[Front Cover]
Annual Report October 31, 1997
OPPENHEIMER
Quest Capital
Value Fund, Inc.
[Oppenheimer Logo (4 interlocking hands)]
OppenheimerFunds(SM)
T H E R I G H T W A Y T O I N V E S T
<PAGE>
Contents
3 President's Letter
4 Fund Performance
6 An Interview
with the Fund's
Managers
10 Statement of
Investments
12 Statement of
Assets & Liabilities
14 Statement of
Operations
15 Statements of
Changes in
Net Assets
16 Financial Highlights
19 Notes to Financial
Statements
24 Report of
Independent
Accountants
25 Federal Income
Tax Information
26 Shareholder
Meeting
27 Officers &
Directors
28 Information &
Services
| Report highlights
|_______________________________________________________________________________
[bullet] From closed-end to open-end: On March 3, 1997, the Fund converted from
a closed-end fund to an open-end fund.
[bullet] Our "bottom-up" approach to stock selection helps us identify
reasonably priced, good, solid companies that we believe may deliver a
high return on capital.
Avg Annual Total Returns
For the period ended 10/31/97
(without sales charges)(1)
Class A
1 year
14.54%
Class B
Since inception
11.80%
Class C
Since inception
11.82%
Total returns include changes in share price and reinvestment of dividends
and capital gains distributions in a hypothetical investment for the periods
shown. In reviewing performance and rankings, please remember that
past performance does not guarantee future results. Investment return
and principal value of an investment in the Fund will fluctuate so that an
investor's shares, when redeemed, may be worth more or less than the
original cost. The Fund's investment advisor is OppenheimerFunds, Inc.,
and its subadvisor is OpCap Advisors (formerly Quest for Value Advisors,
the Fund's advisor until 2/28/97).
The Fund commenced operations on 2/13/87 as a closed-end investment
company, formerly named Quest for Value Dual Purpose Fund, Inc., with
a dual purpose structure and two classes of shares, Income shares and
Capital shares. Under the prior dual purpose structure, Capital shares
were entitled to all gains and losses on all Fund assets and no expenses
were allocated to such shares; the Income shares bore all of the Fund's
operating expenses. On 1/31/97, the Fund redeemed its Income shares,
which are no longer outstanding, and its dual purpose structure
terminated. On 3/3/97, the Fund converted from a closed-end fund to an
open-end fund, and its outstanding Capital shares were designated as
Class A shares now bearing their allocable share of the Fund's expenses.
1. Includes change in net asset value per share without deducting any
sales charges. Such performance would have been lower if sales charges
were taken into account. Class A shares total returns reflect the historical
performance of the Class A shares of the Fund (formerly Capital shares)
as adjusted for the fees and expenses of Class A shares in effect as of
3/3/97 (without giving effect to any fee waivers). Class B and C shares
were first available on 3/3/97.
2 Oppenheimer Quest Capital Value Fund, Inc.
<PAGE>
| Dear shareholder,
|_______________________________________________________________________________
[Photo: Bridget A. Macaskill]
Bridget A. Macaskill
President
Oppenheimer
Quest Capital Value
Fund, Inc.
As you are no doubt aware, during the end of October and early November many
stock markets around the world recorded their all-time largest point declines,
followed by subsequent gains and continued volatility, leaving investors
uncertain about what would occur next.
To put those events in focus, let's look at a "snapshot" of the two-week
time period. Sharp declines in the overseas stock markets, particularly in Asia,
triggered a series of sell-offs throughout Europe, Latin America and the United
States. In response, the U.S. stock market, as measured by the Dow Jones
Industrial Average, dropped 554 points on October 27, its largest point decline
in history. However, almost as quickly, the U.S. stock market bounced back over
the succeeding few days, regaining nearly all of its losses.
While no one could have predicted the timing or extent of these
fluctuations, many analysts, including our fund managers here at
OppenheimerFunds, had warned of a correction for several months. We believed
that U.S. valuations were too high, stocks were expensive relative to bonds,
recent corporate earnings were somewhat disappointing and that Federal Reserve
Chairman Alan Greenspan could possibly seek a short-term interest rate hike.
While only one short-term interest rate hike occurred in March of 1997, the
other factors have held true.
We'd like to take this opportunity to remind shareholders that stock
market volatility is a normal and expected part of the business cycle. As Alan
Greenspan suggested, in years to come this period will likely be remembered as a
positive change for a market that was growing too quickly.
For frequent market updates, please visit our website at
www.oppenheimerfunds.com or call 1-800-835-3104 to listen to our recorded
messages. In the meantime, thank you for your confidence in OppenheimerFunds,
The Right Way to Invest. We look forward to helping you reach your investment
goals in the future.
/s/ Bridget A. Macaskill
Bridget A. Macaskill
November 21, 1997
3 Oppenheimer Quest Capital Value Fund, Inc.
<PAGE>
Avg Annual Total Returns
For the Period Ended 9/30/97(1)
Class A
1 year 5 year 10 year
19.13% 13.83% 16.48%
Class B
Since
1 year 5 year Inception
N/A N/A 13.60%
Class C
Since
1 year 5 year Inception
N/A N/A 17.63%
Cumulative Total Return
For the Period Ended 9/30/97(1)
Class A
5 year
91.15% $17,296(2)
| Performance update
|_______________________________________________________________________________
Oppenheimer Quest Capital Value Fund, Inc. seeks to
purchase the stock of strong companies that the Fund's
manager believes are undervalued in the market--value
stocks. We believe that over the long term, these types
of stocks may provide an opportunity for a high return
on capital.
.............................[Mountain Chart:].................................
Growth of $10,000
Over five years
(without sales charges)(2)
Oppenheimer
Quest Capital
Value Fund, Inc. S&P 500
Class A shares Index
---------------- -------
9/30/92 10000 10000
10335 10503
10869 10982
11014 11015
9/30/93 11054 11300
11056 11562
10835 11123
10970 11170
9/30/94 11146 11716
10690 11714
11968 12855
13282 14082
9/30/95 14596 15201
14333 16117
15640 16982
16402 17744
9/30/96 15839 18292
16940 19817
15881 20348
17525 23901
9/30/97 18351 25692
..............................................................................
1. Total returns include changes in share price and reinvestment of dividends
and capital gains distributions in a hypothetical investment for the periods
shown. Class A shares total returns reflect the historical performance of the
Class A shares of the Fund (formerly Capital shares) as adjusted for the fees
and expenses of Class A shares in effect as of 3/3/97 (without giving effect to
any fee waivers). Average annual total returns for Class A shares include the
current 5.75% maximum initial sales charge. Class B and C shares were first
offered for sale on 3/3/97. Class B returns include the applicable contingent
deferred sales charge of 5% (since inception). Class C returns include the
applicable contingent deferred sales charge of 1%. Additional information on
charges and expenses is in the Fund's prospectus. Class B and C shares are
subject to an annual 0.75% asset-based sales charge and Class A shares are
subject to an annual 0.25% asset-based sales charge (the Fund's distributor has
voluntarily agreed to waive 0.15% of this fee
until 2/28/99).
4 Oppenheimer Quest Capital Value Fund, Inc.
<PAGE>
.................................[Pie Chart:].................................
Sector Weightings(3)
Consumer Cyclical 26.1%
Financial 25.7
Industrial 16.5
Technology 14.5
Basic Materials 5.1
Energy 4.8
Utilities 3.8
Consumer Non-Cyclical 3.5
..............................................................................
| Portfolio review
|_______________________________________________________________________________
Oppenheimer Quest Capital Value Fund, Inc. is for
investors looking for capital appreciation.
What We Look For
[bullet] Good businesses identified through fundamental analysis.
[bullet] Management motivated to work for shareholders.
[bullet] Securities that can be purchased at a reasonable price.
[bullet] Companies with high return on capital vs. high growth.
Top 10 Stock Holdings(3)
Security Capital Tele-Communications
Group, Inc.(4) 20.0% TCI Ventures Group, Cl. A 5.5%
..................................................................
EXEL Ltd. 5.8 Countrywide Credit
Industries, Inc. 5.4
..................................................................
Canadian Pacific Ltd. 5.7 WorldCom, Inc. 5.3
..................................................................
Mid Ocean Ltd. 5.7 ACE Ltd. 5.3
..................................................................
H&R Block, Inc. 5.6 LucasVarity plc, ADR 5.2
..................................................................
2. Results of a hypothetical $10,000 investment in Class A shares on September
30, 1992. The S&P 500 Index is a broad-based unmanaged stock index including
daily reinvestment of dividends, and cannot be purchased directly by investors.
Past performance does not guarantee future results.
3. Portfolio is subject to change. Percentages are as of October 31, 1997 and
are based on total market value of stock holdings.
4. This position was subsequently sold.
5 Oppenheimer Quest Capital Value Fund, Inc.
<PAGE>
_______________________
"Several major |
holdings in |
Bermuda-based |
insurance companies |
have performed well |
for the Fund." |
| An interview with your Fund's managers
|_______________________________________________________________________________
How did the Fund perform?
For the one-year period ended October 31, 1997, Oppenheimer Quest Capital Value
Fund, Inc. Class A shares delivered an average annual total return, without
sales charges, of 14.54%.((1))
Which investments contributed the most to the Fund's performance?((2))
Security Capital--the Fund's largest holding until only a short time ago--made
a substantial contribution to the Fund's performance. Security Capital is a
real estate investment group that principally invests in real estate investment
trusts (REITs). By definition, REITs make investments in a diverse array of
real estate, such as shopping centers, medical facilities, nursing homes,
office buildings, apartment complexes, industrial warehouses and hotels.
Security Capital's varied investments, coupled with the fact that it recently
went public, has helped increase the price of the stock. We have sold our
holdings and taken profits for the Fund.
Another strong performer was WorldCom, Inc. Through a series of
strategic acquisitions, WorldCom has grown into the world's largest commercial
Internet access company. And their recent bid to buy MCI Telecommunications has
attracted a good deal of press attention. WorldCom specializes in delivering
telephone and Internet services to the business market--which tends to be more
stable than the consumer market.
1. Includes changes in net asset value per share without deducting any sales
charges. Such performance would have been lower if sales charges were taken
into account.
2. The Fund's portfolio is subject to change.
6 Oppenheimer Quest Capital Value Fund, Inc.
<PAGE>
[Photo: Colin Glinsman, Jeff Whittington]
Portfolio Management
Team (l to r)
Colin Glinsman
Jeff Whittington
(Fund Manager)
The company also has a very strong management team dedicated to growing
the company, thereby improving stock prices for shareholders. In our opinion,
WorldCom could experience high revenue growth for the next three to five
years--while remaining attractively valued from a long-term perspective.
WorldCom's recent acquisition of the CompuServe online service
benefited another of the Fund's largest holdings--CompuServe's parent company,
H&R Block. Block boosted its performance by selling off its unprofitable
CompuServe consumer operation (which WorldCom then sold to America Online).
Plus, H&R Block has been a consistent performer--posting gains in all but one
of the past 20 years.
While we don't target sectors, there are some areas that have performed
well for the Fund. For example, the Fund has several major holdings in Bermuda-
based insurance companies: EXEL Ltd., ACE Ltd. and Mid Ocean Ltd. These
companies generate an enormous amount of excess capital, which allows them to
underwrite a substantial business volume. Operating in Bermuda, these companies
have very low expense structures relative to their U.S. and European
competitors. Plus, in line with the Fund's value strategy, these companies are
still modestly valued in our opinion.
Which investments didn't perform as well as expected?
The stocks of oil and gas exploration companies have been particularly
volatile over the past year-- suffering one of their worst quarters since the
80s.
7 Oppenheimer Quest Capital Value Fund, Inc.
<PAGE>
_______________
"We don't |
try to |
time the |
market." |
| An interview with your Fund's managers
|_______________________________________________________________________________
This impacted some of the Fund's holdings and we reduced those positions
accordingly.
LucasVarity, a British electrical equipment conglomerate, was also a
disappointment earlier in the year following the merger of Lucas Industries and
Varity. However, the new company recently reported stabilized earnings numbers
and they're benefiting from a strong UK market. The investment community likes
the fact that LucasVarity is on budget for earnings and cost-cutting for the
year. We feel it could be a very powerful company once the post-merger
transition period is over.
What challenges does the Fund face in the coming months?
Our constant challenge is to maintain a portfolio of what we consider to be the
best companies with the best management at the best prices. We don't try to
time the market or invest based on what we think interest rates, corporate
profits or the economy might do in the near term.
In our view, the biggest risk in any investment is the price that you
pay for it. That's why the Fund employs a "bottom-up" approach to stock
selection. Rather than targeting specific industries or sectors, we seek to
identify good, solid individual companies that we believe are reasonably valued
and may deliver a high return on capital based on above-average growth
prospects.
What is your outlook for the Fund?
While we like the portfolio of stocks the Fund currently owns, no one knows for
sure what the market or interest rates may do through the end of the year and
into 1998. We believe that, over time, by owning a portfolio of solid companies
with strong management at good prices, the Fund should be in a good position to
weather most economic environments.
8 Oppenheimer Quest Capital Value Fund, Inc.
<PAGE>
| Financials
|_______________________________________________________________________________
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.
23 Oppenheimer Quest Capital Value Fund, Inc.
<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.
Price Waterhouse LLP
Denver, Colorado
November 21, 1997
24 Oppenheimer Quest Capital Value Fund, Inc.
<PAGE>
Federal Income Tax Information (Unaudited)
In early 1998 shareholders will receive information regarding all dividends and
distributions paid to them by the Fund during calendar year 1997. Regulations of
the U.S. Treasury Department require the Fund to report this information to the
Internal Revenue Service.
Dividends paid by the Fund during the ten months ended October 31,
1997 which are not designated as capital gain distributions should be multiplied
by 23.55% to arrive at the net amount eligible for the corporate
dividend-received deduction.
The foregoing information is presented to assist shareholders in
reporting distributions received from the Fund to the Internal Revenue Service.
Because of the complexity of the federal regulations which may affect your
individual tax return and the many variations in state and local tax
regulations, we recommend that you consult your tax advisor for specific
guidance.
25 Oppenheimer Quest Capital Value Fund, Inc.
<PAGE>
Shareholder Meeting (Unaudited)
On May 19, 1997, a special shareholder meeting was held at which the proposed
changes to certain of the Fund's fundamental investment policies, including
changes to the investment objective were approved (Proposal No. 1) and the
Subadvisory Agreement between OppenheimerFunds, Inc. and OpCap Advisors was
approved (Proposal No. 2) as described in the Fund's proxy statement for that
meeting. The following is a report of the votes cast:
<TABLE>
<CAPTION>
Withheld/ Broker
Proposal For Against Abstain Non-Votes Total
- ---------------- --------------- ------------- ------------- ----------- --------------
<S> <C> <C> <C> <C> <C>
Proposal No. 1 5,333,081.606 387,728.558 492,181.397 4,689,389 6,212,991.561
Proposal No. 2 5,193,678.421 344,416.743 674,896.397 4,689,389 6,212,991.561
</TABLE>
26 Oppenheimer Quest Capital Value Fund, Inc.
<PAGE>
Oppenheimer Quest Capital Value Fund, Inc.
Officers and Directors Bridget A. Macaskill, Chairman of the Board of Directors
and President
Paul Y. Clinton, Director
Thomas W. Courtney, Director
Lacy B. Herrmann, Director
George Loft, Director
Robert C. Doll, Jr., Vice President
George C. Bowen, Treasurer
Robert J. Bishop, Assistant Treasurer
Scott T. Farrar, Assistant Treasurer
Andrew J. Donohue, Secretary
Robert G. Zack, Assistant Secretary
- --------------------------------------------------------------------------------
Investment Advisor OppenheimerFunds, Inc.
- --------------------------------------------------------------------------------
Sub-Advisor OpCap Advisors
- --------------------------------------------------------------------------------
Distributor OppenheimerFunds Distributor, Inc.
- --------------------------------------------------------------------------------
Transfer and Shareholder OppenheimerFunds Services
Servicing Agent
- --------------------------------------------------------------------------------
Custodian of State Street Bank and Trust Company
Portfolio Securities
- --------------------------------------------------------------------------------
Independent Accountants Price Waterhouse LLP
- --------------------------------------------------------------------------------
Legal Counsel Gordon Altman Butowsky Weitzen Shalov & Wein
This is a copy of a report to shareholders of
Oppenheimer Quest Capital Value Fund, Inc. This report
must be preceded or accompanied by a Prospectus of
Oppenheimer Quest Capital Value Fund, Inc. For material
information concerning the Fund, see the Prospectus.
Shares of Oppenheimer funds are not deposits or
obligations of any bank, are not guaranteed by any bank,
and are not insured by the FDIC or any other agency, and
involve investment risks, including possible loss of the
principal amount invested.
27 Oppenheimer Quest Capital Value Fund, Inc.
<PAGE>
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[Oppenheimer Funds logo (4 intertwined hands)] Oppenheimer Funds(SM)
Distributor, Inc.
RA0835.001.1097 December 30, 1997
