<PAGE>
Quest for Value
Dual Purpose
Fund, Inc.
One World Financial
Center
New York, NY 10281
1-800-232-3863
The Other Funds of
Quest for Value:
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 information
about any of the
Quest for Value Funds,
call your broker.
QUEST FOR VALUE
DUAL PURPOSE
FUND, INC. AUGUST 7, 1995
DEAR SHAREHOLDER:
The Dual Purpose Fund generated a total return on its portfolio of 9.1%
in the second quarter, slightly below the 9.5% return of the Standard &
Poor's 500 Index including dividends (S&P 500). For the first half, the
Fund's return of 19.5% compared with 20.2% for the S&P 500. The Fund's
slight underperformance in both periods reflected lower returns from
securities other than common stocks owned by the Fund for income
purposes, as well as our conservative investment posture. As equity
prices climbed to new highs, we made extensive use of hedging
techniques, reducing risk but dampening returns in a rising market.
The Fund has been a consistently strong performer over time. Since its
inception on February 13, 1987, the Fund has generated a compound annual
total return of 15.6% on its portfolio, significantly exceeding the
11.8% return of the S&P 500.
The Fund is a closed-end investment company with an equal number of
Capital Shares and Income Shares. Capital Shares receive all the capital
appreciation and absorb any losses from the Fund's entire portfolio,
while Income Shares receive all net income. Both classes of shares
performed well in the quarter and the half.
PORTFOLIO ACTIVITY
The Fund's performance was driven by excellent stock selection. The
common stocks in the Fund's portfolio provided a total return of 25.5%
in the half, easily outdistancing the S&P 500's total return of 20.2%.
We did especially well with our investments in financial service company
stocks, such as Citicorp, up 40% in the half; Federal Home Loan Mortgage
Corp. (Freddie Mac), up 36%; Travelers Group, Inc., up 35%; and Mellon
Bank Corp., up 36%. The investments we made in these companies during
the past few years were not an interest rate play, but were based on the
exceptional opportunities we saw in terms of growth and high returns on
capital, combined with reasonable market valuations. Quite simply, we
thought many quality financial stocks were cheap--and we continue to
believe so. Many of these companies offer the prospect of favorable
returns in both up and down interest rate cycles.
Our performance was also aided by investments in stocks such as Triton
Energy Corp., up 36% in the half, and McDonnell Douglas Corp., up 62%.
During the second quarter, we established new positions in the common
stocks of Champion International Corp., General Motors Corp. and Tenet
Healthcare Corp. and increased the Fund's investments in American
Express Co., Freeport McMoRan, Inc. and Freeport McMoRan Copper & Gold.
We sold the Fund's holdings of Warner-Lambert Co. common stock and made
minor reductions in several other positions.
As of June 30, 1995, the Fund's assets were allocated 71% to common
stocks, 17% to convertible securities, 9% to notes and bonds, and 3% to
cash and equivalents. This represented a reduction in cash reserves
during the second quarter and an increase in holdings of common stocks.
We continued our portfolio hedging program, which had been reinstituted
late in the first quarter as the stock market climbed to record price
levels. As of June 30, 1995, 30.3% of the Fund's common stock holdings
were hedged through the sale of Standard & Poor's 500 Index futures, our
principal hedging instrument, and an additional 2.0% through other
techniques. Hedging reduces risk, but could limit the Fund's returns in
a rising market. Our use of S&P
<PAGE>
Index futures cost the Fund $10.9 million, or $.60 per Capital Share, in the
second quarter's sharply higher market. Despite this cost, we believe that
hedging makes sense at this time, given our cautious view of the stock market
outlook. As of June 30, the market had risen for 1,722 days without a correction
of 10% or more, the longest such advance in 35 years. Throughout the 1,722-day
period, there has been a confluence of positive factors, including low inflation
and rising corporate profits, and an almost total absence of negative factors.
It has been a truly wonderful time to own stocks. We are not seers and do not
attempt to predict turns in the stock market. However, we have some concern
about the market's current high valuation levels. Moreover, enriched levels make
markets vulnerable to financial shocks, which by definition are unpredictable.
Within the equity-related segment of the portfolio, the Fund's convertible bonds
generated a total return of 21.8% in the first half and its convertible
preferred stocks provided a total return of 12.1%. The fixed income and
preferred stock segment of the portfolio had a total return of 15.4% in the
half. These segments are an important part of the Fund's current portfolio
strategy, which is to combine relatively high-yielding fixed income and
convertible securities with common stocks chosen primarily for their
appreciation potential.
CAPITAL SHARES
The Capital Shares are intended for investors seeking capital appreciation,
leverage and professional management at no cost (the management fees and
expenses of the Fund are paid out of current income by the Income Shareholders).
The net asset value (NAV) of the Capital Shares increased 11.5% in the second
quarter and 25.3% in the first half, exceeding the S&P 500 for both periods. The
Capital Shares tend to exaggerate the performance of the total portfolio, up or
down, because of their leverage. At June 30, 1995, the Capital Shares had an NAV
of $32.29 each and were entitled to the capital appreciation or depreciation on
the entire net assets of the Fund, equal to $43.98 per Capital Share--thereby
magnifying changes in value, up or down, of the Fund's portfolio by
approximately 1.4 times. This leverage was tempered by our hedging program,
described previously.
The Capital Shares have been superior performers over time. From the Fund's
inception on February 13, 1987 through June 30, 1995, they provided a compound
annual pretax return of 18.2% (based on the NAV, after adjustment for short-term
capital gains distributions and for taxes paid on net realized long-term capital
gains retained by the Fund), far surpassing the 11.8% return of the S&P 500.
This strong performance reflects a combination of above-average investment
returns and the impact of leverage.
The market price of the Capital Shares rose 11.8% in the second quarter and
24.1% in the first half, adjusted for short-term capital gains distributions. As
of June 30, 1995, the Capital Shares were priced at $28.50 per share on the New
York Stock Exchange, an 11.7% discount from NAV. The Capital Shares will be
redeemable at their full NAV and any remaining discount will automatically
disappear after January 31, 1997, when the Fund will either liquidate or,
following a vote of shareholders, convert to an open-end fund.
INCOME SHARES
The Income Shares are intended for investors seeking high current income and
relative safety of principal. They provided a total return (dividends paid and
change in market price assuming the reinvestment of dividends) of 2.9% in the
second quarter, matching the total return of a 10-year Treasury security
maturing in February 1997, and 6.5% in the first half, slightly surpassing the
Treasury security's return.
Our goal is to deliver competitive returns that equal or exceed benchmark
indices. From inception on February 13, 1987 through June 30, 1995, the compound
annual total return on the Income Shares was 10.8% at market, assuming
reinvestment of dividends, well in excess of the 7.8% compound return for a
10-year Treasury security maturing in February 1997.
The Fund paid regular monthly dividends of $.10 per Income Share during the
first half, plus an extra dividend of $.05 per share declared in April, for
total dividends of $.65 per Income Share in the half. After the half, an extra
of $.05 per share was declared in July, representing some of the additional
income earned in the second quarter. The portfolio continues to generate income
in excess of the $.10 monthly dividend rate. Consequently, we currently expect
to pay total dividends--monthly dividends plus extras--in 1995 modestly
exceeding the $1.34 per Income Share paid in 1994. We will inform you in future
quarterly reports if there is any significant change in this outlook.
<PAGE>
The Income Shares had a market price of $12.25 each at June 30, 1995. They are
scheduled to be redeemed on January 31, 1997 at $11.60 per share plus all
accumulated and unpaid dividends.
SUMMARY
The stock market entered the third quarter with tremendous upward momentum, but
appeared also to be vulnerable to negative news. In this uncertain environment,
we continue to do what we do best: purchase companies with superior business
characteristics at reasonable prices and thereby seek to preserve capital and
outperform the popular indices regardless of the broad market direction. Thank
you for investing with us at Quest for Value. We remain mindful of managing the
Fund to generate favorable returns for both the Capital and Income shareholders.
Sincerely,
/s/ Joseph M. La Motta
Joseph M. La Motta
President
<PAGE>
QUEST FOR VALUE DUAL PURPOSE FUND, INC.
SCHEDULE OF INVESTMENTS (UNAUDITED)
JUNE 30, 1995
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
------------ ------------
<S> <C> <C>
U.S. TREASURY BILLS--0.9%
$ 6,900,000 5.815%, 7/13/95 (A)
(cost--$6,886,606)............................ $ 6,886,606
------------
REPURCHASE AGREEMENT--1.7%
$13,056,000 Lehman Brothers 6.13%, 7/03/95 (proceeds at
maturity: $13,062,669, collateralized by
$12,280,000 par, $13,318,888 value, U.S.
Treasury Notes, 8.625%, 6/15/97)
(cost--$13,056,000)........................... $ 13,056,000
------------
CORPORATE NOTES AND BONDS--9.1%
Casinos/Gaming--1.6%
$12,500,000 Harrah's Jazz Co.
First Mortgage Notes
14.25%, 11/15/01.............................. $ 13,000,000
------------
Chemicals--0.7%
5,000,000 IMC Fertilizer Group, Inc.
Sr. Notes
10.75%, 6/15/03............................... 5,375,000
------------
Insurance--1.1%
8,750,000 Reliance Group Holdings, Inc.
Sr. Sub. Deb.
9.75%, 11/15/03............................... 8,487,500
------------
Oil/Gas--1.6%
16,000,000 Triton Energy Corp.
Sr. Sub. Disc. Notes
Zero Coupon, 11/01/97......................... 13,040,000
------------
Telecommunications--3.4%
15,000,000 Comcast Corp.
Sr. Sub. Deb.
10.625%, 7/15/12.............................. 16,050,000
20,000,000 Nextel Communications, Inc.
Sr. Sub. Disc. Notes 0.00%/11.50%,
9/01/03**..................................... 11,200,000
------------
27,250,000
------------
<CAPTION>
PRINCIPAL
AMOUNT VALUE
------------ ------------
<S> <C> <C>
Tobacco/Beverages/Food Products--0.7%
$ 5,000,000 Chiquita Brands International, Inc.
Sub. Notes
11.50%, 6/01/01............................... $ 5,150,000
------------
Total Corporate Notes and Bonds
(cost--$71,111,459)........................... $ 72,302,500
------------
CONVERTIBLE CORPORATE NOTES AND BONDS--12.9%
Airlines--2.9%
$22,000,000 AMR Corp.
Conv. Sub. Deb.
6.125%, 11/01/24.............................. $ 22,880,000
------------
Drugs/Medical Products--2.7%
56,380,000 Alza Corp.
Conv. Sub. Notes
Zero Coupon, 7/14/14.......................... 21,424,400
------------
Insurance--2.6%
20,000,000 Equitable Co.
Conv. Sub. Notes
6.125%, 12/15/24.............................. 20,750,000
------------
Oil/Gas--2.3%
12,970,545 Crusader Limited
Conv. Sub. Notes
6.00%, 2/14/04 (B)............................ 18,335,162
------------
Real Estate--2.4%
18,728,536 Security Capital Realty, Inc.
Conv. Sub. Notes
12.00%, 6/30/14 (B)........................... 18,728,536
------------
Total Convertible Corporate Notes and Bonds
(cost--$92,051,904)........................... $102,118,098
------------
</TABLE>
<TABLE>
<CAPTION>
SHARES VALUE
------------ ------------
<S> <C> <C>
CONVERTIBLE PREFERRED STOCKS--4.4%
Insurance--1.3%
170,000 Travelers Group, Inc.
$2.75 Conv. Pfd. Series B..................... $ 10,667,500
------------
Tobacco/Beverages/Food Products--3.1%
1,250,000 Flagstar Companies, Inc.
$2.28 Conv. Exch. Pfd......................... 24,375,000
------------
Total Convertible Preferred Stocks
(cost--$38,871,093)........................... $ 35,042,500
------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SHARES VALUE
------------ ------------
<S> <C> <C>
COMMON STOCKS--70.5%
Aerospace--5.0%
515,000 McDonnell Douglas Corp.......................... $ 39,526,250
------------
Automotive--1.8%
300,000 General Motors Corp............................. 14,062,500
------------
Banking--9.1%
900,000 Citicorp (A).................................... 52,087,500
474,084 Mellon Bank Corp................................ 19,733,747
------------
71,821,247
------------
Chemicals--6.4%
584,500 Hercules, Inc................................... 28,494,375
250,000 Monsanto Co..................................... 22,531,250
------------
51,025,625
------------
Cosmetics/Toiletries--0.7%
79,800 Avon Products, Inc.............................. 5,346,600
------------
Drugs/Medical Products--2.2%
300,000 Becton, Dickinson & Co.......................... 17,475,000
------------
Electronics--3.1%
500,000 Arrow Electronics, Inc.*........................ 24,875,000
------------
Healthcare Services--1.8%
1,000,000 Tenet Healthcare Corp.*......................... 14,375,000
------------
Insurance--13.2%
454,500 AFLAC, Inc...................................... 19,884,375
400,000 EXEL Limited.................................... 20,800,000
77,400 Progressive Corp., Ohio......................... 2,970,225
600,000 Transamerica Corp............................... 34,950,000
600,000 Travelers Group, Inc............................ 26,250,000
------------
104,854,600
------------
Metals/Mining--5.0%
646,250 Freeport McMoRan, Copper & Gold (Class A)....... 13,328,906
1,500,000 Freeport McMoRan, Inc........................... 26,437,500
------------
39,766,406
------------
<CAPTION>
SHARES VALUE
------------ ------------
<S> <C> <C>
Miscellaneous Financial
Services--8.9%
750,000 American Express Co............................. $ 26,343,750
600,000 Federal Home Loan Mortgage Corp................. 41,250,000
146,300 John Alden Financial Corp....................... 2,505,388
------------
70,099,138
------------
Oil/Gas--2.8%
475,000 Triton Energy Corp.*............................ 22,028,125
------------
Paper Products--3.3%
500,000 Champion International Corp..................... 26,062,500
------------
Real Estate--2.7%
24,346 Security Capital Realty, Inc. (B)............... 21,473,235
------------
Retail--1.1%
200,000 May Department Stores Co........................ 8,325,000
------------
Telecommunications--3.4%
800,000 Sprint Corp..................................... 26,900,000
------------
Total Common Stocks
(cost--$371,543,704).......................... $558,016,226
------------
</TABLE>
<TABLE>
<S> <C> <C>
TOTAL INVESTMENTS
(cost--$593,520,766)............................... 99.5% $787,421,930
----- ------------
<CAPTION>
CONTRACTS VALUE
------------ ------------
<S> <C> <C> <C>
WRITTEN CALL OPTIONS OUTSTANDING--(0.1%)
2,000 Citicorp
expiring July '95 @ $55
(premium received: $1,058,964)........ $ (725,000)
------------
Other Assets in Excess of
Other Liabilities.................................. 0.6 $ 5,091,334
----- ------------
TOTAL NET ASSETS..................................... 100.0% $791,788,264
----- ------------
----- ------------
</TABLE>
See accompanying notes to financial statements.
--------------------------------------------------------------------------------
* Non-income producing security.
** Represents a step-up note which will receive 0.00% interest until 9/01/98,
then will 'step-up' to 11.50% until maturity.
<PAGE>
NOTES TO SCHEDULE OF INVESTMENTS:
(A) Securities segregated (full or partial) as collateral for written call
options and futures contracts outstanding. The market value of such
segregated securities is $18,461,606.
(B) Restricted Securities:
<TABLE>
<CAPTION>
DATE OF PAR VALUATION AS OF
DESCRIPTION ACQUISITION AMOUNT SHARES UNIT COST JUNE 30, 1995
----------------------------------- ----------- ----------- ------------ ---------- -------------
<S> <C> <C> <C> <C> <C>
Crusader Limited 6.00%, 2/14/04.... 4/28/94 $12,970,545 -- $100 $141
Security Capital Realty, Inc.
12.00%, 6/30/14.................. 6/16/94 18,728,536 -- 94 100
Security Capital Realty, Inc.
Common Stock..................... 8/02/93 -- 14,286 686 882
3/07/94 -- 10,060 686 882
</TABLE>
<PAGE>
QUEST FOR VALUE DUAL PURPOSE FUND, INC.
STATEMENT OF ASSETS AND LIABILITIES (UNAUDITED)
JUNE 30, 1995
<TABLE>
<S> <C> <C>
ASSETS
Investments, at value (cost--$593,520,766)........ $787,421,930
Cash.............................................. 480
Dividends and interest receivable................. 4,617,763
Receivable for futures variation margin........... 401,700
Income tax receivable............................. 88,304
Prepaid expenses and other assets................. 188,665
------------
Total assets................................... $792,718,842
LIABILITIES
Written options outstanding, at value
(premium received: $1,058,964)................. $ 725,000
Dividends payable to Income Shareholders.......... 106,766
Other payables and accrued expenses............... 98,812
------------
Total liabilities.............................. 930,578
------------
NET ASSETS
(Shareholders' Equity)
Net assets applicable to 18,004,302 Income Shares
outstanding of $.01 par value.................. $210,407,530
Net assets applicable to 18,004,302 Capital Shares
outstanding of $.01 par value.................. 581,380,734
------------
Total Net Assets............................... $791,788,264
------------
------------
<CAPTION>
INCOME CAPITAL
SHARES SHARES
------------ ------------
<S> <C> <C>
Net asset value per share......................... $11.69 $32.29
------------ ------------
------------ ------------
</TABLE>
See accompanying notes to financial statements.
--------------------------------------------------------------------------------
<PAGE>
QUEST FOR VALUE DUAL PURPOSE FUND, INC.
STATEMENT OF OPERATIONS (UNAUDITED)
FOR THE SIX MONTHS ENDED JUNE 30, 1995
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
Interest........................................ $ 9,032,256
Dividends....................................... 6,384,059
-----------
Total investment income...................... $ 15,416,315
OPERATING EXPENSES:
Investment advisory fees (note 2a).............. $ 2,068,833
Administration fees (note 2b)................... 364,178
Reports and notices to shareholders............. 79,944
Custodian fees.................................. 37,636
Transfer and dividend disbursing agent fees..... 33,003
Auditing, consulting and tax return preparation
fees......................................... 30,194
Directors' fees and expenses.................... 18,967
Exchange fees................................... 17,211
Legal fees...................................... 3,439
Miscellaneous................................... 9,922
-----------
Total operating expenses..................... 2,663,327
------------
Net investment income........................ 12,752,988
------------
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS, OPTIONS AND FUTURES--NET:
Net realized gain on investments................ $39,095,544
Net realized gain on option transactions (note
1d).......................................... 100,694
Net realized loss on futures transactions (note
1e).......................................... (14,228,095)
-----------
Net realized gain on investments, options and
futures transactions........................ $ 24,968,143
Net change in unrealized appreciation
(depreciation) on investments, options and
futures...................................... 92,622,424
------------
Net realized gain and change in net
unrealized appreciation (depreciation) on
investments, options and futures............ 117,590,567
------------
Net increase in net assets resulting from
operations................................... $130,343,555
------------
------------
</TABLE>
See accompanying notes to financial statements.
--------------------------------------------------------------------------------
<PAGE>
QUEST FOR VALUE DUAL PURPOSE FUND, INC.
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED
JUNE 30, DECEMBER 31,
1995 (1) 1994
-------------- ------------
<S> <C> <C>
Net investment income............................. $ 12,752,988 $24,415,397
Net realized gain on investments, options and
futures transactions........................... 24,968,143 36,436,200
Net change in unrealized appreciation
(depreciation) on investments, options and
futures........................................ 92,622,424 (43,370,555)
Provision for income taxes on long-term capital
gains retained (note 1b)....................... -- (9,497,588)
-------------- -----------
Net increase in net assets resulting from
operations................................... 130,343,555 7,983,454
Dividends to Income Shareholders
($.65 and $1.335 per share, respectively)...... (11,702,797) (24,035,669)
Distributions to Capital Shareholders
($.033 and $.389 per share, respectively)...... (594,142) (7,009,075)
-------------- -----------
Total increase (decrease) in net assets......... 118,046,616 (23,061,290)
Net Assets:
Beginning of period............................. 673,741,648 696,802,938
-------------- -----------
End of period (including undistributed net
investment income of $1,549,606 and $499,415,
respectively)................................ $791,788,264 $673,741,648
-------------- ------------
-------------- ------------
</TABLE>
See accompanying notes to financial statements.
--------------------------------------------------------------------------------
(1) Unaudited.
<PAGE>
QUEST FOR VALUE DUAL PURPOSE FUND, INC.
STATEMENT OF CHANGES IN UNDISTRIBUTED NET INVESTMENT INCOME,
REALIZED AND UNREALIZED GAINS (LOSSES)
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED
JUNE 30, DECEMBER 31,
1995 (1) 1994
------------ ------------
<S> <C> <C>
Net investment income available for distribution:
Balance, beginning of period................... $ 499,415 $ 119,687
Net investment income.......................... 12,752,988 24,415,397
Dividends to Income Shareholders
($.65 and $1.335 per share, respectively).... (11,702,797) (24,035,669)
------------ -----------
Balance, end of period...................... $ 1,549,606 $ 499,415
------------ -----------
------------ -----------
Accumulated net realized gains:
Balance, beginning of period................... $156,215,731 $136,286,194
Net realized gain on investments, options and
futures transactions......................... 24,968,143 36,436,200
Provision for income taxes on long-term capital
gains retained (note 1b)..................... -- (9,497,588)
Distributions to Capital Shareholders
($.033 and $.389 per share, respectively).... (594,142) (7,009,075)
------------ -----------
Balance, end of period...................... $180,589,732 $156,215,731
------------ ------------
------------ ------------
Net unrealized appreciation (depreciation) on
investments, options and futures:
Balance, beginning of period................... $ 99,310,654 $142,681,209
Net change in unrealized appreciation
(depreciation) on investments, options and
futures...................................... 92,622,424 (43,370,555)
------------ -----------
Balance, end of period...................... $191,933,078 $99,310,654
------------ -----------
------------ -----------
</TABLE>
See accompanying notes to financial statements.
--------------------------------------------------------------------------------
<PAGE>
QUEST FOR VALUE DUAL PURPOSE FUND, INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
JUNE 30, 1995
(1) ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
Quest for Value Dual Purpose Fund, Inc. (the 'Fund') is a diversified,
closed-end, 'dual-purpose' investment company. The Fund commenced investment
operations on February 13, 1987. Quest for Value Advisors (the 'Adviser'), a
majority-owned (99%) subsidiary of Oppenheimer Capital, serves as the Fund's
investment adviser. Oppenheimer Capital (the 'Administrator') serves as the
Fund's administrator. The following is a summary of significant accounting
policies consistently followed by the 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 securities are valued at their 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
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. The ability
of issuers of debt instruments to meet their obligations may be affected by
economic developments in a specific industry or region. 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 the
Fund's Board of Directors.
(b) FEDERAL INCOME TAXES
It is the Fund's intention to comply with the requirements of the Internal
Revenue Code applicable to regulated investment companies and to distribute
substantially all of its taxable ordinary income to its shareholders;
accordingly, no Federal income tax provision is required. Net realized long-term
capital gains, if any, on security transactions are retained and applicable
taxes thereon will be accrued at the end of the Fund's fiscal year.
(c) 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 has
been 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 are accreted or amortized to interest income over
the lives of the respective securities.
(d) OPTION ACCOUNTING POLICIES
When the Fund writes a call or put option, the premium received is included
in the Fund's Statement of Assets and Liabilities as an asset and an equivalent
amount is recognized as a liability. The amount of the liability is subsequently
marked-to-market to reflect the current market value of the option written. The
current market value of a traded option is the last sale price or, in the
absence of a sale, the last asked price. If the option expires on its stipulated
expiration date or if the 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 the 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 the 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.
(e) FUTURES ACCOUNTING POLICIES
A futures contract is an agreement between two parties to buy and sell a
financial instrument at a set price on a future date. Upon entering into such a
contract the 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. At June 30, 1995, the Fund pledged $6,900,000 U.S. Treasury Bills with
a value of $6,886,606 as initial margin for such futures contracts. Pursuant to
the contracts, the Fund agrees to receive from or pay to the broker an amount of
cash equal to the daily fluctuation in value of the contracts. Such receipts or
payments are known as 'variation margin,' and are recorded by the Fund as
unrealized appreciation or depreciation. When the contracts are closed, the Fund
records a realized gain or loss equal to the difference
<PAGE>
QUEST FOR VALUE DUAL PURPOSE FUND, INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
JUNE 30, 1995
between the value of the contracts at the time they were opened and the value at
the time they were closed and reverses any unrealized appreciation or
depreciation previously recorded.
Futures Contracts open at June 30, 1995 are as follows:
<TABLE>
<CAPTION>
UNREALIZED
DESCRIPTION CONTRACTS SHORT VALUE EXPIRATION LOSS
-------------------------------- --------- ------------ ----------- ----------
<S> <C> <C> <C> <C>
Standard & Poor's 500 Index..... 618 $169,069,545 Sept. '95 $2,302,050
</TABLE>
(F) REPURCHASE AGREEMENTS
The Fund 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 of 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 counterparty
to the agreement, realization and/or retention of the collateral or proceeds may
be subject to legal proceedings.
(G) DIVIDENDS AND DISTRIBUTIONS
The Fund distributes its net investment income to holders of the Income
Shares at a fixed monthly rate (currently $.10 a share) with any excess net
investment income distributed on a quarterly basis. Income Shares are entitled
to cumulative dividends in an amount equivalent to net investment income with a
minimum annual rate of $.875 per share.
To the extent that any such minimum cumulative dividend cannot be satisfied
from net investment income, it will be paid from any tax basis net realized
short-term or long-term capital gains. Capital Shares will not be entitled to
receive dividends from net investment income as long as Income Shares are
outstanding.
The Fund declared dividends of $.65 per Income Share during the six months
ended June 30, 1995. To the extent not needed to pay the Income Shares' minimum
cumulative dividends, distributions from tax basis net realized short-term
capital gains, if any, may be paid to holders of the Capital Shares. The Fund
will not distribute tax basis net realized long-term capital gains except to the
limited extent described previously. Dividends and distributions to shareholders
are recorded on the
ex-dividend date.
On January 31, 1997 Income Shares will be redeemed at $11.60 per share, plus
accumulated and unpaid dividends. Should assets be insufficient to redeem the
Income Shares at such amount, the total net assets of the Fund would be
distributed to Income Shareholders on a pro-rata basis.
(2) INVESTMENT ADVISORY FEE, ADMINISTRATION FEE AND OTHER TRANSACTIONS WITH
AFFILIATES
(a) The investment advisory fee is payable monthly to the Adviser and is
computed on the average weekly net assets of the Fund as of the close of
business each week at the following annual rates: .75% on the first $200
million; and .50% on net assets in excess of $200 million.
(b) The administration fee is payable monthly to the Administrator and is
computed on the average weekly net assets of the Fund as of the close of
business each week at the annual rate of .10%.
(c) Total brokerage commissions paid by the Fund during the six months ended
June 30, 1995 amounted to $371,956 of which Oppenheimer & Co., Inc., an
affiliate of the Adviser, received $95,194.
(3) PURCHASES AND SALES OF SECURITIES
During the six months ended June 30, 1995, purchases and sales of investment
securities, other than short-term securities and options, aggregated
$147,723,049 and $179,364,190, respectively.
<PAGE>
QUEST FOR VALUE DUAL PURPOSE FUND, INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
JUNE 30, 1995
The following table summarizes activity in written option contracts during
the six months ended June 30, 1995:
<TABLE>
<CAPTION>
CONTRACTS PREMIUMS
--------- ----------
<S> <C> <C>
Option contracts written: Outstanding at beginning of
period.............................................. 1,870 $ 997,917
Options written..................................... 8,130 3,244,575
Options terminated in closing purchase
transactions...................................... (682) (169,064)
Options exercised................................... (7,318) (3,014,464)
--------- ----------
Option contracts written: Outstanding at end of
period.............................................. 2,000 $1,058,964
--------- ----------
--------- ----------
</TABLE>
(4) UNREALIZED APPRECIATION (DEPRECIATION) AND COST OF INVESTMENTS FOR
FEDERAL INCOME TAX PURPOSES
At June 30, 1995, the cost of investments for Federal income tax purposes
was $593,659,280. Aggregate gross unrealized appreciation (all securities in
which there is an excess of value over tax cost) amounted to $202,892,266 and
aggregate gross unrealized depreciation (all securities in which there is an
excess of tax cost over value) amounted to $9,129,616, resulting in net
unrealized appreciation of $193,762,650.
(5) CAPITAL STOCK
The Fund is authorized to issue 20 million Capital Shares and 20 million
Income Shares at $.01 par value, respectively. Each class of shares has
18,004,302 issued and outstanding, representing $180,043 at par and $208,677,881
paid-in-surplus.
(6) QUARTERLY RESULTS OF OPERATIONS
<TABLE>
<CAPTION>
REALIZED AND UNREALIZED
NET GAIN (LOSS) ON INVESTMENTS,
INVESTMENT INVESTMENT OPTIONS AND FUTURES--NET
INCOME INCOME (AFTER PROVISION FOR INCOME TAXES)
----------------------- ----------------------- --------------------------------------
PER PER
QUARTER ENDED TOTAL SHARE TOTAL SHARE TOTAL SHARE
----------------------- ----------- ----- ----------- ----- ------------ ------
<S> <C> <C> <C> <C> <C> <C>
March 31, 1995......... $ 7,638,860 $0.43 $ 6,365,976 $0.35 $ 57,584,502 $ 3.20
June 30, 1995.......... 7,777,455 0.43 6,387,012 0.36 60,006,065 3.33
----------- ----- ----------- ----- ------------ ------
$15,416,315 $0.86 $12,752,988 $0.71 $117,590,567 $ 6.53
----------- ----- ----------- ----- ------------ ------
----------- ----- ----------- ----- ------------ ------
March 31, 1994......... $ 6,654,116 $0.37 $ 5,372,817 $0.30 $ (7,528,343) $(0.42)
June 30, 1994.......... 7,076,495 0.39 5,781,334 0.32 8,230,557 0.46
September 30, 1994..... 6,969,837 0.39 5,643,562 0.32 10,890,082 0.61
December 31, 1994...... 8,916,723 0.50 7,617,684 0.42 (28,024,239) (1.56)
----------- ----- ----------- ----- ------------ ------
$29,617,171 $1.65 $24,415,397 $1.36 $(16,431,943) $(0.91)
----------- ----- ----------- ----- ------------ ------
----------- ----- ----------- ----- ------------ ------
</TABLE>
(7) FINANCIAL INSTRUMENTS AND ASSOCIATED RISKS
At June 30, 1995, the Fund had outstanding written options and futures
contracts. These contracts involve elements of market risk in excess of the
amounts reflected in the Statement of Assets and Liabilities. If these contracts
are traded through a regulated exchange, the counterparty risk is generally
eliminated since the exchange interposes itself into the transaction. If,
however, the contracts are traded in the over-the-counter markets, counterparty
credit risk can exist.
During the six months ended June 30, 1995, the Fund made use of a strategy
known as 'dynamic hedging'. Dynamic hedging is an attempt to protect against
declines in the market value of its portfolio through the sale of stock index
futures. It's purpose is to achieve a pre-specified level of downside protection
while at the same time retaining exposure to the upside potential of the
portfolio.
(8) SUBSEQUENT EVENTS
On July 7, 1995, a dividend of $.15 per share or approximately $2,700,645
was declared to Income Shareholders payable July 31, 1995 to shareholders of
record on July 17, 1995.
On August 4, 1995, a dividend of $.10 per share or approximately $1,800,430
was declared to Income Shareholders payable August 31, 1995 to shareholders of
record on August 14, 1995.
<PAGE>
QUEST FOR VALUE DUAL PURPOSE FUND, INC.
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED DECEMBER 31,
JUNE 30, ----------------------------------------------------------------------------
1995 (1) 1994 1993 1992 1991 1990
------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Income Shares:
Net Asset Value, Beginning of
Period..................... $ 11.63 $ 11.61 $ 11.61 $ 11.60 $ 11.60 $ 11.61
Net investment income........ 0.71 1.36 1.30 1.35 1.37 1.57
Dividends from net investment
income..................... (0.65) (1.34) (1.30) (1.34) (1.37) (1.58)
------------ ------------ ------------ ------------ ------------ ------------
Net Asset Value, End of
Period..................... $ 11.69 $ 11.63 $ 11.61 $ 11.61 $ 11.60 $ 11.60
------------ ------------ ------------ ------------ ------------ ------------
------------ ------------ ------------ ------------ ------------ ------------
Market Value, End of Period.. $ 12.25 $ 12.125 $ 13.25 $ 13.00 $ 13.375 $ 12.875
------------ ------------ ------------ ------------ ------------ ------------
------------ ------------ ------------ ------------ ------------ ------------
Total Investment Return (2).. 6.5% 1.8% 12.3% 7.4% 15.0% 11.9%
------------ ------------ ------------ ------------ ------------ ------------
------------ ------------ ------------ ------------ ------------ ------------
Capital Shares:
Net Asset Value, Beginning of
Period..................... $ 25.79 $ 27.09 $ 26.29 $ 22.59 $ 16.43 $ 18.05
Net realized and unrealized
gain (loss) on investments,
options and futures
transactions............... 6.53 (0.38) 2.45 6.09 6.77 (0.91)
Provision for corporate
income taxes on net
realized long-term capital
gains...................... -- (0.53) (1.43) (1.10) (0.60) (0.51)
Distributions from net
realized short-term capital
gains...................... (0.03) (0.39) (0.22) (1.29) (0.01) (0.20)
------------ ------------ ------------ ------------ ------------ ------------
Net Asset Value, End of
Period..................... $ 32.29 $ 25.79 $ 27.09 $ 26.29 $ 22.59 $ 16.43
------------ ------------ ------------ ------------ ------------ ------------
------------ ------------ ------------ ------------ ------------ ------------
Market Value, End of Period.. $ 28.50 $ 23.00 $ 23.75 $ 23.00 $ 17.625 $ 12.00
------------ ------------ ------------ ------------ ------------ ------------
------------ ------------ ------------ ------------ ------------ ------------
Total Investment Return (3).. 24.1% 0.9% 10.5% 44.6% 52.1% (9.7%)
------------ ------------ ------------ ------------ ------------ ------------
------------ ------------ ------------ ------------ ------------ ------------
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Period.... $791,788,264 $673,741,648 $696,802,938 $682,373,943 $615,726,914 $504,739,067
------------ ------------ ------------ ------------ ------------ ------------
Ratio of Operating Expenses
to Average Net Assets...... 0.73%(4,5) 0.74% 0.74% 0.74% 0.77% 0.81%
------------ ------------ ------------ ------------ ------------ ------------
Ratio of Net Investment
Income to Average Net
Assets..................... 3.50%(4,5) 3.47% 3.29% 3.61% 4.39% 5.50%
------------ ------------ ------------ ------------ ------------ ------------
Portfolio Turnover Rate...... 21% 45% 51% 45% 62% 78%
------------ ------------ ------------ ------------ ------------ ------------
Number of each class of
Income and Capital Shares
outstanding at the end of
period..................... 18,004,302 18,004,302 18,004,302 18,004,302 18,004,302 18,004,302
------------ ------------ ------------ ------------ ------------ ------------
------------ ------------ ------------ ------------ ------------ ------------
</TABLE>
(1) Unaudited.
(2) Change in market price assuming reinvestment of dividends on payable date
(at market).
(3) Change in market price assuming reinvestment of short-term capital gains on
payable date and taxes paid on long-term capital gains on year end (both at
market).
(4) Average net assets for the six months ended June 30, 1995 were $734,391,159.
(5) Annualized.
<PAGE>
ABOUT
QUEST FOR VALUE DUAL PURPOSE FUND, INC.
The Quest for Value Dual Purpose Fund, Inc. (the 'Fund') is a closed-end
dual-purpose investment company which invests primarily in stocks and corporate
notes and bonds. The Fund has two classes of shares: Capital Shares (NYSE symbol
KFV) for those seeking long-term growth of capital; and Income Shares (NYSE
symbol KFV Pr.) for those seeking current and long-term growth of income.
Capital Share investors provided 50% of the Fund's capital at inception in
1987, yet receive all of the portfolio's capital appreciation (depreciation).
Income Share investors, on the other hand, initially provided 50% of the Fund's
capital, but receive all of the portfolio's net investment income. Consequently,
investors in each class of shares have more assets working for their respective
investment goals than they have contributed.
After redemption of the Income Shares on January 31, 1997, at initial net
asset value of $11.60, plus any accumulated and unpaid dividends, Capital
Shareholders will own all remaining assets. Thereafter, the Fund will either
liquidate or submit to the Capital Shareholders a proposal to continue as an
open-end investment company (i.e., a mutual fund).
SHARE COMPARISON
The following is a brief summary of certain rights for each class of shares
of the Fund:
<TABLE>
<S> <C>
CAPITAL SHARES INCOME SHARES
o Generally will be entitled to all o Entitled to all the Fund's Net
capital appreciation and subject to Investment Income.
all depreciation from 100% of the
assets of the Fund.
--------------------------------------------------------------------------------
o No distributions from Net Investment o Minimum cumulative dividend of $.875
Income as long as Income Shares are annually.
outstanding.
--------------------------------------------------------------------------------
o Bear none of the Fund's expenses. o Potential for growing income stream.
1995 dividends amounted to $.65
through June 30, 1995
--------------------------------------------------------------------------------
o NYSE symbol KFV. o NYSE symbol KFV Pr.
</TABLE>
DIVIDEND REINVESTMENT PLAN
Income Shareholders may participate in the dividend reinvestment plan (the
'Plan') by calling the Plan Agent, State Street Bank and Trust Company at
1-800-232-3863 if the shares are held in your own name. If shares are held in
nominee name (in the name of your brokerage firm, bank or other institution),
contact your nominee and request that they either participate on your behalf or
re-register the shares in your name.
The Plan, in brief, works like this: On the payable date for a dividend the
Plan Agent will pool the dividends payable to participants in the Plan. Shortly
thereafter, the Plan Agent will purchase shares on the open market on behalf of
the Plan. When completed, they will allocate the shares to each participant.
Each participant will pay the same purchase cost plus a proportionate share of
the brokerage commissions. The administrative expenses of the Plan will be paid
by the Fund. Participation in the Plan in no way reduces or eliminates tax
liability on dividends reinvested. Participants may withdraw from the Plan at
any time by contacting the Plan Agent.
<PAGE>
QUEST FOR VALUE
DUAL PURPOSE
FUND, INC.
DIRECTORS AND OFFICERS
<TABLE>
<S> <C>
Joseph M. La Motta Director, President (1)
Eugene D. Brody Director (2)
George D. Langdon, Jr. Director (1)
George Loft Director (2)
Pamela W. McCann Director (3)
Dr. Thomas W. Murnane Director (3)
Lawrence Sherman Director (1)
George A. Long Vice President
Bernard H. Garil Vice President
Sheldon Siegel Treasurer
Thomas E. Duggan Secretary
Leslie Klein Assistant Treasurer
Deborah Kaback Assistant Secretary
</TABLE>
INVESTMENT ADVISER
Quest for Value Advisors
One World Financial Center
New York, NY 10281
CUSTODIAN, TRANSFER AND SHAREHOLDER SERVICING AGENT
State Street Bank and Trust Company
P.O. Box 366
Boston, MA 02101
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP
1177 Avenue of Americas
New York, NY 10036
KEY:
(1) Director for both Capital and Income Shares
(2) Director for Capital Shares
(3) Director for Income Shares
This report, including the financial information herein, is transmitted to the
shareholders of Quest for Value Dual Purpose Fund, Inc. for their information.
It is not a prospectus, circular or representation intended for use in
the purchase of shares of the Fund or any securities mentioned in this
report.
QUEST FOR VALUE
DUAL PURPOSE
FUND, INC.
SEMI-ANNUAL
REPORT
JUNE 30, 1995
[LOGO]
MANAGED BY
QUEST FOR VALUE ADVISORS
