tax Opinion in Draft Form

16(17)(i) Declaration of the Registrant under Rule 24f-2

16(17)(ii) Financial Data Schedules

<PAGE>

(Letterhead of Price Waterhouse LLP)

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:

(1) 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;

(2) 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;

(3) 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;

(4) 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;

(5) 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;

(6) 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);

(7) 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;

(8) 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

(9) 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.

Notice for Oppenheimer U.S. Government Trust
Two World Trade Center, New York, New York 10048-0203
(Registration No. 2-76645, File No. 811-3430)

NOTICE IS HEREBY GIVEN that Oppenheimer U.S. Government Trust having
previously filed by post-effective amendment of its registration statement
a declaration that an indefinite number of its securities were being
registered pursuant to Rule 24f-2 of the Investment Company Act of 1940,
now elects to continue such indefinite registration.

(i) This Notice is being filed for the fiscal year ended June 30,
1994.

(ii) No shares which had been registered other than pursuant to
this Rule remained unsold at the beginning of the above fiscal
year.

(iii) 4,507,200 Class A shares were registered other than pursuant
to this Rule during the above fiscal year.

(iv) The number of shares sold during the above fiscal year was as
follows (1):

Class A 6,237,904
Class C 531,550

(v) The number of shares sold during the above fiscal year in
reliance upon registration pursuant to this Rule was as follows:

Class A 6,237,904
Class C 531,550

Pursuant to the requirements of the Investment Company Act of 1940,
the undersigned registrant has caused this notice to be signed on its
behalf this 29th day of August, 1994.

Oppenheimer U.S. Government Trust

By /s/ Robert G. Zack
----------------------------------
Rober G. Zack, Assistant Secretary

- -----------------
(1) The calculation of the aggregate sales price is made pursuant to Rule
24f-2 of the Investment Company Act of 1940 as follows:

Value of Value of Filing
Shares Sold Shares Redeemed Net Fee
----------- --------------- --- ------

Class A $61,855,807 $(123,943,881) $(62,088,074) $ 0*
Class C $ 5,070,299 $( 680,730) $ 4,389,569 $1,514**
------
Total $2,131

* Class A shares redeemed in excess of shares sold to be re-registered
pursuant to Rule 24e-2 total 6,508,123.
** Calculated as 1/29 of 1% of net sales.

<PAGE>

GORDON ALTMAN BUTOWSKY WEITZEN SHALOV & WEIN
114 West 47th StreetNew York, N.Y. 10036
Telephone: (212) 626-0800Telecopier (212) 626-0799

August 29, 1994

Oppenheimer U.S. Government Trust
Two World Trade Center
New York, New York 10048-0203

Ladies and Gentlemen:

In connection with the public offering of shares of beneficial
interest, no par value, of Oppenheimer U.S. Government Trust (the "Fund"),
we have examined such records and documents and have made such further
investigation and examination as we deemed necessary for the purpose of
this opinion.

It is our opinion that the shares the registration of which is
made definite by the accompanying Rule 24f-2 Notice of the Fund were
legally issued, fully paid and non-assessable by the Fund to the extent
set forth in its Prospectus forming part of its Registration Statement
under the Securities Act of 1933, as amended.

We hereby consent to the filing of this opinion with said Notice.

Very truly yours,

/s/ GORDON ALTMAN BUTOWSKY
WEITZEN SHALOV & WEIN

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