Registration No. 333-16881
File No. 811-4797
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 / X /
PRE-EFFECTIVE AMENDMENT NO./ /
POST-EFFECTIVE AMENDMENT NO. 2 / X /
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
/ X /
Amendment No. 13 /X /
OPPENHEIMER QUEST CAPITAL VALUE FUND, INC.
- ------------------------------------------------------------------------------
(Exact Name of Registrant as Specified in Charter)
Two World Trade Center, New York, New York 10048-0203
- ------------------------------------------------------------------------------
(Address of Principal Executive Offices)
(212)323-0200
- ------------------------------------------------------------------------------
(Registrant's Telephone Number)
Andrew J. Donohue, Esq.
OppenheimerFunds, Inc.
Two World Trade Center, New York, New York 10048-0203
- ------------------------------------------------------------------------------
(Name and Address of Agent for Service)
It is proposed that this filing will become effective:
APPROXIMATE DATE OF PROPOSED OFFERING: As soon as practicable after the
effective date of this Registration Statement and thereafter from day to day.
/ / Immediately upon filing pursuant to paragraph (b)
/ X/ On January 26, 1998, pursuant to paragraph (b)
/ / 60 days after filing, pursuant to paragraph (a)(1)
/ / On ________________, pursuant to paragraph (a)(1)
/ / 75 days after filing, pursuant to paragraph (a)(2)
/ / On ____________, pursuant to paragraph (a)(2) of Rule 485.
OPPENHEIMER QUEST CAPITAL VALUE FUND, INC.
FORM N-1A
CROSS REFERENCE SHEET
Part A of
Form N-1A
ITEM NO. PROSPECTUS HEADING
1 Front Cover Page
2 Expenses; A Brief Overview of the Fund
3 Financial Highlights; Performance of the Fund
4 Front Cover Page; A Brief Overview of the Fund;
Investment Objective and Policies; Investment Risks;
Investment Techniques and Strategies; How the Fund
is Managed
5 Expenses; A Brief Overview of the Fund; How the Fund is
Managed; Back Cover
5A Performance of the Fund
6 How the Fund is Managed; Dividends, Capital Gains and
Taxes
7 How to Buy Shares; How to Exchange Shares; Special
Investor Services; How to Sell Shares; Shareholder
Account Rules and Policies
8 How to Sell Shares; How to Exchange Shares; Special
Investor Services
9 *
Part B of
Form N-1A Heading in Statement of
ITEM NO. ADDITIONAL INFORMATION
10 Cover Page
11 Cover Page
12 *
13 Investment Objective and Policies
14 How the Fund is Managed
15 How the Fund is Managed
16 How the Fund is Managed; Distribution and Service Plans;
Additional Information About the Fund; Back Cover
17 Brokerage Policies of the Fund
18 Additional Information about the Fund
19 About Your Investment Account-How to Buy Shares; How to
Sell Shares; How to Exchange Shares
20 Dividends, Capital Gains and Taxes
21 How the Fund is Managed; Brokerage Policies of the Fund;
Additional Information About the Fund - The Distributor;
Distribution and Service Plans
22 Performance of the Fund
23 Financial Statements
- --------------------------------------
* Not applicable or negative answer.
prosp\835N1a.#2
OPPENHEIMER QUEST CAPITAL VALUE FUND, INC.
Prospectus dated January 26, 1998
OPPENHEIMER QUEST CAPITAL VALUE FUND, INC. is a mutual fund that seeks
capital appreciation as its investment objective. The Fund invests in securities
(primarily equity securities) of companies believed by management to be
undervalued in the marketplace in relation to factors such as the companies'
assets, earnings, growth potential and cash flows. The Fund may invest its
assets in equity securities of companies without limit as to market
capitalization. The Fund may invest up to 25% of its net assets in high-yield,
lower-grade debt securities (commonly known as "junk bonds"). Please refer to
"Investment Objective and Policies" for more information about the types of
securities in which the Fund invests and refer to "Investment Risks" for a
discussion of the risks of investing in the Fund.
This Prospectus explains concisely what you should know before investing
in the Fund. Please read this Prospectus carefully and keep it for future
reference. You can find more detailed information about the Fund in the January
26, 1998 Statement of Additional Information. For a free copy, call
OppenheimerFunds Services, the Fund's Transfer Agent, at 1-800-525-7048, or
write to the Transfer Agent at the address on the back cover. The Statement of
Additional Information has been filed with the Securities and Exchange
Commission and is incorporated into this Prospectus by reference (which means
that it is legally part of this Prospectus).
(OppenheimerFunds logo)
SHARES OF THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF ANY BANK,
ARE NOT
GUARANTEED BY ANY BANK, ARE NOT INSURED BY THE F.D.I.C. OR ANY OTHER
AGENCY, AND
INVOLVE INVESTMENT RISKS, INCLUDING THE POSSIBLE LOSS OF THE
PRINCIPAL AMOUNT
INVESTED.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
-1-
<PAGE>
CONTENTS
ABOUT THE FUND
EXPENSES
A BRIEF OVERVIEW OF THE FUND
FINANCIAL HIGHLIGHTS
INVESTMENT OBJECTIVE AND POLICIES
INVESTMENT RISKS
INVESTMENT TECHNIQUES AND STRATEGIES
HOW THE FUND IS MANAGED
PERFORMANCE OF THE FUND
ABOUT YOUR ACCOUNT
HOW TO BUY SHARES
Class A Shares
Class B Shares
Class C Shares
SPECIAL INVESTOR SERVICES
AccountLink
Automatic Withdrawal and Exchange Plans
Reinvestment Privilege
Retirement Plans
HOW TO SELL SHARES
By Mail
By Telephone
HOW TO EXCHANGE SHARES
SHAREHOLDER ACCOUNT RULES AND POLICIES
DIVIDENDS, CAPITAL GAINS AND TAXES
APPENDIX A: SPECIAL SALES CHARGE ARRANGEMENTS FOR
SHAREHOLDERS OF THE FORMER QUEST FOR VALUE FUNDS
APPENDIX B: DESCRIPTION OF RATINGS
APPENDIX C: PRIOR FEES AND EXPENSES
-2-
<PAGE>
ABOUT THE FUND
EXPENSES
The Fund pays a variety of expenses directly for management of its assets,
administration, distribution of its shares and other services, and those
expenses are subtracted from the Fund's assets to calculate the Fund's net asset
value per share. All shareholders therefore pay those expenses indirectly.
Shareholders pay other expenses directly, such as sales charges and account
transaction charges. The following tables are provided to help you understand
your direct expenses of investing in the Fund and your share of the Fund's
business operating expenses that you will bear indirectly. The numbers below are
based on the Fund's fees and expenses during its fiscal period ended October 31,
1997. On March 3, 1997, the Fund was converted from a closed-end to an open-end
investment company. See "How the Fund is Managed - Organization and History" for
information on the organizational background of the Fund. The Fund has changed
its fiscal year from December 31 to October 31.
o SHAREHOLDER TRANSACTION EXPENSES are charges you pay when you buy or
sell shares of the Fund. Please refer to "About Your Account," starting on page
___, for an explanation of how and when these charges apply.
Class Class Class
A SHARES B SHARES C SHARES
Maximum Sales Charge
on Purchases (as a %
of offering price) 5.75% None None
- ------------------------------------------------------------------------------
Maximum Deferred Sales
Charge (as a % of
the lower of the
original offering
price or redemption
proceeds) None(1) 5% in the first 1% if redeemed
year, declining within 12
to 1% in the months of
sixth year purchase(2)
and eliminated
thereafter(2)
- ------------------------------------------------------------------------------
Maximum Sale Charge on
Reinvested Dividends None None None
- ------------------------------------------------------------------------------
Exchange Fee None None None
- ------------------------------------------------------------------------------
Redemption Fee None(3) None(3) None(3)
- ------------------------------------------------------------------------------
(1) If you invest $1 million or more ($500,000 or more for purchases by
"Retirement Plans," as defined in "Class A Contingent Deferred Sales
Charge" on page __) in Class A shares, you may have to pay a sales charge
of up to 1% if you sell your shares within 12 calendar months (18 months
for shares purchased prior to May 1, 1997)from the end of the calendar
month during which you purchased those shares. See "How to Buy Shares
Buying Class A Shares," below.
(2) See "How to Buy Shares - Buying Class B Shares" and "How to Buy Shares -
Buying Class C Shares" below, for more information on the contingent
deferred sales charges.
(3) There is a $10 transaction fee for redemptions paid by Federal Funds wire,
but not for redemptions paid by ACH transfer through AccountLink.
See "How to Sell Shares", below.
o ANNUAL FUND OPERATING EXPENSES are paid out of the Fund's assets and represent
the Fund's expenses of operating its business. For example, the Fund pays
management fees to its investment adviser, OppenheimerFunds, Inc. (referred to
in this Prospectus as the "Manager"). The rates of the Manager's fees are set
forth in "How the Fund is Managed," below. The Fund has other regular expenses
for services, such as transfer agent fees, custodial fees paid to the bank that
holds the Fund's portfolio securities, audit fees and legal expenses. Those
expenses are detailed in the Fund's Financial Statements in the Statement of
Additional Information.
ANNUAL FUND OPERATING EXPENSES
(AS A PERCENTAGE OF AVERAGE NET ASSETS)
Class Class B Class C
Shares Shares Shares
------- ------- -------
Management Fees 0.71% 0.71% 0 .71%
(after waiver)
- ------------------------------------------------------------------------------
12b-1 Distribution 0.35% 1.00% 1.00%
Plan Fees
(after waiver)
- ------------------------------------------------------------------------------
Other Expenses 0.20% 0.20% 0.20%
- ------------------------------------------------------------------------------
Total Fund
Operating Expenses 1.26% 1.91% 1.91%
(after waivers)
The numbers for Class A, Class B and Class C shares in the chart above are
based on the Fund's expenses as an open-end investment company in its last
fiscal period ended October 31, 1997 as if the Fund had operated as an open-end
investment company during the entire fiscal period. The Fund was converted to an
open-end investment company on March 3, 1997, and Class B and Class C shares
were first publicly offered on that date.
These amounts are shown as a percentage of the average net assets of each
class of the Fund's shares for such year. The 12b-1 Distribution Plan Fees for
Class A shares are Service Plan Fees (the maximum fee is 0.25% of average annual
net assets of that class), plus the asset-based sales charge of 0.25% of the
average annual net assets of that class. For Class B and Class C shares, the
12b-1 Distribution and Service Plan Fees are service fees (the maximum fee is
0.25% of average annual net assets of that class) plus an asset-based sales
charge of 0.75%. These plans are described in greater detail in "How to Buy
Shares."
The "Management Fees", "12b-1 Distribution Plan Fees" and "Total Fund
Operating Expenses" in the table above reflect fee waivers by the Manager and
the Distributor (as defined below). These fee waivers, which are expected to be
in effect for the current fiscal year, lowered the Fund's overall expense ratio.
Without such fee waivers, the "Management Fees," "12b-1 Distribution Plan Fees"
and "Total Fund Operating Expenses" for Class A shares would have been 0.99%,
0.50% and 1.69%, respectively; and for Class B and Class C shares would have
been 0.99%, 1.00% and 2.19%, respectively. The fee waivers are described in "How
the Fund is Managed - Fees and Expenses" and "Buying Class A Shares -
Distribution and Service Plan for Class A Shares," and the Statement of
Additional Information.
The actual expenses for each class of shares in future years may be more
or less than the numbers in the chart above, depending on a number of factors,
including changes in the actual value of the Fund's assets represented by each
class of shares.
o EXAMPLES. To try to show the effect of these expenses on an investment
over time, we have created the hypothetical examples shown below. Assume that
you make a $1,000 investment in each class of shares of the Fund, and that the
Fund's annual return is 5%, and that its operating expenses for each class are
the ones shown in the Annual Fund Operating Expenses chart above and that Class
B shares automatically convert into Class A shares six years after purchase. If
you were to redeem your shares at the end of each period shown below, your
investment would incur the following expenses by the end of 1, 3, 5 and 10
years:
1 YEAR 3 YEARS 5 YEARS 10 YEARS(*)
------ ------- ------- --------
Class A Shares $70 $95 $123 $201
Class B Shares $69 $90 $123 $191
Class C Shares $29 $60 $103 $223
If you did not redeem your investment, it would incur the following
expenses:
1 YEAR 3 YEARS 5 YEARS 10 YEARS(*)
------ ------- ------- --------
Class A Shares $70 $95 $123 $201
Class B Shares $19 $60 $103 $191
Class C Shares $19 $60 $103 $223
- -------------------------
*The expenses set forth in the examples above are based upon expenses of the
Fund incurred since it commenced operations as an open-end investment company on
March 3, 1997 on an annualized basis. In the first example, expenses include the
Class A initial sales charge and the applicable Class B or Class C contingent
deferred sales charge. In the second example, Class A expenses include the
initial sales charge, but Class B and Class C expenses do not include contingent
deferred sales charges. The Class B expenses in years 7 through 10 are based on
the Class A expenses shown above, because the Fund automatically converts your
Class B shares into Class A shares after 6 years. Because of the effect of the
higher asset-based sales charge and the contingent deferred sales charge imposed
on Class B and Class C shares, long-term holders of Class B and Class C shares
could pay the economic equivalent of more than the maximum front-end sales
charge allowed under applicable regulations. For Class B shareholders, the
automatic conversion of Class B shares to Class A shares is designed to minimize
the likelihood that this will occur. Please refer to "How to Buy Shares --Buying
Class B Shares" for more information.
THESE EXAMPLES SHOW THE EFFECT OF EXPENSES ON AN INVESTMENT, BUT
ARE NOT MEANT
TO STATE OR PREDICT ACTUAL OR EXPECTED COSTS OR INVESTMENT RETURNS
OF THE FUND,
ALL OF WHICH MAY BE MORE OR LESS THAN THOSE SHOWN.
-3-
<PAGE>
A BRIEF OVERVIEW OF THE FUND
Some of the important facts about the Fund are summarized below, with
references to the section of this Prospectus where more complete information can
be found. You should carefully read the entire Prospectus before making a
decision about investing in the Fund. Keep the Prospectus for reference after
you invest, particularly for information about your account, such as how to sell
or exchange shares.
O WHAT IS THE FUND'S INVESTMENT OBJECTIVE? The Fund's investment
objective is to seek capital appreciation.
o WHAT DOES THE FUND INVEST IN? The Fund seeks its investment objective
through investment in securities (primarily equity securities) of companies
believed by management to be undervalued in the marketplace in relation to
factors such as the companies' assets, earnings, growth potential and cash
flows. Equity securities are common stocks and preferred stocks; bonds,
debentures and notes convertible into common stock; and depository receipts for
such securities. The Fund may invest up to 25% of its net assets in high-yield,
lower-grade debt securities (commonly known as "junk bonds"). To provide
liquidity, the Fund typically invests a part of its assets in various types of
U.S. Government securities and money market instruments. For temporary defensive
purposes, the Fund may invest up to 100% of its assets in such securities. These
investments are more fully explained in "Investment Policies and Strategies,"
starting on page _.
o WHO MANAGES THE FUND? The Manager, OppenheimerFunds, Inc., supervises the
Fund's investment program and handles its day-to-day business. The Manager
(including subsidiaries) manages investment company portfolios having over $__
billion in assets as of December 31, 1997. The Manager is paid an advisory fee
by the Fund, based on its net assets. The Fund's sub-adviser is OpCap Advisors
(the "Sub-Adviser"), which is paid a fee by the Manager, not the Fund. The Sub-
Adviser provides day-to-day portfolio management of the Fund. The Fund's
portfolio manager, Jeffrey C. Whittington, is employed by the Sub-Adviser and is
primarily responsible for the selection of the Fund's securities. The Board of
Directors, elected by shareholders, oversees the Manager, the Sub-Adviser and
the portfolio manager. Please refer to "How the Fund is Managed," starting on
page __ for more information about the Manager, the Sub-Adviser and their fees.
o HOW RISKY IS THE FUND? All investments carry risks to some degree. It is
important to remember that the Fund is designed for long-term investors. The
Fund's investments in stocks and bonds are subject to changes in their value
from a number of factors such as changes in general stock and bond market
movements, the change in value of particular stocks because of an event
affecting the issuer, or changes in interest rates that can affect bond prices.
These changes affect the value of the Fund's investments and its price per
share. Lower-grade, high-yield debt securities are subject to greater market
fluctuations and risk of loss of income and principal than higher-grade
securities and may be considered to have certain speculative characteristics.
Investments in foreign securities involve additional risks not associated with
investments in domestic securities, including risks associated with changes in
currency rates.
While the Sub-Adviser tries to reduce risks by diversifying investments,
by carefully researching securities before they are purchased for the Fund's
portfolio, and in some cases by using hedging techniques, there is no guarantee
of success in achieving the Fund's investment objective, and your shares may be
worth more or less than their original cost when you redeem them. Please refer
to "Investment Risks" starting on page _ for a more complete discussion of the
Fund's investment risks.
o HOW CAN I BUY SHARES? You can buy shares through your dealer or
financial institution, or you can purchase shares directly through
OppenheimerFunds Distributor, Inc. (the "Distributor") by completing an
Application or by using an Automatic Investment Plan under AccountLink. Please
refer to "How To Buy Shares" on page __ for more details.
o WILL I PAY A SALES CHARGE TO BUY SHARES? The Fund offers Class A, Class
B and Class C shares. All classes have the same investment portfolio but have
different expenses. Class A shares are offered with a front-end sales charge,
starting at 5.75%, and is reduced for larger purchases. Class B and Class C
shares are offered without a front-end sales charge, but may be subject to a
contingent deferred sales charge if redeemed within six years or 12 months,
respectively, of buying them. There is also an annual asset-based sales charge,
which is higher on Class B and Class C shares. Please review "How To Buy Shares"
starting on page __ for more details, including a discussion about factors you
and your financial advisor should consider in determining which class may be
appropriate for you.
o HOW CAN I SELL MY SHARES? Shares can be redeemed by mail or by telephone
call to the Transfer Agent on any business day, or through your dealer. Please
refer to "How To Sell Shares" on page __. The Fund also offers exchange
privileges to other Oppenheimer funds, described in "How to Exchange Shares" on
page __.
o HOW HAS THE FUND PERFORMED? Prior to March 3, 1997, the Fund operated as
a closed-end investment company with a dual-purpose structure, and with dual
investment objectives. See "How the Fund is Managed - Organization and History".
The Fund measures its performance by quoting its average annual total return and
cumulative total return, which measure historical performance. The historical
performance of the Class A shares of the Fund prior to open-end conversion has
been restated to reflect the fees and expenses of such Class A shares in effect
as of March 3, 1997(without giving effect to any fee waivers). Appendix C sets
forth the fees and expenses in effect as of March 3, 1997. The Fund's total
returns can be compared to the returns (over similar periods) of other funds. Of
course, other funds may have different objectives, investments, and levels of
risk. The Fund's performance can also be compared to a broad-based market index,
which we have done on pages __ and ___.
-4-
<PAGE>
FINANCIAL HIGHLIGHTS
The financial highlights table on the following pages presents selected
financial information about the Fund, including per share data, expense ratios
and other data based on the Fund's average net assets. This information has been
audited by Price Waterhouse LLP, the Fund's independent accountants, whose
report on the Fund's financial statements for the fiscal period ended October
31, 1997 is included in the Statement of Additional Information. The Fund has
changed its fiscal year from December 31 to October 31. Class B and Class C
shares were only offered during a portion of the fiscal period ended October 31,
1997, commencing on March 3, 1997.
The financial information below for Class A shares reflects the Fund's
performance as a closed-end investment company. Capital Shares of the Fund
existing at the time of its conversion to an open-end investment company on
March 3, 1997 were classified as Class A shares. See "How the Fund is Managed"
for additional information about the background of the Fund.
<PAGE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
CLASS A
----------------------------------------------------------
TEN MONTHS YEAR
ENDED ENDED
OCTOBER 31, DECEMBER 31,
1997(2) 1996 1995 1994
=================================================================================================================
<S> <C> <C> <C> <C>
PER SHARE OPERATING DATA:
Net asset value, beginning of period $37.25 $33.65 $25.79
$27.09
- -----------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Income from investment operations .44 -- -- --
Net realized and unrealized gain (loss) 3.93 6.91 9.46 (.38)
Provision/reduction for corporate income taxes
on net realized long-term capital gain .01 (3.31) (1.57) (.53)
------ ------ ------ ------
Total income (loss) from investment operations 4.38 3.60 7.89
(.91)
- -----------------------------------------------------------------------------------------------------------------
Distributions from net realized short-term gain -- -- (.03) (.39)
------ ------ ------ ------
Total dividends and distributions to shareholders -- -- (.03) (.39)
- -----------------------------------------------------------------------------------------------------------------
Net asset value, end of period $41.63 $37.25 $33.65 $25.79
====== ====== ====== ======
Market value, end of period N/A $36.13 $31.88 $23.00
====== ====== ====== ======
=================================================================================================================
TOTAL RETURN, AT MARKET VALUE(3) N/A 23.63%
45.58% 0.89%
=================================================================================================================
TOTAL RETURN, AT NET ASSET VALUE(5) 11.76% 20.46%(4)
36.68%(4) (1.29)%(4)
=================================================================================================================
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in thousands) $343,329 $879,934 $815,179
$673,742
- -----------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $434,401 $883,395 N/A
N/A
- -----------------------------------------------------------------------------------------------------------------
Ratios to average net assets:
Net investment income 1.28%(6)(8) 2.82% 3.20%
3.47%
Expenses, before voluntary assumption by
the Manager 1.54%(6)(8) 0.72%(7) 0.73% 0.74%
Expenses, net of voluntary assumption by
the Manager 1.11%(6)(8) N/A N/A N/A
- -----------------------------------------------------------------------------------------------------------------
Portfolio turnover rate(9) 33.8% 74% 72% 45%
Average brokerage commission rate(10) $0.0570 $0.0500 -- --
</TABLE>
1. For the period from March 3, 1997 (inception of offering) to October 31,
1997.
2. For the ten months ended October 31, 1997 for Class A shares (formerly
Capital Shares). On February 28, 1997, OppenheimerFunds, Inc. became the
investment advisor to the Fund and on March 3, 1997 the Fund was converted from
a closed-end fund to an open-end fund, and Capital Shares were redesignated as
Class A shares. The Fund changed its fiscal year end from December 31 to
October 31.
3. Change in market price assuming reinvestment of short-term capital gains
distributions, if any, at payable date and federal taxes paid on long-term
capital gains on year end (both at market).
4. Total returns of Class A shares (formerly Capital Shares) at net asset value
for periods prior to March 3, 1997, the date the Fund converted to an open-end
fund, are not audited and have not been restated to reflect the fees and
expenses (without giving effect to fee waivers) to which the Fund became
subject on March 3, 1997. Had such a restatement been made, total returns
(unaudited) at net asset value for each of the years ended December 31, 1996,
1995, 1994, 1993, 1992, 1991, 1990, 1989 and 1988 would have been 18.25%,
34.20%, (3.11)%, 7.32%, 24.88%, 38.27%, (4.93)%, 53.92% and 37.13%,
respectively.
10
<PAGE>
<TABLE>
<CAPTION>
CLASS B CLASS C
- -------------------------------------------------------------------------------------------- -----------
- ----------
PERIOD PERIOD
ENDED ENDED
OCTOBER 31, OCTOBER
31,
1993 1992 1991 1990 1989 1988 1997(1)
1997(1)
==============================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
<C>
$26.29 $22.59 $16.43 $18.05 $11.93 $8.70 $37.04
$37.04
- ------------------------------------------------------------------------------------------------------------------------------
-- -- -- -- -- -- .01 .01
2.45 6.09 6.77 (.91) 6.43 3.23 4.36 4.37
(1.43) (1.10) (.60) (.51) (.31) -- -- --
------ ------ ------ ------ ------ ------ ------ ----
1.02 4.99 6.17 (1.42) 6.12 3.23 4.37 4.38
- ------------------------------------------------------------------------------------------------------------------------------
(.22) (1.29) (.01) (.20) -- -- -- --
------ ------ ------ ------ ------ ------ ------ ----
(.22) (1.29) (.01) (.20) -- -- -- --
- ------------------------------------------------------------------------------------------------------------------------------
$27.09 $26.29 $22.59 $16.43 $18.05 $11.93 $41.41
$41.42
====== ====== ====== ====== ====== ======
====== ======
$23.75 $23.00 $17.63 $12.00 $14.13 $ 8.63 N/A
N/A
====== ====== ====== ====== ====== ======
====== ======
==============================================================================================================================
10.50% 44.60% 52.10% (9.70)% 67.40% 35.30% N/A
N/A
==============================================================================================================================
9.34%(4) 27.26%(4) 41.27%(4) (4.93)%(4) 53.92%(4) 37.13%(4)
11.80% 11.82%
==============================================================================================================================
$696,803 $682,374 $615,727 $504,739 $533,994 $425,376
$1,208 $773
- ------------------------------------------------------------------------------------------------------------------------------
N/A N/A N/A N/A N/A N/A $ 552
$372
- ------------------------------------------------------------------------------------------------------------------------------
3.29% 3.61% 4.39% 5.50% 5.17% 5.04%
0.07%(6) 0.06%(6)
0.74% 0.74% 0.77% 0.81% 0.83% 0.86%
2.14%(6) 2.13%(6)
N/A N/A N/A N/A N/A N/A 1.86%(6)
1.85%(6)
- -------------------------------------------------------------------------------------------------------------------------------
51% 45% 62% 78% 76% 155% 33.8%
33.8%
-- -- -- -- -- -- $0.0570 $0.0570
</TABLE>
5. Assumes a hypothetical initial investment on the business day before the
first day of the fiscal period (or inception of offering), with all dividends
and distributions reinvested in additional shares on the reinvestment date, and
redemption at the net asset value calculated on the last business day of the
fiscal period. Sales charges are not reflected in the total returns. Total
returns are not annualized for periods of less than one full year. Prior to
March 3, 1997, the Fund operated as a closed-end investment company and total
return was calculated based on market value.
6. Annualized.
7. The expense ratio reflects the effect of gross expenses paid indirectly by
the Fund.
8. Due to the change from the Fund's dual purpose structure and conversion from
a closed-end to an open-end fund, the ratios for Class A shares are not
necessarily comparable to those of prior periods.
9. The lesser of purchases or sales of portfolio securities for a period,
divided by the monthly average of the market value of portfolio securities
owned during the period. Securities with a maturity or expiration date at the
time of acquisition of one year or less are excluded from the calculation.
Purchases and sales of investment securities (excluding short-term securities)
for the period ended October 31, 1997 were $142,520,307 and $663,674,705,
respectively.
10. Total brokerage commissions paid on applicable purchases and sales of
portfolio securities for the period, divided by the total number of related
shares purchased and sold.
11
-5-
<PAGE>
INVESTMENT OBJECTIVE AND POLICIES
OBJECTIVE. The Fund seeks capital appreciation.
INVESTMENT POLICIES AND STRATEGIES. The Fund seeks its investment objective
through investment in securities (primarily equity securities) of companies
believed by management to be undervalued in the marketplace in relation to
factors such as the companies' assets, earnings, growth potential and cash
flows. The Fund may invest its assets in equity securities of companies with no
limit as to market capitalization. For the purposes of this Prospectus the term
equity securities is defined as common stocks and preferred stocks; bonds,
debentures and notes convertible into common stocks; and depository receipts for
such securities.
The Fund may invest up to 25% of its net assets in high-yield, lower-grade
bonds (or high-yielding unrated bonds) rated below Baa3 by Moody's Investors
Service, Inc. ("Moody's") or BBB-by Standard & Poors Corporation
("S&P")(commonly known as "junk bonds"). To provide liquidity for the purchase
of new instruments and to effect redemptions of shares, the Fund typically
invests a part of its assets in various types of U.S. Government securities and
high quality, short-term debt securities with remaining maturities of one year
or less such as government obligations, certificates of deposit, bankers'
acceptances, commercial paper, short-term corporate securities and repurchase
agreements ("money market instruments"). For temporary defensive purposes, the
Fund may invest up to 100% of its assets in such U.S. Government securities and
money market instruments.
o CAN THE FUND'S INVESTMENT OBJECTIVE AND POLICIES CHANGE? The Fund
has an
investment objective, which is described above, as well as investment policies
it follows to try to achieve its objective. Additionally, the Fund uses certain
investment techniques and strategies in carrying out those investment policies.
The Fund's investment policies and practices are not "fundamental" unless this
Prospectus or the Statement of Additional Information states that a particular
policy is "fundamental". The Fund's investment objective is a fundamental
policy.
Fundamental policies are those that cannot be changed without the approval
of a "majority" of the Fund's outstanding voting shares. The term "majority" is
defined in the Investment Company Act of 1940 to be a particular percentage of
outstanding voting shares (and this term is explained in the Statement of
Additional Information). The Board of Directors may change non-fundamental
policies without shareholder approval, although significant changes will be
described in amendments to this Prospectus.
o INVESTMENT IN BONDS AND CONVERTIBLE SECURITIES. The Fund may invest
up
to 25% of its net assets in high-yield, lower-grade bonds. Such securities are
rated below "investment grade," which means they have a rating lower than "Baa3"
by Moody's or lower than "BBB-" by S&P or similar ratings by other rating
organizations, or if unrated, are determined by the Sub-Adviser to be of
comparable quality to debt securities rated below investment grade. Appendix B
to this Prospectus describes these rating categories. A reduction in the rating
of a security after its purchase by the Fund will not require the Fund to
dispose of the security. Once the rating of a security has been changed, the
Fund will consider all circumstances deemed relevant in determining whether to
continue to hold the security. Lower-grade debt securities are subject to
special risks as described in "Investment Risks" below.
Convertible fixed-income securities in which the Fund invests are bonds,
debentures or notes that may be converted into or exchanged for a prescribed
amount of company stock of the same or a different issue within a particular
period of time at a specified price or formula. The Fund considers convertible
securities to be "equity equivalents" because of the conversion feature and the
security's rating has less impact on the investment decision than in the case of
non-convertible securities.
o FOREIGN SECURITIES. The Fund may purchase foreign securities that are
listed on a domestic or foreign securities exchange, traded in domestic or
foreign over-the-counter markets or represented by American Depository Receipts,
European Depository Receipts or Global Depository Receipts. There is no limit to
the amount of foreign securities the Fund may acquire. The Fund may buy
securities in any country; however, the Fund does not presently intend to invest
more than 25% of its net assets (at time of purchase) in securities of issuers
located in any single foreign country and does not presently intend to invest
more than 5% of its net assets in securities issued by emerging market
countries, or by companies located in those countries. The Fund will hold
foreign currency only in connection with the purchase or sale of foreign
securities.
o PORTFOLIO TURNOVER. A change in the securities held by the Fund is
known as "portfolio turnover." The Fund ordinarily does not engage in
short-term trading to try to achieve its objective.
As a result, the Fund's portfolio turnover (excluding turnover of securities
having a maturity of one year or less) is not expected to be more than 100% each
year. The "Financial Highlights" table above shows the Fund's portfolio turnover
rate during past fiscal years. Portfolio turnover affects brokerage costs,
dealer markups and other transaction costs, and results in the Fund's
realization of capital gains or losses for tax purposes.
INVESTMENT RISKS
All investments carry risks to some degree, whether they are risks that market
prices of the investment will fluctuate (this is known as "market risk") or that
the underlying issuer will experience financial difficulties and may default on
its obligation under a fixed-income investment to pay interest and repay
principal (this is referred to as "credit risk"). These general investment risks
and the special risks of certain types of investments that the Fund may hold are
described below. They affect the value of the Fund's investments, its investment
performance and the prices of its shares. These risks collectively form the risk
profile of the Fund.
Because of the types of securities the Fund invests in and the investment
techniques the Fund uses, the Fund is designed for investors who are investing
for the long term. It is not intended for investors seeking assured income or
preservation of capital. While the Sub-Adviser tries to reduce risks by
diversifying investments, by carefully researching securities before they are
purchased, and in some cases by using hedging techniques, changes in overall
market prices can occur at any time, and because the income earned on securities
is subject to change, there is no assurance that the Fund will achieve its
investment objective. When you redeem your shares, they may be worth more or
less than what you paid for them.
o STOCK INVESTMENT RISKS. Because the Fund normally invests a substantial
portion of its assets in stocks, the value of the Fund's portfolio will be
affected by changes in the stock markets. At times, the stock markets can be
volatile and stock prices can change substantially. This market risk will affect
the Fund's net asset values per share, which will fluctuate as the values of the
Fund's portfolio securities change. Not all stock prices change uniformly or at
the same time and not all stock markets move in the same direction at the same
time. Other factors can affect a particular stock's prices (for example, poor
earnings reports by an issuer, loss of major customers, major litigation against
an issuer, or changes in government regulations affecting an industry). Not all
of these factors can be predicted.
The Fund attempts to limit market risks by diversifying its investments,
that is, by not holding a substantial amount of the stock of any one company and
by not investing too great a percentage of the Fund's assets in any one company.
Because changes in market prices can occur at any time, there is no assurance
that the Fund will achieve its investment objective, and when you redeem your
shares, they may be worth more or less than what you paid for them.
o FOREIGN SECURITIES HAVE SPECIAL RISKS. For example, foreign issuers may
not be subject to the same accounting and disclosure requirements as U.S.
companies. The value of foreign investments may be affected by changes in
foreign currency rates, exchange control regulations, expropriation or
nationalization of a company's assets, foreign taxes, delays in settlement of
transactions, changes in governmental economic or monetary policy in the U.S. or
abroad, or other political and economic factors. The Fund may invest in emerging
market countries; such countries may have relatively unstable governments,
economies based on only a few industries that are dependent upon international
trade and reduced secondary market liquidity. More information about the risks
and potential rewards of investing in foreign securities is contained in the
Statement of Additional Information.
o RISKS OF FIXED-INCOME SECURITIES. In addition to credit risks, described
below, debt securities are subject to changes in their value due to changes in
prevailing interest rates. When prevailing interest rates fall, the value of
already-issued debt securities generally rise. When interest rates rise, the
values of already-issued debt securities generally decline. The magnitude of
these fluctuations will often be greater for longer-term debt securities than
shorter-term debt securities. Changes in the value of securities held by the
Fund mean that the Fund's share prices can go up or down when interest rates
change because of the effect of the change on the value of the Fund's portfolio
of debt securities. Credit risk relates to the ability of the issuer to meet
interest or principal payments on a security as they become due. Generally,
higher yielding lower-grade bonds, described below, are subject to credit risks
to a greater extent than lower yielding, investment grade bonds.
o SPECIAL RISKS OF LOWER-GRADE SECURITIES. The Fund may invest up to 25% of
its net assets in high-yield, lower-grade bonds as described above in
"Investment Policies and Strategies". High yield, lower-grade securities,
whether rated or unrated, often have speculative characteristics and special
risks that make them riskier investments than investment grade securities.
Generally, higher yielding lower-grade bonds are subject to credit risks to a
greater extent than lower yielding, investment grade bonds. They may be subject
to greater market fluctuations and risk of loss of income and principal than
lower yielding, investment grade securities. There may be less of a market for
them and therefore they may be harder to sell at an acceptable price. There is a
relatively greater possibility that the issuer's earnings may be insufficient to
make the payments of interest due on the bonds. The issuer's low
creditworthiness may increase the potential for its insolvency.
These risks mean that the Fund's net asset value per share may be affected
by declines in value of these securities. However, the Fund's limitations on
investments in these types of securities may reduce some of the risk. Also,
convertible securities may be less subject to some of these risks than other
debt securities, to the extent they can be converted into stock, which may be
more liquid and less affected by these other risk factors.
o SPECIAL RISKS OF HEDGING INSTRUMENTS. As discussed below, the Fund may
invest in certain hedging instruments. The use of hedging instruments requires
special skills and knowledge of investment techniques that are different than
what is required for normal portfolio management. If the Sub-Adviser uses a
hedging instrument at the wrong time or judges market conditions incorrectly,
hedging strategies may reduce the Fund's return. The Fund could also experience
losses if the prices of its futures, forwards and options positions were not
correlated with its other investments or if it could not close out a position
because of an illiquid market for the future or option.
Options trading involves the payment or receipt of premiums and has
special tax effects on the Fund. There are also special risks in particular
hedging strategies. If a covered call written by the Fund is exercised on an
investment that has increased in value, the Fund will be required to sell the
investment at the call price and will not be able to realize any profit if the
investment has increased in value above the call price. In writing a put, there
is a risk that the Fund may be required to buy the underlying security at a
disadvantageous price. The use of forward contracts may reduce the gain that
would otherwise result from a change in the relationship between the U.S. dollar
and a foreign currency. These risks are described in greater detail in the
Statement of Additional Information.
INVESTMENT TECHNIQUES AND STRATEGIES
The Fund may also use the investment techniques and strategies described below.
These techniques involve certain risks. The Statement of Additional Information
contains more information about these practices, including limitations on their
use that may help to reduce some of the risks.
o TEMPORARY DEFENSIVE INVESTMENTS. In times of unstable market or economic
conditions, when the Sub-Adviser determines it appropriate to do so to attempt
to reduce fluctuations in the value of the Fund's net assets, the Fund may
assume a temporary defensive position and invest an unlimited amount of assets
in U.S. Government securities and money market instruments of the type
identified on page __ under "Investment Policies and Strategies." At any time
that the Fund invests for temporary defensive purposes, to the extent of such
investments, it is not pursuing its investment objective.
O WARRANTS. A warrant is an option to purchase an equity security at a
specific price which is valid for a specific period of time. The Fund will
not invest more than 5% of its net assets at the
time of purchase in warrants (other than those that have been acquired in units
or attached to other securities). For further details about this type of
investment, please refer to "Warrants" in the Statement of Additional
Information.
o INVESTING IN SMALL, UNSEASONED COMPANIES. The Fund may invest without
limitation in securities of small, unseasoned companies. These are companies
that have been in continuous operation for less than three years, counting the
operations of any predecessors. Securities of these companies may have limited
liquidity (which means that the Fund may have difficulty selling them at an
acceptable price when it wants to) and the prices of these securities may be
volatile.
o HEDGING. The Fund may purchase and sell certain kinds of futures
contracts, forward contracts, and options on securities, futures and
broadly-based stock indices. These are all referred to as "hedging instruments."
The Fund does not use hedging instruments for speculative purposes, and has
limits on the use of them, described below. The hedging instruments the Fund may
use are described below and in greater detail in "Other Investment Techniques
and Strategies" in the Statement of Additional Information.
The Fund may buy and sell options, futures and forward contracts for a
number of purposes. It may do so to try to manage its exposure to the
possibility that the prices of its portfolio securities may decline, or to
establish a position in the securities market as a temporary substitute for
purchasing individual securities. It may do so to try to manage its exposure to
changing interest rates. Some of these strategies, such as selling futures,
buying puts and writing covered calls, hedge the Fund's portfolio against price
fluctuations. Other hedging strategies, such as buying futures and call options,
tend to increase the Fund's exposure to the securities market.
Forward contracts are used to try to manage foreign currency risks on the
Fund's foreign investments. Foreign currency options are used to try to protect
against declines in the dollar value of foreign securities the Fund owns, or to
protect against an increase in the dollar cost of buying foreign securities.
o FUTURES. The Fund may buy and sell futures contracts that relate to (1)
broadly-based stock indices (these are referred to as Stock Index Futures), (2)
foreign currencies (these are called Forward Contracts and are discussed below)
or (3) commodities (these are referred to as commodity futures).
o PUT AND CALL OPTIONS. The Fund may buy and sell exchange-traded and
over-the-counter put and call options. The Fund may buy puts and calls that
relate to securities it owns (as to puts) or intends to purchase (as to calls),
broadly-based stock indices, foreign currencies or Stock Index Futures. A call
or put may be purchased only if, after the purchase, the value of all call and
put options held by the Fund will not exceed 5% of the Fund's total assets.
If the Fund sells (that is, writes) a call option, it must be "covered."
That means the Fund must own the security subject to the call while the call is
outstanding, or, for other types of written calls, the Fund must segregate
liquid assets to enable it to satisfy its obligations if the call is exercised.
Up to 25% of the Fund's total assets may be subject to calls.
The Fund may write puts on broadly-based stock indices, foreign currencies
or Stock Index Futures. If the Fund writes a put, the put must be covered by
segregated liquid assets. The Fund will not write puts if more than 25% of the
Fund's net assets would have to be segregated to cover put options.
o FORWARD CONTRACTS. Forward contracts are foreign currency exchange
contracts. They are used to buy or sell foreign currency for future delivery at
a fixed price. The Fund uses them to try to "lock in" the U.S. dollar price of a
security denominated in a foreign currency that the Fund has bought or sold, or
to protect against possible losses from changes in the relative values of the
U.S. dollar and foreign currency. The Fund limits its exposure in foreign
currency exchange contracts in a particular foreign currency to the amount of
its assets denominated in that currency or in a closely- correlated currency.
o ILLIQUID AND RESTRICTED SECURITIES. Under the policies and procedures
established by the Board of Directors, the Manager determines the liquidity of
certain of the Fund's investments. Investments may be illiquid because of the
absence of an active trading market, making it difficult to value them or
dispose of them promptly at an acceptable price. A restricted security is one
that has a contractual restriction on its resale or which cannot be sold
publicly until it is registered under the Securities Act of 1933.
The Fund may not invest more than 15% of its net assets in illiquid and
restricted securities, including repurchase agreements that have a maturity of
longer than seven days and certain over-the-counter options. The Fund's
percentage limitation on these investments does not apply to certain restricted
securities that are eligible for resale to "qualified institutional buyers". The
Manager monitors holdings of illiquid securities on an ongoing basis to
determine whether to sell any holdings to maintain adequate liquidity.
o LOANS OF PORTFOLIO SECURITIES. To attempt to raise cash for liquidity
purposes, the Fund may lend its portfolio securities to brokers, dealers and
other financial institutions. The Fund must receive collateral for a loan. After
any loan, the value of the securities loaned is not expected to exceed 33-1/3%
of the value of the total assets of the Fund. Other conditions to which loans
are subject are described in the Statement of Additional Information. There are
some risks in connection with securities lending. The Fund might experience a
delay in receiving additional collateral to secure a loan or a delay in recovery
of the loaned securities.
o REPURCHASE AGREEMENTS. The Fund may enter into repurchase agreements to
generate income for liquidity purposes to meet anticipated redemptions, or
pending the investment of proceeds from sales of Fund shares or settlement of
purchases of portfolio investments. In a repurchase transaction, the Fund buys a
security and simultaneously sells it to the vendor for delivery at a future
date. Repurchase agreements must be fully collateralized. However, if the vendor
fails to pay the resale price on the delivery date, the Fund may incur costs in
disposing of the collateral and may experience losses if there is any delay in
its ability to do so.
The Fund may enter into reverse repurchase agreements. Under such
agreements, the Fund sells securities and agrees to repurchase them at a
mutually agreed upon date and price. Reverse repurchase agreements create
leverage, a speculative factor, and will be considered borrowings by the Fund
for purposes of the percentage limitations set forth in "Borrowing" below.
Investment in repurchase agreements having a maturity beyond seven days is
subject to the limitations set forth above under "Illiquid and Restricted
Securities." Additional information about repurchase agreements is set forth in
"Repurchase Agreements" in the Statement of Additional Information.
o "WHEN-ISSUED" AND DELAYED DELIVERY TRANSACTIONS. The Fund
may
purchase securities on a "when-issued" basis, and may purchase or sell such
securities on a "delayed delivery" basis or
on a "firm commitment" basis. These terms refer to securities that have been
created and for which a market exists, but which are not available for immediate
delivery. The Fund does not intend to make such purchases for speculative
purposes. During the period between the purchase and settlement, the underlying
securities are subject to market fluctuations and no interest accrues prior to
delivery of the securities.
|X| BORROWING. As a fundamental policy, the Fund may not borrow money,
except as a temporary measure for extraordinary or emergency purposes, and in no
event in excess of 33-1/3% of the lower of the market value or cost of its total
assets, and will not purchase any securities at a time while such borrowings
exceed 5% of its total assets. This investment technique may subject the Fund to
greater risks and costs, including the burden of interest expense, an expense
the Fund would not otherwise incur. The Fund can borrow only if it maintains a
300% ratio of assets to borrowings at all times in the manner set forth in the
Investment Company Act.
o INVESTMENT IN OTHER INVESTMENT COMPANIES. The Fund generally may
invest up to 10% of its total assets in the aggregate in shares of other
investment companies and up to 5% of its total
assets in any one investment company, as long as each investment does not
represent more than 3% of the outstanding voting securities of the acquired
investment company. These limitations do not apply in the case of investment
company securities which may be purchased as part of a plan of merger,
consolidation, reorganization or acquisition. Investment in other investment
companies may involve the payment of substantial premiums above the value of
such investment companies' portfolio securities, and is subject to limitations
under the Investment Company Act and market availability. The Fund does not
intend to invest in such investment companies unless, in the judgment of the
Manager, the potential benefits of such investment justify the payment of any
applicable premiums or sales charge. As a shareholder in an investment company,
the Fund would bear its ratable share of that investment company's expenses,
including its advisory and administration fees. At the same time, the Fund would
continue to pay its own management fees and other expenses.
OTHER INVESTMENT RESTRICTIONS. The Fund has other investment restrictions
which are fundamental policies. Under these fundamental policies, the Fund
cannot:
o Invest 25% or more of the value of its total assets (valued at the time
of investment) in any one industry.
o With respect to 75% of its total assets, invest more than 5% of the
value of its total assets (taken at market value at time of purchase) in the
outstanding securities of any one issuer, excluding obligations issued or
guaranteed by the U.S. Government or any agency or instrumentality thereof or
own more than 10% of the outstanding voting securities of any one issuer (other
than securities issued or guaranteed by the U.S. Government or any agency of
instrumentality thereof).
Unless this Prospectus states that a percentage restriction applies on an
ongoing basis, it applies only at the time the Fund makes an investment, and the
Fund need not sell securities to meet the percentage limits if the value of the
investment increases in proportion to the size of the Fund. Other investment
restrictions are listed in "Investment Restrictions" in the Statement of
Additional Information.
HOW THE FUND IS MANAGED
ORGANIZATION AND HISTORY. The Fund is a diversified, open-end management
investment company. The Fund was incorporated as "QFV Dual Purpose Fund, Inc."
on August 4, 1986 as a Maryland corporation (and later renamed "Quest for Value
Dual Purpose Fund, Inc.") and commenced operations on February 13, 1987 as a
closed-end investment company with a dual purpose structure, a dual investment
objective of (a) long-term capital appreciation and preservation of capital and
(b) current income and long-term growth of income, and had common stock (the
"Capital Shares") and preferred stock (the "Income Shares") outstanding. Under
the Fund's prior dual purpose structure, the Capital Shares were entitled to all
gains and losses on all of the assets of the Fund and no expenses were allocated
to such shares; the Income Shares were entitled to receive all of the Fund's
income and bore all of the operating expenses of the Fund. The Income Shares
were redeemed by the Fund on January 31, 1997 and the Fund's dual purpose
structure terminated. On March 3, 1997, the Fund was converted to an open-end
investment company with a single investment objective of capital appreciation
and the outstanding Capital Shares of the Fund became Class A shares of common
stock, bearing their allocable share of the Fund's expenses. On that date the
Fund was renamed "Oppenheimer Quest Capital Value Fund, Inc."
The shares of common stock are divided into three classes designated Class
A, Class B and Class C, consisting of 300,000,000 Class A shares, and
100,000,000 each of Class B and Class C shares. The remaining 500,000,000 shares
of authorized common stock have not been classified. The Board of Directors has
the power, without shareholder approval, to issue additional classes of shares
of the Fund. All classes invest in the same investment portfolio. Each class has
its own dividends and distributions and pays certain expenses which may be
different for the different classes. Each class may have a different net asset
value. Each share entitles a shareholder to one vote on matters submitted to the
shareholders to vote on with fractional shares voting proportionally. Only
shares of a particular class vote as a class on matters that affect that class
alone. Shares are freely transferrable. Please refer to "How the Fund is
Managed" in the Statement of Additional Information for more information on the
voting of shares.
The Fund is governed by a Board of Directors, which is responsible for
protecting the interests of shareholders under Maryland law. The Directors meet
periodically throughout the year to oversee the Fund's activities, review its
performance, and review the actions of the Manager and the Sub-Adviser.
"Directors and Officers of the Fund" in the Statement of Additional Information
names the Directors and officers of the Fund and provides more information about
them. Although the Fund will not normally hold annual meetings, it may hold
shareholder meetings from time to time on important matters, and shareholders
have the right to call a meeting to remove a Director or to take other action
described in the Fund's Amended and Restated Articles of Incorporation.
THE MANAGER. The Fund is managed by the Manager, OppenheimerFunds, Inc., which
supervises the Fund's investment program and handles its day-to-day business.
The Manager carries out its duties, subject to the policies established by the
Board of Directors, under an Investment Advisory Agreement with the Fund which
states the Manager's responsibilities. The Agreement sets forth the fees paid by
the Fund to the Manager and describes the expenses that the Fund is responsible
to pay to conduct its business.
The Manager has operated as an investment adviser since 1959. The Manager
(including subsidiaries) currently manages investment companies, including other
Oppenheimer funds, with assets of more than $75 billion as of December 31, 1997,
and with more than 3.5 million shareholder accounts. The Manager is owned by
Oppenheimer Acquisition Corp., a holding company that is owned in part by senior
officers of the Manager and controlled by Massachusetts Mutual Life Insurance
Company.
The management services provided to the Fund by the Manager, and the
services provided by the Distributor and the Transfer Agent to shareholders,
depend on the smooth functioning of their computer systems. Many computer
software systems in use today cannot distinguish the year 2000 from the year
1900 because of the way dates are encoded and calculated. That failure could
have a negative impact on the handling of securities trades, pricing and account
services. The Manager, the Distributor and the Transfer Agent have been actively
working on necessary changes to their computer systems to deal with the year
2000 and expect that their systems will be adapted in time for that event,
although there can be no assurance of success. THE SUB-ADVISER. The Manager has
retained the Sub-Adviser to provide day-to-day portfolio management of the Fund.
Prior to February 28, 1997, the Sub-Adviser was the investment adviser to the
Fund. The Sub-Adviser is a majority owned subsidiary of Oppenheimer Capital, a
registered investment advisor, whose employees perform all investment advisory
services provided to the Fund by the Sub-Adviser.
On November 4, 1997, PIMCO Advisors L.P. ("PIMCO Advisors"), a registered
investment adviser with $125 billion in assets under management through various
subsidiaries and affiliates, acquired control of Oppenheimer Capital and the
Sub-Adviser. On November 5, 1997, a new sub-advisory agreement between the
Sub-Adviser and the Manager, on terms identical to the prior sub-advisory
agreement, became effective. The new sub-advisory agreement had been approved by
shareholders of the Fund on May 19, 1997. On November 30, 1997, Oppenheimer
Capital merged with a subsidiary of PIMCO Advisors and, as a result, Oppenheimer
Capital and the Sub-Adviser became indirect wholly-owned subsidiaries of PIMCO
Advisors. PIMCO Advisors has two general partners: PIMCO Partners, G.P., a
California general partnership, and PIMCO Advisors Holdings L.P. (formerly
Oppenheimer Capital, L.P.), an NYSE-listed Delaware limited partnership of which
PIMCO Partners, G.P. is the sole general partner.
o PORTFOLIO MANAGER. The Fund's portfolio manager, Jeffrey C. Whittington,
is employed by the Sub-Adviser and is primarily responsible for the selection of
the Fund's securities. Mr. Whittington, who is also a Senior Vice President of
Oppenheimer Capital, was the Fund's portfolio manager from 1987 to September
1991, and from January 1996 to the present. From October 1991 to July 1993, Mr.
Whittington was a portfolio manager with Oppenheimer & Co., Inc., from August
1993 to July 1994 was a portfolio manager with Neuberger & Berman and since
August 1994 has been a portfolio manager at Oppenheimer Capital.
The Sub-Adviser's equity investment policy is overseen by George Long, who
is Chairman, Chief Executive Officer and Chief Investment Officer for
Oppenheimer Capital. Mr. Long has been with Oppenheimer Capital since 1981.
o FEES AND EXPENSES. Under the Investment Advisory Agreement, the Fund has
agreed to pay the Manager a monthly fee at the following annual rates, which
decline on additional assets as the Fund grows: 1.00% of the first $400 million
of average daily net assets; 0.90% of the next $400 million; and 0.85% of
average daily net assets over $800 million. Pursuant to the Agreement, until
February 28, 1999, the Manager will waive the following portion of the advisory
fee: 0.15% of the first $200 million of average annual net assets; 0.40% of the
next $200 million; 0.30% of the next $400 million; and 0.25% of average annual
net assets over $800 million. After giving effect to the waiver, the Fund's
management fee for the fiscal period ended October 31, 1997 was 0.71% of average
annual net assets for its Class A, Class B and Class C shares (without the
waiver, the management fee would have been 0.99%). The Fund pays expenses
related to its daily operations, such as custodian fees, Directors' fees,
transfer agency fees and legal and auditing costs. These expenses are paid out
of the Fund's assets and are not paid directly by shareholders. However, they
reduce the net asset value of shares, and therefore are indirectly borne by
shareholders through their investment. More information about the Investment
Advisory Agreement and the other expenses paid by the Fund is contained in the
Statement of Additional Information.
The Manager pays the Sub-Adviser an annual fee payable monthly based on
the average daily net assets of the Fund equal to 40% of the net advisory fee
collected by the Manager based on the net assets of the Fund as of February 28,
1997 and remaining 120 days later (the "Base Amount") plus 30% of the investment
advisory fee collected by the Manager based on the total net assets of the Fund
that exceed the Base Amount, in each case calculated after any waivers,
voluntary or otherwise.
Information about the Fund's brokerage policies and practices is set forth
in "Brokerage Policies of the Fund" in the Statement of Additional Information.
That section discusses how brokers and dealers are selected for the Fund's
portfolio transactions. When deciding which broker to use, the Manager and the
Sub-Adviser are permitted by the Investment Advisory Agreement to consider
whether brokers have sold shares of the Fund or any other funds for which the
Manager serves as investment adviser.
THE DISTRIBUTOR. The Fund's shares are sold through dealers, brokers and other
financial institutions that have a sales agreement with OppenheimerFunds
Distributor, Inc., a subsidiary of the Manager that acts as the Fund's
Distributor. The Distributor also distributes the shares of the other
Oppenheimer funds managed by the Manager and is sub-distributor for funds
managed by a subsidiary of the Manager.
THE TRANSFER AGENT AND SHAREHOLDER SERVICING AGENT. The transfer
agent and
shareholder servicing agent for the Fund is OppenheimerFunds Services, a
division of the Manager. It also acts as the shareholder servicing agent for
certain other Oppenheimer funds. Shareholders should direct inquiries about
their accounts to the Transfer Agent at the address and toll-free number shown
below in this Prospectus and on the back cover.
PERFORMANCE OF THE FUND
EXPLANATION OF PERFORMANCE TERMINOLOGY. The Fund uses the terms "total
return"
and "average annual total return" to illustrate its performance. The performance
of each class of shares is shown separately, because the performance of each
class of shares will usually be different as a result of the different kinds of
expenses each class bears. These returns measure the performance of a
hypothetical account in the Fund over various periods, and do not show the
performance of each shareholder's investment (which will vary if dividends are
received in cash, or shares are sold or additional shares are purchased). The
Fund's performance information may help you see how well your investment in the
Fund has done over time and to compare it to other funds or, as we have done on
page __, market indices.
Prior to March 3, 1997, the Fund operated as a closed-end investment
company with a dual- purpose structure and with dual investment objectives. See
"How the Fund is Managed -Organization and History." The historical performance
of the Class A shares of the Fund (formerly, the Capital Shares) prior to
open-end conversion has been restated to reflect the fees and expenses of such
Class A shares in effect as of March 3, 1997(without giving effect to any fee
waivers). See Appendix C for a description of such fees and expenses. As
discussed in "How the Fund is Managed -Organization and History", prior to
January 31, 1997 (the date of redemption of the Income Shares) the Capital
Shares were entitled to all gains and losses attributable to both the Capital
Shares as well as the Income Shares. Consequently, the Capital Shares were
leveraged financially. Absent the leverage afforded by the former dual-purpose
structure, the historical performance of the Capital Shares would have been
lower.
It is important to understand that the Fund's total returns represent past
performance (as adjusted for Class A shares) and should not be considered to be
predictions of future returns or performance. This performance data is described
below, but more detailed information about how total returns are calculated is
contained in the Statement of Additional Information, which also contains
information about other ways to measure and compare the Fund's performance. The
Fund's investment performance will vary over time, depending on market
conditions, the composition of the portfolio, expenses and which class of shares
you purchase.
o TOTAL RETURNS. There are different types of total returns used to
measure the Fund's performance. Total return is the change in value of a
hypothetical investment in the Fund over a given period, assuming that all
dividends and capital gains distributions are reinvested in additional shares.
The cumulative total return measures the change in value over the entire period
(for example, ten years). An average annual total return shows the average rate
of return for each year in a period that would produce the cumulative total
return over the entire period. However, average annual total returns do not show
the Fund's actual year-by-year performance.
When total returns are quoted for Class A shares, normally the current
maximum initial sales charge has been deducted. When total returns are shown for
Class B or Class C shares, normally the contingent deferred sales charge that
applies to the period for which the total return is shown has been deducted.
However, total returns may also be quoted at "net asset value", without
considering the effect of the sales charge, and those returns would be lower if
sales charges were deducted.
HOW HAS THE FUND PERFORMED? Below is a discussion by the Manager of the Fund's
performance during its fiscal period ended October 31, 1997, followed by a
graphical comparison of the Fund's performance to an appropriate broad-based
market index.
o MANAGEMENT'S DISCUSSION OF PERFORMANCE. During the fiscal period ended
October 31, 1997, the Fund remained virtually fully invested in equity
securities, and participated in the domestic stock market's strong performance.
Consistent with its investment objective, the Fund sought investment in the
common stocks of companies believed to have superior, undervalued businesses in
strong competitive niches. Three such investments, all in the insurance
industry, represented substantial Fund holdings and positively contributed to
the Fund's performance. During the year the Fund maintained an above-average
cash position resulting from sales of portfolio holdings in anticipation of its
open-end conversion, and as a result of profit taking on certain stocks. The
Fund's portfolio holdings, allocations and strategies are subject to change.
o COMPARING THE FUND'S PERFORMANCE TO THE MARKET. The graphs below
show
the performance of a hypothetical $10,000 investment in Class A, Class B and
Class C shares of the Fund at October 31, 1997. In the case of Class A shares
(formerly, Capital Shares), performance is measured over a ten-year period and
in the case of Class B and Class C shares, performance is measured from the
inception of those classes on March 3, 1997. The Fund's performance reflects the
deduction of the 5.75% current maximum initial sales charge on Class A shares,
the applicable contingent deferred sales charge on Class B and Class C shares,
and the reinvestment of any dividends and capital gains distributions. In
addition, the performance for Class A shares reflects the adjustment for fees
and expenses as of March 3, 1997 as described above in "Explanation of
Performance Terminology".
The Fund's performance is compared to the performance of the S&P 500
Index, a broad-based index of equity securities widely regarded as the general
measure of the performance of the U.S. equity securities market. Index
performance reflects the reinvestment of dividends but does not consider the
effect of capital gains or transaction costs, and none of the data below shows
the effect of taxes. Also, the Fund's performance reflects the effect of Fund
business and operating expenses. While index comparisons may be useful to
provide a benchmark for the Fund's performance, it must be noted that the Fund's
investments are not limited to the securities in the S&P 500 Index. Moreover,
the index performance data does not reflect any assessment of the risk of the
investments included in the index.
CLASS A SHARES
COMPARISON OF CHANGE IN VALUE OF $10,000 HYPOTHETICAL INVESTMENT IN:
Oppenheimer Quest Capital Value Fund, Inc. (Class A) and the S & P 500 Index
[Graph]
Average Annual Total Returns of Class A Shares of the Fund at 10/31/971
1 YEAR 5 YEARS 10 YEARS
7.95% 12.02% 19.07%
CLASS B SHARES
COMPARISON OF CHANGE IN VALUE OF $10,000 HYPOTHETICAL INVESTMENT IN:
Oppenheimer Quest Capital Value Fund, Inc. (Class B) and the S & P 500 Index
[Graph]
Cumulative Total Returns of Class B Shares of the Fund at 10/31/972
LIFE OF CLASS
6.80%
CLASS C SHARES
COMPARISON OF CHANGE IN VALUE OF $10,000 HYPOTHETICAL INVESTMENT IN:
Oppenheimer Quest Capital Value Fund, Inc. (Class C) and the S & P 500 Index
[Graph]
Cumulative Total Returns of Class C Shares of the Fund at 10/31/973
LIFE OF CLASS
10.83%
Total returns and ending account values in the graphs show change in share value
and include reinvestment of all dividends and capital gains distributions. The
Fund's fiscal year end has changed from 12/31 to 10/31. The performance
information for the S & P 500 Index begins on 1/31/87 for Class A shares and
2/28/97 for Class B and Class C shares. 1The inception date of the Fund (Class A
shares) was 2/13/87. Class A returns are shown net of the applicable 5.75%
maximum initial sales charge. 2Class B shares of the Fund were first publicly
offered on 3/3/97. Returns are shown net of the applicable 5% contingent
deferred sales charge for the life-of-class. The ending account value for Class
B shares in the graph is net of the applicable 5% contingent deferred sales
charge. 3Class C shares of the Fund were first publicly offered on 3/3/97. The
1-year return is shown net of the applicable 1% contingent deferred sales
charge. Past performance is not predictive of future performance. Graphs are not
drawn to same scale.
ABOUT YOUR ACCOUNT
HOW TO BUY SHARES
CLASSES OF SHARES. The Fund offers investors three different classes of shares.
The different classes of shares represent investments in the same portfolio of
securities but may be subject to different expenses and will likely have
different share prices.
o CLASS A SHARES. If you buy Class A shares, you may pay an initial
sales charge on investments up to $1 million (up to $500,000 for purchases by
"Retirement Plans" as defined in "Class A Contingent Deferred Sales Charge" on
page __). If you purchase Class A shares as part of an investment of at least $1
million ($500,000 for Retirement Plans) in shares of one or more Oppenheimer
funds you will not pay an initial sales charge, but if you sell any of those
shares within 12 months of buying them (18 months if the shares were purchased
prior to May 1, 1997), you may pay a contingent deferred sales charge. The
amount of that sales charge will vary depending on the amount you invested.
Sales charge rates are described in "Buying Class A Shares" below.
o CLASS B SHARES. If you buy Class B shares, you pay no sales charge at
the time of purchase, but if you sell your shares within six years of buying
them you will normally pay a contingent deferred sales charge that varies,
depending on how long you have owned your shares as described in "Buying Class B
Shares" below.
o CLASS C SHARES. If you buy Class C shares, you pay no sales charge at
the time of purchase, but if you sell your shares within 12 months of buying
them, you will normally pay a contingent deferred sales charge of 1% as
described in "Buying Class C Shares" below.
WHICH CLASS OF SHARES SHOULD YOU CHOOSE? Once you decide that the Fund is
an
appropriate investment for you, the decision as to which class of shares is
better suited to your needs depends on a number of factors which you should
discuss with your financial advisor. The Fund's operating costs that apply to a
class of shares and the effect of the different types of sales charges on your
investment will vary your investment results over time. The most important
factors to consider are how much you plan to invest and how long you plan to
hold your investment. If your goals and objectives change over time and you plan
to purchase additional shares, you should re-evaluate those factors to see if
you should consider another class of shares.
In the following discussion, to help provide you and your financial
advisor with a framework in which to choose a class, we have made some
assumptions using a hypothetical investment in the Fund. We used the sales
charge rates that apply to each class, and considered the effect of the higher
annual asset-based sales charges on Class B and Class C expenses (which, like
all expenses, will affect your investment return). For the sake of comparison,
we have assumed that there is a 10% rate of appreciation on the investment each
year. Of course, the actual performance of your investment cannot be predicted
and will vary, based on the Fund's actual investment returns and the operating
expenses borne by each class of shares, and which class of shares you invest in.
The factors discussed below are not intended to be investment advice or
recommendations, because each investor's financial considerations are different.
The discussion below of the factors to consider in purchasing a particular class
of shares assumes that you will purchase only ONE class of shares and not a
combination of shares of different classes.
o HOW LONG DO YOU EXPECT TO HOLD YOUR INVESTMENT? While future
financial
needs cannot be predicted with certainty, knowing how long you expect to hold
your investment will assist you in selecting the appropriate class of shares.
The effect of the sales charge, over time, using our assumptions will generally
depend on the amount invested. Because of the effect of class-based expenses,
your choice will also depend on how much you plan to invest. For example, the
reduced sales charges available for larger purchases of Class A shares may, over
time, offset the effect of paying an initial sales charge on your investment
(which reduces the amount of your investment dollars used to buy shares for your
account), compared to the effect over time of higher class-based expenses on
Class B or Class C shares for which no initial sales charge is paid.
o INVESTING FOR THE SHORT TERM. If you have a short-term investment horizon
(that is, you plan to hold your shares for not more than six years), you should
probably consider purchasing Class A or Class C shares rather than Class B
shares, because of the effect of the Class B contingent deferred sales charge if
you redeem within 6 years, as well as the effect of the higher Class B
asset-based sales charge on the investment return for that class in the
short-term. Class C shares might be the appropriate choice (especially for
investments of less than $100,000), because there is no initial sales charge on
Class C shares, and the contingent deferred sales charge does not apply to
amounts you sell after holding them one year.
However, if you plan to invest more than $100,000 for the shorter term,
then the more you invest and the more your investment horizon increases toward
six years, Class C shares might not be as advantageous as Class A shares. That
is because the higher annual asset-based sales charge on Class C shares will
have a greater economic impact on your account over the longer term than the
reduced front-end sales charge available for larger purchases of Class A shares.
For example, Class A might be more advantageous than Class C (as well as Class
B) for investments of more than $100,000 expected to be held for 5 or 6 years
(or more). For investments over $250,000 expected to be held 4 to 6 years (or
more), Class A shares may become more advantageous than Class C (and Class B).
If investing $500,000 or more, Class A may be more advantageous as your
investment horizon approaches 3 years or more.
And for most investors who invest $1 million or more, in most cases
Class A shares will be the most advantageous choice, no matter how long you
intend to hold your shares. For that reason, the Distributor normally will not
accept purchase orders of $500,000 or more of Class B shares or $1 million or
more of Class C shares from a single investor.
o INVESTING FOR THE LONGER TERM. If you are investing for the
longer-term, for example, for retirement, and do not expect to need access to
your money for seven years or more, Class B shares may be an appropriate
consideration, if you plan to invest less than $100,000. If you plan to invest
more than $100,000 over the long term, Class A shares will likely be more
advantageous than Class B shares or Class C shares, as discussed above, because
of the effect of the expected lower expenses for Class A shares and the reduced
initial sales charges available for larger investments in Class A shares under
the Fund's Right of Accumulation.
Of course, these examples are based on approximations of the effect of
current sales charges and expenses on a hypothetical investment over time, using
the assumed annual performance return stated above, and therefore you should
analyze your options carefully.
o ARE THERE DIFFERENCES IN ACCOUNT FEATURES THAT MATTER TO YOU?
Because
some account features may not be available for Class B or Class C shareholders,
or other features (such as Automatic Withdrawal Plans) may not be advisable
(because of the effect of the contingent deferred sales charge in non-retirement
accounts) for Class B or Class C shareholders, you should carefully review how
you plan to use your investment account before deciding which class of shares is
better for you. For example, share certificates are not available for Class B or
Class C shares, and if you are considering using your shares as collateral for a
loan, that may be a factor to consider. Additionally, dividends payable to Class
B and Class C shareholders will be reduced by the additional expenses borne
solely by those classes or higher expenses, such as the asset-based sales
charges to which Class B and Class C shares are subject, as described below and
in the Statement of Additional Information.
o HOW DOES IT AFFECT PAYMENTS TO MY BROKER? A salesperson, such as a
broker, or any other person who is entitled to receive compensation for selling
Fund shares may receive different compensation for selling one class of shares
than for selling another class. It is important that investors understand that
the purpose of the contingent deferred sales charges and asset-based sales
charges for Class B and Class C shares is the same as the purpose of the
front-end sales charge on sales of Class A shares: that is, to compensate the
Distributor for commissions it pays to dealers and financial institutions for
selling shares. The Distributor may pay additional periodic compensation from
its own resources to securities dealers or financial institutions based upon the
value of shares of the Fund owned by the dealer or financial institution for its
own account or for its customers.
HOW MUCH MUST YOU INVEST? You can open a Fund account with a minimum initial
investment of $1,000 and make additional investments at any time with as little
as $25. There are reduced minimum investments under special investment plans:
o With Asset Builder Plans, Automatic Exchange Plans, 403(b)(7)
custodial plans and military allotment plans, you can make initial and
subsequent investments of as little as $25; and subsequent purchases of at least
$25 can be made by telephone through AccountLink.
o Under pension, profit-sharing and 401(k) plans and Individual
Retirement Accounts (IRAs), you can make an initial investment of as little as
$250 (if your IRA is established under an Asset Builder Plan, the $25 minimum
applies), and subsequent investments may be as little as $25.
There is no minimum investment requirement if you are buying shares by
reinvesting dividends or distributions from the Fund or other Oppenheimer funds
(a list of them appears in the Statement of Additional Information, or you can
ask your dealer or call the Transfer Agent), or by reinvesting distributions
from unit investment trusts that have made arrangements with the Distributor.
o HOW ARE SHARES PURCHASED? You can buy shares several ways: through any
dealer, broker or financial institution that has a sales agreement with the
Distributor, directly through the Distributor, or automatically from your bank
account through an Asset Builder Plan under the OppenheimerFunds AccountLink
service. The Distributor may appoint certain servicing agents as the
Distributor's agent to accept purchase (and redemption) orders. WHEN YOU BUY
SHARES, BE SURE TO SPECIFY CLASS A, CLASS B OR CLASS C SHARES. IF YOU
DO NOT
CHOOSE, YOUR INVESTMENT WILL BE MADE IN CLASS A SHARES.
o BUYING SHARES THROUGH YOUR DEALER. Your dealer will place your
order with the Distributor on your behalf.
o BUYING SHARES THROUGH THE DISTRIBUTOR. Complete an
OppenheimerFunds
New Account Application and return it with a check payable to "OppenheimerFunds
Distributor, Inc." Mail it to P.O. Box 5270, Denver, Colorado 80217. If you
don't list a dealer on the application, the Distributor will act as your agent
in buying the shares. However, we recommend that you discuss your investment
first with a financial advisor, to be sure it is appropriate for you.
PAYMENT BY FEDERAL FUNDS WIRE: Shares may be purchased by Federal Funds wire.
The Minimum investment is $2,500. You must FIRST call the Distributor's Wire
Department at 1-800-525-7041 to notify the Distributor of the wire, and receive
further instructions.
o BUYING SHARES THROUGH OPPENHEIMERFUNDS ACCOUNTLINK. You
can use
AccountLink to link your Fund account with an account at a U.S. bank or other
financial institution that is an Automated Clearing House (ACH) member, to
transmit funds electronically to PURCHASE SHARES, to have the Transfer Agent
SEND REDEMPTION PROCEEDS, or to TRANSMIT DIVIDENDS AND
DISTRIBUTIONS TO YOUR
BANK ACCOUNT.
Shares are purchased for your account on AccountLink on the regular
business day the Distributor is instructed by you to initiate the ACH transfer
to buy shares. You can provide those instructions automatically, under an Asset
Builder Plan, described below, or by telephone instructions using
OppenheimerFunds PhoneLink, also described below. You should request AccountLink
privileges on the application or dealer settlement instructions used to
establish your account. Please refer to "AccountLink" below for more details.
o ASSET BUILDER PLANS. You may purchase shares of the Fund (and up to
four other Oppenheimer funds) automatically each month from your account at a
bank or other financial
institution under an Asset Builder Plan with AccountLink. Details are in the
Statement of Additional
Information.
O AT WHAT PRICE ARE SHARES SOLD? Shares are sold at the public offering
price based on the net asset value (and any initial sales charge that applies)
that is next determined after the Distributor receives the purchase order in
Denver, Colorado, or the order is received and transmitted to the Distributor by
an entity authorized by the Fund to accept purchase or redemption orders. The
Fund has authorized the Distributor, certain broker-dealers and agents or
intermediaries designated by the Distributor or those broker-dealers to accept
orders. In most cases, to enable you to receive that day's offering price, the
Distributor or an authorized entity must receive your order by the time of day
The New York Stock Exchange closes, which is normally 4:00 P.M., New York time,
but may be earlier on some days (all references to time in this Prospectus mean
"New York time"). The net asset value of each class of shares is determined as
of that time on each day The New York Stock Exchange is open (which is a
"regular business day"). If you buy shares through a dealer, the dealer must
receive your order by the close of The New York Stock Exchange on a regular
business day and normally your order must be transmitted to the Distributor so
that it is received before the Distributor's close of business that day, which
is normally 5:00 P.M. THE DISTRIBUTOR, IN ITS SOLE DISCRETION, MAY REJECT
ANY
PURCHASE ORDER FOR THE FUND'S SHARES.
SPECIAL SALES CHARGE ARRANGEMENTS FOR CERTAIN PERSONS. Appendix A
to this
Prospectus sets forth conditions for the waiver of, or exemption from, sales
charges or the special sales charge rates that apply to shareholders of one of
the Former Quest for Value Funds (as defined in that Appendix).
BUYING CLASS A SHARES. Class A shares are sold at their offering price, which is
normally net asset value plus an initial sales charge. However, in some cases,
described below, purchases are not subject to an initial sales charge, and the
offering price will be the net asset value. In some cases, reduced sales charges
may be available, as described below. Out of the amount you invest, the Fund
receives the net asset value to invest for your account. The sales charge varies
depending on the amount of your purchase. A portion of the sales charge may be
retained by the Distributor and allocated to your dealer as commission. The
current initial sales charge rates and commissions paid to dealers and brokers
are as follows:
FRONT-END SALES CHARGE COMMISSION
AS A PERCENTAGE OF AS PERCENTAGE
OFFERING AMOUNT OF OFFERING
AMOUNT OF PURCHASE PRICE INVESTED PRICE
- ------------------------------------------------------------------------------
Less than $25,000 5.75% 6.10% 4.75%
$25,000 or more but
less than $50,000 5.50% 5.82% 4.75%
$50,000 or more but
less than $100,000 4.75% 4.99% 4.00%
$100,000 or more but
less than $250,000 3.75% 3.90% 3.00%
$250,000 or more but
less than $500,000 2.50% 2.56% 2.00%
$500,000 or more but
less than $1 million 2.00% 2.04% 1.60%
The Distributor reserves the right to reallow the entire commission to dealers.
If that occurs, the dealer may be considered an "underwriter" under Federal
securities laws.
o CLASS A CONTINGENT DEFERRED SALES CHARGE. There is no initial sales
charge on purchases of Class A shares of any one or more of the Oppenheimer
funds in the following cases:
o Purchases aggregating $1 million or more.
o Purchases by a retirement plan qualified under section 401(a) of the
Internal Revenue Code if the retirement plan has total plan assets of $500,000
or more.
o Purchases by a retirement plan qualified under sections 401(a) or 401(k)
of the Internal Revenue Code, by a non-qualified deferred compensation plan,
employee benefit plan, group retirement plan (see "How to Buy Shares -
Retirement Plans" in the Statement of Additional Information for further
details), an employee's 403(b)(7) custodial plan account, SEP IRA, SARSEP, or
SIMPLE plan (all of these plans are collectively referred to as "Retirement
Plans") that: (1) buys shares costing $500,000 or more or (2) has, at the time
of purchase, 100 or more eligible participants, or (3) certifies that it
projects to have annual plan purchases of $200,000 or more.
o Purchases by an OppenheimerFunds Rollover IRA if the purchases are made
(1) through a broker, dealer, bank or registered investment adviser that has
made special arrangements with the Distributor for these purchases, or (2) by a
direct rollover of a distribution from a qualified retirement plan if the
administrator of that plan has made special arrangements with the Distributor
for those purchases.
The Distributor pays dealers of record commissions on those purchases in
an amount equal to (i) 1.0% for non-Retirement Plan accounts, and (ii)for
Retirement Plan accounts, 1.0% of the first $2.5 million, plus 0.50% of the next
$2.5 million, plus 0.25% of purchases over $5 million, and calculated on a
calendar year basis. That commission will be paid only on those purchases that
were not previously subject to a front-end sales charge and dealer commission.
No sales commission will be paid to the dealer, broker or financial institution
on sales of Class A shares purchased with the redemption proceeds of shares of a
mutual fund offered as an investment option in a Retirement Plan in which
Oppenheimer funds are also offered as investment options under a special
arrangement with the Distributor if the purchase occurs more than 30 days after
the addition of the Oppenheimer funds as an investment option to the Retirement
Plan.
If you redeem any of those shares purchased prior to May 1, 1997 within 18
months of the end of the calendar month of their purchase, a contingent deferred
sales charge (called the "Class A contingent deferred sales charge") will be
deducted from the redemption proceeds. A Class A contingent deferred sales
charge may be deducted from the redemption proceeds of any of those shares
purchased on or after May 1, 1997 that are redeemed within 12 months of the end
of the calendar month of their purchase. That sales charge may be equal to 1.0%
of the lesser of (1) the aggregate net asset value of the redeemed shares (not
including shares purchased by reinvestment of dividends or capital gain
distributions) or (2) the original offering price (which is the original net
asset value) of the redeemed shares. However, the Class A contingent deferred
sales charge will not exceed the aggregate amount of the commissions the
Distributor paid to your dealer on all Class A shares of all Oppenheimer funds
you purchased subject to the Class A contingent deferred sales charge.
In determining whether a contingent deferred sales charge is payable, the
Fund will first redeem shares that are not subject to the sales charge,
including shares purchased by reinvestment of dividends and capital gains, and
then will redeem other shares in the order that you purchased them. The Class A
contingent deferred sales charge is waived in certain cases described in
"Waivers of Class A Sales Charges" below.
No Class A contingent deferred sales charge is charged on exchanges of
shares under the Fund's exchange privilege (described below). However, if the
shares acquired by exchange are redeemed within 18 months of the end of the
calendar month of the purchase of the exchanged shares, the contingent deferred
sales charge will apply.
o SPECIAL ARRANGEMENTS WITH DEALERS. The Distributor may advance up to 13
months' commissions to dealers that have established special arrangements with
the Distributor for Asset Builder Plans for their clients.
REDUCED SALES CHARGES FOR CLASS A SHARE PURCHASES. You may be eligible
to buy
Class A shares at reduced sales charge rates in one or more of the following
ways:
o RIGHT OF ACCUMULATION. To qualify for the lower sales charge rates that
apply to larger purchases of Class A shares, you and your spouse can add
together Class A and Class B shares you purchase for your individual accounts,
or jointly, or for trust or custodial accounts on behalf of your children who
are minors. A fiduciary can count all shares purchased for a trust, estate or
other fiduciary account (including one or more employee benefit plans of the
same employer) that has multiple accounts.
Additionally, you can add together current purchases of Class A and Class
B shares of the Fund and other Oppenheimer funds to reduce the sales charge rate
that applies to current purchases of Class A shares. You can also count Class A
and Class B shares of Oppenheimer funds you previously purchased subject to an
initial or contingent deferred sales charge to reduce the sales charge rate for
current purchases of Class A shares, provided that you still hold your
investment in one of the Oppenheimer funds. The Distributor will add the value,
at current offering price, of the shares you previously purchased and currently
own to the value of current purchases to determine the sales charge rate that
applies. The Oppenheimer funds are listed in "Reduced Sales Charges" in the
Statement of Additional Information, or a list can be obtained from the Transfer
Agent. The reduced sales charge will apply only to current purchases and must be
requested when you buy your shares.
o LETTER OF INTENT. Under a Letter of Intent, if you purchase Class A
shares or Class A and Class B shares of the Fund and other Oppenheimer funds
during a 13-month period, you can reduce the sales charge rate that applies to
your purchases of Class A shares. The total amount of your intended purchases of
both Class A and Class B shares will determine the reduced sales charge rate for
the Class A shares purchased during that period. This can include purchases made
up to 90 days before the date of the Letter. More information is contained in
the Application and in "Reduced Sales Charges" in the Statement of Additional
Information. In order to receive a waiver of the Class A contingent deferred
sales charge, you must notify the Transfer Agent as to which conditions apply.
o WAIVERS OF CLASS A SALES CHARGES. The Class A sales charges are not
imposed in the circumstances described below. There is an explanation of this
policy in "Reduced Sales Charges" in the Statement of Additional Information. In
order to receive a waiver of the Class A contingent deferred sales charge, you
must notify the Transfer Agent as to which conditions apply.
WAIVERS OF INITIAL AND CONTINGENT DEFERRED SALES CHARGES FOR
CERTAIN
PURCHASERS. Class A shares purchased by the following investors are not subject
to any Class A sales charges:
o the Manager or its affiliates;
o present or former officers, directors, trustees and employees (and their
"immediate families" as defined in "Reduced Sales Charges" in the Statement of
Additional Information) of the Fund, the Manager and its affiliates, and
retirement plans established by them for their employees;
o registered management investment companies, or separate accounts of
insurance companies having an agreement with the Manager or the Distributor for
that purpose;
o dealers or brokers that have a sales agreement with the Distributor, if
they purchase shares for their own accounts or for retirement plans for their
employees;
o employees and registered representatives (and their spouses) of dealers
or brokers described above or financial institutions that have entered into
sales arrangements with such dealers or brokers (and are identified to the
Distributor) or with the Distributor; the purchaser must certify to the
Distributor at the time of purchase that the purchase is for the purchaser's own
account (or for the benefit of such employee's spouse or minor children);
o dealers, brokers, banks or registered investment advisers that have
entered into an agreement with the Distributor providing specifically for the
use of shares of the Fund in particular investment products made available to
their clients (those clients may be charged a transaction fee by their dealer,
broker or adviser for the purchase or sale of Fund shares);
o (1) investment advisers and financial planners who have entered into an
agreement for this purpose with the Distributor and who charge an advisory,
consulting or other fee for their services and buy shares for their own accounts
or the accounts of their clients, (2) Retirement Plans and deferred compensation
plans and trusts used to fund those Plans (including, for example, plans
qualified or created under sections 401(a), 403(b) or 457 of the Internal
Revenue Code), and "rabbi trusts" that buy shares for their own accounts, in
each case if those purchases are made through a broker or agent or other
financial intermediary that has made special arrangements with the Distributor
for those purchases; and (3) clients of investment advisers or financial
planners (that have entered into an agreement for this purpose with the
Distributor) who buy shares for their own accounts may also purchase shares
without sales charge but only if their accounts are linked to a master account
of their investment adviser or financial planner on the books and records of the
broker, agent or financial intermediary with which the Distributor has made such
special arrangements (each of these investors may be charged a fee by the
broker, agent or financial intermediary for purchasing shares)
o employee benefit plans purchasing shares through a shareholder servicing
agent which the Distributor has appointed as agent to accept those purchase
orders;
o directors, trustees, officers or full time employees of the Sub-Adviser
or its affiliates, their relatives or any trust, pension, profit sharing or
other benefit plan which beneficially owns shares for those persons;
o accounts for which Oppenheimer Capital is the investment adviser (the
Distributor must be advised of this arrangement) and persons who are directors
or trustees of the company or trust which is the beneficial owner of such
accounts;
o any unit investment trust that has entered into an appropriate
agreement with the Distributor;
o a TRAC-2000 401(k) plan (sponsored by the former Quest for Value
Advisors) whose Class B or Class C shares of a Former Quest for Value Fund were
exchanged for Class A shares of that fund due to the termination of the Class B
and Class C TRAC-2000 program on November 24, 1995; or
o qualified retirement plans that had agreed with the former Quest for
Value Advisors to purchase shares of any of the Former Quest for Value Funds at
net asset value, with such shares to be held through DCXchange, a sub-transfer
agency mutual fund clearinghouse, provided that such arrangements are
consummated and share purchases commenced by December 31, 1996.
WAIVERS OF INITIAL AND CONTINGENT DEFERRED SALES CHARGES IN
CERTAIN
TRANSACTIONS. Class A shares issued or purchased in the following transactions
are not subject to Class A sales charges:
o shares issued in plans of reorganization, such as mergers, asset
acquisitions and exchange offers, to which the Fund is a party;
o shares purchased by the reinvestment of loan repayments by a participant
in a retirement plan for which the Manager or its affiliates acts as sponsor;
o shares purchased by the reinvestment of dividends or other distributions
reinvested from the Fund or other Oppenheimer funds (other than Oppenheimer Cash
Reserves) or unit investment trusts for which reinvestment arrangements have
been made with the
Distributor;
o shares purchased and paid for with the proceeds of shares redeemed in
the prior 30 days from a mutual fund (other than a fund managed by the Manager
or any of its subsidiaries) on which an initial sales charge or contingent
deferred sales charge was paid (this waiver also applies to shares purchased by
exchange of shares of Oppenheimer Money Market Fund, Inc. that were purchased
and paid for in this manner); this waiver must be requested when the purchase
order is placed for your shares of the Fund, and the Distributor may require
evidence of your qualification for this waiver; or
o shares purchased with the proceeds of maturing principal of units of any
Qualified Unit Investment Liquid Trust Series.
WAIVERS OF THE CLASS A CONTINGENT DEFERRED SALES CHARGE FOR
CERTAIN
REDEMPTIONS. The Class A contingent deferred sales charge is also waived if
shares that would otherwise be subject to the contingent deferred sales charge
are redeemed in the following cases:
o to make Automatic Withdrawal Plan payments that are limited annually to
no more than 12% of the original account value;
o involuntary redemptions of shares by operation of law or involuntary
redemptions of small accounts (see "Shareholder Account Rules and Policies,"
below);
o if, at the time of purchase of shares (prior to May 1, 1997) the dealer
agreed in writing to accept the dealer's portion of the sales commission in
installments of 1/18th of the commission per month (and no further commission
will be payable if the shares are redeemed within 18 months of purchase);
o if, at the time of purchase of shares (if purchased during the period
May 1, 1997 through December 31, 1997) the dealer agreed in writing to accept
the dealer's portion of the sales commission in installments of 1/12th of the
commission per month (and no further commission will be payable if the shares
are redeemed within 12 months of purchase);
o for distributions from a TRAC-2000 401(k) plan sponsored by the
Distributor due to the termination of the TRAC-2000 program;
o for distributions from Retirement Plans, deferred compensation plans or
other employee benefit plans for any of the following purposes: (1) following
the death or disability (as defined in the Internal Revenue Code) of the
participant or beneficiary (the death or disability must occur after the
participant's account was established); (2) to return excess contributions; (3)
to return contributions made due to a mistake of fact; (4) hardship withdrawals,
as defined in the plan; (5) under a Qualified Domestic Relations Order, as
defined in the Internal Revenue Code; (6) to meet the minimum distribution
requirements of the Internal Revenue Code; (7) to establish "substantially equal
periodic payments" as described in Section 72(t) of the Internal Revenue Code;
(8) for retirement distributions or loans to participants or beneficiaries; (9)
separation from service; (10) participant-directed redemptions to purchase
shares of a mutual fund (other than a fund managed by the Manager or its
subsidiaries) offered as an investment option in a Retirement Plan in which
Oppenheimer funds are also offered as investment options under a special
arrangement with the Distributor; or (11) plan termination or "in-service
distributions", if the redemption proceeds are rolled over directly to an
OppenheimerFunds IRA;
o for distributions from Retirement Plans having 500 or more eligible
participants, except distributions due to termination of all of the Oppenheimer
funds as an investment option under the Plan; and
o for distributions from 401(k) plans sponsored by broker-dealers that
have entered into a special agreement with the Distributor allowing this waiver.
o DISTRIBUTION AND SERVICE PLAN FOR CLASS A SHARES. The Fund has adopted
a
Distribution and Service Plan for Class A shares to compensate the Distributor
for its services in connection with the distribution of shares and the personal
service and maintenance of shareholder accounts that hold Class A shares. Under
the Plan, the Fund pays an annual asset-based sales charge to the Distributor at
an annual rate of 0.25% of the average annual net assets of the class. The Fund
also pays a service fee to the Distributor at an annual rate of 0.25% of the
average annual net assets of the class. For the first two years after the
effective date of the Plan, the Distributor has voluntarily agreed to waive
0.15% of the distribution fee payable under the Plan and has agreed that all
fees paid to the Distributor will be paid to dealers, brokers, banks and other
financial institutions quarterly for providing personal service and maintenance
of accounts of their customers that hold Class A shares and will not be retained
by the Distributor.
Services to be provided include, among others, answering customer
inquiries about the Fund, assisting in establishing and maintaining accounts in
the Fund, making the Fund's investment plans available and providing other
services at the request of the Fund or the Distributor. The payments under the
Plan increase the annual expenses of Class A shares. For more details, please
refer to "Distribution and Service Plans" in the Statement of Additional
Information.
BUYING CLASS B SHARES. Class B shares are sold at net asset value per share
without an initial sales charge. However, if Class B shares are redeemed within
6 years of their purchase, a contingent deferred sales charge will be deducted
from the redemption proceeds. That sales charge will not apply to shares
purchased by the reinvestment of dividends or capital gains distributions. The
contingent deferred sales charge will be based on the lesser of the net asset
value of the redeemed shares at the time of redemption or the original offering
price (which is the original net asset value). The contingent deferred sales
charge is not imposed on the amount of your account value represented by the
increase in net asset value over the initial purchase price. The Class B
contingent deferred sales charge is paid to the Distributor to reimburse its
expenses of providing distribution-related services to the Fund in connection
with the sale of Class B shares.
To determine whether the contingent deferred sales charge applies to a
redemption, the Fund redeems shares in the following order: (1) shares acquired
by reinvestment of dividends and capital gains distributions and (2) shares held
the longest during the 6-year period. The contingent deferred sales charge is
not imposed in the circumstances described in "Waivers of Class B and Class C
Sales Charges" below. Class B shares held for a period greater than 6 years
automatically convert to Class A shares.
The amount of the contingent deferred sales charge will depend on the
number of years since you invested and the dollar amount being redeemed,
according to the following schedule:
YEARS SINCE BEGINNING CONTINGENT DEFERRED SALES CHARGE
OF MONTH IN WHICH PURCHASE ON REDEMPTIONS IN THAT YEAR
ORDER WAS ACCEPTED (AS % OF AMOUNT SUBJECT TO CHARGE)
0 - 1 5.0%
1 - 2 4.0%
2 - 3 3.0%
3 - 4 3.0%
4 - 5 2.0%
5 - 6 1.0%
6 and following None
In the table, a "year" is a 12-month period. All purchases are considered to
have been made on the first regular business day of the month in which the
purchase was made.
o AUTOMATIC CONVERSION OF CLASS B SHARES. 72 months after you purchase
Class B shares, those shares will automatically convert to Class A shares. This
conversion feature relieves Class B shareholders of the asset-based sales charge
that applies to Class B shares under the Class B Distribution and Service Plan,
described below. The conversion is based on the relative net asset value of the
two classes, and no sales load or other charge is imposed. When Class B shares
convert, any other Class B shares that were acquired by the reinvestment of
dividends and distributions on the converted shares will also convert to Class A
shares. The conversion feature is subject to the continued availability of a tax
ruling described in "Alternative Sales Arrangements - Class A, Class B and Class
C Shares" in the Statement of Additional Information.
BUYING CLASS C SHARES. Class C shares are sold at net asset value per share
without an initial sales charge. However, if Class C shares are redeemed within
12 months of their purchase, a contingent deferred sales charge of 1.0% will be
deducted from the redemption proceeds. That sales charge will not apply to
shares purchased by the reinvestment of dividends or capital gains
distributions. The contingent deferred sales charge will be based on the lesser
of the net asset value of the redeemed shares at the time of redemption or the
original offering price (which is the original net asset value). The contingent
deferred sales charge is not imposed on the amount of your account value
represented by the increase in net asset value over the initial purchase price.
The Class C contingent deferred sales charge is paid to compensate the
Distributor for its expenses of providing distribution-related services to the
Fund in connection with the sale of Class C shares.
To determine whether the contingent deferred sales charge applies to a
redemption, the Fund redeems shares in the following order: (1) shares acquired
by reinvestment of dividends and capital gains distributions, (2) shares held
for over 12 months, and (3) shares held the longest during the 12- month period.
O DISTRIBUTION AND SERVICE PLANS FOR CLASS B AND CLASS C SHARES.
The Fund
has adopted Distribution and Service Plans for Class B and Class C shares to
compensate the Distributor for its services and costs in distributing Class B
and Class C shares and servicing accounts. Under the Plans, the Fund pays the
Distributor an annual "asset-based sales charge" of 0.75% per year on Class B
shares that are outstanding for 6 years or less and on Class C shares. The
Distributor also receives a service fee of 0.25% per year under each Plan.
Under each Plan, both fees are computed on the average of the net asset
value of shares in the respective class, determined as of the close of each
regular business day during the period. The asset-based sales charge and service
fees increase Class B and Class C expenses by up to 1.00% of the net assets per
year of the respective class.
The Distributor uses the service fees to compensate dealers for providing
personal services for accounts that hold Class B or Class C shares. Those
services are similar to those provided under the Class A Distribution and
Service Plan, described above. The Distributor pays the 0.25% service fees to
dealers in advance for the first year after Class B or Class C shares have been
sold by the dealer and retains the service fee paid by the Fund in that year.
After the shares have been held for a year, the Distributor pays the service
fees to dealers on a quarterly basis.
The asset-based sales charge allows investors to buy Class B or Class C
shares without a front-end sales charge while allowing the Distributor to
compensate dealers that sell those shares. The Fund pays the asset-based sales
charges to the Distributor for its services rendered in distributing Class B and
Class C shares. Those payments are at a fixed rate that is not related to the
Distributor's expenses. The services rendered by the Distributor include paying
and financing the payment of sales commissions, service fees and other costs of
distributing and selling Class B and Class C shares.
The Distributor currently pays sales commissions of 3.75% of the purchase
price of Class B shares to dealers from its own resources at the time of sale.
Including the advance of the service fee, the total amount paid by the
Distributor to the dealer at the time of sale of Class B shares is therefore
4.00% of the purchase price. The Distributor retains the Class B asset-based
sales charge. The Distributor may pay the Class B service fee and the
asset-based sales charge to the dealer quarterly in lieu of paying the sales
commission and service fee advance at the time of purchase.
The Distributor currently pays sales commissions of 0.75% of the purchase
price of Class C shares to dealers from its own resources at the time of sale.
Including the advance of the service fee, the total amount paid by the
Distributor to the dealer at the time of sale of Class C shares is therefore
1.00% of the purchase price. The Distributor retains the asset-based sales
charge during the first year Class C shares are outstanding to recoup sales
commissions it has paid, the advances of service fee payments it has made, and
its financing costs and other expenses. The Distributor plans to pay the
asset-based sales charge as an ongoing commission to the dealer on Class C
shares that have been outstanding for a year or more. The Distributor may pay
the Class C service fee and asset-based sales charge to the dealer quarterly in
lieu of paying the sales commission and service fee advance at the time of
purchase.
The Distributor's actual expenses in selling Class B and Class C shares
may be more than the payments it receives from contingent deferred sales charges
collected on redeemed shares and from the Fund under the Distribution and
Service Plans for Class B and Class C shares. At October 31, 1997, the end of
the Class B Plan year, the Distributor had incurred unreimbursed expenses in
connection with sales of Class B shares of $48,136 (equal to 4.0% of the Fund's
net assets represented by Class B shares on that date). At October 31, 1997, the
end of the Class C Plan year, the Distributor had incurred unreimbursed expenses
in connection with sales of Class C shares of $6,753 (equal to 0.87% of the
Fund's net assets represented by Class C shares on that date).
If either Plan is terminated by the Fund, the Board of Directors may allow
the Fund to continue payments of the service fee and/or asset-based sales charge
to the Distributor for distributing
shares before the Plan was terminated.
o WAIVERS OF CLASS B AND CLASS C SALES CHARGES. The Class B and Class C
contingent deferred sales charges will not be applied to shares purchased in
certain types of transactions nor will it apply to Class B or Class C shares
redeemed in certain circumstances as described below. The reasons for this
policy are in "Reduced Sales Charges" in the Statement of Additional
Information. In order to receive a waiver of the Class B or Class C contingent
deferred sales charge, you must notify the Transfer Agent as to which conditions
apply.
WAIVERS FOR REDEMPTIONS IN CERTAIN CASES. The Class B and Class C
contingent deferred sales charges will be waived for redemptions of shares in
the following cases:
o distributions to participants or beneficiaries from Retirement Plans, if
the distributions are made (a) under an Automatic Withdrawal Plan after the
participant reaches age 59-1/2, as long as the payments are no more than 10% of
the account value annually (measured from the date the Transfer Agent receives
the request), or (b) following the death or disability (as defined in the
Internal Revenue Code) of the participant or beneficiary (the death or
disability must have occurred after the account was established);
o redemptions from accounts other than Retirement Plans following the
death or disability of the last surviving shareholder, including a trustee of a
"grantor" trust or revocable living trust for which the trustee is also the sole
beneficiary (the death or disability must have occurred after the account was
established, and for disability you must provide evidence of a determination of
disability by the Social Security Administration);
o returns of excess contributions to Retirement Plans;
o distributions from retirement plans to make "substantially equal
periodic payments" as permitted in Section 72(t) of the Internal Revenue Code
provided the distributions do not exceed 10% of the account value annually,
measured from the date the Transfer Agent receives the request;
o shares redeemed involuntarily, as described in "Shareholder Account
Rules and Policies," below; or
o distributions from OppenheimerFunds prototype 401(k) plans and from
certain Massachusetts Mutual Life Insurance Company prototype 401(k) plans: (1)
for hardship withdrawals; (2) under a Qualified Domestic Relations Order, as
defined in the Internal Revenue Code; (3) to meet minimum distribution
requirements as defined in the Internal Revenue Code; (4) to make "substantially
equal periodic payments" as described in Section 72(t) of the Internal Revenue
Code;(5) for separation from service or (6) for loans to participants.
WAIVERS FOR SHARES SOLD OR ISSUED IN CERTAIN TRANSACTIONS. The
contingent
deferred sales charge is also waived on Class B and Class C shares sold or
issued in the following cases:
o shares sold to the Manager or its affiliates;
o shares sold to registered management investment companies or separate
accounts of insurance companies having an agreement with the Manager or the
Distributor for that purpose;
o shares issued in plans of reorganization to which the Fund is a party
or;
o distributions from 401(k) plans sponsored by broker-dealers that have
entered into a special agreement with the Distributor allowing this waiver.
SPECIAL INVESTOR SERVICES
ACCOUNTLINK. OppenheimerFunds AccountLink links your Fund account to your
account at your bank or other financial institution to enable you to send money
electronically between those accounts to perform a number of types of account
transactions. These include purchases of shares by telephone (either through a
service representative or by PhoneLink, described below), automatic investments
under Asset Builder Plans, and sending dividends and distributions or Automatic
Withdrawal Plan payments directly to your bank account. Please call the Transfer
Agent for more information.
AccountLink privileges should be requested on your dealer's settlement
instructions if you buy your shares through your dealer. After your account is
established, you can request AccountLink privileges by sending
signature-guaranteed instructions to the Transfer Agent. AccountLink privileges
will apply to each shareholder listed in the registration on your account as
well as to your dealer representative of record unless and until the Transfer
Agent receives written instructions terminating or changing those privileges.
After you establish AccountLink for your account, any change of bank account
information must be made by signature-guaranteed instructions to the Transfer
Agent signed by all shareholders who own the account.
o USING ACCOUNTLINK TO BUY SHARES. Purchases may be made by telephone only
after your account has been established. To purchase shares in amounts up to
$250,000 through a telephone representative, call the Distributor at
1-800-852-8457. The purchase payment will be debited from your bank account.
o PHONELINK. PhoneLink is the OppenheimerFunds automated telephone system
that enables shareholders to perform a number of account transactions
automatically using a touch-tone phone. PhoneLink may be used on
already-established Fund accounts after you obtain a Personal Identification
Number (PIN), by calling the special PhoneLink number:
1-800-533-3310.
o PURCHASING SHARES. You may purchase shares in amounts up to $100,000 by
phone, by calling 1-800-533-3310. You must have established AccountLink
privileges to link your bank account with the Fund, to pay for these purchases.
o EXCHANGING SHARES. With the OppenheimerFunds exchange privilege,
described below, you can exchange shares automatically by phone from your Fund
account to another Oppenheimer funds account you have already established by
calling the special PhoneLink number.
Please refer to "How to Exchange Shares," below, for details.
o SELLING SHARES. You can redeem shares by telephone automatically by
calling the PhoneLink number and the Fund will send the proceeds directly to
your AccountLink bank account.
Please refer to "How to Sell Shares," below, for details.
SHAREHOLDER TRANSACTIONS BY FAX. Requests for certain account transactions may
be sent to the Transfer Agent by fax (telecopier). Please call 1-800-525-7048
for information about which transactions are included. Transaction requests
submitted by fax are subject to the same rules and restrictions as written and
telephone requests described in this Prospectus.
OPPENHEIMERFUNDS INTERNET WEB SITE. Information about the Fund, including your
account balance, daily share prices, market and Fund portfolio information, may
be obtained by visiting the OppenheimerFunds Internet Web Site, at the following
Internet address: http://www.oppenheimerfunds.com. In 1998, the Transfer Agent
anticipates offering certain account transactions through the Internet Web Site.
To find out more information about those transactions and procedures, please
visit the Web Site.
AUTOMATIC WITHDRAWAL AND EXCHANGE PLANS. The Fund has several plans that
enable
you to sell shares automatically or exchange them to another Oppenheimer funds
account on a regular basis:
o AUTOMATIC WITHDRAWAL PLANS. If your Fund account is worth $5,000 or
more, you can establish an Automatic Withdrawal Plan to receive payments of at
least $50 on a monthly, quarterly, semi-annual or annual basis. The checks may
be sent to you or sent automatically to your bank account on AccountLink. You
may even set up certain types of withdrawals of up to $1,500 per month by
telephone. You should consult the Statement of Additional Information for more
details.
o AUTOMATIC EXCHANGE PLANS. You can authorize the Transfer Agent to
exchange an amount you establish in advance automatically for shares of up to
five other Oppenheimer funds on a monthly, quarterly, semi-annual or annual
basis under an Automatic Exchange Plan. The minimum purchase for each other
Oppenheimer funds account is $25. These exchanges are subject to the terms of
the exchange privilege, described below.
REINVESTMENT PRIVILEGE. If you redeem some or all of your Class A or Class B
shares of the Fund, you have up to 6 months to reinvest all or part of the
redemption proceeds in Class A shares of the Fund or other Oppenheimer funds
without paying a sales charge. This privilege applies to Class A shares that you
purchased subject to an initial sales charge and to Class A or Class B shares on
which you paid a contingent deferred sales charge when you redeemed them. This
privilege does not apply to Class C shares. You must be sure to ask the
Distributor for this privilege when you send your payment. Please consult the
Statement of Additional Information for more details.
RETIREMENT PLANS. Fund shares are available as an investment for your retirement
plans. If you participate in a plan sponsored by your employer, the plan trustee
or administrator must make the purchase of shares for your retirement plan
account. The Distributor offers a number of different retirement plans that can
be used by individuals and employers:
o INDIVIDUAL RETIREMENT ACCOUNTS including rollover IRAs, for individuals
and their spouses and SIMPLE IRA as offered by employers
o 403(B)(7) CUSTODIAL PLANS for employees of eligible tax-exempt
organizations, such as schools, hospitals and charitable organizations
o SEP-IRAS (Simplified Employee Pension Plans) for small business owners
or people with income from self-employment, including SAR/SEP IRAs
o PENSION AND PROFIT-SHARING PLANS for self-employed persons and other
employers
o 401(K) prototype retirement plans for businesses
Please call the Distributor for the OppenheimerFunds plan documents, which
contain important information and applications.
HOW TO SELL SHARES
You can arrange to take money out of your account by selling (redeeming)
some or all of your shares on any regular business day. Your shares will be sold
at the next net asset value calculated after your order is received and accepted
by the Transfer Agent. The Fund offers you a number of ways to sell your shares:
in writing or by telephone. You can also set up Automatic Withdrawal Plans to
redeem shares on a regular basis, as described above. IF YOU HAVE QUESTIONS
ABOUT ANY OF THESE PROCEDURES, AND ESPECIALLY IF YOU ARE REDEEMING
SHARES IN A
SPECIAL SITUATION, SUCH AS DUE TO THE DEATH OF THE OWNER, OR FROM A
RETIREMENT
PLAN, PLEASE CALL THE TRANSFER AGENT FIRST, AT 1-800-525- 7048, FOR
ASSISTANCE.
o RETIREMENT ACCOUNTS. To sell shares in an OppenheimerFunds
retirement account in your name, call the Transfer Agent for a distribution
request form. There are special income tax
withholding requirements for distributions from retirement plans and you must
submit a withholding form with your request to avoid delay. If your retirement
plan account is held for you by your employer, you must arrange for the
distribution request to be sent by the plan administrator or trustee. There are
additional details in the Statement of Additional Information.
o CERTAIN REQUESTS REQUIRE A SIGNATURE GUARANTEE. To protect you and
the
Fund from fraud, certain redemption requests must be in writing and must include
a signature guarantee in the following situations (there may be other situations
also requiring a signature guarantee):
o You wish to redeem more than $50,000 worth of shares and receive a
check
o The redemption check is not payable to all shareholders listed on the
account statement
o The redemption check is not sent to the address of record on your
account statement
o Shares are being transferred to a Fund account with a different owner
or name
o Shares are redeemed by someone other than the owners (such as an
Executor)
o WHERE CAN I HAVE MY SIGNATURE GUARANTEED? The Transfer Agent will
accept a guarantee of your signature by a number of financial institutions,
including: a U.S. bank, trust
company, credit union or savings association, or by a foreign bank that has a
U.S. correspondent
bank, or by a U.S. registered dealer or broker in securities, municipal
securities or government
securities, or by a U.S. national securities exchange, a registered
securities association or a clearing
agency. IF YOU ARE SIGNING AS A FIDUCIARY OR ON BEHALF OF A
CORPORATION,
PARTNERSHIP OR OTHER BUSINESS, YOU MUST ALSO INCLUDE YOUR TITLE
IN THE
SIGNATURE.
SELLING SHARES BY MAIL. Write a "letter of instructions" that includes:
o Your name
o The Fund's name
o Your Fund account number (from your account statement) o The dollar
amount or number of shares to be redeemed o Any special payment
instructions o Any share certificates for the shares you are selling, o
The signatures of all registered owners exactly as the account is
registered, and
o Any special requirements or documents requested by the Transfer Agent
to assure proper authorization of the person asking to sell shares.
USE THE FOLLOWING ADDRESS FOR SEND COURIER OR EXPRESS MAIL
REQUEST BY MAIL: REQUESTS TO:
OppenheimerFunds Services OppenheimerFunds Services
P.O. Box 5270 10200 E. Girard Ave.,
Denver, Colorado 80217 Building D
Denver, Colorado 80231
SELLING SHARES BY TELEPHONE. You and your dealer representative of record may
also sell your shares by telephone. To receive the redemption price on a regular
business day, your call must be received by the Transfer Agent by the close of
The New York Stock Exchange that day, which is normally 4:00 P.M. but may be
earlier on some days. SHARES HELD IN AN OPPENHEIMERFUNDS RETIREMENT
PLAN OR
UNDER A SHARE CERTIFICATE MAY NOT BE REDEEMED BY TELEPHONE.
o To redeem shares through a service representative, call 1-800-852-8457 o
To redeem shares automatically on PhoneLink, call 1-800-533-3310
Whichever method you use, you may have a check sent to the address on the
account statement, or, if you have linked your Fund account to your bank account
on AccountLink, you may
have the proceeds wired to that bank account.
o TELEPHONE REDEMPTIONS PAID BY CHECK. Up to $50,000 may be redeemed by
telephone in any 7-day period. The check must be payable to all owners of record
of the shares and must be sent to the address on the account statement. This
service is not available within 30 days of changing the address on an account.
o TELEPHONE REDEMPTIONS THROUGH ACCOUNTLINK OR BY WIRE. There
are no
dollar limits on telephone redemption proceeds sent to a bank account designated
when you establish AccountLink. Normally the ACH transfer to your bank is
initiated on the business day after the redemption. You do not receive dividends
on the proceeds of the shares you redeemed while they are waiting to be
transferred.
Shareholders may also have the Transfer Agent send redemption proceeds of
$2,500 or more by Federal Funds wire to a designated commercial bank account.
The bank must be a member of the Federal Reserve wire system. There is a $10 fee
for each Federal Funds wire. To place a wire redemption request, call the
Transfer Agent at 1-800-852-8457. The wire will normally be transmitted on the
next bank business day after the shares are redeemed. There is a possibility
that the wire may be delayed up to seven days to enable the Fund to sell
securities to pay the redemption proceeds. No dividends are accrued or paid on
the proceeds of shares that have been redeemed and are awaiting transmittal by
wire. To establish wire redemption privileges on an account that is already
established, please contact the Transfer Agent for instructions.
SELLING SHARES THROUGH YOUR DEALER. The Distributor has made arrangements to
repurchase Fund shares from dealers and brokers on behalf of their customers.
Brokers or dealers may charge for that service. Please call your dealer for
more information about this procedure. Please refer to "Special Arrangements for
Repurchase of Shares from Dealers and Brokers" in the Statement of Additional
Information for more details.
HOW TO EXCHANGE SHARES
Shares of the Fund may be exchanged for shares of certain Oppenheimer
funds at net asset value per share at the time of exchange, without sales
charge. To exchange shares, you must meet several conditions:
o Shares of the fund selected for exchange must be available for sale
in your state of residence
o The prospectuses of this Fund and the fund whose shares you want to
buy must offer the exchange privilege
o You must hold the shares you buy when you establish your account for at
least 7 days before you can exchange them; after the account is open 7 days, you
can exchange shares every regular business day
o You must meet the minimum purchase requirements for the fund you
purchase by exchange
o BEFORE EXCHANGING INTO A FUND, YOU SHOULD OBTAIN AND READ
ITS
PROSPECTUS
SHARES OF A PARTICULAR CLASS OF THE FUND MAY BE EXCHANGED ONLY
FOR SHARES
OF THE SAME CLASS IN THE OTHER OPPENHEIMER FUNDS. For example, you can
exchange
Class A shares of this Fund only for Class A shares of another fund. At present,
Oppenheimer Money Market Fund, Inc. offers only one class of shares, which are
considered to be Class A shares for this purpose. In some cases, sales charges
may be imposed on exchange transactions. Please refer to "How to Exchange
Shares" in the Statement of Additional Information for more details.
Exchanges may be requested in writing or by telephone:
o WRITTEN EXCHANGE REQUESTS. Submit an OppenheimerFunds Exchange
Request form, signed by all owners of the account. Send it to the Transfer
Agent at the addresses listed in "How
to Sell Shares."
o TELEPHONE EXCHANGE REQUESTS. Telephone exchange requests may be made
either by calling a service representative at 1-800-852-8457 or by using
PhoneLink for automated exchanges,
by calling 1-800-533-3310. Telephone exchanges may be made only between accounts
that are registered with the same name(s) and address. Shares held under
certificates may not be exchanged by telephone.
You can find a list of Oppenheimer funds currently available for exchanges
in the Statement of Additional Information or obtain one by calling a service
representative at 1-800-525-7048. That list can change from time to time.
There are certain exchange policies you should be aware of:
o Shares are normally redeemed from one fund and purchased from the other
fund in the exchange transaction on the same regular business day on which the
Transfer Agent receives an exchange request that is in proper form by the close
of The New York Stock Exchange that day, which is normally 4:00 P.M. but may be
earlier on some days. However, either fund may delay the purchase of shares of
the fund you are exchanging into up to 7 days if it determines it would be
disadvantaged by a same-day transfer of the proceeds to buy shares. For example,
the receipt of multiple exchange requests from a dealer in a "market-timing"
strategy might require the sale of portfolio securities at a time or price
disadvantageous to the Fund.
o Because excessive trading can hurt fund performance and harm
shareholders, the Fund reserves the right to refuse any exchange request that
will disadvantage it, or to refuse multiple exchange requests submitted by a
shareholder or dealer.
o The Fund may amend, suspend or terminate the exchange privilege at any
time. Although the Fund will attempt to provide you notice whenever it is
reasonably able to do so, it may impose these changes at any time.
o For tax purposes, exchanges of shares involve a redemption of the shares
of the Fund you own and a purchase of the shares of the other fund, which may
result in a capital gain or loss. For more information about the taxes affecting
exchanges, please refer to "How to Exchange Shares" in the Statement of
Additional Information.
o If the Transfer Agent cannot exchange all the shares you request because
of a restriction cited above, only the shares eligible for exchange will be
exchanged.
SHAREHOLDER ACCOUNT RULES AND POLICIES
o NET ASSET VALUE PER SHARE is determined for each class of shares as of
the close of The New York Stock Exchange that day, which is normally 4:00 P.M.
but may be earlier on some days, on each day the Exchange is open by dividing
the value of the Fund's net assets attributable to a class by the number of
shares of that class that are outstanding. The Fund's Board of Directors has
established procedures to value the Fund's securities to determine net asset
value. In general, securities values are based on market value. There are
special procedures for valuing illiquid and restricted securities and
obligations for which market values cannot be readily obtained. These procedures
are described more completely in the Statement of Additional Information.
o THE OFFERING OF SHARES may be suspended during any period in which the
determination of net asset value is suspended, and the offering may be suspended
by the Board of Directors at any time the Board believes it is in the Fund's
best interest to do so.
o TELEPHONE TRANSACTION PRIVILEGES for purchases, redemptions or exchanges
may be modified, suspended or terminated by the Fund at any time.
If an account has more than one owner,
the Fund and the Transfer Agent may rely on the instructions of any one owner.
Telephone privileges apply to each owner of the account and the dealer
representative of record for the account unless and until the Transfer Agent
receives cancellation instructions from an owner of
the account.
o THE TRANSFER AGENT WILL RECORD ANY TELEPHONE CALLS to verify
data
concerning transactions and has adopted other procedures to confirm that
telephone instructions are genuine, by requiring callers to provide tax
identification numbers and other account data or by using PINs, and by
confirming such transactions in writing. If the Transfer Agent does not use
reasonable procedures it may be liable for losses due to unauthorized
transactions, but otherwise neither the Transfer Agent nor the Fund will be
liable for losses or expenses arising out of telephone instructions reasonably
believed to be genuine. If you are unable to reach the Transfer Agent during
periods of unusual market activity, you may not be able to complete a telephone
transaction and should consider placing your order by mail.
o REDEMPTION OR TRANSFER REQUESTS WILL NOT BE HONORED UNTIL THE
TRANSFER
AGENT RECEIVES ALL REQUIRED DOCUMENTS IN PROPER FORM. From time to
time, the
Transfer Agent in its discretion may waive certain of the requirements for
redemptions stated in this Prospectus.
o DEALERS THAT CAN PERFORM ACCOUNT TRANSACTIONS FOR THEIR
CLIENTS BY
PARTICIPATING IN NETWORKING through the National Securities Clearing Corporation
are responsible for obtaining their clients' permission to perform those
transactions and are responsible to their clients who are shareholders of the
Fund if the dealer performs any transaction erroneously or improperly.
o THE REDEMPTION PRICE FOR SHARES WILL VARY from day to day because the
value of the securities in the Fund's portfolio fluctuates, and the redemption
price, which is the net asset value per share, will normally be different for
Class A, Class B and Class C shares. Therefore, the redemption
value of your shares may be more or less than their original cost.
o PAYMENT FOR REDEEMED SHARES is made ordinarily in cash and forwarded by
check or through AccountLink (as elected by the shareholder under the redemption
procedures described above) within 7 days after the Transfer Agent receives
redemption instructions in proper form, except under unusual circumstances
determined by the Securities and Exchange Commission delaying or suspending such
payments. For accounts registered in the name of a broker-dealer, payment will
be forwarded within 3 business days. THE TRANSFER AGENT MAY DELAY
FORWARDING A
CHECK OR PROCESSING A PAYMENT VIA ACCOUNTLINK FOR RECENTLY
PURCHASED SHARES, BUT
ONLY UNTIL THE PURCHASE PAYMENT HAS CLEARED. THAT DELAY MAY BE
AS MUCH AS 10
DAYS FROM THE DATE THE SHARES WERE PURCHASED. THAT DELAY MAY BE
AVOIDED IF YOU
PURCHASE SHARES BY FEDERAL FUNDS WIRE, CERTIFIED CHECK OR ARRANGE
TO HAVE YOUR
BANK TO PROVIDE TELEPHONE OR WRITTEN ASSURANCE TO THE TRANSFER
AGENT THAT YOUR
PURCHASE PAYMENT HAS CLEARED.
o INVOLUNTARY REDEMPTIONS OF SMALL ACCOUNTS may be made by the Fund if
the
account value has fallen below $500 (or such other amount as may be fixed by the
Board of Directors) for reasons other than the fact that the market value of
shares has dropped, and in some cases involuntary redemptions may be made to
repay the Distributor for losses from the cancellation of share purchase orders.
o UNDER UNUSUAL CIRCUMSTANCES, shares of the Fund may be redeemed "in
kind", which means that the redemption proceeds will be paid with securities
from the Fund's portfolio. Please refer to "How to Sell Shares" in the Statement
of Additional Information for
more details.
o "BACKUP WITHHOLDING" of Federal income tax may be applied at the rate of
31% from taxable dividends, distributions and redemption proceeds (including
exchanges) if you fail to furnish the Fund a correct and properly certified
Social Security or Employer Identification Number when you sign your
application, or if you underreport your income to the Internal Revenue Service.
o THE FUND DOES NOT CHARGE A REDEMPTION FEE, but if your dealer or broker
handles your redemption, they may charge a fee. That fee can be avoided by
redeeming your Fund shares directly through the Transfer Agent. Under the
circumstances described in "How To Buy Shares," you may be subject to a
contingent deferred sales charges when redeeming certain Class A, Class B and
Class C shares.
o TO AVOID SENDING DUPLICATE COPIES OF MATERIALS TO HOUSEHOLDS,
the Fund
will mail only one copy of each annual and semi-annual report to shareholders
having the same last name and address on the Fund's records. However, each
shareholder may call the Transfer Agent at 1-800-525- 7048 to ask that copies of
those materials be sent personally to that shareholder.
DIVIDENDS, CAPITAL GAINS AND TAXES
DIVIDENDS. The Fund declares dividends separately for Class A, Class B and
Class C shares from net investment income on an annual basis and normally pays
those dividends to shareholders following the end of its fiscal year, which is
October 31. Dividends paid on Class A shares generally are expected to be higher
than for Class B and Class C shares because expenses allocable to Class B and
Class C shares will generally be higher than for Class A shares. There is no
fixed dividend rate and there can be no assurance as to the payment of any
dividends or the realization of any gains.
CAPITAL GAINS. The Fund may make distributions annually in December out of any
net short-term or long-term capital gains, and the Fund may make supplemental
distributions of dividends and capital gains following its fiscal year which
ended October 31. Short-term capital gains are treated as dividends for tax
purposes. Long-term capital gains will be separately identified in the tax
information the Fund sends you after the end of the calendar year. There can be
no assurances that the Fund will pay any capital gains distributions in a
particular year.
DISTRIBUTION OPTIONS. When you open your account, specify on your
application how you want to receive your distributions. For OppenheimerFunds
retirement accounts, all distributions are
reinvested. For other accounts, you have four options:
o REINVEST ALL DISTRIBUTIONS IN THE FUND. You can elect to reinvest
all dividends and long-
term capital gains distributions in additional shares of the Fund.
o REINVEST LONG-TERM CAPITAL GAINS ONLY. You can elect to reinvest
long-term capital gains in the Fund while receiving dividends by check or
sent to your bank account on AccountLink.
o RECEIVE ALL DISTRIBUTIONS IN CASH. You can elect to receive a check
for all dividends and long-term capital gains distributions or have them sent
to your bank on AccountLink.
o REINVEST YOUR DISTRIBUTIONS IN ANOTHER OPPENHEIMER FUND
ACCOUNT. You
can reinvest all distributions in the same class of shares of another
Oppenheimer fund account you have
established.
TAXES. If your account is not a tax-deferred retirement account, you should be
aware of the following tax implications of investing in the Fund. Long-term
capital gains are taxable as long-term capital gains when distributed to
shareholders. It does not matter how long you have held your shares. Dividends
paid from short-term capital gains and net investment income are taxable as
ordinary income. Distributions are subject to federal income tax and may be
subject to state or local taxes. Your distributions are taxable when paid,
whether you reinvest them in additional shares or take them in cash. Every year
the Fund will send you and the IRS a statement showing the amount of each
taxable distribution you received in the previous year. So that the Fund will
not have to pay taxes on the amounts it distributes to shareholders as dividends
and capital gains, the Fund intends to manage its investments so that it will
qualify as a "regulated investment company" under the Internal Revenue Code,
although it reserves the right not to qualify in a particular year.
o "BUYING A DIVIDEND": When a Fund goes ex-dividend, its share price is
reduced by the amount of the distribution. If you buy shares on or just before
the ex-dividend date, or just before the Fund declares a capital gains
distribution, you will pay the full price for the shares and then receive a
portion of the price back as a taxable dividend or capital gain.
o TAXES ON TRANSACTIONS: Share redemptions, including redemptions for
exchanges, are subject to capital gains tax. Generally speaking a capital gain
or loss is the difference between the price you paid for the shares and the
price you receive when you sell them.
o RETURNS OF CAPITAL: In certain cases distributions made by the Fund may
be considered a non-taxable return of capital to shareholders. If that occurs,
it will be identified in notices to shareholders. A non-taxable return of
capital may reduce your tax basis in your Fund shares.
This information is only a summary of certain federal tax information
about your investment. More information is contained in the Statement of
Additional Information, and in addition you should consult with your tax adviser
about the effect of an investment in the Fund on your particular tax situation.
-6-
<PAGE>
APPENDIX A
SPECIAL SALES CHARGE ARRANGEMENTS FOR SHAREHOLDERS OF THE FUND
WHO
WERE SHAREHOLDERS OF THE FORMER QUEST FOR VALUE FUNDS
The initial and contingent deferred sales charge rates and waivers for Class A,
Class B and Class C shares of the Fund described elsewhere in this Prospectus
are modified as described below for those shareholders of (i) Oppenheimer Quest
Value Fund, Inc., Oppenheimer Quest Growth & Income Value Fund, Oppenheimer
Quest Opportunity Value Fund, Oppenheimer Quest Small Cap Value Fund and
Oppenheimer Quest Global Value Fund, Inc. on November 24, 1995, when
OppenheimerFunds, Inc. became the investment adviser to those funds, and (ii)
Quest for Value U.S. Government Income Fund, Quest for Value Investment Quality
Income Fund, Quest for Global Income Fund, Quest for Value New York Tax-Exempt
Fund, Quest for Value National Tax-Exempt Fund and Quest for Value California
Tax-Exempt Fund when those funds merged into various Oppenheimer funds on
November 24, 1995. The funds listed above are referred to in this Prospectus as
the "Former Quest for Value Funds." The waivers of initial and contingent
deferred sales charges described in this Appendix apply to shares of the Fund
acquired by such shareholder pursuant to an exchange of shares of one of the
Oppenheimer funds that was one of the Former Quest for Value Funds.
CLASS A SALES CHARGES
o REDUCED CLASS A INITIAL SALES CHARGE RATES FOR CERTAIN FORMER
QUEST
SHAREHOLDERS
o PURCHASES BY GROUPS, ASSOCIATIONS AND CERTAIN QUALIFIED
RETIREMENT PLANS. The
following table sets forth the initial sales charge rates for Class A shares
purchased by a "Qualified Retirement Plan" through a single broker, dealer or
financial institution, or by members of "Associations" formed for any purpose
other than the purchase of securities if that Qualified Retirement Plan or that
Association purchased shares of any of the Former Quest for Value Funds or
received a proposal to purchase such shares from OCC Distributors prior to
November 24, 1995. For this purpose only, a "Qualified Retirement Plan" includes
any 401(k) plan, 403(b) plan, and SEP/IRA or IRA plan for employees of a single
employer.
FRONT-END FRONT-END COMMISSION
SALES CHARGE SALES CHARGEAS
AS A AS A PERCENTAGE
NUMBER OF PERCENTAGE PERCENTAGE OF
ELIGIBLE EMPLOYEES OF OFFERING OF AMOUNT OFFERING
OR MEMBERS PRICE INVESTED PRICE
9 or fewer 2.50% 2.56% 2.00%
At least 10 but not
more than 49 2.00% 2.04% 1.60%
For purchases by Qualified Retirement plans and Associations having 50 or
more eligible employees or members, there is no initial sales charge on
purchases of Class A shares, but those shares are subject to the Class A
contingent deferred sales charge described on pages __ and __ of this
Prospectus.
Purchases made under this arrangement qualify for the lower of the sales
charge rate in the table based on the number of eligible employees in a
Qualified Retirement Plan or members of an Association or the sales charge rate
that applies under the Rights of Accumulation described above in the Prospectus.
In addition, purchases by 401(k) plans that are Qualified Retirement Plans
qualify for the waiver of the Class A initial sales charge if they qualified to
purchase shares of any of the Former Quest For Value Funds by virtue of
projected contributions or investments of $1 million or more each year.
Individuals who qualify under this arrangement for reduced sales charge rates as
members of Associations, or as eligible employees in Qualified Retirement Plans
also may purchase shares for their individual or custodial accounts at these
reduced sales charge rates, upon request to the Fund's Distributor.
O WAIVER OF CLASS A SALES CHARGES FOR CERTAIN SHAREHOLDERS
Class A shares of the Fund purchased by the following investors are not
subject to any Class A initial or contingent deferred sales charges:
o Shareholders of the Fund who were shareholders of the AMA Family of
Funds on February 28, 1991 and who acquired shares of any of the Former Quest
for Value Funds by merger of a portfolio of the AMA Family of Funds.
o Shareholders of the Fund who acquired shares of any Former Quest for
Value Fund by merger of any of the portfolios of the Unified Funds.
O WAIVER OF CLASS A CONTINGENT DEFERRED SALES CHARGE IN CERTAIN
TRANSACTIONS
The Class A contingent deferred sales charge will not apply to redemptions
of Class A shares of the Fund purchased by the following investors who were
shareholders of any Former Quest for
Value Fund:
o Investors who purchased Class A shares from a dealer that is not or was
not permitted to receive a sales load or redemption fee imposed on a shareholder
with whom that dealer has a fiduciary relationship under the Employee Retirement
Income Security Act of 1974 and regulations adopted under that law.
o Participants in Qualified Retirement Plans that purchased shares of any
of the Former Quest For Value Funds pursuant to a special "strategic alliance"
with the distributor of those funds. The Fund's Distributor will pay a
commission to the dealer for purchases of Fund shares as described above in
"Class A Contingent Deferred Sales Charge."
CLASS A, CLASS B AND CLASS C CONTINGENT DEFERRED SALES CHARGE
WAIVERS
O WAIVERS FOR REDEMPTIONS OF SHARES PURCHASED PRIOR TO MARCH 6, 1995
In the following cases, the contingent deferred sales charge will be
waived for redemptions of Class A, Class B or Class C shares of the Fund if
those shares were purchased prior to March 6, 1995: in connection with (i)
distributions to participants or beneficiaries of plans qualified under Section
401(a) of the Internal Revenue Code or from custodial accounts under Section
403(b)(7) of the Code, Individual Retirement Accounts, deferred compensation
plans under Section 457 of the Code, and other employee benefit plans, and
returns of excess contributions made to each type of plan, (ii) withdrawals
under an automatic withdrawal plan holding only either Class B or Class C shares
if the annual withdrawal does not exceed 10% of the initial value of the
account, and (iii) liquidation of a shareholder's account if the aggregate net
asset value of shares held in the account is less than the required minimum
value of such accounts.
O WAIVERS FOR REDEMPTIONS OF SHARES PURCHASED ON OR AFTER MARCH
6, 1995 BUT
PRIOR TO NOVEMBER 24, 1995.
In the following cases, the contingent deferred sales charge will be
waived for redemptions of Class A, Class B or Class C shares of the Fund if
those shares were purchased on or after March 6, 1995, but prior to November 24,
1995: (1) distributions to participants or beneficiaries from Individual
Retirement Accounts under Section 408(a) of the Internal Revenue Code or
retirement plans under Section 401(a), 401(k), 403(b) and 457 of the Code, if
those distributions are made either (a) to an individual participant as a result
of separation from service or (b) following the death or disability (as defined
in the Code) of the participant or beneficiary; (2) returns of excess
contributions to such retirement plans; (3) redemptions other than from
retirement plans following the death or disability of the shareholder(s) (as
evidenced by a determination of total disability by the U.S. Social Security
Administration); (4) withdrawals under an automatic withdrawal plan (but only
for Class B or Class C shares) where the annual withdrawals do not exceed 10% of
the initial value of the account; and (5) liquidation of a shareholder's account
if the aggregate net asset value of shares held in the account is less than the
required minimum account value. A shareholder's account will be credited with
the amount of any contingent deferred sales charge paid on the redemption of any
Class A, Class B or Class C shares of the Fund described in this section if
within 90 days after that redemption, the proceeds are invested in the same
Class of shares in this Fund or another Oppenheimer fund.
<PAGE>
APPENDIX B
DESCRIPTION OF RATINGS
BOND RATINGS
o MOODY'S INVESTORS SERVICE, INC.
AAA: Bonds which are rated "Aaa" are judged to be the best quality and to carry
the smallest degree of investment risk. Interest payments are protected by a
large or by an exceptionally stable margin and principal is secure. While the
various protective elements are likely to change, the changes that can be
expected are most unlikely to impair the fundamentally strong position of such
issues.
AA: Bonds which are rated "Aa" are judged to be of high quality by all
standards. Together with the "Aaa" group, they comprise what are generally known
as "high-grade" bonds. They are rated lower than the best bonds because margins
of protection may not be as large as with "Aaa" securities or fluctuation of
protective elements may be of greater amplitude or there may be other elements
present which make the long-term risks appear somewhat larger than those of
"Aaa" securities.
A: Bonds which are rated "A" possess many favorable investment attributes and
are to be considered as upper-medium grade obligations. Factors giving security
to principal and interest are considered adequate but elements may be present
which suggest a susceptibility to impairment sometime in the future.
BAA: Bonds which are rated "Baa" are considered medium grade obligations,
i.e., they are neither highly protected nor poorly secured. Interest
payments and principal security appear adequate for
the present but certain protective elements may be lacking or may be
characteristically unreliable over any great length of time. Such bonds lack
outstanding investment characteristics and have speculative characteristics as
well.
BA: Bonds which are rated "Ba" are judged to have speculative elements; their
future cannot be considered well-assured. Often the protection of interest
and principal payments may be very
moderate and not well safeguarded during both good and bad times over the
future. Uncertainty of
position characterizes bonds in this class.
B: Bonds which are rated "B" generally lack characteristics of desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small.
CAA: Bonds which are rated "Caa" are of poor standing and may be in default
or there may be present elements of danger with respect to principal or
interest.
CA: Bonds which are rated "Ca" represent obligations which are speculative in
a high degree and are often in default or have other marked shortcomings.
C: Bonds which are rated "C" can be regarded as having extremely poor
prospects of ever retaining any real investment standing.
o STANDARD & POOR'S CORPORATION
AAA: "AAA" is the highest rating assigned to a debt obligation and indicates
an extremely strong capacity to pay principal and interest.
AA: Bonds rated "AA" also qualify as high quality debt obligations. Capacity to
pay principal and interest is very strong, and in the majority of instances they
differ from "AAA" issues only in small degree.
A: Bonds rated "A" have a strong capacity to pay principal and interest,
although they are somewhat more susceptible to adverse effects of change in
circumstances and economic conditions.
BBB: Bonds rated "BBB" are regarded as having an adequate capacity to pay
principal and interest. Whereas they normally exhibit protection parameters,
adverse economic conditions or changing circumstances are more likely to lead to
a weakened capacity to pay principal and interest for bonds in this category
than for bonds in the "A" category.
BB, B, CCC, CC: Bonds rated "BB," "B," "CCC" and "CC" are regarded, on balance,
as predominantly speculative with respect to the issuer's capacity to pay
interest and repay principal in accordance with the terms of the obligation.
"BB" indicates the lowest degree of speculation and "CC" the highest degree.
While such bonds will likely have some quality and protective characteristics,
these are outweighed by large uncertainties or major risk exposures to adverse
conditions.
C, D: Bonds on which no interest is being paid are rated "C." Bonds rated "D"
are in default and payment of interest and/or repayment of principal is in
arrears.
o FITCH INVESTORS SERVICE, INC.
AAA: Bonds considered to be investment grade and of the highest credit quality.
The obligor has an exceptionally strong ability to pay interest and repay
principal, which is unlikely to be affected by reasonably foreseeable events.
AA: Bonds considered to be investment grade and of very high credit quality.
The obligor's ability to pay interest and repay principal is very strong,
although not quite as strong as bonds rated "AAA."
Because bonds rated in the "AAA" and "AA" categories are not significantly
vulnerable to foreseeable future developments, short-term debt of these issuers
is generally rated "F-1+." A: Bonds considered to be investment grade and of
high credit quality. The obligor's ability to pay interest and repay principal
is considered to be strong, but may be more vulnerable to adverse changes in
economic conditions and circumstances than bonds with higher ratings.
BBB: Bonds considered to be investment grade and of satisfactory credit quality.
The obligor's ability to pay interest and repay principal is considered to be
adequate. Adverse changes in economic conditions and circumstances, however, are
more likely to have adverse impact on these bonds, and therefore impair timely
payment. The likelihood that the ratings of these bonds will fall below
investment grade is higher than for bonds with higher ratings.
BB: Bonds are considered speculative. The obligor's ability to pay interest and
repay principal may be affected over time by adverse economic changes. However,
business and financial alternatives can be identified which could assist the
obligor in satisfying its debt service requirements.
B: Bonds are considered highly speculative. While bonds in this class are
currently meeting debt service requirements, the probability of continued timely
payment of principal and interest reflects the obligor's limited margin of
safety and the need for reasonable business and economic activity through the
life of the issue.
CCC: Bonds have certain identifiable characteristics which, if not remedied,
may lead to default. The ability to meet obligations requires an
advantageous business and economic environment.
CC: Bonds are minimally protected. Default in payment of interest and/or
principal seems probable over time.
C: Bonds are in imminent default in payment of interest or principal.
DDD, DD, AND D Bonds are in default on interest and/or principal payments. Such
bonds are extremely speculative and should be valued on the basis of their
ultimate recovery value in liquidation or reorganization of the obligor. "DDD"
represents the highest potential for recovery of these bonds, and "D" represents
the lowest potential for recovery.
PLUS (+) MINUS (-) Plus and minus signs are used with a rating symbol to
indicate the relative position of a credit within the rating category. Plus and
minus signs, however, are not used in the "DDD," "DD," or "D" categories.
SHORT-TERM DEBT RATINGS.
o MOODY'S INVESTORS SERVICE, INC. The following rating designations for
commercial paper (defined by Moody's as promissory obligations not having
original maturity in excess of nine months), are judged by Moody's to be
investment grade, and indicate the relative repayment capacity of rated issuers:
PRIME-1: Superior capacity for repayment. Capacity will normally be evidenced by
the following characteristics: (a) leveling market positions in well-established
industries; (b) high rates of return on funds employed; (c) conservative
capitalization structures with moderate reliance on debt and ample asset
protection; (d) broad margins in earning coverage of fixed financial charges and
high internal cash generation; and (e) well established access to a range of
financial markets and assured sources of alternate liquidity.
PRIME-2: Strong capacity for repayment. This will normally be evidenced by many
of the characteristics cited above but to a lesser degree. Earnings trends and
coverage ratios, while sound, will be more subject to variation. Capitalization
characteristics, while still appropriate, may be more affected by external
conditions. Ample alternate liquidity is maintained. Moody's ratings for state
and municipal short-term obligations are designated "Moody's Investment Grade"
("MIG"). Short-term notes which have demand features may also be designated as
"VMIG". These rating categories are as follows:
MIG1/VMIG1: Best quality. There is present strong protection by established cash
flows, superior liquidity support or demonstrated broadbased access to the
market for refinancing.
MIG2/VMIG2: High quality. Margins of protection are ample although not so
large as in the preceding group.
o STANDARD & POOR'S CORPORATION ("S&P"): The following ratings by S&P for
commercial paper (defined by S&P as debt having an original maturity of no more
than 365 days) assess the likelihood of payment:
A-1: Strong capacity for timely payment. Those issues determined to possess
extremely strong safety characteristics are denoted with a plus sign (+)
designation.
A-2: Satisfactory capacity for timely payment. However, the relative degree of
safety is not as high as for issues designated "A-1".
S&P'S RATINGS FOR MUNICIPAL NOTES DUE IN THREE YEARS OR LESS ARE:
SP-1: Very strong or strong capacity to pay principal and interest. Those issues
determined to possess overwhelming safety characteristics will be given a plus
(+) designation.
SP-2: Satisfactory capacity to pay principal and interest.
S&P assigns "dual ratings" to all municipal debt issues that have a demand or
double feature as part of their provisions. The first rating addresses the
likelihood of repayment of principal and interest as due, and the second rating
addresses only the demand feature. With short-term demand debt, S&P's note
rating symbols are used with the commercial paper symbols (for example,
"SP-1+/A-1+").
o FITCH INVESTORS SERVICE, INC. Fitch assigns the following short-term
ratings to debt obligations that are payable on demand or have original
maturities of generally up to three years, including
commercial paper, certificates of deposit, medium-term notes, and municipal
and investment notes:
F-1+: Exceptionally strong credit quality; the strongest degree of assurance for
timely payment.
F-1: Very strong credit quality; assurance of timely payment is only slightly
less in degree than issues rated "F-1+".
F-2: Good credit quality; satisfactory degree of assurance for timely payment,
but the margin of safety is not as great as for issues assigned "F-1+" or "F-1"
ratings.
o DUFF & PHELPS, INC. The following ratings are for commercial paper (defined by
Duff & Phelps as obligations with maturities, when issued, of under one year),
asset-backed commercial paper, and certificates of deposit (the ratings cover
all obligations of the institution with maturities, when issued, of under one
year, including bankers' acceptance and letters of credit):
DUFF 1+: Highest certainty of timely payment. Short-term liquidity, including
internal operating factors and/or access to alternative sources of funds, is
outstanding, and safety is just below risk-free U.S. Treasury short-term
obligations.
DUFF 1: Very high certainty of timely payment. Liquidity factors are excellent
and supported by good fundamental protection factors. Risk factors are minor.
DUFF 1-: High certainty of timely payment. Liquidity factors are strong and
supported by good fundamental protection factors. Risk factors are very small.
DUFF 2: Good certainty of timely payment. Liquidity factors and company
fundamentals are sound. Although ongoing funding needs may enlarge total
financing requirements, access to capital markets is good. Risk factors are
small.
o IBCA LIMITED OR ITS AFFILIATE IBCA INC. Short-term ratings, including
commercial paper (with maturities up to 12 months), are as follows:
A1+: Obligations supported by the highest capacity for timely repayment.
A1: Obligations supported by a very strong capacity for timely repayment.
A2: Obligations supported by a strong capacity for timely repayment, although
such capacity may be susceptible to adverse changes in business, economic, or
financial conditions.
o THOMSON BANKWATCH, INC. The following short-term ratings apply to commercial
paper, certificates of deposit, unsecured notes, and other securities having a
maturity of one year or less.
TBW-1: The highest category; indicates the degree of safety regarding timely
repayment of principal and interest is very strong.
TBW-2: The second highest rating category; while the degree of safety regarding
timely repayment of principal and interest is strong, the relative degree of
safety is not as high as for issues rated "TBW-1".
B-1
<PAGE>
APPENDIX C
PRIOR FEES AND OPERATING EXPENSES
As discussed in the Prospectus in "Performance of the Fund - Explanation of
Performance Terminology", the historical performance of the Class A shares of
the Fund (formerly, the Capital Shares) prior to open-end conversion has been
restated to reflect the fees and expenses of such Class A shares in effect as of
March 3, 1997 (without giving effect to any fee waivers). THESE FEES AND
EXPENSES AS OF SUCH DATE ARE SET FORTH BELOW FOR INFORMATION ONLY
AND ARE NO
LONGER IN EFFECT. See "Expenses - Annual Fund Operating Expenses" in the
Prospectus for the Fund's current fees and expenses.
PRIOR ANNUAL FUND OPERATING EXPENSES AT MARCH 3, 1997
(AS A PERCENTAGE OF AVERAGE NET ASSETS)
Class A
Shares
-------
Management Fees .97%
(without waiver)
- ------------------------------------------------------------------------------
12b-1 Distribution .50%
Plan Fees
(without waiver)
- ------------------------------------------------------------------------------
Other Expenses .40%
- ------------------------------------------------------------------------------
Total Fund
Operating Expenses 1.87%
(without waivers)
The Annual Fund Operating Expenses, including "Other Expenses," shown
above were based on restated data estimated to be paid through the end of the
Fund's first fiscal year (ending December 31, 1997) as an open-end investment
company as if the Fund had operated as an open-end investment company during the
entire fiscal year. These amounts are shown as a percentage of the average net
assets of the Fund's Class A shares for such year.
C-1
<PAGE>
APPENDIX TO PROSPECTUS OF
OPPENHEIMER QUEST CAPITAL VALUE FUND, INC.
Graphic material included in Prospectus of Oppenheimer Quest Capital Value
Fund, Inc.: "Comparison of Total Return of Oppenheimer Quest Capital Value Fund,
Inc. with the S&P 500 Index - Change in Value of $10,000 Hypothetical
Investments in Class A, Class B and Class C shares of Quest Capital Value Fund,
Inc., and the S&P 500 Index.
A linear graph will be included in the Prospectus of Oppenheimer Quest
Capital Value Fund, Inc. (the "Fund") depicting the initial account value and
subsequent account value of a hypothetical $10,000 investment in the Fund. In
the case of the Fund's Class A shares (formerly, the Capital Shares), that graph
will cover the performance of the Fund for the ten fiscal years ended 12/31/96
and the period from 1/1/97 through 10/31/97 and in the case of the Fund's Class
B and Class C shares will cover the period from the inception of those classes
on 3/3/97 through 10/31/97. The graph will compare such values with hypothetical
$10,000 investments over the time periods indicated below in the S&P 500 Index.
Set forth below are the relevant data points that will appear on the linear
graph. Additional information with respect to the foregoing, including a
description of the S&P 500 Index, is set forth in the Prospectus under
"Performance of the Fund Comparing the Fund's Performance to the Market."
Fiscal
Period/Year Oppenheimer Quest S&P 500
ENDED CAPITAL VALUE FUND, INC. INDEX(1)
- ----- ------------------------ --------
12/31/87 $ 9,425 $10,000
12/31/88 $12,697 $11,656
12/31/89 $19,179 $15,343
12/31/90 $17,882 $14,866
12/31/91 $24,814 $19,386
12/31/92 $30,989 $20,861
12/31/93 $33,255 $22,958
12/31/94 $32,222 $23,261
12/31/95 $43,244 $31,991
12/31/96 $51,136 $39,331
10/31/97 $56,965 $49,285
Oppenheimer
Fiscal Year/ Quest Capital Value S&P
PERIOD ENDED FUND,INC.B 500 INDEX(2)
3/3/97 $10,000 $10,000
10/31/97 $10,680 $11,702
C-2
<PAGE>
Oppenheimer
Fiscal Year/ Quest Capital Value S&P
PERIOD ENDED FUND, INC.C 500 INDEX(2)
3/3/97 $10,000 $10,000
10/31/97 $11,083 $11,702
(1) Performance information for the S & P 50 Index begins on 1/31/87 for
Class A shares.
(2) Performance information for the S & P 50 Index begins on 2/28/97 for
Class B and Class C shares.
C-3
<PAGE>
OPPENHEIMER QUEST CAPITAL VALUE FUND, INC.
Two World Trade Center
New York, New York 10048-0203
1-800-525-7048
INVESTMENT ADVISER
OppenheimerFunds, Inc.
Two World Trade Center
New York, New York 10048-0203
SUB-ADVISER
OpCap Advisors
One World Financial Center
New York, New York 10281
DISTRIBUTOR
OppenheimerFunds Distributor, Inc.
Two World Trade Center
New York, New York 10048-0203
TRANSFER AGENT
OppenheimerFunds Services
P.O. Box 5270
Denver, Colorado 80217
1-800-525-7048
OPPENHEIMERFUNDS INTERNET WEB SITE:
http://www.oppenheimerfunds.com
CUSTODIAN OF PORTFOLIO SECURITIES
State Street Bank and Trust Company
P.O. Box 8505
Boston, Massachusetts 02266-8505
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP
950 Seventeenth Street
Denver, Colorado 80202
LEGAL COUNSEL
Gordon Altman Butowsky Weitzen
Shalov & Wein
114 West 47th Street
New York, New York 10036
NO DEALER, BROKER, SALESPERSON OR ANY OTHER PERSON HAS BEEN
AUTHORIZED TO GIVE
ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE
CONTAINED IN
THIS PROSPECTUS OR THE STATEMENT OF ADDITIONAL INFORMATION, AND
IF GIVEN OR
MADE, SUCH INFORMATION AND REPRESENTATIONS MUST NOT BE RELIED
UPON AS HAVING
BEEN AUTHORIZED BY THE FUND, OPPENHEIMERFUNDS, INC.,
OPPENHEIMERFUNDS
DISTRIBUTOR, INC. OR ANY AFFILIATE THEREOF. THIS PROSPECTUS DOES NOT
CONSTITUTE
AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY OF THE
SECURITIES
OFFERED HEREBY IN ANY STATE TO ANY PERSON TO WHOM IT IS UNLAWFUL TO
MAKE SUCH AN
OFFER IN SUCH STATE.
PRO835.001.0198
prosp\835psp.#2
C-4
OPPENHEIMER QUEST CAPITAL VALUE FUND, INC.
Two World Trade Center, New York, New York 10048
1-800-525-7048
STATEMENT OF ADDITIONAL INFORMATION DATED JANUARY 26, 1998
This Statement of Additional Information of Oppenheimer Quest Capital Value
Fund, Inc. is not a Prospectus. This document contains additional information
about the Fund and supplements information in the Prospectus dated January 26,
1998. It should be read together with the Prospectus, which may be obtained upon
written request to the Fund's Transfer Agent, OppenheimerFunds Services at P.O.
Box 5270, Denver, Colorado 80217, or by calling the Transfer Agent at the
toll-free number shown above.
CONTENTS
PAGE
ABOUT THE FUND
Investment Objective and Policies......................................
Investment Policies and Strategies.................................
Other Investment Techniques and Strategies.........................
Other Investment Restrictions......................................
How the Fund is Managed ...............................................
Organization and History..........................................
Directors and Officers of the Fund.................................
The Manager and Its Affiliates.....................................
Brokerage Policies of the Fund.........................................
Performance of the Fund................................................
Distribution and Service Plans.........................................
ABOUT YOUR ACCOUNT
How To Buy Shares.....................................................
How To Sell Shares....................................................
How To Exchange Shares................................................
Dividends, Capital Gains and Taxes....................................
Additional Information About the Fund..................................
FINANCIAL INFORMATION ABOUT THE FUND
Report of Independent Accountants.....................................
Financial Statements...................................................
APPENDIX A: Corporate Industry Classifications......................A-1
<PAGE>
ABOUT THE FUND
INVESTMENT OBJECTIVE AND POLICIES
INVESTMENT POLICIES AND STRATEGIES. The investment objective and policies of the
Fund are described in the Prospectus. Set forth below is supplemental
information about those policies and the types of securities in which the Fund
may invest, as well as the strategies the Fund may use to try to achieve its
objective. Capitalized terms used in this Statement of Additional Information
have the same meaning as those terms have in the Prospectus.
O FOREIGN SECURITIES. The Fund may invest in securities (which may be
denominated in U.S. dollars or non-U.S. currencies) issued or guaranteed by
foreign corporations, certain supranational entities (described below) and
foreign governments or their agencies or instrumentalities, and in securities
issued by U.S. corporations denominated in non-U.S. currencies. All such
securities are referred to as "foreign securities."
Investing in foreign securities offers the Fund potential benefits not
available from investing solely in securities of domestic issuers, including the
opportunity to invest in foreign issuers that appear to offer growth potential,
or in foreign countries with economic policies or business cycles different from
those of the U.S., or to reduce fluctuations in portfolio value by taking
advantage of foreign stock markets that do not move in a manner parallel to U.S.
markets. If the Fund's portfolio securities are held abroad, the countries in
which such securities may be held and the sub-custodians or depositories holding
them must be approved by the Fund's Board of Directors to the extent that
approval is required under applicable rules of the Securities and Exchange
Commission (the "SEC"). In buying foreign securities, the Fund may convert U.S.
dollars into foreign currency, but only to effect securities transactions on
foreign securities exchanges and not to hold such foreign currency as an
investment.
o RISKS OF FOREIGN INVESTING. Investing in foreign securities involves
special additional risks and considerations not typically associated with
investing in securities of issuers traded in the U.S. These include: reduction
of income by foreign taxes; fluctuation in value of foreign portfolio
investments due to changes in currency rates and control regulations (e.g.,
currency blockage); transaction charges for currency exchange; lack of public
information about foreign issuers; lack of uniform accounting, auditing and
financial reporting standards comparable to those applicable to domestic
issuers; less volume on foreign exchanges than on U.S. exchanges; greater
volatility and less liquidity on foreign markets than in the U.S.; less
regulation of foreign issuers, stock exchanges and brokers than in the U.S.;
greater difficulties in commencing lawsuits and obtaining judgments in foreign
courts; higher brokerage commission rates than in the U.S.; increased risks of
delays in settlement of portfolio transactions or loss of certificates for
portfolio securities; possibilities in some countries of expropriation or
nationalization of assets, confiscatory taxation, political, financial or social
instability or adverse diplomatic developments; and unfavorable differences
between the U.S. economy and foreign economies. In the past, U.S. Government
policies have discouraged certain investments abroad by U.S. investors, through
taxation or other restrictions, and it is possible that such restrictions could
be re-imposed.
o EMERGING MARKET COUNTRIES: Certain developing countries may have
relatively unstable governments, economies based on only a few industries that
are dependent upon international trade, and reduced secondary market liquidity.
Foreign investment in certain emerging market countries is restricted or
controlled in varying degrees. In the past, securities in these countries have
experienced greater price movement, both positive and negative, than securities
of companies located in developed countries. Lower-rated high-yielding emerging
market securities may be considered to have speculative elements.
O U.S. GOVERNMENT OBLIGATIONS. Obligations of U.S. Government agencies or
instrumentalities (including mortgage-backed securities) may or may not be
guaranteed or supported by the "full faith and credit" of the United States.
Some are backed by the right of the issuer to borrow from the U.S. Treasury;
others, by discretionary authority of the U.S. Government to purchase the
agencies' obligations; while others are supported only by the credit of the
instrumentality. All U.S. Treasury obligations are backed by the full faith and
credit of the United States. If the securities are not backed by the full faith
and credit of the United States, the owner of the securities must look
principally to the agency issuing the obligation for repayment and may not be
able to assert a claim against the United States in the event that the agency or
instrumentality does not meet its commitment. The Fund will invest in U.S.
Government securities of such agencies and instrumentalities only when the
Manager is satisfied that the credit risk with respect to such instrumentality
is minimal.
o MONEY MARKET SECURITIES. As stated in the Prospectus, the Fund typically
invests a part of its assets in money market securities, and may invest up to
100% of its total assets in money market securities for temporary defensive
purposes. Money market securities in which the Fund may invest include the
following:
o TIME DEPOSITS AND VARIABLE RATE NOTES. The Fund may invest in fixed time
deposits, whether or not subject to withdrawal penalties. However, investment in
such deposits which are subject to withdrawal penalties, other than overnight
deposits, are subject to the 15% limit on illiquid investments set forth in the
Prospectus for the Fund.
The commercial paper obligations which the Fund may buy are unsecured and
may include variable rate notes. The nature and terms of a variable rate note
(i.e., a "Master Note") permit the Fund to invest fluctuating amounts at varying
rates of interest pursuant to a direct arrangement between the Fund as lender,
and the issuer, as borrower. It permits daily changes in the amounts borrowed.
The Fund has the right at any time to increase, up to the full amount stated in
the note agreement, or to decrease the amount outstanding under the note. The
issuer may prepay at any time and without penalty any part or the full amount of
the note. The note may or may not be backed by one or more bank letters of
credit. Because these notes are direct lending arrangements between the Fund and
the issuer, it is not generally contemplated that they will be traded; moreover,
there is currently no secondary market for them. Except as specifically provided
in the Prospectus for the Fund, there is no limitation on the type of issuer
from whom these notes will be purchased. However, in connection with such
purchase and on an ongoing basis, OpCap Advisors (the "Sub-Adviser") will
consider the earning power, cash flow and other liquidity ratios of the issuer,
and its ability to pay principal and interest on demand, including a situation
in which all holders of such notes made demand simultaneously. The Fund will not
invest more than 5% of its total assets in variable rate notes. Variable rate
notes are subject to the Fund's investment restriction on illiquid securities
unless such notes can be put back to the issuer on demand within seven days.
o INSURED BANK OBLIGATIONS. The Federal Deposit Insurance Corporation
("FDIC") insures the deposits of federally insured banks and savings and loan
associations (collectively referred to as "banks") up to $100,000. The Fund may,
within the limits set forth in the Prospectus, purchase bank obligations which
are fully insured as to principal by the FDIC. Currently, to remain fully
insured as to principal, these investments must be limited to $100,000 per bank.
If the principal amount and accrued interest together exceed $100,000, the
excess principal and accrued interest will not be insured. Insured bank
obligations may have limited marketability. Unless the Board of Directors
determines that a readily available market exists for such obligations, the Fund
will treat such obligations as subject to the 15% limit for illiquid investments
set forth in the Prospectus for the Fund unless such obligations are payable at
principal amount plus accrued interest on demand or within seven days after
demand.
o CONVERTIBLE SECURITIE The Fund may invest in fixed-income securities
which are convertible into common stock. Convertible securities rank senior to
common stocks in a corporation's capital structure and, therefore, entail less
risk than the corporation's common stock. The value of a convertible security is
a function of its "investment value" (its value as if it did not have a
conversion privilege), and its "conversion value" (the security's worth if it
were to be exchanged for the underlying security, at market value, pursuant to
its conversion privilege).
To the extent that a convertible security's investment value is greater than its
conversion value, its price will be primarily a reflection of such investment
value and its price will be likely to increase when interest rates fall and
decrease when interest rates rise, as with a fixed-income security (the credit
standing of the issuer and other factors may also have an effect on the
convertible security's value). If the conversion value exceeds the investment
value, the price of the convertible security will rise above its investment
value and, in addition, will sell at some premium over its conversion value.
(This premium represents the price investors are willing to pay for the
privilege of purchasing a fixed-income security with a possibility of capital
appreciation due to the conversion privilege.) At such times the price of the
convertible security will tend to fluctuate directly with the price of the
underlying equity security. Convertible securities may be purchased by the Fund
at varying price levels above their investment values and/or their conversion
values in keeping with the Fund's objectives.
o INVESTMENT RISKS OF FIXED-INCOME SECURITIES. All fixed-income securities
are subject to two types of risks: credit risk and interest rate risk. Credit
risk relates to the ability of the issuer to meet interest or principal payments
on a security as they become due. Generally, higher yielding lower-grade bonds
are subject to credit risk to a greater extent than lower yielding, investment
grade bonds. Interest rate risk refers to the fluctuations in value of
fixed-income securities resulting solely from the inverse relationship between
price and yield of outstanding fixed-income securities. An increase in
prevailing interest rates will generally reduce the market value of
already-issued fixed-income investments, and a decline in interest rates will
tend to increase their value. In addition, debt securities with longer
maturities, which tend to produce higher yields, are subject to potentially
greater changes in their prices from changes in interest rates than obligations
with shorter maturities. Fluctuations in the market value of fixed-income
securities after the Fund buys them will not affect the interest payable on
those securities, nor the cash income from such securities. However, those price
fluctuations will be reflected in the valuations of these securities and
therefore the Fund's net asset values.
o LOWER-GRADE SECURITIES. As stated in the Prospectus, the Fund may invest
up to 25% of its net assets in bonds rated below Baa3 by Moody's or BBB- by
Standard & Poor's (commonly known as "high yield" or "junk bonds"). The Manager
will not rely solely on the ratings assigned by rating services and may invest,
without limit, in unrated securities which offer, in the opinion of the Manager,
yields and risks comparable to those of rated securities in which the Fund may
invest.
Some of the principal risks of high yield securities include: (i) limited
liquidity and secondary market support, (ii) substantial market price volatility
resulting from changes in prevailing interest rates, (iii) subordination of the
holder's claims to the prior claims of banks and other senior lenders in
bankruptcy proceedings, (iv) the operation of mandatory sinking fund or
call/redemption provisions during periods of declining interest rates, whereby
the holder might receive redemption proceeds at times when only lower-yielding
portfolio securities are available for investment, (v) the possibility that
earnings of the issuer may be insufficient to meet its debt service, and (vi)
the issuer's low creditworthiness and potential for insolvency during periods of
rising interest rates and economic downturn. Some high yield bonds pay interest
in kind rather than in cash and tend to be more volatile than securities that
pay interest in cash.
As a result of the limited liquidity of high yield securities, their
prices have at times experienced significant and rapid decline when a
significant number of holders of high yield securities simultaneously decided to
sell them. A decline is also likely in the high yield bond market during an
economic downturn. An economic downturn or an increase in interest rates could
severely disrupt the market for high yield securities and adversely affect the
value of outstanding securities and the ability of the issuers to repay
principal and interest.
O WARRANTS. The Fund may purchase warrants subject to the percentage
limitations stated in the Prospectus. Warrants basically are options to purchase
equity securities at specific prices valid for a specific period of time. Their
prices do not necessarily move parallel to the prices of the underlying
securities. Warrants have no voting rights, receive no dividends and have no
rights with respect to the assets of the issuer.
2
<PAGE>
O INVESTING IN SMALL, UNSEASONED COMPANIES. The securities of small,
unseasoned companies may have a limited trading market, which may adversely
affect the Fund's ability to sell them and can reduce the price the Fund might
be able to obtain for them. If other investors holding the same securities as
the Fund sells them when the Fund attempts to dispose of its holdings, the Fund
may receive lower prices than might otherwise be obtained, because of the
thinner market for such securities.
o BORROWING. The Fund may increase its ownership of securities by
borrowing as a temporary measure for extraordinary or emergency purposes and
investing the borrowed funds, subject to the restrictions stated in the
Prospectus. Any such borrowing will be made only from banks, and pursuant to the
requirements of the Investment Company Act of 1940, as amended (the "1940 Act")
will be made only to the extent that the value of that Fund's assets, less its
liabilities other than borrowings, is equal to at least 300% of all borrowings
as set forth in the 1940 Act including the proposed borrowing and amounts
covering the Fund's obligations under "forward roll" transactions. If the value
of the Fund's assets so computed should fail to meet the 300% asset coverage
requirement, the Fund is required within three days to reduce its bank debt to
the extent necessary to meet such requirement and may have to sell a portion of
its investments at a time when independent investment judgment would not dictate
such sale. Borrowing for investment increases both investment opportunity and
risk. Since substantially all of the Fund's assets fluctuate in value, but
borrowing obligations are fixed, when the Fund has outstanding borrowings, its
net asset value per share correspondingly will tend to increase and decrease
more when portfolio assets fluctuate in value than otherwise would be the case.
OTHER INVESTMENT TECHNIQUES AND STRATEGIES
o WHEN-ISSUED SECURITIES. The Fund may take advantage of offerings of
eligible portfolio securities on a "when-issued" basis where delivery of and
payment for such securities takes place sometime after the transaction date on
terms established on such date. Normally, settlement on U.S. Government
securities takes place within ten days. The Fund only will make when-issued
commitments on eligible securities with the intention of actually acquiring the
securities. If the Fund chooses to dispose of the right to acquire a when-issued
security prior to its acquisition, it could, as with the disposition of any
other portfolio obligation, incur a gain or loss due to market fluctuation.
When-issued commitments will not be made if, as a result, more than 15% of the
net assets of the Fund would be so committed.
o REPURCHASE AGREEMENTS. The Fund may purchase securities subject to
repurchase agreements for liquidity purposes to meet anticipated redemptions, or
pending the investment of the proceeds from sales of Fund shares, or pending the
settlement of purchases of portfolio securities. In a repurchase transaction,
the Fund purchases a security from, and simultaneously resells it to, an
approved vendor (a U.S. commercial bank or the U.S. branch of a foreign bank
having total domestic assets of at least $1 billion or a broker-dealer with a
net worth of at least $50 million and which that has been designated a primary
dealer in government securities) that must meet credit requirements set by the
Fund's Board of Directors from time to time for delivery on an agreed-on future
date. The resale price exceeds the purchase price by an amount that reflects an
agreed-upon interest rate effective for the period during which the repurchase
agreement is in effect. The majority of these transactions run from day to day,
and delivery pursuant to the resale typically will occur within one to five days
of the purchase. Repurchase agreements are considered "loans" under the
Investment Company Act, collateralized by the underlying security. The Fund's
repurchase agreements require that at all times while the repurchase agreement
is in effect, the value of the collateral must equal or exceed the repurchase
price to fully collateralize the repayment obligation. Additionally, the Manager
will impose creditworthiness requirements to confirm that the vendor is
financially sound and will continuously monitor the collateral's value.
The Fund may enter into reverse repurchase agreements. Under a reverse
repurchase agreement, the Fund sells securities and agrees to repurchase them at
a mutually agreed upon date and price. At the time the Fund enters into a
reverse repurchase agreement, it will establish and maintain a segregated
account with an approved custodian containing liquid assets of any type,
including equity and debt securities of any grade having a value not less than
the repurchase price (including accrued interest). Reverse repurchase agreements
involve the risk that the market value of the securities retained in lieu of
sale by the Fund may decline more than or appreciate less than the securities
the Fund has sold but is obligated to repurchase. In the event the buyer of
securities under a reverse repurchase agreement files for bankruptcy or becomes
insolvent, such buyer or its trustee or receiver may receive an extension of
time to determine whether to enforce the Fund's obligation to repurchase the
securities and the Fund's use of the proceeds of the reverse repurchase
agreements may effectively be restricted pending such decisions. Reverse
repurchase agreements create leverage, a speculative factor, and will be
considered borrowings for purposes of the Fund's limitation on borrowing.
O ILLIQUID AND RESTRICTED SECURITIES. To enable the Fund to sell restricted
securities not registered under the Securities Act of 1933, the Fund may have to
cause those securities to be registered. The expenses of registration of
restricted securities may be negotiated by the Fund with the issuer at the time
such securities are purchased by the Fund, if such registration is required
before such securities may be sold publicly. When registration must be arranged
because the Fund wishes to sell the security, a considerable period may elapse
between the time the decision is made to sell the securities and the time the
Fund would be permitted to sell them. The Fund would bear the risks of any
downward price fluctuation during that period. The Fund may also acquire,
through private placements, securities having contractual restrictions on their
resale, which might limit the Fund's ability to dispose of such securities and
might lower the amount realizable upon the sale of such securities. Illiquid
securities include repurchase agreements maturing in more than seven days, or
certain participation interests other than those with puts exercisable within
seven days.
The Fund has percentage limitations that apply to purchases of restricted
securities, as stated in the Prospectus. Those percentage restrictions do not
limit purchases of restricted securities that are eligible for sale to qualified
institutional purchasers pursuant to Rule 144A under the Securities Act of 1933,
provided that those securities have been determined to be liquid by the Board of
Directors of the Fund or by the Sub-Adviser under Board-approved guidelines.
Those guidelines take into account the trading activity for such securities and
the availability of reliable pricing information, among other factors. If there
is a lack of trading interest in a particular Rule 144A security, the Fund's
holding of that security may be deemed to be illiquid.
O LOANS OF PORTFOLIO SECURITIES. The Fund may lend its portfolio
securities subject to the restrictions stated in the Prospectus and herein.
Under applicable regulatory requirements (which are subject to change), the loan
collateral on each business day must at least equal the value of the loaned
securities and must consist of cash, bank letters of credit or securities of the
U.S. Government (or its agencies or instrumentalities). To be acceptable as
collateral, letters of credit must obligate a bank to pay amounts demanded by
the Fund if the demand meets the terms of the letter. Such terms and the issuing
bank must be satisfactory to the Fund. When it lends securities, the Fund
receives amounts equal to the dividends or interest on loaned securities and
also receives one or more of (a) negotiated loan fees, (b) interest on
securities used as collateral, and (c) interest on short-term debt securities
purchased with such loan collateral. Either type of interest may be shared with
the borrower. The Fund may also pay reasonable finder's, custodian and
administrative fees. The terms of the Fund's loans must meet applicable tests
under the Internal Revenue Code and must permit the Fund to reacquire loaned
securities on five days' notice or in time to vote on any important matter.
o HEDGING WITH OPTIONS AND FUTURES CONTRACTS. The Fund may employ
one or
more types of Hedging Instruments for the purposes described in the Prospectus.
When hedging to attempt to protect against declines in the market value of the
Fund's portfolio, or to permit the Fund to retain unrealized gains in the value
of portfolio securities which have appreciated, or to facilitate selling
securities for investment reasons, the Fund may: (i) sell Stock Index Futures,
(ii) buy puts, or (iii) write covered calls (as described in the Prospectus).
When hedging to establish a position in the equity securities markets as a
temporary substitute for the purchase of individual equity securities the Fund
may: (i) buy Stock Index Futures, or (ii) buy calls on Stock Index Futures.
Normally, the Fund would then purchase the equity securities and terminate the
hedging portion.
The Fund's strategy of hedging with Futures and options on Futures will be
incidental to the Fund's investment activities in the underlying cash market. In
the future, the Fund may employ hedging instruments and strategies that are not
presently contemplated but which may be subsequently developed, to the extent
such investment methods are consistent with the Fund's investment objective, and
are legally permissible and disclosed in the Prospectus. Additional information
about the hedging instruments the Fund may use is provided below.
o WRITING CALL OPTIONS. As described in the Prospectus, the Fund may write
covered calls. When the Fund writes a call on an investment, it receives a
premium and agrees to sell the callable investment to a purchaser of a
corresponding call during the call period (usually not more than 9 months) at a
fixed exercise price (which may differ from the market price of the underlying
investment) regardless of market price changes during the call period. To
terminate its obligation on a call it has written, the Fund may purchase a
corresponding call in a "closing purchase transaction." A profit or loss will be
realized, depending upon whether the net of the amount of option transaction
costs and the premium received on the call the Fund has written is more or less
than the price of the call the Fund subsequently purchased. A profit may also be
realized if the call lapses unexercised because the Fund retains the underlying
investment and the premium received. Those profits are considered short-term
capital gains for Federal income tax purposes, as are premiums on lapsed calls,
and when distributed by the Fund are taxable as ordinary income. If the Fund
could not effect a closing purchase transaction due to the lack of a market, it
would have to hold the callable investment until the call lapsed or was
exercised.
The Fund may also write calls on Futures without owning a futures contract
or deliverable securities, provided that at the time the call is written, the
Fund covers the call by segregating in escrow an equivalent dollar value of
deliverable securities or liquid assets. The Fund will segregate additional
liquid assets if the value of the escrowed assets drops below 100% of the
current value of the Future. In no circumstances would an exercise notice as to
a Future put the Fund in a short futures position.
o WRITING PUT OPTIONS. A put option on securities gives the purchaser
the right to sell, and the writer the obligation to buy, the underlying
investment at the exercise price during the option
period. Writing a put covered by segregated liquid assets equal to the exercise
price of the put has the same economic effect to the Fund as writing a covered
call. The premium the Fund receives from writing a put option represents a
profit, as long as the price of the underlying investment remains above the
exercise price. However, the Fund has also assumed the obligation during the
option period to buy the underlying investment from the buyer of the put at the
exercise price, even though the value of the investment may fall below the
exercise price. If the put expires unexercised, the Fund (as the writer of the
put) realizes a gain in the amount of the premium less transaction costs. If the
put is exercised, the Fund must fulfill its obligation to purchase the
underlying investment at the exercise price, which will usually exceed the
market value of the investment at that time. In that case, the Fund may incur a
loss, equal to the sum of the sale price of the underlying investment and the
premium received minus the sum of the exercise price and any transaction costs
incurred.
When writing put options on securities or on foreign currencies, to secure
its obligation to pay for the underlying security, the Fund will deposit in
escrow liquid assets with a value equal to or greater than the exercise price of
the underlying securities. The Fund therefore forgoes the opportunity of
investing the segregated assets or writing calls against those assets. As long
as the obligation of the Fund as the put writer continues, it may be assigned an
exercise notice by the exchange or broker-dealer through whom such option was
sold, requiring the Fund to exchange currency at the specified rate of exchange
or to take delivery of the underlying security against payment of the exercise
price. The Fund may have no control over when it may be required to purchase the
underlying security, since it may be assigned an exercise notice at any time
prior to the termination of its obligation as the writer of the put. This
obligation terminates upon expiration of the put, or such earlier time at which
the Fund effects a closing purchase transaction by purchasing a put of the same
series as that previously sold. Once the Fund has been assigned an exercise
notice, it is thereafter not allowed to effect a closing purchase transaction.
The Fund may effect a closing purchase transaction to realize a profit on
an outstanding put option it has written or to prevent an underlying security
from being put. Furthermore, effecting such a closing purchase transaction will
permit the Fund to write another put option to the extent that the exercise
price thereof is secured by the deposited assets, or to utilize the proceeds
from the sale of such assets for other investments by the Fund. The Fund will
realize a profit or loss from a closing purchase transaction if the cost of the
transaction is less or more than the premium received from writing the option.
As above for writing covered calls, any and all such profits described herein
from writing puts are considered short-term capital gains for Federal tax
purposes, and when distributed by the Fund, are taxable as ordinary income.
o PURCHASING PUTS AND CALLS. The Fund may purchase calls to protect against
the possibility that the Fund's portfolio will not participate in an anticipated
rise in the securities market. When the Fund purchases a call (other than in a
closing purchase transaction), it pays a premium and, except as to calls on
stock indices, has the right to buy the underlying investment from a seller of a
corresponding call on the same investment during the call period at a fixed
exercise price. In purchasing a call, the Fund benefits only if the call is sold
at a profit or if, during the call period, the market price of the underlying
investment is above the sum of the exercise price, transaction costs, and the
premium paid, and the call is exercised. If the call is not exercised or sold
(whether or not at a profit), it will become worthless at its expiration date
and the Fund will lose its premium payment and the right to purchase the
underlying investment. When the Fund purchases a call on a stock index, it pays
a premium, but settlement is in cash rather than by delivery of the underlying
investment to the Fund.
When the Fund purchases a put, it pays a premium and, except as to puts on
stock indices, has the right to sell the underlying investment to a seller of a
corresponding put on the same investment during the put period at a fixed
exercise price. Buying a put on an investment the Fund owns (a "protective put")
enables the Fund to attempt to protect itself during the put period against a
decline in the value of the underlying investment below the exercise price by
selling the underlying investment at the exercise price to a seller of a
corresponding put. If the market price of the underlying investment is equal to
or above the exercise price and as a result the put is not exercised or resold,
the put will become worthless at its expiration and the Fund will lose the
premium payment and the right to sell the underlying investment. However, the
put may be sold prior to expiration (whether or not at a profit).
Buying a put on an investment it does not own, either a put on an index or
a put on a Stock Index Future not held by the Fund, permits the Fund either to
resell the put or buy the underlying investment and sell it at the exercise
price. The resale price of the put will vary inversely with the price of the
underlying investment. If the market price of the underlying investment is above
the exercise price and as a result the put is not exercised, the put will become
worthless on its expiration date. In the event of a decline in the stock market,
the Fund could exercise or sell the put at a profit to attempt to offset some or
all of its loss on its portfolio securities. When the Fund purchases a put on an
index, or on a Future not held by it, the put protects the Fund to the extent
that the index or Future moves in a similar pattern to the securities held. In
the case of a put on an index or Future, settlement is in cash rather than by
delivery by the Fund of the underlying investment.
Puts and calls on broadly-based stock indices or Stock Index Futures are
similar to puts and calls on securities or futures contracts except that all
settlements are in cash and gain or loss depends on changes in the index in
question (and thus on price movements in the stock market generally) rather than
on price movements of individual securities or futures contracts. When the Fund
buys a call on a stock index or Stock Index Future, it pays a premium. If the
Fund exercises the call during the call period, a seller of a corresponding call
on the same investment will pay the Fund an amount of cash to settle the call if
the closing level of the stock index or Future upon which the call is based is
greater than the exercise price of the call. That cash payment is equal to the
difference between the closing price of the call and the exercise price of the
call times a specified multiple (the "multiplier") which determines the total
dollar value for each point of difference. When the Fund buys a put on a stock
index or Stock Index Future, it pays a premium and has the right during the put
period to require a seller of a corresponding put, upon the Fund's exercise of
its put, to deliver cash to the Fund to settle the put if the closing level of
the stock index or Stock Index Future upon which the put is based is less than
the exercise price of the put. That cash payment is determined by the
multiplier, in the same manner as described above as to calls.
When the Fund purchases a put on a stock index, or on a Stock Index Future
not owned by it, the put protects the Fund to the extent that the index moves in
a similar pattern to the securities, the Fund holds. The Fund can either resell
the put or, in the case of a put on a Stock Index Future, buy the underlying
investment and sell it at the exercise price. The resale price of the put will
vary inversely with the price of the underlying investment. If the market price
of the underlying investment is above the exercise price, and as a result the
put is not exercised, the put will become worthless on the expiration date. In
the event of a decline in price of the underlying investment, the Fund could
exercise or sell the put at a profit to attempt to offset some or all of its
loss on its portfolio securities.
The Fund's option activities may affect its portfolio turnover rate and
brokerage commissions. The exercise of calls written by the Fund may cause the
Fund to sell related portfolio securities, thus increasing its turnover rate.
The exercise by the Fund of puts on securities will cause the sale of underlying
investments, increasing portfolio turnover. Although the decision whether to
exercise a put it holds is within the Fund's control, holding a put might cause
the Fund to sell the related investments for reasons that would not exist in the
absence of the put. The Fund will pay a brokerage commission each time it buys
or sells a call, put or an underlying investment in connection with the exercise
of a put or call. Those commissions may be higher than the commissions for
direct purchases or sales of the underlying investments.
Premiums paid for options are small in relation to the market value of the
underlying investments and, consequently, put and call options offer large
amounts of leverage. The leverage offered by trading in options could result in
the Fund's net asset value being more sensitive to changes in the value of the
underlying investments.
o STOCK INDEX FUTURES. As described in the Prospectus, the Fund may invest
in Stock Index Futures only if they relate to broadly-based stock indices. A
stock index is considered to be broadly- based if it includes stocks that are
not limited to issuers in any particular industry or group of industries. A
stock index assigns relative values to the common stocks included in the index
and fluctuates with the changes in the market value of those stocks. Stock
indices cannot be purchased or sold directly.
Stock index futures are contracts based on the future value of the basket
of securities that comprise the underlying stock index. The contracts obligate
the seller to deliver, and the purchaser to take, cash to settle the futures
transaction or to enter into an offsetting contract. No physical delivery of the
securities underlying the index is made on settling the futures obligation. No
monetary amount is paid or received by the Fund on the purchase or sale of a
Stock Index Future. Upon entering into a Futures transaction, the Fund will be
required to deposit an initial margin payment, in cash or U.S. Treasury bills,
with the futures commission merchant (the "futures broker"). Initial margin
payments will be deposited with the Fund's Custodian in an account registered in
the futures broker's name; however, the futures broker can gain access to that
account only under certain specified conditions. As the Future is marked to
market (that is, its value on the Fund's books is changed) to reflect changes in
its market value, subsequent margin payments, called variation margin, will be
paid to or by the futures broker on a daily basis.
At any time prior to the expiration of the Future, the Fund may elect to
close out its position by taking an opposite position, at which time a final
determination of variation margin is made and additional cash is required to be
paid by or released to the Fund. Any gain or loss is then realized by the Fund
on the Future for tax purposes. Although Stock Index Futures by their terms call
for settlement by the delivery of cash, in most cases the settlement obligation
is fulfilled without such delivery by entering into an offsetting transaction.
All futures transactions are effected through a clearing house associated with
the exchange on which the contracts are traded.
o REGULATORY ASPECTS OF HEDGING INSTRUMENTS. The Fund is required to
operate within certain guidelines and restrictions with respect to its use of
futures and options thereon as established by the Commodities Futures Trading
Commission ("CFTC"). In particular, the Fund is excluded from registration as a
"commodity pool operator" if it complies with the requirements of Rule 4.5 (the
"Rule") adopted by the CFTC. Under the Rule, the Fund is not limited regarding
the percentage of its assets committed to futures margins and related options
premiums subject to a hedge position. However, under the Rule the Fund must
limit its aggregate initial futures margins and related options premiums to 5%
or less of the Fund's total assets for hedging strategies that are not
considered bona fide hedging strategies under the Rule. Under the Rule the Fund
also must use short futures and options on futures positions solely for bona
fide hedging purposes within the meaning and intent of applicable provisions of
the Commodity Exchange Act.
Transactions in options by the Fund are subject to limitations established
by option exchanges governing the maximum number of options that may be written
or held by a single investor or group of investors acting in concert, regardless
of whether the options were written or purchased on the same or different
exchanges or are held in one or more accounts or through one or more different
exchanges or through one or more brokers. Thus the number of options which the
Fund may write or hold may be affected by options written or held by other
entities, including other investment companies having the same adviser as the
Fund (or an adviser that is an affiliate of the Fund's adviser). The exchanges
also impose position limits on Futures transactions.
An exchange may order
the liquidation of positions found to be in violation of those limits and may
impose certain other sanctions.
Due to requirements under the Investment Company Act, when the Fund
purchases a Stock Index Future, the Fund will maintain, in a segregated account
or accounts with its custodian, cash or readily-marketable, short-term (maturing
in one year or less) debt instruments in an amount equal to the market value of
the securities underlying such Future, less the margin deposit applicable to it.
o ADDITIONAL INFORMATION ABOUT HEDGING INSTRUMENTS AND THEIR
USE. The
Fund's Custodian, or a securities depository acting for the Custodian, will act
as the Fund's escrow agent, through the facilities of the Options Clearing
Corporation ("OCC"), as to the investments on which the Fund has written options
traded on exchanges or as to other acceptable escrow securities, so that no
margin will be required for such transactions. OCC will release the securities
on the expiration of the option or upon the Fund's entering into a closing
transaction. An option position may be closed out only on a market which
provides secondary trading for options of the same series, and there is no
assurance that a liquid secondary market will exist for any particular option.
When the Fund writes an over-the-counter ("OTC") option, it will enter
into an arrangement with a primary U.S. Government securities dealer, which
would establish a formula price at which the Fund would have the absolute right
to repurchase that OTC option. That formula price would generally be based on a
multiple of the premium received for the option, plus the amount by which the
option is exercisable below the market price of the underlying security (that
is, the extent to which the option is "in-the-money"). When the Fund writes an
OTC option, it will treat as illiquid (for purposes of the limit on its assets
that may be invested in the illiquid securities, stated in the Prospectus) the
mark-to-market value of any OTC option held by it unless subject to a buy-back
agreement with the executing broker. The SEC is evaluating whether OTC options
should be considered liquid securities, and the procedure described above could
be affected by the outcome of that evaluation.
The Fund's option activities may affect its turnover rate and brokerage
commissions. The exercise by the Fund of puts on securities will cause the sale
of related investments, increasing portfolio turnover. Although such exercise is
within the Fund's control, holding a put might cause the Fund to sell the
related investments for reasons which would not exist in the absence of the put.
The Fund will pay a brokerage commission each time it buys a put or call, sells
a call, or buys or sells an underlying investment in connection with the
exercise of a put or call. Such commissions may be higher than those which would
apply to direct purchases or sales of such underlying investments. Premiums paid
for options are small in relation to the market value of the related
investments, and consequently, put and call options offer large amounts of
leverage. The leverage offered by trading options could result in the Fund's net
asset value being more sensitive to changes in the value of the underlying
investments.
o TAX ASPECTS OF COVERED CALLS AND HEDGING INSTRUMENTS. The Fund
intends to
qualify as a "regulated investment company" under the Internal Revenue Code
(although it reserves the right not to qualify). That qualification enables the
Fund to "pass through" its income and realized capital gains to shareholders
without the Fund having to pay tax on them. This avoids a "double tax" on that
income and capital gains, since shareholders normally will be taxed on the
dividends and capital gains they receive from the Fund (unless the Fund's shares
are held in a retirement account or the shareholder is otherwise exempt from
tax).
Certain foreign currency exchange contracts ("Forward Contracts") in which
the Fund may invest are treated as "section 1256 contracts." Gains or losses
relating to section 1256 contracts generally are characterized under the
Internal Revenue Code as 60% long-term and 40% short-term capital gains or
losses. However, foreign currency gains or losses arising from certain section
1256 contracts (including Forward Contracts) generally are treated as ordinary
income or loss. In addition, section 1256 contracts held by the Fund at the end
of each taxable year are "marked-to-market" with the result that unrealized
gains or losses are treated as though they were realized. These contracts also
may be marked-to-market for purposes of the excise tax applicable to investment
company distributions and for other purposes under rules prescribed pursuant to
the Internal Revenue Code. An election can be made by the Fund to exempt these
transactions from this marked-to-market treatment.
Certain Forward Contracts entered into by the Fund may result in
"straddles" for Federal income tax purposes. The straddle rules may affect the
character and timing of gains (or losses) recognized by the Fund on straddle
positions. Generally, a loss sustained on the disposition of a position making
up a straddle is allowed only to the extent such loss exceeds any unrecognized
gain in the offsetting positions making up the straddle. Disallowed loss is
generally allowed at the point where there is no unrecognized gain in the
offsetting positions making up the straddle, or the offsetting position is
disposed of.
Under the Internal Revenue Code, gains or losses attributable to
fluctuations in exchange rates that occur between the time the Fund accrues
interest or other receivables or accrues expenses or other liabilities
denominated in a foreign currency and the time the Fund actually collects such
receivables or pays such liabilities generally are treated as ordinary income or
ordinary loss. Similarly, on disposition of debt securities denominated in a
foreign currency and on disposition foreign currency forward contracts, gains or
losses attributable to fluctuations in the value of a foreign currency between
the date of acquisition of the security or contract and the date of the
disposition also are treated as an ordinary gain or loss. Currency gains and
losses are offset against market gains and losses on each trade before
determining a net "section 988" gain or loss under the Internal Revenue Code,
which may ultimately increase or decrease the amount of the Fund's investment
company income available for distribution to its shareholders.
o ADDITIONAL RISK FACTORS IN HEDGING. An option position may be closed out
only on a market that provides secondary trading for options of the same series,
and there is no assurance that a liquid secondary market will exist for any
particular option. An option position may be closed out only on a market that
provides secondary trading for options of the same series, and there is no
assurance that a liquid secondary market will exist for any particular option.
In addition to the risks with respect to options discussed in the Prospectus and
above, there is a risk in using short hedging by (i) selling Stock Index Futures
or (ii) purchasing puts on stock indices or Stock Index Futures to attempt to
protect against declines in the value of the Fund's equity securities. The risk
is that the prices of Stock Index Futures will correlate imperfectly with the
behavior of the cash (i.e., market value) prices of the Fund's equity
securities. The ordinary spreads between prices in the cash and futures markets
are subject to distortions, due to differences in the natures of those markets.
First, all participants in the futures markets are subject to margin deposit and
maintenance requirements. Rather than meeting additional margin deposit
requirements, investors may close out futures contracts through offsetting
transactions which could distort the normal relationship between the cash and
futures markets. Second, the liquidity of the futures markets depends on
participants entering into offsetting transactions rather than making or taking
delivery. To the extent participants decide to make or take delivery, liquidity
in the futures markets could be reduced, thus producing distortion. Third, from
the point of view of speculators, the deposit requirements in the futures
markets are less onerous than margin requirements in the securities markets.
Therefore, increased participation by speculators in the futures markets may
cause temporary price distortions.
The risk of imperfect correlation increases as the composition of the
Fund's portfolio diverges from the securities included in the applicable index.
To compensate for the imperfect correlation of movements in the price of the
equity securities being hedged and movements in the price of the hedging
instruments, the Fund may use hedging instruments in a greater dollar amount
than the dollar amount of equity securities being hedged if the historical
volatility of the prices of the equity securities being hedged is more than the
historical volatility of the applicable index. It is also possible that if the
Fund has used hedging instruments in a short hedge, the market may advance and
the value of equity securities held in the Fund's portfolio may decline. If that
occurred, the Fund would lose money on the hedging instruments and also
experience a decline in value in its portfolio securities. However, while this
could occur for a very brief period or to a very small degree, over time the
value of a diversified portfolio of equity securities will tend to move in the
same direction as the indices upon which the hedging instruments are based.
If the Fund uses hedging instruments to establish a position in the
equities markets as a temporary substitute for the purchase of individual equity
securities (long hedging) by buying Stock Index Futures and/or calls on such
Futures, on securities or on stock indices, it is possible that the market may
decline. If the Fund then concludes not to invest in equity securities at that
time because of concerns as to a possible further market decline or for other
reasons, the Fund will realize a loss on the hedging instruments that is not
offset by a reduction in the price of the equity securities purchased.
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<PAGE>
OTHER INVESTMENT RESTRICTIONS
The Fund's most significant investment restrictions are set forth in the
Prospectus. There are additional investment restrictions that the Fund must
follow that are also fundamental policies. Fundamental policies and the Fund's
investment objective cannot be changed without the vote of a "majority" of the
Fund's outstanding voting securities. Under the Investment Company Act, such a
majority vote is defined as the vote of the holders of the lesser of: (i) 67% or
more of the shares present or represented by proxy at a shareholder meeting, if
the holders of more than 50% of the outstanding shares are present or
represented by proxy, or (ii) more than 50% of the outstanding shares.
Under these additional restrictions, the Fund cannot:
o Invest for the purpose of exercising control over management of
any company;
o Purchase or retain securities of any company if, to the knowledge of the
Fund, any officer or director of the Fund, the investment adviser or the
Sub-Adviser owns more than 1/2 of 1% of the outstanding securities of such
company and such officers or directors who own 1/2 of 1% in the aggregate own
more than 5% of the outstanding securities;
o Make loans of money or property to any person, except (i) through loans
of portfolio securities in an amount not to exceed 33-1/3% of the value of the
Fund's total assets, (ii) the purchase of fixed income securities consistent
with the Fund's investment objective and policies and (iii) by entering into
repurchase agreements (for the purpose of this restriction, collateral
arrangements with respect to stock options, options on securities and stock
indices, stock index futures and securities and options on such futures are not
deemed to be loans of assets);
o Underwrite the securities of other issuers, except to the extent that in
connection with the disposition of portfolio securities or the sale of its own
shares the Fund may be deemed to be an underwriter;
o Purchase real estate or interests therein, although the Fund may
purchase or sell securities of companies which deal in real estate or interests
therein;
o Invest in physical commodities or physical commodity contracts;
however, the Fund may: (i) buy and sell hedging instruments to the extent
specified in its Prospectus from time to time,
and (ii) buy and sell options, futures, securities or other instruments backed
by, or the investment return from which is linked to changes in the price of,
physical commodities;
4
<PAGE>
o Mortgage, hypothecate or pledge any of its assets, except to the extent
that the Fund may pledge assets to secure permitted borrowings and in connection
with collateral arrangements with respect to options or futures; and
o Issue senior securities, as defined in the 1940 Act, except that the
Fund may enter into repurchase agreements, lend its portfolio securities and
borrow money from banks for temporary or emergency purposes.
NON-FUNDAMENTAL INVESTMENT RESTRICTIONS. The following operating policies
of
the Fund are not fundamental policies and, as such, may be changed by vote of
a majority of the Fund's Board of
Directors without shareholder approval. These additional restrictions provide
that the Fund cannot:
o purchase securities on margin (except for such short-term loans as may
be necessary for the clearance of transactions) or make short sales of
securities.
o 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.
For purposes of the Fund's policy not to invest more than 25% of its
assets in any one industry as described in the Prospectus, the Fund has adopted,
as a matter of non-fundamental policy, the corporate industry classifications
set forth in Appendix A to this Statement of Additional Information. The
percentage restrictions described above and in the Prospectus apply only at the
time of investment and require no action by the Fund as a result of subsequent
changes in relative values.
HOW THE FUND IS MANAGED
ORGANIZATION AND HISTORYThe Fund is organized as a Maryland corporation which
currently operates as a diversified open-end management investment company. The
Fund originally commenced operations on February 13, 1987 as a closed-end
investment company. On March 3, 1997, the Fund was converted to an open-end
investment company.
As a Maryland corporation, the Fund is not required to hold, and does not
plan to hold, regular annual meetings of shareholders. The Fund will hold
meetings when required to do so by the Investment Company Act or other
applicable law, or when a shareholder meeting is called by the Trustees or upon
proper request of the shareholders. Each share of the Fund represents an
interest in the Fund proportionately equal to the interest of each other share
of the same class and entitles the holder to one vote per share (and a
fractional vote for a fractional share) on matters submitted to their vote at
shareholders' meetings. Shareholders of the Fund vote together in the aggregate
on certain matters at shareholders' meetings, such as the election of Directors
and ratification of appointment of auditors for the Fund. Shareholders of a
particular class vote separately on proposals which affect that class, and
shareholders of a class which is not affected by that matter are not entitled to
vote on the proposal. For example, only shareholders of a class of a series vote
on certain amendments to the Distribution and/or Service Plans if the amendments
affect that class.
DIRECTORS AND OFFICERS OF THE FUND. The Fund's Directors and officers, and the
Fund's portfolio manager (who is not an officer), are listed below, together
with principal occupations and business affiliations during the past five years.
The address of each is Two World Trade Center, New York, New York 10048, except
as noted. All of the Directors are directors or trustees of Oppenheimer Quest
Capital Value Fund, Inc., Oppenheimer Quest For Value Funds (consisting of the
following series: Oppenheimer Quest Growth & Income Value Fund, Oppenheimer
Quest Officers Value Fund, Oppenheimer Quest Opportunity Value Fund, and
Oppenheimer Quest Small Cap Value Fund), Oppenheimer Quest Global Value Fund,
Inc. and Oppenheimer Quest Value Fund, Inc. (collectively, the "Oppenheimer
Quest Funds"), Rochester Fund Municipals, Rochester Portfolio Series - Limited
Term New York Municipal Fund and Bond Fund Series - Oppenheimer Bond Fund For
Growth (collectively, the "Oppenheimer Rochester Funds") and Oppenheimer MidCap
Fund. As of January 2, 1998, the Directors and officers of the Fund as a group
owned less than 1% of the outstanding shares of each class of the Fund. The
foregoing does not include shares held of record by an employee benefit plan for
employees of the Manager (for which one of the officers listed below, Mr.
Donohue, is a trustee), other than the shares beneficially owned under that plan
by officers of the Fund listed below.
BRIDGET A. MACASKILL, CHAIRMAN OF THE BOARD OF TRUSTEES AND
PRESIDENT 1; AGE: 49
President (since June 1991), Chief Executive Officer (since September 1995) and
a Director (since December 1994) of the Manager; President and director (since
June 1991) of HarbourView Asset Management Corporation ("HarbourView"), a
subsidiary of the Manager; Chairman and a director of Shareholder Services, Inc.
("SSI") (since August 1994) and Shareholder Financial Services, Inc. ("SFSI")
(September 1995), transfer agent subsidiaries of the Manager; President (since
September 1995) and a director (since October 1990) of Oppenheimer Acquisition
Corp. ("OAC"), the Manager's parent holding company; President (since September
1995) and a director (since November 1989) of Oppenheimer Partnership Holdings,
Inc., a holding company subsidiary of the Manager; a director of Oppenheimer
Real Asset Management, Inc. (since July 1996); President and a director (since
October 1997) of OppenheimerFunds International Ltd. ("OFIL"), an offshore fund
manager subsidiary of the Manager and Oppenheimer Millennium Funds plc (since
October 1997); President and a director of other Oppenheimer funds; a director
of the NASDAQ Stock Market, Inc. and of Hillsdown Holdings plc (a U.K. food
company); formerly an Executive Vice President of the Manager.
- -----------------------
1 A Director who is an "interested person" of the Fund as defined in the 1940
Act.
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PAUL Y. CLINTON, TRUSTEE; AGE: 66
39 Blossom Avenue, Osterville, Massachusetts 02655
Principal of Clinton Management Associates (financial and venture capital
consulting firm); Trustee of Capital Cash Management Trust (money-market fund)
and Narragansett Tax-Free Fund (tax-exempt bond fund); Director of OCC Cash
Reserves, Inc. and Trustee of OCC Accumulation Trust, (both open-end investment
companies). Formerly: Director, External Affairs, Kravco Corporation, ( national
real estate owner and property management corporation); President of Essex
Management Corporation (management consulting company); a general partner of
Capital Growth Fund (venture capital partnership); a general partner of Essex
Limited Partnership ( investment partnership); President of Geneve Corp.
(venture capital fund); Chairman of Woodland Capital Corp. (small business
investment company); and Vice President of W.R. Grace & Co.
THOMAS W. COURTNEY, TRUSTEE; AGE: 64
833 Wyndemere Way, Naples, Florida 34105
Principal of Courtney Associates, Inc. (venture capital firm); former General
Partner of Trivest Venture Fund (private venture capital fund); Trustee of Cash
Assets Trust, (money market fund); Director of OCC Cash Reserves, Inc., and
Trustee of OCC Accumulation Trust, both open-end investment companies); Trustee
of Hawaiian Tax-Free Trust and Tax Free Trust of Arizona, (both tax-exempt bond
funds); Director of several privately owned corporations. Formerly President of
Investment Counseling Federated Investors, Inc.; former President of Boston
Company Institutional Investors; Director of Financial Analysts Federation.
LACY B. HERRMANN, TRUSTEE; AGE: 68
380 Madison Avenue, Suite 2300, New York, New York 10017
Chairman and Chief Executive Officer of Aquila Management Corporation
(sponsoring organization and Administrator and/or Sub-Adviser to the following
open-end investment companies, and Chairman of the Board of Trustees and
President of each: Churchill Cash Reserves Trust, Aquila Cascadia Equity Fund,
Pacific Capital Cash Assets Trust, Pacific Capital U.S. Treasuries Cash Assets
Trust, Pacific Capital Tax-Free Cash Assets Trust, Prime Cash Fund, Narragansett
Insured Tax-Free Income Fund, Tax-Free Fund For Utah, Churchill Tax-Free Fund of
Kentucky, Tax-Free Fund of Colorado, Tax-Free Trust of Oregon, Tax-Free Trust of
Arizona, Hawaiian Tax-Free Trust, and Aquila Rocky Mountain Equity Fund); Vice
President, Director, Secretary, and formerly Treasurer of Aquila Distributors,
Inc., distributor of the above funds; President and Chairman of the Board of
Trustees of Capital Cash Management Trust ("CCMT"), and an Officer and
Trustee/Director of its predecessors; President and Director of STCM Management
Company, Inc. (sponsor and adviser to CCMT; Chairman, President and a Director
of InCap Management Corporation (formerly sub-adviser and administrator of Prime
Cash Fund and Short Term Asset Reserves); Director of OCC Cash Reserves, Inc.,
and Trustee of OCC Accumulation Trust (both open-end investment companies);
Trustee Emeritus of Brown University.
GEORGE LOFT, TRUSTEE; AGE: 82
51 Herrick Road, Sharon, Connecticut 06069
Private Investor; Director of OCC Cash Reserves, Inc. and Trustee of OCC
Accumulation Trust (both open-end investment companies).
ROBERT C. DOLL, JR., VICE PRESIDENT; AGE: 43
Executive Vice President and Director of the Manager (since January 1993) ;
Executive Vice President of HarbourView (since January 1993); Vice President and
a director of OAC (since September 1995); an officer of other Oppenheimer funds.
JEFFREY C. WHITTINGTON, PORTFOLIO MANAGER; AGE 40
One World Financial Center, 200 Liberty Street, New York, New York 10281 Senior
Vice President of Oppenheimer Capital; formerly a portfolio manager at Neuberger
& Berman and prior thereto, a portfolio manager at Oppenheimer & Co., Inc.
ANDREW J. DONOHUE, SECRETARY; AGE: 47
Executive Vice President (since January 1993), General Counsel (since October
1991) and a Director (since September 1995) of the Manager; Executive Vice
President (since September 1993), and a director (since January 1992) of
OppenheimerFunds Distributor, Inc. (the "Distributor"); Executive Vice
President, General Counsel and a director of HarbourView, SSI, SFSI and
Oppenheimer Partnership Holdings, Inc. since (September 1995) and MultiSource
Services, Inc. (a broker-dealer) (since December 1995); President and a director
of Centennial Asset Management Corporation ("Centennial") (since September
1995); President and a director of Oppenheimer Real Asset Management, Inc.
(since July 1996); General Counsel (since May 1996) and Secretary (since April
1997) of OAC; Vice President of OFIL and Oppenheimer Millennium Funds plc (since
October 1997); an officer of other Oppenheimer funds.
GEORGE C. BOWEN, TREASURER; AGE: 61
6803 South Tucson Way, Englewood, Colorado 80112
Senior Vice President (since September 1987) and Treasurer (since March 1985) of
the Manager; Vice President (since June 1983) and Treasurer (since March 1985)
of the Distributor; Vice President (since October 1989) and Treasurer (since
April 1986) of HarbourView; Senior Vice President (since February 1992),
Treasurer (since July 1991) and a director (since December 1991) of Centennial;
President, Treasurer and a director of Centennial Capital Corporation (since
June 1989); Vice President and Treasurer (since August 1978) and Secretary
(since April 1981) of SSI; Vice President, Treasurer and Secretary of SFSI
(since November 1989); Treasurer of OAC (since June 1990); Treasurer of
Oppenheimer Partnership Holdings, Inc. (since November 1989); Vice President and
Treasurer of Oppenheimer Real Asset Management, Inc. (since July 1996); Chief
Executive Officer, Treasurer and a director of MultiSource Services, Inc., a
broker-dealer (since December 1995); a director and officer of other Oppenheimer
funds.
ROBERT BISHOP, ASSISTANT TREASURER; AGE: 39
6803 South Tucson Way, Englewood, Colorado 80112
Vice President of the Manager/Mutual Fund Accounting (since May 1996); an
officer of other Oppenheimer funds; formerly an Assistant Vice President of the
Manager/Mutual Fund Accounting (April 1994-May 1996), and a Fund Controller for
the Manager.
SCOTT T. FARRAR, ASSISTANT TREASURER; AGE: 32
6803 South Tucson Way, Englewood, Colorado 80112
Vice President of the Manager/Mutual Fund Accounting (since May 1996);
Assistant Treasurer of Oppenheimer Millennium Funds plc (since October 1997);
an officer of other Oppenheimer funds;
formerly an Assistant Vice President of the Manager/Mutual Fund Accounting
(April 1994-May 1996), and a Fund Controller for the Manager.
ROBERT G. ZACK, ASSISTANT SECRETARY; AGE: 49
Senior Vice President (since May 1985) and Associate General Counsel (since May
1981) of the Manager, Assistant Secretary of SSI (since May 1985), and SFSI
(since November 1989); Assistant Secretary of Oppenheimer Millennium Funds plc
(since October 1997); an officer of other Oppenheimer funds.
o REMUNERATION OF DIRECTORS. All officers of the Fund and Ms. Macaskill, a
Director, are officers or directors of the Manager and receive no salary or fee
from the Fund. The remaining Directors of the Fund received the total amounts
shown below from (i) the Fund during its fiscal period ended October 31, 1997
and (ii) other investment companies (or series thereof) managed by the Manager
and/or Sub-Adviser paid during the calendar year ended December 31, 1997.
PENSION OR
RETIREMENT
AGGREGATE BENEFITS ESTIMATED TOTAL
COMPENSATION ACCRUED AS ANNUAL COMPENSATION
FROM THE PART OF FUND BENEFITS UPON FROM FUND
NAME OF PERSON FUND(1) EXPENSES RETIREMENT COMPLEX(2)
Paul Y. Clinton $6,047 None None $68,379
Thomas W. Courtney $6,047 None None $68,379
Lacy B. Herrmann $5,497 None None $63,154
George Loft $6,047 None None $68,379
(1) For the purpose of the chart above, "Fund Complex" includes the Oppenheimer
Quest Funds, the Oppenheimer Rochester Funds, Oppenheimer MidCap Fund and three
funds advised by the Sub- Adviser (the "Sub-Adviser Funds"). For these purposes,
each series constitutes a separate fund. Messrs. Clinton and Courtney served as
directors or trustees of two Sub-Adviser Funds, for which they are to receive
$49,250 and $49,250, respectively, and Messrs. Herrmann and Loft served as a
directors or trustees of three Sub-Adviser Funds, for which they are to receive
$45,388 and $50,688, respectively. Effective April 1997, Messrs. Herrmann and
Loft resigned as trustees from the third Sub-Adviser fund.
DEFERRED COMPENSATION PLAN. The Board of Directors has adopted a Deferred
Compensation plan for disinterested Directors that enables Directors to elect to
defer receipt of all or a portion of the annual fees they are entitled to
receive from the Fund. Under the plan, the compensation deferred by a Director
is periodically adjusted as though an equivalent amount had been invested in
shares of one or more Oppenheimer funds selected by the Director. The amount
paid to the Director under the plan will be determined based upon the
performance of the selected funds.
Deferral of Directors' fees under the plan will not materially affect the Fund's
assets, liabilities or net income per share. The plan will not obligate the Fund
to retain the services of any Director or to pay any particular level of
compensation to any Director. Pursuant to an Order issued by the SEC, the Fund
may, without shareholder approval, invest in the funds selected by the Director
under the plan for the limited purpose of determining the value of the
Director's deferred fee account.
o MAJOR SHAREHOLDERS. As of January 2, 1998, no person owned of record or was
known by the Fund to own beneficially 5% or more of the Fund's outstanding Class
A, Class B or Class C shares except: Smith Barney Inc. (for the benefit of its
customers), 388 Greenwich Street, New York, New York 10013, which owned of
record 565,059.365 Class A shares (approximately 5.98% of the Class A shares
then outstanding); Charles Schwab & Co., Inc. (for the benefit of its
customers), 101 Montgomery Street, San Francisco, California 94104-4122, which
owned of record 532,863.660 Class A shares (approximately 5.70% of the Class A
shares then outstanding); CIBC Oppenheimer Capital (Accumulation Plan Omnibus
Account), Oppenheimer Tower, 1 World Financial Center, New York, New York
10281-1003, which owned of record (i) 486,304.925 Class A shares (approximately
5.15% of the Class A shares then outstanding) and (ii) 3,472.784 Class C shares
(approximately 14.49% of the Class C shares then outstanding); Dean Witter
Reynolds as Custodian for Morrison Heth (IRA Rollover), Church Street Station,
P.O. Box 250, New York, New York 10277-1763, which owned of record 1,373.155
Class C shares (approximately 5.73% of the Class C shares then outstanding);
CIBC Oppenheimer Corp. FBO 387-75021-16, P.O. Box 3484, Church Street Station,
New York, New York 10008-8484, which owned of record 1,333.666 Class C shares
(approximately 5.56% of the Class C shares then outstanding); RPSS TR IRA FBO
Leon Rossen, 3732 80th Street, Jackson Heights, New York 11372-6827, which owned
of record 1,232.969 Class C shares (approximately 5.14% of the Class C shares
then outstanding); and Donaldson Lufkin Jenrette Securities Corporation, Inc.,
P.O. Box 2052, Jersey City, New Jersey 07303-9998, which owned of record
1,223.091 Class C shares (approximately 5.10% of the Class C shares then
outstanding).
THE MANAGER AND ITS AFFILIATES. The Manager is wholly-owned by Oppenheimer
Acquisition Corp. ("OAC"), a holding company controlled by Massachusetts Mutual
Life Insurance Company. OAC is also owned in part by certain of the Manager's
directors and officers, some of whom also serve as officers of the Fund and one
of whom (Ms. Macaskill) also serves as an officer and a Director of the Fund.
The Manager and the Fund have a Code of Ethics. In addition to having its
own Code of Ethics, the Sub-Adviser is obligated to report to the Manager any
violations of the Sub-Adviser's Code of Ethics relating to the Fund. The Code of
Ethics is designed to detect and prevent improper personal trading by certain
employees, including the Fund's portfolio manager, who is an employee of the
Sub-Adviser, that would compete with or take advantage of the Funds' portfolio
transactions. Compliance with the Code of Ethics is carefully monitored and
strictly enforced by the Manager.
o PORTFOLIO MANAGEMENT. The Portfolio Manager of the Fund is Jeffrey C.
Whittington, who is principally responsible for the day-to-day management of the
Fund's portfolio. Mr. Whittington's background is described in the Prospectus
under "Portfolio Manager".
o THE INVESTMENT ADVISORY AGREEMENT. The Manager acts as investment adviser
to the Fund pursuant to the terms of an Investment Advisory Agreement dated as
of February 28, 1997. The Sub-Adviser previously served as the Fund's investment
adviser from the Fund's inception (February 13, 1987) through February 28, 1997;
effective as of February 28, 1997, the Manager acquired the investment advisory
and other contracts and business relationships and certain assets and
liabilities of the Sub-Adviser, OCC Distributors and Oppenheimer Capital
relating to the Fund. The Investment Advisory Agreement was approved by the
Board of Directors, including a majority of the Directors who are not
"interested persons" of the Fund (as defined in the 1940 Act) and who have no
direct or indirect financial interest in such agreement, on September 17, 1996
and by the shareholders of the Fund at a meeting held for that purpose on
December 20, 1996.
Under the Investment Advisory Agreement, the Manager acts as the
investment adviser for the Fund and supervises the investment program of the
Fund. The Investment Advisory Agreement provides that the Manager will provide
administrative services for the Fund, including completion and maintenance of
records, preparation and filing of reports required by the SEC, reports to
shareholders, and composition of proxy statements and registration statements
required by Federal laws. The Manager will furnish the Fund with office space,
facilities and equipment and arrange for its employees to serve as officers of
the Fund. The administrative services to be provided by the Manager under the
Investment Advisory Agreement will be at its own expense.
Expenses not assumed by the Manager under the Investment Advisory
Agreement or paid by the Distributor under the General Distributor's Agreement
will be paid by the Fund. Certain expenses are further allocated to certain
classes of shares of a series as explained in the Prospectus and under "How to
Buy Shares," below. The Investment Advisory Agreement lists examples of expenses
paid by the Fund, including interest, taxes, brokerage commissions, insurance
premiums, fees of non- interested Directors, legal and audit expenses, transfer
agent and custodian expenses, share issuance costs, certain printing and
registration costs, and non-recurring expenses, including litigation. For the
fiscal period March 3, 1997 (when the Manager became the investment adviser to
the Fund) to October 31, 1997 (the "Fiscal Period") the Fund paid to the Manager
$2,581,264 in management fees after giving effect to the fee waiver described
below; without such fee waiver, the Management fees for the Fiscal Period would
have been $3,222,939.
The Investment Advisory Agreement provides that for a period of two years
from the date thereof, the Manager will waive the following portion of the
advisory fee: 0.15% of the first $200 million of average daily net assets, 0.40%
of the next $200 million, 0.30% of the next $400 million and 0.25% of average
daily net assets over $800 million. Pursuant to the foregoing, the Manager's fee
at the end of any month will be reduced or eliminated such that there will not
be any accrued but unpaid liability under this fee waiver. Any waiver of fees
would lower the Fund's overall expense ratio and increase its total return
during any period in which they are in effect.
The Investment Advisory Agreement provides that in the absence of willful
misfeasance, bad faith, or gross negligence in the performance of its duty, or
reckless disregard for its obligations and duties under the advisory agreement,
the Manager is not liable for any loss resulting from good faith errors or
omissions on its part with respect to any of its duties thereunder. The
Investment Advisory Agreement permits the Fund to use the name "Oppenheimer" or
"Quest For Value" in the name of the Fund for the duration of the Agreement.
Pursuant to the Investment Advisory Agreement, the Manager may act as investment
adviser for any other person, firm or corporation and may use the name
"Oppenheimer" and "Quest For Value" in connection with its other investment
companies for which it may act as an investment adviser or general distributor.
If the Manager shall no longer act as investment adviser to a Fund, the right of
the Fund to use "Oppenheimer" or "Quest For Value" as part of its name may be
withdrawn.
The Investment Advisory Agreement provides that the Manager may enter into
sub-advisory agreements with other affiliated or unaffiliated registered
investment advisers in order to obtain specialized services for the Funds
provided that the Fund is not required to pay any additional fees for such
services. The Manager has retained the Sub-Adviser pursuant to a separate
Subadvisory Agreement dated as of November 5, 1997, with respect to the Fund,
described below, which replaced the Subadvisory Agreement dated as of February
28, 1997.
o FEES PAID UNDER THE PRIOR INVESTMENT ADVISORY AGREEMENT AND
ADMINISTRATION
AGREEMENT. The Sub-Adviser served as investment adviser to the Fund from its
inception until February 28, 1997.
Under the prior Investment Advisory Agreement, the total advisory fees accrued
or paid by the Fund were $4,418,791 and $4,916,973 for the fiscal years ended
December 31, 1995 and 1996, respectively, and $730,855 for the fiscal period
January 1, 1997 to February 28, 1997 (the "Interim Period").
For the fiscal years ended December 31, 1995 and 1996 and the Interim
Period, the Fund paid or accrued administration fees to Oppenheimer Capital in
the amounts of $783,758, $883,395 and $130,006, respectively. The Administration
Agreement between the Fund and Oppenheimer Capital was terminated as of February
28, 1997; the services previously provided thereunder are provided by the
Manager under the Investment Advisory Agreement.
o THE SUBADVISORY AGREEMENT. The Subadvisory Agreement provides that the
Sub-Adviser shall regularly provide investment advice with respect to the Fund
and invest and reinvest cash, securities and the property comprising the assets
of the Fund. Under the Subadvisory Agreement, the Sub- Adviser agrees to use its
reasonable best efforts to retain the services of the Portfolio Manager and
agrees not to change the Portfolio Manager of the Fund without the written
approval of the Manager. In addition the Portfolio Manager will provide
assistance in the distribution and marketing of the Fund. The Subadvisory
Agreement was approved by the Board of Directors, including a majority of the
Directors who are not "interested persons" of the Fund (as defined in the 1940
Act) and who have no direct or indirect financial interest in such agreement, on
February 28, 1997 and by the shareholders of the Fund at a meeting held for that
purpose on May 19, 1997. Under the Subadvisory Agreement, the Manager will pay
the Sub-Adviser an annual fee payable monthly, based on the average daily net
assets of the Fund, equal to 40% of the investment advisory fee collected by the
Manager from the Fund based on the total net assets of the Fund as of February
28, 1997 and remaining 120 days later (the "base amount") plus 30% of the
investment advisory fee collected by the Manager based on the total net assets
of the Fund that exceed the base amount, in each case calculated after any
waivers, voluntary or otherwise.
The Subadvisory Agreement provides that in the absence of willful
misfeasance, bad faith, negligence or reckless disregard of its duties or
obligations, the Sub-Adviser shall not be liable to the Manager for any act or
omission in the course of or connected with rendering services under the
Subadvisory Agreement or for any losses that may be sustained in the purchase,
holding or sale of any security.
The Sub-Adviser is a majority owned subsidiary of Oppenheimer Capital, a
registered investment advisor, whose employees perform all investment advisory
services provided to the Fund by the Sub-Adviser. On November 4, 1997, PIMCO
Advisors L.P. ("PIMCO Advisors"), a registered investment adviser with $125
billion in assets under management through various subsidiaries and affiliates,
acquired control of Oppenheimer Capital and the Sub-Adviser. On November 5,
1997, the new Sub-advisory Agreement between the Sub-Adviser and the Manager
became effective. On November 30, 1997, Oppenheimer Capital merged with a
subsidiary of PIMCO Advisors and, as a result, Oppenheimer Capital and the
Sub-Adviser became indirect wholly-owned subsidiaries of PIMCO Advisors. PIMCO
Advisors has two general partners: PIMCO Partners, G.P., a California general
partnership ("PIMCO GP"), and PIMCO Advisors Holdings L.P. (formerly Oppenheimer
Capital, L.P.), an NYSE-listed Delaware limited partnership of which PIMCO GP is
the sole general partner.
PIMCO GP beneficially owns or controls (through its general partner
interest in Oppenheimer Capital, L.P.) greater than 80% of the units of limited
partnership ("Units") of PIMCO Advisors. PIMCO GP has two general partners. The
first of these is Pacific Investment Management Company, a wholly-owned
subsidiary of Pacific Financial Asset Management Company, which is a direct
subsidiary of Pacific Life Insurance Company ("Pacific Life").
The managing general partner of PIMCO GP is PIMCO Partners L.L.C.
("PPLLC"), a California limited liability company. PPLLC's members are the
Managing Directors (the "PIMCO Managers") of Pacific Investment Management
Company, a subsidiary of PIMCO Advisors (the "PIMCO Subpartnership"). The PIMCO
Managers are: William H. Gross, Dean S. Meiling, James F. Muzzy, William F.
Podlich, III, Brent R. Harris, John L. Hague, William S. Thompson Jr., William
C. Powers, David H. Edington, Benjamin Trosky, William R. Benz, II and Lee R.
Thomas, III.
PIMCO Advisors is governed by a Management Board, which consists of sixteen
members, pursuant to a delegation by its general partners. PIMCO GP has the
power to designate up to nine members of the Management Board and the PIMCO
Subpartnership, of which the PIMCO Managers are the Managing Directors, has the
power to designate up to two members. In addition, PIMCO GP, as the controlling
general partner of PIMCO Advisors, has the power to revoke the delegation to the
Management Board and exercise control of PIMCO Advisors. As a result, Pacific
Life and/or the PIMCO Managers may be deemed to control PIMCO Advisors. Pacific
Life and the PIMCO Managers disclaim such control.
o THE DISTRIBUTOR. Under a General Distributor's Agreement with the Fund
dated as of February 28, 1997, the Distributor acts as the Fund's principal
underwriter in the continuous public offering of its Class A, Class B and Class
C shares of the Fund but is not obligated to sell a specific number of shares.
Expenses normally attributable to sales, including advertising and the cost of
printing and mailing prospectuses, other than those furnished to existing
shareholders, are borne by the Distributor. During the Fiscal Period, the
aggregate amount of sales charges on sales of the Fund's Class A shares was
$117,049, of which the Distributor and affiliated brokers retained $21,937.
During the Fiscal Period, the Distributor received contingent deferred sales
charges of $305 upon redemption of Class B shares, and received contingent
deferred sales charges of $39 upon redemption of Class C shares.
o THE TRANSFER AGENT. OppenheimerFunds Services, a division of the Manager,
acts as the Fund's Transfer Agent pursuant to a Transfer Agency and Service
Agreement dated February 28, 1997. Pursuant to the Agreement, the Transfer Agent
is responsible for maintaining the Fund's shareholder registry and shareholder
accounting records and for shareholder servicing and administrative functions.
As compensation therefor, the Fund is obligated to pay the Transfer Agent an
annual maintenance fee for each Fund shareholder account and reimburse the
Transfer Agent for its out of pocket expenses.
BROKERAGE POLICIES OF THE FUND
BROKERAGE PROVISIONS OF THE INVESTMENT ADVISORY AND SUBADVISORY
AGREEMENT. The
Investment Advisory Agreement contains provisions relating to the selection of
broker-dealers ("brokers") for the Fund's portfolio transactions. The Manager
and the Sub-Adviser may use such brokers as may, in their best judgment based on
all relevant factors, implement the policy of the Fund to achieve best execution
of portfolio transactions. While the Manager need not seek advance competitive
bidding or base its selection on posted rates, it is expected to be aware of the
current rates of most eligible brokers and to minimize the commissions paid to
the extent consistent with the interests and policies of the Fund as established
by its Board and the provisions of the Investment Advisory Agreement.
The Investment Advisory Agreement also provides that, consistent with
obtaining the best execution of the Fund's portfolio transactions, the Manager
and the Sub-Adviser, in the interest of the Fund, may select brokers other than
affiliated brokers, because they provide brokerage and/or research services to
the Fund and/or other accounts of the Manager or the Sub-Adviser. The
commissions paid to such brokers may be higher than another qualified broker
would have charged if a good faith determination is made by the Manager or the
Sub-Adviser that the commissions are reasonable in relation to the services
provided, viewed either in terms of that transaction or the Manager's or the
Sub-Adviser's overall responsibilities to all its accounts. No specific dollar
value need be put on the services, some of which may or may not be used by the
Manager or the Sub- Adviser for the benefit of the Fund or other of its advisory
clients. To show that the determinations were made in good faith, the Manager or
any Sub-Adviser must be prepared to show that the amount of such commissions
paid over a representative period selected by the Board was reasonable in
relation to the benefits to the Fund. The Investment Advisory Agreement
recognizes that an affiliated broker-dealer may act as one of the regular
brokers for the Fund provided that any commissions paid to such broker are
calculated in accordance with procedures adopted by the Fund's Board under
applicable rules of the SEC.
In addition, the Subadvisory Agreement permits the Sub-Adviser to enter
into "soft dollar" arrangements through the agency of third parties to obtain
services for the Fund. Pursuant to these arrangements, the Sub-Adviser will
undertake to place brokerage business with broker-dealers who pay third parties
that provide services. Any such "soft dollar" arrangements will be made in
accordance with policies adopted by the Board of the Fund and in compliance with
applicable law.
DESCRIPTION OF BROKERAGE PRACTICES. Portfolio decisions are based upon
recommendations of the portfolio manager and the judgment of the portfolio
managers. The Fund will pay brokerage commissions on transactions in listed
options and equity securities. Prices of portfolio securities purchased from
underwriters of new issues include a commission or concession paid by the issuer
to the underwriter, and prices of debt securities purchased from dealers include
a spread between the bid and asked prices.
Transactions may be directed to dealers during the course of an
underwriting in return for their brokerage and research services, which are
intangible and on which no dollar value can be placed. There is no formula for
such allocation. The research information may or may not be useful to one or
more of the Fund and/or other accounts of the Manager or the Sub-Adviser;
information received in connection with directed orders of other accounts
managed by the Manager or the Sub- Adviser or its affiliates may or may not be
useful to one or more of the Funds. Such information may be in written or oral
form and includes information on particular companies and industries as well as
market, economic or institutional activity areas. It serves to broaden the scope
and supplement the research activities of the Manager or the Sub-Adviser, to
make available additional views for consid eration and comparison, and to enable
the Manager or the Sub-Adviser to obtain market information for the valuation of
securities held in the Fund's assets.
Sales of shares of the Fund, subject to applicable rules covering the
Distributor's activities in this area, will also be considered as a factor in
the direction of portfolio transactions to dealers, but only in conformity with
the price, execution and other considerations and practices discussed above. The
Fund will not purchase any securities from or sell any securities to an
affiliated broker-dealer acting as principal for its own account.
6
<PAGE>
The Sub-Adviser currently serves as investment manager to a number of
clients, including other investment companies, and may in the future act as
investment manager or advisor to others. It is the practice of the Sub-Adviser
to cause purchase or sale transactions to be allocated among the Fund and others
whose assets it manages in such manner as it deems equitable. In making such
allocations among the Fund and other client accounts, the main factors
considered are the respective investment objectives, the relative size of
portfolio holdings of the same or comparable securities, the availability of
cash for investment, the size of investment commitments generally held and the
opinions of the persons responsible for managing the portfolios of each Fund and
other client accounts.
When orders to purchase or sell the same security on identical terms are
placed by more than one of the funds and/or other advisory accounts managed by
the Sub-Adviser or its affiliates, the transactions are generally executed as
received, although a fund or advisory account that does not direct trades to a
specific broker ("free trades") usually will have its order executed first.
Purchases are combined where possible for the purpose of negotiating brokerage
commissions, which in some cases might have a detrimental effect on the price or
volume of the security in a particular transaction as far as the Fund is
concerned. Orders placed by accounts that direct trades to a specific broker
will generally be executed after the free trades. All orders placed on behalf of
the Fund are considered free trades. However, having an order placed first in
the market does not necessarily guarantee the most favorable price.
The following table presents information as to the allocation of brokerage
commissions paid by the Fund for the fiscal years ended December 31, 1995 and
1996 and the Fiscal Period. Prior to November 3, 1997, Oppenheimer & Co., Inc.
("OpCo"), a broker-dealer, was an affiliate of the Sub- Adviser.
<TABLE>
<CAPTION>
Total Amount of
Total Transactions Where
For the Brokerage Brokerage Commissions Brokerage
Fiscal Year/ Commissions Paid to Opco PAID TO OPCO
Period PAID Dollar Amount % Dollar Amount %
ENDED
<S> <C> <C> <C> <C> <C> <C>
12/31/95 $1,051,545 $267,394 25.4% $251,309,982 31.3%
12/31/96 $1,040,957 $319,406 30.7 % $245,963,037 31.0%
10/31/97 $772,516 $264,046 34.2 % $158,017,489 19.6%
</TABLE>
During the Fiscal Period $4,410 was paid by the Fund to brokers as
commissions in return for research services; the aggregate dollar amount of
those transactions was $3,558,524.
PERFORMANCE OF THE FUND
TOTAL RETURN INFORMATION. As described in the Prospectus, from time to time the
"average annual total return," "cumulative total return" and "total return at
net asset value" of an investment in a class of shares of the Fund may be
advertised. An explanation of how these total returns are calculated for each
class and the components of those calculations is set forth below.
The Fund's advertisements of its performance data must, under applicable
SEC rules, include the average annual total returns for each advertised class of
shares of the Fund for the 1, 5, and 10- year periods (or the life of the class,
if less) ending as of the most recently-ended calendar quarter prior to the
publication of the advertisement. This enables an investor to compare the Fund's
performance to the performance of other funds for the same periods. However, a
number of factors should be considered before using such information as a basis
for comparison with other investments. An investment in the Fund is not insured;
its returns and share prices are not guaranteed and normally will fluctuate on a
daily basis. When redeemed, an investor's shares may be worth more or less than
their original cost. Returns for any given past period are not a prediction or
representation by the Fund of future returns. The returns of Class A, Class B
and Class C shares of the Fund are affected by portfolio quality, the type of
investments the Fund holds and its operating expenses allocated to the
particular class.
Prior to March 3, 1997, the Fund operated as a closed-end investment
company with a dual purpose structure and with dual investment objectives of (a)
long-term capital appreciation and preservation of capital and (b) current
income and long-term growth of income, and had common stock (the "Capital
Shares") and preferred stock (the "Income Shares") outstanding. The Income
Shares were redeemed by the Fund on January 31, 1997 and the Fund's dual purpose
structure terminated. Effective as of March 3, 1997, the Fund was converted to
an open-end investment company with a single investment objective of capital
appreciation. The outstanding Capital Shares of the Fund became Class A shares
of common stock and bear their allocable share of the Fund's expenses. The
historical performance of the Class A shares of the Fund (formerly, the Capital
Shares) has been restated to reflect the fees and expenses of such Class A
shares in effect as of March 3, 1997 without giving effect to any fee waivers.
O AVERAGE ANNUAL TOTAL RETURNS. The "average annual total return" of each
class is an average annual compounded rate of return for each year in a
specified number of years. It is the rate of return based on the change in value
of a hypothetical initial investment of $1,000 ("P" in the formula below) held
for a number of years ("n") to achieve an Ending Redeemable Value ("ERV") of
that investment, according to the following formula:
1/n
(ERV)
(---) -1 = Average Annual Total Return
( P )
o CUMULATIVE TOTAL RETURNS. The cumulative "total return" calculation
measures the change in value of a hypothetical investment of $1,000 over an
entire period of years. Its calculation uses
some of the same factors as average annual total return, but it does not average
the rate of return on an annual basis. Cumulative total return is determined as
follows:
ERV - P
------- = Total Return
P
In calculating total returns for Class A shares, the current maximum sales
charge of 5.75% (as a percentage of the offering price) is deducted from the
initial investment ("P") (unless the return is shown at net asset value, as
described below). Prior to March 3, 1997, the Fund operated as a closed-end
investment company and no initial sales charge was imposed on Fund shares. For
Class B shares, the payment of the applicable contingent deferred sales charge
(5.0% for the first year, 4.0% for the second year, 3.0% for the third and
fourth years, 2.0% for the fifth year, 1.0% for the sixth year, and none
thereafter) is applied to the investment result for the period shown (unless the
total return is shown at net asset value, as described below). For Class C
shares, the 1.0% contingent deferred sales charge is applied to the investment
result for the one-year period (or less). Total returns also assume that all
dividends and capital gains distributions during the period are reinvested to
buy additional shares at net asset value per share, and that the investment is
redeemed at the end of the period. As discussed above, total returns for Class A
shares have been adjusted to reflect the fees and expenses of such Class of
shares in effect as of the date thereof without giving effect to any fee
waivers.
The "average annual total returns" on an investment in Class A shares of
the Fund (using the method described above) for the one year and five year
periods ended October 31, 1997 and for the period from February 13, 1987
(commencement of operations) to October 31, 1997 were 7.96%, 12.02% and 15.45%,
respectively. Class B and Class C shares were first offered on March 3, 1997;
accordingly, average annual total return information for such shares is not yet
available.
The "cumulative total return" on Class A shares for the period from
February 13, 1987 (commencement of operations) to October 31, 1997 was 366.16%.
The cumulative total return on Class B shares and Class C shares for the period
from March 3, 1997 (commencement of the public offering of the class) through
October 31, 1997 was 6.80% and 10.83%, respectively.
O TOTAL RETURNS AT NET ASSET VALUE. From time to time the Fund may also
quote an "average annual total return at net asset value" or a "cumulative total
return at net asset value" for Class A, Class B or Class C shares. Each is based
on the difference in net asset value per share at the beginning and the end of
the period for a hypothetical investment in that class of shares (without
considering front-end or contingent deferred sales charges) and takes into
consideration the reinvestment of dividends and capital gains distributions.
The average annual total return at net asset value for Class A shares for
the one and five year periods ended October 31, 1997 and for the period from
February 13, 1987 through October 31, 1997 were 14.54%, 13.36% and 16.09%,
respectively. The cumulative total return at net asset value on the Fund's Class
A shares for the period from February 13, 1987 (commencement of operations) to
October 31, 1997 was 394.60%. The cumulative total return at net asset value on
the Fund's Class B and Class C shares for the period from March 3, 1997
(commencement of the public offering of the class) through October 31, 1997 was
11.80% and 11.83%, respectively.
OTHER PERFORMANCE COMPARISONS.From time to time the Fund may publish the
ranking
of its Class A, Class B or Class C shares by Lipper Analytical Services, Inc.
("Lipper"), a widely-recognized independent mutual fund monitoring service.
Lipper monitors the performance of regulated investment companies, including the
Fund, and ranks their performance for various periods based on categories
relating to investment objectives. The performance of the Fund is ranked against
(i) all other funds and (ii) all other capital appreciation funds. The Lipper
performance rankings are based on total returns that include the reinvestment of
capital gain distributions and income dividends but do not take sales charges or
taxes into consideration.
From time to time the Fund may publish the star ranking of the performance
of its Class A, Class B and/or Class C shares by Morningstar Inc.
("Morningstar"),an independent mutual fund monitoring service. Morningstar ranks
mutual funds in broad investment categories: domestic stock funds, international
stock funds, taxable bond funds and municipal bond funds, based on risk-adjusted
total investment returns. The Fund is ranked among domestic equity funds.
Investment return measures a fund's or class's one, three, five and ten-year
average annual total returns (depending on the inception of the fund or class)
in excess of 90-day U.S. Treasury bill returns after considering the fund's
sales charges and expenses. Risk measure a fund's class performance below 90-day
U.S. Treasury bill returns. Risk and investment return are combined to produce
star rankings reflecting performance relative to the average fund in the fund's
category. Five stars is the "highest" ranking (top 10%), four stars is "above
average" (next 22.5%), three stars is "average" (next 35%), two stars is "below
average" (next 22.5%) and one star is "lowest" (bottom 10%). The current star
rankings is the fund's or class's 3-year ranking or its combined 3 and 5-year
ranking (weighted 60%/40% respectively, or its combined 3-,5-and 10-year ranking
(weighted 40%, 30% and 30%, respectively) depending on the inception of the fund
or class. Rankings are subject to change monthly. From time to time, the Fund
may include in its advertisements and sales literature performance information
about the Fund cited in newspapers and other periodicals, such as THE NEW YORK
Times, which may include performance quotations from other sources, including
Lipper.
The Fund may also compare its performance to that of other funds in its
Morningstar category. In addition to its star rankings, Morningstar also
categorizes and compares a fund's 3-year performance on Morningstar's
classification of the fund's investments and investment style, rather than how a
fund defines its investment objective. Morningstar's four broad categories
(domestic equity, international equity, municipal bond and taxable bond) are
each further subdivided into categories based on types of investments and
investment styles. Those comparison by Morningstar are based on the same risk
and return measurements as its star rankings but do not consider the effect of
sales charges.
The total return on an investment in the Fund's Class A, Class B and Class
C shares may be compared with performance for the same period of the S&P 500
Index as described in the Prospectus. The performance of the index includes a
factor for the reinvestment of income dividends, but does not reflect
reinvestment of capital gains, expenses or taxes.
The performance of the Fund's Class A, Class B, or Class C shares may also
be compared in publications to (i) the performance of various market indices or
to other investments for which reliable performance data is available, and (ii)
to averages, performance rankings or other benchmarks prepared by recognized
mutual fund statistical services.
Total return information, may be useful to investors in reviewing the
performance of the Fund's Class A, Class B or Class C shares. However, when
comparing total return of an investment in Class A, Class B and Class C shares
of the Fund, a number of factors should be considered before using such
information as a basis for comparison with other investments. For example, an
investor may also wish to compare the Fund's Class A, Class B or Class C shares
may also wish to compare the Fund's Class A, Class B or Class C return to the
returns on fixed income investments available from banks and thrift
institutions, such as certificates of deposit, ordinary interest-paying checking
and savings accounts, and other forms of fixed or variable time deposits, and
various other instruments such as Treasury bills. However, the Fund's returns
and share price are not guaranteed or insured by the FDIC or any other agency
and will fluctuate daily, while bank depository obligations may be insured by
the FDIC and may provide fixed rates of return, and Treasury bills are
guaranteed as to principal and interest by the U.S. government.
From time to time, the Fund's Manager may publish rankings or ratings of
the Manager (or Transfer Agent) or the investor services provided by them to
shareholders of the Oppenheimer funds, other than performance rankings of the
Oppenheimer funds themselves. Those ratings or rankings of shareholder/investor
services by third parties may compare the Oppenheimer funds' services to those
of other mutual fund families selected by the rating or ranking services and may
be based upon the opinions of the rating or ranking service itself, based on its
research or judgment, or based upon surveys of investors, brokers, shareholders
or others.
DISTRIBUTION AND SERVICE PLANS
The Fund has adopted separate Distribution and Service Plans and
Agreements, each dated February 28, 1997, for Class A, Class B and Class C
shares of the Fund under Rule 12b-1 of the Investment Company Act pursuant to
which the Fund will compensate the Distributor for all or a portion of its costs
incurred in connection with the distribution and/or servicing of the shares of
that class, as described in the Prospectus. Each Plan has been approved by a
vote of (i) the Board of Directors of the Fund, including a majority of the
Directors who are not "interested persons" (as defined in the Investment Company
Act) of the Fund and who have no direct or indirect financial interest in the
operation of the Fund's 12b-1 plans or in any related agreement ("Independent
Directors"), cast in person at a meeting on September 17, 1996 called for the
purpose, among others, of voting on that Plan, and (ii) the holders of a
"majority" (as defined in the 1940 Act) of the shares of each class. For the
Class A Plan Fund, shareholder approval was received on December 20, 1996; for
the Class B and Class C Plans, the vote was cast by the Manager as the sole
initial holder of Class B and Class C shares of the Fund. Prior to March 3, 1997
the Fund operated as a closed-end investment company and did not have
Distribution and Service Plans and Agreements.
Under the Plans the Manager and the Distributor, in their sole discretion,
from time to time may use their own resources (which, in the case of the
Manager, may include profits from the advisory fee it receives from the Fund) to
make payments to brokers, dealers or other financial institutions (each is
referred to as a "Recipient" under the Plans) for distribution and
administrative services they perform at no cost to the Fund. The Distributor and
the Manager may, in their sole discretion, increase or decrease the amount of
payments they make from their own resources to Recipients.
Unless terminated as described below, each plan continues in effect from
year to year but only as long as such continuance is specifically approved at
least annually by the Fund's Board of Directors and its "Independent Directors"
by a vote cast in person at a meeting called for the purpose of voting on such
continuance. Any Plan may be terminated at any time by the vote of a majority of
the Independent Directors or by the vote of the holders of a "majority" (as
defined in the Investment Company Act) of the outstanding shares of that class.
No Plan may be amended to increase materially the amount of payments to be made
unless such amendment is approved by shareholders of the class affected by the
amendment. In addition, because Class B shares of the Fund automatically convert
into Class A shares after six years, the Fund is required by a SEC rule to
obtain the approval of Class B as well as Class A shareholders for a proposed
material amendment to the Class A Plan that would materially increase payments
under the Plan. Such approval must be by a "majority" of the Class A and Class B
shares (as defined in the Investment Company Act), voting separately by class.
All material amendments must be approved by the Board of Directors and the
Independent Directors.
While the Plans are in effect, the Treasurer of the Fund shall provide
separate written reports to the Fund's Board of Directors at least quarterly
detailing services rendered in connection with the distribution of shares, the
amount of all payments made pursuant to each Plan and the purpose for which the
payments were made. The reports shall also include the distribution costs for
that quarter, and such costs for previous fiscal periods that are carried
forward, as explained in the Prospectus and below. Those reports, including the
allocations on which they are based, will be subject to the review and approval
of the Independent Directors in the exercise of their fiduciary duty. Each Plan
further provides that while it is in effect, the selection and nomination of
those Directors of the Fund who are not "interested persons" of the Fund is
committed to the discretion of the Independent Directors. This does not prevent
the involvement of others in such selection and nomination if the final decision
on any such selection or nomination is approved by a majority of the Independent
Directors.
Under the Plans, no payment will be made to any Recipient in any quarter
if the aggregate net asset value of all Fund shares held by the Recipient for
itself and its customers did not exceed a minimum amount, if any, that may be
determined from time to time by a majority of the Fund's Independent Directors.
Initially, the Board of Directors has set the fee at the maximum rate and set no
requirement for a minimum amount.
The Plans allow the service fee payments to be paid by the Distributor to
Recipients in advance for the first year Class A, Class B and Class C shares are
outstanding, and thereafter on a quarterly basis, as described in the
Prospectus. The advance payment is based on the net assets of the shares of that
class sold. An exchange of shares does not entitle the Recipient to an advance
service fee payment. In the event Class A, Class B or Class C shares are
redeemed during the first year such shares are outstanding, the Recipient will
be obligated to repay a pro rata portion of such advance payment to the
Distributor.
Although the Plans permit the Distributor to retain both the asset-based
sales charge and the service fee, or to pay Recipients the service fee on a
quarterly basis, without payment in advance, the Distributor presently intends
to pay the service fee to Recipients in the manner described above. A minimum
holding period may be established from time to time under the Plans by the
Board. Initially, the Board has set no minimum holding period. All payments
under the Plans are subject to the limitations imposed by the Conduct Rules of
the National Association of Securities Dealers, Inc. on payments of asset-based
sales charges and service fees.
For the Fiscal Period, (i) payments made under the Class A Plan totaled
$1,225,249, of which $170,077 was paid to a dealer affiliated with the
Distributor and no amount was retained by the Distributor, (ii) payments made
under the Class B Plan totaled $3,641, of which $3,532 was retained by the
Distributor and $3 was paid to a dealer affiliated with the Distributor and
(iii) payments made under the Class C plan totaled $2,459, of which $2,136 was
retained by the Distributor and no amount was paid to a dealer affiliated with
the Distributor. The Plans provide for the Distributor to be compensated at a
flat rate, whether the Distributor's expenses are more or less than the amounts
paid by the Fund during that period. The asset-based sales charges paid to the
Distributor by the Fund under the Plans are intended to allow the Distributor to
recoup the cost of sales commissions paid to authorized brokers and dealers at
the time of sale, plus financing costs, as described in the Prospectus. Such
payments may also be used to pay for the following expenses in connection with
the distribution of shares: (i) financing the advance of the service fee payment
to Recipients under the Plans, (ii) compensation and expenses of personnel
employed by the Distributor to support distribution of shares, and (iii) costs
of sales literature, advertising and prospectuses (other than those furnished to
current shareholders).
ABOUT YOUR ACCOUNT
HOW TO BUY SHARES
ALTERNATIVE SALES ARRANGEMENTS - CLASS A, CLASS B AND CLASS C
SHARES. The Fund
is authorized to issue three different classes of shares. The availability of
three classes of shares permits the individual investor to choose the method of
purchasing shares that is more beneficial to the investor depending on the
amount of the purchase, the length of time the investor expects to hold shares
and other relevant circumstances. Investors should understand that the purpose
and function of the deferred sales charge and asset-based sales charge with
respect to Class B and Class C shares are the same as those of the initial sales
charge with respect to Class A shares. Any salesperson or other person entitled
to receive compensation for selling Fund shares may receive different
compensation with respect to one class of shares than another. The Distributor
will generally not accept any order for $500,000 or more of Class B shares or $1
million or more of Class C shares on behalf of a single investor (not including
dealer "street name" or omnibus accounts) because generally it will be more
advantageous for that investor to purchase Class A shares of the Fund instead.
The three classes of shares each represent an interest in the same
portfolio investments of the Fund. However, each class has different shareholder
privileges and features. The net income attributable to Class B and Class C
shares and the dividends payable on Class B and Class C shares will be reduced
by incremental expenses borne solely by that class, respectively, including the
asset-based sales charges to which Class B and Class C shares are subject.
The conversion of Class B shares to Class A shares after six years is
subject to the continuing availability of a private letter ruling from the
Internal Revenue Service, or an opinion of counsel or tax adviser, to the effect
that the conversion of Class B shares does not constitute a taxable event for
the holder under Federal income tax law. If such a revenue ruling or opinion is
no longer available, the automatic conversion feature may be suspended, in which
event no further conversions of Class B shares would occur while such suspension
remained in effect. Although Class B shares could then be exchanged for Class A
shares on the basis of relative net asset value of the two classes, without the
imposition of a sales charge or fee, such exchange could constitute a taxable
event for the holder, and absent such exchange, Class B shares might continue to
be subject to the asset-based sales charge for longer than six years.
The methodology for calculating the net asset value, dividends and
distributions of the Fund's Class A, Class B and Class C shares recognizes two
types of expenses. General expenses that do not pertain specifically to any
class are allocated pro rata to the shares of each class, based on the
percentage of the net assets of such class to the Fund's total net assets, and
then equally to each outstanding share within a given class. Such general
expenses include (i) management fees, (ii) legal, bookkeeping and audit fees,
(iii) printing and mailing costs of shareholder reports, Prospectuses,
Statements of Additional Information and other materials for current
shareholders, (iv) fees to Independent Directors, (v) custodian expenses, (vi)
share issuance costs, (vii) organization and start-up costs, (viii) interest,
taxes and brokerage commissions, and ( ix) non-recurring expenses, such as
litigation costs. Other expenses that are directly attributable to a class are
allocated equally to each outstanding share within that class. Such expenses
include (a) Distribution and Service Plan fees, (b) incremental transfer and
shareholder servicing agent fees and expenses, (c) registration fees and (d)
shareholder meeting expenses, to the extent that such expenses pertain to a
specific class rather than to the Fund as a whole.
DETERMINATION OF NET ASSET VALUES PER SHARThe net asset values per share of
Class A, Class B and Class C shares of the Fund are determined as of the close
of business of The New York Stock Exchange (the "Exchange") on each day that the
Exchange is open, by dividing the value of the Fund's net assets attributable to
that class by the total number of Fund shares of that class outstanding. The
Exchange normally closes at 4:00 P.M. New York time, but may close earlier on
some other days (for example, in case of weather emergencies or on days falling
before a holiday). The Exchange's most recent annual announcement (which is
subject to change) states that it will close on New Year's Day, Martin Luther
King Jr. Day, President's Day, Good Friday, Memorial Day, Independence Day,
Labor Day, Thanksgiving Day and Christmas Day. It may also close on other days.
The Fund may invest a substantial portion of its assets in foreign securities
primarily listed on foreign exchanges which may trade on Saturdays or customary
U.S. business holidays on which the Exchange is closed. Because the Fund's net
asset values will not be calculated on those days, the Fund's net asset value
per share may be significantly affected on such days when shareholders may not
purchase or redeem shares.
The Fund's Board of Directors has established procedures for the valuation
of the Fund's securities, generally as follows: (i) equity securities traded on
a U.S. securities exchange or on the Automated Quotation System ("NASDAQ") of
the Nasdaq Stock Market, Inc. for which last sale information is regularly
reported are valued at the last reported sale price on the principal exchange
for such security or NASDAQ that day (the "Valuation Date") or, in the absence
of sales that day, at the last reported sale price preceding the Valuation Date
if it is within the spread of the closing "bid" and "asked" prices on the
Valuation Date or, if not, the closing "bid" price on the Valuation Date; (ii)
equity securities traded on a foreign securities exchange are valued generally
at the last sales price available to the pricing service approved by the Fund's
Board of Trustees or to the Manager as reported by the principal exchange on
which the security is traded at its last trading session on or immediately
preceding the Valuation Date, or, if unavailable, at the mean between "bid" and
"asked" prices obtained from the principal exchange or two active market makers
in the security on the basis of reasonable inquiry; (iii) a non-money market
fund will value (x) debt instruments that had a maturity of more than 397 days
when issued, (y) debt instruments that had a maturity of 397 days or less when
issued and have a remaining maturity in excess of 60 days, and (z) non-money
market type debt instruments that had a maturity of 397 days or less when issued
and have a remaining maturity of sixty days or less, at the mean between "bid"
and "asked" prices determined by a pricing service approved by the Fund's Board
of Trustees or, if unavailable, obtained by the Manager from two active market
makers in the security on the basis of reasonable inquiry; (iv) money
market-type debt securities held by a non-money market fund that had a maturity
of less than 397 days when issued and have a remaining maturity of 60 days or
less, and debt instruments held by a money market fund that have a remaining
maturity of 397 days or less, shall be valued at cost, adjusted for amortization
of premiums and accretion of discount; and (v) securities (including restricted
securities) not having readily-available market quotations are valued at fair
value determined under the Board's procedures. If the Manager is unable to
locate two market makers willing to give quotes (see (ii) and (iii) above), the
security may be priced at the mean between the "bid" and "asked" prices provided
by a single active market maker (which in certain cases may be the "bid" price
if no "asked" price is available) provided that the Manager is satisfied that
the firm rendering the quotes is reliable and that the quotes reflect the
current market value.
In the case of U.S. Government securities and mortgage-backed securities,
where last sale information is not generally available, such pricing procedures
may include a "matrix" comparisons to the prices for comparable instruments on
the basis of quality, yield, maturity and other special factors involved. The
Manager may use any of the pricing services approved by the Board of Directors
to price U.S. Government securities or mortgage-backed securities for which last
sale information is not generally available. The Manager will monitor the
accuracy of such pricing services, which may include comparing prices used for
portfolio evaluation to actual prices of selected securities.
Trading in securities on European and Asian exchanges and over-the-counter
markets is normally completed before the close of the Exchange. Events affecting
the values of foreign securities traded in such securities markets that occur
between the time their prices are determined and the close of the Exchange will
not be reflected in the Fund's calculation of its net asset value unless the
Board of Directors or the Manager, under procedures established by the Board,
determines that the particular event is likely to effect a material change in
the value of such security. Foreign currency, including forward contracts, will
be valued at the closing price in the London foreign exchange market that day as
provided by a reliable bank, dealer or pricing service. The values of securities
denominated in foreign currency will be converted to U.S. dollars at the closing
price in the London foreign exchange market that day as provided by a reliable
bank, dealer or pricing service.
Puts, calls and Futures are valued at the last sale price on the principal
exchanges on which they are traded or on NASDAQ, as applicable, as determined by
a pricing service approved by the Board of Directors or by the Manager. If there
were no sales that day, value shall be the last sale price on the preceding
trading day if it is within the spread of the closing "bid" and "asked" prices
on the principal exchange or on NASDAQ on the valuation date, or, if not, value
shall be the closing "bid" price on the principal exchange or on NASDAQ on the
valuation date. If the put, call or future is not traded on an exchange or on
NASDAQ, it shall be valued at the mean between "bid" and "asked" prices obtained
by the Manager from two active market makers (which in certain cases may be the
"bid" price if no "asked" price is available).
When the Fund writes an option, an amount equal to the premium received by the
Fund is included in the Fund's Statement of Assets and Liabilities as an asset,
and an equivalent deferred credit is included in the liability section. Credit
is adjusted ("marked-to-market") to reflect the current market value of the
option. In determining the Fund's gain on investments, if a call or put written
by the Fund is exercised, the proceeds are increased by the premium received. If
a call or put written by the Fund expires, the Fund has a gain in the amount of
the premium; if the Fund enters into a closing purchase transaction, it will
have a gain or loss depending on whether the premium received was more or less
than the cost of the closing transaction. If the Fund exercises a put it holds,
the amount the Fund receives on its sale of the underlying investment is reduced
by the amount of premium paid by the Fund.
ACCOUNTLINK. When shares are purchased through AccountLink, each purchase must
be at least $25.00. Shares will be purchased on the regular business day the
Distributor is instructed to initiate the Automated Clearing House ("ACH")
transfer to buy the shares. Dividends will begin to accrue on shares purchased
by the proceeds of ACH transfers on the business day the Fund receives Federal
Funds for the purchase through the ACH system before the close of The New York
Stock Exchange. The Exchange normally closes at 4:00 P.M., but may close earlier
on certain days. If Federal Funds are received on a business day after the close
of the Exchange, the shares will be purchased and dividends will begin to accrue
on the next regular business day. The proceeds of ACH transfers are normally
received by the Fund 3 days after the transfers are initiated. The Distributor
and the Fund are not responsible for any delays in purchasing shares resulting
from delays in ACH transmissions.
REDUCED SALES CHARGES. As discussed in the Prospectus, a reduced sales charge
rate may be obtained for Class A shares under Rights of Accumulation and Letters
of Intent because of the economies of sales efforts and reduction in expenses
realized by the Distributor, dealers and brokers making such sales. No sales
charge is imposed in certain other circumstances described in the Prospectus
because the Distributor or dealer or broker incurs little or no selling
expenses. The term "immediate family" refers to one's spouse, children,
grandchildren, parents, grandparents, parents-in- law, sons- and
daughters-in-law, aunt, uncle, niece, nephew, siblings, a sibling's spouse and a
spouse's siblings. Relations by virtue of a remarriage (step-children,
step-parents, etc.) are included.
o THE OPPENHEIMER FUNDS. The Oppenheimer funds are those mutual funds
for which the Distributor acts as the distributor or the sub-distributor and
include the following:
Oppenheimer Municipal Bond Fund
Oppenheimer New York Municipal Fund
Oppenheimer California Municipal Fund
Oppenheimer Intermediate Municipal Fund
Oppenheimer Insured Municipal Fund
Oppenheimer Main Street California Municipal Fund
Oppenheimer Florida Municipal Fund
Oppenheimer Pennsylvania Municipal Fund
Oppenheimer New Jersey Municipal Fund
Oppenheimer Discovery Fund
Oppenheimer Capital Appreciation Fund
Oppenheimer Growth Fund
Oppenheimer Equity Income Fund
Oppenheimer Multiple Strategies Fund
Oppenheimer Total Return Fund, Inc.
Oppenheimer Main Street Income & Growth Fund
Oppenheimer High Yield Fund
Oppenheimer Champion Income Fund
Oppenheimer Bond Fund
Oppenheimer U.S. Government Trust
Oppenheimer Limited-Term Government Fund
Oppenheimer Global Fund
Oppenheimer Global Growth & Income Fund
Oppenheimer Gold & Special Minerals Fund
Oppenheimer Strategic Income Fund
Oppenheimer International Bond Fund
Oppenheimer International Small Company Fund
Oppenheimer Enterprise Fund
Oppenheimer Quest Opportunity Value Fund
Oppenheimer Quest Growth & Income Value Fund
Oppenheimer Quest Small Cap Value Fund
Oppenheimer Quest Officers Value Fund
Oppenheimer Quest Global Value Fund, Inc.
Oppenheimer Quest Capital Value Fund, Inc.
Oppenheimer Quest Value Fund, Inc.
Oppenheimer Bond Fund For Growth
Limited Term New York Municipal Fund
Rochester Fund Municipals
Oppenheimer Disciplined Value Fund
Oppenheimer Disciplined Allocation Fund
Oppenheimer LifeSpan Balanced Fund
Oppenheimer LifeSpan Income Fund
Oppenheimer LifeSpan Growth Fund
Oppenheimer International Growth Fund
Oppenheimer Developing Markets Fund
Oppenheimer MidCap Fund
Oppenheimer Real Asset Fund
and the following "Money Market Funds":
Oppenheimer Money Market Fund, Inc.
Oppenheimer Cash Reserves
Centennial Money Market Trust
Centennial Tax Exempt Trust
Centennial Government Trust
Centennial New York Tax Exempt Trust
Centennial California Tax Exempt Trust
Centennial America Fund, L.P.
Daily Cash Accumulation Fund, Inc.
There is an initial sales charge on the purchase of Class A shares of each
of the Oppenheimer funds except Money Market Funds (under certain circumstances
described herein, redemption proceeds of Money Market Fund shares may be subject
to a contingent deferred sales charge).
o LETTERS OF INTENT. A Letter of Intent ("Letter") is the investor's
statement in writing to the Distributor of the intention to purchase Class A
shares or Class A and Class B shares (or shares of either class) of the Fund
(and other eligible Oppenheimer funds) during the 13-month period from the
investor's first purchase pursuant to the Letter (the "Letter of Intent
period"), which may, at the investor's request, include purchases made up to 90
days prior to the date of the Letter. The Letter states the investor's intention
to make the aggregate amount of purchases (excluding any purchases made by
reinvestment of dividends or distributions or purchases made at net asset value
without sales charge), which together with the investor's holdings of such funds
(calculated at their respective public offering prices calculated on the date of
the Letter) will equal or exceed the amount specified in the Letter. This
enables the investor to count the shares to be purchased under the Letter of
Intent to obtain the reduced sales charge rate on purchases of Class A shares of
the Fund (and other Oppenheimer funds) that applies under the Right of
Accumulation to current purchases of Class A shares. Each purchase of Class A
shares under the Letter will be made at the public offering price (including the
sales charge) that applies to a single lump-sum purchase of shares in the amount
intended to be purchased under the Letter.
In submitting a Letter, the investor makes no commitment to purchase
shares, but if the investor's purchases of shares within the Letter of Intent
period, when added to the value (at offering price) of the investor's holdings
of shares on the last day of that period, do not equal or exceed the intended
purchase amount, the investor agrees to pay the additional amount of sales
charge applicable to such purchases, as set forth in "Terms of Escrow," below
(as those terms may be amended from time to time). The investor agrees that
shares equal in value to 5% of the intended purchase amount will be held in
escrow by the Transfer Agent subject to the Terms of Escrow. Also, the investor
agrees to be bound by the terms of the Prospectus, this Statement of Additional
Information and the Application used for such Letter of Intent, and if such
terms are amended, as they may be from time to time by the Fund, that those
amendments will apply automatically to existing Letters of Intent.
For purchases of shares of the Fund and other Oppenheimer funds by
OppenheimerFunds prototype 401(k) plans under a Letter of Intent, the Transfer
Agent will not hold shares in escrow. If the intended purchase amount under the
Letter entered into by an OppenheimerFunds prototype 401(k) plan is not
purchased by the plan by the end of the Letter of Intent period, there will be
no adjustment of commissions paid to the broker-dealer or financial institution
of record for accounts held in the name of that plan.
If the total eligible purchases made during the Letter of Intent period do
not equal or exceed the intended purchase amount, the commissions previously
paid to the dealer of record for the account and the amount of sales charge
retained by the Distributor will be adjusted to the rates applicable to actual
total purchases. If total eligible purchases during the Letter of Intent period
exceed the intended purchase amount and exceed the amount needed to qualify for
the next sales charge rate reduction set forth in the applicable prospectus, the
sales charges paid will be adjusted to the lower rate, but only if and when the
dealer returns to the Distributor the excess of the amount of commissions
allowed or paid to the dealer over the amount of commissions that apply to the
actual amount of purchases. The excess commissions returned to the Distributor
will be used to purchase additional shares for the investor's account at the net
asset value per share in effect on the date of such purchase, promptly after the
Distributor's receipt thereof.
In determining the total amount of purchases made under a Letter, shares
redeemed by the investor prior to the termination of the Letter of Intent period
will be deducted. It is the responsibility of the dealer of record and/or the
investor to advise the Distributor about the Letter in placing any purchase
orders for the investor during the Letter of Intent period. All of such
purchases must be made through the Distributor.
o TERMS OF ESCROW THAT APPLY TO LETTERS OF INTENT.
1. Out of the initial purchase (or subsequent purchases if necessary) made
pursuant to a Letter, shares of the Fund equal in value up to 5% of the intended
purchase amount specified in the Letter shall be held in escrow by the Transfer
Agent. For example, if the intended purchase amount is $50,000, the escrow shall
be shares valued in the amount of $2,500 (computed at the public offering price
adjusted for a $50,000 purchase). Any dividends and capital gains distributions
on the escrowed shares will be credited to the investor's account.
2. If the total minimum investment purchase amount specified under the
Letter is completed within the thirteen-month Letter of Intent period, the
escrowed shares will be promptly released to the investor.
3. If, at the end of the thirteen-month Letter of Intent period the total
purchases pursuant to the Letter are less than the intended purchase amount
specified in the Letter, the investor must remit to the Distributor an amount
equal to the difference between the dollar amount of sales charges actually paid
and the amount of sales charges which would have been paid if the total amount
purchased had been made at a single time. Such sales charge adjustment will
apply to any shares redeemed prior to the completion of the Letter. If such
difference in sales charges is not paid within twenty days after a request from
the Distributor or the dealer, the Distributor will, within sixty days of the
expiration of the Letter, redeem the number of escrowed shares necessary to
realize such difference in sales charges. Full and fractional shares remaining
after such redemption will be released from escrow. If a request is received to
redeem escrowed shares prior to the payment of such additional sales charge, the
sales charge will be withheld from the redemption proceeds.
4. By signing the Letter, the investor irrevocably constitutes and
appoints the Transfer Agent as attorney-in-fact to surrender for redemption any
or all escrowed shares.
5. The shares eligible for purchase under the Letter (or the holding of
which may be counted toward completion of a Letter) include (a) Class A shares
sold with a front-end sales charge or subject to a Class A contingent deferred
sales charge, (b) Class B shares of other Oppenheimer funds acquired subject to
a contingent deferred sales charge, and (c) Class A shares or Class B shares
acquired in exchange for either (i) Class A shares sold with a front-end sales
charge or Class B shares of one of the other Oppenheimer funds that were
acquired subject to a Class A initial or contingent deferred sales charge or
(ii) Class B shares of one of the other Oppenheimer funds that were acquired
subject to a contingent deferred sales charge.
6. Shares held in escrow hereunder will automatically be exchanged for
shares of another fund to which an exchange is requested, as described in the
section of the Prospectus entitled "How to Exchange Shares," and the escrow will
be transferred to that other fund.
ASSET BUILDER PLANS. To establish an Asset Builder Plan from a bank account, a
check (minimum $25) for the initial purchase must accompany the application.
Shares purchased by Asset Builder Plan payments from bank accounts are subject
to the redemption restrictions for recent purchases described in "How to Sell
Shares," in the Prospectus. Asset Builder Plans also enable shareholders of
Oppenheimer Cash Reserves to use those accounts for monthly automatic purchases
of shares of up to four other Oppenheimer funds. If you make payments from your
bank account to purchase shares of the Fund, your bank account will
automatically be debited normally four to five business days prior to the
investment dates selected in the Account Application. Neither the Distributor,
the Transfer Agent nor the Fund shall be responsible for any delays in
purchasing shares resulting from delays in ACH transmission.
There is a front-end sales charge on the purchase of certain Oppenheimer
funds, or a contingent deferred sales charge may apply to shares purchased by
Asset Builder payments. An application should be obtained from the Distributor,
completed and returned, and a prospectus of the selected fund(s) should be
obtained from the Distributor or your financial advisor before initiating Asset
Builder payments. The amount of the Asset Builder investment may be changed or
the automatic investments may be terminated at any time by writing to the
Transfer Agent. A reasonable period (approximately 15 days) is required after
the Transfer Agent's receipt of such instructions to implement them. The Fund
reserves the right to amend, suspend, or discontinue offering such plans at any
time without prior notice.
CANCELLATION OF PURCHASE ORDERS. Cancellation of purchase orders for the Fund's
shares (for example, when a purchase check is returned to the Fund unpaid)
causes a loss to be incurred when the net asset value of the Fund's shares on
the cancellation date is less than on the purchase date. That loss is equal to
the amount of the decline in the net asset value per share multiplied by the
number of shares in the purchase order. The investor is responsible for that
loss. If the investor fails to compensate the Fund for the loss, the Distributor
will do so. The Fund may reimburse the Distributor for that amount by redeeming
shares from any account registered in that investor's name, or the Fund or the
Distributor may seek other redress.
RETIREMENT PLANS. In describing certain types of employee benefit plans that may
purchase Class A shares without being subject to the Class A contingent differed
sales charge, the term "employee benefit plan" means any plan or arrangement,
whether or not "qualified" under the Internal Revenue Code, including, medical
savings accounts, payroll deduction plans, or similar plans in which Class A
shares are purchased by a fiduciary or other person for the account of
participants who are employees of a single employer or of affiliated employers,
if the Fund account is registered in the name of the fiduciary or other person
for the benefit of participants in the plan.
The term "group retirement plan" means any qualified or non-qualified
retirement plan (including 457 plans, SEPs, SARSEPs, 403(b) plans other than
public school 403(b) plans, and SIMPLE plans) for employees of a corporation or
a sole proprietorship, members and employees of a partnership or association or
other organized group of persons (the members of which may include other
groups), if the group or association has made special arrangements with the
Distributor and all members of the group or association participating in or who
are eligible to participate in the plan(s) purchase Class A shares of the Fund
through a single investment dealer, broker, or other financial institution
designated by the group. "Group retirement plan" also includes qualified
retirement plans and non-qualified deferred compensation plans and IRAs that
purchase Class A shares of the Fund through a single investment dealer, broker,
or other financial institution, if that broker-dealer has made special
arrangements with the Distributor enabling those plans to purchase Class A
shares of the Fund at net asset value but subject to a contingent deferred sales
charge.
In addition to the discussion in the Prospectus relating to the ability of
Retirement Plans to purchase Class A shares at net asset value in certain
circumstances, there is no initial sales charge on purchases of Class A shares
of any one or more of the Oppenheimer funds by a Retirement Plan in the
following cases: (i) the recordkeeping for the Retirement Plan is performed on a
daily valuation basis by Merrill Lynch Pierce Fenner & Smith, Inc. ("Merrill
Lynch") and, on the date the plan sponsor signs the Merrill Lynch recordkeeping
service agreement, the Retirement Plan has $3 million or more in assets invested
in mutual funds other than those advised or managed by Merrill Lynch Asset
Management, L.P. ("MLAM") that are made available pursuant to a Service
Agreement between Merrill Lynch and the mutual fund's principal underwriter or
distributor and in funds advised or managed by MLAM (collectively, the
"Applicable Investments"); or (ii) the recordkeeping for the Retirement Plan is
performed on a daily valuation basis by an independent record keeper whose
services are provided under a contract or arrangement between the Retirement
Plan and Merrill Lynch. On the date the plan sponsor signs the Merrill Lynch
record keeping service agreement, the Plan must have $3 million or more in
assets, excluding assets held in money market funds, invested in Applicable
Investments; or (iii) the Plan has 500 or more eligible employees, as determined
by the Merrill Lynch plan conversion manager on the date the plan sponsor signs
the Merrill Lynch record keeping service agreement.
If a Retirement Plan's records are maintained on a daily valuation basis
by Merrill Lynch or an independent record keeper under a contract or alliance
arrangement with Merrill Lynch, and if on the date the plan sponsor signs the
Merrill Lynch record keeping service agreement the Retirement Plan has less than
$3 million in assets, excluding money market funds, invested in Applicable
Investments, then the Retirement Plan may purchase only Class B shares of one or
more of the Oppenheimer funds. Otherwise, the Retirement Plan will be permitted
to purchase Class A shares of one or more of the Oppenheimer funds. Any of those
Retirement Plans that currently invest in Class B shares of the Fund will have
their Class B shares be converted to Class A shares of the Fund once the Plan's
Applicable Investments have reached $5 million.
Any redemptions of shares of the Fund held by Retirement Plans whose
records are maintained on a daily valuation basis by Merrill Lynch or an
independent record keeper under a contract with Merrill Lynch that are currently
invested in Class B shares of the Fund shall not be subject to the Class B CDSC.
7
<PAGE>
HOW TO SELL SHARES
Information on how to sell shares of the Fund is stated in the
Prospectus. The information
below supplements the terms and conditions for redemptions set forth in the
Prospectus.
o INVOLUNTARY REDEMPTIONS. The Fund's Board of Directors has the right to
cause the involuntary redemption of the shares held in any Fund account if the
aggregate net asset value of those shares is less than $500 or such lesser
amount as the Board may fix. The Board of Directors will not cause the
involuntary redemption of shares in an account if the aggregate net asset value
of the shares has fallen below the stated minimum solely as a result of market
fluctuations. Should the Board elect to exercise this right, it may also fix, in
accordance with the 1940 Act, and the provisions of Maryland law, the
requirements for any notice to be given to the shareholders in question (not
less than 30 days), or the Board may set requirements for granting permission to
the Shareholder to increase the investment, and set other terms and conditions
so that the shares would not be involuntarily redeemed.
REINVESTMENT PRIVILEGE. Within six months of a redemption, a shareholder may
reinvest all or part of the redemption proceeds of (i) Class A shares that you
purchased subject to an initial sales charge or a Class A contingent deferred
sales charge, or (ii) Class B shares that were subject to the Class B contingent
deferred sales charge when you redeemed them. This privilege does not apply to
Class C shares. The reinvestment may be made without sales charge only in Class
A shares of the Fund or any of the other Oppenheimer funds into which shares of
the Fund are exchangeable as described in "How to Exchange Shares" below, at the
net asset value next computed after the Transfer Agent receives the reinvestment
order. The shareholder must ask the Distributor for that privilege at the time
of reinvestment. Any capital gain that was realized when the shares were
redeemed is taxable, and reinvestment will not alter any capital gains tax
payable on that gain. If there has been a capital loss on the redemption, some
or all of the loss may not be tax deductible, depending on the timing and amount
of the reinvestment. Under the Internal Revenue Code, if the redemption proceeds
of Fund shares on which a sales charge was paid are reinvested in shares of the
Fund or another of the Oppenheimer funds within 90 days of payment of the sales
charge, the shareholder's basis in the shares of the Fund that were redeemed may
not include the amount of the sales charge paid. That would reduce the loss or
increase the gain recognized from the redemption. However, in that case the
sales charge would be added to the basis of the shares acquired by the
reinvestment of the redemption proceeds. The Fund may amend, suspend or cease
offering this reinvestment privilege at any time as to shares redeemed after the
date of such amendment, suspension or cessation.
TRANSFERS OF SHARES. Shares are not subject to the payment of a contingent
deferred sales charge of any class at the time of transfer to the name of
another person or entity (whether the transfer occurs by absolute assignment,
gift or bequest, not involving, directly or indirectly, a public sale). The
transferred shares will remain subject to the contingent deferred sales charge,
calculated as if the transferee shareholder had acquired the transferred shares
in the same manner and at the same time as the transferring shareholder. If less
than all shares held in an account are transferred, and some but not all shares
in the account would be subject to a contingent deferred sales charge if
redeemed at the time of transfer, the priorities described in the Prospectus
under "How to Buy Shares" for the imposition of the Class B or Class C
contingent deferred sales charge will be followed in determining the order in
which shares are transferred.
DISTRIBUTIONS FROM RETIREMENT PLANS. Requests for distributions from
OppenheimerFunds- sponsored IRAs, 403(b)(7) custodial plans, 401(k) plans, or
pension or profit-sharing plans should be addressed to "Trustee,
OppenheimerFunds Retirement Plans," c/o the Transfer Agent at its address listed
in "How To Sell Shares" in the Prospectus or on the back cover of the Statement
of Additional Information. The request must: (i) state the reason for the
distribution; (ii) state the owner's awareness of tax penalties if the
distribution is premature; and (iii) conform to the requirements of the plan and
the Fund's other redemption requirements. Participants, other than self-employed
persons maintaining a plan account in their own name, in
OppenheimerFunds-sponsored prototype pension or profit-sharing or 401(k) plans
may not directly redeem or exchange shares held for their account under those
plans. The employer or plan administrator must sign the request. Distributions
from pension plans, 401(k) or profit sharing plans are subject to special
requirements under the Internal Revenue Code and certain documents (available
from the Transfer Agent) must be completed before the distribution may be made.
Distributions from retirement plans are subject to withholding requirements
under the Internal Revenue Code, and IRS Form W-4P (available from the Transfer
Agent) must be submitted to the Transfer Agent with the distribution request, or
the distribution may be delayed. Unless the shareholder has provided the
Transfer Agent with a certified tax identification number, the Internal Revenue
Code requires that tax be withheld from any distribution even if the shareholder
elects not to have tax withheld. The Fund, the Manager, the Distributor, the
Trustee and the Transfer Agent assume no responsibility to determine whether a
distribution satisfies the conditions of applicable tax laws and will not be
responsible for any tax penalties assessed in connection with a distribution.
SPECIAL ARRANGEMENTS FOR REPURCHASE OF SHARES FROM DEALERS AND
BROKERS. The
Distributor is the Fund's agent to repurchase its shares from authorized dealers
or brokers on behalf of their customers. The shareholder should contact the
broker or dealer to arrange this type of redemption. The repurchase price per
share will be the net asset value next computed after the Distributor receives
the order placed by the dealer or broker, except that if the Distributor
receives a repurchase order from the dealer or broker after the close of The New
York Stock Exchange on a regular business day, it will be processed at that
day's net asset value, if the order was received by the dealer or broker from
its customer prior to the time the Exchange closes (normally, that is 4:00 P.M.,
but may be earlier on some days) and the order was transmitted to and received
by the Distributor prior to its close of business that day (normally 5:00 P.M.).
Ordinarily, for accounts redeemed by a broker-dealer under this procedure,
payment will be made within three business days after the shares have been
redeemed upon the Distributor's receipt of the required redemption documents in
proper form, with the signature(s) of the registered owners guaranteed on the
redemption document as described in the Prospectus.
AUTOMATIC WITHDRAWAL AND EXCHANGE PLANS. Investors owning shares of the
Fund
valued at $5,000 or more can authorize the Transfer Agent to redeem shares
(minimum $50) automatically on a monthly, quarterly, semi-annual or annual basis
under an Automatic Withdrawal Plan. Shares will be redeemed three business days
prior to the date requested by the shareholder for receipt of the payment.
Automatic withdrawals of up to $1,500 per month may be requested by telephone if
payments are to be made by check payable to all shareholders of record and sent
to the address of record for the account (and if the address has not been
changed within the prior 30 days). Required minimum distributions from
OppenheimerFunds-sponsored retirement plans may not be arranged on this basis.
Payments are normally made by check, but shareholders having AccountLink
privileges (see "How To Buy Shares") may arrange to have Automatic Withdrawal
Plan payments transferred to the bank account designated on the OppenheimerFunds
New Account Application or signature- guaranteed instructions. Shares are
normally redeemed pursuant to an Automatic Withdrawal Plan three business days
before the date you select in the Account Application. If a contingent deferred
sales charge applies to the redemption, the amount of the check or payment will
be reduced accordingly. The Fund cannot guarantee receipt of a payment on the
date requested and reserves the right to amend, suspend or discontinue offering
such plans at any time without prior notice. Because of the sales charge
assessed on Class A share purchases, shareholders should not make regular
additional Class A share purchases while participating in an Automatic
Withdrawal Plan. Class B and Class C shareholders should not establish
withdrawal plans because of the imposition of the contingent deferred sales
charges on such withdrawals (except where the Class B and Class C contingent
deferred sales charges are waived as described in the Prospectus under "Waivers
of Class B and Class C Contingent Deferred Sales Charges").
By requesting an Automatic Withdrawal or Exchange Plan, the shareholder
agrees to the terms and conditions applicable to such plans, as stated below as
well as the Prospectus. These provisions may be amended from time to time by the
Fund and/or the Distributor. When adopted, such amendments will automatically
apply to existing Plans.
o AUTOMATIC EXCHANGE PLANS. Shareholders can authorize the Transfer Agent
(on the OppenheimerFunds Application or signature-guaranteed instructions) to
exchange a pre-determined amount of shares of the Fund for shares (of the same
class) of other Oppenheimer funds automatically on a monthly, quarterly,
semi-annual or annual basis under an Automatic Exchange Plan. The minimum amount
that may be exchanged to each other fund account is $25. Exchanges made under
these plans are subject to the restrictions that apply to exchanges as set forth
in "How to Exchange Shares" in the Prospectus and below in this Statement of
Additional Information.
o AUTOMATIC WITHDRAWAL PLANS. Fund shares will be redeemed as necessary to
meet withdrawal payments. Shares acquired without a sales charge will be
redeemed first and shares acquired with reinvested dividends and capital gains
distributions will be redeemed next, followed by shares acquired with a sales
charge, to the extent necessary to make withdrawal payments. Depending upon the
amount withdrawn, the investor's principal may be depleted. Payments made under
withdrawal plans should not be considered as a yield or income on your
investment. It may not be desirable to purchase additional Class A shares while
making automatic withdrawals because of the sales charges that apply to
purchases when made. Accordingly, a shareholder normally may not maintain an
Automatic Withdrawal Plan while simultaneously making regular purchases of Class
A shares.
The Transfer Agent will administer the investor's Automatic Withdrawal
Plan (the "Plan") as agent for the investor (the "Planholder") who executed the
Plan authorization and application submitted to the Transfer Agent. Neither the
Transfer Agent nor the Fund shall incur any liability to the Planholder for any
action taken or omitted by the Transfer Agent in good faith to administer the
Plan. Certificates will not be issued for shares of the Fund purchased for and
held under the Plan, but the Transfer Agent will credit all such shares to the
account of the Planholder on the records of the Fund. Any share certificates
held by a Planholder may be surrendered unendorsed to the Transfer Agent with
the Plan application so that the shares represented by the certificate may be
held under the Plan.
For accounts subject to Automatic Withdrawal Plans, distributions of
capital gains must be reinvested in shares of the Fund, which will be done at
net asset value without a sales charge. Dividends on shares held in the account
may be paid in cash or reinvested.
Redemptions of shares needed to make withdrawal payments will be made at
the net asset value per share determined on the redemption date. Checks or ACH
transfer payments of the proceeds of Plan withdrawals will normally be
transmitted three business days prior to the date selected for receipt of the
payment (receipt of payment on the date selected cannot be guaranteed),
according to the choice specified in writing by the Planholder.
The amount and the interval of disbursement payments and the address to
which checks are to be mailed or AccountLink payments are to be sent may be
changed at any time by the Planholder by writing to the Transfer Agent. The
Planholder should allow at least two weeks' time in mailing such notification
for the requested change to be put in effect. The Planholder may, at any time,
instruct the Transfer Agent by written notice (in proper form in accordance with
the requirements of the then-current Prospectus of the Fund) to redeem all, or
any part of, the shares held under the Plan. In that case, the Transfer Agent
will redeem the number of shares requested at the net asset value per share in
effect in accordance with the Fund's usual redemption procedures and will mail a
check for the proceeds to the Planholder.
The Plan may be terminated at any time by the Planholder by writing to the
Transfer Agent. A Plan may also be terminated at any time by the Transfer Agent
upon receiving directions to that effect from the Fund. The Transfer Agent will
also terminate a Plan upon receipt of evidence satisfactory to it of the death
or legal incapacity of the Planholder. Upon termination of a Plan by the
Transfer Agent or the Fund, shares that have not been redeemed from the account
will be held in uncertificated form in the name of the Planholder, and the
account will continue as a dividend- reinvestment, uncertificated account unless
and until proper instructions are received from the Planholder or his or her
executor or guardian, or other authorized person.
To use shares held under the Plan as collateral for a debt, the Planholder
may request issuance of a portion of the shares in certificated form. Upon
written request from the Planholder, the Transfer Agent will determine the
number of shares for which a certificate may be issued without causing the
withdrawal checks to stop because of exhaustion of uncertificated shares needed
to continue payments. However, should such uncertificated shares become
exhausted, Plan withdrawals will terminate.
If the Transfer Agent ceases to act as transfer agent for the Fund, the
Planholder will be deemed to have appointed any successor transfer agent to act
as agent in
administering the Plan.
HOW TO EXCHANGE SHARES
As stated in the Prospectus, shares of a particular class of Oppenheimer
funds having more than one class of shares may be exchanged only for shares of
the same class of other Oppenheimer funds. Shares of the Oppenheimer funds that
have a single class without a class designation are deemed "Class A" shares for
this purpose. All of the Oppenheimer funds offer Class A, Class B and Class C
shares except Oppenheimer Money Market Fund, Inc., Centennial Money Market
Trust, Centennial Tax-Exempt Trust, Centennial Money Market Trust, Centennial
Government Trust, Centennial New York Tax Exempt Trust, Centennial California
Tax-Exempt Trust, Centennial America Fund, L.P., and Daily Cash Accumulation
Fund, Inc., which only offer Class A shares and Oppenheimer Main Street
California Municipal Fund which only offers Class A and Class B shares (Class B
and Class C shares of Oppenheimer Cash Reserves are generally available only by
exchange from the same class of shares of other Oppenheimer funds or through
OppenheimerFunds sponsored 401(k) plans). A current list showing which funds
offer which classes can be obtained by calling the distributor at
1-800-525-7048.
For accounts established on or before March 8, 1996 holding Class M shares
of Oppenheimer Bond Fund for Growth, Class M shares can be exchanged only for
Class A shares of other Oppenheimer funds. Exchanges to Class M shares of
Oppenheimer Bond Fund for Growth are permitted from Class A shares of
Oppenheimer Money Market Fund, Inc. or Oppenheimer Cash Reserves that were
acquired by exchange from Class M shares. Otherwise no exchanges of any class of
any Oppenheimer fund into Class M shares are permitted.
Class A shares of Oppenheimer funds may be exchanged at net asset value
for shares of any Money Market Fund. Shares of any Money Market Fund purchased
without a sales charge may be exchanged for shares of Oppenheimer funds offered
with a sales charge upon payment of the sales charge (or, if applicable, may be
used to purchase shares of Oppenheimer funds subject to a contingent deferred
sales charge). However, shares of Oppenheimer Money Market Fund, Inc. purchased
with the redemption proceeds of shares of other mutual funds (other than funds
managed by the Manager or its subsidiaries) redeemed within the 12 months prior
to that purchase may subsequently be exchanged for shares of other Oppenheimer
funds without being subject to an initial or contingent deferred sales charge,
whichever is applicable. To qualify for that privilege, the investor or the
investor's dealer must notify the Distributor of eligibility for this privilege
at the time the shares of Oppenheimer Money Market Fund, Inc. are purchased,
and, if requested, must supply proof of entitlement to this privilege.
Shares of the Fund acquired by reinvestment of dividends or distributions
from any other of the Oppenheimer funds (except Oppenheimer Cash Reserves) or
from any unit investment trust for which reinvestment arrangements have been
made with the Distributor may be exchanged at net asset value for shares of any
of the Oppenheimer funds. No contingent deferred sales charge is imposed on
exchanges of shares of any class purchased subject to a contingent deferred
sales charge. However, when Class A shares acquired by exchange of Class A
shares of other Oppenheimer funds purchased subject to a Class A contingent
deferred sales charge are redeemed within 12 months of the end of the calendar
month of the initial purchase of the exchanged Class A shares (18 months if the
shares were purchased prior to May 1, 1997), the Class A contingent deferred
sales charge is
imposed on the redeemed shares (see "Class A Contingent Deferred Sales Charge"
in the Prospectus). The Class B contingent deferred sales charge is imposed on
Class B shares acquired by exchange if they are redeemed within six years of the
initial purchase of the exchanged Class B shares. The Class C contingent
deferred sales charge is imposed on Class C shares acquired by exchange if they
are redeemed within 12 months of the initial purchase of the exchanged Class C
shares.
When Class B or Class C shares are redeemed to effect an exchange, the
priorities described in "How To Buy Shares" in the Prospectus for the imposition
of the Class B and Class C contingent deferred sales charges will be followed in
determining the order in which the shares are exchanged. Shareholders should
take into account the effect of any exchange on the applicability and rate of
any contingent deferred sales charge that might be imposed in the subsequent
redemption of remaining shares. SHAREHOLDERS OWNING SHARES OF MORE THAN
ONE
CLASS MUST SPECIFY WHETHER THEY INTEND TO EXCHANGE CLASS A, CLASS
B OR CLASS C
SHARES.
The Fund reserves the right to reject telephone or written exchange
requests submitted in bulk by anyone on behalf of more than one account. The
Fund may accept requests for exchanges of up to 50 accounts per day from
representatives of authorized dealers that qualify for this privilege. In
connection with any exchange request, the number of shares exchanged may be less
than the number requested if the exchange or the number requested would include
shares subject to a restriction cited in the Prospectus or this Statement of
Additional Information or would include shares covered by a share certificate
that is not tendered with the request. In those cases, only the shares available
for exchange without restriction will be exchanged.
When exchanging shares by telephone, a shareholder must either have an
existing account in, or obtain and acknowledge receipt of a prospectus of, the
fund to which the exchange is to be made. For full or partial exchanges of an
account made by telephone, any special account features such as Asset Builder
Plans, Automatic Withdrawal Plans and retirement plan contributions will be
switched to the new account unless the Transfer Agent is instructed otherwise.
If all telephone lines are busy (which might occur, for example, during periods
of substantial market fluctuations), shareholders might not be able to request
exchanges by telephone and would have to submit written exchange requests.
Shares to be exchanged are redeemed on the regular business day the
Transfer Agent receives an exchange request in proper form (the "Redemption
Date"). Normally, shares of the fund to be acquired are purchased on the
Redemption Date, but such purchases may be delayed by either fund up to five
business days if it determines that it would be disadvantaged by an immediate
transfer of the redemption proceeds. The Fund reserves the right, in its
discretion, to refuse any exchange request that may disadvantage it (for
example, if the receipt of multiple exchange requests from a dealer might
require the disposition of portfolio securities at a time or at a price that
might be disadvantageous to the Fund).
The different Oppenheimer funds available for exchange have different
investment objectives, policies and risks, and a shareholder should assure that
the Fund selected is appropriate for his or her investment and should be aware
of the tax consequences of an exchange. For federal income tax purposes, an
exchange transaction is treated as a redemption of shares of one fund and a
purchase of shares of another. "Reinvestment Privilege," above, discusses some
of the tax consequences of reinvestment of redemption proceeds in such cases.
The Fund, the Distributor, and the Transfer Agent are unable to provide
investment, tax or legal advice to a shareholder in connection with an exchange
request or any other investment transaction.
8
<PAGE>
DIVIDENDS, CAPITAL GAINS AND TAXES
TAX STATUS OF THE FUND'S DIVIDENDS AND DISTRIBUTIONS. The Federal tax
treatment
of the Fund's dividends and capital gains distributions is explained in the
Prospectus under the caption "Dividends, Capital Gains and Taxes." Special
provisions of the Internal Revenue Code govern the eligibility of the Fund's
dividends for the dividends-received deduction for corporate shareholders.
Long-term capital gains distributions are not eligible for the deduction. In
addition, the amount of dividends paid by the Fund which may qualify for the
deduction is limited to the aggregate amount of qualifying dividends that the
Fund derives from its portfolio investments that the Fund has held for a minimum
period, usually 46 days. A corporate shareholder will not be eligible for the
deduction on dividends paid on Fund shares held for 45 days or less. To the
extent the Fund's dividends are derived from gross income from option premiums,
interest income or short-term gains from the sale of securities or dividends
from foreign corporations, those dividends will not qualify for the deduction.
Under the Internal Revenue Code, by December 31 each year, the Fund must
distribute 98% of its taxable investment income earned from January 1 through
December 31 of that year and 98% of its capital gains realized in the period
from November 1 of the prior year through October 31 of the current year, or
else the Fund must pay an excise tax on the amounts not distributed. While it is
presently anticipated that the Fund will meet those requirements, the Board of
Directors and the Manager might determine in a particular year that it would be
in the best interest of shareholders for the Fund not to make such distributions
at the required levels and to pay the excise tax on the undistributed amounts.
That would reduce the amount of income or capital gains available for
distribution to shareholders.
If the Fund qualifies as a "regulated investment company" under the
Internal Revenue Code, it will not be liable for Federal income taxes on amounts
paid by it as dividends and distributions. The Fund qualified during its last
fiscal year, and intends to qualify in current and future years, but reserves
the right not to do so. The Internal Revenue Code contains a number of complex
tests to determine whether the Fund will qualify, and the Fund might not meet
those tests in a particular year.
The amount of a class's distributions may vary from time to time depending
on market conditions, the composition of the Fund's portfolio, and expenses
borne by the Fund or borne separately by a class, as described in "Alternative
Sales Arrangements -- Class A, Class B and Class C Shares," above. Dividends are
calculated in the same manner, at the same time and on the same day for shares
of each class. However, dividends on Class B and Class C shares are expected to
be lower as a result of the asset-based sales charge on Class B and Class C
shares, and Class B and Class C dividends will also differ in amount as a
consequence of any difference in net asset value between the classes.
Dividends, distributions and the proceeds of the redemption of Fund shares
represented by checks returned to the Transfer Agent by the Postal Service as
undeliverable will be invested in shares of Oppenheimer Money Market Fund, Inc.,
as promptly as possible after the return of such checks to the Transfer Agent,
to enable the investor to earn a return on otherwise idle funds. DIVIDEND
REINVESTMENT IN ANOTHER FUND. Shareholders of the Fund may elect to reinvest all
dividends and/or capital gains distributions in shares of the same class of any
of the other Oppenheimer funds listed in "Reduced Sales Charges," above, at net
asset value without sales charge. To elect this option, a shareholder must
notify the Transfer Agent in writing and either must have an existing account in
the fund selected for reinvestment or must obtain a prospectus for that fund and
an application from the Distributor to establish an account. The investment will
be made at the net asset value per share in effect at the close of business on
the payable date of the dividend or distribution. Dividends and/or distributions
from certain of the Oppenheimer funds may be invested in shares of this Fund on
the same basis.
ADDITIONAL INFORMATION ABOUT THE FUND
THE CUSTODIAN. State Street Bank and Trust Company acts as custodian
of the assets of the Fund. The Fund's cash balances in excess of $100,000
are not protected by Federal deposit
insurance. Such uninsured balances may be substantial.
INDEPENDENT ACCOUNTANTS. Price Waterhouse LLP serves as the Fund's
independent accountants. Their services include examining the annual
financial statements of the Fund as well as
other related services.
9
<PAGE>
Report of Independent Accountants
The Board of Directors and Shareholders of
Oppenheimer Quest Capital Value Fund, Inc.
In our opinion, the accompanying statement of assets and liabilities, including
the statement of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of Oppenheimer Quest Capital Value
Fund, Inc. (formerly Quest for Value Dual Purpose Fund, Inc., hereafter referred
to as the Fund), at October 31, 1997, the results of its operations, the changes
in its net assets and the financial highlights for each of the periods
indicated, in conformity with generally accepted accounting principles. These
financial statements and financial highlights (hereafter referred to as
financial statements) are the responsibility of the Fund's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these financial statements in accordance
with generally accepted auditing standards which require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits, which included confirmation of securities at October
31, 1997 by correspondence with the custodian and the application of alternative
auditing procedures where securities purchased had not been received, provide a
reasonable basis for the opinion expressed above.
/s/ Price Waterhouse LLP
Price Waterhouse LLP
Denver, Colorado
November 21, 1997
9 Oppenheimer Quest Capital Value Fund, Inc.
<PAGE>
Statement of Investments October 31, 1997
- --------------------------------------------------------------------------------
Market Value
Shares See Note 1
================================================================================
Common Stocks--91.3%
- --------------------------------------------------------------------------------
Basic Materials--4.6%
- --------------------------------------------------------------------------------
Metals--4.6%
UCAR International, Inc.(1) 425,000 $15,937,500
- --------------------------------------------------------------------------------
Consumer Cyclicals--23.8%
- --------------------------------------------------------------------------------
Autos & Housing--19.7%(2)
Budget Group, Inc., Cl. A(1) 148,900 5,211,500
- --------------------------------------------------------------------------------
Security Capital Group, Inc.(1) 41,977 62,965,787
-----------
68,177,287
- --------------------------------------------------------------------------------
Leisure & Entertainment--4.1%
Tricon Global Restaurants, Inc.(1) 100,000 3,031,250
- --------------------------------------------------------------------------------
Trump Hotels & Casino Resorts, Inc.(1)(3) 1,200,000 11,025,000
-----------
14,056,250
- --------------------------------------------------------------------------------
Consumer Non-Cyclicals--3.2%
- --------------------------------------------------------------------------------
Healthcare/Supplies & Services--3.2%
Allegiance Corp. 400,000 11,100,000
- --------------------------------------------------------------------------------
Energy--4.4%
- --------------------------------------------------------------------------------
Oil-Integrated--4.4%
Triton Energy Ltd.(1) 390,000 15,258,750
- --------------------------------------------------------------------------------
Financial--23.5%
- --------------------------------------------------------------------------------
Diversified Financial--5.0%
Countrywide Credit Industries, Inc. 500,000 17,156,250
- --------------------------------------------------------------------------------
Insurance--18.5%(2)
- --------------------------------------------------------------------------------
ACE Ltd. 180,000 16,728,750
- --------------------------------------------------------------------------------
Aetna, Inc. 100,000 7,106,250
- --------------------------------------------------------------------------------
EXEL Ltd. 300,000 18,131,250
- --------------------------------------------------------------------------------
Mid Ocean Ltd. 275,000 17,840,625
- --------------------------------------------------------------------------------
Progressive Corp. 39,400 4,107,450
-----------
63,914,325
- --------------------------------------------------------------------------------
Industrial--15.0%
- --------------------------------------------------------------------------------
Industrial Services--5.1%
H & R Block, Inc. 475,000 17,575,000
10 Oppenheimer Quest Capital Value Fund, Inc.
<PAGE>
Market Value
Shares See Note 1
- --------------------------------------------------------------------------------
Manufacturing--4.7%
LucasVarity plc, ADR 480,000 $ 16,380,000
- --------------------------------------------------------------------------------
Transportation--5.2%
Canadian Pacific Ltd. (New) 600,000 17,887,500
- --------------------------------------------------------------------------------
Technology--13.3%
- --------------------------------------------------------------------------------
Computer Software/Services--1.5%
Electronic Arts, Inc.(1) 149,200 5,054,150
- --------------------------------------------------------------------------------
Telecommunications-Technology--11.8%
CommScope, Inc.(1) 600,000 6,600,000
- --------------------------------------------------------------------------------
Tele-Communications TCI Ventures Group, Cl. A(1) 750,000 17,296,875
- --------------------------------------------------------------------------------
WorldCom, Inc. 500,000 16,812,500
------------
40,709,375
- --------------------------------------------------------------------------------
Utilities--3.5%
- --------------------------------------------------------------------------------
Electric Utilities--3.5%
CalEnergy, Inc.(1) 353,000 12,090,250
------------
Total Common Stocks (Cost $251,850,789) 315,296,637
Face
Amount
- --------------------------------------------------------------------------------
Short-Term Notes--1.2%
- --------------------------------------------------------------------------------
Panasonic Finance, Inc., 5.68%, 11/3/97
(Cost $4,209,671)(4) $ 4,211,000 4,209,671
- --------------------------------------------------------------------------------
Total Investments, at Value
(Cost $256,060,460) 92.5% 319,506,308
- --------------------------------------------------------------------------------
Other Assets Net of Liabilities 7.5 25,802,436
----------- ------------
Net Assets 100.0% $345,308,744
=========== ============
1. Non-income producing security.
2. The Fund may have elements of risk due to concentrated investments in
specific industries. Such concentrations may subject the Fund to additional
risks resulting from future political or economic conditions.
3. Affiliated company. Represents ownership of at least 5% of the voting
securities of the issuer, and is or was an affiliate, as defined in the
Investment Company Act of 1940, at or during the period ended October 31, 1997.
The aggregate fair value of securities of affiliated companies held by the Fund
as of October 31, 1997 amounts to $11,025,000. Transactions during the period in
which the issuer was an affiliate are as follows:
<TABLE>
<CAPTION>
Shares Gross Gross Shares
December 31, 1996 Additions Reductions October 31, 1997
------------------- ----------- ------------ -----------------
<S> <C> <C> <C> <C>
Trump Hotels &
Casino Resorts, Inc. 1,200,000 -- -- 1,200,000
</TABLE>
4. Short-term notes are generally traded on a discount basis; the interest rate
is the discount rate received by the Fund at the time of purchase.
See accompanying Notes to Financial Statements.
11 Oppenheimer Quest Capital Value Fund, Inc.
<PAGE>
Statement of Assets and Liabilities October 31, 1997
- --------------------------------------------------------------------------------
Assets
Investments, at value--see accompanying statement:
Unaffiliated companies (cost $232,388,312) $308,481,308
Affiliated companies (cost $23,672,148) 11,025,000
- --------------------------------------------------------------------------------
Cash 394,853
- --------------------------------------------------------------------------------
Receivables:
Investments sold 34,865,564
Shares of capital stock sold 57,214
Dividends 20,000
- --------------------------------------------------------------------------------
Other 424,605
------------
Total assets 355,268,544
- --------------------------------------------------------------------------------
Liabilities
Payables and other liabilities:
Investments purchased 8,582,578
Shares of capital stock redeemed 634,664
Redemption of income certificates--Note 1 553,132
Distribution and service plan fees 78,399
Transfer and shareholder servicing agent fees 15,010
Other 96,017
------------
Total liabilities 9,959,800
- --------------------------------------------------------------------------------
Net Assets $345,308,744
============
- --------------------------------------------------------------------------------
Composition of Net Assets
Par value of shares of capital stock $ 82,948
- --------------------------------------------------------------------------------
Additional paid-in capital 168,747,707
- --------------------------------------------------------------------------------
Undistributed net investment income 1,025,380
- --------------------------------------------------------------------------------
Accumulated net realized gain on investment transactions 112,006,861
- --------------------------------------------------------------------------------
Net unrealized appreciation on investments--Note 3 63,445,848
------------
Net assets $345,308,744
============
12 Oppenheimer Quest Capital Value Fund, Inc.
<PAGE>
Net Asset Value Per Share
Class A Shares:
- --------------------------------------------------------------------------------
Net asset value and redemption price per share
(based on net assets of $343,328,529 and 8,247,021
shares of capital stock outstanding) $41.63
Maximum offering price per share (net asset value
plus sales charge of 5.75% of offering price) $44.17
- --------------------------------------------------------------------------------
Class B Shares:
Net asset value, redemption price (excludes
applicable contingent deferred sales charge)
and offering price per share (based on net
assets of $1,207,634 and 29,163 shares of
capital stock outstanding) $41.41
- --------------------------------------------------------------------------------
Class C Shares:
Net asset value, redemption price (excludes
applicable contingent deferred sales charge) and
offering price per share (based on net assets of
$772,581 and 18,654 shares of capital stock outstanding) $41.42
See accompanying Notes to Financial Statements.
13 Oppenheimer Quest Capital Value Fund, Inc.
<PAGE>
Statement of Operations For the Period Ended October 31, 1997(1)
Investment Income
Interest $ 5,419,423
- ------------------------------------------------------------------------------
Dividends (net of foreign withholding taxes of $60,459) 3,242,523
------------
Total income 8,661,946
- --------------------------------------------------------------------------------
Expenses
Management fees--Note 4 3,312,119
- ------------------------------------------------------------------------------
Distribution and service plan fees--Note 4:
Class A 1,225,249
Class B 3,641
Class C 2,459
- ------------------------------------------------------------------------------
Shareholder reports 239,417
- ------------------------------------------------------------------------------
Transfer and shareholder servicing agent fees--Note 4 105,568
- ------------------------------------------------------------------------------
Custodian fees and expenses 41,602
- ------------------------------------------------------------------------------
Legal and auditing fees 30,694
- ------------------------------------------------------------------------------
Directors' fees and expenses 26,759
- ------------------------------------------------------------------------------
Registration and filing fees 4,510
- ------------------------------------------------------------------------------
Other 57,630
------------
Total expenses 5,049,648
Less reimbursement of expenses by OppenheimerFunds, Inc.--Note 4 (1,009,252)
------------
Net expenses 4,040,396
- --------------------------------------------------------------------------------
Net Investment Income 4,621,550
- --------------------------------------------------------------------------------
Realized and Unrealized Gain (Loss)
Net realized gain on:
Investments 112,202,017
Reduction of 1996 income taxes on capital gains 101,806
------------
Net realized gain 112,303,823
- ------------------------------------------------------------------------------
Net change in unrealized appreciation or depreciation on
investments (81,440,121)
------------
Net realized and unrealized gain 30,863,702
- --------------------------------------------------------------------------------
Net Increase in Net Assets Resulting from Operations $ 35,485,252
============
1. The Fund changed its fiscal year end from December 31 to October 31. See
accompanying Notes to Financial Statements.
14 Oppenheimer Quest Capital Value Fund, Inc.
<PAGE>
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
Period Ended Year Ended
Oct. 31, 1997(1) Dec. 31, 1996
------------------- ---------------
<S> <C> <C>
Operations
Net investment income $ 4,621,550 $ 24,888,014
- -------------------------------------------------------------------------------------------------
Net realized gain 112,202,017 173,198,410
- -------------------------------------------------------------------------------------------------
Provision/reduction of income taxes on capital gains 101,806 (59,569,499)
- -------------------------------------------------------------------------------------------------
Net change in unrealized appreciation or depreciation (81,440,121) (48,825,541)
-------------- -------------
Net increase in net assets resulting from operations 35,485,252 89,691,384
- -------------------------------------------------------------------------------------------------
Dividends and Distributions to Shareholders
Dividends from net investment income--income shares (1,463,750) (24,935,959)
- -------------------------------------------------------------------------------------------------
Capital Stock Transactions
Net increase (decrease) in net assets resulting from capital stock
transactions--Note 2:
Class A (361,670,071) --
Class B 1,137,545 --
Class C 743,541 --
Redemption of income shares (208,857,924) --
- -------------------------------------------------------------------------------------------------
Net Assets
Total increase (decrease) (534,625,407) 64,755,425
- -------------------------------------------------------------------------------------------------
Beginning of period 879,934,151 815,178,726
-------------- -------------
End of period (including undistributed net investment
income of $1,025,380 and $469,962, respectively) $ 345,308,744 $ 879,934,151
============== =============
</TABLE>
1. The Fund changed its fiscal year end from December 31 to October 31. See
accompanying Notes to Financial Statements.
15 Oppenheimer Quest Capital Value Fund, Inc.
<PAGE>
Financial Highlights
<TABLE>
<CAPTION>
Class A
---------------------------------------------------
Ten Months Ended
October 31, Year Ended December 31,
1997(2) 1996 1995
------------------ --------------------- ----------
<S> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------
Per Share Operating Data:
Net asset value, beginning of period $ 37.25 $ 33.65 $ 25.79
- -------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Income from investment operations .44 -- --
Net realized and unrealized gain (loss) 3.93 6.91 9.46
Provision/reduction for corporate income
taxes on net realized long-term capital gain .01 (3.31) (1.57)
- -------------------------------------------------------------------------------------------------------
Total income (loss) from investment operations 4.38 3.60 7.89
- -------------------------------------------------------------------------------------------------------
Distributions from net realized short-term gain -- -- (.03)
- -------------------------------------------------------------------------------------------------------
Total dividends and distributions to shareholders -- -- (.03)
- -------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 41.63 $ 37.25 $ 33.65
======== ============= =========
Market value, end of period N/A $ 36.13 $ 31.88
======== ============= =========
- -------------------------------------------------------------------------------------------------------
Total Return, at Market Value(3) N/A 23.63% 45.58%
- -------------------------------------------------------------------------------------------------------
Total Return, at Net Asset Value(5) 11.76% 20.46%(4) 36.68(4)
- -------------------------------------------------------------------------------------------------------
Ratios/Supplemental Data:
Net assets, end of period (in thousands) $343,329 $ 879,934 $ 815,179
- -------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $434,401 $ 883,395 N/A
- -------------------------------------------------------------------------------------------------------
Ratios to average net assets:
Net investment income 1.28%(6)(8) 2.82% 3.20%
Expenses, before voluntary assumption
by the Manager 1.54%(6)(8) 0.72%(7) 0.73%
Expenses, net of voluntary assumption
by the Manager 1.11%(6)(8) N/A N/A
- -------------------------------------------------------------------------------------------------------
Portfolio turnover rate(9) 33.8% 74% 72%
Average brokerage commission rate(10) $0.0570 $ 0.0500 --
- -------------------------------------------------------------------------------------------------------
The following information is in regards to Income
Shares which were redeemed on January 31, 1997
and are no longer outstanding:
Per Share Operating Data:
Income Shares:
Net asset value, beginning of period $ 11.63 $ 11.63 $ 11.63
--------- ------------- ---------
Income from investment operations .05 1.38 1.39
Dividends from net investment income (.08) (1.38) (1.39)
- -------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 11.60 $ 11.63 $ 11.63
========= ============= =========
Market value, end of period N/A $ 11.50 $ 12.00
========= ============= =========
- -------------------------------------------------------------------------------------------------------
Total Return, at Market Value(11) N/A 7.80% 10.90%
- -------------------------------------------------------------------------------------------------------
</TABLE>
16 Oppenheimer Quest Capital Value Fund, Inc.
<PAGE>
Class B Class C
- --------------------------------- ------------ ------------
Period Ended Period Ended
Year Ended December 31, October 31, October 31,
1994 1993 1992 1997(1) 1997(1)
- ---------------------------------------------------------------------
$ 27.09 $ 26.29 $ 22.59 $ 37.04 $ 37.04
- ---------------------------------------------------------------------
-- -- -- .01 .01
(.38) 2.45 6.09 4.36 4.37
(.53) (1.43) (1.10) -- --
- ---------------------------------------------------------------------
(.91) 1.02 4.99 4.37 4.38
- ---------------------------------------------------------------------
(.39) (.22) (1.29) -- --
- ---------------------------------------------------------------------
(.39) (.22) (1.29) -- --
- ---------------------------------------------------------------------
$ 25.79 $ 27.09 $ 26.29 $ 41.41 $ 41.42
======== ======== ======== ======== ========
$ 23.00 $ 23.75 $ 23.00 N/A N/A
======== ======== ======== ======== ========
- ---------------------------------------------------------------------
0.89% 10.50% 44.60% N/A N/A
- ---------------------------------------------------------------------
(1.29%)(4) 9.34%(4) 27.26%(4) 11.80% 11.82%
- ---------------------------------------------------------------------
$673,742 $696,803 $682,374 $ 1,208 $ 773
- ---------------------------------------------------------------------
N/A N/A N/A $ 552 $ 372
- ---------------------------------------------------------------------
3.47% 3.29% 3.61% 0.07%(6) 0.06%(6)
0.74% 0.74% 0.74% 2.14%(6) 2.13%(6)
N/A N/A N/A 1.86%(6) 1.85%(6)
- ---------------------------------------------------------------------
45% 51% 45% 33.8% 33.8%
-- -- -- $ 0.0570 $ 0.0570
- ---------------------------------------------------------------------
$ 11.61 $ 11.61 $ 11.60 N/A N/A
- -------- -------- -------- -------- --------
1.36 1.30 1.35 N/A N/A
(1.34) (1.30) (1.34) N/A N/A
- ---------------------------------------------------------------------
$ 11.63 $ 11.61 $ 11.61 N/A N/A
======== ======== ======== ======== ========
$ 12.13 $ 13.25 $ 13.00 N/A N/A
======== ======== ======== ======== ========
- ---------------------------------------------------------------------
1.80% 12.30% 7.40% N/A N/A
- ---------------------------------------------------------------------
17 Oppenheimer Quest Capital Value Fund, Inc.
<PAGE>
Financial Highlights (Continued)
- --------------------------------------------------------------------------------
1. For the period from March 3, 1997 (inception of offering of shares) to
October 31, 1997.
2. For the ten months ended October 31, 1997 for Class A shares (formerly
Capital Shares) and for the period from January 1, 1997 to January 31, 1997 for
Income Shares (Income shares were redeemed on January 31, 1997). On February 28,
1997, OppenheimerFunds, Inc. became the investment advisor to the Fund and on
March 3, 1997 the Fund was converted from a closed-end fund to an open-end fund,
and Capital Shares were redesignated as Class A shares. The Fund changed its
fiscal year end from December 31 to October 31.
3. Change in market price assuming reinvestment of short-term capital gains
distributions, if any, at payable date and federal taxes paid on long-term
capital gains on year end (both at market).
4. Total returns of Class A shares (formerly, the Capital Shares) at net asset
value for periods prior to March 3, 1997, the date the Fund converted to an
open-end fund, are not audited and have not been restated to reflect the fees
and expenses (without giving effect to fee waivers) to which the Fund became
subject on March 3, 1997. Had such a restatement been made, total returns
(unaudited) at net asset value for each of the years ended December 31, 1996,
1995, 1994, 1993 and 1992 would have been 18.25%, 34.20%, (3.11)%, 7.32% and
24.88%, respectively.
5. Assumes a hypothetical initial investment on the business day before the
first day of the fiscal period (or inception of offering), with all dividends
and distributions reinvested in additional shares on the reinvestment date, and
redemption at the net asset value calculated on the last business day of the
fiscal period. Sales charges are not reflected in the total returns. Total
returns are not annualized for periods of less than one full year. Prior to
March 3, 1997, the Fund operated as a closed-end investment company and total
return was calculated based on market value.
6. Annualized.
7. The expense ratio reflects the effect of gross expenses paid indirectly by
the Fund.
8. Due to the change from the Fund's dual purpose structure and conversion from
a closed-end to an open-end fund, the ratios for Class A shares are not
necessarily comparable to those of prior periods.
9. The lesser of purchases or sales of portfolio securities for a period,
divided by the monthly average of the market value of portfolio securities owned
during the period. Securities with a maturity or expiration date at the time of
acquisition of one year or less are excluded from the calculation. Purchases and
sales of investment securities (excluding short-term securities) for the period
ended October 31, 1997 were $142,520,307 and $663,674,705, respectively.
10. Total brokerage commissions paid on applicable purchases and sales of
portfolio securities for the period, divided by the total number of related
shares purchased and sold.
11. Change in market price assuming reinvestment of dividends on payable date
(at market).
See accompanying Notes to Financial Statements.
18 Oppenheimer Quest Capital Value Fund, Inc.
<PAGE>
Notes to Financial Statements
1. Significant Accounting Policies
Oppenheimer Quest Capital Value Fund, Inc. (the Fund), formerly named Quest for
Value Dual Purpose Fund, Inc. was initially registered under the Investment
Company Act of 1940, as amended, as a diversified, closed-end, "dual-purpose"
management investment company. Under the Fund's dual purpose structure, the
Capital Shares were entitled to all gains and losses of the assets of the Fund
and no expenses were allocated to such shares; the Income Shares were entitled
to receive all of the Fund's income and bore all of the operating expenses of
the Fund. On December 20, 1996, shareholders approved the conversion of the
Capital Shares of the Fund to an open-end Fund. The Income Shares were redeemed
by the Fund on January 31, 1997 and the Fund's dual purpose structure
terminated. The Capital Shares of the Fund became Class A shares and now bear
their allocable share of the Fund's expenses. On February 28, 1997 the Fund
entered into an investment advisory agreement with OppenheimerFunds, Inc. (the
Manager) and the Manager has entered into a sub-advisory agreement with OpCap
Advisors (the former Manager). Effective March 3, 1997, the Fund began operating
as an open-end Fund. In conjunction with this conversion, amounts were
reclassified to reflect an increase in paid-in capital of $319,863,716, a
decrease in accumulated net realized gain on investments of $317,057,528 and a
decrease in undistributed net investment income of $2,806,188. The Fund's
investment objective is to seek capital appreciation. It is the intention of the
Fund to continue to invest in equity securities of companies believed by the
Manager to be undervalued. On August 5, 1997, the Board of Directors elected to
change the fiscal year end of the Fund from December to October. Accordingly,
these financial statements include information for the period ended October 31,
1997. The Fund offers Class A, Class B and Class C shares. Class A shares are
sold with a front-end sales charge. Class B and Class C shares may be subject to
a contingent deferred sales charge. All classes of shares have identical rights
to earnings, assets and voting privileges, except that each class has its own
expenses directly attributable to that class and exclusive voting rights with
respect to matters affecting that class. Classes A, B and C have separate
distribution and/or service plans. Class B shares will automatically convert to
Class A shares six years after the date of purchase. The following is a summary
of significant accounting policies consistently followed by the Fund.
19 Oppenheimer Quest Capital Value Fund, Inc.
<PAGE>
Notes to Financial Statements (Continued)
1. Significant Accounting Policies (continued)
Investment Valuation. Portfolio securities are valued at the close of the New
York Stock Exchange on each trading day. Listed and unlisted securities for
which such information is regularly reported are valued at the last sale price
of the day or, in the absence of sales, at values based on the closing bid or
the last sale price on the prior trading day. Long-term and short-term
"non-money market" debt securities are valued by a portfolio pricing service
approved by the Board of Directors. Such securities which cannot be valued by
an approved portfolio pricing service are valued using dealer-supplied
valuations provided the Manager is satisfied that the firm rendering the quotes
is reliable and that the quotes reflect current market value, or are valued
under consistently applied procedures established by the Board of Directors to
determine fair value in good faith. Short-term "money market type" debt
securities having a remaining maturity of 60 days or less are valued at cost
(or last determined market value) adjusted for amortization to maturity of any
premium or discount.
- --------------------------------------------------------------------------------
Allocation of Income, Expenses, and Gains and Losses. Income, expenses (other
than those attributable to a specific class) and gains and losses are allocated
daily to each class of shares based upon the relative proportion of net assets
represented by such class. Operating expenses directly attributable to a
specific class are charged against the operations of that class.
- --------------------------------------------------------------------------------
Federal Taxes. The Fund intends to continue to comply with provisions of the
Internal Revenue Code applicable to regulated investment companies and to
distribute all of its taxable income, including any net realized gain on
investments not offset by loss carryovers, to shareholders. Therefore, no
federal income or excise tax provision is required.
- --------------------------------------------------------------------------------
Distributions to Shareholders. Dividends and distributions to shareholders are
recorded on the ex-dividend date.
- --------------------------------------------------------------------------------
Classification of Distributions to Shareholders. Net investment income (loss)
and net realized gain (loss) may differ for financial statement and tax
purposes. The character of the distributions made during the year from net
investment income or net realized gains may differ from its ultimate
characterization for federal income tax purposes. Also, due to timing of
dividend distributions, the fiscal year in which amounts are distributed may
differ from the fiscal year in which the income or realized gain was recorded by
the Fund.
The Fund changed the classification of distributions to
shareholders to reflect the differences between financial statement amounts and
distributions determined in accordance with income tax regulations. Amounts have
been reclassified to reflect a decrease in paid-in capital of $102,000, a
decrease in accumulated net realized gain on investments of $101,806, and an
increase in undistributed net investment income of $203,806.
20 Oppenheimer Quest Capital Value Fund, Inc.
<PAGE>
- --------------------------------------------------------------------------------
Other. Investment transactions are accounted for on the date the investments are
purchased or sold (trade date) and dividend income is recorded on the
ex-dividend date. Interest income is accrued on a daily basis. Realized gains
and losses on investments and unrealized appreciation and depreciation are
determined on an identified cost basis, which is the same basis used for federal
income tax purposes.
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of income and expenses during the reporting
period. Actual results could differ from those estimates.
- --------------------------------------------------------------------------------
2. Capital Stock
The Fund has authorized one billion shares of $.01 par value capital stock.
Transactions in shares of capital stock for the period March 3, 1997 to October
31, 1997 were as follows:
Period Ended October 31, 1997
---------------------------------
Shares Amount
- --------------------------------------------------------------------------------
Class A:
Sold 487,331 $ 16,807,176
Redeemed (10,244,612) (378,477,247)
----------- --------------
Net decrease (9,757,281) $ (361,670,071)
=========== ==============
- --------------------------------------------------------------------------------
Class B:
Sold 29,862 $ 1,164,926
Redeemed (699) (27,381)
----------- --------------
Net increase 29,163 $ 1,137,545
=========== ==============
- --------------------------------------------------------------------------------
Class C:
Sold 22,769 $ 916,393
Redeemed (4,115) (172,852)
----------- --------------
Net increase 18,654 $ 743,541
=========== ==============
Income Shares:
Redeemed 18,004,302 $ 208,857,924
=========== ==============
- --------------------------------------------------------------------------------
3. Unrealized Gains and Losses on Investments
At October 31, 1997, net unrealized appreciation on investments of $63,445,848
was composed of gross appreciation of $83,904,079, and gross depreciation of
$20,458,231.
21 Oppenheimer Quest Capital Value Fund, Inc.
<PAGE>
Notes to Financial Statements (Continued)
- --------------------------------------------------------------------------------
4. Management Fees and Other Transactions with Affiliates Management fees paid
to the Manager were in accordance with the investment advisory agreement with
the Fund which provides for a fee of 1.00% of the first $400 million of average
daily net assets, 0.90% of the next $400 million of average daily net assets and
0.85% of average daily net assets over $800 million. Pursuant to the Agreement,
for a period of two years from the date thereof, the Manager will waive the
following portion of the advisory fee: 0.15% of the first $200 million of
average daily net assets, 0.40% of the next $200 million, 0.30% of the next $400
million and 0.25% of average daily net assets over $800 million. For the period
ended October 31, 1997, the waiver amounted to $641,675. Prior to February 28,
1997, management fees were paid to the former Manager at an annual rate of 0.75%
on the first $200 million and 0.50% on net assets in excess of $200 million.
Effective February 28, 1997, the Manager pays OpCap Advisors (the
Sub-Advisor) based on the fee schedule set forth in the Prospectus. For the
period ended October 31, 1997, the Manager paid $721,743 to the Sub-Advisor. On
February 13, 1997 PIMCO Advisors L.P. signed a definitive agreement with
Oppenheimer Group, Inc. and its subsidiary Oppenheimer Financial Corp. for PIMCO
Advisors L.P. and its affiliate, Thomson Advisory Group, Inc., to acquire the
one-third managing general partner interest in Oppenheimer Capital (the parent
of OpCap Advisors) and the 1.0% general interest in Oppenheimer Capital L.P.
For the period ended October 31, 1997, commissions (sales charges
paid by investors) on sales of Class A shares totaled $117,049, of which $21,937
was retained by OppenheimerFunds Distributor, Inc. (OFDI), a subsidiary of the
Manager, as general distributor, and by an affiliated broker/dealer. Sales
charges advanced to broker/dealers by OFDI on sales of the Fund's Class B and
Class C shares totaled $40,420 and $4,312, respectively.
Effective March 3, 1997, OppenheimerFunds Services (OFS), a
division of the Manager, is the transfer and shareholder servicing agent for the
Fund. The Fund pays OFS an annual maintenance fee of $14.85 for each Fund
shareholder account and reimburses OFS for its out-of-pocket expenses. During
the period ended October 31, 1997, the Fund paid OFS $78,031.
The Fund has adopted a Distribution and Service Plan for Class A
shares to compensate OFDI for a portion of its costs incurred in connection with
the personal service and maintenance of shareholder accounts that hold Class A
shares. Under the Plan, the Fund pays an annual asset-based sales charge to OFDI
of 0.25% per year on Class A shares. The Fund also pays a service fee to OFDI of
0.25% per year. Both fees are computed on the average annual net assets of Class
A shares of the Fund, determined as of the close of each regular business day.
22 Oppenheimer Quest Capital Value Fund, Inc.
<PAGE>
- --------------------------------------------------------------------------------
OFDI uses all of the service fee and the asset-based sales charge to compensate
brokers, dealers, banks and other financial institutions quarterly for providing
personal service and maintenance of accounts of their customers that hold Class
A shares. For the first two years after the effective date of the Plan, the
Distributor has voluntarily agreed to waive 0.15% of the distribution fee
payable under the plan. For the period ended October 31, 1997, the waiver
amounted to $367,577. During the ten months ended October 31, 1997, OFDI paid
$170,077 to an affiliated broker/dealer as compensation for Class A personal
service and maintenance expenses.
The Fund has adopted Distribution and Service Plans for Class B and
Class C shares to compensate OFDI for its costs in distributing Class B and
Class C shares and servicing accounts. Under the Plans, the Fund pays OFDI an
annual asset-based sales charge of 0.75% per year on Class B shares and on Class
C shares for its services rendered in distributing Class B and Class C shares.
OFDI also receives a service fee of 0.25% per year to compensate dealers for
providing personal services for accounts that hold Class B and C shares. Each
fee is computed on the average annual net assets of Class B and Class C shares,
respectively, determined as of the close of each regular business day. During
the ten months ended October 31, 1997, OFDI retained $3,532 and $2,136,
respectively, as compensation for Class B and Class C sales commissions and
service fee advances, as well as financing costs. If either Plan is terminated
by the Fund, the Board of Directors may allow the Fund to continue payments of
the asset-based sales charge to OFDI for distributing shares before the Plan was
terminated. At October 31, 1997, OFDI had incurred unreimbursed expenses of
$48,136 for Class B and $6,753 for Class C.
- --------------------------------------------------------------------------------
5. Bank Borrowings
The Fund may borrow from a bank for temporary or emergency purposes including,
without limitation, funding of shareholder redemptions provided asset coverage
for borrowings exceeds 300%. The Fund has entered into an agreement which
enables it to participate with other Oppenheimer funds in an unsecured line of
credit with a bank, which permits borrowings up to $400 million, collectively.
Interest is charged to each fund, based on its borrowings, at a rate equal to
the Federal Funds Rate plus 0.35%. Borrowings are payable 30 days after such
loan is executed. The Fund also pays a commitment fee equal to its pro rata
share of the average unutilized amount of the credit facility at a rate of
0.0575% per annum.
The Fund had no borrowings outstanding during the ten months ended
October 31, 1997.
<PAGE>
APPENDIX A
CORPORATE INDUSTRY CLASSIFICATIONS
Aerospace/Defense
Air Transportation
Auto Parts Distribution
Automotive
Bank Holding Companies
Banks
Beverages
Broadcasting
Broker-Dealers
Building Materials
Cable Television
Chemicals
Commercial Finance
Computer Hardware
Computer Software
Conglomerates
Consumer Finance
Containers
Convenience Stores
Department Stores
Diversified Financial
Diversified Media
Drug Stores
Drug Wholesalers
Durable Household Goods
Education
Electric Utilities
Electrical Equipment
Electronics
Energy Services & Producers
Entertainment/Film
Environmental
Food
Gas Utilities
Gold
Health Care/Drugs
Health Care/Supplies & Services
Homebuilders/Real Estate
Hotel/Gaming
Industrial Services
Information Technology
Insurance
Leasing & Factoring
Leisure
Manufacturing
Metals/Mining
Nondurable Household Goods
Oil - Integrated
Paper
Publishing/Printing
Railroads
Restaurants
Savings & Loans
Shipping
Special Purpose Financial
Specialty Retailing
Steel
Supermarkets
Telecommunications - Technology
Telephone - Utility
Textile/Apparel
Tobacco
Toys
Trucking
Wireless Services
A-0
<PAGE>
OPPENHEIMER QUEST CAPITAL VALUE FUND, INC.
Two World Trade Center
New York, New York 10048-0203
1-800-525-7048
INVESTMENT ADVISER
OppenheimerFunds, Inc.
Two World Trade Center
New York, New York 10048-0203
SUB-ADVISER
OpCap Advisors
One World Financial Center
New York, New York 10281
DISTRIBUTOR
OppenheimerFunds Distributor, Inc.
Two World Trade Center
New York, New York 10048-0203
TRANSFER AGENT
OppenheimerFunds Services
P.O. Box 5270
Denver, Colorado 80217
1-800-525-7048
CUSTODIAN OF PORTFOLIO SECURITIES
State Street Bank and Trust Company
P.O. Box 8505
Boston, Massachusetts 02266-8505
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP
950 Seventeenth Street
Denver, Colorado 80202
LEGAL COUNSEL
Gordon Altman Butowsky Weitzen
Shalov & Wein
114 West 47th Street
New York, New York 10036
835sai.#2
A-1
OPPENHEIMER QUEST CAPITAL VALUE FUND, INC.
PART C
OTHER INFORMATION
Item 24. Financial Statements and Exhibits
- ------- ---------------------------------
(a) Financial Statements:
--------------------
(1) Financial Highlights - See Parts A and B - Filed herewith.
(2) Report of Independent Accountants - See Part B - Filed
herewith.
(3) Statement of Investments - See Part B - Filed herewith.
(4) Statement of Assets and Liabilities - See Part B - Filed
herewith.
(5) Statement of Operations - See Part B - Filed herewith.
(6) Statement of Changes in Net Assets - See Part B - Filed
herewith.
(7) Notes to Financial Statements - See Part B - Filed herewith.
(b) Exhibits:
(1) Articles of Amendment and Restatement of the
Fund: Filed with Registrant's Pre- Effective Amendment No. 2, 2/21/97, and
incorporated herein by reference.
(2)(a)By-Laws of the Fund: Filed with Post-Effective Amendment No. 1,
11/25/97, and incorporated herein by reference.
2(b) Amendment No. 1 to By-Laws of the Fund: Filed with
Post-Effective Amendment No. 1, 11/25/97, and incorporated herein by
reference.
(3) Not Applicable.
(4) (i) Specimen Class A Share Certificate: Filed with Registrant's
Registration Statement on Form N-1A, 11/27/96, and incorporated herein by
reference.
(ii) Specimen Class B Share Certificate: Filed with Registrant's
Registration Statement on Form N-1A, 11/27/96, and incorporated herein by
reference.
<PAGE>
(iii) Specimen Class C Share Certificate: Filed with Registrant's
Registration Statement on Form N-1A, 11/27/96, and incorporated herein by
reference.
(5) (a)Investment Advisory Agreement dated 2/28/97: Filed with
Post-Effective Amendment No. 1, 11/25/97, and incorporated herein by
reference.
(b)Subadvisory Agreement dated 11/5/97: Filed with
Post-Effective Amendment No. 1, 11/25/97, and incorporated herein by
reference.
(6) (a) General Distributor's Agreement dated 2/28/97: Filed with
Post-Effective Amendment No. 1, 11/25/97, and incorporated herein by
reference.
(b)(1) Form of Dealer Agreement of OppenheimerFunds Distributor, Inc.:
Filed with Post-Effective Amendment No. 14 of Oppenheimer Main Street Funds,
Inc. (Reg. No. 33-17850), 9/30/94, and incorporated herein by reference.
(2) Form of OppenheimerFunds Distributor, Inc. Broker Agreement: Filed with
Post- Effective Amendment No. 14 of Oppenheimer Main Street Funds, Inc. (Reg.
No. 33-17850), 9/30/94, and incorporated herein by reference.
(3) Form of OppenheimerFunds Distributor, Inc. Agency Agreement: Filed with
Post- Effective Amendment No. 14 of Oppenheimer Main Street Funds, Inc. (Reg.
No. 33-17850), 9/30/94, and incorporated herein by reference.
(4)Broker Agreement between OppenheimerFunds Distributor, Inc. and
Newbridge Securities dated 10/1/86: Filed with Post-Effective Amendment No. 25
of Oppenheimer Special Fund (Reg. No. 2-45272), 11/1/86, refiled with
Post-Effective Amendment No. 45 of Oppenheimer Special Fund (Reg. No. 2-45272),
8/22/94, pursuant to Item 102 of Regulation S-T, and incorporated herein by
reference.
(7) Not Applicable.
(8) Custody Agreement: Filed with Registrant's Pre-Effective
Amendment No. 2, 2/21/97, and incorporated herein by reference.
(9) Not Applicable.
(10) (a) Opinion and consent of counsel as to the legality of the Capital
Shares previously registered, indicating whether they will when sold be legally
issued, fully paid and non-assessable: Previously filed as Exhibit 10 to
Pre-Effective Amendment No.1 and refiled herewith pursuant to Item 102 of
Regulation S-T, and incorporated herein by reference.
(b) Opinion and consent of counsel as to the legality of the
securities being registered, indicating whether they will when sold be legally
issued, fully-paid and non-assessable: Filed with Registrant's Pre-Effective
Amendment No. 2, 2/21/97, and incorporated herein
by reference.
(11) Consent of Independent Accountants: Filed herewith.
(12) Not Applicable.
(13) (a) Investment Letter of Quest for Value Advisors, Inc.: Previously
filed as Exhibit 1 to Post-Effective Amendment No. 1 and refiled herewith
pursuant to Item 102 or Regulation S-T, and incorporated herein by reference.
(b) Investment Letter of OppenheimerFunds, Inc.: Filed with Post-Effective
Amendment No. 1, 11/25/97, and incorporated herein by reference.
(14) (i) Form of Individual Retirement Account Trust Agreement: Filed as
Exhibit 14 of Post-Effective Amendment No. 21 of Oppenheimer U.S. Government
Trust (Reg. No. 2-76645), 8/25/93, and incorporated herein by reference.
(ii) Form of prototype Standardized and Non-Standardized Profit-Sharing
Plan and Money Purchase Pension Plan for self-employed persons and corporations:
Filed with Post-Effective Amendment No. 3 of Oppenheimer Global Growth & Income
Fund (File No. 33-33799), 1/31/92, and refiled with Post-Effective Amendment No.
7 to the Registration Statement of Oppenheimer Global Growth & Income Fund (Reg.
No. 33-33799), 12/1/94, pursuant to Item 102 of Regulation S-T, and incorporated
herein by reference.
(iii) Form of Tax-Sheltered Retirement Plan and Custody Agreement for
employees of public schools and tax-exempt organizations: Filed with
Post-Effective Amendment No. 47 to the Registration Statement of Oppenheimer
Growth Fund (Reg. No. 2-45272), 10/21/94, and incorporated herein by reference.
(iv) Form of Simplified Employee Pension IRA: Filed with Post-Effective
Amendment No. 42 to the Registration Statement of Oppenheimer Equity Income Fund
(Reg. No. 2-33043), 10/28/94, and incorporated herein by reference.
(v) Form of SAR-SEP Simplified Employee Pension IRA: Filed with
Post-Effective Amendment No. 15 to the Registration Statement of Oppenheimer
Mortgage Income Fund, (File No. 33-6614), 2/20/94, and incorporated herein by
reference.
(vi) Form of Prototype 401(k) plan: Filed with Post-Effective
Amendment No. 7 to the Registration Statement of Oppenheimer Strategic Income &
Growth Fund (33-47378), 9/28/95, and incorporated herein by reference.
(15) (a) Distribution and Service Plan and Agreement dated 2/28/97 with
respect to Class A shares: Filed with Post-Effective Amendment No. 1, 11/25/97,
and incorporated herein by reference.
(b) Distribution and Service Plan and Agreement dated 2/2/897 with
respect to Class B shares: Filed with Post-Effective Amendment No. 1, 11/25/97,
and incorporated herein by reference.
(c) Distribution and Service Plan and Agreement dated 2/28/97 with
respect to Class C shares: Filed with Post-Effective Amendment No. 1, 11/25/97,
and incorporated herein by reference.
(16) Performance Computation Schedule: Filed herewith.
(17) (1) Financial Data Schedule for Class A shares: Filed
herewith.
(2) Financial Data Schedule for Class B shares: Filed herewith.
(3) Financial Data Schedule for Class C shares: Filed herewith.
(18) Oppenheimer Funds Multiple Class Plan under Rule 18f-3
dated 10/24/95: Filed with the Initial Registration Statement of Oppenheimer
MidCap Fund (333-31533), 7/18/97, and incorporated herein by reference.
-- Powers of Attorney and Certified Board Resolutions signed by
Registrant's Directors: Filed with Post-Effective Amendment No. 1, 11/25/97,
and incorporated herein by reference.
Item 25. Persons Controlled by or Under Common Control with Registrant
- -----------------------------------------------------------------------------
No person is presently controlled by or under common control with
Registrant.
Item 26. Number of Holders of Securities
- ------- --------------------------------------
Number of Record
Holders as of
Title of Class January 2, 1998
- -------------- -----------------
Shares of Beneficial Interest
Class A 9,393
Class B 166
Class C 70
Item 27. Indemnification
- ------- ---------------
Reference is made to the provisions of Article SEVEN of Registrant's
Articles of Amendment and Restatement filed as Exhibit 24(b)(1) to this
Registration
Statement.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of Registrant pursuant to the foregoing provisions or otherwise,
Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Securities Act of 1933 and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment by
Registrant of expenses incurred or paid by a director, officer or controlling
person of Registrant in the successful defense of any action, suit or
proceeding) is asserted by such trustee, officer or controlling person,
Registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate jurisdiction
the question whether such indemnification by it is against public policy as
expressed in the Securities Act of 1933 and will be governed by the final
adjudication of such issue.
Item 28. Business and Other Connections of Investment Adviser
- -------- -----------------------------------------------------------------
(a) OppenheimerFunds, Inc. is the investment adviser of the
Registrant; it and certain subsidiaries and affiliates act in the same capacity
to other registered investment companies as described in Parts A and B hereof
and listed in Item 28(b) below.
The directors and executive officers OpCap Advisors, their
positions and their other business affiliations and business experience for the
past two years are listed in Item 28(b) below.
(b) There is set forth below information as to any other business,
profession, vocation or employment of a substantial nature in which each officer
and director of OppenheimerFunds, Inc. is, or at any time during the past two
fiscal years has been, engaged for his/her own account or in the capacity of
director, officer, employee, partner or trustee.
Name and Current Position
with OppenheimerFunds, Inc. Other Business and Connections
During
("OFI") the Past Two Years
- --------------------------- ------------------------------------
Mark J.P. Anson,
Vice President Vice President of Oppenheimer Real
Asset Management, Inc. ("ORAMI");
formerly Vice
President of Equity Derivatives at
Salomon
Brothers, Inc.
Peter M. Antos,
Senior Vice President An officer and/or portfolio manager
of certain Oppenheimer funds; a
Chartered Financial Analyst;
Senior Vice President of
HarbourView Asset
Management Corporation
("HarbourView"); prior to
March, 1996 he was the senior
equity portfolio
manager for the Panorama Series
Fund, Inc. (the
"Company") and other mutual funds
and pension funds managed by G.R.
Phelps & Co. Inc. ("G.R.
Phelps"), the Company's former
investment adviser,
which was a subsidiary of
Connecticut Mutual Life
Insurance Company; was also
responsible for
managing the common stock
department and
common stock investments of
Connecticut Mutual
Life Insurance Co.
Lawrence Apolito,
Vice President None.
Victor Babin,
Senior Vice President None.
Bruce Bartlett,
Vice President An officer and/or portfolio manager
of certain Oppenheimer funds.
Formerly a Vice President and
Senior Portfolio Manager at First
of America
Investment Corp.
Beichert, Kathleen None.
Rajeev Bhaman,
Vice President Formerly Vice President (January
1992 - February, 1996) of Asian
Equities for Barclays de Zoete
Wedd, Inc.
Robert J. Bishop,
Vice President Vice President of Mutual Fund
Accounting (since May 1996); an
officer of other Oppenheimer funds;
formerly an Assistant Vice
President of
OFI/Mutual Fund Accounting (April
1994-May
1996), and a Fund Controller for
OFI.
George C. Bowen,
Senior Vice President & Treasurer Vice President (since June 1983)
and Treasurer (since March 1985)
of OppenheimerFunds
Distributor, Inc. (the
"Distributor"); Vice President
(since October 1989) and Treasurer
(since April
1986) of HarbourView; Senior Vice
President
(since February 1992), Treasurer
(since July
1991)and a director (since December
1991) of
Centennial; President, Treasurer
and a director of
Centennial Capital Corporation
(since June 1989);
Vice President and Treasurer (since
August 1978)
and Secretary (since April 1981)
of Shareholder
Services, Inc. ("SSI"); Vice
President, Treasurer and
Secretary of Shareholder Financial
Services, Inc.
("SFSI") (since November 1989);
Treasurer of
Oppenheimer Acquisition Corp.
("OAC") (since June 1990);
Treasurer of Oppenheimer Partnership
Holdings, Inc. (since November
1989); Vice
President and Treasurer of ORAMI
(since July
1996); Chief Executive Officer,
Treasurer and a
director of MultiSource Services,
Inc., a broker-
dealer (since December 1995); an
officer and
director of other Oppenheimer funds.
Scott Brooks,
Vice President None.
Susan Burton,
Assistant Vice President None.
Adele Campbell,
Assistant Vice President & Assistant
Treasurer: Rochester Division Formerly Assistant Vice President
of Rochester Fund Services, Inc.
Michael Carbuto,
Vice President An officer and/or portfolio
manager of certain Oppenheimer funds;
Vice President of Centennial.
Ruxandra Chivu,
Assistant Vice President None.
H.D. Digby Clements,
Assistant Vice President:
Rochester Division None.
O. Leonard Darling,
Executive Vice President Trustee (1993 - present) of
Awhtolia College -Greece.
Robert A. Densen,
Senior Vice President None.
Sheri Devereux,
Assistant Vice President None.
Robert Doll, Jr.,
Executive Vice President & Director An officer
and/or portfolio manager of certain
Oppenheimer funds.
John Doney,
Vice President An officer and/or portfolio
manager of certain Oppenheimer funds.
Andrew J. Donohue,
Executive Vice President,
General Counsel and Director Executive Vice President (since
September 1993), and a director
(since January 1992) of the
Distributor; Executive Vice
President, General
Counsel and a director of
HarbourView, SSI, SFSI
and Oppenheimer Partnership
Holdings, Inc. since
(September 1995) and MultiSource
Services, Inc.
(a broker-dealer) (since December
1995); President
and a director of Centennial (since
September
1995); President and a director of
ORAMI (since
July 1996); General Counsel
(since May 1996) and
Secretary (since April 1997) of
OAC; Vice
President of OppenheimerFunds
International, Ltd.
("OFIL") and Oppenheimer Millennium
Funds plc
(since October 1997); an officer
of other
Oppenheimer funds.
George Evans,
Vice President An officer and/or portfolio
manager of certain Oppenheimer funds.
Edward Everett,
Assistant Vice President None.
Scott Farrar,
Vice President Assistant Treasurer of Oppenheimer
Millennium Funds plc (since October
1997); an officer of other
Oppenheimer funds; formerly an
Assistant Vice
President of OFI/Mutual Fund
Accounting (April
1994-May 1996), and a Fund
Controller for OFI.
Leslie A. Falconio,
Assistant Vice President None.
Katherine P. Feld,
Vice President and Secretary Vice President and Secretary of the
Distributor; Secretary of
HarbourView, MultiSource and
Centennial; Secretary, Vice
President and Director
of Centennial Capital Corporation;
Vice President
and Secretary of ORAMI.
Ronald H. Fielding,
Senior Vice President; Chairman:
Rochester Division An officer, Director and/or
portfolio manager of certain
Oppenheimer funds; Presently he
holds the
following other positions: Director
(since 1995) of
ICI Mutual Insurance Company;
Governor (since
1994) of St. John's College;
Director (since 1994 -present) of
International Museum of Photography
at
George Eastman House; Director
(since 1986) of GeVa Theatre.
Formerly he held the following
positions: formerly, Chairman of
the Board and
Director of Rochester Fund
Distributors, Inc.
("RFD"); President and Director of
Fielding
Management Company, Inc. ("FMC");
President
and Director of Rochester Capital
Advisors, Inc.
("RCAI"); Managing Partner of
Rochester Capital
Advisors, L.P., President and
Director of Rochester
Fund Services, Inc. ("RFS");
President and Director
of Rochester Tax Managed Fund,
Inc.; Director
(1993 - 1997) of VehiCare Corp.;
Director (1993 -1996) of VoiceMode.
John Fortuna,
Vice President None.
Patricia Foster,
Vice President Formerly she held the following
positions: An officer of certain
former Rochester funds (May,
1993 - January, 1996); Secretary of
Rochester
Capital Advisors, Inc. and General
Counsel (June,
1993 - January 1996) of Rochester
Capital
Advisors, L.P.
Jennifer Foxson,
Assistant Vice President None.
Paula C. Gabriele,
Executive Vice President Formerly, Managing Director
(1990-1996) for
Bankers Trust Co.
Robert G. Galli,
Vice Chairman Trustee of the New York-based
Oppenheimer Funds. Formerly Vice
President and General
Counsel of Oppenheimer Acquisition
Corp.
Linda Gardner,
Vice President None.
Alan Gilston,
Vice President Formerly Vice President for
Schroder Capital Management
International.
Jill Glazerman,
Assistant Vice President None.
Jeremy Griffiths,
Chief Financial Officer Currently a Member and Fellow of
the Institute of Chartered
Accountants; formerly an accountant
for
Arthur Young (London, U.K.).
Robert Grill,
Vice President Formerly Marketing Vice President
for Bankers Trust Company
(1993-1996); Steering Committee
Member, Subcommittee Chairman for
American
Savings Education Council
(1995-1996).
Caryn Halbrecht,
Vice President An officer and/or portfolio manager
of certain Oppenheimer funds;
formerly Vice President of
Fixed Income Portfolio Management
at Bankers
Trust.
Elaine T. Hamann,
Vice President Formerly Vice President (September,
1989 -January, 1997) of Bankers
Trust Company.
Glenna Hale,
Director of Investor Marketing Formerly, Vice President
(1994-1997) of
Retirement Plans Services for
OppenheimerFunds
Services.
Thomas B. Hayes,
Vice President None.
Barbara Hennigar,
Executive Vice President and
Chief Executive Officer of
OppenheimerFunds Services,
a division of the Manager President and Director of SFSI;
President and Chief executive
Officer of SSI.
Dorothy Hirshman, None.
Assistant Vice President
Alan Hoden,
Vice President None.
Merryl Hoffman,
Vice President None.
Nicholas Horsley,
Vice President Formerly a Senior Vice President
and Portfolio Manager for Warburg,
Pincus Counsellors, Inc.
(1993-1997), Co-manager of Warburg,
Pincus
Emerging Markets Fund (12/94 -
10/97), Co-
manager Warburg, Pincus Institutional
Emerging Markets Fund - Emerging
Markets Portfolio (8/96 -10/97),
Warburg Pincus Japan OTC Fund,
Associate Portfolio Manager of Warburg
Pincus International Equity Fund,
Warburg Pincus Institutional Fund -
Intermediate Equity Portfolio, and
Warburg Pincus EAFE Fund.
Scott T. Huebl,
Assistant Vice President None.
Richard Hymes,
Assistant Vice President None.
Jane Ingalls,
Vice President None.
Byron Ingram,
Assistant Vice President None.
Ronald Jamison,
Vice President Formerly Vice President and
Associate General Counsel at
Prudential Securities, Inc.
Frank Jennings,
Vice President An officer and/or portfolio manager
of certain Oppenheimer funds;
formerly, a Managing Director
of Global Equities at Paine
Webber's Mitchell
Hutchins division.
Thomas W. Keffer,
Senior Vice President Formerly Senior Managing Director
(1994 - 1996) of Van Eck Global.
Avram Kornberg,
Vice President None.
Joseph Krist,
Assistant Vice President None.
Paul LaRocco,
Vice President An officer and/or portfolio
manager of certain Oppenheimer funds;
formerly, a Securities Analyst for
Columbus Circle Investors.
Michael Levine,
Assistant Vice President None.
Shanquan Li,
Vice President Director of Board (since 2/96),
Chinese Finance Society; formerly,
Chairman (11/94-2/96), Chinese
Finance Society; and Director
(6/94-6/95), Greater
China Business Networks.
Stephen F. Libera,
Vice President An officer and/or portfolio manager
for certain Oppenheimer funds; a
Chartered Financial Analyst;
a Vice President of HarbourView;
prior to March
1996, the senior bond portfolio
manager for
Panorama Series Fund Inc., other
mutual funds and
pension accounts managed by G.R.
Phelps; also
responsible for managing the public
fixed-income
securities department at
Connecticut Mutual Life
Insurance Co.
Mitchell J. Lindauer,
Vice President None.
David Mabry,
Assistant Vice President None.
Steve Macchia,
Assistant Vice President None.
Bridget Macaskill,
President, Chief Executive Officer
and Director Chief Executive Officer (since
September 1995); President and
director (since June 1991) of
HarbourView; Chairman and a
director of SSI (since
August 1994), and SFSI (September
1995);
President (since September 1995)
and a director
(since October 1990) of OAC;
President (since
September 1995) and a director
(since November
1989) of Oppenheimer Partnership
Holdings, Inc.,
a holding company subsidiary of
OFI; a director of
ORAMI (since July 1996) ; President
and a director
(since October 1997) of OFIL, an
offshore fund
manager subsidiary of OFI and
Oppenheimer
Millennium Funds plc (since October
1997);
President and a director of other
Oppenheimer
funds; a director of the NASDAQ
Stock Market,
Inc. and of Hillsdown Holdings plc
(a U.K. food
company); formerly an Executive
Vice President of
OFI.
Wesley Mayer,
Vice President Formerly Vice President (January,
1995 - June, 1996) of Manufacturers
Life Insurance Company.
Loretta McCarthy,
Executive Vice President None.
Kevin McNeil,
Vice President Treasurer (September, 1994 -
present) for the Martin Luther King
Multi-Purpose Center (non-
profit community organization);
Formerly Vice
President (January, 1995 - April,
1996) for
Lockheed Martin IMS.
Tanya Mrva,
Assistant Vice President None.
Lisa Migan,
Assistant Vice President None.
Robert J. Milnamow,
Vice President An officer and/or portfolio manager
of certain Oppenheimer funds;
formerly a Portfolio Manager
(August, 1989 - August, 1995) with
Phoenix
Securities Group.
Denis R. Molleur,
Vice President None.
Linda Moore,
Vice President Formerly, Marketing Manager (July
1995-
November 1996) for Chase Investment
Services
Corp.
Tanya Mrva,
Assistant Vice President None.
Kenneth Nadler,
Vice President None.
David Negri,
Vice President An officer and/or portfolio
manager of certain Oppenheimer funds.
Barbara Niederbrach,
Assistant Vice President None.
Robert A. Nowaczyk,
Vice President None.
Richard M. O'Shaugnessy,
Assistant Vice President:
Rochester Division None.
Gina M. Palmieri,
Assistant Vice President None.
Robert E. Patterson,
Senior Vice President An officer and/or
portfolio manager of certain
Oppenheimer funds.
John Pirie,
Assistant Vice President Formerly, a Vice President with
Cohane
Rafferty Securities, Inc.
Jane Putnam,
Vice President An officer and/or portfolio
manager of certain Oppenheimer funds.
Russell Read,
Senior Vice President Formerly a consultant for
Prudential Insurance on behalf of
the General Motors Pension Plan.
Thomas Reedy,
Vice President An officer and/or portfolio
manager of certain Oppenheimer funds;
formerly, a Securities Analyst for the
Manager.
David Robertson,
Vice President None.
Adam Rochlin,
Vice President None.
Michael S. Rosen
Vice President; President,
Rochester Division An officer and/or portfolio manager
of certain Oppenheimer funds;
Formerly, Vice President
(June, 1983 - January, 1996) of
RFS, President and
Director of RFD; Vice President and
Director of
FMC; Vice President and director of
RCAI; General
Partner of RCA; Vice President and
Director of
Rochester Tax Managed Fund Inc.
Richard H. Rubinstein,
Senior Vice President An officer and/or portfolio manager
of certain Oppenheimer funds;
formerly Vice President and
Portfolio Manager/Security Analyst
for
Oppenheimer Capital Corp., an
investment adviser.
Lawrence Rudnick,
Assistant Vice President None.
James Ruff,
Executive Vice President None.
Valerie Sanders,
Vice President None.
Ellen Schoenfeld,
Assistant Vice President None.
Stephanie Seminara,
Vice President Formerly, Vice President of
Citicorp
Investment Services
Richard Soper,
Vice President None.
Nancy Sperte,
Executive Vice President None.
Donald W. Spiro,
Chairman Emeritus and Director Vice Chairman
and Trustee of the New York-based
Oppenheimer Funds; formerly Chairman
of the Manager and the Distributor.
Richard A. Stein,
Vice President: Rochester Division Assistant Vice President (since
1995) of Rochester Capitol
Advisors, L.P.
Arthur Steinmetz,
Senior Vice President An officer and/or
portfolio manager of certain
Oppenheimer funds.
Ralph Stellmacher,
Senior Vice President An officer and/or
portfolio manager of certain
Oppenheimer funds.
John Stoma,
Senior Vice President, Director
Retirement Plans Formerly Vice President of U.S.
Group Pension Strategy and
Marketing for Manulife Financial.
Michael C. Strathearn,
Vice President An officer and/or portfolio manager
of certain Oppenheimer funds; a
Chartered Financial Analyst;
a Vice President of HarbourView;
prior to March
1996, an equity portfolio manager
for Panorama
Series Fund, Inc. and other mutual
funds and pension accounts managed
by G.R. Phelps.
James C. Swain,
Vice Chairman of the Board Chairman, CEO and Trustee, Director
or Managing Partner of the
Denver-based Oppenheimer Funds;
President and a Director of
Centennial; formerly
President and Director of OAMC, and
Chairman of
the Board of SSI.
James Tobin,
Vice President None.
Jay Tracey,
Vice President An officer and/or portfolio
manager of certain Oppenheimer funds;
formerly Managing Director of
Buckingham Capital Management.
Gary Tyc,
Vice President, Assistant
Secretary and Assistant Treasurer Assistant Treasurer of the
Distributor and SFSI.
Ashwin Vasan,
Vice President An officer and/or portfolio
manager of certain Oppenheimer funds.
Dorothy Warmack,
Vice President An officer and/or portfolio
manager of certain Oppenheimer funds.
Jerry Webman,
Senior Vice President Director of New York-based
tax-exempt fixed
income Oppenheimer funds; Formerly,
Managing
Director and Chief Fixed Income
Strategist at
Prudential Mutual Funds.
Christine Wells,
Vice President None.
Joseph Welsh,
Assistant Vice President None.
Kenneth B.White,
Vice President An officer and/or portfolio manager
of certain Oppenheimer funds; a
Chartered Financial Analyst;
Vice President of HarbourView;
prior to March
1996, an equity portfolio manager
for Panorama
Series Fund, Inc. and other mutual
funds and
pension funds managed by G.R.
Phelps.
William L. Wilby,
Senior Vice President An officer and/or
portfolio manager of certain
Oppenheimer funds; Vice President of
HarbourView.
Carol Wolf,
Vice President An officer and/or portfolio manager
of certain Oppenheimer funds; Vice
President of Centennial;
Vice President, Finance and
Accounting and
member of the Board of Directors of
the Junior
League of Denver, Inc.; Point of
Contact: Finance
Supporters of Children; Member of
the Oncology
Advisory Board of the Childrens
Hospital; Member
of the Board of Directors of the
Colorado Museum
of Contemporary Art.
Caleb Wong,
Assistant Vice President None.
Robert G. Zack,
Senior Vice President and
Assistant Secretary, Associate
General Counsel Assistant Secretary of SSI (since
May 1985), and SFSI (since
November 1989); Assistant Secretary
of Oppenheimer Millennium Funds plc
(since
October 1997); an officer of other
Oppenheimer
funds.
Jill Zachman,
Assistant Vice President:
Rochester Division None.
Arthur J. Zimmer,
Senior Vice President An officer and/or
portfolio manager of certain
Oppenheimer funds; Vice President of
Centennial.
The Oppenheimer Funds include the New York-based Oppenheimer
Funds, the
Denver-based Oppenheimer Funds and the Oppenheimer/Quest Rochester Funds, as
set forth below:
New York-based Oppenheimer Funds
- --------------------------------
Oppenheimer Multiple Strategies Fund
Oppenheimer California Municipal Fund
Oppenheimer Capital Appreciation Fund
Oppenheimer Discovery Fund
Oppenheimer Enterprise Fund
Oppenheimer Global Fund
Oppenheimer Global Growth & Income Fund
Oppenheimer Gold & Special Minerals Fund
Oppenheimer Growth Fund
Oppenheimer International Growth Fund
Oppenheimer Money Market Fund, Inc.
Oppenheimer Multi-Sector Income Trust
Oppenheimer Multi-State Municipal Trust
Oppenheimer New York Municipal Fund
Oppenheimer Fund Oppenheimer Series Fund, Inc.
Oppenheimer Municipal Bond Fund
Oppenheimer U.S. Government Trust
Oppenheimer World Bond Fund
Oppenheimer Developing Markets Fund
Oppenheimer International Small Company Fund
Quest/Rochester Funds
- ---------------------
Oppenheimer Quest Global Value Fund, Inc.
Oppenheimer Quest Value Fund, Inc.
Oppenheimer Quest For Value Funds
Oppenheimer Quest Capital Value Fund, Inc.
Oppenheimer Bond Fund For Growth
Oppenheimer MidCap Fund
Rochester Fund Municipals
Limited Term New York Municipal Fund
Denver-based Oppenheimer Funds
- ------------------------------
Oppenheimer Cash Reserves
Centennial America Fund, L.P.
Centennial California Tax Exempt Trust
Centennial Government Trust
Centennial Money Market Trust
Centennial New York Tax Exempt Trust
Centennial Tax Exempt Trust
Daily Cash Accumulation Fund, Inc.
The New York Tax-Exempt Income Fund, Inc.
Oppenheimer Champion Income Fund
Oppenheimer Equity Income Fund
Oppenheimer High Yield Fund
Oppenheimer Integrity Funds
Oppenheimer International Bond Fund
Oppenheimer Limited-Term Government Fund
Oppenheimer Main Street Funds, Inc.
Oppenheimer Strategic Income Fund
Oppenheimer Municipal Fund
Oppenheimer Total Return Fund, Inc.
Oppenheimer Variable Account Funds
Panorama Series Fund, Inc.
Oppenheimer Real Asset Fund
The address of OppenheimerFunds, Inc., the New York- based
Oppenheimer Funds, the Quest Funds, OppenheimerFunds Distributor,
Inc., HarbourView Asset Management Corp., Oppenheimer Partnership
Holdings, Inc., and Oppenheimer Acquisition Corp. is Two World Trade
Center, New York, New York 10048-0203.
The address of the Denver-based Oppenheimer Funds, Shareholder
Financial Services, Inc., Shareholder Services, Inc.,
OppenheimerFunds Services, Centennial Asset Management Corporation,
Centennial Capital Corp., and Oppenheimer Real Asset Management,
Inc. is 6803 South Tucson Way, Englewood, Colorado 80012.
The address of MultiSource Services, Inc. is 1700 Lincoln
Street, Denver, Colorado 80203.
The address of the Rochester-based funds is 350 Linden Oaks,
Rochester, New York 14625-2807.
Name & Current Position with Other Business and Connections
OpCap Advisors During the Past Two Years
- ---------------------------- -------------------------------
Gavin Albert
Portfolio Manager Vice President, Oppenheimer
Capital
Robert J. Bluestone,
Director of Fixed Income
Management President, Oppenheimer Capital;
Director of Oppenheimer Capital
Trust Company.
Timothy J. Curro
Portfolio Manager Vice President, Oppenheimer
Capital
Pierre Daviron,
Portfolio Manager President, Oppenheimer Capital
International Division.
Thomas E. Duggan,
General Counsel & Secretary Managing Director & General
Counsel of Oppenheimer Capital;
Assistant Secretary
of Oppenheimer Financial Corp;
General
Counsel of Oppenheimer Capital
Limited.
Linda S. Ferrante,
Portfolio Manager Managing Director of Oppenheimer
Capital.
Bernard H. Garil,
President Managing Director of Oppenheimer
Capital and Oppenheimer & Co.,
Inc; Director of
Oppenheimer Capital Trust
Company.
John Giusio,
Portfolio Manager Vice President of Oppenheimer
Capital.
Richard J. Glasebrook, II,
Portfolio Manager Managing Director of Oppenheimer
Capital.
Colin Glinsman,
Portfolio Manager Senior Vice President of
Oppenheimer Capital.
Louis Goldstein,
Assistant Portfolio Manager Senior Vice President of
Oppenheimer Capital.
Matthew Greenwald,
Portfolio Manager Senior Vice President of
Oppenheimer Capital.
Vikki Y. Hanges,
Portfolio Manager Vice President of Oppenheimer
Capital.
Joseph M. LaMotta,
Chairman Chairman Emeritus of Oppenheimer
Capital; Director & Executive
Vice
President of Oppenheimer
Financial Corp.
and Oppenheimer Group, Inc.;
General
Partner of Oppenheimer & Co.,
L.P.; Director of Oppenheimer
Capital Trust
Company; Director and President
of
Oppenheimer Capital Limited.
Francis LeCatts, Jr.
Director of Research Managing Director of Oppenheimer
Capital
George A. Long,
Chief Investment Officer Chairman, President, Chief
Executive Officer and Chief
Investment Officer of
Oppenheimer Capital.
Elisa A. Mazen,
Portfolio Manager Vice President of Oppenheimer
Capital International Division.
Timothy McCormack,
Portfolio Manager Vice President of Oppenheimer
Capital; formerly Assistant Vice
President of
Oppenheimer Capital.
Susan Murphy,
President of an affiliate President of OCC Cash Management
Services Division and
Oppenheimer Capital
Trust Company; Managing Director
of
Oppenheimer Capital.
Eileen Rominger,
Portfolio Manager Managing Director of Oppenheimer
Capital.
Sheldon M. Siegel,
Treasurer and Chief Financial
Officer Managing
Director/Treasurer/Chief
Financial Officer of Oppenheimer
Capital;
Director of Oppenheimer Capital
Trust
Company; Treasurer and Chief
Financial
Officer of Oppenheimer Capital
Limited.
Jeffrey Whittington,
Portfolio Manager Senior Vice President of
Oppenheimer Capital.
The address of OpCap Advisors is 200 Liberty Street, New York, New York
10281. For information as to the business, profession, vocation or
employment of a substantial nature of the officers of Oppenheimer Capital,
reference is made to Form ADV filed by OpCap Advisors, under the
Investment Advisers Act of 1940, which is incorporated herein by
reference.
Item 29. Principal Underwriter
- -------- ---------------------
(a) OppenheimerFunds Distributor, Inc. is the Distributor of the
Registrant's shares. It is also the Distributor of each of the other registered
open-end investment companies for which OppenheimerFunds, Inc. is the investment
adviser, as described in Part A and B of this Registration Statement and listed
in Item 28(b) above.
(b) The directors and officers of the Registrant's principal
underwriter are:
Name & Principal Positions & Offices Positions &
Offices
Business Address with Underwriter with Registrant
- ---------------- -------------------
- -------------------
George C. Bowen(1) Vice President and Vice President and
Treasurer Treasurer of the
Oppenheimer funds.
Julie Bowers Vice President None
21 Dreamwold Road
Scituate, MA 02066
Peter W. Brennan Vice President None
1940 Cotswold Drive
Orlando, FL 32825
Maryann Bruce(2) Senior Vice President; None
Director: Financial
Institution Division
Robert Coli Vice President None
12 White Tail Lane
Bedminster, NJ 07921
Ronald T. Collins Vice President None
710-3 E. Ponce de Leon Ave.
Decatur, GA 30030
William Coughlin Vice President None
542 West Surf - #2N
Chicago, IL 60657
Mary Crooks(1)
E. Drew Devereaux(3) Assistant Vice President None
Rhonda Dixon-Gunner(1) Assistant Vice President None
Andrew John Donohue(2) Executive Vice Secretary of
President & Director the Oppenheimer
funds.
Wendy H. Ehrlich Vice President None
4 Craig Street
Jericho, NY 11753
Kent Elwell Vice President None
41 Craig Place
Cranford, NJ 07016
Todd Ermenio Vice President None
11011 South Darlington
Tulsa, OK 74137
John Ewalt Vice President None
2301 Overview Dr. NE
Tacoma, WA 98422
George Fahey Vice President None
201 E. Rund Grove Rd.
#26-22
Lewisville, TX 75067
Katherine P. Feld(2) Vice President None
& Secretary
Mark Ferro Vice President None
43 Market Street
Breezy Point, NY 11697
Ronald H. Fielding(3) Vice President None
Reed F. Finley Vice President None
1657 Graefield
Birmingham, MI 48009
Ronald R. Foster Senior Vice President None
11339 Avant Lane
Cincinnati, OH 45249
Patricia Gadecki Vice President None
950 First St., S.
Suite 204
Winter Haven, FL 33880
Luiggino Galleto Vice President None
10239 Rougemont Lane
Charlotte, NC 28277
Mark Giles Vice President None
5506 Bryn Mawr
Dallas, TX 75209
Ralph Grant(2) Vice President/National None
Sales Manager
Sharon Hamilton Vice President None
720 N. Juanita Ave.,#1
Redondo Beach, CA 90277
Byron Ingram(2) Assistant Vice President None
Mark D. Johnson Vice President None
129 Girard Place
Kirkwood, MO 63105
Michael Keogh(2) Vice President None
Richard Klein Vice President None
4820 Fremont Avenue So.
Minneapolis, MN 55409
Daniel Krause Vice President None
13416 Larchmere Square
Shaker Heights, OH 44120
Ilene Kutno(2) Assistant Vice President None
Todd Lawson Vice President None
3333 E. Bayaud Avenue
Unit 714
Denver, CO 80209
Wayne A. LeBlang Senior Vice President None
23 Fox Trail
Lincolnshire, IL 60069
Dawn Lind Vice President None
7 Maize Court
Melville, NY 11747
James Loehle Vice President None
30 John Street
Cranford, NJ 07016
Todd Marion Vice President None
21 N. Passaic Avenue
Chatham,N.J. 07928
Marie Masters Vice President None
520 E. 76th Street
New York, NY 10021
John McDonough Vice President None
P.O. Box 760
50 Riverview Road
New Castle, NH 03854
Tanya Mrva(2) Assistant Vice President None
Laura Mulhall(2) Senior Vice President None
Charles Murray Vice President None
18 Spring Lake Drive
Far Hills, NJ 07931
Wendy Murray Vice President None
32 Carolin Road
Upper Montclair, NJ 07043
Chad V. Noel Vice President None
3238 W. Taro Lane
Phoenix, AZ 85027
Joseph Norton Vice President None
2518 Fillmore Street
San Francisco, CA 94115
Patrick Palmer Vice President None
958 Blue Mountain Cr.
West Lake Village, CA 91362
Kevin Parchinski Vice President None
1105 Harney St., #310
Omaha, NE 68102
Randall Payne Vice President None
3530 Providence Plantation Way
Charlotte, NC 28270
Gayle Pereira Vice President None
2707 Via Arboleda
San Clemente, CA 92672
Charles K. Pettit Vice President None
22 Fall Meadow Dr.
Pittsford, NY 14534
Bill Presutti Vice President None
1777 Larimer St. #807
Denver, CO 80202
Tilghman G. Pitts, III(2) Chairman & Director None
Elaine Puleo(2) Vice President None
Minnie Ra Vice President None
895 Thirty-First Ave.
San Francisco, CA 94121
Michael Raso Vice President None
16 N. Chatsworth Ave.
Apt. 301
Larchmont, NY 10538
John C. Reinhardt(3) Vice President None
Douglas Rentschler Vice President None
867 Pemberton
Grosse Pointe Park, MI
48230
Ian Robertson Vice President None
4204 Summit Wa
Marietta, GA 30066
Michael S. Rosen(3) Vice President None
Kenneth Rosenson Vice President None
3802 Knickerbocker Place
Apt. #3D
Indianapolis, IN 46240
James Ruff(2) President None
Timothy Schoeffler Vice President None
1717 Fox Hall Road
Washington, DC 77479
Michael Sciortino Vice President None
785 Beau Chene Drive
Mandeville, LA 70471
Robert Shore Vice President None
26 Baroness Lane
Laguna Niguel, CA 92677
George Sweeney Vice President None
1855 O'Hara Lane
Middletown, PA 17057
Andrew Sweeny Vice President None
5967 Bayberry Drive
Cincinnati, OH 45242
Scott McGregor Tatum Vice President None
7123 Cornelia Lane
Dallas, TX 75214
David G. Thomas Vice President None
8116 Arlingon Blvd.
#123
Falls Church, VA 22042
Philip St. John Trimble Vice President None
2213 West Homer
Chicago, IL 60647
Sarah Turpin Vice President None
2735 Dover Road
Atlanta,GA 30327
Gary Paul Tyc(1) Assistant Treasurer None
Mark Stephen Vandehey(1) Vice President None
Marjorie Williams Vice President None
6930 East Ranch Road
Cave Creek, AZ 85331
(1) 6803 South Tucson Way, Englewood, Colorado 80112
(2) Two World Trade Center, New York, NY 10048-0203
(3) 350 Linden Oaks, Rochester, NY 14625-2807
(c) Not applicable.
Item 30. Location of Accounts and Records
- -------- --------------------------------
The accounts, books and other documents required to be maintained
by Registrant pursuant to Section 31(a) of the Investment Company Act of 1940
and rules promulgated thereunder are in the possession of OppenheimerFunds, Inc.
at its offices at 6803 South Tucson Way, Englewood, Colorado 80112 and Two World
Trade Center, New York, New York 10048-0203
Item 31. Management Services
- ------- -------------------
Not Applicable.
Item 32. Undertakings
- ------- ------------
(a) Not applicable.
(b) Not applicable.
(c) Not applicable.
(d) Not applicable.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and/or the Investment
Company Act of 1940, the Registrant certifies that it meets all the requirements
for effectiveness of this Registration Statement pursuant to Rule 485(b) under
the Securities Act of 1933 and has duly caused this Registration Statement to be
signed on its behalf by the undersigned, thereunto duly authorized, in the City
of New York and State of New York on the 22nd day of January, 1998.
OPPENHEIMER QUEST CAPITAL VALUE FUND, INC.
By: /s/ Bridget A. Macaskill*
-------------------------
Bridget A. Macaskill
Chairman of the Board and President
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement has been signed below by the following persons in the capacities and
on the dates
indicated:
Signatures Title Date
- ---------- ----- ----
/s/ Bridget A Macaskill* Chairman of the Board, January 22, 1998
- ----------------------- President (Principal
Bridget A. Macaskill Executive Officer) and
Director
/s/ George C. Bowen* Treasurer (Principal January 22, 1998
- ----------------------- Financial and Accounting
George Bowen Officer)
/s/ Paul Y. Clinton* Director January 22, 1998
- -----------------------
Paul Y. Clinton
/s/ Thomas W. Courtney* Director January 22, 1998
- -----------------------
Thomas W. Courtney
/s/ Lacy B. Herrmann* Director January 22, 1998
- -----------------------
Lacy B. Herrmann
/s/ George Loft* Director January 22, 1998
- -----------------------
George Loft
*By: /s/ Robert G. Zack
-------------------------
Robert G. Zack, Attorney-in-fact
OPPENHEIMER QUEST CAPITAL VALUE FUND, INC.
INDEX TO EXHIBITS
Exhibit Number Description
24(b)(11) Consent of Independent Accountants
24(b)(16) Performance Computation Schedule
24(b)(17)(1) Financial Data Schedule for Class A shares
24(b)(17)(2) Financial Data Schedule for Class B shares
24(b)(17(3) Financial Data Schedule for Class C shares
835ptc.#2
Consent of Independent Accountants
We hereby consent to the use in the Statement of Additional Information
constituting part of this Post-Effective Amendment No. 2 to the registration
statement on Form N-1A (the "Registration Statement") of our report dated
November 21, 1997, relating to the financial statements and financial highlights
of Oppenheimer Quest Capital Value Fund, Inc. (formerly Quest for Value Dual
Purpose Fund, Inc.), which appears in such Statement of Additional Information,
and to the incorporation by reference of our report into the Prospectus which
constitutes part of this Registration Statement. We also consent to the
reference to us under the heading "Independent Accountants" in such Statement of
Additional Information and to the references to us under the headings "Financial
Highlights" and "Independent Accountants" in such Prospectus.
/s/ Price Waterhouse LLP
Price Waterhouse LLP
Denver, Colorado
January 22, 1998
835con.#1
Oppenheimer Quest Capital Value Fund
Exhibit 24(b)(16) to Form N-1A
Performance Data Computation Schedule
The Fund's average annual total returns and total returns are calculated as
described below, on the basis of the Fund's distributions, for the past 10 years
which are as follows:
Distribution Amount From Amount From
Reinvestment Investment Long or Short-Term Reinvestment
(Ex)Date Income Capital Gains Price
Class A Shares
10/31/87 0.0000000 0.1561000 10.850
11/16/87 0.0000000 0.6743000 9.670
12/24/87 0.0000000 0.0930000 10.940
12/29/89 0.0000000 0.3130000 20.260
12/24/90 0.0000000 0.2020000 17.210
12/31/90 0.0000000 0.5102000 18.160
01/14/91 0.0000000 0.0140000 18.970
12/31/91 0.0000000 0.6018000 24.580
12/24/92 0.0000000 1.2950000 28.000
12/31/92 0.0000000 1.0990000 28.240
12/27/93 0.0000000 0.2160000 28.830
12/31/93 0.0000000 1.4305000 28.650
02/09/94 0.0000000 0.0693000 29.670
12/23/94 0.0000000 0.3200000 27.040
12/31/94 0.0000000 0.5616000 26.810
02/07/95 0.0000000 0.0330000 29.680
12/29/95 0.0000000 1.5599000 34.380
12/31/96 0.0000000 3.2848000 37.370
Class B Shares No dividends have been declared.
Class C Shares
No dividends have been declared
<PAGE>
Oppenheimer Quest Capital Value Fund
Page 2
1. Average Annual Total Returns for the Periods Ended 10/31/97:
The formula for calculating average annual total return is as follows:
1/number of years = n {(ERV/P)^n} - 1 = average annual total return
Where: ERV = ending redeemable value of a hypothetical $1,000 payment
made at the beginning of the period
P = hypothetical initial investment of $1,000
Class A Shares
Examples, assuming a maximum Examples at NAV:
sales charge of 5.75%:
One Year One Year
{($1,079.55/$1,000)^ 1} - 1 = 7.96% {($1,145.41/$1,000)^ 1} - 1 = 14.54%
Five Year Five Year
{($1,763.95/$1,000)^.2} - 1 = 12.02% {($1,871.52/$1,000)^.2} - 1 = 13.35%
Ten Year Ten Year
{($5,726.33/$1,000)^.1} - 1 = 19.07% {($6,075.77/$1,000)^.1} - 1 = 19.77%
<PAGE>
Oppenheimer Quest Capital Value Fund
Page 3
2. Cumulative Total Returns for the Periods Ended 10/31/97:
The formula for calculating cumulative total return is as follows:
(ERV - P) / P = Cumulative Total Return
Class A Shares
Examples, assuming a maximum Examples at NAV:
sales charge of 5.75%:
One Year One Year
$1,079.55 - $1,000/$1,000 = 7.96% $1,145.41 - $1,000/$1,000 = 14.54%
Five Year Five Year
$1,763.95 - $1,000/$1,000 = 76.40% $1,871.52 - $1,000/$1,000 = 87.15%
Ten Year Ten Year
$5,726.33 - $1,000/$1,000 = 472.63% $6,075.77 - $1,000/$1,000 = 507.58%
Class B Shares
Examples, assuming a maximum Examples at NAV:
contingent deferred sales charge
of 5.00% for the inception year:
Inception Inception
$1,068.01 - $1,000/$1,000 = 6.80% $1,117.99 - $1,000/$1,000 = 11.80%
Class C Shares
Examples, assuming a maximum Examples at NAV:
contingent deferred sales charge
of 1.00% for the inception year:
Inception Inception
$1,108.27 - $1,000/$1,000 = 10.83% $1,118.26 - $1,000/$1,000 = 11.83%
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