<PAGE>
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 Section 240.14a-11(c) or
Section 240.14a-12
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(c)(2))
QUEST FOR VALUE DUAL PURPOSE FUND, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required
/ / 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 (set forth the amount on which the
filing fee is calculated and state how it was determined):
------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
------------------------------------------------------------------------
(5) Total fee paid:
------------------------------------------------------------------------
/ / Fee paid previously with preliminary materials.
/ / 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:
------------------------------------------------------------------------
<PAGE>
Quest for Value Dual Purpose Fund: President's Letter
Dear Shareholder:
You are cordially invited to attend the Special Meeting of Capital
Shareholders of the Quest for Value Dual Purpose Fund, Inc. to be held at One
World Financial Center, New York, New York (40th Floor) on December 20, 1996 at
3:00 p.m. Eastern Time.
You are being asked to consider and approve several proposals including the
conversion of the Fund from a closed-end to an open-end investment company. By
converting to an open-end fund, shareholders will have the ongoing right to
redeem their shares at a price based on the net asset value of the shares rather
than a price set in the market. This would eliminate the current market discount
from net asset value. IF THE PROPOSAL TO CONVERT THE FUND AND THE OTHER
PROPOSALS DESCRIBED IN THE ACCOMPANYING PROXY STATEMENT ARE NOT APPROVED, THE
FUND WILL BE LIQUIDATED. THE PAYMENT OF LIQUIDATION DISTRIBUTIONS WOULD BE A
TAXABLE EVENT. Neither the Fund nor its capital shareholders will realize any
gain or loss for tax purposes if the Fund is converted to an open-end fund.
Your Fund was organized as a dual purpose structure with two separate
classes of stock, Capital Shares and Income Shares. Since the Income Shares will
be redeemed on January 31, 1997, your Board of Directors believes that the
interests of the Capital Shareholders are best served by converting the Fund to
an open-end fund and allowing Capital Shareholders to invest in a vehicle that
closely resembles their original investment. You should note that, as described
in the Proxy Statement, the expenses of the Fund as an open-end company would be
higher than they have been for a closed-end company.
Please note that this is not a routine vote of shareholders. The Fund must
receive a "yes" vote of two-thirds of the outstanding Capital Shares with
respect to one proposal necessary to implement the conversion. Failing to cast
your vote could lead to the liquidation of the Fund.
In addition, you are being asked to consider and approve a new Investment
Advisory Agreement with OppenheimerFunds, Inc. ("OFI"), a new Distribution and
Service Plan and Agreement with OppenheimerFunds, Distributor, Inc., a
subsidiary of OFI, and a new Subadvisory Agreement with OpCap Advisors, the
current advisor to the Fund. If these agreements and the other proposals
presented are approved and the conversion is implemented, the portfolio of the
Fund will continue to be managed by OpCap Advisors and Shareholders will have
the advantages of being part of the Oppenheimer funds family. These advantages
include the ability to exchange shares of the Fund for shares of any of over 40
Oppenheimer funds without paying a sales charge. Information about the
Oppenheimer funds, including prospectuses, can be obtained by calling
1-800-525-7048. The Board of Directors of the Fund believes that the new
Agreements are in the best interests of the Fund and Capital Shareholders.
Futhermore, the Board is asking you to consider and approve changes in the
Fund's investment objective and investment policies and the restatement and
amendment of the Fund's Articles of Incorporation.
Please take the time to carefully review the Proxy Statement which describes
each of the proposals in detail.
Your Board of Directors believes the matters being proposed for approval are
in the best interests of the Fund and its shareholders and recommends a vote
"for" each Proposal. Regardless of the number of shares you own, it is important
that they be represented and voted. Please participate by
<PAGE>
signing, dating and mailing your proxy card in the enclosed postage paid return
envelope. If you have any questions regarding the meeting or need assistance in
voting your shares, please contact our proxy solicitor, D. F. King & Co., Inc.,
at 1-800-XXX-XXXX.
Your prompt response will help save your Fund the costs associated with
additional solicitations.
Once again, we appreciate the time and consideration that you give to this
important matter.
Sincerely yours,
Joseph M. La Motta
President
<PAGE>
QUEST FOR VALUE DUAL PURPOSE FUND, INC.
ONE WORLD FINANCIAL CENTER, NEW YORK, N.Y. 10281
------------------------
NOTICE OF SPECIAL MEETING OF CAPITAL SHAREHOLDERS
TO BE HELD DECEMBER 20, 1996
---------------------
TO THE CAPITAL SHAREHOLDERS:
Notice is hereby given that a special meeting of the holders of Capital
Shares of the Quest for Value Dual Purpose Fund, Inc. (the "Fund") will be held
at One World Financial Center, New York, New York 10281 on the 40th floor on
December 20, 1996, at 3:00 p.m., Eastern Time, for the following purposes:
1. To approve a proposal to change the Fund's subclassification under the
Investment Company Act of 1940 from a closed-end management investment
company to an open-end management investment company;
2. To approve a new Investment Advisory Agreement with OppenheimerFunds,
Inc.;
3. To approve a new Subadvisory Agreement between OppenheimerFunds, Inc. and
OpCap Advisors, the current advisor to the Fund;
4. To approve a new Distribution and Service Plan and Agreement with
Oppenheimer Funds Distributor, Inc. with respect to Class A shares;
5. To approve Amended and Restated Articles of Incorporation;
6. To approve a change in the Fund's fundamental investment objective;
7. To approve a change to certain of the Fund's fundamental investment
restrictions;
8. To elect Directors; and
9. To act upon such other matters as may properly come before the meeting or
any adjournment or adjournments thereof.
The close of business on October 28, 1996, has been fixed as the record date
for the determination of shareholders entitled to notice of and to vote at the
meeting. A list of shareholders entitled to vote at the meeting will be
available for inspection by shareholders at the Fund's office for ten days prior
to the meeting date.
BY ORDER OF THE BOARD OF DIRECTORS,
THOMAS E. DUGGAN
SECRETARY
IMPORTANT
THE BOARD OF DIRECTORS URGES YOU TO MARK, SIGN AND RETURN THE ENCLOSED PROXY AS
SOON AS POSSIBLE WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING IN PERSON. THE
ENCLOSED ADDRESSED ENVELOPE REQUIRES NO POSTAGE AND IS PROVIDED FOR YOUR
CONVENIENCE. YOUR PROMPT RESPONSE WILL ELIMINATE THE NEED FOR ADDITIONAL AND
UNNECESSARY MAILINGS. OPCAP ADVISORS HAS RETAINED D. F. KING & CO., INC. TO
ASSIST IN THE SOLICITATION OF PROXIES. SHAREHOLDERS WHO HAVE NOT VOTED THEIR
PROXIES IN A TIMELY MANNER MAY RECEIVE A TELEPHONE CALL FROM D. F. KING & CO.,
INC. IN AN EFFORT TO URGE THEM TO VOTE.
<PAGE>
QUEST FOR VALUE DUAL PURPOSE FUND, INC.
ONE WORLD FINANCIAL CENTER, NEW YORK, N.Y. 10281
PROXY STATEMENT
---------------
SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD DECEMBER 20, 1996
---------------------
This statement is furnished to the holders of Capital Shares of the Quest
for Value Dual Purpose Fund, Inc. (the "Fund") in connection with the
solicitation by management of proxies to be used at a special meeting (the
"meeting") of holders of the Capital Shares of the Fund to be held on December
20, 1996 or any adjournment or adjournments thereof. This statement will first
be mailed to shareholders on or about November 4, 1996.
The Fund has two classes of stock: Capital Shares and Income Shares. All of
the issued and outstanding Income Shares will be redeemed on January 31, 1997,
as provided in the Fund's Articles of Incorporation. Only the holders of Capital
Shares will vote on the matters presented at this meeting. As of October 28,
1996, the record date, there were 18,004,302 Capital Shares outstanding. Each
Capital Shareholder will be entitled to one vote for each share held on the
record date. Income Shareholders are not eligible to vote on the matters
presented. Unless the context otherwise requires, the term "shares" refers to
Capital Shares.
If the enclosed form of proxy is properly executed and returned, the shares
represented thereby will be voted at the meeting as indicated thereon with
respect to the Proposals stated therein. In the absence of choices, the shares
represented by the proxy will be voted in favor of the Proposals.
In order that your shares may be represented at the meeting or any
adjournment or adjournments thereof, you are requested to: indicate your voting
instructions on the proxy card; date and sign the proxy card; mail the proxy
card promptly in the enclosed postage-paid envelope; and allow sufficient time
for the proxy to be received on or before 3:00 p.m. on December 20, 1996.
The proxy confers discretionary authority upon the persons named therein to
vote on other business, not currently contemplated, which may come before the
meeting. In the event that a quorum (the presence in person or by proxy of the
holders of a majority of the Fund's Capital Shares entitled to vote) cannot be
obtained, an adjournment or adjournments of the meeting may be sought by the
Board of Directors. In the event that a quorum is present at the meeting but
sufficient votes to approve a particular Proposal are not received, the persons
named as proxies may propose one or more adjournments of the meeting to permit
further solicitation of proxies. Any such adjournment would require the
affirmative vote of the holders of a majority of the shares of the Fund present
at the meeting or any adjournment thereof, in person or by proxy. The persons
named as proxies will vote those proxies which they are entitled to vote FOR any
matter in favor of such an adjournment and will vote those proxies required to
be voted AGAINST any matter that comes before the meeting against any such
adjournment.
The proxy may be revoked at any time prior to the voting thereof by: (i)
written instructions addressed to the Secretary of the Fund at One World
Financial Center, New York, New York 10281; (ii) attendance at the meeting and
voting in person; or (iii) signing and returning a new proxy (if returned and
received in time to be voted).
It is anticipated that proxy solicitation will be made principally by mail,
although employees of OpCap Advisors may, without special compensation, contact
shareholders by telephone or wire. Arrangements have been made with brokers and
custodians, nominees and fiduciaries to send proxy material to beneficial
owners. In addition, OpCap Advisors has retained D. F. King & Co., Inc. to
assist
1
<PAGE>
in the solicitation of proxies primarily by contacting shareholders by telephone
and telegram for a fee not to exceed $5,000 plus reasonable out-of-pocket
expenses. With respect to a telephone solicitation by the firm, additional
expenses would include $5.00 per telephone vote transacted, $2.75 per outbound
telephone contact and costs relating to obtaining shareholders, telephone
numbers. D.F. King & Co., Inc. may call shareholders to ask if they would be
willing to have their votes recorded by telephone. The telephone voting
procedure is designed to authenticate shareholders' identities, to allow
shareholders to authorize the voting of their shares in accordance with their
instructions and to confirm that their instructions have been recorded properly.
The Fund has been advised by counsel that these procedures are consistent with
the requirements of applicable law. Shareholders voting by telephone would be
asked for their social security number or other identifying information and
would be given an opportunity to authorize proxies to vote their shares in
accordance with their instructions. To ensure that the shareholders'
instructions have been recorded correctly they will receive a confirmation of
their instructions in the mail. A special toll-free number will be available in
case the information contained in the confirmation is incorrect. Although a
shareholder's vote may be taken by telephone, each shareholder will receive a
copy of this Proxy Statement and may vote by mail using the enclosed proxy card.
The portion of the expenses of this meeting relating to the proposed conversion
of the Fund to an open-end investment company, approval of Amended and Restated
Articles of Incorporation and approval of a change in the Fund's fundamental
investment objective, will be borne by the Capital Shares of the Fund after the
Income Shares are redeemed. The balance of the expenses of the solicitation and
meeting will be shared by OpCap Advisors and OppenheimerFunds, Inc.
To the knowledge of the Fund, the following shareholders held as beneficial
or record owners 5% or more of each specified class of shares of the Fund as of
the record date:
<TABLE>
<CAPTION>
NUMBER AND CLASS OF SHARES PERCENTAGE OF
BENEFICIALLY OWNED OR HELD OF RECORD NAME AND ADDRESS CLASS
- -------------------------------------- ---------------------------------- ------------------
<S> <C> <C>
</TABLE>
The officers and Directors of the Fund, as a group, owned beneficially
approximately % of the Capital Shares of the Fund as of the record date.
PROPOSAL NO. 1
APPROVAL OF A CHANGE IN THE FUND'S CLASSIFICATION UNDER
THE INVESTMENT COMPANY ACT OF 1940 FROM A CLOSED-END
INVESTMENT COMPANY TO AN OPEN-END INVESTMENT COMPANY
BACKGROUND OF THE PROPOSAL
The Fund was organized as a closed-end investment company with a "dual
purpose" structure; its dual investment objective is (a) long-term capital
appreciation and preservation of capital and (b) current income and long-term
growth of income. The Fund originally issued an equal amount of common stock
(the "Capital Shares") and preferred stock (the "Income Shares"). The Capital
Shares are entitled to all gains and losses on all of the assets of the Fund and
the Income Shares are entitled to receive all of the Fund's income and bear all
of the expenses of the Fund. The Fund's Articles of Incorporation and Prospectus
provide that the Income Shares are to be redeemed on January 31, 1997 at their
initial net asset value per share plus accumulated and unpaid dividends, if any.
With respect to the Capital Shares, the Fund's Articles of Incorporation and its
Prospectus envisioned one of two possibilities subsequent to the termination of
the dual purpose structure: (i) conversion of the Fund to an open-end investment
company or (ii) liquidation and dissolution. It was contemplated that
implementation of either of these alternatives would require approval of the
Board of Directors of the Fund as well as by the Capital shareholders.
2
<PAGE>
For the reasons set forth in detail below, the Board of Directors of the
Fund, at a meeting held on September 17, 1996, considered each of the foregoing
alternatives and determined that it was in the best interests of Capital
Shareholders to convert the Fund to an open-end fund. Accordingly, the Board
approved the submission to the Capital Shareholders of the Fund of a proposal to
convert the Fund from a closed-end investment company to an open-end investment
company (the "Conversion").
In connection with the Conversion, the Directors also considered and
approved an amendment of the Fund's sub-classification under the Investment
Company Act of 1940 ( the "Act") from a closed-end management investment company
to an open-end management investment company and the amendment and restatement
of the Fund's Articles of Incorporation to provide for such Conversion. The
Board of Directors also considered and approved new contractual arrangements for
the management and distribution of the Fund as an open-end investment company.
In addition, at a meeting held on October 10, 1996, the Board of Directors
approved a change in the Fund's investment objective to eliminate the income
objective of the Fund; its new objective would be solely capital appreciation.
Furthermore, the Board approved changes to certain of the Fund's fundamental
investment policies. Each of the foregoing is subject to approval by the Capital
Shareholders.
If the Fund is converted to an open-end investment company, shareholders
will have the right to redeem their shares at a price based on the net asset
value of the shares rather than a price set in the market. Shareholders also
will have the ability to purchase additional shares at a price based on the net
asset value of the shares plus any applicable sales charge. All of the Proposals
must be approved by the requisite shareholder vote for the Conversion to be
implemented. If each Proposal is not approved by the shareholders, the Fund will
be liquidated.
EVALUATION BY THE BOARD OF DIRECTORS
In making its determination to recommend the Conversion to the Capital
Shareholders, the Board of Directors considered, among other things, (i) the
principal differences between a closed-end fund and an open-end fund (as
discussed herein) and the relative advantages and disadvantages of each; (ii)
that a liquidation of the Fund would be a taxable event to shareholders; and
(iii) that a liquidation would deprive the Capital Shareholders of the ability
to continue their investments in a vehicle that closely resembles what they were
seeking when they invested in the Fund. In addition, the Board considered the
capability of OppenheimerFunds, Inc. ("OFI") to act as investment adviser for
the Fund and the fact that the Fund's portfolio would continue to be managed by
OpCap Advisors as sub-adviser if Proposal No. 3 is approved. The Board also
considered the capability of OppenheimerFunds Distributor, Inc. (the
"Distributor"), an affiliate of OFI, to engage in an ongoing distribution of
Fund shares if Proposal No. 4 is approved. OFI and the Distributor are not
related to Oppenheimer Capital, OpCap Advisors or their affiliate Oppenheimer &
Co., Inc., the brokerage firm.
For the reasons set forth in this Proxy Statement, the Board of Directors
concluded that it was in the best interests of the Capital Shareholders to
convert the Fund into an open-end investment company.
DIFFERENCES BETWEEN FUND OPERATIONS AS AN OPEN-END AND CLOSED-END INVESTMENT
COMPANY
The Fund is currently registered as a "closed-end" management investment
company under the Act. Closed-end investment companies neither redeem their
outstanding shares nor generally engage in the continuous sale of new
securities, and thus operate with a relatively fixed capitalization. The shares
of closed-end investment companies are normally bought and sold on national
securities exchanges. The Fund's shares are currently traded on The New York
Stock Exchange, Inc. (the "NYSE"). The Income Shares will be redeemed on January
31, 1997. The Fund's Capital Shares will be delisted from the NYSE upon
effectiveness of the registration statement pursuant to which the Fund offers
its shares as an open-end investment company.
In contrast, open-end management investment companies, commonly referred to
as "mutual funds," issue redeemable securities. The holders of redeemable
securities have the right to surrender
3
<PAGE>
those securities to the mutual fund and obtain in return their proportionate
share of the value of the fund's net assets (less any redemption fee or deferred
sales charge charged by the fund). No redemption fees or deferred sales charges
will be applicable to the outstanding Capital Shares. Many mutual funds
(including the Fund, if the proposed conversion is effected) also continuously
issue new shares to investors through the fund's distributor at the public
offering price at the time of such issuance.
Some of the legal and practical differences between operations of the Fund
as a closed-end and an open-end investment company are as follows:
(a)ACQUISITION AND DISPOSITION OF SHARES. If the Fund is converted into an
open-end investment company, the Fund's Capital Shares will no longer be
listed on the NYSE and investors wishing to acquire shares of the Fund
would be able to purchase them from the Distributor at the public
offering price. Shareholders desiring to realize the value of their
shares would be able to do so by exercising their right to have such
shares redeemed by the Fund at the next determined current net asset
value. The Fund's net asset value per share is calculated by dividing (i)
the value of its portfolio securities plus all cash and other assets
(including accrued interest and dividends received but not collected)
less all liabilities (including accrued expenses) by (ii) the number of
outstanding shares of the Fund. The Securities and Exchange Commission
(the "SEC") generally requires open-end investment companies to value
their assets on each business day in order to determine the current net
asset value on the basis of which their shares may be redeemed by
shareholders or purchased by investors. It is anticipated that the net
asset value of the Fund will be published daily by leading financial
publications.
(b)ELIMINATION OF DISCOUNT. Converting the Fund into an open-end fund will
eliminate immediately any market discount from net asset value. If the
Conversion is approved by the shareholders, the market discount may be
reduced or the shares may trade at a premium prior to the date of any
conversion to open-end status to the extent investors are induced to
purchase shares in the open market in anticipation of a prospective
open-ending or in order to avoid the payment of sales charges that will
be in effect after the Conversion.
(c)PORTFOLIO MANAGEMENT. Because a closed-end investment company does not
have to redeem its shares, it may keep all of its assets fully invested
and make investment decisions without having to adjust for cash inflows
and outflows from continuing sales and redemptions of its shares. In
contrast, open-end funds may be subject to pressure to sell portfolio
securities at disadvantageous times or prices to satisfy such redemption
requests. OpCap Advisors, the Fund's current investment advisor and
proposed subadvisor, believes that due to the highly liquid nature of the
Fund's portfolio, it should have no difficulty in satisfying redemption
requests or in otherwise managing the Fund as an open-end fund. The
Fund's current investment objectives are (a) long-term capital
appreciation and preservation of capital and (b) current income and
long-term growth of income. Since current income and long-term growth of
income is the objective of the Income Shares and those shares will be
redeemed on January 31, 1997, it is proposed that the Fund's fundamental
investment objective be changed to capital appreciation (see Proposal 6
regarding approval of a change in the Fund's fundamental investment
objective). The Fund's income producing investments have been primarily
corporate bonds and convertible securities and dividend-paying common
stocks. In order to redeem the Income Shares on January 31, 1997, all or
a portion (depending upon market conditions) of the Fund's holdings of
bonds, convertible securities and dividend-paying common stocks will be
sold. If the Conversion and the other Proposals presented at the meeting
are approved, the Fund will invest in common stocks, bonds and
convertible securities only for the potential of capital appreciation,
not for the generation of income. For the foregoing reasons, OpCap
Advisors does not believe that converting the Fund to an open-end fund
will adversely affect investment performance.
4
<PAGE>
(d)EXPENSES; POTENTIAL NET REDEMPTIONS. Under the Fund's existing dual
purpose structure, all operating expenses of the Fund are borne by the
Income Shares and no expenses are allocated to the Capital Shares. If the
Fund is converted to an open-end fund, the Capital Shares will become
Class A shares of Common Stock and will bear their allocable share of the
Fund's expenses. Open-end funds are generally more expensive to operate
and administer than closed-end funds and it is expected that the Fund's
expense ratio will be higher than it is currently. Expenses of operation
as an open-end fund not currently borne by the Fund include the costs
associated with the distribution of the Fund's shares (see Proposal No. 4
regarding approval of a Distribution and Service Plan and Agreement
pursuant to Rule 12b-1), higher transfer agency expenses and the cost of
registration of the Fund's shares with the Securities and Exchange
Commission and in the various states (see "State Securities Law
Implications" below). In addition, the Fund might be required to sell
portfolio securities in order to meet redemptions, thereby resulting in
realization of gains (or losses). The Fund's expense ratio could be
adversely affected by significant net redemptions. In the unlikely event
the Fund's asset base is reduced to such a small size as to render the
Fund no longer economically viable, the Board might consider alternatives
to continuing the Fund's operations, including merging the Fund with
another investment company or liquidating the Fund.
(e)STATE SECURITIES LAW IMPLICATIONS. As a closed-end fund listed on the
NYSE, the Fund does not currently bear the expense of registering the
sale of its shares with state securities commissions. However, as a
result of open-ending and making a continuous offering of its shares, the
Fund will be required to register the sale of its shares with state
securities commissions and will incur the costs related to such
registration.
(f)COMPARATIVE EXPENSE INFORMATION. Set forth below are tables that compare
current and pro forma expenses based on assets and expenses for the six
months ended June 30,1996 and for the fiscal year ended December 31,
1995. The pro forma fees and expenses are those estimated to be incurred
if the Fund is converted to an open-end fund and the new Investment
Advisory Agreement, 12b-1 plans and other agreements proposed are
approved by the Capital Shareholders.
CURRENT
(PERIOD: SIX MONTHS ENDED JUNE 30, 1996)
SUMMARY OF FUND EXPENSES
Under the Fund's dual purpose structure, the Capital Shares are entitled to
any capital appreciation from all the assets of the Fund and the Income Shares
are entitled to receive all the Fund's net income and bear all the expenses of
the Fund, including advisory and administration fees and organizational
expenses. For the purpose of this comparison and because the dual purpose
structure of the Fund will not terminate until January 31, 1997, when the Income
Shares will be redeemed, the following table presents expenses of the Fund as a
whole.
5
<PAGE>
<TABLE>
<CAPTION>
SHAREHOLDER TRANSACTION EXPENSES
<S> <C>
Maximum Sales Load Imposed on Purchases (as a percentage of offering price)......... *
Maximum Sales Load Imposed on Reinvested Dividends.................................. *
Maximum Deferred Sales Load (as a percentage of original purchase price or
redemption proceeds, whichever is lower)........................................... None
Redemption Fee...................................................................... None
Exchange Fee........................................................................ N/A
ANNUAL FUND OPERATING EXPENSES (AS A PERCENTAGE OF AVERAGE NET ASSETS)
Management Fees..................................................................... .56%
12b-1 Fees.......................................................................... None
Other Expenses...................................................................... .16%
---------
Total Fund Operating Expenses....................................................... .72%
</TABLE>
- ------------------------
* Purchases and sales made on the NYSE are subject to customary brokerage
commissions of approximately 1% but may be less or more than 1% depending on
the size of the transaction.
PRO FORMA
SUMMARY OF FUND EXPENSES
The following table estimates the expenses expected to have been incurred if
the Fund operated as an open-end fund during the six month period ended June 30,
1996 (with $700 million of assets) under the new investment advisory, 12b-1
plans and other agreements and the new capital structure of three classes of
shares: Class A with a front-end sales load and Class B and Class C sold without
a front-end sales load but with different contingent deferred sales
arrangements.
<TABLE>
<CAPTION>
CLASS OF SHARES:
-------------------------------
A B C
--------- --------- ---------
<S> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum Initial Sales Load Imposed on Purchase (as a % of offering price)........... 5.75%* none none
Maximum Deferred Sales Load (1)..................................................... none 5.00% 1.00%
Maximum Sales Load Imposed On Reinvested Dividends.................................. none none none
Redemption Fee...................................................................... none none none
Exchange Fee........................................................................ none none none
ANNUAL FUND OPERATING EXPENSES (AS A % OF AVERAGE NET ASSETS)
Management Fee (2).................................................................. .67% .67% .67%
12b-1 Fee (including service fees of .25%) (2)...................................... .35% 1.00% 1.00%
Other Expenses...................................................................... .40% .40% .40%
--------- --------- ---------
TOTAL FUND OPERATING EXPENSES....................................................... 1.42% 2.07% 2.07%
</TABLE>
- ------------------------
* Capital Shareholders will not pay a sales charge in connection with the
Conversion. The sales charge will be applicable to purchases of Class A
shares made subsequent to the Conversion.
(1) Purchases of Class A shares made after the Conversion of $1 million or more
($500,000 or more for purchases by Oppenheimer Funds prototype 401(k) plans)
will not be subject to front-end sales charges but a contingent deferred
sales charge of 1% will be imposed if the shares are redeemed within the
first 18 months after the end of the calendar month of their purchase.
(2) The management fee is higher than that paid by most other investment
companies. For the first two years after the new Investment Advisory
Agreement takes effect, OFI will waive the following portion of the advisory
fee: .15% of the first $200 million of net assets; .40% of the next $200
million of net assets; .30% of the next $400 million of net assets and .25%
of net assets over $800 million. For the first two years after the new 12b-1
plan for Class A shares takes effect, the
6
<PAGE>
Distributor will waive .15% of the annual distribution fee. Without these
waivers, the management fee would be .96%, the 12b-1 fee for Class A shares
would be .50% and total fund operating expenses would be 1.86%, 2.36% and
2.36% for Class A, B and C shares, respectively.
CURRENT
EXAMPLE 1: YOU WOULD PAY THE FOLLOWING EXPENSES OVER THE INDICATED PERIODS
IN THE FUND ON A $1,000 INVESTMENT.
<TABLE>
<CAPTION>
<S> <C>
1 Year................................................................................. $ 7
3 Years................................................................................ 23
5 Years................................................................................ 40
10 Years............................................................................... 89
</TABLE>
PRO FORMA
EXAMPLE 1: YOU WOULD PAY THE FOLLOWING EXPENSES OVER THE INDICATED PERIODS
IN THE FUND 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 SIX YEARS.
<TABLE>
<CAPTION>
A B C
--------- --------- ---------
<S> <C> <C> <C>
1 Year............................................................... $ 71 $ 21 $ 21
3 Years.............................................................. 104 68 68
5 Years.............................................................. 144 121 121
10 Years............................................................. 256 241 265
</TABLE>
EXAMPLE 2: YOU WOULD PAY THE FOLLOWING EXPENSES OVER THE INDICATED PERIODS
IN THE FUND 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 SIX YEARS.
<TABLE>
<CAPTION>
A B C
--------- --------- ---------
<S> <C> <C> <C>
1 Year............................................................... $ 71 $ 71 $ 31
3 Years.............................................................. 104 98 68
5 Years.............................................................. 144 141 121
10 Years............................................................. 256 241 265
</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.
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 Conduct Rules.
CURRENT
PERIOD: FISCAL YEAR ENDED DECEMBER 31, 1995
SUMMARY OF FUND EXPENSES
Under the Fund's dual purpose structure, the Capital Shares are entitled to
any capital appreciation from all the assets of the Fund and the Income Shares
are entitled to receive all the Fund's net income and bear all the expenses of
the Fund, including advisory and administration fees and
7
<PAGE>
organizational expenses. For the purpose of this comparison and because the dual
purpose structure of the Fund will not terminate until January 31, 1997, when
the Income Shares will be redeemed, the following table presents expenses of the
Fund as a whole.
<TABLE>
<CAPTION>
SHAREHOLDER TRANSACTION EXPENSES
<S> <C>
Maximum Initial Sales Load Imposed on Purchase (as a percentage of offering
price)............................................................................. *
Maximum Sales Load Imposed On Reinvested Dividends.................................. None
Maximum Deferred Sales Load (as a percentage of original purchase price or
redemption)........................................................................ None
Redemption Fee...................................................................... None
Exchange Fee........................................................................ N/A
ANNUAL FUND OPERATING EXPENSES (AS A % OF AVERAGE NET ASSETS)
Management Fee...................................................................... .56%
12b-1 Fees.......................................................................... None
Other Expenses...................................................................... .17%
---------
TOTAL FUND OPERATING EXPENSES....................................................... .73%
</TABLE>
- ------------------------
* Purchases and sales made on the NYSE are subject to customary brokerage
commissions of approximately 1% but may be less or more than 1% depending on
the size of the transaction.
PRO FORMA
SUMMARY OF FUND EXPENSES
The following table estimates the expenses expected to have been incurred if
the Fund operated as an open-end fund during the fiscal year ended December 31,
1995 (with $700 million of assets) under the new investment advisory, 12b-1
plans and other agreements and the new capital structure of three classes of
shares: Class A with a front-end sales load and Class B and Class C sold without
a front-end sales load but within different contingent deferred sales
arrangements.
<TABLE>
<CAPTION>
CLASS OF SHARES:
-------------------------------
A B C
--------- --------- ---------
<S> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum Initial Sales Load Imposed on Purchase (as a % of offering price)........... 5.75%* none none
Maximum Deferred Sales Load (1)..................................................... none 5.00% 1.00%
Maximum Sales Load Imposed On Reinvested Dividends.................................. none none none
Redemption Fee...................................................................... none none none
Exchange Fee........................................................................ none none none
ANNUAL FUND OPERATING EXPENSES (AS A % OF AVERAGE NET ASSETS)
Management Fee (2).................................................................. .67% .67% .67%
12b-1 Fee (including service fees of .25%) (2)...................................... .35% 1.00% 1.00%
Other Expenses...................................................................... .40% .40% .40%
--------- --------- ---------
TOTAL FUND OPERATING EXPENSES....................................................... 1.42% 2.07% 2.07%
</TABLE>
- ------------------------
* Capital Shareholders will not pay a sales charge in connection with the
Conversion. The sales charge will be applicable to purchases of Class A
shares made subsequent to the Conversion.
(1) Purchases of Class A shares made after the Conversion of $1 million or more
($500,000 or more for purchases by Oppenheimer Funds prototype 401(k) plans)
will not be subject to front-end sales charges but a contingent deferred
sales charge of 1% will be imposed if the shares are redeemed within the
first 18 months after the end of the calendar month of their purchase.
(2) The management fee is higher than that paid by most other investment
companies. For the first two years after the new Investment Advisory
Agreement takes effect, OFI will waive the following
8
<PAGE>
portion of the advisory fee: .15% of the first $200 million of net assets;
.40% of the next $200 million of net assets; .30% of the next $400 million
of net assets and .25% of net assets over $800 million. For the first two
years after the new 12b-1 plan for Class A shares takes effect, the
Distributor will waive .15% of the distribution fee. Without these waivers,
the management fee would be .96%, the 12b-1 fee applicable to Class A shares
would be .50% and total fund operating expenses would be 1.86%, 2.36% and
2.36% for Class A, B and C shares, respectively.
CURRENT
EXAMPLE 1: YOU WOULD PAY THE FOLLOWING EXPENSES OVER THE INDICATED PERIODS
IN THE FUND ON A $1,000 INVESTMENT.
<TABLE>
<CAPTION>
<S> <C>
1 Year................................................................................. $ 7
3 Years................................................................................ 23
5 Years................................................................................ 41
10 Years............................................................................... 91
</TABLE>
PRO FORMA
EXAMPLE 1: YOU WOULD PAY THE FOLLOWING EXPENSES OVER THE INDICATED PERIODS
IN THE FUND 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 SIX YEARS.
<TABLE>
<CAPTION>
A B C
--------- --------- ---------
<S> <C> <C> <C>
1 Year............................................................... $ 71 $ 21 $ 21
3 Years.............................................................. 104 68 68
5 Years.............................................................. 144 121 121
10 Years............................................................. 256 241 265
</TABLE>
EXAMPLE 2: YOU WOULD PAY THE FOLLOWING EXPENSES OVER THE INDICATED PERIODS
IN THE FUND 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 SIX YEARS.
<TABLE>
<CAPTION>
A B C
--------- --------- ---------
<S> <C> <C> <C>
1 Year............................................................... $ 71 $ 71 $ 31
3 Years.............................................................. 104 98 68
5 Years.............................................................. 144 141 121
10 Years............................................................. 256 241 265
</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.
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 Conduct Rules.
(g)VOTING RIGHTS. Under the Fund's dual purpose structure the Capital
Shareholders vote on the election of Capital Share Directors and on any
matters on which the Act or any other applicable law requires a class
vote. Capital Shareholders are entitled to one vote per share.
If the Conversion and the other Proposals presented at this meeting are
approved, there will be three classes of shares of Common Stock of the
Fund. The Capital Shares will become Class A shares and in addition,
Class B and Class C shares will be created. Each class will
9
<PAGE>
have exclusive voting rights as to matters that relate solely to its
arrangement and will have separate voting rights on any matter submitted
to shareholders in which the interests of one class differ from the
interests of another class. Opportunities to vote may become less
frequent if the Fund converts to open-end status because the Fund will
not hold shareholder meetings unless required to do so by the Act.
Maryland law provides that registered investment companies are not
required to hold an annual shareholder meeting as long as there is no
requirement under the Act which must be met by convening a shareholders'
meeting. The Fund has been required to hold annual shareholder meetings
by the regulations of the NYSE but if the Conversion is approved, the
Fund's shares will be delisted and the Fund will not hold annual meetings
in any year in which it is not required by the Act to do so.
By not having to hold annual shareholder meetings, the Fund would save
the costs of preparing proxy materials and soliciting shareholders' votes
on the usual proposals contained therein. Based on the number of
outstanding shares and shareholders as of the record date, such costs
would aggregate approximately $55,000 per year. Under the Act, the Fund
would be required to hold a shareholder meeting if the number of
Directors elected by the shareholders were less than a majority of the
total number of Directors, or if a change were sought in the fundamental
investment policies of the Fund or the Fund's status (such as, for
example, a change from open-end to closed-end status).
(h)DIVIDEND REINVESTMENT PLAN. Only Income Shareholders may participate in
the Fund's current Dividend Reinvestment Plan. Under the Fund's Plan,
State Street Bank and Trust Company, as Plan Agent, pools dividends
payable to Income Shareholders who are participants in the Plan,
purchases shares on the open market on behalf of the Plan and then
allocates shares and a proportionate share of the brokerage commissions
of each participant. If the proposals presented at this meeting are
approved, shareholders would have the opportunity to reinvest dividends
and capital gains distributions in shares of the Fund, at net asset
value.
(i)SENIOR SECURITIES AND BORROWINGS. The Act prohibits mutual funds from
issuing "senior securities" representing indebtedness (i.e., bonds,
debentures, notes and other similar securities), other than indebtedness
to banks where there is an asset coverage of at least 300% for all
borrowings. Closed-end investment companies are permitted to issue
"senior securities" representing indebtedness to any lender if the 300%
asset coverage test is met and may issue preferred stock (subject to
various limitations), whereas open-end investment companies generally may
not issue preferred stock. Currently, the Fund is leveraged because under
its dual purpose structure, the Capital Shareholders are entitled to all
gains and losses attributable to the Income Shares as well as the Capital
Shares. This leverage will be eliminated upon the redemption of the
Income Shares. The Fund, however, may only borrow money in an amount up
to 10% of its total assets. This policy is expected to be changed after
the Conversion is effected. See Proposal No. 7.
(j)SHAREHOLDER SERVICES. If the Fund is converted into an open-end
investment company, the same services will be made available to
shareholders of the Fund as are available to shareholders of each of the
open-end Oppenheimer funds. Such services include: (1) an automatic
purchasing plan, (2) a systematic withdrawal plan, (3) an Exchange
Privilege which allows shareholders of the Fund to exchange their shares
for shares of certain other Oppenheimer funds and (4) the ability to
effect various transactions by telephone including by Phone Link, a
24-hour automated telephone system.
(k)DISTRIBUTION PLANS. An open-end investment company, unlike a closed-end
investment company, is permitted to finance the distribution of its
shares by adopting a plan of distribution pursuant to Rule 12b-1 under
the Act. If the Fund is converted to a mutual fund and if
10
<PAGE>
Proposal No. 4 is approved by shareholders, the Fund will adopt a Plan of
Distribution pursuant to Rule 12b-1 in order to compensate the
Distributor for services provided and activities undertaken to distribute
the shares of the Fund. See Proposal No. 4 below.
(l)MINIMUM INVESTMENT AND INVOLUNTARY REDEMPTIONS. If the Fund is converted
to an open-end fund, it will adopt requirements for future shareholders
that an initial investment in Fund shares and for all shareholders that
any subsequent investment must be in a specified minimum amount, in order
to reduce the administrative burdens incurred in monitoring numerous
small accounts. The Fund expects that the minimum initial purchase for
future shareholders will be $1,000 ($25 if the account is opened through
certain plans, or for pension and profit-sharing plans and IRAs, $250).
Additional investments may be made in the amount of $25. The Fund
reserves the right to redeem, upon sixty days' notice and at net asset
value, the shares of any shareholder, other than a shareholder that is an
IRA or other tax-deferred retirement plan, whose shares have a value of
less than $100 as a result of redemptions or repurchases, or such lesser
amount as may be fixed by the Board of Directors. The Fund will notify
such shareholder that the value of his or her shares is less than the
applicable amount and allow the shareholder to make additional
investments in an amount which will increase the value of the account to
at least the applicable amount before the redemption.
(m)QUALIFICATION AS A REGULATED INVESTMENT COMPANY. The Fund intends to
continue to qualify for treatment as a regulated investment company under
the Internal Revenue Code of 1986, as amended (the "Code"), after
conversion to open-end status, so that it will continue to be relieved of
federal income tax on that part of its investment company taxable income
and net capital gain that is distributed to its shareholders. To qualify
for this treatment the Fund must currently meet several requirements, one
of which is that the Fund must derive less than 30% of its gross income
each taxable year from the sale or other disposition of securities,
options or futures contracts held for less than three months.
CONVERSION TO AN OPEN-END INVESTMENT COMPANY
If the Conversion and the other Proposals presented at this meeting are
approved, the Board will take such other actions as are necessary to effect the
Conversion. The Conversion of the Fund to an open-end investment company will be
accomplished by: (i) the filing of Amended and Restated Articles of
Incorporation of the Fund with the Secretary of State of the State of Maryland;
(ii) changing the Fund's subclassification under the Act from a closed-end
management investment company to an open-end management investment company; and
(iii) the filing of a registration statement under the Securities Act of 1933,
as amended, and the Act with the Securities and Exchange Commission and state
securities commissions. It is expected that the registration statement will be
filed before the date of the meeting and will become effective on the date of
the Conversion.
Although management will use all practicable measures to keep costs at a
minimum, certain costs will be incurred, many of which will be non-recurring, in
connection with the Conversion, including costs associated with the seeking of
necessary government clearances, the preparation of a registration statement and
prospectus as required by federal securities laws (including printing, mailing
and legal costs) and the payment of necessary filing fees under the securities
laws of various states.
Neither the Fund nor its shareholders will realize any gain or loss for
federal income tax purposes as a result of the Fund's conversion. However, the
shareholders will recognize a gain or loss if they later redeem their shares to
the extent that the redemption proceeds are greater or less than the respective
adjusted tax basis of their shares. Payment for any such redemption generally
will be made within seven days after receipt of a proper request for redemption
(in accordance with redemption procedures specified in the prospectus). Such
payment may be postponed or the right of redemption suspended under unusual
circumstances that affect the ability to value the securities in the Fund's
portfolio or when an emergency makes it not reasonably practicable for the Fund
to dispose of
11
<PAGE>
portfolio securities or fairly to determine the value of its net assets. If the
proposal to open-end the Fund and the other proposals presented at this meeting
are not approved by the shareholders, the Fund will be liquidated.
VOTE REQUIRED
Approval of a change in the Fund's subclassification under the Act from a
closed-end investment management company to an open-end management investment
company will require the vote of a majority of the outstanding Capital Shares.
Under the Act, the vote of a "majority of the outstanding voting securities" of
an investment company means the vote, at a duly called annual or special meeting
of shareholders, of 67% or more of the shares present at the meeting, if the
holders of more than 50% of the outstanding shares of the company are present or
represented by proxy, or of more than 50% of the total outstanding shares of the
company, whichever is less.
THE BOARD OF DIRECTORS, INCLUDING A MAJORITY OF THE INDEPENDENT DIRECTORS,
RECOMMENDS THAT SHAREHOLDERS APPROVE THE PROPOSAL TO CHANGE THE FUND'S
SUBCLASSIFICATION UNDER THE ACT FROM A CLOSED-END MANAGEMENT INVESTMENT COMPANY
TO AN OPEN-END MANAGEMENT INVESTMENT COMPANY.
PROPOSALS NO. 2 AND 3
APPROVAL OF NEW INVESTMENT ADVISORY AGREEMENT
WITH OPPENHEIMERFUNDS, INC.
AND NEW SUBADVISORY AGREEMENT
BETWEEN OPPENHEIMERFUNDS, INC.
AND OPCAP ADVISORS
BACKGROUND
Oppenheimer Capital formed its subsidiary OpCap Advisors (previously called
Quest for Value Advisors) to offer its institutional investment advisory
services to the retail market. Its flagship fund, the Quest for Value Fund,
Inc., was established in 1980 and the Fund was established in 1987. Since that
time OpCap Advisors steadily added to its product line through the development
of new funds and by acquisitions. OCC Distributors, a subsidiary of Oppenheimer
Capital, marketed these products through a network of third party broker-dealers
and with an emphasis on the retirement market. Although Oppenheimer Capital was
proud of the performance of its mutual fund products and the benefits they
brought to shareholders, in the course of a review of its business, it concluded
that it should concentrate on its core investment management business and not
continue in the retail distribution of mutual funds. The retail mutual fund
market requires significant assets per fund and in the aggregate for a mutual
fund family to cover normal costs, significant capital investment in new
products and services, financing for Class B and Class C shares and sales
support. Consequently, it became increasingly difficult for a relatively small
mutual fund operation, with assets under $10 billion, to compete.
After this determination had been made, representatives of OFI approached
Oppenheimer Capital about acquiring certain of its mutual fund assets.
Representatives of OFI, Oppenheimer Capital, OCC Distributors and OpCap Advisors
held meetings beginning in April 1995 and the parties executed an Acquisition
Agreement (the "Acquisition Agreement") on August 17, 1995 relating to the
mutual fund assets of certain open-end mutual funds advised by OpCap Advisors.
In connection with the Acquisition Agreement, the parties also executed a
Put/Call letter agreement on August 17, 1995 which provided that if OFI gave
Oppenheimer Capital written notice at any time after June 1, 1996 and before
September 30, 1996, OFI would have the right and obligation to acquire the
interest of Oppenheimer Capital, OpCap Advisors and OCC Distributors in the
Fund, subject to the approval of the Board of Directors and the Capital
Shareholders of the Fund. Such written notice was given by OFI to Oppenheimer
Capital on September 16, 1996. On September 17, 1996, the Board of Directors of
12
<PAGE>
the Fund, including a majority of the independent directors, approved a new
investment advisory agreement with OFI and a new subadvisory agreement between
OFI and OpCap Advisors, subject to the approval of the Capital Shareholders. The
terms of the current investment advisory agreement and the terms of the proposed
agreements are discussed below.
THE EXISTING INVESTMENT ADVISORY AGREEMENT WITH OPCAP ADVISORS
OpCap Advisors provides investment advisory and management services to the
Fund pursuant to an Investment Advisory Agreement dated January 28, 1987. The
existing Investment Advisory Agreement was renewed most recently by the Board of
Directors of the Fund, including a majority of the independent Directors, for a
period of one year on February 15, 1996. The shareholders of the Fund approved
the existing Investment Advisory Agreement at a meeting held on February 11,
1988.
The advisory fees accrued or paid to OpCap Advisors with respect to the Fund
for the fiscal year ended December 31, 1995 were $4,418,791 and the
administration fees accrued or paid to Oppenheimer Capital pursuant to the
Administration Agreement with the Fund were $783,758 for the fiscal year ended
December 31, 1995.
For the fiscal year ended December 31, 1995, Oppenheimer & Co., Inc., an
affiliated broker-dealer of the Fund, was paid a total of $267,394 in brokerage
commissions by the Fund, which amount was 25.4% of the Fund's total brokerage
commissions during the period.
THE PROPOSED NEW INVESTMENT ADVISORY AND SUBADVISORY AGREEMENTS
If all the proposals presented to the meeting are approved by the Capital
Shareholders of the Fund, the new Investment Advisory Agreement (the "New
Investment Advisory Agreement") and the New Subadvisory Agreement (the "New
Subadvisory Agreement") will become effective at the Closing, which is
anticipated to be held promptly after the redemption of the Income Shares. The
following summary of the New Investment Advisory and New Subadvisory Agreements
is qualified in its entirety by reference to the forms of such agreements which
are attached to this proxy statement as Exhibits B and C, respectively.
SERVICES TO BE PERFORMED
Under the New Investment Advisory Agreement, OFI will act as the investment
adviser for the Fund and will supervise the investment program of the Fund. The
New Investment Advisory Agreement provides that OFI will provide administrative
services for the Fund including the completion and maintenance of records,
preparation and filing of reports required by the Securities and Exchange
Commission, reports to shareholders and composition of proxy statements and
registration statements required by Federal and state securities laws. OFI will
furnish the Fund with office space, facilities and equipment and arrange for its
employees to serve as officers of the Fund. The administrative services to be
provided by OFI under the New Investment Advisory Agreement will be at its own
expense.
Expenses not assumed by OFI under the New Investment Advisory Agreement or
paid by the Distributor will be paid by the Fund including interest, taxes,
brokerage commissions, insurance premiums, expenses and fees of non-interested
Directors, legal and audit expenses, transfer agent and custodian fees and
expenses, registration fees, expenses of printing and mailing reports and proxy
statements to shareholders, expenses of shareholders meetings and non-recurring
expenses including litigation.
The New Investment Advisory Agreement provides that OFI may enter into sub
advisory agreements with other affiliated or unaffiliated registered investment
advisers in order to obtain specialized services for the Fund provided that the
Fund is not required to pay any additional fees for such services. The New
Subadvisory Agreement provides that OpCap Advisors shall regularly provide
investment advice with respect to the Fund and invest and reinvest cash,
securities and the property
13
<PAGE>
comprising the assets of the Fund. Under the New Subadvisory Agreement, OpCap
Advisors agrees not to change the Portfolio Manager of the Fund without the
written approval of OFI and to provide assistance in the distribution and
marketing of the Fund.
ADVISORY AND SUBADVISORY FEES
For the services and facilities to be provided by OFI under the New
Investment Advisory Agreement, the Fund will pay a monthly fee computed as a
percentage of the Fund's average daily net assets. The fee applicable to the
Fund will be an annual fee, payable monthly, at the rate of 1.00% of the first
$400 million of net assets, .90% of the next $400 million of net assets and .85%
of net assets over $800 million. The New Investment Advisory Agreement contains
the following expense limitation: for a two year period following the effective
date of the agreement, OFI will waive the following portion of the advisory fee
- -- .15% of the first $200 million of net assets; .40% of the next $200 million
of the net assets; .30% of the next $400 million of the net assets; and .25% of
net assets over $800 million. After giving effect to such waiver, the advisory
fee would be .85% of the first $200 million of net assets and .60% of net assets
in excess of $200 million. The existing advisory fee for the Fund is .75% of the
first $200 million of net assets and .50% of net assets over $200 million. In
addition, the Fund currently pays an annual fee equal to the greater of $40,000
or .10% of the Fund's average weekly net assets for services provided by
Oppenheimer Capital pursuant to an Administration Agreement with the Fund. If
the Proposals presented to this meeting are approved, the Administration
Agreement with Oppenheimer Capital will be terminated and the administrative
services provided under the Administration Agreement will be provided by OFI
under the New Investment Advisory Agreement. Under the New Subadvisory
Agreement, OFI will pay OpCap Advisors an annual fee payable monthly, based on
the average daily net assets of the Fund, equal to 40% of the net investment
advisory fee collected by OFI from the Fund based on the total net assets of the
Fund as of the effective date of the New Subadvisory Agreement and remaining 120
days later (the "base amount") plus 30% of the investment advisory fee collected
by OFI based on the total net assets of the Fund that exceed the base amount. On
the record date, the net assets of the Fund were $ .
LIMITATION OF LIABILITY
The New Investment 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 New
Investment Advisory Agreement, OFI will not be liable for any loss sustained by
reason of good faith errors or omissions in connection with any matters to which
the New Investment Advisory Agreement relates. The existing Investment Advisory
Agreement contains a similar provision. The New Subadvisory Agreement provides
that in the absence of willful misfeasance, bad faith, negligence or reckless
disregard of its duties or obligations, OpCap Advisors shall not be liable to
OFI for any act or omission in the course of or connected with rendering
services under the New Subadvisory Agreement or for any losses that may be
sustained in the purchase, holding or sale of any security.
TERMINATION
The New Investment Advisory Agreement may be terminated by OFI or by the
Fund at any time without penalty upon 60 days written notice to the other party.
Termination by the Fund must be approved by the vote of a majority of the
Directors or by vote of a majority of the outstanding shares of the Fund. The
New Investment Advisory Agreement will terminate in the event of an
"assignment," as required by the Act. The existing Investment Advisory Agreement
contains a similar provision except that OpCap Advisors may terminate the
agreement on 90 days' notice. The New Subadvisory Agreement contains similar
provisions to the New Investment Advisory Agreement with respect to termination
in the event of an "assignment" and termination by the Fund.
In addition, the New Subadvisory Agreement provides that if the agreement is
terminated by OFI prior to the tenth anniversary thereof, OFI will be obligated
to pay OpCap Advisors an amount equal
14
<PAGE>
to the subadvisory fee until the tenth anniversary unless the New Investment
Advisory Agreement has been terminated or the New Subadvisory Agreement has been
terminated upon the occurrence of any of the following events:
(1)The performance of the Fund's Class A shares ranks in the bottom quartile
as compared to Class A shares of comparable funds for two consecutive
calendar years (beginning with the calendar year 1997) and earns a Morningstar,
Inc. three year rating of less than three stars;
(2)OpCap Advisors is disqualified from serving as an investment adviser to
the Fund under Section 9(a) of the Act;
(3)OpCap Advisors, OCC Distributors, Oppenheimer Capital or persons under
their control cause a material violation of the Non Compete Agreement
that was entered into in connection with the Acquisition Agreement; or
(4)OpCap Advisors breaches a material provision of the New Subadvisory
Agreement.
PORTFOLIO TRANSACTIONS AND BROKERAGE
The New Investment Advisory Agreement contains provisions relating to the
selection of broker-dealers ("brokers") for the Fund's portfolio transactions.
OFI and any Subadvisor may use such brokers as may, in their best judgment based
on all relevant factors, implement the policy of the Fund to achieve best
execution of portfolio transactions. While OFI need not seek advance competitive
bidding or base its selection on posted rates, it is expected to be aware of the
current rates of most eligible brokers and to minimize the commissions paid to
the extent consistent with the interests and policies of the Fund as established
by the Board and the provisions of the New Investment Advisory Agreement. The
existing Investment Advisory Agreement contains similar provisions.
The New Investment Advisory Agreement also provides that, consistent with
obtaining the best execution of the Fund's portfolio transactions, OFI and any
Subadvisor, in the interest of the Fund, may select brokers other than
affiliated brokers, because they provide brokerage and/or research services to
the Fund and/or other accounts of OFI or any Subadvisor. The commissions paid to
such brokers may be higher than another qualified broker would have charged if a
good faith determination is made by OFI or any Subadvisor that the commissions
are reasonable in relation to the services provided, viewed either in terms of
that transaction or OFI or any Subadvisor's overall responsibilities to all its
accounts. No specific dollar value need be put on the services, some of which
may or may not be used by OFI or any Subadvisor for the benefit of the Fund or
other of its advisory clients. To show that the determinations were made in good
faith, OFI or any Subadvisor must be prepared to show that the amount of such
commissions paid over a representative period selected by the Board was
reasonable in relation to the benefits to the Fund. The New Investment Advisory
Agreement recognizes that an affiliated broker-dealer may act as one of the
regular brokers for the Fund provided that any commissions paid to such broker
are calculated in accordance with procedures adopted by the Fund's Board under
applicable SEC rules. The existing Investment Advisory Agreement contains
similar provisions.
The New Subadvisory Agreement permits OpCap Advisors to enter into "soft
dollar" arrangements through the agency of third parties to obtain services for
the Fund. Pursuant to these arrangements, OpCap Advisors will undertake to place
brokerage business with broker-dealers who pay third parties that provide
services. Any such "soft dollar" arrangements will be made in accordance with
policies adopted by the Board of the Fund and in compliance with applicable law.
OFI and its subsidiaries are engaged principally in the business of
managing, distributing and servicing registered investment companies. OFI owns
all of the outstanding stock of the Distributor. OFI is a wholly-owned
subsidiary of Oppenheimer Acquisition Corp. ("OAC"), a holding company
controlled by Massachusetts Mutual Life Insurance Company ("MassMutual"), a
mutual life insurance company located at 1295 State Street, Springfield, MA
01111, that also advises pension plans and
15
<PAGE>
investment companies. OFI, the Distributor and OAC are located at Two World
Trade Center, New York, New York 10048. OAC acquired OFI on October 22, 1990.
OFI is not related to Oppenheimer Capital nor its affiliate, the brokerage firm
Oppenheimer & Co., Inc. As indicated below the common stock of OAC is owned by
(i) certain officers and/or directors of OFI, (ii) MassMutual and (iii) another
investor. No institution or person holds 5% or more of OAC's outstanding common
stock except MassMutual. MassMutual has engaged in the life insurance business
since 1851.
The common stock of OAC is divided into three classes. At June 30, 1996,
MassMutual held (i) all of the 2,160,000 shares of Class A voting stock, (ii)
526,105 shares of Class B voting stock, and (iii) 1,328,053 shares of Class C
non-voting stock. This collectively represented 84.0% of the voting power of OAC
as of that date. Certain officers and/or directors of OFI held (i) 598,704
shares of the Class B voting stock, representing 12.5% of the outstanding common
stock and 6.0% of the voting power, and (ii) options acquired without cash
payment which, when they become exercisable, allow the holders to purchase up to
627,362 shares of Class C non-voting stock. That group includes Ms. Bridget A.
Macaskill, who is a nominee to the Board of Directors of the Fund. Holders of
OAC Class B and Class C common stock may put (sell) their shares and vested
options to OAC or MassMutual at a formula price (based on earnings of OFI).
MassMutual may exercise call (purchase) options on all outstanding shares of
both such classes of common stock and vested options at the same formula price.
During the period September 1, 1994 to June 30, 1996, Ms. Macaskill surrendered
to OAC 20,000 stock appreciation rights issued in tandem with the Class C OAC
options for cash payments aggregating $1,421,800.
The names and principal occupations of the executive officers and directors
of OFI are as follows: Bridget A. Macaskill, President, Chief Executive Officer
and a Director; Donald W. Spiro, Chairman Emeritus and a Director; Robert G.
Galli and James C. Swain, Vice Chairmen; Robert C. Doll, O. Leonard Darling,
Barbara Henniger, James Ruff, Loretta McCarthy and Nancy Sperte, Executive Vice
Presidents; Tilghman G. Pitts III, Executive Vice President and a Director;
Andrew J. Donohue, Executive Vice President and General Counsel; George C.
Bowen, Senior Vice President and Treasurer; Peter M. Antos, Victor Babin, Robert
A. Densen, Robert H. Fielding, Robert Patterson, Richard Rubinstein, Arthur
Steinmetz, Ralph Stellmacher, John Stoma, Jerry Webman, William L. Wilby and
Robert G. Zack, Senior Vice Presidents. These officers and directors are located
at one of the four offices of OFI: Two World Trade Center, New York, NY; 3410 S.
Galena Street, Denver, Colorado 80231; 350 Linden Oaks, Rochester, NY 14625 and
1 Financial Center Plaza, 755 Main Street, Hartford, CT 06103.
Shareholders of the Fund are being asked to approve the new Investment
Advisory Agreement with OFI and the new Subadvisory Agreement between OFI and
OpCap Advisors. A favorable shareholder vote on the matters presented to this
meeting also will constitute a vote to approve the termination of the Fund's
existing Investment Advisory Agreement with OpCap Advisors and its existing
Administration Agreement with Oppenheimer Capital.
THE TERMS OF THE PUT/CALL AGREEMENT
The Put/Call Agreement generally provides for the acquisition by OFI of all
of the investment advisory and other contracts and business relationships and
certain assets and liabilities (the "Purchased Assets") of OpCap Advisors, OCC
Distributors and Oppenheimer Capital (collectively, the "Companies") relating to
the Fund and the assumption by OFI of certain liabilities of the Companies with
respect to the Fund (the "Assumed Liabilities") (the foregoing is referred to as
the "Acquisition").
The purchase price for the Purchased Assets will be calculated pursuant to
the formula set forth on Exhibit A hereto. If the net asset value of the Fund is
the same 120 days after the Closing as it was
16
<PAGE>
on September 30, 1996, OpCap Advisors estimates that the purchase price would be
approximately $12.3 million. The actual purchase price may be higher or lower
depending upon the net asset value of the Fund on the 120th day after the
closing.
A condition to the obligation of OFI to close under the Put/Call Agreement
(the "Closing") is the shareholder approval of the investment advisory
agreement, distribution plans and election of the proposed nominees for
director. The Put/Call Agreement sets forth certain other closing conditions.
The Companies have each agreed pursuant to an Agreement Not To Compete (the
"Non Compete Agreement") not to sponsor, manage or distribute any open-end or
closed-end management investment company registered under the 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 subadvisory agreement for
any fund between OFI and OpCap Advisors or (ii) November 22, 2003. OFI and the
Companies have agreed to indemnify the other party for certain liabilities.
OTHER MATTERS IN CONNECTION WITH OR SUBSEQUENT TO THE CLOSING
It is a condition to the Closing that the Fund enter into a transfer agency
agreement with OppenheimerFunds Services ("OFS"), a division of OFI. The fees to
be paid to OFS for transfer agency and dividend disbursing services include an
annual per account fee of $14.85 and reimbursement for out-of-pocket expenses.
The Board of Directors of the Fund approved the terms of the proposed transfer
agency agreement with OFS at a meeting held on September 17, 1996. The Transfer
Agency Agreement is not required to be approved by shareholders of the Fund. It
is expected that on or about the time of the Closing, the Fund will elect new
officers.
EVALUATION BY THE BOARD OF DIRECTORS
The Board of Directors has determined that continuity and efficiency of
management services after the Conversion can best be assured by approving the
New Investment Advisory and Subadvisory Agreements on behalf of the Fund. The
Board believes that the New Investment Advisory and Subadvisory Agreements will
enable the Fund to obtain services of high quality at costs which they deem
appropriate and reasonable and that approval of the Agreements is in the best
interests of the Fund and its shareholders. The Board recognized that open-end
investment companies typically have higher expenses than closed-end investment
companies.
In evaluating the New Investment Advisory and Subadvisory Agreements, the
Board of Directors requested and reviewed, with the assistance of independent
legal counsel, material furnished by OFI and OpCap Advisors. These materials
included financial statements as well as other written information regarding OFI
and its personnel, operations, and financial condition. The Board also reviewed
the same type of information about OpCap Advisors. Consideration was given to
comparative information concerning other mutual funds with similar investment
objectives including information prepared by Lipper Analytical Services, Inc.
Attached to this Proxy Statement as Exhibit D is a list of other funds managed
by OFI that have capital appreciation as the investment objective (which will be
the Fund's investment objective if Proposal 6 is approved by the Capital
Shareholders), their net assets and the rate of the advisory fee paid to OFI.
The Board of Directors also reviewed and discussed the terms and provisions of
the New Investment Advisory and Subadvisory Agreements and compared them to the
existing management arrangements 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. The Board evaluated the
nature and extent of services provided by other investment advisers to their
respective funds and also considered the benefits OFI would obtain from its
relationship with the Fund and the economies of scale in costs and expenses to
OFI associated with its providing such services. The Directors noted that the
portfolio of the Fund will continue to be
17
<PAGE>
managed by OpCap Advisors, although overall management and distribution and
shareholder services will be provided by OFI and its subsidiaries. In this way,
although the Fund will become part of the Oppenheimer funds family, there will
be continuity of portfolio management.
The Board of Directors also considered the ability of OFI to provide
services to the Fund. The independent Directors met with OFI's senior executives
and certain Board members of the Oppenheimer Quest funds who are the proposed
nominees for election as directors of the Fund (see Proposal No. 8). The Board
evaluated such factors as OFI's experience in providing various financial
services to investment companies, its experience in the investment company
business, its distribution and shareholder servicing capabilities and its
reputation, integrity, financial responsibility and stability. The Board also
considered the following factors in determining to approve the New Investment
Advisory Agreement: shareholders of the Fund would be able to exchange their
shares after the Closing for a wide variety of portfolios within the Oppenheimer
funds family and the annual operating expenses of the Fund on a pro forma basis,
although higher than the Fund's expenses for the most recent fiscal year ended
December 31, 1995 and six month period ended June 30, 1996, are anticipated to
be comparable to the expenses of comparable open-end funds. The Board of
Directors determined that OFI's assumption of the investment management function
for the Fund would in all likelihood offer the Fund continued effective advisory
services and capabilities. The Board also noted the assurances it received from
OFI that it is adequately capitalized to enable it to provide high quality
investment management services.
Based upon its review, the Board of Directors concluded that the terms of
the New Investment Advisory and Subadvisory Agreements are reasonable, fair and
in the best interests of the Fund and its shareholders, and that the fees
provided therein are fair and reasonable in light of the usual and customary
charges made by others for services of the same nature and quality. Accordingly,
the Board concluded that retaining OFI to serve as investment adviser and OpCap
Advisors as Subadvisor to the Fund after the Conversion is desirable and in the
best interests of the Fund and its shareholders.
VOTE REQUIRED
As provided under the Act, approval of the New Investment Advisory Agreement
and the New Subadvisory Agreement will require, with respect to each agreement,
the vote of a "majority of the outstanding voting securities" (as previously
defined) of the Fund.
THE DIRECTORS, INCLUDING THE DIRECTORS WHO ARE NOT INTERESTED PERSONS OF THE
FUND, OPCAP ADVISORS OR OPPENHEIMERFUNDS, INC. OR THEIR AFFILIATES, RECOMMEND
THAT THE SHAREHOLDERS OF THE FUND VOTE TO APPROVE THE NEW INVESTMENT ADVISORY
AGREEMENT WITH OPPENHEIMERFUNDS, INC. AND THAT THE SHAREHOLDERS OF THE FUND VOTE
TO APPROVE THE NEW SUBADVISORY AGREEMENT BETWEEN OPPENHEIMERFUNDS, INC. AND
OPCAP ADVISORS WITH RESPECT TO THE FUND.
PROPOSAL NO. 4
APPROVAL OF NEW DISTRIBUTION PLAN FOR CLASS A SHARES
It is proposed that the Fund establish three classes of shares -- Class A, B
and C -- and that the Fund enter into a Distribution and Service Plan and
Agreement (a "Plan") with the Distributor with respect to each Class of shares
(the "Plans"). The existing Capital Shares will be reclassified as Class A
shares. The Plan for Class A shares (the "Class A Plan") is attached as Exhibit
E. The Plans were approved on September 17, 1996 by the Directors, including the
independent Directors, subject to the approval by the shareholders. Capital
Shareholders of the Fund will vote on the approval of the Class A Plan and OFI
as the initial shareholder of Class B and Class C shares intends to approve the
Class B and Class C Plans. The following is a summary of the terms of the Plans.
18
<PAGE>
If the Class A Plan and the other proposals presented to the meeting are
approved by the Capital Shareholders, the Class A Plan will become effective at
the Closing. The Closing is conditioned upon, among other things, approval of
the Class A Plan by the Capital Shareholders of the Fund.
The fees payable by each class of shares of the Fund under the Plans will
consist of a service fee at the annual rate of .25% of the average net assets of
the shares and a distribution fee which will be at the annual rate of .25% of
the average net assets of Class A shares of the Fund and at the annual rate of
.75% of the average net assets of Class B and Class C shares of the Fund. For
the first two years after the effective date of the Class A Plan, the
Distributor has agreed to waive .15% of the distribution fee payable under the
Class A Plan and that all fees paid to the Distributor under the Class A Plan
will be paid to the Recipients (as defined below) and not retained by the
Distributor.
The Distributor will be authorized under the Plans to pay broker-dealers,
banks or other entities (the "Recipients") that render assistance in the
distribution of shares or provide administrative support with respect to shares
held by customers. The service fee payments made under the Plans will compensate
the Distributor and the Recipients for providing administrative support with
respect to shareholder accounts. The distribution fee payments made under the
Plans will compensate the Distributor and the Recipients for providing
distribution assistance in connection with the sale of Fund shares.
The Plans provide that payments may be made by OFI or by the Distributor to
the Recipients from its own resources or from borrowings. The Plans may not be
amended to increase materially the amount of payments to be made without the
approval of the relevant class of shareholders of the Fund.
If the Class A Plan is approved by the Fund's Capital Shareholders, the
Class A Plan will remain in effect only if its continuance is specifically
approved at least annually by the vote of both a majority of the Directors and a
majority of the independent Directors who have no direct or indirect individual
financial interest in the operation of the Plan or any agreements related
thereto (the "Qualified Directors"). The Class A Plan may be terminated at any
time by vote of a majority of the Qualified Directors or by a vote of a majority
of the Class A shares of the Fund. In the event of such termination, the Board,
including the Qualified Directors, shall determine whether the Distributor is
entitled to payment by the Fund of all or a portion of the service fee and/or
the distribution fee with respect to shares sold prior to the effective date of
such termination.
The service fee and the distribution fee payable under the Class A Plan are
subject to reduction or elimination under the limits imposed by the Conduct
Rules of the National Association of Securities Dealers, Inc. ("NASD Rules").
The Class A Plan is intended to comply with NASD Rules and Rule 12b-1 adopted
under the Act. Rule 12b-1 requires that the selection and nomination of
Directors who are not "interested persons" of the Fund be committed to the
discretion of the Qualified Directors and that the Directors receive quarterly
reports on the payments made under the Plans and the purposes for those
payments.
PROPOSED SALES ARRANGEMENTS
After the Conversion, Class A shares will be sold with a maximum initial
sales load of 5.75% for purchases of less than $25,000. Purchases of Class A
shares in the amount of $1 million ($500,000 or more for purchases by
OppenheimerFunds prototype 401(k) plans) or more will be made without an initial
sales load but will be subject to a contingent deferred sales charge of 1% if
the shares are redeemed within 18 months of purchase. Class B shares will be
sold without an initial sales load but will be subject to a maximum contingent
deferred sales charge ("CDSC") of 5% if the shares are redeemed within one year
after the end of the calendar month of their purchase. Class B shares convert
automatically to Class A shares after 6 years. Class C shares will be sold
without an initial sales load but will be subject to a CDSC of 1% if the shares
are redeemed within one year after the end of the calendar month in which they
were purchased. Class A shares of the Fund may be exchanged for Class A shares
of any Oppenheimer Fund, Class B shares of the Fund may be exchanged for Class B
19
<PAGE>
shares of any Oppenheimer Fund and Class C shares of the Fund may be exchanged
for Class C shares of any Oppenheimer Fund. Any Income Shareholder of the Fund
may purchase Class A shares of any Oppenheimer Fund at net asset value, without
a sales load, in the amount of the proceeds that they receive from the Fund for
the redemption of the Income Shares and within days of such redemption.
EVALUATION BY THE BOARD OF DIRECTORS
The Directors, including the Qualified Directors, believe the adoption of a
distribution plan under Rule 12b-1 is essential to and a part of the purpose of
each class of shares of the Fund in selling its shares to those persons who wish
to avail themselves of the services of a broker-dealer. The Directors took into
account the competitive market environment in which the Fund will operate as an
open-end investment company. More specifically, the Directors recognized the
need to provide adequate compensation to broker-dealers who serve existing
shareholders or offer the Fund to prospective shareholders. Without such
service, the Fund would incur a substantial risk that it could not maintain or
increase its assets, threatening the viability of the Fund as an investment
company. In addition, the Directors believe that maintaining a plan under Rule
12b-1 is an essential part of distributing an open-end fund. In their
deliberations, the Directors considered many pertinent factors such as the
levels of fees prescribed by the Class A Plan. The Board also considered the
potential benefit to the Fund of the proposed method of distribution through the
Distributor; the potential conflicts of interest inherent in the use of Fund
assets to pay for distribution expenses; the relationship of the fees under the
Class A Plan to the overall cost structure of the Fund; and the potential
benefits to existing shareholders of continued asset growth, including the
potential to benefit from economies of scale. Based upon their review, the
Directors, including a majority of the Qualified Directors, determined that
there is a reasonable likelihood that the Class A Plan will benefit the Fund and
its shareholders.
VOTE REQUIRED
Approval of the Class A Plan of the Fund will require the vote of a
"majority of the outstanding voting securities" (as previously defined) of the
Fund.
THE BOARD OF DIRECTORS, INCLUDING THE QUALIFIED DIRECTORS, RECOMMEND THAT
THE CLASS A PLAN BE APPROVED.
PROPOSAL NO. 5
TO APPROVE ARTICLES OF AMENDMENT AND RESTATEMENT FOR THE FUND.
The Capital Shareholders are being asked to approve an amendment and
restatement of the Fund's Articles of Incorporation. The purposes of the charter
amendment are as follows: (1) to reduce the par value of the existing common
stock, solely as a means of reducing filing fees payable to the State of
Maryland upon the approval of the amendment and restatement and without in any
manner affecting stockholder rights; (2) to revise the charter to a form
customary for an open-end fund that continually offers to issue and redeem its
shares at net asset value; (3) as is customary for an open-end mutual fund and
consistent with the Maryland General Corporation Law, to reduce from two-thirds
of the outstanding voting stock to a majority of the outstanding voting stock
the vote required for fundamental corporate actions, such as a charter
amendments, mergers, consolidations, and the like, and corporate dissolutions;
(4) to update the provisions for indemnification of officers and directors to
reflect changes in Maryland law which have occurred since the original formation
of the Fund; and (5) to include a customary provision limiting the liability of
directors and officers to the Fund and its stockholders for monetary damages,
reflecting a change in the Maryland General Corporation Law which occurred in
1988. A copy of the proposed Articles of Amendment and Restatement is attached
to this Proxy Statement as Exhibit F.
20
<PAGE>
VOTE REQUIRED
As provided under Maryland law, approval of the Articles of Amendment and
Restatement will require the vote of two-thirds of the outstanding Capital
Shares of the Fund.
THE BOARD OF DIRECTORS, INCLUDING THE DIRECTORS WHO ARE NOT INTERESTED
PERSONS OF THE FUND, RECOMMEND THAT THE CAPITAL SHAREHOLDERS OF THE FUND APPROVE
THE ARTICLES OF AMENDMENT AND RESTATEMENT.
PROPOSAL NO. 6
TO APPROVE A CHANGE IN THE FUND'S FUNDAMENTAL INVESTMENT OBJECTIVE.
The Fund's current investment objectives of long-term capital appreciation
and preservation of capital and current income and long-term growth of income
reflect the Fund's dual purpose structure since long term capital appreciation
is the objective of the Capital Shares and current income and long-term growth
of income is the objective of the Income Shares. Once the Income Shares are
redeemed on January 31, 1997, the objective of current income and long-term
growth of income will no longer be appropriate for the Capital Shareholders.
It is proposed that the Fund's fundamental investment objective be revised
to the following: "The investment objective of Fund is capital appreciation."
The Fund will seek to achieve its investment objective through investment in
securities (primarily equity securities) of companies believed to be undervalued
in the marketplace in relation to factors such as the companies' assets,
earnings, growth potential and cash flows.
VOTE REQUIRED
Approval of the proposed change in the Fund's fundamental investment
objective will require the vote of a "majority of the outstanding voting
securities" (as previously defined) of the Fund.
THE BOARD OF DIRECTORS, INCLUDING THE DIRECTORS WHO ARE NOT INTERESTED
PERSONS OF THE FUND, RECOMMEND THAT THE CAPITAL SHAREHOLDERS OF THE FUND APPROVE
THE PROPOSED CHANGE IN THE FUND'S FUNDAMENTAL INVESTMENT OBJECTIVE.
PROPOSAL NO. 7
APPROVAL OF CHANGES TO CERTAIN OF THE FUND'S
FUNDAMENTAL INVESTMENT RESTRICTIONS
The Fund has certain investment restrictions that, together with its
investment objective, are fundamental and are therefore changeable only by the
vote of a "majority" (as defined in the Act) of the outstanding voting
securities of the Fund. With respect to the fundamental investment restrictions
set forth below, it is being proposed that (i) each investment restriction be
considered non-fundamental and (ii) certain limitations on the restrictions be
revised, as discussed below. The reason for making these investment restrictions
non-fundamental is to provide the Fund with the ability to modify or eliminate
these restrictions at a later date to respond to changes in regulatory
restrictions or changes in the markets and market conditions without the delay
and expense of seeking shareholder approval. Changes to non-fundamental
investment restrictions only require approval of the Fund's Board of Directors.
(a) BORROWING. The Fund may not borrow money, except as a temporary measure for
extraordinary or emergency purposes, and in no event in excess of 10% of the
lower of the market value or cost of its total assets (the Fund will not
purchase any securities at a time while such borrowings exceed 5% of total
assets). Capital Shareholders are being asked to approve a change increasing
the amount of borrowing permitted by the Fund from 10% to 33 1/3%. In
addition, as noted above, it is being proposed that this restriction be
considered non-fundamental.
21
<PAGE>
(b) SHORT SALES. The Fund may not make short sales of securities except short
sales "against-the-box". As noted above, it is being proposed that this
restriction be considered non-fundamental.
(c) INVESTMENT IN DEBT SECURITIES RATED BELOW INVESTMENT GRADE. The Fund may
not invest in debt securities which are rated lower than CCC by Standard &
Poor's Corporation or Caa by Moody's Investors Service, Inc. Capital
shareholders are being asked to approve a change to permit the Fund to
invest up to 25% of its net assets in debt securities rated lower than
investment grade. In addition, as noted above, it is being proposed that
this restriction be considered non-fundamental.
(d) INVESTMENT IN CERTAIN MINERAL LEASES. The Fund may not purchase oil, gas or
other mineral leases, rights or royalty contracts or exploration or
development programs except that the Fund may invest in the securities of
companies which invest in or sponsor such programs. As noted above, it is
being proposed that this restriction be considered non-fundamental.
The Fund currently has fundamental investment policies with respect to the
making of loans and the issuance of senior securities, as described below. These
restrictions are changeable only by the vote of a "majority" (as defined in the
Act) of the outstanding voting securities of the Fund.
(a) LOANS. The Fund may not make loans of money or property to any person,
except through loans of portfolio securities and the purchase of fixed
income securities consistent with the Fund's investment objective and
policies and by entering into repurchase agreements (for the purpose of this
restriction, collateral arrangements with respect to stock options, option
on stock indices, stock index futures and options on such futures are not
deemed to be loans of assets).
The Fund has a non-fundamental investment policy with respect to hedging
that is consistent with this lending policy. Upon consummation of the
Conversion, the Board of Directors of the Fund intends to revise this
non-fundamental policy to permit purchases and sales of options on
securities, as well as broadly-based stock indices, foreign currencies or
stock index futures. To be consistent with this change, it is proposed that
the Fund change its fundamental policy with respect to lending to include
options on securities as one of the collateral arrangements that are not
deemed to be loans of assets.
(b) SENIOR SECURITIES. The Fund may not issue senior securities, as defined in
the Act, other than the Income Shares, except that the Fund may enter into
repurchase agreements, lend its portfolio securities and borrow money from
banks for temporary or emergency purposes. It is proposed that the Fund make
a technical change to this restriction to eliminate reference to the Income
Shares since the Income Shares will be redeemed prior to the Conversion.
VOTE REQUIRED
Approval of the proposed changes to certain of the Fund's fundamental
investment restrictions as described above, will require the vote of a "majority
of the outstanding voting securities" (as previously defined) of the Fund.
THE BOARD OF DIRECTORS, INCLUDING THE DIRECTORS WHO ARE NOT INTERESTED
PERSONS OF THE FUND, RECOMMEND THAT THE CAPITAL SHAREHOLDERS APPROVE THE
PROPOSED CHANGES TO CERTAIN FUNDAMENTAL INVESTMENT RESTRICTIONS OF THE FUND.
PROPOSAL NO. 8
ELECTION OF DIRECTORS
If Proposals 1 through 7 are approved, proxies not indicating a contrary
intention will be voted in favor of the election of the five persons named below
as Directors, to hold office for an indefinite period and until their successors
are elected and qualified.
22
<PAGE>
OFI, OpCap Advisors, OCC Distributors and Oppenheimer Capital have agreed to
comply and use all reasonable efforts to cause compliance with the provisions of
Section 15(f) of the Act. Section 15(f) provides, in pertinent part, that an
investment adviser and its affiliates may receive any amount or benefit in
connection with the sale of such investment adviser which results in an
assignment of an investment advisory contract if (1) for a period of three years
after the time of such event, at least 75% of the members of the board of
directors of the investment company which it advises are not "interested
persons" (as defined in the Act) of the new or old investment adviser, and (2)
during the two-year period after the date on which the transaction occurs, there
is no "unfair burden" imposed in the investment company as a result of the
transaction. For this purpose, "unfair burden" is defined to include any
arrangement during the two-year period after the transaction whereby the
investment adviser or predecessor or successor investment advisers, or any
interested person of any such adviser, receives or is entitled to receive any
compensation directly or indirectly (i) from any person in connection with the
purchase or sale of securities or other property to, from, or on behalf of the
investment company other than bona fide ordinary compensation as principal
underwriter for such company, or (ii) from the investment company or its
security holders for other than bona fide investment advisory or other services.
No compensation arrangements of the types described above are contemplated in
the proposed transaction. The composition of the Board of Directors of the Fund
will be in compliance with the 75% requirement if all nominees named in Proposal
8 are elected.
The Board is recommending the election of one Director, George Loft, who is
currently a Director of the Fund and is not an "interested person" of OFI, OpCap
Advisors, OCC Distributors or Oppenheimer Capital, three directors who are
currently Directors of other Oppenheimer Funds and funds advised by OpCap
Advisors but who are not interested persons of OFI, OpCap Advisors, OCC
Distributors or Oppenheimer Capital and one Director, Bridget A. Macaskill, who
is an "interested person" of OFI but not of OpCap Advisors. Joseph M. La Motta,
who is currently the Chairman of the Board of the Fund, Messrs. Eugene Brody,
George Langdon, Thomas Murnane and Lawrence Sherman and Ms. Pamela McCann, are
not standing for re-election and, upon the Closing, will resign.
Each nominee has consented to being named as a nominee in this Proxy
Statement. Should any nominee become unable or unwilling to serve, the persons
appointed as proxies shall vote for the election of such other person or persons
as the Board of Directors of the Fund shall recommend. The Board of Directors
has no reason to believe that any person nominated will be unable or unwilling
to serve if elected to office.
The following table shows the nominees who are standing for election and
their principal occupation which, unless specific dates are shown, are of more
than five years duration, although titles held may not have been the same
throughout. The table also shows how long the nominee has served on the Board of
Directors of the Fund; if no date is shown, the nominee is standing for election
for the first time at this Meeting.
<TABLE>
<CAPTION>
DIRECTOR
NAME, AGE AND ADDRESS SINCE PRINCIPAL OCCUPATION DURING PAST 5 YEARS
- ------------------------------------ --------- -----------------------------------------------------------------
<S> <C> <C>
Paul Y. Clinton .................... N/A Principal of Clinton Management Associates, a financial and
Age: 65 venture capital consulting firm; Director, External Affairs,
39 Blossom Avenue Kravco Corporation, a national real estate owner and property
Osterville, MA 02655 management corporation from 1985 to 1995; formerly President of
Essex Management Corporation, a management consulting company;
Trustee of Capital Cash Management Trust, a money-market fund;
and Director of Narragansett Tax Free Fund, a tax-exempt bond
fund; Director of Oppenheimer Quest Global Value Fund, Inc.,
Oppenheimer Quest Value Fund, Inc., the Rochester
</TABLE>
23
<PAGE>
<TABLE>
<CAPTION>
DIRECTOR
NAME, AGE AND ADDRESS SINCE PRINCIPAL OCCUPATION DURING PAST 5 YEARS
- ------------------------------------ --------- -----------------------------------------------------------------
Funds and OCC Cash Reserves, Inc., Trustee of OCC Accumulation
Trust and Oppenheimer Quest for Value 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.
<S> <C> <C>
Thomas W. Courtney, C.F.A. ......... N/A Principal of Courtney Associates, Inc., a venture capital firm;
Age: 63 former General Partner of Trivest Venture Fund, a private venture
PO Box 580 capital fund; former President of Investment Counseling Federated
Sewickley, PA 15143 Investors, Inc.; Trustee of Cash Assets Trust, a money market
fund; Director of OCC Cash Reserves, Inc., Oppenheimer Quest
Global Value Fund, Inc., Oppenheimer Quest Value Fund, Inc., and
The Rochester Funds, Trustee of OCC Accumulation Trust and
Oppenheimer Quest for Value Funds, all of which are open-end
investment companies; 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 ................... N/A President and Chairman of the Board of Aquila Management
Age: 67 Corporation (since 1984), the sponsoring organization and
380 Madison Avenue Administrator and/or Advisor or Sub- Advisor to the following
Suite 2300 open-end investment companies, and Chairman of the Board of
New York, NY 10017 Trustees and President of each: Churchill Cash Reserves Trust
(since 1985), Short Term Asset Reserves (from 1984 to 1985),
Pacific Capital Assets Trust (since 1984), Pacific Capital U.S.
Treasuries Cash Assets Trust (since 1988), Pacific Capital
Tax-Free Cash Assets Trust (since 1988), Prime Cash Fund (from
1982 to 1996), 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),
Tax-Free Fund for Utah (since 1992), Narragansett Insured Tax
Free Income Fund (since 1992), 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 each of the above
funds; President and Chairman of the Board
</TABLE>
24
<PAGE>
<TABLE>
<CAPTION>
DIRECTOR
NAME, AGE AND ADDRESS SINCE PRINCIPAL OCCUPATION DURING PAST 5 YEARS
- ------------------------------------ --------- -----------------------------------------------------------------
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;
Director of OCC Cash Reserves, Inc., Oppenheimer Quest Global
Value Fund, Inc., Oppenheimer Quest Value Fund, Inc., and The
Rochester Funds; Trustee of OCC Accumulation Trust, Oppenheimer
Quest for Value Funds and The Saratoga Advantage Trust, each of
which is an open-end investment company.
<S> <C> <C>
George Loft ........................ 1993 Private Investor; Director of OCC Cash Reserves, Inc.,
Age: 81 Oppenheimer Quest Global Value Fund, Inc., Oppenheimer Quest
51 Herrick Road Value Fund, Inc. and The Rochester Funds; Trustee of OCC
Sharon, CT 06069 Accumulation Trust, Oppenheimer Quest for Value Funds and The
Saratoga Advantage Trust, all of which are open-end investment
companies.
Bridget A. Macaskill ............... Chief Executive Officer of OFI since September 30, 1995,
Age: 48 President and Chief Operating Officer of OFI since 1991 and a
Two World Trade Center Director of OFI; prior thereto, Chief Operating Officer of OFI
New York, NY 10048 from 1989 to 1991 and Executive Vice President of OFI from
1987-1989. President and Director of Oppenheimer Acquisition
Corp. and Oppenheimer Partnership Holdings, Inc., Chairman and a
Director of Shareholder Services, Inc. and Shareholder Financial
Services, Inc., Director of Oppenheimer Real Asset Management,
Inc., President, Chief Executive Officer and a Director of
Harbourview Asset Management Corporation, all of which are
subsidiaries of OFI; Director of various Oppenheimer Funds.
</TABLE>
If all five nominees are elected, four of the five Directors (over 75%) will
not be "interested persons" of OFI, OpCap Advisors, OCC Distributors or
Oppenheimer Capital or any of their affiliates.
As of October 28, 1996, each nominee for Director and the current officers
and Directors of the Fund as a group held the number of Capital Shares of the
Fund as set forth below:
<TABLE>
<CAPTION>
NUMBER OF SHARES NUMBER OF SHARES
NUMBER OF SHARES AS TO WHICH NUMBER OF SHARES AS TO WHICH
AS TO WHICH OWNERS HAVE AS TO WHICH OWNERS HAVE
OWNERS HAVE SOLE SHARED VOTING OWNERS HAVE SOLE SHARED INVESTMENT
NAME VOTING POWER POWER INVESTMENT POWER POWER
- ---------------------------- ----------------- ----------------- ----------------- -----------------
<S> <C> <C> <C> <C>
Paul Y. Clinton............. 0 0 0 0
Thomas W. Courtney.......... 0 0 0 0
Lacy B. Herrmann............
George Loft.................
Bridget A. Macaskill........
All current officers and
directors as a group.......
</TABLE>
25
<PAGE>
During the last fiscal year of the Fund the Board of Directors held four
regular quarterly meetings and one special meeting. The Board of Directors'
audit committee, which consists of all Directors who are not "interested
persons," held two meetings during the Fund's last fiscal year. That committee
reviews audits, audit procedures, financial statements and other financial and
operational matters of the Fund. The Board has neither a standing nominating
committee nor a standing compensation committee. Messrs. Brody, La Motta,
Langdon, Loft and Sherman each attended at least 75 percent of the aggregate of
the total number of meetings of the Board of Directors and the total number of
meetings held by the committee of the Board on which such Director served during
the last fiscal year. Ms. McCann and Mr. Murnane each attended 71 percent of
such meetings. Section 16(a) of the Securities Exchange Act of 1934 and Section
30(f) of the Act in combination require the Fund's directors and officers,
persons who own more than ten percent of the Fund's Capital Shares or Income
Shares, OpCap Advisors and its directors and officers to file reports of
ownership with the Securities and Exchange Commission and the New York Stock
Exchange, Inc. The Fund believes that all relevant persons have complied with
applicable filing requirements except that the Form 4 Statement of Changes in
Beneficial Ownership for Mr. Sheldon Siegel, the Treasurer of the Fund, for the
month of November, 1995 was filed one day after the 10 day period after the
month in which the transaction occurred and the Form 4 Statement of Changes in
Beneficial Ownership for Joyce Kramer for the month of March 1996 was filed 12
days late. Ms. Kramer is required to file reports of ownership of the Fund's
shares because she is an officer of Oppenheimer Financial Corp., the general
partner of OpCap Advisors and Oppenheimer Capital.
REMUNERATION OF DIRECTORS
Mr. Brody and Mr. La Motta and the officers of the Fund receive no salary
from the Fund. The following table sets forth the aggregate compensation
received from the Fund and OpCap Advisors' Fund Complex by the Fund's
independent directors during the fiscal year ended December 31, 1995.
<TABLE>
<CAPTION>
PENSION OR
RETIREMENT
BENEFITS ESTIMATED TOTAL
AGGREGATE ACCRUED AS ANNUAL BENEFITS COMPENSATION
COMPENSATION PART OF FUND UPON FROM FUND AND
NAME OF PERSON AND POSITION FROM THE FUND EXPENSES RETIREMENT FUND COMPLEX
- --------------------------------------------------- ------------- ------------ --------------- --------------
<S> <C> <C> <C> <C>
George Langdon..................................... $ 6,700 None None $ 6,700
Capital/Income
Director
George Loft........................................ $ 6,700 None None $ 81,350*
Capital Share
Director
Pamela W. McCann................................... $ 5,500 None None $ 5,500
Income Share
Director
Dr. Thomas W. Murnane.............................. $ 6,700 None None $ 6,700
Income Share
Director
Lawrence M. Sherman................................ $ 6,700 None None $ 6,700
Capital/Income
Director
</TABLE>
- ------------------------
* Mr. Loft earned directors fees with respect to 17 investment companies that
were part of OpCap Advisors' Fund Complex, 10 of which are no longer part of
OpCap Advisors' Fund Complex. In addition, Mr. Loft served as director with
respect to 13 investment companies for which he 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.
26
<PAGE>
OPCAP ADVISORS AND OPPENHEIMER CAPITAL
OpCap Advisors and Oppenheimer Capital are located at One World Financial
Center, New York, New York, and all executive officers of OpCap Advisors have
business addresses at that location. Oppenheimer Capital is the Fund's
Administrator.
OpCap Advisors is a general partnership of which Oppenheimer Capital, an
investment management firm, holds a 99% interest and Oppenheimer Financial Corp.
holds a 1% interest. Oppenheimer Capital is a general partnership of which
Oppenheimer Financial Corp., a holding company, holds a 33.0% interest and
Oppenheimer Capital, L.P., a limited partnership of which Oppenheimer Financial
Corp. is the sole general partner, holds a 67.0% interest. Oppenheimer Capital
L.P. acquired a 32.3% interest in Oppenheimer Capital on July 9, 1987 for
$99,032,000 in connection with a public offering of units of limited partnership
interest in Oppenheimer Capital, L.P. (see Registration Statement No. 33-14364
and Amendments). Additional interests were acquired subsequently as a result of
the issuance of units pursuant to the Restricted Unit and Restricted Option
Plans. An additional interest of 33.6% in Oppenheimer Capital was acquired by
Oppenheimer Capital, L.P. on April 23 and May 1, 1991 in connection with a
public offering of 6.6 million units of limited partnership interest in
Oppenheimer Capital, L.P. (see Registration Statement No. 33-39345 and
Amendments). All such units were sold by Oppenheimer Financial Corp., which is
owned by Oppenheimer Group, Inc. Oppenheimer & Co., L.P., an investment limited
partnership, owns 100% of the common stock of Oppenheimer Group, Inc. Mr. La
Motta is Chairman of OpCap Advisors and Oppenheimer Capital, Executive Vice
President of Oppenheimer & Co., Inc., and Director and Executive Vice President
of Oppenheimer Financial Corp., Oppenheimer Group, Inc., and Oppenheimer
Holdings, Inc.
The following table sets forth, with respect to executive officers of the
Fund who are not also Directors, their position with OpCap Advisors, the year in
which they first became an executive officer of the Fund and their current age
and a brief account of their business experience during the past five years.
Bernard H. Garil, Vice President since 1991
President since 1994 and Chief Operating Officer of OpCap Advisors since
1990; Executive Vice President of OpCap Advisors from 1990 to 1994.
Age: 56
Jeffrey Whittington, Vice President and Portfolio Manager since January 1996
and from 1987 to 1991
Senior Vice President, Oppenheimer Capital since 1994; Portfolio Manager
with Neuberger & Berman from 8/93 to 7/94; Portfolio Manager with
Oppenheimer & Co., Inc. from 10/91 to 8/93 and Vice President of
Oppenheimer Capital from 1986 to 1991.
Age: 38
Sheldon Siegel, Treasurer since 1986
Managing Director, Oppenheimer Capital
Chief Financial Officer of OpCap Advisors
Age: 54
Thomas E. Duggan, Secretary since 1986
General Counsel and Secretary, OpCap Advisors and Oppenheimer Capital
Age: 52
Richard Peteka, Assistant Treasurer since 1996
Vice President, Oppenheimer Capital
Age: 35
27
<PAGE>
Deborah Kaback, Assistant Secretary since 1989
Senior Vice President, Oppenheimer Capital
Age: 45
Mr. La Motta and Mr. Siegel hold general partnership interests in
Oppenheimer & Co., L.P.; Mr. Duggan and Mr. Garil hold limited partnership
interests in Oppenheimer & Co., L.P.
Upon the Closing, it is anticipated that the foregoing officers of the Fund
will resign and that OFI will propose to the Directors that Bridget A. Macaskill
be elected Chairman of the Board and President, that George Bowen be elected
Treasurer, that Robert Doll be elected Vice President and that Andrew J. Donohue
be elected Secretary. Information about Ms. Macaskill, who is a nominee for
Director, is provided in the table of nominees. The address of all such proposed
officers is OppenheimerFunds, Inc., 2 World Trade Center, NY, NY except for Mr.
Bowen, whose address is Oppenheimer Funds, Inc., 3410 S. Galena Street, Denver,
Colorado 80231. The following table provides information about the other
proposed officers:
<TABLE>
<CAPTION>
NAME AND AGE PRINCIPAL OCCUPATION DURING PAST FIVE YEARS
- ------------------------------ ---------------------------------------------------------------------------------
<S> <C>
George C. Bowen .............. Senior Vice President and Treasurer of OFI; Vice President and Treasurer of the
Age: 60 Distributor and Harbourview View Asset Management Corporation; Senior Vice
President, Treasurer, Assistant Secretary and a Director of Centennial Asset
Management Corporation; Senior Vice President and Secretary of Shareholder
Services, Inc., Vice President, Treasurer and Secretary of Shareholder Financial
Services, Inc. and an officer of various Oppenheimer Funds.
Robert C. Doll, Jr. .......... Executive Vice President and Director of Equity Investments of OFI; Vice
Age: 42 President and a Director of Oppenheimer Acquisition Corp.; portfolio manager of
various Oppenheimer Funds.
Andrew J. Donohue. ........... Executive Vice President and General Counsel of OFI and the Distributor,
Age: 46 President and a Director of Centennial Asset Management Corporation; Executive
Vice President, General Counsel and a Director of Harbourview View Asset
Management Corporation, Shareholder Services Inc., Shareholder Financial
Services, Inc. and Oppenheimer Partnership Holdings Inc., President and a
director of Oppenheimer Real Asset Management, Inc., General Counsel of
Oppenheimer Acquisition Corp., Executive Vice President, Chief Legal Officer and
a director of MultiSource Services, Inc., officer of various Oppenheimer Funds;
formerly Senior Vice President and Associate General Counsel of OFI and the
Distributor, partner in Kraft & McManimom (a law firm), an officer of First
Investors Corporation (a broker-dealer) and First Investors Management Company,
Inc. (broker-dealer and investment advisor), and a director and an officer of
First Investor Family of Funds and First Investors Life Insurance Company.
</TABLE>
VOTE REQUIRED
A plurality of all the votes cast at the meeting, if a quorum is present at
the meeting, is sufficient to elect the nominees. If the other Proposals are not
approved by the shareholders, no election of Directors will be held and the
slate of officers first named above will continue in office.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE TO ELECT EACH OF
THE NOMINEES.
28
<PAGE>
RECEIPT OF SHAREHOLDERS PROPOSALS, QUORUM AND VOTING
Under the proxy rules of the SEC, shareholder proposals meeting tests
contained in those rules may, under certain conditions, be included in the
Fund's proxy statement and proxy for a particular annual meeting. Those rules
require that at the time the shareholder submits the proposal the shareholder be
a record or beneficial owner of at least 1% or $1,000 in market value of
securities entitled to be voted on the proposal and have held such securities
for at least one year prior thereto, and continue to hold such shares through
the date on which such meeting is held. Another of these conditions relates to
the timely receipt by the Fund of any such proposal. Under these rules,
proposals submitted for inclusion in the Fund's proxy material for the next
annual meeting after the meeting to which this proxy statement relates must be
received by the Fund not less than 120 days before the first anniversary of the
date stated on the first page of this Proxy Statement relating to the first
mailing of this Proxy Statement. The date for such submission could change,
depending on the scheduled date for the next annual meeting.
The fact that the Fund receives a shareholder proposal in timely manner does
not insure its inclusion in its proxy material, since there are other
requirements in the proxy rules relating to such inclusion.
Shareholders should be aware that under the law of the state in which the
Fund is established, Maryland, corporations need hold no annual meetings of
shareholders as long as there is no particular requirement under the Act which
must be met by convening such a shareholder's meeting. As it is the intention of
the Board of Directors not to hold annual shareholder meetings in the future
unless required to do so under the Act, there can be no assurance that
shareholder proposals validly submitted to the Fund will be acted upon at a
regularly scheduled annual shareholder's meeting.
Shares represented in person or by proxy (including share which abstain or
do not vote with respect to one or more of the proposals presented for
shareholder approval including "broker non-votes") will be counted for purposes
of determining whether a quorum is present at the Meeting. Abstentions will be
treated as shares that are present and entitled to vote for purposes of
determining the number of shares that are present and entitled to vote with
respect to any particular proposal, but will not be counted as a vote in favor
of such proposal. Accordingly, an abstention from voting on a proposal has the
same legal effect as a vote against the proposal. "Broker non-votes" have the
same legal effect as a vote against the proposal. "Broker non-votes" exist where
a proxy received from a broker indicates that the broker does not have
discretionary authority to vote the shares on that matter.
INDEPENDENT AUDITORS
Price Waterhouse LLP are the independent auditors of the Fund. A
representative of the firm is not expected to be present at the meeting.
MAILING OF ANNUAL REPORT
The Fund will furnish, without charge, a copy of its Annual Report for the
year ended December 31, 1995 and its Semi-Annual Report for the six month period
ended June 30, 1996 to a shareholder upon request. Such request should be made
to Bernard H. Garil, OpCap Advisors, One World Financial Center, New York, NY
10281, or by calling 1-800-600-5487. The report will be sent by first class mail
within three business days of the request.
29
<PAGE>
OTHER BUSINESS
The Fund's management knows of no business other than the matters specified
above which will be presented at the meeting. Inasmuch as 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 may properly
come before the meeting and it is the intention of the person named in the proxy
to vote in accordance with their judgment on such matters.
By Order of the Board of Directors,
Thomas E. Duggan
SECRETARY
30
<PAGE>
EXHIBIT A
The aggregate purchase price for the Purchased Assets (the "Acquisition
Price") will be an amount equal to the sum of (i) the Initial Payment (as
hereinafter defined) payable in cash on the Payment Date (as hereinafter
defined); and (ii) if applicable, the Exchange Payments (as hereinafter
defined). The Payment Date shall be no later than 140 days after the Closing
Date.
The "Initial Payment" shall be an amount equal to 270% of the Annualized
Fee. The "Annualized Fee" shall equal the product of (i) the Remaining Assets
(as hereinafter defined) and (ii) the marginal annual advisory fee (including
any applicable administration fee) payable to OFI by the Fund at the rate
indicated in its most recent prospectus at the Payment Date. "Remaining Assets"
shall mean the aggregate net asset value of the Fund (calculated in accordance
with the Investment Company Act and as described in its prospectus) as of the
close of business 120 days after the Closing Date.
The "Exchange Payments" shall be payable on assets which are directly
exchanged by Fund shareholders from the Fund or from the Fund directly through
an Oppenheimer money market fund to another Oppenheimer Fund (other than a
Oppenheimer money market fund) until each Exchange Payment date ("Exchange
Assets"). No assets with respect to which an Initial Payment is made shall be
considered Exchange Assets or be eligible for Exchange Payments.
Remaining Exchange Assets shall mean the Exchange Assets determined as of
each relevant date. Exchange Payments shall be payable to the Sellers with
respect to "Remaining Exchange Assets" as follows within 20 days after
determination:
(1)with respect to Oppenheimer Funds on which OpCap Advisors is not a
sub-advisor:
(a) 225% of the marginal annualized fee determined at the marginal
management fee rate then payable (the "Marginal Fee Rate") by the
relevant Oppenheimer Fund on Remaining Exchange Assets determined 120
days after the Closing Date.
(b) 112.5% of the marginal annualized fee then payable as calculated at
the Marginal Fee Rate by the relevant Oppenheimer Fund on Remaining
Exchange Assets determined 485 days after the Closing Date ("Second
Exchange Payment") and
(c) 112.5% of the annualized fee then payable as calculated at the
Marginal Fee Rate by the relevant Oppenheimer Fund on Remaining
Exchange Assets determined 850 days after the Closing Date ("Third
Exchange Payment").
(2)with respect to Oppenheimer Funds on which OpCap Advisors is a
Sub-Advisor:
(a) The Remaining Exchange Assets for each such Oppenheimer Fund and the
specific shareholder accounts shall be determined 120 days after the
Closing Date and 270% of the marginal Annualized Fee then payable by
the relevant Oppenheimer Fund on the Remaining Exchange Assets so
determined shall be paid.
(b) Thereafter, OpCap Advisors shall receive the sub-advisory fee
relevant to the Remaining Exchange Assets at the rate set forth in
the applicable Sub-advisory Agreement and to the extent that the
Remaining Exchange Assets for each Oppenheimer Fund do not exceed the
Remaining Exchange Assets determined in (2)(a) above for the
Oppeneheimer Fund, OFI will, for so long as the Sub-advisory
Agreement is in effect, pay OpCap Advisors a separate payment equal
to the difference between 40% of the relevant average management fee
applicable to such Remaining Exchange Assets and the amount OpCap
Advisors actually received on such assets under the Sub-advisory
Agreement.
A-1
<PAGE>
EXHIBIT B
INVESTMENT ADVISORY AGREEMENT
AGREEMENT, made the day of January, 1997, by and between OPPENHEIMER QUEST
CAPITAL VALUE FUND, INC., a Maryland corporation (hereinafter referred to as the
"Company"), and OPPENHEIMERFUNDS, INC. (hereinafter referred to as "OFI").
WHEREAS, the Company is an open-end, diversified management investment
company registered as such with the Securities and Exchange Commission (the
"Commission") pursuant to the Investment Company Act of 1940 (the "Investment
Company Act"), and OFI is an investment adviser registered as such with the
Commission under the Investment Advisers Act of 1940;
WHEREAS, the Company desires that OFI shall act as its investment adviser
pursuant to this Agreement;
NOW, THEREFORE, in consideration of the mutual promises and covenants
hereinafter set forth, it is agreed by and between the parties, as follows:
1. GENERAL PROVISIONS:
The Company hereby employs OFI and OFI hereby undertakes to act as the
investment adviser of the Company, and to perform for the Company such other
duties and functions for the period and on such terms as set forth in this
Agreement. OFI shall, in all matters, give to the Company and its Board of
Directors (the "Directors") the benefit of its best judgment, effort, advice and
recommendations and shall at all times conform to, and use its best efforts to
enable the Company to conform to (i) the provisions of the Investment Company
Act and any rules or regulations thereunder; (ii) any other applicable
provisions of state or Federal law; (iii) the provisions of the Articles of
Incorporation and By-Laws of the Company as amended from time to time; (iv)
policies and determinations of the Directors; (v) the fundamental policies and
investment restrictions as reflected in the registration statement of the
Company under the Investment Company Act or as such policies may, from time to
time, be amended and (vi) the Prospectus and Statement of Additional Information
in effect from time to time. The appropriate officers and employees of OFI shall
be available upon reasonable notice for consultation with any of the Directors
and officers of the Company with respect to any matters dealing with the
business and affairs of the Company including the valuation of portfolio
securities of the Company which are either not registered for public sale or not
traded on any securities market.
2. INVESTMENT MANAGEMENT:
(a)OFI shall, subject to the direction and control by the Directors, (i)
regularly provide investment advice and recommendations to the Company
with respect to the investments, investment policies and the purchase and sale
of securities; (ii) supervise continuously the investment program of the Company
and the composition of its portfolio and determine what securities shall be
purchased or sold by the Company; and (iii) arrange, subject to the provisions
of paragraph 7 hereof, for the purchase of securities and other investments by
the Company and the sale of securities and other investments held in the
Company's portfolio.
(b)Provided that the Company shall not be required to pay any compensation
for services under this Agreement other than as provided by the terms of
the Agreement and subject to the provisions of paragraph 7 hereof, OFI may
obtain investment information, research or assistance from any other person,
firm or corporation to supplement, update or otherwise improve its investment
management services including entering into sub-advisory agreements with other
affiliated or unaffiliated registered investment advisers to obtain specialized
services.
B-1
<PAGE>
(c)Provided that nothing herein shall be deemed to protect OFI from willful
misfeasance, bad faith or gross negligence in the performance of its
duties, or reckless disregard of its obligations and duties under this
Agreement, OFI shall not be liable for any loss sustained by reason of good
faith errors or omissions in connection with any matters to which this Agreement
relates.
(d)Nothing in this Agreement shall prevent OFI or any entity controlling,
controlled by or under common control with OFI or any officer thereof
from acting as investment adviser for any other person, firm or corporation or
in any way limit or restrict OFI or any of its directors, officers, stockholders
or employees from buying, selling or trading any securities for its or their own
account or for the account of others for whom it or they may be acting, provided
that such activities will not adversely affect or otherwise impair the
performance by OFI of its duties and obligations under this Agreement.
3. OTHER DUTIES OF OFI:
OFI shall, at its own expense, provide and supervise the activities of all
administrative and clerical personnel as shall be required to provide effective
corporate administration for the Company, including the compilation and
maintenance of such records with respect to its operations as may reasonably be
required; the preparation and filing of such reports with respect thereto as
shall be required by the Commission; composition of periodic reports with
respect to operations of the Company for its shareholders; composition of proxy
materials for meetings of the Company's shareholders; and the composition of
such registration statements as may be required by Federal and state securities
laws for continuous public sale of Shares of the Company. OFI shall, at its own
cost and expense, also provide the Company with adequate office space,
facilities and equipment. OFI shall, at its own expense, provide such officers
for the Company as the Board of Directors may request.
4. ALLOCATION OF EXPENSES:
All other costs and expenses of the Company not expressly assumed by OFI
under this Agreement, or to be paid by OppenheimerFunds Distributor, Inc., the
distributor of the shares of the Company, shall be paid by the Company,
including, but not limited to: (i) interest, taxes and governmental fees; (ii)
brokerage commissions and other expenses incurred in acquiring or disposing of
the portfolio securities and other investments; (iii) insurance premiums for
fidelity and other coverage requisite to its operations; (iv) compensation and
expenses of its Directors other than those affiliated with OFI; (v) legal and
audit expenses; (vi) custodian and transfer agent fees and expenses; (vii)
expenses incident to the redemption of its Shares; (viii) expenses incident to
the issuance of its Shares against payment therefor by or on behalf of the
subscribers thereto; (ix) fees and expenses, other than as hereinabove provided,
incident to the registration under Federal and state securities laws of Shares
of the Company for public sale; (x) expenses of printing and mailing reports,
notices and proxy materials to shareholders of the Company; (xi) except as noted
above, all other expenses incidental to holding meetings of the Company's
shareholders; and (xii) such extraordinary non-recurring expenses as may arise,
including litigation, affecting the Company and any legal obligation which the
Company may have to indemnify its officers and Directors with respect thereto.
Any officers or employees of OFI or any entity controlling, controlled by, or
under common control with OFI who also serve as officers, Directors or employees
of the Company shall not receive any compensation from the Company for their
services.
5. COMPENSATION OF OFI:
The Company agrees to pay OFI and OFI agrees to accept as full compensation
for the performance of all functions and duties on its part to be performed
pursuant to the provisions hereof, a fee computed on the total net asset value
of the Company as of the close of each business day and payable monthly at the
annual rate set forth on Schedule A hereto.
B-2
<PAGE>
6. USE OF NAME "OPPENHEIMER" OR "QUEST FOR VALUE":
OFI hereby grants to the Company a royalty-free, non-exclusive license to
use the name "Oppenheimer" or "Quest For Value" in the name of the Company for
the duration of this Agreement and any extensions or renewals thereof. To the
extent necessary to protect OFI's rights to the name "Oppenheimer" or "Quest For
Value" under applicable law, such license shall allow OFI to inspect, subject to
control by the Company's Board, control the nature and quality of services
offered by the Company under such name and may, upon termination of this
Agreement, be terminated by OFI, in which event the Company shall promptly take
whatever action may be necessary to change its name and discontinue any further
use of the name "Oppenheimer" or "Quest For Value" in the name of the Company or
otherwise. The name "Oppenheimer" and "Quest For Value" may be used or licensed
by OFI in connection with any of its activities, or licensed by OFI to any other
party.
7. PORTFOLIO TRANSACTIONS AND BROKERAGE:
(a)OFI (and any sub-adviser) is authorized, in arranging the purchase and
sale of the portfolio securities of the Company, to employ or deal with
such members of securities or commodities exchanges, brokers or dealers
(hereinafter "broker-dealers"), including "affiliated" broker-dealers (as that
term is defined in the Investment Company Act), as may, in its best judgment,
implement the policy of the Fund to obtain, at reasonable expense, the "best
execution" (prompt and reliable execution at the most favorable security price
obtainable) of the portfolio transactions of the Company as well as to obtain,
consistent with the provisions of subparagraph (c) of this paragraph 7, the
benefit of such investment information or research as will be of significant
assistance to the performance by OFI of its investment management functions.
(b)OFI (and any sub-adviser) shall select broker-dealers to effect the
portfolio transactions of the Company on the basis of its estimate of
their ability to obtain best execution of particular and related portfolio
transactions. The abilities of a broker-dealer to obtain best execution of
particular portfolio transaction(s) will be judged by OFI (or any sub-adviser)
on the basis of all relevant factors and considerations including, insofar as
feasible, the execution capabilities required by the transaction or
transactions; the ability and willingness of the broker-dealer to facilitate the
portfolio transactions of the Company by participating therein for its own
account; the importance to the Company of speed, efficiency or confidentiality;
the broker-dealer's apparent familiarity with sources from or to whom particular
securities might be purchased or sold; as well as any other matters relevant to
the selection of a broker-dealer for particular and related transactions of the
Company.
(c)OFI (and any sub-adviser) shall have discretion, in the interest of the
Company, to allocate brokerage on the portfolio transactions of the
Company to broker-dealers, other than an affiliated broker-dealer, qualified to
obtain best execution of such transactions who provide brokerage and/or research
services (as such services are defined in Section 28(e)(3) of the Securities
Exchange Act of 1934) for the Company and/or other accounts for which OFI or its
affiliates (or any sub-adviser) exercise "investment discretion" (as that term
is defined in Section 3(a)(35) of the Securities Exchange Act of 1934) and to
cause the Company to pay such broker-dealers a commission for effecting a
portfolio transaction for the Company that is in excess of the amount of
commission another broker-dealer adequately qualified to effect such transaction
would have charged for effecting that transaction, if OFI (or any sub-adviser)
determines, in good faith, that such commission is reasonable in relation to the
value of the brokerage and/or research services provided by such broker-dealer
viewed in terms of either that particular transaction or the overall
responsibilities of OFI or its affiliates (or any sub-adviser) with respect to
accounts as to which they exercise investment discretion. In reaching such
determination, OFI (or any sub-adviser) will not be required to place or attempt
to place a specific dollar value on the brokerage and/or research services
provided or being provided by such broker-dealer. In demonstrating that such
determinations were made in good faith, OFI (and any sub-
B-3
<PAGE>
adviser) shall be prepared to show that all commissions were allocated for
purposes contemplated by this Agreement and that the total commissions paid by
the Company over a representative period selected by the Company's Directors
were reasonable in relation to the benefits to the Company.
(d)OFI (or any sub-adviser) shall have no duty or obligation to seek advance
competitive bidding for the most favorable commission rate applicable to
any particular portfolio transactions or to select any broker-dealer on the
basis of its purported or "posted" commission rate but will, to the best of its
ability, endeavor to be aware of the current level of the charges of eligible
broker-dealers and to minimize the expense incurred by the Company for effecting
its portfolio transactions to the extent consistent with the interests and
policies of the Company as established by the determinations of the Board of
Directors of the Company and the provisions of this paragraph 7.
(e)The Company recognizes that an affiliated broker-dealer: (i) may act as
one of the Company's regular brokers for the Company so long as it is
lawful for it so to act; (ii) may be a major recipient of brokerage commissions
paid by the Company; and (iii) may effect portfolio transactions for the Company
thereof only if the commissions, fees or other renumeration received or to be
received by it are determined in accordance with procedures contemplated by any
rule, regulation or order adopted under the Investment Company Act for
determining the permissible level of such commissions.
(f)Subject to the foregoing provisions of this paragraph 7, OFI (and any
sub-adviser) may also consider sales of shares of the Company, and the
other funds advised by OFI and its affiliates as a factor in the selection of
broker-dealers for its portfolio transactions.
8. DURATION:
This Agreement will take effect on the date first set forth above. Unless
earlier terminated pursuant to paragraph 10 hereof, this Agreement shall remain
in effect from year-to-year, so long as such continuance shall be approved at
least annually by the Company's Board of Directors, including the vote of the
majority of the Directors of the Company who are not parties to this Agreement
or "interested persons" (as defined in the Investment Company Act) of any such
party, cast in person at a meeting called for the purpose of voting on such
approval, or by the holders of a "majority" (as defined in the Investment
Company Act) of the outstanding voting securities of the Company, and by such a
vote of the Company's Board of Directors.
9. TERMINATION:
This Agreement may be terminated (i) by OFI at any time without penalty upon
sixty days' written notice to the Company (which notice may be waived by the
Company); or (ii) by the Company at any time without penalty upon sixty days'
written notice to OFI (which notice may be waived by OFI) provided that such
termination by the Company shall be directed or approved by the vote of a
majority of all of the Directors of the Company then in office or by the vote of
the holders of a "majority" of the outstanding voting securities of the Company
(as defined in the Investment Company Act).
10. ASSIGNMENT OR AMENDMENT:
This Agreement may not be amended, or the rights of OFI hereunder sold,
transferred, pledged or otherwise in any manner encumbered without the
affirmative vote or written consent of the holders of the "majority" of the
outstanding voting securities of the Company. This Agreement shall automatically
and immediately terminate in the event of its "assignment," as defined in the
Investment Company Act.
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<PAGE>
11. DEFINITIONS:
The terms and provisions of the Agreement shall be interpreted and defined
in a manner consistent with the provisions and definitions contained in the
Investment Company Act.
OPPENHEIMER QUEST CAPITAL VALUE FUND,
INC.
<TABLE>
<S> <C>
Attest: By:
-------------------------------------------
- ------------------------------------------- Bridget A. Macaskill
Andrew J. Donohue Chairman
Secretary
OPPENHEIMERFUNDS, INC.
Attest: By:
-------------------------------------------
- ------------------------------------------- Andrew J. Donohue
Katherine P. Feld Executive Vice President
Secretary
</TABLE>
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<PAGE>
SCHEDULE A
TO
INVESTMENT ADVISORY AGREEMENT
BETWEEN
OPPENHEIMER QUEST CAPITAL VALUE FUND, INC.
AND
OPPENHEIMERFUNDS, INC.
<TABLE>
<CAPTION>
ANNUAL FEE AS A PERCENTAGE OF DAILY TOTAL NET
NAME OF SERIES ASSETS(1)
- --------------------------------- --------------------------------------------------
<S> <C>
Oppenheimer Quest Capital Value 1.00% of first $400 million of all net assets
Fund, Inc. 0.90% of next $400 million of all net assets
0.85% of net assets over $800 million
</TABLE>
- ------------------------
(1) For a period of two years from the date of this Agreement, OFI agrees to
waive the following portion of its investment advisory fee: 0:15% of first
$200 million of all net assets; 0.40% of next $200 million of all net
assets; 0.30% of next $400 million of all net assets; and 0.25% of net
assets over $800 million.
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EXHIBIT C
SUBADVISORY AGREEMENT
THIS AGREEMENT is made by and between OppenheimerFunds, Inc., a Colorado
corporation (the "Adviser"), and OpCap Advisors, a Delaware general partnership
(the "Subadviser"), as of the date set forth below.
RECITAL
WHEREAS, Oppenheimer Quest Capital Value Fund, Inc. (the "Fund") is
registered under the Investment Company Act of 1940, as amended (the "1940
Act"), as an open-end, diversified management investment company;
WHEREAS, the Adviser is registered under the Investment Advisers Act of
1940, as amended (the "Advisers Act"), as an investment adviser and engages in
the business of acting as an investment adviser;
WHEREAS, the Subadviser is registered under the Advisers Act as an
investment adviser and engages in the business of acting as an investment
adviser;
WHEREAS, the Adviser has entered into an Investment Advisory Agreement as of
the date hereof with the Fund (the "Investment Advisory Agreement"), pursuant to
which the Adviser shall act as investment adviser with respect to the Fund; and
WHEREAS, pursuant to Paragraph 2 of the Investment Advisory Agreement, the
Adviser wishes to retain the Subadviser for purposes of rendering investment
advisory services to the Adviser in connection with the Fund upon the terms and
conditions hereinafter set forth;
NOW THEREFORE, in consideration of the mutual covenants herein contained and
other good and valuable consideration, the receipt of which are hereby
acknowledged, the parties hereto agree as follows:
I. APPOINTMENT AND OBLIGATIONS OF THE ADVISOR.
The Adviser hereby appoints the Subadviser to render to the Adviser with
respect to the Fund, investment research and advisory services as set forth
below in Section II, under the supervision of the Adviser and subject to the
approval and direction of the Fund's Board of Directors (the "Board"), and the
Subadviser hereby accepts such appointment, all subject to the terms and
conditions contained herein. The Subadviser shall, for all purposes herein, be
deemed an independent contractor and shall not have, unless otherwise expressly
provided or authorized, any authority to act for or represent the Fund in any
way or otherwise to serve as or be deemed an agent of the Fund.
II. DUTIES OF THE SUBADVISER AND THE ADVISER.
A. DUTIES OF THE SUBADVISER.
The Subadviser shall regularly provide investment advice with respect to the
Fund and shall, subject to the terms of this Agreement, continuously supervise
the investment and reinvestment of cash, securities and instruments or other
property comprising the assets of the Fund, and in furtherance thereof, the
Subadviser's duties shall include:
1. Obtaining and evaluating pertinent information about significant
developments and economic, statistical and financial data, domestic,
foreign or otherwise, whether affecting the economy generally or the Fund,
and whether concerning the individual issuers whose securities are included
in the Fund or the activities in which such issuers engage, or with respect
to securities which the Subadviser considers desirable for inclusion in the
Fund's investment portfolio;
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2. Determining which securities shall be purchased, sold or exchanged by
the Fund or otherwise represented in the Fund's investment portfolio
and regularly reporting thereon to the Adviser and, at the request of the
Adviser, to the Board;
3. Formulating and implementing continuing programs for the purchases
and sales of the securities of such issuers and regularly reporting
thereon to the Adviser and, at the request of the Adviser, to the Board; and
4. Taking, on behalf of the Fund, all actions that appear to the
Subadviser necessary to carry into effect such investment program,
including the placing of purchase and sale orders, and making appropriate
reports thereon to the Adviser and the Board.
B. DUTIES OF THE ADVISER.
The Adviser shall retain responsibility for, among other things, providing
the following advice and services with respect to the Fund:
1. Without limiting the obligation of the Subadviser to so comply, the
Adviser shall monitor the investment program maintained by the
Subadviser for the Fund to ensure that the Fund's assets are invested in
compliance with this Agreement and the Fund's Registration Statement, as
currently in effect from time to time; and
2. The Adviser shall oversee matters relating to Fund promotion,
including, but not limited to, marketing materials and the
Subadviser's reports to the Board.
III. REPRESENTATIONS, WARRANTIES AND COVENANTS.
A. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE SUBADVISER.
1. ORGANIZATION. The Subadviser is now, and will continue to be, a
general partnership duly formed and validly existing under the laws of
its jurisdiction of formation, fully authorized to enter into this Agreement
and carry out its duties and obligations hereunder.
2. REGISTRATION. The Subadviser is registered as an investment adviser
with the Securities and Exchange Commission (the "SEC") under the
Advisers Act, and is registered or licensed as an investment adviser under
the laws of all jurisdictions in which its activities require it to be so
registered or licensed, except where the failure to be so licensed would not
have a material adverse effect on the Subadviser. The Subadviser shall
maintain such registration or license in effect at all times during the term
of this Agreement.
3. BEST EFFORTS. The Subadviser at all times shall provide its best
judgment and effort to the Adviser and the Fund in carrying out its
obligations hereunder.
4. OTHER COVENANTS. The Subadviser further agrees that:
a. it will use the same skill and care in providing such services as
it uses in providing services to other accounts for which it has
investment management responsibilities;
b. it will not make loans to any person to purchase or carry shares
of the Fund or make loans to the Fund;
c. it will report regularly to the Fund and to the Adviser and will
make appropriate persons available for the purpose of reviewing
with representatives of the Adviser on a regular basis the
management of the Fund, including, without limitation, review of
the general investment strategy of the Fund, economic
considerations and general conditions affecting the marketplace;
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<PAGE>
d. as required by applicable laws and regulations, it will maintain
books and records with respect to the Fund's securities
transactions and it will furnish to the Adviser and to the Board
such periodic and special reports as the Adviser or the Board may
reasonably request;
e. it will treat confidentially and as proprietary information of
the Fund all records and other information relative to the Fund,
and will not use records and information for any purpose other
than performance of its responsibilities and duties hereunder,
except after prior notification to and approval in writing by the
Fund or when so requested by the Fund or required by law or
regulation;
f. it will, on a continuing basis and at its own expense, (1)
provide the distributor of the Fund (the "Distributor") with
assistance in the distribution and marketing of the Fund in such
amount and form as the Adviser may reasonably request from time
to time, and (2) use its best efforts to cause the portfolio
manager or other person who manages or is responsible for
overseeing the management of the Fund's portfolio (the "Portfolio
Manager") to provide marketing and distribution assistance to the
Distributor, including, without limitation, conference calls,
meetings and road trips, provided that each Portfolio Manager
shall not be required to devote more than 10% of his or her time
to such marketing and distribution activities;
g. it will use its reasonable best efforts (i) to retain the
services of the Portfolio Manager who manages the portfolio of
the Fund, from time to time and (ii) to promptly obtain the
services of a Portfolio Manager acceptable to the Adviser if the
services of the Portfolio Manager are no longer available to the
Subadviser;
h. it will, from time to time, assure that each Portfolio Manager is
acceptable to the Adviser;
i. it will obtain the written approval of the Adviser prior to
designating a new Portfolio Manager; provided, however, that, if
the services of a Portfolio Manager are no longer available to
the Subadviser due to circumstances beyond the reasonable control
of the Subadviser (e.g., voluntary resignation, death or
disability), the Subadviser may designate an interim Portfolio
Manager who (a) shall be reasonably acceptable to the Adviser and
(b) shall function for a reasonable period of time until the
Subadviser designates an acceptable permanent replacement; and
j. it will promptly notify the Adviser of any impending change in
Portfolio Manager, portfolio management or any other material
matter that may require disclosure to the Board, shareholders of
the Fund or dealers.
B. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE ADVISER.
1. ORGANIZATION. The Adviser is now, and will continue to be, duly
organized and in good standing under the laws of its state of
incorporation, fully authorized to enter into this Agreement and carry out
its duties and obligations hereunder.
2. REGISTRATION. The Adviser is registered as an investment adviser
with the SEC under the Advisers Act, and is registered or licensed as an
investment adviser under the laws of all jurisdictions in which its
activities require it to be so registered or licensed. The Adviser shall
maintain such registration or license in effect at all times during the term
of this Agreement.
3. BEST EFFORTS. The Adviser at all times shall provide its best
judgment and effort to the Fund in carrying out its obligations
hereunder. For a period of five years from the date hereof, and
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<PAGE>
subject to the Adviser's fiduciary obligations to the Fund and its
shareholders, the Adviser will not recommend to the Board that the Fund be
reorganized into another Fund unless the total net assets of the Fund are
less than $100 million at the time of such reorganization.
IV. COMPLIANCE WITH APPLICABLE REQUIREMENTS.
In carrying out its obligations under this Agreement, the Subadviser shall
at all times conform to:
A. all applicable provisions of the 1940 Act and any rules and regulations
adopted thereunder;
B. the provisions of the registration statement of the Fund, as the same may
be amended from time to time, under the Securities Act of 1933, as
amended, and the 1940 Act;
C. the provisions of the Fund's Articles of Incorporation or other governing
document, as amended from time to time;
D. the provisions of the By-laws of the Fund, as amended from time to time;
E. any other applicable provisions of state or federal law; and
F. guidelines, investment restrictions, policies, procedures or instructions
adopted or issued by the Fund or the Adviser from time to time.
The Adviser shall promptly notify the Subadviser of any changes or
amendments to the provisions of B., C., D. and F. above when such changes or
amendments relate to the obligations of the Subadviser.
V. CONTROL BY THE BOARD.
Any investment program undertaken by the Subadviser pursuant to this
Agreement, as well as any other activities undertaken by the Subadviser with
respect to the Fund, shall at all times be subject to any directives of the
Adviser and the Board.
VI. BOOKS AND RECORDS.
The Subadviser agrees that all records which it maintains for the Fund on
behalf of the Adviser are the property of the Fund and further agrees to
surrender promptly to the Fund or to the Adviser any of such records upon
request. The Subadviser further agrees to preserve for the periods prescribed by
applicable laws, rules and regulations all records required to be maintained by
the Subadviser on behalf of the Adviser under such applicable laws, rules and
regulations, or such longer period as the Adviser may reasonably request from
time to time.
VII. BROKER-DEALER RELATIONSHIPS.
A. PORTFOLIO TRADES.
The Subadviser, at its own expense, and to the extent appropriate, in
consultation with the Adviser, shall place all orders for the purchase and sale
of portfolio securities for the Fund with brokers or dealers selected by the
Subadviser, which may include, to the extent permitted by the Adviser and the
Fund, brokers or dealers affiliated with the Subadviser. The Subadviser shall
use its best efforts to seek to execute portfolio transactions at prices that
are advantageous to the Fund and at commission rates that are reasonable in
relation to the benefits received.
B. SELECTION OF BROKER-DEALERS.
With respect to the execution of particular transactions, the Subadviser
may, to the extent permitted by the Adviser and the Fund, select brokers or
dealers who also provide brokerage and research services (as those terms are
defined in Section 28(e) of the Securities Exchange Act of 1934, as amended) to
the Fund and/or the other accounts over which the Subadviser or its affiliates
exercise investment discretion. The Subadviser is authorized to pay a broker or
dealer who provides such brokerage and research services a commission for
executing a portfolio transaction for the Fund that is in excess of the amount
of commission another broker or dealer would have charged for effecting
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<PAGE>
that transaction if the Subadviser determines in good faith that such amount of
commission is reasonable in relation to the value of the brokerage and research
services provided by such broker or dealer. This determination may be viewed in
terms of either that particular transaction or the overall responsibilities that
the Subadviser and its affiliates have with respect to accounts over which they
exercise investment discretion. The Adviser, Subadviser and the Board shall
periodically review the commissions paid by the Fund to determine, among other
things, if the commissions paid over representative periods of time were
reasonable in relation to the benefits received.
C. SOFT DOLLAR ARRANGEMENTS.
The Subadviser may enter into "soft dollar" arrangements through the agency
of third parties on behalf of the Adviser. Soft dollar arrangements for services
may be entered into in order to facilitate an improvement in performance in
respect of the Subadviser's service to the Adviser with respect to the Fund. The
Subadviser makes no direct payments but instead undertakes to place business
with broker-dealers who in turn pay third parties who provide these services.
Soft dollar transactions will be conducted on an arm's-length basis, and the
Subadviser will secure best execution for the Adviser. Any arrangements
involving soft dollars and/or brokerage services shall be effected in compliance
with Section 28(e) of the Securities Exchange Act of 1934, as amended, and the
policies that the Adviser and the Board may adopt from time to time. The
Subadviser agrees to provide reports to the Adviser as necessary for purposes of
providing information on these arrangements to the Board.
VIII. COMPENSATION.
A. AMOUNT OF COMPENSATION. The Adviser shall pay the Subadviser, as
compensation for services rendered hereunder, from its own assets, an
annual fee, payable monthly, equal to 40% of the investment advisory fee
collected by the Adviser from the Fund, based on the total net assets of
the Fund existing as of the date hereof and remaining 120 days later (the
"base amount"), plus 30% of the advisory fee collected by the Adviser,
based on the total net assets of the Fund that exceed the base amount
(the "marginal amount"), in each case calculated after any waivers,
voluntary or otherwise.
B. CALCULATION OF COMPENSATION. Except as hereinafter set forth,
compensation under this Agreement shall be calculated and accrued on the
same basis as the advisory fee paid to the Adviser by the Fund. If this
Agreement becomes effective subsequent to the first day of a month or
shall terminate before the last day of a month, compensation for that
part of the month this Agreement is in effect shall be prorated in a
manner consistent with the calculation of the fees set forth above.
C. PAYMENT OF COMPENSATION: Subject to the provisions of this paragraph,
payment of the Subadviser's compensation for the preceding month shall be
made within 15 days after the end of the preceding month.
D. REORGANIZATION OF THE FUND. If the Fund is reorganized with another
investment company for which the Subadviser does not serve as an
investment adviser or subadviser, and the Fund is the surviving entity,
the subadvisory fee payable under this section shall be adjusted in an
appropriate manner as the parties may agree.
IX. ALLOCATION OF EXPENSES.
The Subadviser shall pay the expenses incurred in providing services in
connection with this Agreement, including, but not limited to, the salaries,
employment benefits and other related costs of those of its personnel engaged in
providing investment advice to the Fund hereunder, including, without
limitation, office space, office equipment, telephone and postage costs and
other expenses. In the event of an "assignment" of this Agreement, other than an
assignment resulting solely by action of the Adviser or an affiliate thereof,
the Subadviser shall be responsible for payment of all costs and
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<PAGE>
expenses incurred by the Adviser and the Fund relating thereto, including, but
not limited to, reasonable legal, accounting, printing and mailing costs related
to obtaining approval of Fund shareholders.
X. NON-EXCLUSIVITY.
The services of the Subadviser with respect to the Fund are not to be deemed
to be exclusive, and the Subadviser shall be free to render investment advisory
and administrative or other services to others (including other investment
companies) and to engage in other activities, subject to the provisions of a
certain Agreement Not to Compete dated as of November 22, 1995 among the
Adviser, Oppenheimer Capital, the Subadviser and Quest For Value Distributors
(the "Agreement Not to Compete"). It is understood and agreed that officers or
directors of the Subadviser may serve as officers or directors of the Adviser or
of the Fund; that officers or directors of the Adviser or of the Fund may serve
as officers or directors of the Subadviser to the extent permitted by law; and
that the officers and directors of the Subadviser are not prohibited from
engaging in any other business activity or from rendering services to any other
person, or from serving as partners, officers, directors or trustees of any
other firm or trust, including other investment advisory companies (subject to
the provisions of the Agreement Not to Compete), provided it is permitted by
applicable law and does not adversely affect the Fund.
XI. TERM.
This Agreement shall become effective at the close of business on the date
hereof and shall remain in force and effect, subject to Paragraphs XII.A and
XII.B hereof and approval by the Fund's shareholders, for a period of two years
from the date hereof.
XII. RENEWAL.
Following the expiration of its initial two-year term, the Agreement shall
continue in full force and effect from year to year for a period of eight years,
provided that such continuance is specifically approved:
A. at least annually (1) by the Board or by the vote of a majority of the
Fund's outstanding voting securities (as defined in Section 2(a)(42) of
the 1940 Act), and (2) by the affirmative vote of a majority of the
directors who are not parties to this Agreement or interested persons of
a party to this Agreement (other than as a director of the Fund), by
votes cast in person at a meeting specifically called for such purpose;
or
B. by such method required by applicable law, rule or regulation then in
effect.
XIII. TERMINATION.
A. TERMINATION BY THE FUND. This Agreement may be terminated at any time,
without the payment of any penalty, by vote of the Board or by vote of a
majority of the Fund's outstanding voting securities, on sixty (60) days'
written notice. The notice provided for herein may be waived by the party
required to be notified.
B. ASSIGNMENT. This Agreement shall automatically terminate in the event of
its "assignment," as defined in Section 2 (a) (4) of the 1940 Act. In the
event of an assignment that occurs solely due to the change in control of
the Subadviser (provided that no condition exists that permits, or, upon
the consummation of the assignment, will permit, the termination of this
Agreement by the Adviser pursuant to Section XIII. D. hereof), the
Adviser and the Subadviser, at the sole expense of the Subadviser, shall
use their reasonable best efforts to obtain shareholder approval of a
successor Subadvisory Agreement on substantially the same terms as
contained in this Agreement.
C. PAYMENT OF FEES AFTER TERMINATION. Notwithstanding the termination of
this Agreement prior to the tenth anniversary of the date hereof, the
Adviser shall continue to pay to the
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Subadviser the subadvisory fee for the term of this Agreement and any
renewals thereof through such tenth anniversary, if: (1) the Adviser or
the Fund terminates this Agreement for a reason other than the reasons
set forth in Section XIII.D. hereof, provided the Investment Advisory
Agreement remains in effect; (2) the Fund reorganizes with another
investment company advised by the Adviser (or an affiliate of the
Adviser) and for which the Subadviser does not serve as an investment
adviser or subadviser and such other investment company is the surviving
entity; or (3) the Investment Advisory Agreement terminates (i) by reason
of an "assignment;" (ii) because the Adviser is disqualified from serving
as an investment adviser; or (iii) by reason of a voluntary termination
by the Adviser; provided that the Subadviser does not serve as the
investment adviser or subadviser of the Fund after such termination of
the Investment Advisory Agreement. The amount of the subadvisory fee paid
pursuant to this section shall be calculated on the basis of the Fund's
net assets measured at the time of such termination or such
reorganization. Notwithstanding anything to the contrary, if the
Subadviser terminates this Agreement or if this Agreement is terminated
by operation of law, due solely to an act or omission by the Subadviser,
Oppenheimer Capital ("OpCap") or their respective partners, subsidiaries,
directors, officers, employees or agents (other than by reason of an
"assignment" of this Agreement), then the Adviser shall not be liable for
any further payments under this Agreement, provided, however, that if at
any time prior to the end of the term of the Agreement Not to Compete any
event that would have permitted the termination of this Agreement by the
Adviser pursuant to Section XIII. D. (3) hereof occurs, the Adviser shall
be under no further obligation to pay any subadvisory fees.
D. TERMINATION BY THE ADVISER. The Adviser may terminate this Agreement
without penalty and without the payment of any fee or penalty,
immediately after giving written notice, upon the occurrence of any of
the following events:
1. The Fund's investment performance of the Fund's Class A shares
compared to the appropriate universe of Class A shares (or their
equivalent), as set forth on Schedule D-1, as amended from time
to time, ranks in the bottom quartile for two consecutive
calendar years (beginning with the calendar year 1996) and earns
a Morningstar three-year rating of less than three (3) stars at
the time of such termination; or
2. Any of the Subadviser, OpCap, their respective partners,
subsidiaries, affiliates, directors, officers, employees or
agents engages in an action or omits to take an action that would
cause the Subadviser or OpCap to be disqualified in any manner
under Section 9(a) of the 1940 Act, if the SEC were not to grant
an exemptive order under Section 9(c) thereof or that would
constitute grounds for the SEC to deny, revoke or suspend the
registration of the Subadviser as an investment adviser with the
SEC; or
3. Any of OpCap, the Subadviser, their respective partners,
subsidiaries, affiliates, directors, officers, employees or
agents causes a material violation of the Agreement Not to
Compete which is not cured in accordance with the provisions of
that agreement; or
4. The Subadviser breaches the representations contained in
Paragraph III.A.4.i. of this Agreement or any other material
provision of this Agreement, and any such breach is not cured
within a reasonable period of time after notice thereof from the
Adviser to the Subadviser. However, consistent with its fiduciary
obligations, for a period of seven months the Adviser will not
terminate this Agreement solely because the Subadviser has failed
to designate an acceptable permanent replacement to a Portfolio
Manager whose services are no longer available to the Subadviser
due to circumstances beyond the reasonable control of the
Subadviser, provided that the
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Subadviser uses its reasonable best efforts to promptly obtain
the services of a Portfolio Manager acceptable to the Adviser and
further provided that the Adviser has not unreasonably withheld
approval of such replacement Portfolio Manager.
E. TRANSACTIONS IN PROGRESS UPON TERMINATION. The Adviser and Subadviser
will cooperate with each other to ensure that portfolio or other
transactions in progress at the date of termination of this Agreement
shall be completed by the Adviser in accordance with the terms of such
transactions, and to this end the Subadviser shall provide the Adviser
with all necessary information and documentation to secure the
implementation thereof.
XIV. NON-SOLICITATION.
During the term of this Agreement, the Adviser (and its affiliates under its
control) shall not solicit or knowingly assist in the solicitation of any
Portfolio Manager of the Fund or any portfolio assistant of the Fund then
employed by the Subadviser or OpCap, provided, however, that the Adviser (or its
affiliates) may solicit or hire any such individual who (A) the Subadviser or
OpCap (or its affiliates) has terminated or (B) has voluntarily terminated his
or her employment with the Subadviser, OpCap (or its affiliates) without
inducement of the Adviser (or its affiliates under its control) prior to the
time of such solicitation. Advertising in general circulation newspapers or
industry newsletters by the Adviser shall not constitute "inducement" by the
Adviser (or its affiliates under its control).
XV. LIABILITY OF THE SUBADVISER.
In the absence of willful misfeasance, bad faith, negligence or reckless
disregard of obligations or duties hereunder on the part of the Subadviser or
any of its officers, directors or employees, the Subadviser shall not be subject
to liability to the Adviser for any act or omission in the course of, or
connected with, rendering services hereunder or for any losses that may be
sustained in the purchase, holding or sale of any security; PROVIDED, HOWEVER,
that the foregoing shall not be construed to relieve the Subadviser of any
liability it may have arising under the Agreement Not to Compete or the
Acquisition Agreement dated August 15, 1995, among the Subadviser, the Adviser
and certain affiliates of the Subadviser.
XVI. NOTICES.
Any notice or other communication required or that may be given hereunder
shall be in writing and shall be delivered personally, telecopied, sent by
certified, registered or express mail, postage prepaid or sent by national
next-day delivery service and shall be deemed given when so delivered personally
or telecopied, or if mailed, two days after the date of mailing, or if by
next-day delivery service, on the business day following delivery thereto, as
follows or to such other location as any party notifies any other party:
A. if to the Adviser, to:
OppenheimerFunds, Inc.
Two World Trade Center
New York, New York 10048-0203
Attention: Andrew J. Donohue
Executive Vice President and General Counsel
Telecopier: 212-321-1159
C-8
<PAGE>
B. if to the Subadviser, to:
OpCap Advisors
c/o Oppenheimer Capital
225 Liberty Street
New York, New York 10281
Attention: Thomas E. Duggan
Secretary and General Counsel
Telecopier: 212-349-4759
XVII. QUESTIONS OF INTERPRETATION.
This Agreement shall be governed by the laws of the State of New York
applicable to agreements made and to be performed entirely within the State of
New York (without regard to any conflicts of law principles thereof). Any
question of interpretation of any term or provision of this Agreement having a
counterpart in or otherwise derived from a term or provision of the 1940 Act
shall be resolved by reference to such term or provision of the 1940 Act and to
interpretations thereof, if any, by the United States Courts or, in the absence
of any controlling decision of any such court, by rules, regulations or orders
of the SEC issued pursuant to the 1940 Act. In addition, where the effect of a
requirement of the 1940 Act reflected in any provision of this Agreement is
revised by rule, regulation or order of the SEC, such provision shall be deemed
to incorporate the effect of such rule, regulation or order.
XVIII. FORM ADV -- DELIVERY.
The Adviser hereby acknowledges that it has received from the Subadviser a
copy of the Subadviser's Form ADV, Part II as currently filed, at least 48 hours
prior to entering into this Agreement and that it has read and understood the
disclosures set forth in the Subadviser's Form ADV, Part II.
XIX. MISCELLANEOUS.
The captions in this Agreement are included for convenience of reference
only and in no way define or delimit any of the provisions hereof or otherwise
affect their construction or effect. If any provision of this Agreement shall be
held or made invalid by a court decision, statute, rule or otherwise, the
remainder of this Agreement shall not be affected thereby. This Agreement shall
be binding upon and shall inure to the benefit of the parties hereto and their
respective successors.
XX. COUNTERPARTS.
This Agreement may be executed in counterparts, each of which shall
constitute an original and both of which, collectively, shall constitute one
agreement.
C-9
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed in duplicate by their respective officers as of the day of January,
1997.
OPPENHEIMERFUNDS, INC.
By:
-----------------------------------
Name: Andrew J. Donohue
Title: Executive Vice President
OPCAP ADVISORS
By: OPPENHEIMER FINANCIAL CORP.
a general partner
By:
-----------------------------------
Name:
Title:
C-10
<PAGE>
SCHEDULE XIII.D.1
The universe of funds to which Class A shares of Oppenheimer Quest Capital
Value Fund, Inc. (the "Fund") subadvised by OpCap Advisors will be compared to
so that it can be determined in which quartile the performance ranks shall
consist of those funds with the same Lipper investment objective being offered
as the only class of shares of such fund or, in the case where there is more
than one class of shares being offered, with a front-end load (typically
referred to as Class A shares).
The present Lipper investment objective category for the fund is:
<TABLE>
<CAPTION>
FUND LIPPER CATEGORY
- ------------------------------------------------------ -------------------------------------
<S> <C>
Oppenheimer Quest Capital CA -- Capital Appreciation
Value Fund, Inc.
</TABLE>
C-11
<PAGE>
EXHIBIT D
INFORMATION ON COMPARABLE FUNDS MANAGED
BY OPPENHEIMERFUNDS, INC.
<TABLE>
<CAPTION>
APPROXIMATE NET ASSETS
AS OF 6/30/96 ADVISORY FEE RATE AS %
NAME OF FUND (MILLIONS) OF AVERAGE ANNUAL NET ASSETS
- -------------------------------------------- ---------------------- --------------------------------------------
<S> <C> <C>
Oppenheimer Global Emerging Growth Fund $ 174.4 1.0% on the first $50 million
.75% on the next $150 million
.72% on the next $200 million
.69% on the next $200 million
.66% on the next $200 million
.60% of net assets in excess of $800 million
Oppenheimer Value Stock Fund $ 178.9 .75% on the first $100 million
.72% on the next $200 million
.69% on the next $200 million
.66% of net assets in excess of $500 million
Oppenheimer Fund $ 279.0 .75% on the first $200 million
Oppenheimer Enterprise Fund $ 72.3 .72% on the next $200 million
.69% on the next $200 million
Oppenheimer Growth Fund $ 1,269.0 .66% on the next $200 million
Oppenheimer Discovery Fund $ 1,293.3 .60% of net assets in excess of $800 million
Oppenheimer Target Fund $ 831.4 .75% on the first $200 million
.72% on the next $200 million
.69% on the next $200 million
.66% on the next $200 million
.60% on the next $800 million
.58% of net assets in excess of $1.5 billion
Oppenheimer Global Fund $ 2,985.4 .80% on the first $250 million
.77% on the next $250 million
.75% on the next $500 million.
.69% on the next $1 billion
.67% on the next $1.5 billion
.65% of net assets in excess of $3.5 billion
*Oppenheimer Quest Value Fund, Inc $ 453.8 1.0% on the first $400 million
.90% on the next $400 million
*Oppenheimer Quest Small Cap Value Fund $ 164.1 .85% of net assets in excess of $800 million
*Oppenheimer Quest Opportunity Value Fund $ 1,324.4
*Oppenheimer Quest Global Value Fund, Inc. $ 221.9 .75% on the first $400 million
.70% on the next $400 million
.65% of net assets in excess of $800 million
*Oppenheimer Quest Officers Value Fund $ 9.4 1.0% of its daily net assets**
Oppenheimer Disciplined Value Fund $ 137.9 .625% on the first $300 million
.500% on the next $100 million
.450% of net assets in excess of $400
million
Oppenheimer International Growth Fund $ 12.1 .80% on the first $250 million
.77% on the next $250 million
.75% on the next $500 million
.69% on the next $1 billion
.67 % of next assets in excess of $2 billion
Oppenheimer Variable Account Funds .75% of the first $200 million
Oppenheimer Growth Fund $ 144.5 .72% of the next $200 million
Oppenheimer Capital Appreciation Fund $ 485.5 .69% of the next $200 million
Oppenheimer Global Securities Fund $ 480.2 .66% of the next $200 million
.60% of net assets in excess of $800 million
</TABLE>
- ------------------------
* OFI pays a sub-advisory fee to OpCap Advisors to provide day-to-day portfolio
management of the Fund. OFI pays OpCap Advisors monthly an annual fee based on
the average daily net assets of the Fund equal to 40% of the advisory fee
collected by OFI based on the total net assets of the Fund as of November 22,
1995 (the "base amount") plus 30% of the investment advisory fee collected by
OFI based on the total net assets of the Fund that exceed the base amount.
** Effective August 1, 1996, OFI voluntarily agreed to waive that portion of it
management fee equal to what OFI would have been required to pay OpCap Advisors
as the sub-advisory fee. Effective as of such date, the sub-advisor voluntarily
agreed to waive its subadvisory fee.
D-1
<PAGE>
EXHIBIT E
DISTRIBUTION AND SERVICE PLAN AND AGREEMENT
BETWEEN
OPPENHEIMERFUNDS DISTRIBUTOR, INC.
AND
OPPENHEIMER QUEST CAPITAL VALUE FUND, INC.
FOR CLASS A SHARES OF
OPPENHEIMER QUEST CAPITAL VALUE FUND, INC.
DISTRIBUTION AND SERVICE PLAN AND AGREEMENT (the "Plan") dated the day
of January, 1997, by and between OPPENHEIMER QUEST CAPITAL VALUE FUND, INC. (the
"Fund") and OPPENHEIMERFUNDS DISTRIBUTOR, INC. (the "Distributor").
1. THE PLAN. This Plan is the Fund's written distribution plan for Class A
shares of the Fund (the "Shares"), contemplated by Rule 12b-1 (the "Rule") under
the Investment Company Act of 1940 (the "1940 Act"), pursuant to which the Fund
will compensate the Distributor for its services incurred in connection with the
distribution of Shares, and the personal service and maintenance of shareholder
accounts that hold Shares ("Accounts"). The Fund may act as distributor of
securities of which it is the issuer, pursuant to the Rule, according to the
terms of this Plan. The Distributor is authorized under the Plan to pay
"Recipients," as hereinafter defined, for rendering (1) distribution assistance
in connection with the sale of Shares and/or (2) administrative support services
with respect to Accounts. Such Recipients are intended to have certain rights as
third-party beneficiaries under this Plan. The terms and provisions of this Plan
shall be interpreted and defined in a manner consistent with the provisions and
definitions contained in (i) the 1940 Act, (ii) the Rule, (iii) Rule 2830 of the
National Association of Securities Dealers, Inc. Conduct Rules, or its successor
(the "NASD Conduct Rules") and (iv) any conditions pertaining either to
distribution-related expenses or to a plan of distribution, to which the Fund is
subject under any order on which the Fund relies, issued at any time by the
Securities and Exchange Commission.
2. DEFINITIONS. As used in this Plan, the following terms shall have the
following meanings:
(a)"Recipient" shall mean any broker, dealer, bank or other person or entity
which: (i) has rendered assistance (whether direct, administrative or
both) in the distribution of Shares or has provided administrative support
services with respect to Shares held by Customers (defined below) of the
Recipient; (ii) shall furnish the Distributor (on behalf of the Fund) with such
information as the Distributor shall reasonably request to answer such questions
as may arise concerning the sale of Shares; and (iii) has been selected by the
Distributor to receive payments under the Plan. Notwithstanding the foregoing, a
majority of the Fund's Board of Directors (the "Board") who are not "interested
persons" (as defined in the 1940 Act) and who have no direct or indirect
financial interest in the operation of this Plan or in any agreements relating
to this Plan (the "Independent Directors") may remove any broker, dealer, bank
or other person or entity as a Recipient, whereupon such person's or entity's
rights as a third-party beneficiary hereof shall terminate.
(b)"Qualified Holdings" shall mean, as to any Recipient, all Shares owned
beneficially or of record by: (i) such Recipient, or (ii) such customers,
clients and/or accounts as to which such Recipient is a fiduciary or custodian
or co-fiduciary or co-custodian (collectively, the "Customers"), but in no event
shall any such Shares be deemed owned by more than one Recipient for purposes of
this Plan. In the event that two entities would otherwise qualify as Recipients
as to the same Shares, the Recipient which is the dealer of record on the Fund's
books shall be deemed the Recipient as to such Shares for purposes of this Plan.
3. PAYMENTS FOR DISTRIBUTION ASSISTANCE AND ADMINISTRATIVE SUPPORT
SERVICES.
(a)The Fund will make payments to the Distributor (i) within forty-five (45)
days of the end of each calendar quarter, in the aggregate amount of
0.0625% (0.25% on an annual basis) of the average during the calendar quarter of
the aggregate net asset value of the Shares computed as of the close of each
business day (the "Service Fee"), plus (ii) within ten (10) days of the end of
each month, in the
E-1
<PAGE>
aggregate 0.020833% (0.25% on an annual basis) of the average during the
calendar quarter of the aggregate net asset value of the Shares computed as of
the close of each business day (the "Asset-Based Sales Charge"). Such Service
Fee payments received from the Fund will compensate the Distributor and
Recipients for providing administrative support services with respect to
Accounts. Such Asset-Based Sales Charge payments received from the Fund will
compensate the Distributor and Recipients for providing distribution assistance
in connection with the sale of Shares.
The administrative support services in connection with the Accounts to be
rendered by Recipients may include, but shall not be limited to, the following:
answering routine inquiries concerning the Fund, assisting in establishing and
maintaining accounts or sub-accounts in the Fund and processing Share redemption
transactions, making the Fund's investment plans and dividend payment options
available, and providing such other information and services in connection with
the rendering of personal services and/or the maintenance of Accounts, as the
Distributor or the Fund may reasonably request.
The distribution assistance in connection with the sale of Shares to be
rendered by the Distributor and by Recipients may include, but shall not be
limited to, the following: distributing sales literature and prospectuses other
than those furnished to current holders of the Fund's Shares ("Shareholders"),
and providing such other information and services in connection with the
distribution of Shares as the Distributor or the Fund may reasonably request.
It may be presumed that a Recipient has provided distribution assistance or
administrative support services qualifying for payment under the Plan if it has
Qualified Holdings of Shares to entitle it to payments under the Plan. In the
event that either the Distributor or the Board should have reason to believe
that, notwithstanding the level of Qualified Holdings, a Recipient may not be
rendering appropriate distribution assistance in connection with the sale of
Shares or administrative support services for the Accounts, then the
Distributor, at the request of the Board, shall require the Recipient to provide
a written report or other information to verify that said Recipient is providing
appropriate distribution assistance and/or services in this regard. If the
Distributor or the Board of Directors still is not satisfied, either may take
appropriate steps to terminate the Recipient's status as such under the Plan,
whereupon such Recipient's rights as a third-party beneficiary hereunder shall
terminate.
(b)The Distributor shall make service fee payments to any Recipient
quarterly, within forty-five (45) days of the end of each calendar
quarter, at a rate not to exceed 0.0625% (0.25% on an annual basis) of the
average during the calendar quarter of the aggregate net asset value of Shares,
computed as of the close of each business day, constituting Qualified Holdings
owned beneficially or of record by the Recipient or by its Customers for a
period of more than the minimum period (the "Minimum Holding Period"), if any,
to be set from time to time by a majority of the Independent Directors.
Alternatively, the Distributor may, at its sole option, make service fee
payments ("Advance Service Fee Payments") to any Recipient quarterly, within
forty-five (45) days of the end of each calendar quarter, at a rate not to
exceed (i) 0.25% of the average during the calendar quarter of the aggregate net
asset value of Shares, computed as of the close of business on the day such
Shares are sold, constituting Qualified Holdings sold by the Recipient during
that quarter and owned beneficially or of record by the Recipient or by its
Customers, plus (ii) 0.0625% (0.25% on an annual basis) of the average during
the calendar quarter of the aggregate net asset value of Shares computed as of
the close of each business day, constituting Qualified Holdings owned
beneficially or of record by the Recipient or by its Customers for a period of
more than one (1) year, subject to reduction or chargeback so that the Advance
Service Fee Payments do not exceed the limits on payments to Recipients that
are, or may be, imposed by the NASD Conduct Rules. In the event Shares are
redeemed less than one year after the date such Shares were sold, the Recipient
is obligated and will repay to the Distributor on demand a pro rata portion of
such Advance Service Fee Payments, based on the ratio of the time such shares
were held to one (1) year.
The Advance Service Fee Payments described in part (i) of the preceding
sentence may, at the Distributor's sole option, be made more often than
quarterly, and sooner than the end of the calendar
E-2
<PAGE>
quarter. In addition, the Distributor may make asset-based sales charge payments
to any Recipient quarterly, within forty-five (45) days of the end of each
calendar quarter, at a rate not to exceed 0.0625% (0.25% on an annual basis) of
the average during the calendar quarter of the aggregate net asset value of
Shares computed as of the close of each business day, constituting Qualified
Holdings owned beneficially or of record by the Recipient or its Customers.
However, no such service fee or asset-based sales charge payments (collectively,
the "Recipient Payments") shall be made to any Recipient for any such quarter in
which its Qualified Holdings do not equal or exceed, at the end of such quarter,
the minimum amount ("Minimum Qualified Holdings"), if any, to be set from time
to time by a majority of the Independent Directors.
A majority of the Independent Directors may at any time or from time to time
decrease and thereafter adjust the rate of fees to be paid to the Distributor or
to any Recipient, but not to exceed the rates set forth above, and/or direct the
Distributor to increase or decrease the Minimum Holding Period or the Minimum
Qualified Holdings. The Distributor shall notify all Recipients of the Minimum
Qualified Holdings or Minimum Holding Period, if any, and the rates of Recipient
Payments hereunder applicable to Recipients, and shall provide each Recipient
with written notice within thirty (30) days after any change in these
provisions. Inclusion of such provisions or a change in such provisions in a
revised current prospectus shall constitute sufficient notice. The Distributor
may make Plan payments to any "affiliated person" (as defined in the 1940 Act)
of the Distributor if such affiliated person qualifies as a Recipient.
(c)The Service Fee and the Asset-Based Sales Charge on Shares are subject to
reduction or elimination of such amounts under the limits to which the
Distributor is, or may become, subject under the NASD Conduct Rules. The
distribution assistance and administrative support services to be rendered by
the Distributor in connection with the Shares may include, but shall not be
limited to, the following: (i) paying sales commissions to any broker, dealer,
bank or other person or entity that sells Shares, and\or paying such persons
Advance Service Fee Payments in advance of, and\or greater than, the amount
provided for in Section 3(b) of this Agreement; (ii) paying compensation to and
expenses of personnel of the Distributor who support distribution of Shares by
Recipients; (iii) obtaining financing or providing such financing from its own
resources, or from an affiliate, for interest and other borrowing costs of the
Distributor's unreimbursed expenses incurred in rendering distribution
assistance and administrative support services to the Fund; (iv) paying other
direct distribution costs, including without limitation the costs of sales
literature, advertising and prospectuses (other than those furnished to current
Shareholders) and state "blue sky" registration expenses; and (v) providing any
service rendered by the Distributor that a Recipient may render pursuant to part
(a) of this Section 3. Such services include distribution assistance and
administrative support services rendered in connection with Shares acquired (i)
by purchase, (ii) in exchange for shares of another investment company for which
the Distributor serves as distributor or sub-distributor, or (iii) pursuant to a
plan of reorganization to which the Fund is a party. In the event that the Board
should have reason to believe that the Distributor may not be rendering
appropriate distribution assistance or administrative support services in
connection with the sale of Shares, then the Distributor, at the request of the
Board, shall provide the Board with a written report or other information to
verify that the Distributor is providing appropriate services in this regard.
(d)Under the Plan, payments may be made to Recipients: (i) by
OppenheimerFunds, Inc. ("OFI") from its own resources (which may include
profits derived from the advisory fee it receives from the Fund), or (ii) by the
Distributor (a subsidiary of OFI), from its own resources, from Asset-Based
Sales Charge payments or from its borrowings.
(e)Notwithstanding any other provision of this Plan, this Plan does not
obligate or in any way make the Fund liable to make any payment
whatsoever to any person or entity other than directly to the Distributor. In no
event shall the amounts to be paid to the Distributor exceed the rate of fees to
be paid by the Fund to the Distributor set forth in paragraph (a) of this
Section 3.
4. SELECTION AND NOMINATION OF DIRECTORS. While this Plan is in effect,
the selection and nomination of those persons to be Directors of the Fund who
are not "interested persons" of the Fund ("Disinterested Directors") shall be
committed to the discretion of such Disinterested Directors.
E-3
<PAGE>
Nothing herein shall prevent the Disinterested Directors from soliciting the
views or the involvement of others in such selection or nomination if the final
decision on any such selection and nomination is approved by a majority of the
incumbent Disinterested Directors.
5. REPORTS. While this Plan is in effect, the Treasurer of the Fund shall
provide written reports to the Funds's Board for its review, detailing services
rendered in connection with the distribution of the Shares, the amount of all
payments made and the purpose for which the payments were made. The reports
shall be provided quarterly and shall state whether all provisions of Section 3
of this Plan have been complied with.
6. RELATED AGREEMENTS. Any agreement related to this Plan shall be in
writing and shall provide that: (i) such agreement may be terminated at any
time, without payment of any penalty, by a vote of a majority of the Independent
Directors or by a vote of the holders of a "majority" (as defined in the 1940
Act) of the Fund's outstanding voting securities of the Class, on not more than
sixty days written notice to any other party to the agreement; (ii) such
agreement shall automatically terminate in the event of its assignment (as
defined in the 1940 Act); (iii) it shall go into effect when approved by a vote
of the Board and its Independent Directors cast in person at a meeting called
for the purpose of voting on such agreement; and (iv) it shall, unless
terminated as herein provided, continue in effect from year to year only so long
as such continuance is specifically approved at least annually by a vote of the
Board and its Independent Directors cast in person at a meeting called for the
purpose of voting on such continuance.
7. EFFECTIVENESS, CONTINUATION, TERMINATION AND AMENDMENT. This Plan has
been approved by a vote of the Board and its Independent Directors cast in
person at a meeting called on , 1996 for the purpose of voting on
this Plan, and shall take effect after approval by Class A shareholders of the
Fund. Unless terminated as hereinafter provided, it shall continue in effect
from year to year from the date first set forth above or as the Board may
otherwise determine only so long as such continuance is specifically approved at
least annually by a vote of the Board and its Independent Directors cast in
person at a meeting called for the purpose of voting on such continuance. This
Plan may not be amended to increase materially the amount of payments to be made
without approval of the Class A Shareholders, in the manner described above, and
all material amendments must be approved by a vote of the Board and of the
Independent Directors. This Plan may be terminated at any time by vote of a
majority of the Independent Directors or by the vote of the holders of a
"majority" (as defined in the 1940 Act) of the Fund's outstanding voting
securities of the Class. In the event of such termination, the Board and its
Independent Directors shall determine whether the Distributor is entitled to
payment from the Fund of all or a portion of the Service Fee and/or the
Asset-Based Sales Charge in respect of Shares sold prior to the effective date
of such termination.
OPPENHEIMER QUEST CAPITAL VALUE FUND,
INC.
By:
-----------------------------------
Bridget A. Macaskill, Chairman
OPPENHEIMERFUNDS DISTRIBUTOR, INC.
By:
-----------------------------------
Andrew J. Donohue
Executive Vice President
E-4
<PAGE>
EXHIBIT F
ARTICLES OF AMENDMENT AND
RESTATEMENT OF
QUEST FOR VALUE DUAL PURPOSE FUND, INC.
Quest for Value Dual Purpose Fund, Inc., a Maryland corporation (the
"Corporation), hereby certifies to the State Department of Assessments and
Taxation of Maryland that:
FIRST: The charter of the Corporation is hereby amended by:
Changing and reclassifying each of the shares of Common Stock (par value
$.01 per share) of the Corporation, which is issued at the close of business on
the effective date of this amendment, into one share of Common Stock of the
Oppenheimer Quest Capital Value Fund Series of Common Stock (par value $.0001
per share) and by transferring to the account designated "capital in excess of
par value" $.0099 for each share of Common Stock outstanding immediately after
the change and reclassification.
SECOND: The charter of the Corporation is hereby amended and restated to
read in its entirety as follows:
OPPENHEIMER QUEST CAPITAL VALUE FUND, INC.
ARTICLES OF INCORPORATION
ARTICLE I
The name of the Corporation is Oppenheimer Quest Capital Value Fund, Inc.
ARTICLE II
(a) The purposes for which the Corporation is formed and the business and
objects to be carried on and promoted by it are:
(1) To engage primarily in the business of investing, reinvesting or trading
in securities as an investment company classified under the Investment
Company Act of 1940 as an open-end, management company.
(2) To engage in any one or more businesses or transactions, or to acquire
all or any portion of any entity engaged in any one or more businesses or
transactions, which the Board of Directors may from time to time
authorize or approve, whether or not related to the business described
elsewhere in this article or to any other business at the time or
theretofore engaged in by the Corporation.
(b) The foregoing enumerated purposes and objects shall be in no way limited
or restricted by reference to, or inference from, the terms of any other clause
of this or any other Article of the Charter of the Corporation, and each shall
be regarded as independent; and they are intended to be and shall be construed
as powers as well as purposes and objects of the Corporation and shall be in
addition to and not in limitation of the general powers of corporations under
the General Laws of the State of Maryland.
ARTICLE III
The post office address of the principal office of the Corporation in this
State is c/o The Corporation Trust Incorporated, 32 South Street, Baltimore,
Maryland 21202.
F-1
<PAGE>
ARTICLE IV
The name of the resident agent of the Corporation in this State is The
Corporation Trust Incorporated, a corporation of this state and the post office
address of the resident agent is 32 South Street, Baltimore, Maryland 21202.
ARTICLE V
(a) The total number of shares of stock of all classes and series which the
Corporation initially has authority to issue is 1,000,000,000 (one billion)
shares of common stock (par value $.0001 per share), amounting in aggregate par
value to $100,000 (one hundred thousand). Of the authorized shares of capital
stock of the Corporation, 500,000,000 (five hundred million) shares are further
initially classified as a series of Common Stock designated the "Oppenheimer
Quest Capital Value Fund". This series of Common Stock shall initially have
three classes of shares, designated Class A, Class B and Class C, consisting,
until further changed, of 300,000,000 (three hundred million) Class A shares,
100,000,000 (one hundred million) Class B shares and 100,000,000 (one hundred
million) Class C shares. The Board of Directors may classify and reclassify any
unissued shares of capital stock by setting or changing in any one or more
respects the preferences, conversion or other rights, voting powers,
restrictions, limitations as to dividends, qualifications, or terms or
conditions of redemption of such shares of stock.
(b) Unless otherwise prohibited by law, so long as the Corporation is
registered as an open-end company under the Investment Company Act of 1940, the
Board of Directors shall have the power and authority, without the approval of
the holders of any outstanding shares, to increase or decrease the number of
shares of capital stock, or the number of shares of capital stock of any class
or series, that the Corporation has authority to issue.
(c) The following is a description of the preferences, conversion and other
rights, voting powers, restrictions, limitations as to dividends,
qualifications, and terms and conditions of redemption of the Oppenheimer Quest
Capital Value Fund, and any additional series of Common Stock of the Corporation
(unless otherwise provided in the articles supplementary or other charter
document classifying or reclassifying such series) and Class A, Class B and
Class C of each series of Common Stock of the Corporation.
(1) All consideration received by the Corporation from the issue or sale of
shares of a particular series of Common Stock, together with all assets
in which such consideration is invested or reinvested, all income,
earnings, profits and proceeds thereof, including any proceeds derived
from the sale, exchange or liquidation of such assets, and any funds or
payments derived from any investment or reinvestment of such proceeds in
whatever form the same may be, shall irrevocably belong to that series
for all purposes and shall be so recorded upon the books of account of
the Corporation. Such consideration, assets, income, earnings, profits
and proceeds, together with any items allocated as provided in the
following sentence, are hereinafter referred to collectively as the
"assets belonging to" that series. In the event that there are any
assets, income, profits or proceeds which are not identifiable as
belonging to a particular series of Common Stock, such items shall be
allocated by or under the supervision of the Board of Directors to and
among one or more of the series of Common Stock from time to time
classified or reclassified, in such manner and on such basis as the Board
of Directors, in its sole discretion, deems fair and equitable. Each such
allocation shall be conclusive and binding for all purposes. No holder of
a particular series of Common Stock shall have any right or claim against
the assets belonging to any other series, except as a holder of the
shares of such other series.
(2) The assets belonging to each series of Common Stock shall be charged
with the liabilities of the Corporation in respect of that series and all
expenses, costs, charges and reserves attributable to that series. Any
liabilities, expenses, costs, charges or reserves of the Corporation
F-2
<PAGE>
which are attributable to more than one series of Common Stock, or are
not identifiable as pertaining to any series, shall be allocated and
charged by or under the supervision of the Board of Directors to and
among one or more of the series of Common Stock from time to time
classified or reclassified, in such manner and on such basis as the Board
of Directors, in its sole discretion, deems fair and equitable. Each such
allocation shall be conclusive and binding for all purposes. The
liabilities, expenses, costs, charges and reserves charged to a series of
Common Stock are hereinafter referred to collectively as the "liabilities
of" that series. All persons who have extended credit with respect to, or
who have a claim or contract in respect of, a particular series of Common
Stock shall look only to the assets belonging to that series for payment
or satisfaction of such credit, claim or contract.
(3) The net asset value per share of a particular series of Common Stock
shall be the quotient obtained by dividing the value of the net assets of
the series (being the value of the assets belonging to that series less
the liabilities of that series) by the total number of shares of that
series outstanding, all as determined by or under the discretion of the
Board of Directors in accordance with generally accepted accounting
principles and the Investment Company Act of 1940. Subject to the
applicable provisions of the Investment Company Act of 1940, the Board of
Directors, in its sole discretion, may prescribe and shall set forth in
the by-laws of the Corporation, or in a duly adopted resolution of the
Board of Directors, such bases and times for determining the current net
asset value per share of each series of Common Stock and the net income
attributable to such series, as the Board of Directors deems necessary or
desirable. The Board of Directors shall have full discretion, to the
extent not inconsistent with the Investment Company Act of 1940, to
determine whether any moneys or other assets received by the Corporation
shall be treated as income or capital and whether any item of expense
shall be charged to income or capital, and each such determination shall
be conclusive and binding for all purposes.
(4) Subject to the provisions of law and any preferences of any class or
series of stock from time to time classified or reclassified, dividends,
including dividends payable in shares of another class or series of the
Corporation's stock, may be paid on a particular class or series of
Common Stock of the Corporation at such time and in such amounts as the
Board of Directors may deem advisable. Dividends and other distributions
on the shares of a particular series of Common Stock shall be paid only
out of the assets belonging to that series after providing for the
liabilities of that series.
(5) Each holder of Common Stock shall have one vote for each share standing
in his name on the books of the Corporation, irrespective of the class or
series thereof, and the exclusive voting power for all purposes shall be
vested in the holders of the Common Stock. All classes and series of
Common Stock shall vote together as a single class; provided, however,
that as to any matter with respect to which a separate vote of a
particular class or series is required by the Investment Company Act of
1940 or the Maryland General Corporation Law, such requirement shall
apply and, in that event, the other classes and series entitled to vote
on the matter shall vote together as a single class; and provided,
further, that the holders of a particular class or series of Common Stock
shall not be entitled to vote on any matter which does not affect any
interest of that class or series (as determined by the Board of Directors
in its sole discretion), including liquidation of another class or
series, except as otherwise required by the Investment Company Act of
1940 or the Maryland General Corporation Law.
(6) Each holder of Common Stock shall have the right to require the
Corporation to redeem all or any part of his shares of any class or
series at a redemption price equal to the current net asset value per
share of that class or series which is next computed after receipt of a
tender of such shares for redemption, less such redemption fee or
deferred sales charge, if any, as the Board of Directors may from time to
time establish in accordance with the Investment Company Act of 1940 and
the Rules of Fair Practice adopted by the National Association of
F-3
<PAGE>
Securities Dealers, Inc. Payment of the redemption price shall be made by
the Corporation only from the assets belonging to the series whose shares
are being redeemed. The redemption price shall be paid in cash; provided,
however, that if the Board of Directors determines, which determination
shall be conclusive, that conditions exist which make payment wholly in
cash unwise or undesirable, the Corporation may, to the extent and in the
manner permitted by law, make payment wholly or partly in securities or
other assets, at the value of such securities or other assets used in
such determination of current net asset value. Notwithstanding the
foregoing, the Corporation may suspend the right of holders of any series
of Common Stock to require the Corporation to redeem their shares, or
postpone the date of payment or satisfaction upon such redemption for
more than seven days after tender of such shares for redemption, during
any period or at any time when and to the extent permitted under the
Investment Company Act of 1940.
(7) To the extent and in the manner permitted by the Investment Company Act
of 1940 and the Maryland General Corporation Law, the Board of Directors
may cause the Corporation to redeem, at their current net asset value,
the shares of any series of Common Stock held in the account of any
stockholder having, because of redemptions or exchanges, an aggregate net
asset value which is less than the minimum initial investment in that
series specified by the Board of Directors from time to time in its sole
discretion. The Board of Directors of the Corporation may also, from time
to time in its discretion, authorize the Corporation to require the
redemption of all or any part of the outstanding shares of its capital
stock of any series for the proportionate interest in the assets of the
Corporation represented by those shares or the cash equivalent thereof
(which shall be the net asset value of those shares determined as
provided hereof), upon the sending of written or telegraphic notice of
redemption to each holder whose shares are so redeemed and upon such
terms and conditions as the Board of Directors of the Corporation shall
deem advisable.
(8) In the event of any liquidation, dissolution or winding up of the
Corporation, whether voluntary or involuntary, or of the liquidation of a
particular series of Common Stock, the holders of each series that is
being liquidated shall be entitled, after payment or provision for
payment of the liabilities of that series and the amount to which the
holders of any class of that series shall be entitled, as a class, to
share ratably in the remaining assets belonging to the series. The
holders of shares of any particular series shall not be entitled thereby
to any distribution upon the liquidation of any other series. The
liquidation of any series of Common Stock of which there are shares then
outstanding shall be approved by the vote of a majority (as defined in
the Investment Company Act of 1940) of the outstanding shares of that
series, and without the vote of the holders of shares of any other series
of Common Stock.
(9) Subject to compliance with the Investment Company Act of 1940, the Board
of Directors shall have authority to provide that holders of any series
of Common Stock shall have the right to exchange their shares for shares
of one or more other series in accordance with such requirements and
procedures as may be established by the Board of Directors.
(10) Except to the extent provided otherwise by the charter of the
Corporation, the Class A, Class B and Class C shares of each series of
Common Stock shall represent an equal proportionate interest in the
assets belonging to that series (subject to the liabilities of that
series) and each share of a particular series shall have identical
voting, dividend, liquidation and other rights; provided, however, that
notwithstanding anything in the charter of the Corporation to the
contrary:
(i) The Class A, Class B and Class C shares may be issued and sold
subject to such different sales or charges, whether initial,
deferred or contingent, or any combination thereof, as
F-4
<PAGE>
the Board of Directors may from time to time establish in accordance
with the Investment Company Act of 1940 and the Rules of Fair
Practice adopted by the National Association of Securities Dealers,
Inc.
(ii) Expenses, costs and charges which are determined by or under the
supervision of the Board of Directors to be attributable to a
particular class of a series may be charged to that class and
appropriately reflected in the net asset value of, or dividends
payable on, the shares of that class of the series.
(iii) The Class A, Class B and Class C shares of a particular series may
have such different exchange and conversion rights as the Board of
Directors shall provide in compliance with the Investment Company
Act of 1940.
(d) Subject to the foregoing and to the Investment Company Act of 1940, the
power of the Board of Directors to classify and reclassify any of the shares of
capital stock shall include, without limitation, subject to the provisions of
the charter of the Corporation, authority to classify or reclassify any unissued
shares of such stock into one or more classes or series of preferred stock,
preference stock, special stock or other stock, and to divide and classify
shares of any class or series into one or more classes or series of such class
or series, by determining, fixing or altering one or more of the following:
(1) The distinctive designation of such class or series and the number of
shares to constitute such class or series; provided that, unless
otherwise prohibited by the terms of such or any other class or series,
the number of shares of any class or series may be decreased by the Board
of Directors in connection with any classification or reclassification of
unissued shares and the number of shares of such class or series may be
increased by the Board of Directors in connection with any such
classification or reclassification, and any shares of any class or series
which have been redeemed, purchased, otherwise acquired or converted into
shares of any other class or series shall become part of the authorized
capital stock and be subject to classification and reclassification as
herein provided.
(2) Whether or not and, if so, the rates, amounts and times at which, and
the conditions under which, dividends shall be payable on shares of such
class or series, whether any such dividends shall rank senior or junior
to or on a parity with the dividends payable on any other class or series
of stock, and the status of any such dividends as cumulative, cumulative
to a limited extent or non-cumulative and as participating or
non-participating.
(3) Whether or not shares of such class or series shall have voting rights,
in addition to any voting rights provided by law and, if so, the terms of
such voting rights.
(4) Whether or not shares of such class or series shall have conversion or
exchange privileges and, if so, the terms and conditions thereof,
including provision for adjustment of the conversion or exchange rate in
such events or at such times as the Board of Directors shall determine.
(5) Whether or not shares of such class or series shall be subject to
redemption and, if so, the terms and conditions of such redemption,
including the date or dates upon or after which they shall be redeemable
and the amount per share payable in case of redemption, which amount may
vary under different conditions and at different redemption dates; and
whether or not there shall be any sinking fund or purchase account in
respect thereof and, if so, the terms thereof.
(6) The rights of the holders of shares of such class or series upon the
liquidation, dissolution or winding up of the affairs of, or upon any
distribution of the assets of, the Corporation, which rights may vary
depending upon whether such liquidation, dissolution or winding up is
F-5
<PAGE>
voluntary or involuntary and, if voluntary, may vary at different dates,
and whether such rights shall rank senior or junior to or on a parity
with such rights of any other class or series of stock.
(7) Whether or not there shall be any limitations applicable, while shares
of such class or series are outstanding, upon the payment of dividends or
making of distributions on, or the acquisition of, or the use of monies
for purchase or redemption of, any stock of the Corporation, or upon any
other action of the Corporation, including action under this paragraph
and, if so, the terms and conditions thereof.
(8) Any other preferences, rights, restrictions, including restrictions on
transferability, and qualifications of shares of such class or series,
not inconsistent with law and the charter of the Corporation.
(e) For the purposes hereof and of any articles supplementary to the charter
providing for the classification or reclassification of any shares of capital
stock or of any other charter document of the Corporation (unless otherwise
provided in any such articles or document), any class or series of stock of the
Corporation shall be deemed to rank:
(1) prior to another class or series either as to dividends or upon
liquidation, if the holders of such class or series be entitled to the
receipt of dividends or of amounts distributable on liquidation,
dissolution or winding up, as the case may be, in preference or priority
to holders of such other class or series;
(2) on a parity with another class or series either as to dividends or upon
liquidation, whether or not the dividend rates, dividend payment dates or
redemption or liquidation price per share thereof be different from those
of such others, if the holders of such class or series of stock shall be
entitled to receipt of dividends or amounts distributable upon
liquidation, dissolution or winding up, as the case may be, in proportion
to their respective dividend rates or redemption or liquidation prices,
without preference or priority over the holders of such other class or
series; and
(3) junior to another class or series either as to dividends or upon
liquidation, if the rights of the holders of such class or series shall
be subject or subordinate to the rights of the holders of such other
class or series in respect of the receipt of dividends or the amounts
distributable upon liquidation, dissolution or winding up, as the case
may be.
(f) The Corporation may issue and sell fractions of shares of capital stock
having pro rata all the rights of full shares, including, without limitation,
the right to vote and to receive dividends, and wherever the words "share" or
"shares" are used in the charter or by-laws of the Corporation, they shall be
deemed to include fractions of shares where the context does not clearly
indicate that only full shares are intended.
(g) The Corporation shall not be obligated to issue certificates
representing shares of capital stock of any class or series. At the time of
issue or transfer of shares without certificates, the Corporation shall provide
the stockholder with such information as may be required under the Maryland
General Corporation Law.
ARTICLE SIX
The number of directors of the Corporation shall be five, which number may
be increased or decreased pursuant to the by-laws of the Corporation, but shall
never be less than the minimum
F-6
<PAGE>
number permitted by the General Laws of the State of Maryland now or hereafter
in force. The names of the directors who will serve until the next annual
meeting and until their successors are elected and qualified are as follows:
Paul Clinton
Thomas Courtney
Lacy Herrmann
George Loft
Bridget A. Macaskill
ARTICLE SEVEN
(a) The following provisions are hereby adopted for the purpose of defining,
limiting and regulating the powers of the Corporation and of the directors and
stockholders:
(1) The Board of Directors is hereby empowered to authorize the issuance
from time to time of shares of its stock of any class or series, whether
now or hereafter authorized, or securities convertible into shares of its
stock of any class or series, whether now or hereafter authorized, for
such consideration as may be deemed advisable by the Board of Directors
and without any action by the stockholders.
(2) No holder of any stock or any other securities of the Corporation,
whether now or hereafter authorized, shall have any preemptive right to
subscribe for or purchase any stock or any other securities of the
Corporation other than such, if any, as the Board of Directors, in its
sole discretion, may determine and at such price or prices and upon such
other terms as the Board of Directors, in its sole discretion, may fix;
and any stock or other securities which the Board of Directors may
determine to offer for subscription may, as the Board of Directors in its
sole discretion shall determine, be offered to the holders of any class,
series or type of stock or other securities at the time outstanding to
the exclusion of the holders of any or all other classes, series or types
of stock or other securities at the time outstanding.
(3) The Board of Directors of the Corporation shall, consistent with
applicable law, have power in its sole discretion to determine from time
to time in accordance with sound accounting practice or other reasonable
valuation methods what constitutes annual or other net profits, earnings,
surplus or net assets in excess of capital; to determine that retained
earnings or surplus shall remain in the hands of the Corporation; to set
apart out of any funds of the Corporation such reserve or reserves in
such amount or amounts and for such proper purpose or purposes as it
shall determine and to abolish any such reserve or any part thereof; to
distribute and pay distributions or dividends in stock, cash or other
securities or property, out of surplus or any other funds or amounts
legally available therefor, at such times and to the stockholders of
record on such dates as it may, from time to time, determine; and to
determine whether and to what extent and at what times and places and
under what conditions and regulations the books, accounts and documents
of the Corporation, or any of them, shall be open to the inspection of
stockholders, except as otherwise provided by statue of the by-laws of
the Corporation, and, except as so provided, no stockholder shall have
any right to inspect any book, account or document of the Corporation
unless authorized to do so by resolution of the Board of Directors.
(4) Notwithstanding any provision of law requiring the authorization of any
action by a greater proportion than a majority of the total number of
shares of capital stock or of any class or series of capital stock, such
action shall be valid and effective if authorized by the affirmative vote
of the holders of a majority of the total number of shares of capital
stock or of such class or series, as the case may be, outstanding and
entitled to vote thereon, except as otherwise provided in the charter of
the Corporation. At a meeting of stockholders the presence in
F-7
<PAGE>
person or by proxy of stockholders entitled to cast a majority of all the
votes entitled to be cast on any matter with respect to which one or more
classes or series of capital stock are entitled to vote as a separate
class shall constitute a quorum of such separate class for action on that
matter. Whether or not a quorum of such a separate class for action on
any such matter is present, a meeting of stockholders convened on the
date for which it was called may be adjourned as to that matter from time
to time without further notice by a majority vote of the stockholders of
the separate class present in person or by proxy to a date not more than
120 days after the original record date.
(5) The Corporation shall indemnify (i) its currently acting and its former
directors and officers, whether serving the Corporation or at its request
any other entity, to the full extent required or permitted by the General
Laws of the State of Maryland now or hereafter in force, including the
advance of expenses under the procedures and to the full extent permitted
by law, and (ii) other employees and agents to such extent as shall be
authorized by the Board of Directors or the by-laws of the Corporation
and as permitted by law. The foregoing rights of indemnification shall
not be exclusive of any other rights to which those seeking
indemnification may be entitled. The Board of Directors may take such
action as is necessary to carry out these indemnification provisions and
is expressly empowered to adopt, approve and amend from time to time such
by-laws, resolutions or contracts implementing such provisions or such
further indemnification arrangements as may be permitted by law. The
right of indemnification provided hereunder shall not be construed to
protect any director or officer of the Corporation against any liability
to the Corporation or its security holders to which he would otherwise be
subject by reason of willful misfeasance, bad faith, gross negligence or
reckless disregard of the duties involved in the conduct of his office.
(6) To the fullest extent permitted by Maryland statutory or decisional law,
as amended or interpreted, no director or officer of the Corporation
shall be personally liable to the Corporation or its stockholders for
money damages; provided, however, that this provision shall not be
construed to protect any director or officer against any liability to the
Corporation or its security holders to which he would otherwise be
subject by reason of willful misfeasance, bad faith, gross negligence or
reckless disregard of the duties involved in the conduct of his office.
No amendment, modification or repeal of this provision shall adversely
affect any right or protection provided hereunder that exists at the time
of such amendment, modification or repeal.
(7) The Corporation reserves the right from time to time to make any
amendments of its charter which may now or hereafter be authorized by
law, including any amendments changing the terms or contract rights, as
expressly set forth in its charter, of any of its outstanding stock by
classification, reclassification or otherwise.
(b) The enumeration and definition of particular powers of the Board of
Directors included in the foregoing shall in no way be limited or restricted by
reference to or inference from the terms of any other clause of this or any
other article of the charter of the Corporation, or construed as or deemed by
inference or otherwise in any manner to exclude or limit any powers conferred
upon the Board of Directors under the General Laws of the State of Maryland now
or hereafter in force.
ARTICLE EIGHT
The duration of the Corporation shall be perpetual.
THIRD: The provisions hereunder set forth are all the provisions of the
charter of the Corporation currently in effect.
F-8
<PAGE>
FOURTH:
(a) As of immediately before the amendment the total number of shares of
stock of all classes which the Corporation has authority to issue is 40,000,000
shares of capital stock, of which 20,000,000 shares are Income Shares (par value
$.01 per share) and 20,000,000 shares are Capital Shares (par value $.01 per
share).
(b) As amended the total number of shares of stock of all classes which the
Corporation has authority to issue is 1,000,000,000 shares, of which 500,000,000
shares are Common Stock -- Oppenheimer Quest Capital Value Fund Series (par
value $.0001 per share), consisting of 300,000,000 Class A shares, 100,000,000
Class B shares and 100,000,000 Class C shares and 500,000,000 shares are
undesignated as to class or series (par value $.0001 per share).
(c) The aggregate par value of all shares having a par value is $400,000
before the amendment and $100,000 as amended.
(d) The preferences, conversion or other rights, voting powers,
restrictions, limitations as to dividends, qualifications, and terms and
conditions of redemption of each class of capital stock of the Corporation have
been changed to provide that all shares of capital stock are redeemable shares
of an open-end management investment company and as specified in Article V
above.
FIFTH: In accordance with the provisions of section 2-604 of the General
Corporation Law of the State of Maryland, the foregoing amendment was duly
approved by a majority of the entire Board of Directors and by a vote of
two-thirds (2/3) of the outstanding stock entitled to vote on the matter.
IN WITNESS WHEREOF, the Corporation has caused these present to be signed in
its name and on its behalf by its President and witnessed by its Secretary on
this day of , 1996.
OPPENHEIMER QUEST CAPITAL VALUE FUND,
INC.
By:
-----------------------------------
Attest:
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F-9
<PAGE>
QUEST FOR VALUE DUAL PURPOSE FUND, INC.
CAPITAL SHARES
PROXY SOLICITED ON BEHALF OF MANAGEMENT
FOR SPECIAL SHAREHOLDERS MEETING DECEMBER 20, 1996
The undersigned shareholder of QUEST FOR VALUE DUAL PURPOSE FUND, INC. does
hereby appoint Thomas E. Duggan and Maria Camacho and each of them, as the
attorneys and proxies of the undersigned, with full power of substitution, to
attend the Special Meeting of Capital Shareholders of Quest for Value Dual
Purpose Fund, Inc. to be held on December 20, 1996 at the offices of Oppenheimer
& Co., Inc., 40th Floor, One World Financial Center at 3:00 p.m. New York time
and at all adjournments thereof, to vote the number of shares of stock in the
name of the undersigned on the record date for said meeting on the matters
specified in the proxy statement. As to any other matter or if any of said
nominees are not available for election, said attorneys shall vote in accordance
with their best judgment.
Management recommends a vote FOR the election of directors and FOR the proposals
on the reverse side hereof. The shares represented hereby will be voted as
indicated or FOR if no choice is indicated.
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PLEASE VOTE, DATE, AND SIGN ON OTHER SIDE AND RETURN PROMPTLY IN ENCLOSED
ENVELOPE
- --------------------------------------------------------------------------------
Please sign this proxy exactly as your name appears on the books of the Fund.
Joint owners should each sign personally. Trustees and other fiduciaries should
indicate the capacity in which they sign, and where more than one name appears,
a majority must sign. If a corporation, this signature should be that of an
authorized officer who should state his or her title.
- --------------------------------------------------------------------------------
HAS YOUR ADDRESS CHANGED? DO YOU HAVE ANY COMMENTS?
- ----------------------------------- ----------------------------------------
- ----------------------------------- ----------------------------------------
- ----------------------------------- ----------------------------------------
<PAGE>
/X/ PLEASE MARK VOTES AS IN
THIS EXAMPLE
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
1. To approve a change in the Fund's subclassification under the Investment Company For Against Abstain
Act of 1940 from a closed-end management investment company to an open-end / / / / / /
management investment company:
2. To approve a new Investment Advisory Agreement with OppenheimerFunds, Inc. For Against Abstain
/ / / / / /
3. To approve a new Subadvisory Agreement betwwen OppenheimerFunds, Inc,. For Against Abstain
and OpCap Advisors: / / / / / /
4. To approve a new Distribution and Service Plan and Agreement with For Against Abstain
OppenheimerFunds Distributor, Inc. with respect to Class A shares. / / / / / /
5. To approve Amended and Restated Articles of Incorporation. For Against Abstain
/ / / / / /
6. To approve a change in the Fund's fundamental investment objective. For Against Abstain
/ / / / / /
7. To approve changes in certain of the Fund's fundamental investment policies. For Against Abstain
/ / / / / /
8. Election of Directors. For Withhold For All Except
/ / / / / /
</TABLE>
P. CLINTON, T. COURTNEY, L. HERRMANN, G. LOFT, AND B. MACASKILL
If you do not wish your shares voted "FOR" a particular nominee, mark the "For
All Except" box and strike a line through the nominee(s) name. Your shares will
be voted for the remaining nominee(s).
Please be sure to sign and date this Proxy. Date Mark box at right if / /
comments or address
change have been noted
on the reverse side of
this card.
- ---------------------------------------------
- ---------------------------------------------
Shareholder sign here -- Co-owner sign here
