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 [ ]
Pre-Effective Amendment No. _____ [ ]
Post-Effective Amendment No. 5 [X]
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY
ACT OF 1940 [ ]
Amendment No. 16 [X]
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OPPENHEIMER QUEST CAPITAL VALUE FUND, INC.
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(Exact Name of Registrant as Specified in Charter)
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Two World Trade Center, New York, New York 10048-0203
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(Address of Principal Executive Offices) (Zip Code)
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(212) 323-0200
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(Registrant's Telephone Number, including Area Code)
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Andrew J. Donohue, Esq.
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OppenheimerFunds, Inc.
Two World Trade Center, New York, New York 10048-0203
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(Name and Address of Agent for Service)
It is proposed that this filing will become effective (check appropriate box):
[ ] Immediately upon filing pursuant to paragraph (b) [X] On February 23, 2000
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
If appropriate, check the following box:
[ ] This post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
<PAGE>
Oppenheimer
Quest Capital Value Fund, Inc.
Prospectus dated February 23, 2000
Oppenheimer Quest Capital Value Fund, Inc. is a mutual fund that seeks
capital appreciation as its goal. It invests mainly in common stock and other
equity securities believed to be undervalued in the marketplace.
This Prospectus contains
important information about the Fund's
objective, its investment policies,
strategies and risks. It also contains
important information about how to buy
and sell shares of the Fund and other
account features. Please read this
Prospectus carefully before you invest
and keep it for future reference about
your account.
As with all mutual funds, the Securities and Exchange Commission has not
approved or disapproved the Fund's securities nor has it determined that this
Prospectus is accurate or complete. It is a criminal offense to represent
otherwise.
67890
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CONTENTS
ABOUT THE FUND
The Fund's Investment Objective and Strategies
Main Risks of Investing in the Fund
The Fund's Past Performance
Fees and Expenses of the Fund
About the Fund's Investments
How the Fund is Managed
ABOUT YOUR ACCOUNT
How to Buy Shares
Class A Shares
Class B Shares
Class C Shares
Special Investor Services
AccountLink
PhoneLink
OppenheimerFunds Internet Web Site
Retirement Plans
How to Sell Shares
By Mail
By Telephone
How to Exchange Shares
Shareholder Account Rules and Policies
Dividends, Capital Gains and Taxes
Financial Highlights
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ABOUT THE FUND
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The Fund's Investment Objective and Strategies
WHAT IS THE FUND'S INVESTMENT OBJECTIVE? The Fund seeks capital appreciation.
WHAT DOES THE FUND INVEST IN? The Fund invests mainly in common stocks of U.S.
issuers that the portfolio manager believes are undervalued in the marketplace.
The Fund may invest in other equity securities, such as preferred stocks,
warrants and debt securities convertible into common stocks. These investments
are more fully explained in "About the Fund's Investments," below.
HOW DOES THE PORTFOLIO MANAGER DECIDE WHAT SECURITIES TO BUY OR SELL? In
selecting securities for the Fund, the Fund's portfolio manager, who is
employed by the Sub-Advisor, OpCap Advisors, uses a "value" approach to
investing. The portfolio manager search for securities of companies believed to
be undervalued in the marketplace, in relation to factors such as a company's
assets, earnings, growth potential and cash flows. This process and the
inter-relationship of the factors used may change over time and its
implementation may vary in particular cases. Currently, the selection process
includes the following techniques:
o A "bottom up" analytical approach using fundamental research to
evaluate particular issuers before considering industry trends,
evaluating each issuer's characteristics, financial results and
management.
o A search for securities of companies believed to be undervalued and
having a high return on capital, strong management committed to
shareholder value, and positive cash flows.
o Ongoing monitoring of issuers for fundamental changes in the company
that might alter the portfolio manager's initial expectations about the
security and might result in a decision to sell the security.
WHO IS THE FUND DESIGNED FOR? The Fund is designed for investors seeking capital
appreciation over the long term. Those investors should be willing to assume the
risks of short-term share price fluctuations that are typical for a fund
emphasizing investments in equity securities. Since the Fund does not seek
income and its income from investments will likely be small, it is not designed
for investors needing current income. Because of its focus on long-term growth,
the Fund may be appropriate for a portion of a retirement plan investment. The
Fund is not a complete investment program.
Main Risks of Investing in the Fund
All investments have risks to some degree. The Fund's investments in stocks and
bonds are subject to changes in their value from a number of factors, described
below. There is also the risk that poor security selection by the Sub-Advisor
will cause the Fund to underperform other funds having a similar objective. As
an example, the portfolio manager's "value" approach to investing could result
in fewer Fund investments in stocks that become highly valued by the marketplace
during times of rapid market advances. This could cause the fund to underperform
other funds that seek capital appreciation but that employ a growth non-value
approach to investing.
The risks described collectively form the risk profile of the Fund, and
can affect the value of the Fund's investments, its investment performance and
its price per share. Particular investments and investment strategies also have
risks. These risks mean that you can lose money by investing in the Fund. When
you redeem your shares, they may be worth more or less than what you paid for
them. There is no assurance that the Fund will achieve its investment objective.
RISKS OF INVESTING IN STOCKS. Stocks fluctuate in price, and their short-term
volatility at times may be great. Because the Fund currently emphasizes
investments in equity securities, the value of the Fund's portfolio will be
affected by changes in the stock markets in which it invests. 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. A variety of factors can affect the
price of a particular stock and the prices of individual stocks do not all move
in the same direction uniformly or at the same time. Different stock markets may
behave differently from each other.
Other factors can affect a particular stock's price, such as poor earnings
reports by the issuer, loss of major customers, major litigation against the
issuer, or changes in government regulations affecting the issuer. The Fund
invests mainly in securities of medium and large-capitalization companies. It
also can invest in small companies, which may have more volatile stock prices
than large companies.
RISKS OF FOREIGN INVESTING. The Fund can buy securities of companies in
developed and underdeveloped countries. While the Fund has no limits on the
amounts it can invest in foreign securities, currently it does not intend to
invest more than 25% of its net assets in securities of issuers in any single
foreign country or more than 5% of its net assets in companies or government
issuers in emerging market countries.
While foreign securities offer special investment opportunities, there are
also special risks. The change in value of a foreign currency against the U.S.
dollar will result in a change in the U.S. dollar value of securities
denominated in that foreign currency. Foreign issuers are not subject to the
same accounting and disclosure requirements that U.S. companies are subject to.
The value of foreign investments may be affected by 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.
HOW RISKY IS THE FUND OVERALL? In the short term, the stock markets can be
volatile, and the price of the Fund's shares can go up and down substantially.
The Fund generally does not use income-oriented investments to help cushion the
Fund's total return from changes in stock prices. In the OppenheimerFunds
spectrum, the Fund is generally more conservative than aggressive growth stock
funds, but has greater risks than funds that invest in both stocks and bonds or
in investment-grade bond debt securities.
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An investment in the Fund is not a deposit of any bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency.
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The Fund's Past Performance
The bar chart and table below show one measure of the risks of investing in the
Fund, by showing changes in the Fund's performance (for its Class A shares) from
year to year for the last ten calendar years and by showing how the average
annual total returns of the Fund's shares compare to those of a broad-based
market index. The Fund's past investment performance is not necessarily an
indication of how the Fund will perform in the future.
Annual Total Returns (Class A) (as of 12/31 each year)
[See appendix to prospectus for data in bar chart showing annual total
returns]
Sales charges are not included in the calculations of return in this bar chart,
and if those charges were included, the returns would be less than those shown.
Returns including periods prior to 3/3/97 have been adjusted to reflect expenses
in effect as of that date, because the Fund's Class A shares were previously
"capital" shares of the Fund that bore no expenses while the Fund was a
closed-end investment company. During the period shown in the bar chart, the
highest return (not annualized) for a calendar quarter was 19.34% (4th Q'98) and
the lowest return (not annualized) for a calendar quarter was -15.23 (3rd Q
'90).
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Average Annual Total
Returns for the 1 Year 5 Years 10 Years
periods (or life of class,
ended December 31, if less)
1999
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--------------------- -0.25% 16.91% 13.88%
Class A Shares
(inception 2/13/87)
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--------------------- 21.03% 28.54% 18.19%1
S&P 500 Index
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--------------------- 0.91% 13.28% N/A
Class B Shares(
inception 3/3/97)
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Class C Shares
--------------------- 4.38% 13.93% N/A
(inception 3/3/97)
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1. From 12/31/89
The Fund commenced operations on 2/13/87 as a closed-end investment company with
two classes of shares, income shares and capital shares. Capital shares were
entitled to all gains and losses but bore no expenses. Income shares bore all of
the Fund's operating expenses. The Fund redeemed its income shares and converted
to an open-end fund on 3/3/97. The capital shares were designated as Class A
shares, which bear their allocable share of Fund expenses.
The Fund's average annual total returns in the table include the applicable
sales charge for Classes A, B and C shares: for Class A, the current maximum
initial sales charge of 5.75%; for Class B, the contingent deferred sales
charges of 5% (1-year) and 2% (life of class); and for Class C, the 1%
contingent deferred sales charge for the 1-year period. Returns for Class A
reflect the historical performance of the Fund's previous capital shares as
adjusted for the fees and expenses of Class A in effect on 3/3/97 (without
giving effect to any fee waivers). Returns for periods after 3/3/97 through to
2/28/99 are net of the Manager's waiver of certain fees, described in "How the
Fund Is Managed," and the Distributor's waiver of certain distribution fees,
described in "Distribution and Service (12b-1) Plans," below.
The returns measure the performance of a hypothetical account and assume that
all dividends and capital gains distributions have been reinvested in additional
shares. The performance of the Fund's Class A shares is compared to the S&P 500
Index, an unmanaged index of equity securities. The index performance reflects
the reinvestment of income but does not reflect transaction costs. The Fund's
investments vary from securities in the index.
Fees and Expenses of the Fund
The Fund pays a variety of expenses directly for management of its assets,
administration, distribution of its shares and other services. Those expenses
are subtracted from the Fund's assets to calculate the Fund's net asset values
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 meant to help you understand the
fees and expenses you may pay if you buy and hold shares of the Fund. The
numbers below are based on the Fund's expenses during its fiscal year ended
October 31, 1999.
Shareholder Fees (charges paid directly from your investment):
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Class A Shares Class B Shares Class C Shares
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Maximum Sales Charge
(Load) on purchases 5.75% None None
(as % of offering price)
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Maximum Deferred Sales
Charge (Load) (as % of
the lower of the None1 5%2 1%3
original offering price
or redemption proceeds)
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1. A contingent deferred sales charge may apply to redemptions of investments of
$1 million or more ($500,000 for retirement plan accounts) of Class A shares.
See "How to Buy Shares" for details.
2. Applies to redemptions in first year after purchase. The contingent deferred
sales charge declines to 1% in the sixth year and is eliminated after that.
3. Applies to shares redeemed within 12 months of purchase.
Annual Fund Operating Expenses (deducted from Fund assets):
(% of average daily net assets)
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Class A Shares Class B Shares Class C Shares
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Management Fees 1.00% 1.00% 1.00%
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Distribution and/or
Service (12b-1) Fees .50% 1.00% 1.00%
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Other Expenses 0.21% 0.27% 0.26%
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Total Annual Operating 1.71% 2.27% 2.26%
Expenses
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The management fees and distribution fees shown are the amounts that would have
been paid by the Fund if certain fee waivers were not in effect during the
fiscal year. These waivers terminated on February 28, 1999. After the
management fee waiver, the actual management fees were 0.92% for each class of
shares. After the distribution fees waiver, the actual distribution fees were
0.45% for Class A, 1.00% for Class B and 1.00% for Class C. The asset-based
sales charge rate for Class A shares has been voluntarily reduced from 0.25% to
0.20% of average annual net assets representing Class A shares effective
January 1, 2000, to 0.15% effective January 1, 2001, and to 0.10% effective
January 1, 2002. The Board can set the rate up to 0.25% of average annual net
assets under the Distribution and Service Plan for Class A shares. Expenses may
vary in future years. "Other expenses" include transfer agent fees, custodial
expenses, and accounting and legal expenses the Fund pays.
EXAMPLES. The following examples are intended to help you compare the cost of
investing in the Fund with the cost of investing in other mutual funds. The
examples assume that you invest $10,000 in a class of shares of the Fund for the
time periods indicated and reinvest your dividends and distributions.
The first example assumes that you redeem all of your shares at the end of
those periods. The second example assumes that you keep your shares. Both
examples also assume that your investment has a 5% return each year and
that the class's operating expenses remain the same as in the table above.
Your actual costs may be higher or lower because expenses will vary over
time. Based on these assumptions your expenses would be as follows:
<PAGE>
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If shares are redeemed: 1 Year 3 Years 5 Years 10 Years1
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Class A Shares $ 739 $ 1083 $ 1450 $ 2478
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Class B Shares $ 730 $ 1009 $ 1415 $ 2337
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Class C Shares $ 329 $ 706 $ 1210 $ 2595
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If shares are not 1 Year 3 Years 5 Years 10 Years1
redeemed:
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Class A Shares $ 739 $ 1083 $ 1450 $ 2478
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Class B Shares $ 230 $ 709 $ 1215 $ 2337
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Class C Shares $ 229 $ 706 $ 1210 $ 2595
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In the first example, expenses include the initial sales charge for Class A and
the applicable Class B or Class C contingent deferred sales charges. In the
second example, the Class A expenses include the sales charge, but Class B and
Class C expenses do not include the contingent deferred sales charges. 1. Class
B expenses for years 7 through 10 are based on Class A expenses,
since Class B shares automatically convert to Class A after 6 years.
About the Fund's Investments
THE FUND'S PRINCIPAL INVESTMENT POLICIES. The allocation of the Fund's portfolio
among the different types of investments will vary over time based upon the
evaluation of economic and market trends. The Fund's portfolio might not always
include all of the different types of investments described below. The Statement
of Additional Information contains more detailed information about the Fund's
investment policies and risks.
The Manager has engaged the Sub-Advisor, OpCap Advisors, to select
securities for the Fund's portfolio. The Sub-Advisor tries to reduce risks by
carefully researching securities before they are purchased and to reduce the
Fund's exposure to market risks by diversifying its investments, that is, by not
holding a substantial percentage of stock of any one company and by not
investing too great a percentage of the Fund's assets in any one issuer. Also,
the Fund does not concentrate 25% or more of its investments in any one
industry.
However, changes in the overall market prices of securities and the income
they pay can occur at any time. The share price of the Fund will change daily
based on changes in market prices of securities and market conditions, and in
response to other economic events
Stock Investments. The Fund invests mainly in common stocks and other equity
securities to seek capital appreciation. They can be securities issued by
domestic or foreign companies. While the Fund can invest in securities of
issuers of small, medium or large market capitalization, the Sub-Advisor
currently focuses investments on mid-size companies.
At times, the Fund may increase the relative emphasis of its investments
in the securities of issuers in a particular industry, or of a particular
capitalization or a range of capitalizations, depending on the Sub-Advisor's
judgment about market and economic conditions. Stocks of issuers in a particular
industry may be affected by changes in economic conditions, government
regulations, availability of basic resources or other events that affect that
industry more than others. To the extent that the Fund increases the relative
emphasis of its investments in a particular industry, its share prices will
fluctuate in response to events affecting that industry. Although convertible
securities are debt securities, some convertible securities can be considered to
be "equity equivalents" because of the conversion feature and in that case their
rating has less impact on the investment decision than in the case of other debt
securities.
Foreign Investing. The Fund can buy foreign securities that are listed on a
domestic or foreign stock exchange, traded in domestic or foreign
over-the-counter markets, or represented by American Depository Receipts or
other similar receipts. The Fund may invest to a limited degree in emerging
markets, which have greater risks than developed countries, such as less
developed trading markets and possibly less liquidity, unstable governments and
economies, and greater risks of nationalization and restrictions on foreign
ownership, making these investments more volatile than other foreign
investments. The Fund will hold foreign currency only in connection with buying
and selling foreign securities.
CAN THE FUND'S INVESTMENT OBJECTIVE AND POLICIES CHANGE? The Fund's Board of
Directors can change non-fundamental investment policies without shareholder
approval, although significant changes will be described in amendments to this
Prospectus. Fundamental policies cannot be changed without the approval of a
majority of the Fund's outstanding voting shares. The Fund's investment
objective is a fundamental policy. Investment restrictions that are fundamental
policies are listed in the Statement of Additional Information. An investment
policy is not fundamental unless this Prospectus or the Statement of Additional
Information says that it is.
OTHER INVESTMENT STRATEGIES. To seek its objective, the Fund can also use the
investment techniques and strategies described below. The Fund might not always
use all them. These techniques have certain risks, although some are designed to
help reduce overall investment or market risks.
Debt Securities. The Fund can also invest in debt securities, such as U.S.
Government securities and domestic and foreign corporate and government
bonds and debentures. Short-term debt securities can be selected for
liquidity pending the purchase of other investments or to have cash to pay
for redemptions of Fund shares.
The debt securities the Fund buys may be rated by nationally recognized
rating organizations or they may be unrated securities assigned an
equivalent rating by the Sub-Advisor. The Fund's investments in debt
securities, including convertible debt securities, can be above or below
investment grade in credit quality. The Fund is not required to sell a
security if its rating falls after the Fund buys it. However, the
Sub-Advisor will monitor those investments to determine whether the Fund
should continue to hold them. Rating definitions of national rating
agencies are described in Appendix A to the Statement of Additional
Information.
Special Credit Risks of Lower-Grade Securities. All debt securities are
subject to some degree of credit risk. Credit risk relates to the ability
of the issuer to meet interest or principal payments on a security as they
become due. The Fund can invest up to 25% of its assets in "lower-grade"
securities commonly known as "junk bonds," although it currently does not
hold such investments. These are debt securities rated lower than "Baa3"
by Moody's Investors Service, Inc. or "BBB-" by Standard & Poor's Ratings
Service or that have comparable ratings from another rating organization
or that are unrated securities assigned a comparable rating by the
Sub-Advisor.
Higher yielding lower-grade bonds, whether rated or unrated, have greater
risks than investment grade securities. They may be subject to greater
market fluctuations and risk of loss of income and principal than
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 and principal due on the
bonds. These risks mean that the Fund's net asset value per share may be
affected by declines in value of these securities.
Money Market Instruments. For liquidity purposes, the Fund can also invest in
"money market instruments." These include U.S. Government securities and
high-quality corporate debt securities having a remaining maturity of one
year or less. They also include commercial paper, other short-term
corporate debt obligations, certificates of deposit, bankers' acceptances
and repurchase agreements.
Investing in Small, Unseasoned Companies. The Fund can invest without limit 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. These securities may have limited
liquidity, which means that the Fund could have difficulty selling them at
an acceptable price when it wants to. The prices of these securities may
be very volatile, especially in the short term.
Illiquid And Restricted Securities. Investments may be illiquid because they do
not have 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 cannot invest more than 15% of its net assets in illiquid or
restricted securities. Certain restricted securities that are eligible for
resale to qualified institutional purchasers may not be subject to that
limit. The Manager and Sub-Advisor monitor holdings of illiquid securities
on an ongoing basis to determine whether to sell any holdings to maintain
adequate liquidity.
Hedging. The Fund can buy and sell certain kinds of futures contracts,
forward contracts, and put and call options. These are all referred to as
"hedging instruments." In the broadest sense, hedging instruments the Fund
might use may be considered "derivative investments." In general terms, a
derivative investment is an investment contract whose value depends on (or
is derived from) the value of an underlying asset, interest rate or index.
The Fund does not currently use hedging extensively nor for speculative
purposes. It has limits on its use of hedging instruments and is not
required to use them in seeking its objective.
Some of these strategies would hedge the Fund's portfolio against price
fluctuations. Other hedging strategies, such as buying futures and call
options, would tend to increase the Fund's exposure to the securities
market.
Hedging involves risk. If the manger used a hedging instrument at the
wrong time or judged market conditions incorrectly, the hedge might be
unsuccessful and the strategy could reduce the Fund's returns. The Fund
could also experience losses if the prices of its futures and options
positions were not correlated with its other investments or if it could
not close out a position because of an illiquid market for the future or
option.
Portfolio Turnover. A change in the securities held by the fund is known as
"portfolio turnover". The Fund does not expect to engage frequently in
short-term trading to try to achieve its objective. Portfolio turnover affects
brokerage costs the Fund pays. If the Fund realizes capital gains when it sells
its portfolio investments, it must generally pay those gains out to
shareholders, increasing their taxable distributions. The Financial Highlights
table shows the Fund's portfolio turnover rates during prior fiscal years.
Temporary Defensive Investments. In times of adverse market or economic
conditions, the Fund can invest up to 100% of its assets in temporary defensive
investments. Generally they would be short-term U.S. Government securities and
the types of money market instruments described above. To the extent the Fund
invests defensively in these securities, it might not achieve its investment
objective of capital appreciation.
How the Fund Is Managed
THE MANAGER. The Manager 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 Fund's Board of Directors, under an investment
advisory agreement that states the Manager's responsibilities. The agreement
sets the fees paid by the Fund to the Manager and describes the expenses that
the Fund pays to conduct its business. The Manager became the Fund's investment
advisor on February 28, 1997.
Shareholders of the Fund were previously informed of the proposal to
reorganize the Fund with and into Oppenheimer Quest Balanced Value Fund. At the
adjourned shareholder meeting of the Fund held on December 17, 1999, the
proposal did not receive the requisite shareholder vote and will not be
implemented.
The Manager has been an investment advisor since January 1960. The Manager
(including subsidiaries and an affiliate) managed more than $120 billion of
assets as of December 31, 1999, and more than 5 million shareholder accounts.
The Manager is located at Two World Trade Center, 34th Floor, New York, New York
10048-0203.
The Manager's Fees. Under the investment advisory agreement, the Fund pays the
Manager an advisory fee at an annual rate that declines on additional assets as
the Fund grows: 1.00% of the first $400 million of average annual net assets of
the Fund, 0.90% of the next $400 million, and 0.85% of average annual net assets
in excess of $800 million. Under a provision of the agreement (the provision
expired on February 28, 1999), the Manager waived a portion of its fee equal to
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. The Fund's management fee for its last fiscal year
ended October 31, 1999 was 0.92% of average annual net assets for each class of
shares (after the Manager's waiver of a portion of its fees).
The Sub-Advisor. On February 28, 1997, the Manager retained the Sub-Advisor to
provide day-to-day portfolio management for the Fund. Prior to that date
and from the inception of the Fund, the Sub-Advisor had been the Fund's
investment advisor. The Sub-Advisor has operated as an investment advisor
to investment companies and institutional investors since its organization
in 1980, and as of December 31, 1999, the Sub-Advisor or its parent
Oppenheimer Capital advised accounts having assets in excess of $52.2
billion. The Sub-Advisor is located at 1345 Avenue of the Americas, 49th
Floor, New York, New York 10105-4800.
The Manager, not the Fund, pays the Sub-Advisor an annual fee under the
Sub-Advisory Agreement between the Manager and the Sub-Advisor. The fee is
calculated as a percentage of the fee the Fund pays the Manager. The rate
is 40% of the advisory fee collected by the Manager based on the net
assets of the Fund as of February 28, 1997, and remaining 120 days later,
plus 30% of the fee collected by the Manager on assets in excess of that
amount. In each case the fee is calculated after any waivers of the
Manager's fee from the Fund.
The Sub-Advisor is a majority-owned subsidiary of Oppenheimer Capital.
Oppenheimer Capital is an indirect wholly-owned subsidiary of PIMCO
Advisors L.P. The general partners of PIMCO Advisors are PIMCO Partners,
G.P. and PIMCO Advisors Holdings L.P. On October 31, 1999, PIMCO Advisors,
PIMCO Advisors Holdings and Allianz AG announced that they had entered
into an agreement in which Allianz will acquire majority ownership of
PIMCO Advisors and its subsidiaries, including Oppenheimer Capital and the
Sub-Advisor. That transaction is currently expected to be completed by the
end of the first quarter of 2000. Under the Investment Company Act, the
acquisition of PIMCO Advisors and its subsidiaries by Allianz could be
deemed to be an "assignment" of the Sub-Advisory Agreement between the
Sub-Advisor and the Manager. In that case, approval of the Fund's
shareholders is needed to continue the Sub-Advisory Agreement. Proxy
solicitation materials with respect to that matter have been distributed
to Fund shareholders of record as of December 22, 1999. The consummation
of the Allianz acquisition of PIMCO Advisors would be subject to, among
other things, the Fund's shareholders approving the continuation of the
Sub-Advisory Agreement along with approval by shareholders of other funds
having similar sub-advisory arrangements with the Sub-Advisor.
Portfolio Managers. The portfolio manager of the Fund is Louis P. Goldstein who
is employed by the Sub-Advisor. He is the person primarily responsible for
the day-to-day management of the Fund's portfolio. Mr. Goldstein, a Senior
Vice President of Oppenheimer Capital, became the Fund's portfolio manager
in February 1999. Mr. Goldstein, an equity analyst, joined Oppenheimer
Capital in 1991.
ABOUT YOUR ACCOUNT
How to Buy Shares
HOW DO YOU BUY SHARES? You can buy shares several ways as described below.
The Fund's Distributor, OppenheimerFunds Distributor, Inc., may appoint
certain servicing agents to accept purchase (and redemption) orders. The
Distributor, in its sole discretion, may reject any purchase order for the
Fund's shares.
BuyingShares Through Your Dealer. You can buy shares through any dealer,
broker, or financial institution that has a sales agreement with the
Distributor. Your dealer will place your order with the Distributor on
your behalf.
BuyingShares 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 with a financial advisor before you make a purchase to be
sure that the Fund is appropriate for you.
Paying Buy Federal Funds Wire. Shares purchased through the Distributor may
be paid for by Federal Funds wire. The minimum investment is $2,500.
Before sending a wire, call the Distributor's Wire Department at
1.800.525.7048 to notify the Distributor of the wire, and to receive
further instructions.
Buying Shares Through Oppenheimerfunds Accountlink. With AccountLink, you pay
for shares by electronic transfer from your bank account through the
Automated Clearing House (ACH) system. You can provide those instructions
automatically, under an Asset Builder Plan, described below, or by
telephone instructions using OppenheimerFunds PhoneLink, also described
below. Please refer to "AccountLink," below for more details.
Buying Shares Through 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 Asset Builder
Application and the Statement of Additional Information.
HOW MUCH MUST YOU INVEST? You can buy Fund shares with a minimum initial
investment of $1,000. You can make additional investments at any time with as
little as $25. There are reduced minimum investments under special investment
plans.
With Asset Builder Plans, 403(b) plans, Automatic Exchange Plans and military
allotment plans, you can make initial and subsequent investments for as
little as $25. You can make additional purchases of at least $25 can be made
by telephone through AccountLink.
Under retirement plans, such as IRAs, pension and profit-sharing plans and
401(k) plans, you can start your account with as little as $250. If your IRA
is started under an Asset Builder Plan, the $25 minimum applies. Additional
purchases may be as little as $25.
Theminimum investment requirement does not apply to reinvesting dividends 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 reinvesting distributions from unit investment trusts that have
made arrangements with the Distributor.
AT WHAT PRICE ARE SHARES SOLD? Shares are sold at their offering price, which
is the net asset value per share plus any initial sales charge that
applies. The offering price that applies to a purchase order is based on
the next calculation of the net asset value per share that is made after
the Distributor receives the purchase order at its offices in Denver,
Colorado, or after any agent appointed by the Distributor receives the
order and sends it to the Distributor.
Net asset value. The Fund calculates the net asset value of each class of
shares as of the close of The New York Stocks Exchange, on each day the
Exchange is open for trading (referred to in this Prospectus as a "regular
business day"). The Exchange normally closes at 4:00 P.M., New York time,
but may close earlier on some days. All references to time in this
Prospectus mean "New York time".
The net asset value per share is determined 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. To determine net asset value, the Fund's Board
of Directors has established procedures to value the Fund's securities, in
general based on market value. The Board has adopted special procedures
for valuing illiquid and restricted securities and obligations for which
market values cannot be readily obtained. Because some foreign securities
trade in markets and exchanges that operate on U.S. holidays and weekends,
the values of some of the Fund's foreign investments may change
significantly on days when investors cannot buy or redeem Fund shares.
The offering price. To receive the offering price for a particular day, in
most cases the Distributor or its designated agent must receive your order
by the time of day The New York Stock Exchange closes that day. If your
order is received on a day when the Exchange is closed or after it has
closed, the order will receive the next offering price that is determined
after your order is received.
Buyingthrough a dealer. If you buy shares through a dealer, your dealer must
receive the order by the close of The New York Stock Exchange and transmit
it to the Distributor so that it is received before the Distributor's
close of business on a regular business day (normally 5:00 P.M.) to
receive that day's offering price. Otherwise, the order will receive the
next offering price that is determined.
<PAGE>
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WHAT CLASSES OF SHARES DOES THE FUND OFFER? The Fund offers investors three
different classes of shares. The different classes of shares represent
investments in the same portfolio of securities, but the classes are subject to
different expenses and will likely have different share prices. When you buy
shares, be sure to specify the class of shares. If you do not choose a class,
your investment will be made in Class A shares.
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CLASS A SHARES. If you buy Class A shares, you pay an initial sales charge (on
investments up to $1 million for regular accounts or $500,000 for certain
retirement plans). The amount of that initial sales charge will vary depending
on the amount you invest. The sales charge rates are listed in "How Can You Buy
Class A Shares?" below. There is also an asset-based sales charge on Class A
shares.
CLASS B SHARES. If you buy Class B shares, you pay no sales charge at the time
of purchase, but you will pay an annual asset-based sales charge. If you sell
your shares within six years of buying them, you will normally pay a contingent
deferred sales charge. That contingent deferred sales charge varies depending on
how long you own your shares, as described in "How Can You Buy Class B Shares?"
below.
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CLASS C SHARES. If you buy Class C shares, you pay no sales charge at the time
of purchase, but you will pay an annual asset-based sales charge. 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 "How Can You Buy 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 best
suited to your needs depends on a number of factors that you should discuss with
your financial advisor. Some 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.
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 discussion below is not intended to be investment advice or a
recommendation, because each investor's financial considerations are
different. Of course, these examples are based on approximations of the
effect of current sales charges and expenses projected over time, and do
not detail all of the considerations in selecting a class of shares. You
should analyze your options carefully with your financial advisor before
making that choice. The discussion below assumes that you will purchase
only one class of shares, and not a combination of shares of different
classes.
How Long Do You Expect To Hold Your Investment? While future financial needs
cannot be predicted with certainty, knowing how long you expect to hold
your investment will assist you in selecting the appropriate class of
shares. 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,
compared to the effect over time of higher class-based expenses on shares
of Class B or Class C.
Investing for the Shorter Term. While the Fund is meant to be a long-term
investment, if you have a relatively 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. That is because of the effect of the Class B contingent deferred
sales charge if you redeem within six years, as well as the effect of the
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 as your investment horizon increases toward six years, Class C shares
might not be as advantageous as Class A shares. That is because the annual
asset-based sales charge on Class C shares will have a greater impact on
your account over the longer term than the reduced front-end sales charge
available for larger purchases of Class A shares.
And for 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.
Investing For the Longer Term. If you are investing less than $100,000 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 appropriate.
Are There Differences In Account Features That Matter To You? Some account
features may not be available to Class B or Class C shareholders. Other
features may not be advisable (because of the effect of the contingent
deferred sales charge) for Class B or Class C shareholders. Therefore, you
should carefully review how you plan to use your investment account before
deciding which class of shares to buy.
Additionally, the dividends payable to Class B and Class C shareholders
will be reduced by the additional expenses borne by those classes that are
not borne by Class A shares, such as the Class B and Class C asset-based
sales charge described below and in the Statement of Additional
Information. Share certificates are not available for Class B and Class C
shares, and if you are considering using your shares as collateral for a
loan, that may be a factor to consider.
How Do Share Classes Affect Payment to my Broker? A financial advisor may
receive different compensation for selling one class of shares than for
selling another class. It is important to remember that Class B and Class
C contingent deferred sales charges and asset-based sales charges have the
same purpose as the front-end sales charge on sales of Class A shares: to
compensate the Distributor for commissions and expenses it pays to dealers
and financial institutions for selling shares. The Distributor may pay
additional 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.
SPECIAL SALES CHARGE ARRANGEMENTS AND WAIVERS. Appendix C to the Statement of
Additional Information details the conditions for the waiver of sales charges
that apply in certain cases, and the special sales charge rates that apply to
purchases of shares of the Fund by certain groups or under specified retirement
plan arrangements or in other special types of transactions. To receive a waiver
or special sales charge rate, you must advise the Distributor when purchasing
shares or the Transfer Agent when redeeming shares that the special conditions
apply.
HOW CAN YOU BUY 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 other cases, reduced
sales charges may be available, as described below or in the Statement of
Additional Information. 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 or
allocated to your dealer as commission. The Distributor reserves the right
to reallow the entire commission to dealers. The current sales charge
rates and commissions paid to dealers and brokers are as follows:
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Front-End Sales Front-End Sales
Charge As a Charge As a Commission As
Percentage of Percentage of Net Percentage of
Amount of Purchase Offering Price Amount Invested Offering Price
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Less than $25,000 5.75% 6.10% 4.75%
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$25,000 or more but
less than $50,000 5.50% 5.82% 4.75%
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$50,000 or more but
less than $100,000 4.75% 4.99% 4.00%
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$100,000 or more
but less than 3.75% 3.90% 3.00%
$250,000
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$250,000 or more
but less than 2.50% 2.56% 2.00%
$500,000
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$500,000 or more
but less than $1 2.00% 2.04% 1.60%
million
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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
aggregating $1 million or more or for certain purchases by particular types of
retirement plans described in Appendix C to the Statement of Additional
Information. The Distributor pays dealers of record commissions in an amount
equal to 1.0% of purchases of $1 million or more (other than purchases by those
retirement accounts, which are not permitted in the Fund). For those retirement
plan accounts, the commission is 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, based on the
cumulative purchases during the prior 12 months ending with the current
purchase. In either case, the commission will be paid only on purchases that
were not previously subject to a front-end sales charge and dealer commission.1
That commission will not be paid on purchases of shares
of $1 million or more (including any right of accumulation) by a
retirement plan that pays for the purchase with the redemption of Class C
shares of one or more Oppenheimer funds.
If you redeem any of those shares within an 18-month "holding period"
measured from the end of the calendar month of their purchase, a
contingent deferred sales charge (called the "Class A contingent deferred
sales charge") may be deducted from the redemption proceeds. That sales
charge will be equal to 1.0% of the lesser of (1) the aggregate net asset
value of the redeemed shares (excluding shares purchased by reinvestment
of dividends or capital gain distributions) or (2) 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 purchases of Class A shares of all
Oppenheimer funds you made that were subject to the Class A contingent
deferred sales charge.
Can You Reduce Class A Sales Charges? You may be eligible to buy Class A shares
at reduced sales charge rates under the Fund's "Right of Accumulation" or a
Letter of Intent, as described in "Reduced Sales Charges" in the Statement of
Additional Information. The Class A initial and contingent sales charges are not
imposed in the circumstances described in Appendix C to the Statement of
Additional Information.
HOW CAN YOU BUY 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 the end of the calendar month of their purchase, a contingent
deferred sales charge will be deducted from the redemption proceeds. The Class B
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 B shares.
33
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 for the Class B contingent deferred
sales charge holding period:
<PAGE>
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Contingent Deferred Sales Charge on
Years Since Beginning of Month in Which Redemptions in That Year
Purchase Order was Accepted (As % of Amount Subject to Charge)
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0 - 1 5.0%
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1 - 2 4.0%
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2 - 3 3.0%
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3 - 4 3.0%
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4 - 5 2.0%
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5 - 6 1.0%
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6 and following None
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In the table, a "year" is a 12-month period. In applying the sales charge, all
purchases are considered to have been made on the first regular business day of
the month in which the purchase was made.
Automatic Conversion of Class B Shares. Class B shares automatically convert to
Class A shares 72 months after you purchase them. 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 any
Class B shares you hold convert, any other Class B shares that were
acquired by the reinvesting dividends and distributions on the converted
shares will also convert to Class A shares. For further information on the
conversion feature and its tax implications, see "Class B Conversion" in
the Statement of Additional Information.
HOW CAN YOU BUY 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 a holding period of 12 months from the end of the calendar month of their
purchase, a contingent deferred sales charge of 1.0% will be deducted from the
redemption proceeds. 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.
DISTRIBUTION AND SERVICE (12B-1) PLANS
Distribution and Service Plan for Class A Shares. The Fund has adopted a
Distribution and Service Plan for Class A shares. Under the plan the Fund
currently pays an asset-based sales charge to the Distributor at an annual
rate of 0.20% of average annual net assets of Class A shares of the Fund
(the Board of Directors can set this rate up to 0.25%). The Fund also pays
a service fee to the Distributor of 0.25% of the average annual net assets
of Class A shares. Until February 28, 1999, the Distributor waived its
receipt of a portion of the asset-based sales charge equal to 0.15% of
average annual net assets of Class A shares. The Distributor currently
uses all of the service fee and a portion of the asset-based sales charge
it receives to pay dealers, brokers, banks and other financial
institutions quarterly for providing personal service and maintenance of
accounts of their customers that hold Class A shares.
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
pay 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 and on Class C shares. The Distributor also receives a service
fee of 0.25% per year under each plan. The asset-based sales charge and
service fees increase Class B and Class C expenses by 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. The
Distributor pays the 0.25% service fees to dealers in advance for the
first year after the shares are sold by the dealer. After the shares have
been held for a year, the Distributor pays the service fees to dealers on
a quarterly basis.
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 sales of Class B shares is
therefore 4.00% of the purchase price. The Distributor retains the Class B
asset-based sales charge.
The Distributor currently pays sales commissons 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 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.
Special Investor Services
ACCOUNTLINK. You can use our AccountLink feature to link your Fund account
with an account at a U.S. bank or other financial institution. It must be an
Automated Clearing House (ACH) member. AccountLink lets you:
transmit funds electronically to purchase shares by telephone (through a
service representative or by PhoneLink) or automatically under Asset
Builder Plans, or
have the Transfer Agent send redemption proceeds or transmit dividends and
distributions directly to your bank account. Please call the Transfer
Agent for more information.
You may purchase shares 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.
AccountLink privileges should be requested on your Application or your
dealer's settlement instructions if you buy your shares through a 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.
PHONELINK. PhoneLink is the OppenheimerFunds automated telephone system that
enables shareholders to perform a number of account transactions automatically
using a touch-tone phone. PhoneLink may be used on already-established Fund
accounts after you obtain a Personal Identification Number (PIN), by calling the
special PhoneLink number, 1.800.533.3310.
Purchasing Shares. You may purchase shares in amounts up to $100,000 by phone,
by calling 1.800.533.3310. You must have established AccountLink
privileges to link your bank account with the Fund to pay for these
purchases.
Exchanging Shares. With the OppenheimerFunds exchange privilege, described
below, you can exchange shares automatically by phone from your Fund
account to another OppenheimerFunds account you have already established
by calling the special PhoneLink number.
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.
CAN YOU SUBMIT TRANSACTION REQUESTS BY FAX? You may send requests for certain
types of account transactions to the Transfer Agent by fax (telecopier). Please
call 1.800.525.7048 for information about which transactions may be handled this
way. 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. You can obtain information about the Fund,
as well as your account balance, on the OppenheimerFunds Internet web site, at
http://www.oppenheimerfunds.com. Additionally, shareholders listed in the
account registration (and the dealer of record) may request certain account
transactions through a special section of that web site. To perform account
transactions, you must first obtain a personal identification number (PIN) by
calling the Transfer Agent at 1.800.533.3310. If you do not want to have
Internet account transaction capability for your account, please call the
Transfer Agent at 1.800.525.7048.
AUTOMATIC WITHDRAWAL AND EXCHANGE PLANS. The Fund has several plans that enable
you to sell shares automatically or exchange them to another OppenheimerFunds
account on a regular basis. Please call the Transfer Agent or consult the
Statement of Additional Information for details.
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 only 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.
RETIREMENT PLANS. You may buy shares of the Fund for your retirement plan
account. If you participate in a plan sponsored by your employer, the plan
trustee or administrator must buy the shares for your plan account. The
Distributor also offers a number of different retirement plans that individuals
and employers can use:
Individual Retirement Accounts (IRAs). These include regular IRAs, Roth IRAs,
SIMPLE IRAs, rollover IRAs and Education IRAs.
SEP-IRAs. These are Simplified Employee Pensions Plan IRAs for small business
owners or self-employed individuals.
403(b)(7) Custodial Plans. These are tax deferred plans for employees of
eligible tax-exempt organizations, such as schools, hospitals and
charitable organizations.
401(k) Plans. These are special retirement plans for businesses.
Pension and Profit-Sharing Plans. These plans are designed for businesses and
self-employed individuals.
Please call the Distributor for OppenheimerFunds retirement plan documents,
which include applications and important plan information.
How to Sell Shares
You can sell (redeem) 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 in proper form (which means that it must comply with the procedures
described below) and is accepted by the Transfer Agent. The Fund lets you sell
your shares by writing a letter or by using the Fund's checkwriting privilege or
by telephone. You can also set up Automatic Withdrawal Plans to redeem shares on
a regular basis. 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 account, please call the
Transfer Agent first, at 1.800.525.7048, for assistance.
Certain Requests Require a Signature Guarantee. To protect you and the Fund from
fraud, the following redemption requests must be in writing and must include a
signature guarantee (although there may be other situations that also require a
signature guarantee):
You wish to redeem $100,000 or more and receive a check
The redemption check is not payable to all shareholders listed on the account
statement
The redemption check is not sent to the address of record on your account
statement
Shares are being transferred to a Fund account with a different owner or name
Shares are being redeemed by someone (such as an Executor) other than the
owners
Where Can You Have Your Signature Guaranteed? The Transfer Agent will accept a
guarantee of your signature by a number of financial institutions, including:
o a U.S. bank, trust company, credit union or savings association,
o a foreign bank that has a U.S. correspondent bank,
o a U.S. registered dealer or broker in securities, municipal securities
or government securities, or
o a U.S. national securities exchange,a registered securities association
or a clearing agency.
If you are signing on behalf of a corporation, partnership or other business or
as a fiduciary, you must also include your title in the signature.
Retirement Plan Accounts. There are special procedures to sell shares in an
OppenheimerFunds retirement plan account. Call the Transfer Agent for a
distribution request form. Special income tax withholding requirements
apply to distributions from retirement plans. You must submit a
withholding form with your redemption request to avoid delay in getting
your money and if you do not want tax withheld. If your employer holds
your retirement plan account for you in the name of the plan, you must ask
the plan trustee or administrator to request the sale of the Fund shares
in your plan account.
Sending Redemption Proceeds by Wire. While the Fund normally sends your money by
check, you can arrange to have the proceeds of the shares you sell sent by
Federal Funds wire to a bank account you designate. It must be a
commercial bank that is a member of the Federal Reserve wire system. The
minimum redemption you can have sent by wire is $2,500. There is a $10 fee
for each wire. To find out how to set up this feature on your account or
to arrange a wire, call the Transfer Agent at 1.800.852.8457.
HOW DO YOU SELL SHARES BY MAIL? Write a letter of instructions that includes:
Your name The Fund's name Your Fund account number (from your account statement)
The dollar amount or number of shares to be redeemed Any special payment
instructions Any share certificates for the shares you are selling The
signatures of all registered owners exactly as the account is registered,
and
Anyspecial documents requested by the Transfer Agent to assure proper
authorization of the person asking to sell the shares.
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Use the following address for requests by mail: Send courier or express mail
request to:
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OppenheimerFunds Services OppenheimerFunds Services
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P.O. Box 5270 10200 E. Girard Avenue,
Building D
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Denver, Colorado 80217-5270 Denver, Colorado 80231
HOW DO YOU SELL SHARES BY TELEPHONE? You and your dealer representative of
record may also sell your shares by telephone. To receive the redemption price
calculated on a particular 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. You may not redeem
shares held in an OppenheimerFunds retirement plan account or under a share
certificate by telephone.
To redeem shares through a service representative, call
1.800.852.8457
To redeem shares automatically on PhoneLink, call 1.800.533.3310
Whichever method you use, you may have a check sent to the address on the
account statement, or, if you have linked your Fund account to your bank account
on AccountLink, you may have the proceeds sent to that bank account.
Are There Limits On Amounts Redeemed By Telephone?
Telephone Redemptions Paid by Check. Up to $100,000 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.
Telephone Redemptions Through Accountlink. 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.
CAN YOU SELL 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. If your shares are held in the
name of your dealer, you must redeem them through your dealer.
HOW CONTINGENT DEFERRED SALES CHARGES AFFECT REDEMPTIONS. If you purchase shares
subject to Class A, Class B or Class C contingent deferred sales charge and
redeem any of those shares during the applicable holding period for the class of
shares, the contingent deferred sales charge will be deducted from the
redemption proceeds (unless you are eligible for a waiver of that sales charge
based on the categories listed in Appendix C to the Statement of Additional
Information) and you advise the Transfer Agent of your eligibility for the
waiver when you place your redemption request.
A 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 net
asset value. A contingent deferred sales charge is not imposed on:
o the amount of your account value represented by an increase in net
asset value over the initial purchase price,
o shares purchased by the reinvestment of dividends or capital gains
distributions, or
o shares redeemed in the special circumstances described in Appendix C to
the Statement of Additional Information.
To determine whether a 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 the holding period that applies to the class, (3) shares
held the longest during the holding period.
Contingent deferred sales charges are not charged when you exchange shares
of the Fund for shares of other Oppenheimer funds. However, if you exchange them
within the applicable contingent deferred sales charge holding period, the
holding period will carry over to the fund whose shares you acquire. Similarly,
if you acquire shares of this Fund by exchanging shares of another
Oppenheimerfund that are still subject to a contingent deferred sales charge
holding period, that holding period will carry over to this Fund.
How to Exchange Shares
Shares of the Fund can be purchased by exchanging shares of other Oppenheimer
funds on the same basis. To exchange shares, you must meet several conditions:
Shares of the fund selected for exchange must be available for sale in your
state of residence.
The prospectuses of both funds must offer the exchange privilege. You must hold
the shares you buy when you establish your account for at least
7 days before you can exchange them. After the account is open 7 days, you
can exchange shares every regular business day.
Youmust meet the minimum purchase requirements for the fund whose shares you
purchase by exchange.
Before exchanging into a fund, you must 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. In some
cases, sales charges may be imposed on exchange transactions. For tax purposes,
exchanges of shares involve a sale 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. Please refer to "How to Exchange Shares" in the Statement of Additional
Information for more details.
HOW DO YOU SUBMIT EXCHANGE REQUESTS? Exchanges may be requested in writing or
by telephone:
Written Exchange Requests. Submit an OppenheimerFunds Exchange Request form,
signed by all owners of the account. Send it to the Transfer Agent at the
address on the back cover. Exchanges of shares held under certificates
cannot be processed unless the Transfer Agent receives the certificates
with the request.
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.
ARE THERE LIMITATIONS ON EXCHANGES? There are certain exchange policies you
should be aware of:
Shares are normally redeemed from one fund and purchased from the other
fund in the
o b6exchange transaction on the same regular business day on which the
Transfer Agent receives an exchange request that is in proper form. It
must be received 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 seven days if it determines it would be
disadvantaged by a same-day exchange. For example, the receipt of
multiple exchange requests from a "market timer" might require the Fund
to sell securities at a disadvantageous time and/or price.
Because excessive trading can hurt fund performance and harm shareholders,
the Fund reserves the right to refuse any exchange request that it
believes will disadvantage it, or to refuse multiple exchange requests
submitted by a shareholder or dealer.
TheFund may amend, suspend or terminate the exchange privilege at any time.
Although the Fund will attempt to provide you notice whenever it is
required by applicable law to do so, it may impose these changes at any
time for emergency purposes.
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
More information about the Fund's policies and procedures for buying, selling
and exchanging shares is contained in the Statement of Additional
Information.
The offering of shares may be suspended during any period in which the
determination of net asset value is suspended, and the offering may be
suspended by the Board of Directors at any time the Board believes it is
in the Fund's best interest to do so.
Telephone transaction privileges for purchases, redemptions or exchanges may be
modified, suspended or terminated by the Fund at any time. If an account
has more than one owner, the Fund and the Transfer Agent may rely on the
instructions of any one owner. Telephone privileges apply to each owner of
the account and the dealer representative of record for the account unless
the Transfer Agent receives cancellation instructions from an owner of the
account.
The Transfer Agent will record any telephone calls to verify data concerning
transactions and has adopted other procedures to confirm that telephone
instructions are genuine, by requiring callers to provide tax
identification numbers and other account data or by using PINs, and by
confirming such transactions in writing. The Transfer Agent and the Fund
will not be liable for losses or expenses arising out of telephone
instructions reasonably believed to be genuine.
Redemption or transfer requests will not be honored until the Transfer Agent
receives all required documents in proper form. From time to time, the
Transfer Agent in its discretion may waive certain of the requirements for
redemptions stated in this Prospectus.
Dealers that can perform account transactions for their clients by participating
in NETWORKING through the National Securities Clearing Corporation are
responsible for obtaining their clients' permission to perform those
transactions, and are responsible to their clients who are shareholders of
the Fund if the dealer performs any transaction erroneously or improperly.
The redemption price for shares will vary from day to day because the value of
the securities in the Fund's portfolio fluctuates. The redemption price,
which is the net asset value per share, will normally differ for each
class of shares. The redemption value of your shares may be more or less
than their original cost.
Payment for redeemed shares ordinarily is made in cash. It is forwarded by check
or by AccountLink or (as elected by the shareholder) within seven days
after the Transfer Agent receives redemption instructions in proper form.
However, under unusual circumstances determined by the Securities and
Exchange Commission, payment may be delayed or suspended. For accounts
registered in the name of a broker-dealer, payment will normally be
forwarded within three business days after redemption.
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 or certified check, or arrange with your bank
to provide telephone or written assurance to the Transfer Agent that your
purchase payment has cleared.
Involuntary redemptions of small accounts may be made by the Fund if the account
value has fallen below $500 for reasons other than the fact that the
market value of shares has dropped. In some cases involuntary redemptions
may be made to repay the Distributor for losses from the cancellation of
share purchase orders.
Sharesmay be "redeemed in kind" under unusual circumstances (such as a lack of
liquidity in the Fund's portfolio to meet redemptions). This means that
the redemption proceeds will be paid with liquid securities from the
Fund's portfolio.
"Backup withholding" of federal income tax may be applied against taxable
dividends, distributions and redemption proceeds (including exchanges) if
you fail to furnish the Fund your correct, certified Social Security or
Employer Identification Number when you sign your application, or if you
under-report your income to the Internal Revenue Service.
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 intends to declare dividends separately for each class of
shares from net investment income on an annual basis, on a date selected by the
Board of Directors. Dividends and distributions paid on Class A shares will
generally be higher than dividends for Class B and Class C shares, which
normally have higher expenses than Class A. The Fund has no fixed dividend rate
and cannot guarantee that it will pay any dividends or distributions.
CAPITAL GAINS. The Fund may realize capital gains on the sale of portfolio
securities. If it does, it may make distributions out of any net short-term or
long-term capital gains in December of each year. The Fund may make supplemental
distributions of dividends and capital gains following the end of its fiscal
year. There can be no assurance that the Fund will pay any capital gains
distributions in a particular year.
WHAT ARE YOUR CHOICES FOR RECEIVING DISTRIBUTIONS? When you open your account,
specify on your application how you want to receive your dividends and
distributions. You have four options:
Reinvest All Distributions in the Fund. You can elect to reinvest all
dividends and capital gains distributions in additional shares of the
Fund.
Reinvest Dividends or Capital Gains. You can elect to reinvest some
distributions (dividends, short-term capital gains or long-term capital
gains distributions) in the Fund while receiving other types of
distributions by check or having them sent to your bank account through
AccountLink.
Receive All Distributions in Cash. You can elect to receive a check for all
dividends and capital gains distributions or have them sent to your bank
through AccountLink.
Reinvest Your Distributions in Another OppenheimerFunds Account. You can
reinvest all distributions in the same class of shares of another
OppenheimerFunds account you have established.
TAXES. If your shares are not held in a tax-deferred retirement account, you
should be aware of the following tax implications of investing in the Fund.
Distributions are subject to federal income tax and may be subject to state or
local taxes. Dividends paid from short-term capital gains and net investment
income are taxable as ordinary income. 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. Whether you reinvest your distributions in
additional shares or take them in cash, the tax treatment is the same.
Every year the Fund will send you and the IRS a statement showing the
amount of any taxable distribution you received in the previous year. Any
long-term capital gains will be separately identified in the tax information the
Fund sends you after the end of the calendar year.
Avoid "Buying a Dividend". If you buy shares on or just before the ex-dividend
date or just before the Fund declares a capital gain 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.
Remember, There May be Taxes on Transactions. Because the Fund's share price
fluctuates, you may have a capital gain or loss when you sell or exchange
your shares. A capital gain or loss is the difference between the price
you paid for the shares and the price you received when you sold them. Any
capital gain is subject to capital gains tax.
Returns of Capital Can Occur. 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.
This information is only a summary of certain federal personal income tax
information about your investment. You should consult with your tax advisor
about the effect of an investment in the Fund on your particular tax situation.
<PAGE>
Financial Highlights
The Financial Highlights Table is presented to help you understand the Fund's
financial performance for the past 5 fiscal years. Certain information reflects
financial results for a single Fund share. The total returns in the table
represent the rate that an investor would have earned (or lost) on an investment
in the Fund (assuming reinvestment of all dividends and distributions). This
information has been audited by PricewaterhouseCoopers LLP, the Fund's
independent accountants, whose report, along with the Fund's financial
statements, is included in the Statement of Additional Information, which is
available on request.
<PAGE>
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR YEAR
ENDED ENDED
OCT. 31, DEC. 31,
CLASS A 1999 1998 1997(1) 1996 1995 1994
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING DATA
Net asset value, beginning of period $32.11 $41.63 $37.25 $33.65 $25.79 $27.09
- -----------------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income (loss) (.06) .05 .44 -- -- --
Net realized and unrealized gain (loss) 2.70 4.28 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 2.64 4.33 4.38 3.60 7.89 (.91)
- -----------------------------------------------------------------------------------------------------------------------------------
Dividends and distributions to shareholders:
Dividends from net investment income (.04) (.13) -- -- -- --
Dividends in excess of net investment income --(2) -- -- -- -- --
Distributions from net realized gain (1.05) (13.72) -- -- -- --
Distributions from net realized short-term gain -- -- -- -- (.03) (.39)
--------------------------------------------------------------------------------
Total dividends and distributions to shareholders (1.09) (13.85) -- -- (.03) (.39)
- -----------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $33.66 $32.11 $41.63 $37.25 $33.65 $25.79
================================================================================
Market value, end of period N/A N/A N/A $36.13 $31.88 $23.00
================================================================================
===================================================================================================================================
TOTAL RETURN, AT NET ASSET VALUE(3) 8.47% 13.28% 11.76% 20.46%(4) 36.68%(4) (1.29)%(4)
===================================================================================================================================
TOTAL RETURN, AT MARKET VALUE(5) N/A N/A N/A 23.63% 45.58% 0.89%
===================================================================================================================================
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in thousands) $224,995 $262,669 $343,329 $879,934 $815,179 $673,742
- -----------------------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $256,450 $280,821 $434,401 $883,395 N/A N/A
- -----------------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets:(6)
Net investment income (loss) (0.17)% 0.13% 1.28%(7) 2.82% 3.20% 3.47%
Expenses, before voluntary assumption
or reimbursement 1.71% 1.67%(8) 1.54%(7,8) 0.72%(8) 0.73%(8) 0.74%
Expenses, after voluntary assumption
or reimbursement 1.58% 1.29% 1.11%(7) N/A N/A N/A
- -----------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate(9) 79% 30% 34% 74% 72% 45%
</TABLE>
1. 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.
2. Less than $0.005 per share.
3. Assumes a $1,000 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.
OPPENHEIMER QUEST CAPITAL VALUE FUND, INC.
<PAGE>
FINANCIAL HIGHLIGHTS Continued
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS B YEAR ENDED OCTOBER 31, 1999 1998 1997(10)
=====================================================================================================================
<S> <C> <C> <C>
PER SHARE OPERATING DATA
Net asset value, beginning of period $31.71 $41.41 $37.04
- ---------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income (loss) (.19) (.06) .01
Net realized and unrealized gain (loss) 2.60 4.15 4.36
Provision/reduction for corporate income taxes
on net realized long-term capital gain -- -- --
--------------------------------------
Total income (loss) from investment operations 2.41 4.09 4.37
- ---------------------------------------------------------------------------------------------------------------------
Dividends and distributions to shareholders:
Dividends from net investment income -- (.07) --
Dividends in excess of net investment income --(2) -- --
Distributions from net realized gain (1.05) (13.72) --
Distributions from net realized short-term gain -- -- --
--------------------------------------
Total dividends and distributions to shareholders (1.05) (13.79) --
- ---------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $33.07 $31.71 $41.41
======================================
Market value, end of period N/A N/A N/A
======================================
=====================================================================================================================
TOTAL RETURN, AT NET ASSET VALUE(3) 7.83% 12.54% 11.80%
=====================================================================================================================
TOTAL RETURN, AT MARKET VALUE(5) N/A N/A N/A
=====================================================================================================================
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in thousands) $15,634 $9,562 $1,208
- ---------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $14,112 $4,586 $ 552
- ---------------------------------------------------------------------------------------------------------------------
Ratios to average net assets:(6)
Net investment income (loss) (0.80)% (0.57)% 0.07%
Expenses, before voluntary assumption
or reimbursement 2.27% 2.24%(8) 2.14%(8)
Expenses, after voluntary assumption
or reimbursement 2.19% 2.01% 1.86%
- ---------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate(9) 79% 30% 34%
</TABLE>
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 and 1994 would have been 18.25%, 34.20% and (3.11)%, respectively.
5. 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).
6. Annualized for periods of less than one full year.
7. 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.
OPPENHEIMER QUEST CAPITAL VALUE FUND, INC.
<PAGE>
<TABLE>
<CAPTION>
CLASS C YEAR ENDED OCTOBER 31, 1999 1998 1997(10)
=====================================================================================================================
<S> <C> <C> <C>
PER SHARE OPERATING DATA
Net asset value, beginning of period $31.73 $41.42 $37.04
- ---------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income (loss) (.17) (.13) .01
Net realized and unrealized gain (loss) 2.58 4.21 4.37
Provision/reduction for corporate income taxes
on net realized long-term capital gain -- -- --
--------------------------------------
Total income (loss) from investment operations 2.41 4.08 4.38
- ---------------------------------------------------------------------------------------------------------------------
Dividends and distributions to shareholders:
Dividends from net investment income -- (.05) --
Dividends in excess of net investment income --(2) -- --
Distributions from net realized gain (1.05) (13.72) --
Distributions from net realized short-term gain -- -- --
--------------------------------------
Total dividends and distributions to shareholders (1.05) (13.77) --
- ---------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $33.09 $31.73 $41.42
======================================
Market value, end of period N/A N/A N/A
======================================
=====================================================================================================================
TOTAL RETURN, AT NET ASSET VALUE(3) 7.82% 12.49% 11.82%
=====================================================================================================================
TOTAL RETURN, AT MARKET VALUE(5) N/A N/A N/A
=====================================================================================================================
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in thousands) $4,632 $2,972 $773
- ---------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $4,117 $1,582 $372
- ---------------------------------------------------------------------------------------------------------------------
Ratios to average net assets:(6)
Net investment income (loss) (0.80)% (0.58)% 0.06%
Expenses, before voluntary assumption
or reimbursement 2.26% 2.23%(8) 2.13%(8)
Expenses, after voluntary assumption
or reimbursement 2.18% 2.01% 1.85%
- ---------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate(9) 79% 30% 34%
</TABLE>
8. Expense ratio reflects the effect of expenses paid indirectly by the Fund.
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, 1999, were $198,537,189 and $210,338,096, respectively.
10. For the period from March 3, 1997 (inception of offering of shares) to
October 31, 1997.
OPPENHEIMER QUEST CAPITAL VALUE FUND, INC.
<PAGE>
Appendix to Prospectus of
Oppenheimer Quest Capital Value Fund, Inc.
Graphic Material included in the Prospectus of Oppenheimer Quest
Capital Value Fund, Inc. (the "Fund") under the heading "Annual Total Returns
(Class A) (as of 12/31 each year)":
A bar chart will be included in the Prospectus of the Fund depicting
the annual total returns of a hypothetical investment in Class A shares of
the Fund for each of the three most recent calendar years, without deducting
sales charges. Set forth below are the relevant data points that will appear
on the bar chart.
Calendar
Year Annual Total
Ended Returns
12/31/90 -6.77%
12/31/91 38.77%
12/31/92 24.88%
12/31/93 7.31%
12/31/94 -3.10%
12/31/95 34.20%
12/31/96 18.25%
12/31/97 14.84%
12/31/98 20.15%
12/31/99 5.83%
<PAGE>
For More Information on Oppenheimer Quest Capital Value Fund, Inc.: The
following additional information about the Fund is available without charge upon
request:
Statement of Additional Information
This document includes additional information about the Fund's investment
policies, risks, and operations. It is incorporated by reference into this
Prospectus (which means it is legally part of this Prospectus).
Annual and Semi-Annual Reports
Additional information about the Fund's investments and performance is available
in the Fund's Annual and Semi-Annual Reports to shareholders. The Annual Report
includes a discussion of market conditions and investment strategies that
significantly affected the Fund's performance during its last fiscal year.
- ---------------------------------------------------------------------------
How to Get More Information:
- ---------------------------------------------------------------------------
You can request the Statement of Additional Information, the Annual and
Semi-Annual Reports, and other information about the Fund or your account:
By Telephone:
Call OppenheimerFunds Services toll-free:
1.800.525.7048
By Mail:
Write to:
OppenheimerFunds Services
P.O. Box 5270
Denver, Colorado 80217-5270
On the Internet:
You can send us a request by e-mail or read or download documents on the
OppenheimerFunds web site: http://www.oppenheimerfunds.com You can also obtain
copies of the Statement of Additional Information and other Fund documents and
reports by visiting the SEC's Public Reference Room in Washington, D.C. (Phone
1.202.942.8090) or the EDGAR database on the SEC's Internet web site at
http://www.sec.gov. Copies may be obtained upon payment of a duplicating fee by
electronic request at the SEC's e-mail address: [email protected] or by writing
to the SEC's Public Reference Section, Washington, D.C. 20549-0102.
No one has been authorized to provide any information about the Fund or to
make any representations about the Fund other than what is contained in
this Prospectus. This Prospectus is not an offer to sell shares of the
Fund, nor a solicitation of an offer to buy shares of the Fund, to any
person in any state or other jurisdiction where it is unlawful to make
such an offer.
The Fund's shares are distributed by:
OppenheimerFunds Distributor, Inc.
SEC File No. 811-04797
PR0835.001.0200 Printed on recycled paper.
<PAGE>
Oppenheimer Quest Capital Value Fund, Inc.
- ------------------------------------------------------------------------------
Two World Trade Center, 34th Floor, New York, New York 10048-0203
1-800-525-7048
Statement of Additional Information dated February 23, 2000
This Statement of Additional Information is not a Prospectus. This
document contains additional information about the Fund and supplements
information in the Prospectus dated February 23, 2000. It should be read
together with the Prospectus, which may be obtained by writing 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, or
by downloading it from the OppenheimerFunds Internet web site at
www.oppenheimerfunds.com.
Contents
About the Fund Page
Additional Information About the Fund's Investment Policies and Risks.2
The Fund's Investment Policies....................................2
Other Investment Techniques and Strategies........................9
Investment Restrictions..........................................24
How the Fund is Managed .............................................25
Organization and History.........................................25
Directors and Officers...........................................27
The Manager......................................................31
Brokerage Policies of the Fund.......................................35
Distribution and Service Plans.......................................37
Performance of the Fund..............................................40
About Your Account
How To Buy Shares....................................................44
How To Sell Shares...................................................53
How To Exchange Shares...............................................58
Dividends, Capital Gains and Taxes...................................60
Additional Information About the Fund................................62
Financial Information About the Fund
Report of Independent Accountants....................................63
Financial Statements.................................................64
Appendix A: Ratings Definitions.....................................A-1
Appendix B: Corporate Industry Classifications......................B-1
Appendix C: Special Sales Charge Arrangements and Waivers...........C-1
<PAGE>
101
- ------------------------------------------------------------------------------
ABOUT THE FUND
- ------------------------------------------------------------------------------
Additional Information About the Fund's Investment Policies and Risks
The investment objective, the principal investment policies and the main
risks of the Fund are described in the Prospectus. This Statement of Additional
Information contains supplemental information about those policies and risks and
the types of securities that the Fund invests in. Additional information is also
provided about the Fund's investment Manager, OppenheimerFunds, Inc., and the
strategies that the Fund might use to try to achieve its objective.
The Fund's Investment Policies. The composition of the Fund's portfolio and the
techniques and strategies that the Fund's Sub-Advisor, OpCap Advisors, may use
in selecting portfolio securities will vary over time. The Fund is not required
to use all of the investment techniques and strategies described below in
seeking its goal. It may use some of the special techniques and strategies at
some times or not at all.
In selecting securities for the Fund's portfolio, the Sub-Advisor
evaluates the merits of particular securities primarily through the exercise of
its own investment analysis. In the case of corporate issuers, that process may
include, among other things, evaluation of the issuer's historical operations,
prospects for the industry of which the issuer is part, the issuer's financial
condition, its pending product developments and business (and those of
competitors), the effect of general market and economic conditions on the
issuer's business, and legislative proposals that might affect the issuer. In
the case of foreign securities, the Sub-Advisor may also consider the conditions
of a particular country's economy in relation to the U.S. economy or other
foreign economies, general political conditions in a country or region, the
effect of taxes, the efficiencies and costs of particular markets and other
factors when evaluating the securities of issuers in a particular country.
|X| Investments in Equity Securities. While the Fund currently emphasizes
investments in equity securities of mid-size companies, the Fund does not limit
its investments in equity securities to issuers having a market capitalization
of a specified size or range, and therefore can invest in securities of small-,
mid- and large-capitalization issuers. At times, the Fund might focus its equity
investments in securities of one or more capitalization ranges, based upon the
Sub-Advisor's judgment of where the best market opportunities are to seek the
Fund's objective. At times, the market may favor or disfavor securities of
issuers of a particular capitalization range, and securities of mid-and
small-capitalization issuers may be subject to greater price volatility in
general than securities of larger companies. Therefore, if the Fund has
substantial investments in mid-and/or smaller-capitalization companies at times
of market volatility, the Fund's share price could fluctuate more than that of
funds focusing on larger-capitalization issuers.
|_| Value Investing. In selecting equity investments for the Fund's
portfolio, the portfolio manager currently uses a value investing style. In
using a value approach, the portfolio manager seeks stock and other equity
securities that appear to be temporarily undervalued, by various measures, such
as price/earnings ratios. This approach is subject to change and might not
necessarily be used in all cases. Value investing seeks stocks having prices
that are low in relation to their real worth or future prospects, in the hope
that the Fund will realize appreciation in the value of its holdings when other
investors realize the intrinsic value of the stock.
Using value investing requires research as to the issuer's underlying
financial condition and prospects. Some of the measures used to identify these
securities include, among others:
|_| Price/Earnings ratio, which is the stock's price divided by its
earnings per share. A stock having a price/earnings ratio lower than its
historical range, or the market as a whole or that of similar companies
may offer attractive investment opportunities. |_| Price/book value ratio,
which is the stock price divided by the book value of the company per
share, which measures the company's stock price in relation to its asset
value.
|_| Dividend Yield is measured by dividing the annual dividend by the
stock price per share. |_| Valuation of Assets which compares the stock
price to the value of the company's underlying assets, including their
projected value in the marketplace and liquidation value.
|_| Preferred Stocks. Preferred stock, unlike common stock, has a
stated dividend rate payable from the corporation's earnings. Preferred stock
dividends may be cumulative or non-cumulative, participating, or auction rate.
"Cumulative" dividend provisions require all or a portion of prior unpaid
dividends to be paid before dividends can be paid on the issuer's common stock.
If interest rates rise, the fixed dividend on preferred stocks may be less
attractive, causing the price of preferred stocks to decline. Preferred stock
may have mandatory sinking fund provisions, as well as provisions allowing calls
or redemptions prior to maturity, which also have a negative impact on prices
when interest rates decline. Preferred stock also generally has a preference
over common stock on the distribution of a corporation's assets in the event of
liquidation of the corporation. The rights of preferred stock on distribution of
a corporation's assets in the event of a liquidation are generally subordinate
to the rights associated with a corporation's debt securities. Preferred stock
may be "participating" stock, which means that it may be entitled to a dividend
exceeding the stated dividend in certain cases.
|_| Rights and Warrants. 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. Rights are similar to warrants, but normally have a short duration
and are distributed directly by the issuer to its shareholders. Rights and
warrants have no voting rights, receive no dividends and have no rights with
respect to the assets of the issuer. The Fund will not invest more than 5% of
its net assets in warrants. That limit does not apply to warrants that have been
acquired in units or attached to other securities.
|_| Convertible Securities. Convertible securities are debt
securities that are convertible into an issuer's common stock. Convertible
securities rank senior to common stock in a corporation's capital structure and
therefore are subject to less risk than common stock in case of the issuer's
bankruptcy or liquidation.
The value of a convertible security is a function of its "investment
value" and its "conversion value." If the investment value exceeds the
conversion value, the security will behave more like a debt security, and the
security's price will likely increase when interest rates fall and decrease when
rates rise. If the conversion value exceeds the investment value, the security
will behave more like an equity security: it will likely sell at a premium over
its conversion value, and its price will tend to fluctuate directly with the
price of the underlying security.
While some convertible securities are a form of debt security, in many
cases their conversion feature (allowing conversion into equity securities) may
cause them to be regarded by the Sub-Advisor more as "equity equivalents." As a
result, the rating assigned to the security has less impact on the Sub-Advisor's
investment decision with respect to convertible securities than in the case of
non-convertible debt fixed income securities. To determine whether convertible
securities should be regarded as "equity equivalents," the Sub-Advisor may
consider the following factors: (1) whether, at the option of the investor, the
convertible security can be
exchanged for a fixed number of shares of common stock of the
issuer,
(2) whether the issuer of the convertible securities has restated its
earnings per share of common stock on a fully diluted basis
(considering the effect of conversion of the convertible securities),
and
(3) the extent to which the convertible security may be a defensive "equity
substitute," providing the ability to participate in any appreciation
in the price of the issuer's common stock.
|X| Investments in Debt Securities. The Fund can invest in a variety of
domestic and foreign debt securities including bonds, notes, debentures and
other debt securities, including U.S. Government securities. It can also invest
in short-term debt securities primarily for liquidity or defensive purposes.
Because the Fund currently emphasizes investments in equity securities, such as
stocks, it is not anticipated that more than 25% of the Fund's assets will be
invested in debt securities under normal market conditions.
Foreign debt securities are subject to the risks of foreign investing
described below. In general, domestic and foreign debt securities are also
subject to credit risk and interest rate risk.
|_| Credit Risk. In making investments in debt securities, the
Sub-Advisor may rely to some extent on the ratings of ratings organizations or
it may use its own research to evaluate a security's creditworthiness. The
Fund's debt investments can include investment grade and below investment-grade
bonds (commonly referred to as "junk bonds"). Investment-grade bonds are bonds
rated at least "Baa" by Moody's Investors Service, Inc., at least "BBB" by
Standard & Poor's Rating Service or Duff & Phelps, Inc., or that have comparable
ratings by another nationally recognized statistical rating organization. If the
securities the Fund buys are unrated, to be considered part of the Fund's
holdings of investment-grade securities, they must be judged by the Sub-Advisor
to be of comparable quality to bonds rated as investment grade by a rating
organization. The debt security ratings definitions of Moody's, Standard &
Poor's, Fitch IBCA and Duff & Phelps are included in Appendix A to this
Statement of Additional Information.
|_| Interest Rate Risk. Interest rate risk refers to the
fluctuations in value of debt securities resulting from the inverse relationship
between price and yield. For example, an increase in general interest rates will
tend to reduce the market value of already-issued fixed-income investments, and
a decline in general interest rates will tend to increase their value. In
addition, debt securities with longer maturities, which tend to have higher
yields, are subject to potentially greater fluctuations in value from changes in
interest rates than obligations with shorter maturities.
Fluctuations in the market value of the Fund's portfolio securities after
the Fund buys them normally do not affect the interest income payable on those
securities (unless the security's interest is payable on a variable rate pegged
to particular interest rate changes). However, those price fluctuations will be
reflected in the valuations of the securities, and therefore the Fund's net
asset values will be affected by those fluctuations.
|_| U.S. Government Securities. 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 might 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 Sub-Advisor is satisfied
that the credit risk with respect to such instrumentality is minimal.
|_| Special Risks of Lower-Grade Securities. While it is not
currently anticipated that the Fund will invest more than 25% of its total
assets in lower-grade debt securities, the Fund can invest a portion of its
assets in these securities. Because lower-grade securities tend to offer higher
yields than investment-grade securities, the Fund could invest in lower grade
securities if the Sub-Advisor is trying to achieve greater income. In some
cases, the appreciation possibilities of lower-grade securities might be a
reason they are selected for the Fund's portfolio.
"Lower-grade" debt securities are those rated below "investment grade"
which means they have a rating lower than "Baa" by Moody's or lower than "BBB"
by Standard & Poor's or Duff & Phelps, or similar ratings by other rating
organizations. If they are unrated, and are determined by the Sub-Advisor to be
of comparable quality to debt securities rated below investment grade, they are
included in determining the percentage of the Fund's assets that can be invested
in lower-grade securities. The Fund can invest in securities rated as low as "C"
or "D."
Some of the special credit risks of lower-grade securities are discussed
in the Prospectus. There is a greater risk that the issuer may default on its
obligation to pay interest or to repay principal than in the case of investment
grade securities. The issuer's low creditworthiness may increase the potential
for its insolvency. An overall decline in values in the high yield bond market
is also more likely during a period of a general economic downturn. An economic
downturn or an increase in interest rates could severely disrupt the market for
high yield bonds, adversely affecting the values of outstanding bonds as well as
the ability of issuers to pay interest or repay principal. In the case of
foreign high yield bonds, these risks are in addition to the special risks of
foreign investing discussed in the Prospectus and in this Statement of
Additional Information.
However, the Fund's limitations on these investments may reduce some of
the risks to the Fund, as will the Fund's policy of diversifying its
investments. Additionally, to the extent they can be converted into stock,
convertible securities may be less subject to some of these risks than
non-convertible high yield bonds, since stock may be more liquid and less
affected by some of these risk factors.
While securities rated "Baa" by Moody's or "BBB" by Standard & Poor's or
Duff & Phelps are investment grade and are not regarded as junk bonds, those
securities may be subject to special risks, and have some speculative
characteristics.
|X| Money Market Instruments. The following is a brief description of the
types of money market securities the Fund can invest in. Those money market
securities are high-quality, short-term debt instruments that are issued by the
U.S. Government, corporations, banks or other entities. They may have fixed,
variable or floating interest rates.
|_| U.S. Government Securities. These include obligations
issued or guaranteed by the U.S. government or any of its agencies or
instrumentalities, described above.
|_| Bank Obligations. The Fund can buy time deposits, certificates
of deposit and bankers' acceptances. Time deposits, other than overnight
deposits, may be subject to withdrawal penalties and, if so, they are deemed
"illiquid" investments.
The Fund can purchase bank obligations that are fully insured by the
Federal Deposit Insurance Corporation. The FDIC insures the deposits of member
banks up to $100,000 per account. Insured bank obligations may have a limited
market and a particular investment of this type may be deemed "illiquid" unless
the Board of Directors of the Fund determines that a readily-available market
exists for that particular obligation, or unless the obligation is payable at
principal amount plus accrued interest on demand or within seven days after
demand.
|_| Commercial Paper. The Fund can invest in commercial paper if it
is rated within the top two rating categories of Standard & Poor's and Moody's.
If the paper is not rated, it may be purchased if issued by a company having a
credit rating of at least "AA" by Standard & Poor's or "Aa" by Moody's.
The Fund can buy commercial paper, including U.S. dollar-denominated
securities of foreign branches of U.S. banks, issued by other entities if the
commercial paper is guaranteed as to principal and interest by a bank,
government or corporation whose certificates of deposit or commercial paper may
otherwise be purchased by the Fund.
|_| Variable Amount Master Demand Notes. Master demand notes are
corporate obligations that permit the investment of fluctuating amounts by the
Fund at varying rates of interest under direct arrangements between the Fund, as
lender, and the borrower. They permit daily changes in the amounts borrowed. The
Fund has the right to increase the amount under the note at any time up to the
full amount provided by the note agreement, or to decrease the amount. The
borrower may prepay up to the full amount of the note without penalty. These
notes may or may not be backed by bank letters of credit.
Because these notes are direct lending arrangements between the lender and
borrower, it is not expected that there will be a trading market for them. There
is no secondary market for these notes, although they are redeemable (and thus
are immediately repayable by the borrower) at principal amount, plus accrued
interest, at any time. Accordingly, the Fund's right to redeem such notes is
dependent upon the ability of the borrower to pay principal and interest on
demand.
The Fund has no limitations on the type of issuer from whom these notes
will be purchased. However, in connection with such purchases and on an ongoing
basis, the Sub-Advisor 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. Investments in master demand notes are subject to the limitation
on investments by the Fund in illiquid securities, described in the Prospectus,
unless they have a demand feature permitting them to be put back to the issuer
within seven days. The Fund does not intend that its investments in variable
amount master demand notes will exceed 5% of its total assets.
|X| Foreign Securities. The Fund can purchase equity and debt securities
issued by foreign companies or foreign governments or their agencies. "Foreign
securities" include equity and debt securities of companies organized under the
laws of countries other than the United States and debt securities of foreign
governments and their agencies and instrumentalities. Those securities may be
traded on foreign securities exchanges or in the foreign over-the-counter
markets.
Securities of foreign issuers that are represented by American Depository
Receipts, European Depository Receipts or Global Depository Receipts, or that
are listed on a U.S. securities exchange or traded in the U.S. over-the-counter
markets are considered "foreign securities" for the purpose of the Fund's
investment allocations. That is because they are subject to many of the special
considerations and risks, discussed below, that apply to foreign securities
traded and held abroad.
Because the Fund can purchase securities denominated in foreign
currencies, a change in the value of a foreign currency against the U.S. dollar
could result in a change in the amount of income the Fund has available for
distribution. Because a portion of the Fund's investment income may be received
in foreign currencies, the Fund will be required to compute its income in U.S.
dollars for distribution to shareholders, and therefore the Fund will absorb the
cost of currency fluctuations. After the Fund has distributed income, subsequent
foreign currency losses may result in the Fund's having distributed more income
in a particular fiscal period than was available from investment income, which
could result in a return of capital to shareholders.
Investing in foreign securities offers potential benefits not available
from investing solely in securities of domestic issuers. They include 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. The Fund will hold foreign currency only in connection with the
purchase or sale of foreign securities.
|_| Foreign Debt Obligations. The debt obligations of foreign
governments and their agencies and instrumentalities may or may not be supported
by the full faith and credit of the foreign government. The Fund may buy
securities issued by certain "supra-national" entities, which include entities
designated or supported by governments to promote economic reconstruction or
development, international banking organizations and related government
agencies. Examples are the International Bank for Reconstruction and Development
(commonly called the "World Bank"), the Asian Development bank and the
Inter-American Development Bank.
The governmental members of these supra-national entities are
"stockholders" that typically make capital contributions and may be committed to
make additional capital contributions if the entity is unable to repay its
borrowings. A supra-national entity's lending activities may be limited to a
percentage of its total capital, reserves and net income. There can be no
assurance that the constituent foreign governments will continue to be able or
willing to honor their capitalization commitments for those entities.
|_| Risks of Foreign Investing. Investments in foreign securities
may offer special opportunities for investing but also present special
additional risks and considerations not typically associated with investments in
domestic securities. Some of these additional risks are: o reduction of income
by foreign taxes; o fluctuation in value of foreign investments due to changes
in currency
rates or currency control regulations (for example, currency blockage); o
transaction charges for currency exchange; o lack of public information about
foreign issuers; o lack of uniform accounting, auditing and financial reporting
standards
in foreign countries comparable to those applicable to domestic
issuers;
o less volume on foreign exchanges than on U.S. exchanges;
o greater volatility and less liquidity on foreign markets than in the
U.S.;
o less governmental regulation of foreign issuers, stock exchanges and
brokers than in the U.S.;
o greater difficulties in commencing lawsuits;
o higher brokerage commission rates than in the U.S.;
o increased risks of delays in settlement of portfolio transactions or
loss of certificates for portfolio securities;
o possibilities in some countries of expropriation, confiscatory
taxation, political, financial or social instability or adverse
diplomatic developments; and
o 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.
|_| Special Risks of Emerging Markets. Emerging and developing
markets abroad may also offer special opportunities for growth investing but
have greater risks than more developed foreign markets, such as those in Europe,
Canada, Australia, New Zealand and Japan. There may be even less liquidity in
their securities markets, and settlements of purchases and sales of securities
may be subject to additional delays. They are subject to greater risks of
limitations on the repatriation of income and profits because of currency
restrictions imposed by local governments. Those countries may also be subject
to the risk of greater political and economic instability, which can greatly
affect the volatility of prices of securities in those countries. The
Sub-Advisor will consider these factors when evaluating securities in these
markets.
|X| Portfolio Turnover. "Portfolio turnover" describes the rate at which
the Fund traded its portfolio securities during its last fiscal year. For
example, if a fund sold all of its securities during the year, its portfolio
turnover rate would have been 100% annually. The Fund's portfolio turnover rate
will fluctuate from year to year, but the Fund does not expect to have a
portfolio turnover rate of 100% or more. Increased portfolio turnover creates
higher brokerage and transaction costs for the Fund, which may reduce its
overall performance. Additionally, the realization of capital gains from selling
portfolio securities may result in distributions of taxable long-term capital
gains to shareholders, since the Fund will normally distribute all of its
capital gains realized each year, to avoid excise taxes under the Internal
Revenue Code.
Other Investment Techniques and Strategies. In seeking its objective, the Fund
may from time to time use the types of investment strategies and investments
described below. It is not required to use all of these strategies at all times
and at times may not use them.
|X| Investing in Small, Unseasoned Companies. The Fund may invest in
securities of small, unseasoned companies. These are companies that have been in
operation for less than three years, including the operations of any
predecessors. Securities of these companies may be subject to volatility in
their prices. They may have a limited trading market, which may adversely affect
the Fund's ability to dispose of them and can reduce the price the Fund might be
able to obtain for them. Other investors that own a security issued by a small,
unseasoned issuer for which there is limited liquidity might trade the security
when the Fund is attempting to dispose of its holdings of that security. In that
case the Fund might receive a lower price for its holdings than might otherwise
be obtained.
|X| Investing in Other Investment Companies. The Fund can invest up to 10%
of its total assets in shares of other investment companies. It can invest up to
5% of its total assets in any one investment company (but cannot own more than
3% of the outstanding voting stock of that company). These limits do not apply
to shares acquired in a merger, consolidation, reorganization or acquisition of
another investment company. Because the Fund would be subject to its ratable
share of the other investment company's expenses, the Fund will not make these
investments unless the Sub-Advisor believes that the potential investment
benefits justify the added costs and expenses.
|X| "When-Issued" and "Delayed-Delivery" Transactions. The Fund can invest
in securities on a "when-issued" basis and can purchase or sell securities on a
"delayed-delivery" or "forward commitment" basis. When-issued and
delayed-delivery are terms that refer to securities whose terms and indenture
are available and for which a market exists, but which are not available for
immediate delivery. The Fund limits its when-issued commitments to not more than
15% of its net assets.
When such transactions are negotiated, the price (which is generally
expressed in yield terms) is fixed at the time the commitment is made. Delivery
and payment for the securities take place at a later date (generally within 45
days of the date the offer is accepted). The securities are subject to change in
value from market fluctuations during the period until settlement. The value at
delivery may be less than the purchase price. For example, changes in interest
rates in a direction other than that expected by the Sub-Advisor before
settlement will affect the value of such securities and may cause a loss to the
Fund. During the period between purchase and settlement, no payment is made by
the Fund to the issuer and no interest accrues to the Fund from the investment.
The Fund will engage in when-issued transactions to secure what the
Sub-Advisor considers to be an advantageous price and yield at the time of
entering into the obligation. When the Fund enters into a when-issued or
delayed-delivery transaction, it relies on the other party to
complete the transaction. Its failure to do so may cause the Fund to lose the
opportunity to obtain the security at a price and yield the Sub-Advisor
considers to be advantageous.
When the Fund engages in when-issued and delayed-delivery transactions, it
does so for the purpose of acquiring or selling securities consistent with its
investment objective and policies for its portfolio or for delivery pursuant to
options contracts it has entered into, and not for the purpose of investment
leverage. Although the Fund will enter into delayed-delivery or when-issued
purchase transactions to acquire securities, it may dispose of a commitment
prior to settlement. If the Fund chooses to dispose of the right to acquire a
when-issued security prior to its acquisition or to dispose of its right to
delivery or receive against a forward commitment, it may incur a gain or loss.
At the time the Fund makes the commitment to purchase or sell a security
on a when-issued or delayed-delivery basis, it records the transaction on its
books and reflects the value of the security purchased in determining the Fund's
net asset value. In a sale transaction, it records the proceeds to be received.
The Fund will identify on its books liquid assets at least equal in value to the
value of the Fund's purchase commitments until the Fund pays for the investment.
When-issued and delayed-delivery transactions can be used by the Fund as a
defensive technique to hedge against anticipated changes in interest rates and
prices. For instance, in periods of rising interest rates and falling prices,
the Fund might sell securities in its portfolio on a forward commitment basis to
attempt to limit its exposure to anticipated falling prices. In periods of
falling interest rates and rising prices, the Fund might sell portfolio
securities and purchase the same or similar securities on a when-issued or
delayed-delivery basis to obtain the benefit of currently higher cash yields.
|X| Repurchase Agreements. The Fund can acquire securities subject to
repurchase agreements. It might do so for liquidity purposes to meet anticipated
redemptions of Fund shares, or pending the investment of the proceeds from sales
of Fund shares, or pending the settlement of portfolio securities transactions.
In a repurchase transaction, the Fund buys a security from, and
simultaneously resells it to, an approved vendor for delivery on an agreed-upon
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. Approved vendors include U.S. commercial
banks, U.S. branches of foreign banks, or broker-dealers that have been
designated as primary dealers in Government securities. They must meet credit
requirements set by the Fund's Board of Directors from time to time.
The majority of these transactions run from day to day, and delivery
pursuant to the resale typically occurs within one to five days of the purchase.
Repurchase agreements having a maturity beyond seven days are subject to the
Fund's limits on holding illiquid investments. There is no limit on the amount
of the Fund's net assets that may be subject to repurchase agreements having
maturities of seven days or less.
Repurchase agreements, considered "loans" under the Investment Company
Act, are 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. 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 Sub-Advisor will monitor the vendor's creditworthiness to confirm
that the vendor is financially sound and will continuously monitor the
collateral's value.
|X| Reverse Repurchase Agreements. The Fund can use reverse repurchase
agreements and would normally do so as a cash management tool. These agreements
create leverage, a speculative investment technique. The Fund does not currently
use reverse repurchase agreements, but may do so in the future. When the Fund
enters into a reverse repurchase agreement, it segregates on its books an amount
of cash or U.S. Government securities equal in value to the purchase price of
the securities it has committed to buy, plus accrued interest, until the payment
is made to the seller. Before the Fund enters into a reverse repurchase
agreement, the Manager evaluates the creditworthiness of the seller, typically a
bank or broker-dealer. Reverse repurchase agreements are considered to be a form
of borrowing by the Fund and are subject to the Fund's limitations on borrowing.
These agreements are subject to certain risks. The market value of the
securities retained in lieu of sale by the Fund may decline more or appreciate
more than the securities the Fund has sold but is obligated to repurchase. If
the buyer of the securities under the agreement files for bankruptcy or becomes
insolvent, there may be delays in the Fund's use of the proceeds.
|X| Illiquid and Restricted Securities. To enable the Fund to sell its
holdings of a restricted security not registered under the Securities Act of
1933, the Fund may have to cause those securities to be registered. The expenses
of registering restricted securities may be negotiated by the Fund with the
issuer at the time the Fund buys the securities. When the Fund must arrange
registration because the Fund wishes to sell the security, a considerable period
may elapse between the time the decision is made to sell the security and the
time the security is registered so that the Fund could sell it. The Fund would
bear the risks of any downward price fluctuation during that period.
The Fund may also acquire restricted securities through private
placements. Those securities have contractual restrictions on their public
resale. Those restrictions might limit the Fund's ability to dispose of the
securities and might lower the amount the Fund could realize upon the sale.
The Fund has 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 under Rule 144A of the Securities Act of 1933, if those
securities have been determined to be liquid by the Manager 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 holdings of that security may be considered to be illiquid.
|X| Loans of Portfolio Securities. The Fund can lend its portfolio
securities to certain types of eligible borrowers approved by the Board of
Directors. It may do so to try to provide income or to raise cash for liquidity
purposes. As a fundamental policy, these loans are limited to not more than
one-third of the value of the Fund's total assets. 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. The Fund presently does not intend to engage in loans of
securities, but if the Fund does lend its securities, those loans are not
expected to exceed 5% of the Fund's total assets.
The Fund must receive collateral for a loan. Under current applicable
regulatory requirements (which are subject to change), on each business day the
loan collateral must be at least equal to the value of the loaned securities. It
must consist of cash, bank letters of credit, securities of the U.S. Government
or its agencies or instrumentalities, or other cash equivalents in which the
Fund is permitted to invest. To be acceptable as collateral, letters of credit
must obligate a bank to pay amounts demanded by the Fund if the demand meets the
terms of the letter. The terms of the letter of credit and the issuing bank both
must be satisfactory to the Fund.
When it lends securities, the Fund receives amounts equal to the dividends
or interest on loaned securities. It also receives one or more of (a) negotiated
loan fees, (b) interest on securities used as collateral, and (c) interest on
any 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 in connection with these loans. 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.
|X| Borrowing. As a fundamental policy, the Fund cannot borrow money
except as a temporary measure for extraordinary or emergency purposes, and loans
may not exceed one third of the lower of the market value or cost of its total
assets. Additionally, as part of that fundamental policy, the Fund will not
purchase securities at times when loans exceed 5% of its total assets.
The Fund may borrow only from banks. Under current regulatory
requirements, borrowings can be made only to the extent that the value of the
Fund's assets, less its liabilities other than borrowings, is equal to at least
300% of all borrowings (including the proposed borrowing). If the value of the
Fund's assets fails to meet this 300% asset coverage requirement, the Fund will
reduce its bank debt within three days to meet the requirement. To do so, the
Fund might have to sell a portion of its investments at a disadvantageous time.
The Fund will pay interest on these loans, and that interest expense will
raise the overall expenses of the Fund and reduce its returns. If it does
borrow, its expenses will be greater than comparable funds that do not borrow.
Additionally, the Fund's net asset value per share might fluctuate more than
that of funds that do not borrow.
|X| Hedging. Although the Fund can use hedging instruments, it is not
obligated to use them in seeking its objective. It does not currently
contemplate using them to any significant degree. The Fund may use hedging to
attempt to protect against declines in the market value of the Fund's portfolio,
to permit the Fund to retain unrealized gains in the value of portfolio
securities which have appreciated, or to facilitate selling securities for
investment reasons. To do so, the Fund could:
|_| sell futures contracts,
|_| buy puts on such futures or on securities, or |_| write covered calls
on securities or futures.
The Fund can use hedging to establish a position in the securities market
as a temporary substitute for purchasing particular securities. In that case the
Fund would normally seek to purchase the securities and then terminate that
hedging position. The Fund might also use this type of hedge to attempt to
protect against the possibility that its portfolio securities would not be fully
included in a rise in value of the market. To do so, the Fund could:
|_| buy futures, or
|_| buy calls on such futures or on securities.
The Fund's strategy of hedging with futures and options on futures will be
incidental to the Fund's activities in the underlying cash market. The
particular hedging instruments the Fund can use are described below. The Fund
may employ new hedging instruments and strategies when they are developed, if
those investment methods are consistent with the Fund's investment objective and
are permissible under applicable regulations governing the Fund.
|_| Futures. The Fund can 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 referred to as "forward
contracts"), and (3) commodities (these are referred to as "commodity futures").
A broadly-based stock index is used as the basis for trading stock index
futures. These indices may in some cases be based on stocks of issuers in a
particular industry or group of industries. A stock index assigns relative
values to the common stocks included in the index and its value fluctuates in
response to the changes in value of the underlying stocks. A stock index cannot
be purchased or sold directly. These contracts obligate the seller to deliver,
and the purchaser to take, cash to settle the futures transactions. There is no
delivery made of the underlying securities to settle the futures obligation.
Either party may also settle the transaction by entering into an offsetting
contract.
The Fund can invest a portion of its assets in commodity futures
contracts. Commodity futures may be based upon commodities within five main
commodity groups: (1) energy, which includes crude oil, natural gas, gasoline
and heating oil; (2) livestock, which includes cattle and hogs; (3) agriculture,
which includes wheat, corn, soybeans, cotton, coffee, sugar and cocoa; (4)
industrial metals, which includes aluminum, copper, lead, nickel, tin and zinc;
and (5) precious metals, which includes gold, platinum and silver. The Fund may
purchase and sell commodity futures contracts, options on futures contracts and
options and futures on commodity indices with respect to these five main
commodity groups and the individual commodities within each group, as well as
other types of commodities.
No money is paid or received by the Fund on the purchase or sale of a
future. Upon entering into a futures transaction, the Fund will be required to
deposit an initial margin payment with the futures commission merchant (the
"futures broker"). Initial margin payments will be deposited with the Fund's
custodian bank in an account registered in the futures broker's name. However,
the futures broker can gain access to that account only under specified
conditions. As the future is marked to market (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
daily.
At any time prior to expiration of the future, the Fund may elect to close
out its position by taking an opposite position, at which time a final
determination of variation margin is made and any additional cash must be paid
by or released to the Fund. Any loss or gain on the future is then realized by
the Fund for tax purposes. All futures transactions (except forward contracts)
are effected through a clearinghouse associated with the exchange on which the
contracts are traded.
|_| Put and Call Options. The Fund can buy and sell certain kinds of put
options ("puts") and call options ("calls"). The Fund can buy and sell
exchange-traded and over-the-counter put and call options, including options on
broadly-based stock indices, securities, foreign currencies and stock index
futures.
|_| Writing Covered Call Options. The Fund can write (that is, sell)
covered calls. If the Fund sells a call option, it must be covered. For options
on securities, that means the Fund must own the security subject to the call
while the call is outstanding. For stock index options, that means the call must
be covered by segregating liquid assets to enable the Fund 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 writes.
When the Fund writes a call on a security, it receives cash (a premium).
For calls on securities, the Fund agrees to sell the underlying security to a
purchaser of a corresponding call on the same security during the call period at
a fixed exercise price regardless of market price changes during the call
period. The call period is usually not more than nine months. The exercise price
may differ from the market price of the underlying security. The Fund has the
risk of loss that the price of the underlying security may decline during the
call period. That risk may be offset to some extent by the premium the Fund
receives. If the value of the investment does not rise above the call price, it
is likely that the call will lapse without being exercised. In that case the
Fund would keep the cash premium and the investment.
When the Fund writes a call on an index, it receives cash (a premium). If
the buyer of a call on a stock index exercises it, the Fund will pay an amount
of cash equal to the difference between the closing price of the call and the
exercise price, multiplied by a specified multiple that determines the total
value of the call for each point of difference. If the value of the underlying
investment does not rise above the call price, it is likely that the call will
lapse without being exercised. In that case the Fund would keep the cash
premium.
Settlement of puts and calls on broadly-based stock indices is in cash.
Gain or loss on options on stock indices depends on changes in the index in
question (and thus on price movements in the stock market generally).
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 calls traded on exchanges or as to other acceptable escrow securities.
In that way, no margin will be required for such transactions. The OCC will
release the securities on the expiration of the option or when the Fund enters
into a closing transaction.
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 will
establish a formula price at which the Fund will have the absolute right to
repurchase that OTC option. The formula price will 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 option is "in the money"). When the Fund writes an OTC option, it will
treat as illiquid (for purposes of its restriction on holding illiquid
securities) the mark-to-market value of any OTC option it holds, unless the
option is subject to a buy-back agreement by the executing broker.
To terminate its obligation on a call it has written, the Fund may
purchase a corresponding call in a "closing purchase transaction." The Fund will
then realize a profit or loss, depending upon whether the net of the amount of
the option transaction costs and the premium received on the call the Fund wrote
is more or less than the price of the call the Fund purchases to close out the
transaction. The Fund may realize a profit if the call expires unexercised,
because the Fund will retain the premium it received when it wrote the call. Any
such profits are considered short-term capital gains for Federal income tax
purposes, as are the premiums on lapsed calls. When distributed by the Fund they
are taxable as ordinary income. If the Fund cannot effect a closing purchase
transaction due to the lack of a market, it will have to hold the escrowed
assets in escrow until the call expires or is exercised.
The Fund may also write calls on a futures contract without owning the
futures contract or securities deliverable under the contract. To do so, at the
time the call is written, the Fund must cover the call by segregating an
equivalent dollar amount of liquid assets. The Fund will segregate additional
liquid assets if the value of the segregated assets drops below 100% of the
current value of the future. Because of this segregation requirement, in no
circumstances would the Fund's receipt of an exercise notice as to that future
require the Fund to deliver a futures contract. It would simply put the Fund in
a short futures position, which is permitted by the Fund's hedging policies.
|_| Writing Put Options. The Fund can sell put options on 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, as a result, more than 25% of the Fund's net assets would have to be
segregated to cover such put options.
The premium the Fund receives from writing a put represents a profit, as
long as the price of the underlying investment remains equal to or above the
exercise price of the put. However, the Fund also assumes the obligation during
the option period to settle the transaction in cash with the buyer of the put at
the exercise price, even if the value of the underlying investment falls below
the exercise price. If a put the Fund has written expires unexercised, the Fund
realizes a gain in the amount of the premium less the transaction costs
incurred. If the put is exercised, the Fund must fulfill its obligation to
settle in cash at the exercise price. That price will usually exceed the market
value of the investment at that time.
As long as the Fund's obligation as the put writer continues, it may be
assigned an exercise notice by the broker-dealer through which the put was sold.
That notice will require the Fund to settle the transaction in cash at the
exercise price. The Fund has no control over when it may be required to settle
the transaction, since it may be assigned an exercise notice at any time prior
to the termination of its obligation as the writer of the put. That obligation
terminates upon expiration of the put. It may also terminate if, before it
receives an exercise notice, the Fund effects a closing purchase transaction by
purchasing a put of the same series as it sold. Once the Fund has been assigned
an exercise notice, it cannot effect a closing purchase transaction.
The Fund may decide to effect a closing purchase transaction to realize a
profit on an outstanding put option it has written. The Fund will realize a
profit or loss from a closing purchase transaction depending on whether the cost
of the transaction is less or more than the premium received from writing the
put option. Any profits from writing puts are considered short-term capital
gains for federal tax purposes, and when distributed by the Fund, are taxable as
ordinary income.
|_| Purchasing Calls and Puts. The Fund can buy calls on securities
it intends to purchase and puts on securities that it owns. 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 buys a call (other than in a closing purchase transaction),
it pays a premium. Buying a call on a security or future gives the Fund 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. The Fund
benefits only if it sells the call at a profit or if, during the call period,
the market price of the underlying investment is above the sum of the call price
plus the transaction costs and the premium paid for the call and the Fund
exercises the call. If the Fund does not exercise the call or sell it (whether
or not at a profit), the call will become worthless at its expiration date. In
that case the Fund will have paid the premium but lost the right to purchase the
underlying investment.
In the case of a purchase of a call on a stock index, if the Fund
exercises the call during the call period, a seller of a corresponding call on
the same index will pay the Fund an amount of cash to settle the call if the
closing level of the stock index 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, it pays a premium. It has the right during the
put period to require a seller of a corresponding put, upon the Fund's exercise
of its put, to buy the underlying security (in the case of puts on securities or
futures) or in the case of puts on stock indices, to deliver cash to the Fund to
settle the put if the closing level of the stock index 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.
Buying a put on a security or future enables the Fund 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 securities or
futures the Fund owns 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 date. In
that case the Fund will have paid the premium but lost the right to sell the
underlying investment. However, the Fund may sell the put prior to its
expiration. That sale may or may not be at a profit.
Buying a put on an investment the Fund does not own (such as an index or
future) permits the Fund either to resell the put or to buy the underlying
investment and sell it at the exercise price. The resale price will vary
inversely to 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.
When the Fund purchases a put on a stock index, 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 resell the put. 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 may buy a call or put 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.
|_| Buying and Selling Options on Foreign Currencies. The Fund can
buy and sell calls and puts on foreign currencies. They include puts and calls
that trade on a securities or commodities exchange or in the over-the-counter
markets or are quoted by major recognized dealers in such options. The Fund
could use these calls and puts to try to protect against declines in the dollar
value of foreign securities and increases in the dollar cost of foreign
securities the Fund wants to acquire.
If the Sub-Advisor anticipates a rise in the dollar value of a foreign
currency in which securities to be acquired are denominated, the increased cost
of those securities may be partially offset by purchasing calls or writing puts
on that foreign currency. If the Sub-Advisor anticipates a decline in the dollar
value of a foreign currency, the decline in the dollar value of portfolio
securities denominated in that currency might be partially offset by writing
calls or purchasing puts on that foreign currency. However, the currency rates
could fluctuate in a direction adverse to the Fund's position. The Fund will
then have incurred option premium payments and transaction costs without a
corresponding benefit.
A call the Fund writes on a foreign currency is "covered" if the Fund owns
the underlying foreign currency covered by the call or has an absolute and
immediate right to acquire that foreign currency without additional cash
consideration (or it can do so for additional cash consideration held in a
segregated account by its custodian bank) upon conversion or exchange of other
foreign currency held in its portfolio.
|_| Risks of Hedging with Options and Futures. 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-Advisor uses a hedging instrument at the wrong time or judges market
conditions incorrectly, hedging strategies may reduce the Fund's return. The
Fund could also experience losses if the prices of its futures and options
positions were not correlated with its other investments. The Fund's option
activities may affect its costs.
The Fund's option activities could affect its portfolio turnover rate and
brokerage commissions. The exercise of calls written by the Fund could 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 could pay a brokerage commission each time it buys a call or put,
sells a call or put, or buys or sells an underlying investment in connection
with the exercise of a call or put. Those commissions could be higher on a
relative basis 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. 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 investment.
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. It will not be able to realize any profit if the investment has
increased in value above the call price.
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. The Fund might
experience losses if it could not close out a position because of an illiquid
market for the future or option.
There is a risk in using short hedging by selling futures or purchasing
puts on broadly-based indices or futures to attempt to protect against declines
in the value of the Fund's portfolio securities. The risk is that the prices of
the futures or the applicable index will correlate imperfectly with the behavior
of the cash prices of the Fund's securities. For example, it is possible that
while the Fund has used hedging instruments in a short hedge, the market may
advance and the value of the securities held in the Fund's portfolio might
decline. If that occurred, the Fund would lose money on the hedging instruments
and also experience a decline in the value of 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 securities will tend to move in the
same direction as the indices upon which the hedging instruments are based.
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
portfolio securities being hedged and movements in the price of the hedging
instruments, the Fund might use hedging instruments in a greater dollar amount
than the dollar amount of portfolio securities being hedged. It might do so if
the historical volatility of the prices of the portfolio securities being hedged
is more than the historical volatility of the applicable index.
The ordinary spreads between prices in the cash and futures markets are
subject to distortions, due to differences in the nature of those markets.
First, all participants in the futures market are subject to margin deposit and
maintenance requirements. Rather than meeting additional margin deposit
requirements, investors may close futures contracts through offsetting
transactions which could distort the normal relationship between the cash and
futures markets. Second, the liquidity of the futures market depends on
participants entering into offsetting transactions rather than making or taking
delivery. To the extent participants decide to make or take delivery, liquidity
in the futures market could be reduced, thus producing distortion. Third, from
the point of view of speculators, the deposit requirements in the futures market
are less onerous than margin requirements in the securities markets. Therefore,
increased participation by speculators in the futures market may cause temporary
price distortions.
The Fund can use hedging instruments to establish a position in the
securities markets as a temporary substitute for the purchase of individual
securities (long hedging) by buying futures and/or calls on such futures,
broadly-based indices or on securities. It is possible that when the Fund does
so the market might decline. If the Fund then concludes not to invest in
securities because of concerns that the market might decline further 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 securities purchased.
|_| 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 "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 a 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 a closely-correlated currency. The
Fund may also use "cross-hedging" where the Fund hedges against changes in
currencies other than the currency in which a security it holds is denominated.
Under a forward contract, one party agrees to purchase, and another party
agrees to sell, a specific currency at a future date. That date may be any fixed
number of days from the date of the contract agreed upon by the parties. The
transaction price is set at the time the contract is entered into. These
contracts are traded in the inter-bank market conducted directly among currency
traders (usually large commercial banks) and their customers.
The Fund may use forward contracts to protect against uncertainty in the
level of future exchange rates. The use of forward contracts does not eliminate
the risk of fluctuations in the prices of the underlying securities the Fund
owns or intends to acquire, but it does fix a rate of exchange in advance.
Although forward contracts may reduce the risk of loss from a decline in the
value of the hedged currency, at the same time they limit any potential gain if
the value of the hedged currency increases.
When the Fund enters into a contract for the purchase or sale of a
security denominated in a foreign currency, or when it anticipates receiving
dividend payments in a foreign currency, the Fund might desire to "lock-in" the
U.S. dollar price of the security or the U.S. dollar equivalent of the dividend
payments. To do so, the Fund could enter into a forward contract for the
purchase or sale of the amount of foreign currency involved in the underlying
transaction, in a fixed amount of U.S. dollars per unit of the foreign currency.
This is called a "transaction hedge." The transaction hedge will protect the
Fund against a loss from an adverse change in the currency exchange rates during
the period between the date on which the security is purchased or sold or on
which the payment is declared, and the date on which the payments are made or
received.
The Fund could also use forward contracts to lock in the U.S. dollar value
of portfolio positions. This is called a "position hedge." When the Fund
believes that foreign currency may suffer a substantial decline against the U.S.
dollar, it could enter into a forward contract to sell an amount of that foreign
currency approximating the value of some or all of the Fund's portfolio
securities denominated in that foreign currency. When the Fund believes that the
U.S. dollar may suffer a substantial decline against a foreign currency, it
might enter into a forward contract to buy that foreign currency for a fixed
dollar amount. Alternatively, the Fund could enter into a forward contract to
sell a different foreign currency for a fixed U.S. dollar amount if the Fund
believes that the U.S. dollar value of the foreign currency to be sold pursuant
to its forward contract will fall whenever there is a decline in the U.S. dollar
value of the currency in which portfolio securities of the Fund are denominated.
That is referred to as a "cross hedge."
The Fund will cover its short positions in these cases by identifying to
its custodian bank assets having a value equal to the aggregate amount of the
Fund's commitment under forward contracts. The Fund will not enter into forward
contracts or maintain a net exposure to such contracts if the consummation of
the contracts would obligate the Fund to deliver an amount of foreign currency
in excess of the value of the Fund's portfolio securities or other assets
denominated in that currency or another currency that is the subject of the
hedge. However, to avoid excess transactions and transaction costs, the Fund may
maintain a net exposure to forward contracts in excess of the value of the
Fund's portfolio securities or other assets denominated in foreign currencies if
the excess amount is "covered" by liquid securities denominated in any currency.
The cover must be at least equal at all times to the amount of that excess.
As one alternative, the Fund may purchase a call option permitting the
Fund to purchase the amount of foreign currency being hedged by a forward sale
contract at a price no higher than the forward contract price. As another
alternative, the Fund may purchase a put option permitting the Fund to sell the
amount of foreign currency subject to a forward purchase contract at a price as
high or higher than the forward contact price.
The precise matching of the amounts under forward contracts and the value
of the securities involved generally will not be possible because the future
value of securities denominated in foreign currencies will change as a
consequence of market movements between the date the forward contract is entered
into and the date it is sold. In some cases the Sub-Advisor might decide to sell
the security and deliver foreign currency to settle the original purchase
obligation. If the market value of the security is less than the amount of
foreign currency the Fund is obligated to deliver, the Fund might have to
purchase additional foreign currency on the "spot" (that is, cash) market to
settle the security trade. If the market value of the security instead exceeds
the amount of foreign currency the Fund is obligated to deliver to settle the
trade, the Fund might have to sell on the spot market some of the foreign
currency received upon the sale of the security. There will be additional
transaction costs on the spot market in those cases.
The projection of short-term currency market movements is extremely
difficult, and the successful execution of a short-term hedging strategy is
highly uncertain. Forward contracts involve the risk that anticipated currency
movements will not be accurately predicted, causing the Fund to sustain losses
on these contracts and to pay additional transactions costs. The use of forward
contracts in this manner might reduce the Fund's performance if there are
unanticipated changes in currency prices to a greater degree than if the Fund
had not entered into such contracts.
At or before the maturity of a forward contract requiring the Fund to sell
a currency, the Fund might sell a portfolio security and use the sale proceeds
to make delivery of the currency. In the alternative the Fund might retain the
security and offset its contractual obligation to deliver the currency by
purchasing a second contract. Under that contract the Fund will obtain, on the
same maturity date, the same amount of the currency that it is obligated to
deliver. Similarly, the Fund might close out a forward contract requiring it to
purchase a specified currency by entering into a second contract entitling it to
sell the same amount of the same currency on the maturity date of the first
contract. The Fund would realize a gain or loss as a result of entering into
such an offsetting forward contract under either circumstance. The gain or loss
will depend on the extent to which the exchange rate or rates between the
currencies involved moved between the execution dates of the first contract and
offsetting contract.
The costs to the Fund of engaging in forward contracts varies with factors
such as the currencies involved, the length of the contract period and the
market conditions then prevailing. Because forward contracts are usually entered
into on a principal basis, no brokerage fees or commissions are involved.
Because these contracts are not traded on an exchange, the Fund must evaluate
the credit and performance risk of the counterparty under each forward contract.
Although the Fund values its assets daily in terms of U.S. dollars, it
does not intend to convert its holdings of foreign currencies into U.S. dollars
on a daily basis. The Fund may convert foreign currency from time to time, and
will incur costs in doing so. Foreign exchange dealers do not charge a fee for
conversion, but they do seek to realize a profit based on the difference between
the prices at which they buy and sell various currencies. Thus, a dealer might
offer to sell a foreign currency to the Fund at one rate, while offering a
lesser rate of exchange if the Fund desires to resell that currency to the
dealer.
|_| Regulatory Aspects of Hedging Instruments. When using futures and
options on futures, the Fund is required to operate within certain guidelines
and restrictions with respect to the use of futures as established by the
Commodities Futures Trading Commission (the "CFTC"). In particular, the Fund is
exempted from registration with the CFTC as a "commodity pool operator" if the
Fund complies with the requirements of Rule 4.5 adopted by the CFTC. The Rule
does not limit the percentage of the Fund's assets that may be used for futures
margin and related options premiums for a bona fide hedging position. However,
under the Rule, the Fund must limit its aggregate initial futures margin and
related options premiums to not more than 5% of the Fund's net assets for
hedging strategies that are not considered bona fide hedging strategies under
the Rule. Under the Rule, the Fund must also use short futures and options on
futures solely for bona fide hedging purposes within the meaning and intent of
the applicable provisions of the Commodity Exchange Act.
Transactions in options by the Fund are subject to limitations established
by the option exchanges. The exchanges limit the maximum number of options that
may be written or held by a single investor or group of investors acting in
concert. Those limits apply 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 that the Fund may write or hold may be affected by options
written or held by other entities, including other investment companies having
the same advisor as the Fund (or an advisor that is an affiliate of the Fund's
advisor or Sub-Advisor). 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.
Under the Investment Company Act, when the Fund purchases a future, it
must maintain cash or readily marketable short-term debt instruments in an
amount equal to the market value of the securities underlying the future, less
the margin deposit applicable to it. The account must be a segregated account or
accounts held by the Fund's custodian bank.
|X| Tax Aspects of Certain Hedging Instruments. Certain foreign currency
exchange contracts in which the Fund may invest are treated as "Section 1256
contracts" under the Internal Revenue Code. In general, gains or losses relating
to Section 1256 contracts are characterized as 60% long-term and 40% short-term
capital gains or losses under the Code. However, foreign currency gains or
losses arising from Section 1256 contracts that are 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," and
unrealized gains or losses are treated as though they were realized. These
contracts also may be marked-to-market for purposes of determining 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 those transactions from this marked-to-market treatment.
Certain forward contracts the Fund enters into 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 that the 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, the following gains or losses are treated
as ordinary income or loss: (1) 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, and
(2) gains or losses attributable to fluctuations in the value of a foreign
currency between the date of acquisition of a debt security denominated
in a foreign currency or foreign currency forward contracts and the
date of disposition.
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 for that trade, which may increase or decrease the amount
of the Fund's investment income available for distribution to its shareholders.
Investment Restrictions
|X| What Are "Fundamental Policies?" Fundamental policies are those
policies that the Fund has adopted to govern its investments that can be changed
only by the vote of a "majority" of the Fund's outstanding voting securities.
Under the Investment Company Act, a "majority" vote is defined as the vote of
the holders of the lesser of:
|_| 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 |_| more than 50% of the
outstanding shares.
The Fund's investment objective is a fundamental policy. Other policies
described in the Prospectus or this Statement of Additional Information are
"fundamental" only if they are identified as such. The Fund's Board of Directors
can change non-fundamental policies without shareholder approval. However,
significant changes to investment policies will be described in supplements or
updates to the Prospectus or this Statement of Additional Information, as
appropriate. The Fund's most significant investment policies are described in
the Prospectus.
|X| Does the Fund Have Additional Fundamental Policies? The following
investment restrictions are fundamental policies of the Fund.
|_| The Fund cannot buy securities issued or guaranteed by any one issuer
if more than 5% of its total assets would be invested in securities of that
issuer or if it would own more than 10% of that issuer's voting securities. This
limitation applies to 75% of the Fund's total assets. The limit does not apply
to securities issued by the U.S. Government or any of its agencies or
instrumentalities.
|_| The Fund cannot lend money or property to any person. However, the
Fund can purchase fixed income securities consistent with the Fund's investment
objective and policies. The Fund may also make loans of portfolio securities, in
an amount that does not exceed one-third of the Fund's total assets.
Additionally, the Fund can enter 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 options on such futures
are not deemed to be loans of assets.
|_| The Fund cannot its concentrate investments. That means it cannot
invest 25% or more of its total assets in any industry.
|_| The Fund cannot purchase real estate or in interests in real estate.
However, the Fund can purchase or sell securities of companies that deal in real
estate or interests in real estate.
|_| The Fund cannot invest for the purpose of exercising control over
management of any company.
|_| The Fund cannot underwrite securities of other companies. A permitted
exception is in case it is deemed to be an underwriter under the Securities Act
of 1933 when reselling any securities held in its own portfolio.
|_| The Fund cannot invest or hold securities of any issuer if officers
and directors of the Fund or its Manager or Sub-Advisor individually
beneficially own more than 1/2 of 1% of the securities of that issuer and
together own more than 5% of the securities of that issuer.
|_| The Fund cannot invest in physical commodities or physical commodity
contracts. However, the Fund may buy and sell hedging instruments to the extent
specified in its Prospectus and Statement of Additional Information from time to
time. The Fund can also buy and sell options futures, and securities or other
instruments backed by physical commodities or whose investment return is linked
to changes in the price of physical commodities.
|_| The Fund cannot pledge, mortgage or hypothecate any of its assets.
However, the Fund can pledge assets to secure permitted borrowings and in
connection with collateral arrangements with respect to options and futures.
|_| The Fund cannot issue senior securities, as defined in the Investment
Company Act of 1940. However, the Fund can enter into repurchase agreements,
lend its portfolio securities and borrow money from banks for temporary or
emergency purposes.
For purposes of the Fund's policy not to concentrate its investments as
described above, the Fund has adopted the industry classifications set forth in
Appendix B to this Statement of Additional Information. This is not a
fundamental policy.
|X| Does the Fund Have Any Restrictions That Are Not Fundamental? The Fund
has a number of other investment restrictions that are not fundamental policies,
which means that they can be changed by the Board of Directors without
shareholder approval.
|_| The Fund cannot purchase oil, gas or other mineral leases, rights,
royalty contracts or exploration or development programs. However, the Fund can
invest in securities of companies that invest in or sponsor such programs.
|_| The Fund cannot purchase securities on margin (except for short-term
loans that are necessary for the clearance of transactions) or make short sales
of securities.
Unless the Prospectus or this Statement of Additional Information states
that a percentage restriction applies on an ongoing basis, it applies only at
the time the Fund makes an investment. 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.
How the Fund is Managed
Organization and History. The Fund is an open-end, diversified management
investment company organized as a Maryland corporation in 1986. The Fund
commenced its operations on February 13, 1987 as a closed-end investment company
with a "dual-purpose" structure. The Fund originally had two objectives: (1)
long-term capital appreciation and preservation of capital, and (2) current
income and long-term growth of income. The Fund originally had common stock,
denominated as "capital shares," and preferred stock, denominated as "income
shares."
Under the Fund's original dual-purpose structure, the capital shares were
entitled to all of the Fund's gains and losses on its assets, and no Fund
expenses were allocated to those shares. The income shares were entitled to all
of the Fund's income and bore all of the Fund's operating expenses. The income
shares were redeemed on January 31, 1997, and the Fund's dual-purpose structure
was terminated.
On March 3, 1997, the Fund was converted to an open-end management
investment company with a single investment objective of capital appreciation.
The outstanding capital shares of the Fund were re-denominated as Class A shares
of common stock, which bear their allocable share of Fund expenses.
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.
|X| Classes of Shares. The Board of Directors has the power, without
shareholder approval, to divide unissued shares of the Fund into two or more
classes. The Board has done so, and the Fund currently has three classes of
shares: Class A, Class B, and Class C. All classes invest in the same investment
portfolio. Each class of shares:
o has its own dividends and distributions,
o pays certain expenses which may be different for the different classes,
o may have a different net asset value,
o may have separate voting rights on matters in which interests of one
class are different from interests of another class, and o votes as a
class on matters that affect that class alone.
Shares are freely transferable, and each share of each class has one vote
at shareholder meetings, with fractional shares voting proportionally on matters
submitted to the vote of 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.
The Directors are authorized to create new series and classes of shares.
The Directors may reclassify unissued shares of the Fund or its series or
classes into additional series or classes of shares. The Directors also may
divide or combine the shares of a class into a greater or lesser number of
shares without changing the proportionate beneficial interest of a shareholder
in the Fund. Shares do not have cumulative voting rights or preemptive or
subscription rights. Shares may be voted in person or by proxy at shareholder
meetings.
|X| Meetings of Shareholders. Although the Fund is not required by
Maryland law to hold annual meetings, it may hold shareholder meetings from time
to time on important matters. The Fund's shareholders have the right to call a
meeting to remove a Director or to take certain other action described in the
Articles of Incorporation of the Fund's parent corporation.
The Fund will hold meetings when required to do so by the Investment
Company Act or other applicable law. The Fund will hold a meeting when the
Directors call a meeting or upon proper request of shareholders. If the Fund
receives a written request of the record holders of at least 25% of the
outstanding shares eligible to be voted at a meeting to call a meeting for a
specified purpose (which might include the removal of a Director), the Fund will
call a meeting of shareholders for that specified purpose.
Shareholders of the different classes of the Fund vote together in the
aggregate on certain matters at shareholders' meetings. Those matters include
the election of Directors and ratification of appointment of the independent
auditors. Shareholders of a particular series or class vote separately on
proposals that affect that series or class. Shareholders of a series or class
that is not affected by a proposal are not entitled to vote on the proposal. For
example, only shareholders of a particular series vote on any material amendment
to the investment advisory agreement for that series. Only shareholders of a
particular class of a series vote on certain amendments to the Distribution
and/or Service Plans if the amendments affect only that class.
Directors and Officers of the Fund. The Fund's Directors and officers and their
principal occupations and business affiliations during the past five years are
listed below. Directors denoted with an asterisk (*) below are deemed to be
"interested persons" of the Fund under the Investment Company Act. All of the
Directors are also trustees, directors or managing general partners of the
following Oppenheimer funds:
Oppenheimer Quest Value Fund, Inc.,
Oppenheimer Quest For Value Funds, a series Fund having the following series:
Oppenheimer Quest Small Cap Value Fund,
Oppenheimer Quest Balanced Value Fund and
Oppenheimer Quest Opportunity Value Fund,
Oppenheimer Quest Global Value Fund, Inc.,
Oppenheimer Quest Capital Value Fund, Inc.,
Rochester Portfolio Series, a series Fund having one series: Limited-Term New
York Municipal
Fund,
Rochester Fund Municipals,
Bond Fund Series, a series Fund having one series: Oppenheimer Convertible
Securities Fund, and
Oppenheimer MidCap Fund
Ms. Macaskill and Messrs. Bishop, Doll, Donohue, Farrar, Wixted and Zack,
who are officers of the Fund, respectively hold the same offices of the other
Oppenheimer funds listed above. As of January 14, 2000 the Directors and
officers of the Fund as a group owned less than 1% of the outstanding shares of
the Fund. The foregoing statement does not reflect shares held of record by an
employee benefit plan for employees of the Manager other than shares
beneficially owned under that plan by the officers of the Fund listed below. Ms.
Macaskill and Mr. Donohue, are trustees of that plan.
Bridget A. Macaskill, Chairman of the Board of Trustees and President, Age: 51.
Two World Trade Center, New York, New York 10048-0203 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, an investment adviser subsidiary of
the Manager; Chairman and a director of Shareholder Services, Inc. (since August
1994) and Shareholder Financial Services, Inc. (since September 1995), transfer
agent subsidiaries of the Manager; President (since September 1995) and a
director (since October 1990) of Oppenheimer Acquisition Corp., 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., an offshore fund management subsidiary of
the Manager and of Oppenheimer Millennium Funds plc; President and a director of
other Oppenheimer funds; a director of Prudential Corporation plc (a U.K.
financial service company).
Paul Y. Clinton, Trustee, Age: 69.
39 Blossom Avenue, Osterville, Massachusetts 02655
Principal of Clinton Management Associates, a financial and venture capital
consulting firm; Trustee of Capital Cash Management Trust, a money-market fund
and Narragansett Tax-Free Fund, a tax-exempt bond fund; Director of OCC Cash
Reserves, Inc. and Trustee of OCC Accumulation Trust, both of which are open-end
investment companies. Formerly: Director, External Affairs, Kravco Corporation,
a national real estate owner and property management corporation; President of
Essex Management Corporation, a management consulting company; a general partner
of Capital Growth Fund, a venture capital partnership; a general partner of
Essex Limited Partnership, an investment partnership; President of Geneve Corp.,
a venture capital fund; Chairman of Woodland Capital Corp., a small business
investment company; and Vice President of W.R. Grace & Co.
Thomas W. Courtney, Trustee, Age: 66.
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); former President
of Investment Counseling Federated Investors, Inc.; Trustee of Cash Assets
Trust, a money market fund; Director of OCC Cash Reserves, Inc., and Trustee of
OCC Accumulation Trust, both of which are open-end investment companies; former
President of Boston Company Institutional Investors; Trustee of Hawaiian
Tax-Free Trust and Tax Free Trust of Arizona, tax-exempt bond funds; Director of
several privately owned corporations; former Director of Financial Analysts
Federation.
Robert G. Galli, Trustee, Age: 66.
19750 Beach Road, Jupiter, FL 33469
A Trustee or Director of other Oppenheimer funds. Formerly he held the
following positions: Vice Chairman of the Manager, OppenheimerFunds, Inc.
(October 1995 - December 1997); Executive Vice President of the Manager
(December 1977 - October 1995); Executive Vice President and a director
(April 1986 - October 1995) of HarbourView Asset Management Corporation,
an investment advisor subsidiary of the Manager.
Lacy B. Herrmann, Trustee, Age: 70.
380 Madison Avenue, Suite 2300, New York, New York 10017
Chairman and Chief Executive Officer of Aquila Management Corporation, the
sponsoring organization and manager, 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 of which are
open-end investment companies; Trustee Emeritus of Brown University.
George Loft, Trustee, Age: 85.
51 Herrick Road, Sharon, Connecticut 06069
Private Investor; Director of OCC Cash Reserves, Inc., and Trustee of OCC
Accumulation Trust, both of which are open-end investment companies.
Andrew J. Donohue, Secretary, Age: 49.
Two World Trade Center, New York, New York 10048-0203
Executive Vice President (since January 1993), General Counsel (since October
1991) and a Director (since September 1995) of the Manager; Executive Vice
President and General Counsel (since September 1993) and a director (since
January 1992) of the Distributor; Executive Vice President, General Counsel and
a director of HarbourView Asset Management Corporation, Shareholder Services,
Inc., Shareholder Financial Services, Inc. and (since September 1995)
Oppenheimer Partnership Holdings, Inc.; President and a director of Centennial
Asset Management Corporation (since September 1995); President, General Counsel
and a director of Oppenheimer Real Asset Management, Inc. (since July 1996);
General Counsel (since May 1996) and Secretary (since April 1997) of Oppenheimer
Acquisition Corp.; Vice President and a director of OppenheimerFunds
International Ltd. and Oppenheimer Millennium Funds plc (since October 1997); an
officer of other Oppenheimer funds.
Robert Bishop, Assistant Treasurer, Age: 41.
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: 34.
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.
Brian W. Wixted, Treasurer, Age: 40.
6803 South Tucson Way, Englewood, Colorado 80112
Senior Vice President and Treasurer (since April 1999) of the Manager; Treasurer
of HarbourView Asset Management Corporation, Shareholder Services, Inc.,
Shareholder Financial Services, Inc. and Oppenheimer Partnership Holdings, Inc.
(since April 1999); Assistant Treasurer of Oppenheimer Acquisition Corp. (since
April 1999); Assistant Secretary of Centennial Asset Management Corporation
(since April 1999); formerly Principal and Chief Operating Officer, Bankers
Trust Company - Mutual Fund Services Division (March 1995 - March 1999); Vice
President and Chief Financial Officer of CS First Boston Investment Management
Corp. (September 1991 - March 1995); and Vice President and Accounting Manager,
Merrill Lynch Asset Management (November 1987 - September 1991).
Robert G. Zack, Assistant Secretary, Age: 51.
Two World Trade Center, New York, New York 10048-0203
Senior Vice President (since May 1985) and Associate General Counsel (since
May 1981) of the Manager, Assistant Secretary of Shareholder Services, Inc.
(since May 1985), and Shareholder Financial Services, Inc. (since November
1989); Assistant Secretary of OppenheimerFunds International Ltd. and
Oppenheimer Millennium Funds plc (since October 1997); an officer of other
Oppenheimer funds.
|X| Remuneration of Directors. The officers of the Fund and one Director,
Ms. Macaskill, are affiliated with the Manager and receive no salary or fee from
the Fund. The remaining Directors of the Fund received the compensation shown
below. The compensation from the Fund was paid during its fiscal year ended
October 31, 1999. The table below also shows the total compensation from all of
the Oppenheimer funds listed above, including the compensation from the Fund,
and from two other funds that are not Oppenheimer funds but for which the
Sub-Advisor acts as investment advisor. That amount represents compensation
received as a director, trustee, or member of a committee of the Board during
the calendar year 1999.
<PAGE>
- --------------------------------------------------------------------------------
Total Compensation
From all
Aggregate Retirement Benefits Oppenheimer
Director's Name Compensation Accrued as Fund Quest/Rochester
from the Fund 1 Expenses Funds
(10 Funds)2
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Paul Y. Clinton $ 8,441 $ 5,365 $ 140,1903
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Thomas W. Courtney $ 7,098 $ 4,023 $ 140,1903
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Robert G. Galli $ 2,819 $ 0 $ 176,2154
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Lacy B. Herrmann $ 9,223 $ 6,147 $ 139, 2903
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
George Loft $ 9,074 $ 5,998 $ 140, 1903
- --------------------------------------------------------------------------------
1. Aggregate compensation includes fees and any retirement plan benefits
for a Director.
2. For the 1999 calendar year. Each series of an investment company is
considered a separate "fund" for this purpose.
3. Total Compensation for the 1999 calendar year includes compensation from two
funds for which the Sub-Advisor acts as the investment advisor.
4. Total compensation for the 1999 calendar year also includes compensation
received for serving as a Trustee or Director of 24 other Oppenheimer funds.
|X| Retirement Plan for Directors. The Fund has adopted a retirement plan
that provides for payments to retired Directors. Payments are up to 80% of the
average compensation paid during a Director's five years of service in which the
highest compensation was received. A Director must serve as Director for any of
the Oppenheimer Quest/Rochester/MidCap funds listed above for at least 15 years
to be eligible for the maximum payment. Each Director's retirement benefits will
depend on the amount of the Director's future compensation and length of
service. Therefore the amount of those benefits cannot be determined at this
time, nor can we estimate the number of years of credited service that will be
used to determine those benefits.
|X| Deferred Compensation Plan for Directors. The Board of Directors has
adopted a Deferred Compensation Plan for disinterested directors that enables
them 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 and 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 Securities
and Exchange Commission, the Fund may invest in the funds selected by the
Director under the plan without shareholder approval for the limited purpose of
determining the value of the Director's deferred fee account.
|X| Major Shareholders. As of January 14, 2000 the only persons who owned of
record or were known by the Fund to own of record 5% or more of any class of the
Fund's outstanding shares were: Salomon Smith Barney Inc., 333 West 34th Street,
3rd Floor, New York, New York 10001, which owned for the benefit of its client
677,361.851 Class A shares (representing 9.46% of the Class A shares then
outstanding); and Merrill Lynch Pierce Fenner & Smith Inc., 4800 Deer Lake Drive
East, Floor 3, Jacksonville, Florida, 32246-6484, which owned for the benefit of
its clients 34,256.266 shares (representing 6.19% of the Class B shares then
outstanding).
The Manager. The Manager is wholly-owned by Oppenheimer Acquisition Corp., a
holding company controlled by Massachusetts Mutual Life Insurance Company.
The Manager became the Fund's investment advisor on February 28, 1997.
|X| Code of Ethics. The Fund, the Manager and the Distributor have a Code
of Ethics. It is designed to detect and prevent improper personal trading by
certain employees, including portfolio managers, that would compete with or take
advantage of the Fund's portfolio transactions. Covered persons include persons
with knowledge of the investments and investment intentions of the Fund and
other funds advised by the Manager. The Code of Ethics does permit personnel
subject to the Code to invest in securities, including securities that may be
purchased or held by the Fund, subject to a number of restrictions and controls.
Compliance with the Code of Ethics is carefully monitored and enforced by the
Manager.
|X| The Investment Advisory Agreement. The Manager provides investment
advisory and management services to the Fund under an investment advisory
agreement between the Manager and the Fund. The Manager handles the Fund's
day-to-day business and permits the Manager to enter into sub-advisory
agreements with other registered investment advisors to obtain specialized
services for the Fund, as long as the Fund is not obligated to pay any
additional fees for those services. The Manager has retained the Sub-Advisor
pursuant to a separate Sub-Advisory Agreement, under which the Sub-Advisor buys
and sells portfolio securities for the Fund. The portfolio manager of the Fund
is employed by the Sub-Advisor and is the person who is principally responsible
for the day-to-day management of the Fund's portfolio, as described below.
The investment advisory agreement between the Fund and the Manager requires
the Manager, at its expense, to provide the Fund with adequate office space,
facilities and equipment. It also requires the Manager to provide and supervise
the activities of all administrative and clerical personnel required to provide
effective administration for the Fund. Those responsibilities include the
compilation and maintenance of records with respect to its operations, the
preparation and filing of specified reports, and composition of proxy materials
and registration statements for continuous public sale of shares of the Fund.
The Manager also calculates the Fund's net asset value without additional
compensation.
The Fund pays expenses not expressly assumed by the Manager under the
advisory agreement. The advisory agreement lists examples of expenses paid by
the Fund. The major categories relate to calculation of the Fund's net asset
values per share, interest, taxes, brokerage commissions, fees to certain
Directors, legal and audit expenses, custodian and transfer agent expenses,
share issuance costs, certain printing and registration costs and non-recurring
expenses, including litigation costs. The management fees paid by the Fund to
the Manager are calculated at the rates described in the Prospectus, which are
applied to the assets of the Fund as a whole. The fees are allocated to each
class of shares based upon the relative proportion of the Fund's net assets
represented by that class.
The investment advisory agreement provided that the Manager will waive a
portion of its advisory fee for a period of two years commencing February 28,
1997. Under that provision, the Manager waived the portion of its fee equal to
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. That provision terminated effective February 28, 1999,
and the Fund currently pays the management fees at the full rate set forth in
the Prospectus.
<PAGE>
- --------------------------------------------------------------------------------
Gross Management Fee
Management Fees Paid to (without giving effect
Fiscal Year ended 10/31: OppenheimerFunds, Inc.2 to Manager's waiver)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
19971 $2,670,444 $3,312,119
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1998 $2,223,087 $2,871,810
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1999 $2,539,256 $2,747,591
- --------------------------------------------------------------------------------
1. For the portion of the 1997 fiscal period commencing February 28, 1997, when
the Manager became the Fund's investment advisor. The Fund changed its fiscal
year from December 31 to October 31 during that fiscal period. For the
portion of the 1997 fiscal period from January 1, 1997 to February 28, 1997,
the Fund paid an advisory fee of $730,855 and an administrative fee of
$130,006 to the Sub-Advisor, which was then the Fund's investment advisor.
2. Amounts are shown net of the Manager's waiver of a portion of its fee,
as described above.
The investment advisory agreement states that in the absence of willful
misfeasance, bad faith, gross negligence in the performance of its duties or
reckless disregard of its obligations and duties under the investment advisory
agreement, the Manager is not liable for any loss resulting from a good faith
error or omission on its part with respect to any of its duties under the
agreement.
The agreement permits the Manager to act as investment advisor for any other
person, firm or corporation and to use the names "Oppenheimer" and "Quest for
Value" in connection with other investment companies for which it may act as
investment advisor or general distributor. If the Manager shall no longer act as
investment advisor to the Fund, the Manager may withdraw the right of the Fund
to use the names "Oppenheimer" or "Quest for Value" as part of its name.
The Sub-Advisor. The Sub-Advisor is a majority-owned subsidiary of Oppenheimer
Capital, a registered investment advisor. From the Fund's inception on April 30,
1980, until November 22, 1995, the Sub-Advisor (which was then named Quest for
Value Advisors) or the Sub-Advisor's parent served as the Fund's investment
advisor. The Sub-Advisor acts as investment advisor to other investment
companies and for other investors.
On November 4, 1997, PIMCO Advisors L.P., a registered investment advisor
with $125 billion in assets under management through various subsidiaries and
affiliates, acquired control of Oppenheimer Capital and the Sub-Advisor. On
November 30, 1997, Oppenheimer Capital merged with a subsidiary of PIMCO
Advisors. As a result, Oppenheimer Capital and the Sub-Advisor 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 New York Stock
Exchange-listed Delaware limited partnership of which PIMCO Partners, G.P. is
the sole general partner.
PIMCO Partners, G.P. beneficially owns or controls (through its general
partner interest in Oppenheimer Capital, L.P.) more than 80% of the units of
limited partnership of PIMCO Advisors. PIMCO Partners, G.P. has two general
partners. The first of these is Pacific Investment Management Company, a
wholly-owned subsidiary of Pacific Financial Asset Management Company, a
direct subsidiary of Pacific Life Insurance Company ("Pacific Life").
The managing general partner of PIMCO Partners, G.P. 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
Partners G.P. 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
Partners, G.P., 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.
As described in the Prospectus, on October 31, 1999, PIMCO Advisors
Holdings L.P. and Allianz AG announced that they had entered into an agreement
in which Allianz will acquire majority ownership of PIMCO Advisors and its
subsidiaries, including Oppenheimer Capital and Sub-Advisor. That transaction is
currently expected to be completed by the end of the first quarter of 2000.
|X| The Sub-Advisory Agreement. Under the Sub-Advisory Agreement between
the Manager and the Sub-Advisor, the Sub-Advisor 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
Sub-Advisory Agreement, the Sub-Advisor agrees not to change the portfolio
manager of the Fund without the written approval of the Manager. The Sub-Advisor
also agrees to provide assistance in the distribution and marketing of the Fund.
Under the Sub-Advisory Agreement, the Manager pays the Sub-Advisor an
annual fee in monthly installments, based on the average daily net assets of the
Fund. The fee paid to the Sub-Advisor under the Sub-Advisory agreement is paid
by the Manager, not by the Fund. The fee is 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 (the "Base Amount") that remained in
the Fund 120 days later, 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 the fee is calculated after any waivers by the Manager of
its fee.
The Sub-Advisory Agreement states that in the absence of willful
misfeasance, bad faith, negligence or reckless disregard of its duties or
obligations, the Sub-Advisor shall not be liable to the Manager for any act or
omission in the course of or connected with rendering services under the
Sub-Advisory Agreement or for any losses that may be sustained in the purchase,
holding or sale of any security.
Brokerage Policies of the Fund
Brokerage Provisions of the Investment Advisory Agreement and the Sub-Advisory
Agreement. One of the duties of the Sub-Advisor under the Sub-Advisory Agreement
is to arrange the portfolio transactions for the Fund. The Fund's investment
advisory agreement with the Manager and the Sub-Advisory Agreement contain
provisions relating to the employment of broker-dealers to effect the Fund's
portfolio transactions. The Manager and the Sub-Advisor are authorized to employ
broker-dealers, including "affiliated" brokers, as that term is defined in the
Investment Company Act. They may employ broker-dealers that they think, in their
best judgment based on all relevant factors, will implement the policy of the
Fund to obtain, at reasonable expense, the "best execution" of the Fund's
portfolio transactions. "Best execution" means prompt and reliable execution at
the most favorable price obtainable.
The Manager and the Sub-Advisor need not seek competitive commission
bidding. However, they are expected to be aware of the current rates of 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 of Directors.
The Manager and the Sub-Advisor may select brokers (other than affiliates)
that provide brokerage and/or research services for the Fund and/or the other
accounts over which the Manager, the Sub-Advisor or their respective affiliates
have investment discretion. The commissions paid to such brokers may be higher
than another qualified broker would charge, if the Manager or Sub-Advisor, as
applicable, makes a good faith determination that the commission is fair and
reasonable in relation to the services provided. Subject to those
considerations, as a factor in selecting brokers for the Fund's portfolio
transactions, the Manager and the Sub-Advisor may also consider sales of shares
of the Fund and other investment companies for which the Manager or an affiliate
serves as investment advisor.
The Sub-Advisory Agreement permits the Sub-Advisor to enter into
"soft-dollar" arrangements through the agency of third parties to obtain
services for the Fund. Pursuant to these arrangements, the Sub-Advisor will
undertake to place brokerage business with broker-dealers that pay third parties
that provide services. Any such "soft-dollar" arrangements will be made in
accordance with policies adopted by the Fund's Board of Directors and in
compliance with applicable law.
Brokerage Practices. Brokerage for the Fund is allocated subject to the
provisions of the investment advisory agreement and the Sub-Advisory agreement
and the procedures and rules described above. Generally, the Sub-Advisor's
portfolio traders allocate brokerage based upon recommendations from the Fund's
portfolio manager. In certain instances, portfolio managers may directly place
trades and allocate brokerage. In either case, the Sub-Advisor's executive
officers supervise the allocation of brokerage.
Transactions in securities other than those for which an exchange is the
primary market are generally done with principals or market makers. In
transactions on foreign exchanges, the Fund may be required to pay fixed
brokerage commissions and therefore would not have the benefit of negotiated
commissions available in U.S. markets. Brokerage commissions are paid primarily
for transactions in listed securities or for certain fixed-income agency
transactions in the secondary market. Otherwise brokerage commissions are paid
only if it appears likely that a better price or execution can be obtained by
doing so.
The Sub-Advisor 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-Advisor to allocate
purchase or sale transactions among the Fund and other clients whose assets it
manages in a manner it deems equitable. In making those allocations, the
Sub-Advisor considers several main factors, including the respective investment
objectives, the relative size of portfolio holdings of the same or comparable
securities, the availability of cash for investment, the size of investment
commitments generally held and the opinions of the persons responsible for
managing the portfolios of the Fund and each other client's 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-Advisor 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 (these are called "free trades") usually will have its order
executed first. 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.
Purchases are combined where possible for the purpose of negotiating brokerage
commissions. In some cases that practice might have a detrimental effect on the
price or volume of the security in a particular transaction for the Fund.
Most purchases of debt obligations are principal transactions at net prices.
Instead of using a broker for those transactions, the Fund normally deals
directly with the selling or purchasing principal or market maker unless the
Sub-Advisor determines that a better price or execution can be obtained by using
the services of a broker. Purchases of portfolio securities from underwriters
include a commission or concession paid by the issuer to the underwriter.
Purchases from dealers include a spread between the bid and asked prices. The
Fund seeks to obtain prompt execution of these orders at the most favorable net
price.
The investment advisory agreement and the Sub-Advisory agreement permit the
Manager and the Sub-Advisor to allocate brokerage for research services. The
research services provided by a particular broker may be useful only to one or
more of the advisory accounts of the Sub-Advisor and its affiliates. The
investment research received for the commissions of those other accounts may be
useful both to the Fund and one or more of the Sub-Advisor's other accounts.
Investment research may be supplied to the Sub-Advisor by a third party at the
instance of a broker through which trades are placed.
Investment research services include information and analysis on particular
companies and industries as well as market or economic trends and portfolio
strategy, market quotations for portfolio evaluations, information systems,
computer hardware and similar products and services. If a research service also
assists the Sub-Advisor in a non-research capacity (such as bookkeeping or other
administrative functions), then only the percentage or component that provides
assistance to the Sub-Advisor in the investment decision-making process may be
paid in commission dollars.
The research services provided by brokers broadens the scope and supplements
the research activities of the Sub-Advisor. That research provides additional
views and comparisons for consideration, and helps the Sub-Advisor to obtain
market information for the valuation of securities that are either held in the
Fund's portfolio or are being considered for purchase. The Sub-Advisor provides
information to the Manager and the Board about the commissions paid to brokers
furnishing such services, together with the Sub-Advisor's representation that
the amount of such commissions was reasonably related to the value or benefit of
such services.
Because the Sub-Advisor was an affiliate of Oppenheimer & Co., Inc., a
broker-dealer ("OpCo"), until November 3, 1997, the table below includes
information about brokerage commissions paid to OpCo for the Fund's portfolio
transactions.
- --------------------------------------------------------------------------------
Total $ Amount of
Total Transactions for Which
Brokerage Brokerage Commissions Brokerage Commissions
Fiscal Year Commissions Paid to OpCo: Were Paid to OpCo:
Ended: Paid1
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Dollar % of Total Dollar % of Total
Amount Amount
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
10/31/97 $772,516 $264,046 34.2% $158,017,489 19.6%
- ----------------------------
- --------------------------------------------------------------------------------
10/31/98 $373,116
- ----------------------------
- --------------------------------------------------------------------------------
10/31/99 $384,6612
- --------------------------------------------------------------------------------
1. Amounts do not include spreads or concessions on principal transactions
on a net trade basis.
2. In the fiscal year ended 10/31/99, the amount of transactions directed to
brokers for research services was $17,246,488 and the amount of the
commissions paid to broker-dealers for those services was $25,426.
Distribution and Service Plans
The Distributor. Under its General Distributor's Agreement with the Fund, the
Distributor acts as the Fund's principal underwriter in the continuous public
offering of shares of the Fund's classes of shares. The Distributor is not
obligated to sell a specific number of shares. Expenses normally attributable to
sales are borne by the Distributor.
The compensation paid to (or retained by) the Distributor from the sale of
shares or on the redemption of shares during the Fund's three most recent fiscal
years is shown in the table below.
- --------------------------------------------------------------------------------
Fiscal Aggregate Class A Commissions Commissions Commissions
Year Front-End Front-End on Class A on Class B on Class C
Ended Sales Sales Charges Shares Shares Shares
10/31: Charges on Retained by Advanced by Advanced by Advanced by
Class A Distributor Distributor1 Distributor1 Distributor1
Shares
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
19972 $117,049 $21,937 $ 1,721 $40,420 $ 4,312
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1998 $330,196 $99,219 $27,620 $291,004 $22,732
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1999 $275,544 $66,902 $72,675 $253,910 $22,634
- --------------------------------------------------------------------------------
1. The Distributor advances commission payments to dealers for certain sales of
Class A shares and for sales of Class B and Class C shares from its own
resources at the time of sale.
2. For the period from 2/28/97 to 10/31/97. The Fund's shares were not sold
subject to a sales charge prior to its conversion to an open-end fund and
prior to the commencement of the Fund's offering by the Distributor on
3/3/97.
- --------------------------------------------------------------------------------
Class A Contingent Class B Contingent Class C Contingent
Fiscal Deferred Sales Deferred Sales Deferred Sales Charges
Year Ended Charges Retained by Charges Retained by Retained by Distributor
10/31 Distributor Distributor
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1999 $2,081 $37,829 $4,146
- --------------------------------------------------------------------------------
Distribution and Service Plans. The Fund has adopted Distribution and Service
Plans for Class A, Class B and Class C shares under Rule 12b-1 of the Investment
Company Act. Under those plans the Fund compensates the Distributor for all or a
portion of its costs incurred in connection with the distribution and/or
servicing of the shares of the particular class.
Under the plans, the Manager and the Distributor may make payments to
affiliates and, in their sole discretion, from time to time, may use their own
resources (at no direct cost to the Fund) to make payments to brokers, dealers
or other financial institutions for distribution and administrative services
they perform. The Manager may use its profits from the advisory fee it receives
from the Fund. In their sole discretion, the Distributor and the Manager may
increase or decrease the amount of payments they make from their own resources
to plan recipients.
Unless a plan is terminated as described below, the plan continues in effect
from year to year but only if the Fund's Board of Directors and its Independent
Directors specifically vote annually to approve its continuance. Approval must
be by a vote cast in person at a meeting called for the purpose of voting on
continuing the plan. A 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.
The Board of Directors and the Independent Directors must approve all
material amendments to a plan. An amendment to increase materially the amount of
payments to be made under a plan must be approved by shareholders of the class
affected by the amendment. Because Class B shares of the Fund automatically
convert into Class A shares after six years, the Fund must obtain the approval
of both Class A and Class B shareholders for a proposed material amendment to
the Class A plan that would materially increase payments under the plan. That
approval must be by a "majority" (as defined in the Investment Company Act) of
the shares of each class, voting separately by class.
While the plans are in effect, the Treasurer of the Fund shall provide
separate written reports on the plans to the Board of Directors at least
quarterly for its review. The reports shall detail the amount of all payments
made under a plan, and the purpose for which the payments were made. Those
reports are subject to the review and approval of the Independent Directors.
Each plan states 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 the selection and nomination process as long as the
final decision as to selection or nomination is approved by a majority of the
Independent Directors.
Under the plan for a class, no payment will be made to any recipient in any
quarter in which the aggregate net asset value of all Fund shares of that class
held by the recipient for itself and its customers does not exceed a minimum
amount, if any, that may be set from time to time by a majority of the
Independent Directors. The Board of Directors has set no minimum amount of
assets to qualify for payments under the plans.
|X| Service Plans. Under the service plans, the Distributor currently uses
the fees it receives from the Fund to pay brokers, dealers and other financial
institutions (they are referred to as "recipients") for personal services and
account maintenance services they provide for their customers who hold shares of
a particular Class, A, B or C. The services 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 service plans
permits compensation to the Distributor at a rate of up to 0.25% of average
annual net assets of the applicable class. The Board has set the rate at that
level. While the plans permit the Board to authorize payments to the Distributor
to reimburse itself for services under the plan, the Board has not yet done so.
The Distributor makes payments to plan recipients quarterly at an annual rate
not to exceed 0.25% of the average annual net assets consisting of shares of the
applicable class held in the accounts of the recipients or their customers.
|X| Service and Distribution Plan Fees. Under each plan, service fees and
distribution 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 plans compensate the Distributor at a flat rate for its
services and costs in distributing shares and servicing accounts, whether the
Distributor's expenses are more or less than the amounts paid by the Fund under
the plans during the period for which the fee is paid. The types of services
recipients provide are similar to the services provided under the service plan
described above.
The plans permit the Distributor to retain both the asset-based sales
charges and the service fees or to pay recipients the service fee on a quarterly
basis, without payment in advance. However, the Distributor currently intends to
pay the service fee to recipients in advance for the first year after the shares
are purchased. After the first year shares are outstanding, the Distributor
makes service fee payments quarterly on those shares. The advance payment is
based on the net asset value of shares sold. Shares purchased by exchange do not
qualify for the advance service fee payment. If shares are redeemed during the
first year after their purchase, the recipient of the service fees on those
shares will be obligated to repay the Distributor a pro rata portion of the
advance payment of the service fee made on those shares.
Under the Class A plan, the Distributor currently pays a portion of the
asset-based sales charge to brokers, dealers and financial institutions. The
Distributor retains the asset-based sales charge on Class B shares. The
Distributor retains the asset-based sales charge on Class C shares during the
first year the shares are outstanding. It pays the asset-based sales charge it
receives on Class C shares as an ongoing commission to the recipient on Class C
shares outstanding for a year or more. If a dealer has a special agreement with
the Distributor, the Distributor will pay the Class B and/or Class C service fee
and the asset-based sales charge to the dealer quarterly in lieu of paying the
sales commissions and service fee in advance at the time of purchase.
The asset-based sales charges on Class B and Class C shares allow investors
to buy 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 A,
Class B and Class C shares. The payments are made to the Distributor in
recognition that the Distributor:
o pays sales commissions to authorized brokers and dealers at the time of
sale and pays service fees as described above,
o may finance payment of sales commissions and/or the advance of the
service fee payment to recipients under the plans, or may provide such
financing from its own resources or from the resources of an affiliate,
o employs personnel to support distribution of shares, and
o bears the costs of sales literature, advertising and prospectuses
(other than those furnished to current shareholders) and state "blue sky"
registration fees and certain other distribution expenses.
------------------------------------------------------------------------------
Distribution Fees Paid to the Distributor in the Fiscal Year Ended 10/31/99
------------------------------------------------------------------------------
------------------------------------------------------------------------------
Distributor's Distributor's
Aggregate Unreimbursed
Unreimbursed Expenses as %
Total Payments Amount Retained Expenses Under of Net Assets
Class: Under Plan by Distributor Plan of Class
------------------------------------------------------------------------------
------------------------------------------------------------------------------
Class A $ 1,282,754 $ 293,042 N/A N/A
Plan
------------------------------------------------------------------------------
------------------------------------------------------------------------------
Class B $ 140,949 $ 127,676 $ 539,009 3.45%
Plan
------------------------------------------------------------------------------
------------------------------------------------------------------------------
Class C $ 41,121 $ 27,656 $ 51,019 1.10%
Plan
------------------------------------------------------------------------------
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.
Performance of the Fund
Explanation of Performance Terminology. The Fund uses a variety of terms to
illustrate its investment performance. Those terms include "cumulative total
return," "average annual total return," "average annual total return at net
asset value" and "total return at net asset value." An explanation of how total
returns are calculated is set forth below. The charts below show the Fund's
performance as of the Fund's most recent fiscal year end. You can obtain current
performance information by calling the Fund's Transfer Agent at 1-800-525-7048
or by visiting the OppenheimerFunds Internet web site at
http://www.oppenheimerfunds.com.
The Fund's illustrations of its performance data in advertisements must
comply with rules of the Securities and Exchange Commission. Those rules
describe the types of performance data that may be used and how it is to be
calculated. In general, any advertisement by the Fund of its performance data
must include the average annual total returns for the advertised class of shares
of the Fund. Those returns must be shown 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 (or its submission for
publication).
Use of standardized performance calculations 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 the
Fund's performance information as a basis for comparison with other investments:
|_| Total returns measure the performance of a hypothetical account in the
Fund over various periods and do not show the performance of each shareholder's
account. Your account's performance will vary from the model performance data if
your dividends are received in cash, or you buy or sell shares during the
period, or you bought your shares at a different time and price than the shares
used in the model.
|_| The Fund's performance returns do not reflect the effect of taxes on
dividends and capital gains distributions.
|_| An investment in the Fund is not insured by the FDIC or any other
Government agency.
|_| The principal value of the Fund's shares and total returns are not
guaranteed and normally will fluctuate on a daily basis.
|_| When an investor's shares are redeemed, they may be worth more or less
than their original cost.
|_| Total returns for any given past period represent historical
performance information and are not, and should not be considered, a prediction
of future returns.
The performance of each class of shares is shown separately, because the
performance of each class of shares will usually be different. That is because
of the different kinds of expenses each class bears. The total returns of each
class of shares of the Fund are affected by market conditions, the quality of
the Fund's investments, the maturity of debt investments, the types of
investments the Fund holds, and its operating expenses that are allocated to the
particular class.
|X| Total Return Information. There are different types of "total returns"
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
and that the investment is redeemed at the end of the period. Because of
differences in expenses for each class of shares, the total returns for each
class are separately measured. 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 actual year-by-year performance. The
Fund uses standardized calculations for its total returns as prescribed by the
SEC. The methodology is discussed below.
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 without sales charge, as
described below). For Class B shares, payment of the applicable contingent
deferred sales charge is applied, depending on the period for which the return
is shown: 5.0% in the first year, 4.0% in the second year, 3.0% in the third and
fourth years, 2.0% in the fifth year, 1.0% in the sixth year and none
thereafter. For Class C shares, the 1% contingent deferred sales charge is
deducted for returns for the 1-year period.
The historical performance of Class A shares is restated to reflect the
fees and expenses of Class A that were in effect as of March 3, 1997, without
giving effect to any fee waivers, to reflect the re-denomination of the Fund's
prior capital shares (which bore no expenses) as Class A shares after the Fund
converted to an open-end investment company.
|_| Average Annual Total Return. 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" in the formula) to achieve an Ending Redeemable Value
("ERV" in the formula) of that investment, according to the following formula:
1/n
(ERV)
(---) -1 = Average Annual Total Return
( P )
|_| Cumulative Total Return. 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
|_| Total Returns at Net Asset Value. From time to time the Fund may
also quote a cumulative or an average annual total return "at net asset value"
(without deducting sales charges) 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.
<PAGE>
- --------------------------------------------------------------------------------
The Fund's Total Returns for the Periods Ended 10/31/99
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Cumulative Total Average Annual Total Returns
Class of Returns (10
Shares years or Life of
Class)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
5-Year 10-Year
1-Year (or (or
life-of-class) life-of-class)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
After Without After Without After Without After Without
Sales Sales Sales Sales Sales Sales Sales Sales
Charge Charge Charge Charge Charge Charge Charge Charge
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class A 267.60% 290.02% 2.23% 8.47% 14.12% 15.47% 13.90% 14.58% 1
1
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class B 32.99% 2 35.67% 2 2.83% 7.83% 11.31% 2 12.15% 2 N/A N/A
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class C 35.63% 3 35.63% 3 6.82% 7.82% 12.13% 3 12.13% 3 N/A N/A
- --------------------------------------------------------------------------------
1. Inception of Class A: 2/13/87. Class A returns have been restated, as
described above, to reflect Class A fees and expenses that were in effect on
3/3/97, when the offering of the Fund's Class A shares as an open-end fund
commenced.
2. Inception of Class B: 3/3/97
3. Inception of Class C: 3/3/97
Other Performance Comparisons. The Fund compares its performance annually to
that of an appropriate broadly-based market index in its Annual Report to
shareholders. You can obtain that information by contacting the Transfer Agent
at the addresses or telephone numbers shown on the cover of this Statement of
Additional Information. The Fund may also compare its performance to that of
other investments, including other mutual funds, or use rankings of its
performance by independent ranking entities. Examples of these performance
comparisons are set forth below.
|X| Lipper Rankings. From time to time the Fund may publish the ranking of
the performance of its classes of shares by Lipper, Inc. Lipper is 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 stated fund classifications.
Lipper currently ranks the Fund's performance against all other multi-cap value
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.
|X| Morningstar Rankings. From time to time the Fund may publish the
ranking and/or star rating of the performance of its classes of shares by
Morningstar, Inc., an independent mutual fund monitoring service. Morningstar
rates and ranks mutual funds in broad investment categories: domestic stock
funds, international stock funds, taxable bond funds and municipal bond funds.
The Fund is included among domestic stock funds.
Morningstar proprietary star ratings reflect historical risk-adjusted
total investment return. 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 is measured by a
fund's (or class's) 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 a fund's category. Five stars is the
"highest" ranking (top 10% of funds in a category), 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
ranking 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
date of the fund (or class). Rankings are subject to change monthly.
The Fund may also compare its total return ranking to that of other funds
in its Morningstar category, in addition to its star ratings. Those total return
rankings are percentages from one percent to one hundred percent and are not
risk adjusted. For example, if a fund is in the 94th percentile, that means that
94% of the funds in the same category performed better than it did.
|X| Performance Rankings and Comparisons by Other Entities and
Publications. 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, The Wall Street Journal, Barron's,
or similar publications. That information may include performance quotations
from other sources, including Lipper and Morningstar. The performance of the
Fund's classes of shares may be compared in publications to the performance of
various market indices or other investments, and averages, performance rankings
or other benchmarks prepared by recognized mutual fund statistical services.
Investors may also wish to compare the returns on the Fund's share classes
to the return on fixed-income investments available from banks and thrift
institutions. Those include 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. Repayment of
principal and payment of interest on Treasury securities is backed by the full
faith and credit of the U.S. Government.
From time to time, the Fund may publish rankings or ratings of the Manager
or Transfer Agent, and of 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 and investor services
by third parties may include comparisons of their services to those provided by
other mutual fund families selected by the rating or ranking services. They may
be based upon the opinions of the rating or ranking service itself, using its
research or judgment, or based upon surveys of investors, brokers, shareholders
or others.
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A B O U T Y O U R A C C O U N T
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How to Buy Shares
Additional information is presented below about the methods that can be
used to buy shares of the Fund. Appendix C contains more information about the
special sales charge arrangements offered by the Fund, and the circumstances in
which sales charges may be reduced or waived for certain classes of investors.
AccountLink. When shares are purchased through AccountLink, each purchase must
be at least $25. 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
with 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 Right of Accumulation and Letters
of Intent because of the economies of sales efforts and reduction in expenses
realized by the Distributor, dealers and brokers making such sales. No sales
charge is imposed in certain other circumstances described in Appendix C to this
Statement of Additional Information because the Distributor or dealer or broker
incurs little or no selling expenses.
|X| 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 for your joint accounts, or for trust or
custodial accounts on behalf of your children who are minors,
|_|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, and
|_|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.
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. 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 reduced sales charge will apply only to current purchases. You must
request it when you buy shares.
|X| The Oppenheimer Funds. The Oppenheimer funds are those mutual funds for
which the Distributor acts as the distributor or the sub-distributor and
currently include the following:
Oppenheimer Main Street California
Oppenheimer Bond Fund Municipal Fund
Oppenheimer Main Street Growth & Income
Oppenheimer Capital Appreciation Fund Fund
Oppenheimer Capital Preservation Fund Oppenheimer Main Street Small Cap Fund
Oppenheimer California Municipal Fund Oppenheimer MidCap Fund
Oppenheimer Champion Income Fund Oppenheimer Multiple Strategies Fund
Oppenheimer Convertible Securities Fund Oppenheimer Municipal Bond Fund
Oppenheimer Developing Markets Fund Oppenheimer New York Municipal Fund
Oppenheimer Disciplined Allocation Fund Oppenheimer New Jersey Municipal Fund
Oppenheimer Disciplined Value Fund Oppenheimer Pennsylvania Municipal Fund
Oppenheimer Discovery Fund Oppenheimer Quest Balanced Value Fund
Oppenheimer Quest Capital Value Fund,
Oppenheimer Enterprise Fund Inc.
Oppenheimer Quest Global Value Fund,
Oppenheimer Capital Income Fund Inc.
Oppenheimer Europe Fund Oppenheimer Quest Opportunity Value Fund Oppenheimer
Florida Municipal Fund Oppenheimer Quest Small Cap Value Fund Oppenheimer Global
Fund Oppenheimer Quest Value Fund, Inc. Oppenheimer Global Growth & Income Fund
Oppenheimer Real Asset Fund Oppenheimer Gold & Special Minerals Fund Oppenheimer
Senior Floating Rate Fund Oppenheimer Growth Fund Oppenheimer Strategic Income
Fund Oppenheimer High Yield Fund Oppenheimer Total Return Fund, Inc. Oppenheimer
Insured Municipal Fund Oppenheimer Trinity Core Fund Oppenheimer Intermediate
Municipal Fund Oppenheimer Trinity Growth Fund Oppenheimer International Bond
Fund Oppenheimer Trinity Value Fund Oppenheimer International Growth Fund
Oppenheimer U.S. Government Trust Oppenheimer International Small Company Fund
Oppenheimer World Bond Fund Oppenheimer Large Cap Growth Fund Limited-Term New
York Municipal Fund Oppenheimer Limited-Term Government Fund Rochester Fund
Municipals
and the following money market funds:
Centennial America Fund, L. P. Centennial New York Tax Exempt Trust
Cetennial California Tax Exempt Centennial Tax Exempt Trust
Trust
Centennial Government Trust Oppenheimer Cash Reserves
Centennial Money Market Trust Oppenheimer Money Market Fund, Inc.
There is an initial sales charge on the purchase of Class A shares of each
of the Oppenheimer funds except the money market funds. Under certain
circumstances described in this Statement of Additional Information, redemption
proceeds of certain money market fund shares may be subject to a contingent
deferred sales charge.
|X| Letters 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. You can include purchases made
up to 90 days before the date of the Letter.
A Letter of Intent is an investor's statement in writing to the
Distributor of the intention to purchase Class A shares or Class A and Class B
shares of the Fund (and other Oppenheimer funds) during a 13-month period (the
"Letter of Intent period"). At the investor's request, this may include
purchases made up to 90 days prior to the date of the Letter. The Letter states
the investor's intention to make the aggregate amount of purchases of shares
which, when added to the investor's holdings of shares of those funds, will
equal or exceed the amount specified in the Letter. Purchases made by
reinvestment of dividends or distributions of capital gains and purchases made
at net asset value without sales charge do not count toward satisfying the
amount of the Letter.
A Letter enables an investor to count the Class A and Class B shares
purchased under the Letter to obtain the reduced sales charge rate on purchases
of Class A shares of the Fund (and other 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 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. However, 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. That amount is described in "Terms of
Escrow," below (those terms may be amended by the Distributor 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 a Letter of Intent. If those terms are amended, as they may be from time to
time by the Fund, the investor agrees to be bound by the amended terms and that
those amendments will apply automatically to existing Letters of Intent.
If the total eligible purchases made during the Letter of Intent period do
not equal or exceed the intended purchase amount, the commissions previously
paid to the dealer of record for the account and the amount of sales charge
retained by the Distributor will be adjusted to the rates applicable to actual
total purchases. If total eligible purchases during the Letter of Intent period
exceed the intended purchase amount and exceed the amount needed to qualify for
the next sales charge rate reduction set forth in the Prospectus, the sales
charges paid will be adjusted to the lower rate. That adjustment will be made
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.
The Transfer Agent will not hold shares in escrow for purchases of shares
of the Fund and other Oppenheimer funds by OppenheimerFunds prototype 401(k)
plans under a Letter of Intent. If the intended purchase amount under a Letter
of Intent 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.
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.
|X| 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 offering price
adjusted for a $50,000 purchase). Any dividends and capital gains distributions
on the escrowed shares will be credited to the investor's account.
2. If the total minimum investment specified under the Letter is completed
within the thirteen-month Letter of Intent period, the escrowed shares will be
promptly released to the investor.
3. If, at the end of the thirteen-month Letter of Intent period the total
purchases pursuant to the Letter are less than the intended purchase amount
specified in the Letter, the investor must remit to the Distributor an amount
equal to the difference between the dollar amount of sales charges actually paid
and the amount of sales charges which would have been paid if the total amount
purchased had been made at a single time. That sales charge adjustment will
apply to any shares redeemed prior to the completion of the Letter. If the
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 or Class B shares acquired by exchange of either (1) Class
A shares of one of the other Oppenheimer funds that were acquired
subject to a Class A initial or contingent deferred sales charge or
(2) 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 to buy shares directly
from a bank account, you must enclose a check (minimum $25) for the initial
purchase with your application. Shares purchased by Asset Builder Plan payments
from bank accounts are subject to the redemption restrictions for recent
purchases described in the Prospectus. Asset Builder Plans also enable
shareholders of Oppenheimer Cash Reserves to use their fund account to make
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 be automatically debited, normally four to five
business days prior to the investment dates selected in the Application. Neither
the Distributor, the Transfer Agent nor the Fund shall be responsible for any
delays in purchasing shares resulting from delays in ACH transmissions.
Before initiating Asset Builder payments, obtain a prospectus of the
selected fund(s) from the Distributor or your financial advisor and request an
application from the Distributor, complete it and return it. 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. The Transfer Agent
requires a reasonable period (approximately 15 days) after receipt of such
instructions to implement them. The Fund reserves the right to amend, suspend,
or discontinue offering Asset Builder plans at any time without prior notice.
Retirement Plans. Certain types of retirement plans are entitled to purchase
shares of the Fund without sales charge or at reduced sales charge rates, as
described in Appendix C to this Statement of Additional Information. Certain
special sales charge arrangements described in that Appendix apply to retirement
plans whose records are maintained on a daily valuation basis by Merrill Lynch
Pierce Fenner & Smith, Inc. or an independent record keeper that has a contract
or special arrangement with Merrill Lynch. If on the date the plan sponsor
signed the Merrill Lynch record keeping service agreement the plan has less than
$3 million in assets (other than assets invested in money market funds) invested
in applicable investments, then the retirement plan may purchase only Class B
shares of the Oppenheimer funds. Any retirement plans in that category that
currently invest in Class B shares of the Fund will have their Class B shares
converted to Class A shares of the Fund when the plan's applicable investments
reach $5 million.
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.
Classes of Shares. Each class of shares of the Fund represents an interest in
the same portfolio of investments of the Fund. However, each class has different
shareholder privileges and features. The net income attributable to a class of
shares and the dividends payable on a class of shares will be reduced by
incremental expenses borne solely by that class. Those expenses include the
asset-based sales charges to which Class A, Class B and Class C are subject.
The availability of different classes of shares permits an investor to
choose the method of purchasing shares that is more appropriate for the
investor. That may depend on the amount of the purchase, the length of time the
investor expects to hold shares, and other relevant circumstances. Class A
shares are normally sold subject to an initial sales charge. While Class B and
Class C shares have no initial sales charge, the purpose of the deferred sales
charge and asset-based sales charge on Class B and Class C shares is the same as
that of the initial sales charge on Class A shares - to compensate the
Distributor and brokers, dealers and financial institutions that sell shares of
the Fund. A salesperson who is entitled to receive compensation from his or her
firm for selling Fund shares may receive different levels of compensation for
selling one class of shares rather than another.
The Distributor will not accept any order in the amount of $500,000 or
more for Class B shares or $1 million or more for Class C shares on behalf of a
single investor (not including dealer "street name" or omnibus accounts). That
is because generally it will be more advantageous for that investor to purchase
Class A shares of the Fund.
|X| Class B Conversion Under current interpretations of applicable federal
income tax law by the Internal Revenue Service, the conversion of Class B shares
to Class A shares after six years is not treated as a taxable event for the
shareholder. If those laws or the IRS interpretation of those laws should
change, the automatic conversion feature may be suspended. In that event, no
further conversions of Class B shares would occur while that suspension remained
in effect.
|X| Allocation of Expenses. The Fund pays expenses related to its daily
operations, such as custodian fees, Directors' fees, transfer agency fees, legal
fees and auditing costs. Those expenses are paid out of the Fund's assets and
are not paid directly by shareholders. However, those expenses reduce the net
asset value of shares, and therefore are indirectly borne by shareholders
through their investment.
The methodology for calculating the net asset value, dividends and
distributions of the Fund's share classes recognizes two types of expenses.
General expenses that do not pertain specifically to any one class are allocated
pro rata to the shares of all classes. The allocation is based on the percentage
of the Fund's total assets that is represented by the assets of each class, and
then equally to each outstanding share within a given class. Such general
expenses include management fees, legal, bookkeeping and audit fees, printing
and mailing costs of shareholder reports, Prospectuses, Statements of Additional
Information and other materials for current shareholders, fees to unaffiliated
Directors, custodian expenses, share issuance costs, organization and start-up
costs, interest, taxes and brokerage commissions, and non-recurring expenses,
such as litigation costs.
Other expenses that are directly attributable to a particular class are
allocated equally to each outstanding share within that class. Examples of such
expenses include distribution and service plan (12b-1) fees, transfer and
shareholder servicing agent fees and expenses, and shareholder meeting expenses
(to the extent that such expenses pertain only to a specific class).
Determination of Net Asset Values Per Share. The net asset values per share of
each class of shares of the Fund are determined as of the close of business of
The New York Stock Exchange on each day that the Exchange is open. The
calculation is done 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
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 U.S. holiday). The Exchange's most recent annual announcement (which is
subject to change) states that it will close on New Year's Day, Presidents' Day,
Martin Luther King, Jr. Day, Good Friday, Memorial Day, Independence Day, Labor
Day, Thanksgiving Day and Christmas Day. It may also close on other days.
Dealers other than Exchange members may conduct trading in certain
securities on days on which the Exchange is closed (including weekends and U.S.
holidays) or after 4:00 P.M. on a regular business day. The Fund's net asset
values will not be calculated on those days, and the values of some of the
Fund's portfolio securities may change significantly on those days when
shareholders may not purchase or redeem shares. Additionally, trading on
European and Asian stock exchanges and over-the-counter markets normally is
completed before the close of The New York Stock Exchange.
Changes in the values of securities traded on foreign exchanges or markets
as a result of events that occur after the prices of those securities are
determined, but before the close of The New York Stock Exchange, will not be
reflected in the Fund's calculation of its net asset values that day unless the
Board of Directors determines that the event is likely to effect a material
change in the value of the security. The Manager may make that determination,
under procedures established by the Board.
|X| Securities Valuation. The Fund's Board of Directors has
established procedures for the valuation of the Fund's securities. In general
those procedures are as follows:
|_| Equity securities traded on a U.S. securities exchange or on
NASDAQ are valued as follows:
(1) if last sale information is regularly reported, they are valued at the
last reported sale price on the principal exchange on which
they are traded or on NASDAQ, as applicable, on that day, or
(2) if last sale information is not available on a valuation date,
they are valued 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, at the
closing "bid" price on the valuation date.
|_| Equity securities traded on a foreign securities exchange generally
are valued in one of the following ways: (1) at the last sale price available to
the pricing service approved by the
Board of Directors, or
(2) at the last sale price obtained by the Manager from the report of
the principal exchange on which the security is traded at its
last trading session on or immediately before the valuation date,
or
(3) at the mean between the "bid" and "asked" prices obtained from
the principal exchange on which the security is traded or, on the
basis of reasonable inquiry, from two market makers in the
security.
|_| Long-term debt securities having a remaining maturity in excess of 60
days are valued based on the mean between the "bid" and "asked" prices
determined by a portfolio pricing service approved by the Fund's Board of
Directors or obtained by the Manager from two active market makers in the
security on the basis of reasonable inquiry.
|_| The following securities are valued at the mean between the "bid" and
"asked" prices determined by a pricing service approved by the Fund's Board of
Directors or obtained by the Manager from two active market makers in the
security on the basis of reasonable inquiry:
(1) debt instruments that have a maturity of more than 397 days when
issued,
(2) debt instruments that had a maturity of 397 days or less when issued
and have a remaining maturity of more than 60 days, and
(3) non-money market debt instruments that had a maturity of 397 days or
less when issued and which have a remaining maturity of 60 days or
less.
|_| The following securities are valued at cost, adjusted for amortization
of premiums and accretion of discounts: (1) money market debt securities held by
a non-money market fund that had a
maturity of less than 397 days when issued that have a remaining
maturity of 60 days or less, and
(2) debt instruments held by a money market fund that have a remaining
maturity of 397 days or less.
|_| 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, a 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).
In the case of U.S. Government securities, mortgage-backed securities,
corporate bonds and foreign government securities, when last sale information is
not generally available, the Manager may use pricing services approved by the
Board of Directors. The pricing service may use "matrix" comparisons to the
prices for comparable instruments on the basis of quality, yield, and maturity.
Other special factors may be involved (such as the tax-exempt status of the
interest paid by municipal securities). The Manager will monitor the accuracy of
the pricing services. That monitoring may include comparing prices used for
portfolio valuation to actual sales prices of selected securities.
The closing prices in the London foreign exchange market on a particular
business day that are provided to the Manager by a bank, dealer or pricing
service that the Manager has determined to be reliable are used to value foreign
currency, including forward contracts, and to convert to U.S. dollars securities
that are denominated in foreign currency.
Puts, calls, and futures are valued at the last sale price on the
principal exchange 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, they shall be valued at 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. If not, the 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 by the mean between "bid" and
"asked" prices obtained by the Manager from two active market makers. In certain
cases that may be at the "bid" price if no "asked" price is available.
When the Fund writes an option, an amount equal to the premium received is
included in the Fund's Statement of Assets and Liabilities as an asset. An
equivalent credit is included in the liability section. The 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.
How to Sell Shares
Information on how to sell shares of the Fund is stated in the Prospectus.
The information below provides additional information about the procedures and
conditions for redeeming shares.
Reinvestment Privilege. Within six months of a redemption, a shareholder may
reinvest all or part of the redemption proceeds of:
|_| Class A shares purchased subject to an initial sales charge or Class A
shares on which a contingent deferred sales charge was paid, or |_|
Class B shares that were subject to the Class B contingent deferred
sales charge when redeemed.
The reinvestment may be made without sales charge only in Class A shares
of the Fund or any of the other Oppenheimer funds into which shares of the Fund
are exchangeable as described in "How to Exchange Shares" below. Reinvestment
will be at the net asset value next computed after the Transfer Agent receives
the reinvestment order. The shareholder must ask the Transfer Agent for that
privilege at the time of reinvestment. This privilege does not apply to Class C
shares. 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.
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.
Payments "In Kind". The Prospectus states that payment for shares tendered for
redemption is ordinarily made in cash. However, the Board of Directors of the
Fund may determine that it would be detrimental to the best interests of the
remaining shareholders of the Fund to make payment of a redemption order wholly
or partly in cash. In that case, the Fund may pay the redemption proceeds in
whole or in part by a distribution "in kind" of liquid securities from the
portfolio of the Fund, in lieu of cash.
The Fund has elected to be governed by Rule 18f-1 under the Investment
Company Act. Under that rule, the Fund is obligated to redeem shares solely in
cash up to the lesser of $250,000 or 1% of the net assets of the Fund during any
90-day period for any one shareholder. If shares are redeemed in kind, the
redeeming shareholder might incur brokerage or other costs in selling the
securities for cash. The Fund will value securities used to pay redemptions in
kind using the same method the Fund uses to value its portfolio securities
described above under "Determination of Net Asset Values Per Share." That
valuation will be made as of the time the redemption price is determined.
Involuntary Redemptions. The Fund's Board of Directors has the right to cause
the involuntary redemption of the shares held in any 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 will not cause the involuntary redemption of shares in
an account if the aggregate net asset value of such shares has fallen below the
stated minimum solely as a result of market fluctuations. If the Board exercises
this right, it may also fix the requirements for any notice to be given to the
shareholders in question (not less than 30 days). The Board may alternatively
set requirements for the shareholder to increase the investment, or set other
terms and conditions so that the shares would not be involuntarily redeemed.
Transfers of Shares. A transfer of shares to a different registration is not an
event that triggers the payment of sales charges. Therefore, 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. It does not matter
whether the transfer occurs by absolute assignment, gift or bequest, as long as
it does not involve, directly or indirectly, a public sale of the shares. When
shares subject to a contingent deferred sales charge are transferred, the
transferred shares will remain subject to the contingent deferred sales charge.
It will be 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.
Selling Shares by Wire. The wire of redemptions proceeds may be delayed if the
Fund's custodian bank is not open for business on a day when the Fund would
normally authorize the wire to be made, which is usually the Fund's next regular
business day following the redemption. In those circumstances, the wire will not
be transmitted until the next bank business day on which the Fund is open for
business. No dividends will be paid on the proceeds of redeemed shares awaiting
transfer by wire.
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 this Statement
of Additional Information. The request must: (1) state the reason for the
distribution; (2) state the owner's awareness of tax penalties if the
distribution is
premature; and
(3) conform to the requirements of the plan and the Fund's other redemption
requirements.
Participants (other than self-employed persons) in
OppenheimerFunds-sponsored pension or profit-sharing plans with shares of the
Fund held in the name of the plan or its fiduciary may not directly request
redemption of their accounts. The plan administrator or fiduciary must sign the
request.
Distributions from pension and profit sharing plans are subject to special
requirements under the Internal Revenue Code and certain documents (available
from the Transfer Agent) must be completed and submitted to the Transfer Agent
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, 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. Shareholders should contact their
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
an order placed by the dealer or broker. However, if the Distributor receives a
repurchase order from a 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 customers prior
to the time the Exchange closes. Normally, the Exchange closes at 4:00 P.M., but
may do so earlier on some days. Additionally, the order must have been
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. The signature(s) of the registered owners on the redemption
documents must be guaranteed as described in the Prospectus.
Automatic Withdrawal and Exchange Plans. Investors owning shares of the Fund
valued at $5,000 or more can authorize the Transfer Agent to redeem shares
(having a value of at least $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. Payments must also be sent to the address of record for
the account and the address must not have 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 Account
Application or by signature-guaranteed instructions sent to the Transfer Agent.
Shares are normally redeemed pursuant to an Automatic Withdrawal Plan three
business days before the payment transmittal 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. The
Fund reserves the right to amend, suspend or discontinue offering these 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 charge on such withdrawals (except where the
contingent deferred sales charge is waived as described in Appendix C to this
Statement of Additional Information).
By requesting an Automatic Withdrawal or Exchange Plan, the shareholder
agrees to the terms and conditions that apply to such plans, as stated below.
These provisions may be amended from time to time by the Fund and/or the
Distributor. When adopted, any amendments will automatically apply to existing
Plans.
|X| Automatic Exchange Plans. Shareholders can authorize the Transfer
Agent 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.
Instructions should be provided on the OppenheimerFunds Application or
signature-guaranteed instructions. 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.
|X| Automatic Withdrawal Plans. Fund shares will be redeemed as necessary
to meet withdrawal payments. Shares acquired without a sales charge will be
redeemed first. 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
these plans should not be considered as a yield or income on your investment.
The Transfer Agent will administer the investor's Automatic Withdrawal
Plan as agent for the shareholder(s) (the "Planholder") who executed the Plan
authorization and application submitted to the Transfer Agent. Neither the Fund
nor the Transfer Agent shall incur any liability to the Planholder for any
action taken or not taken by the Transfer Agent in good faith to administer the
Plan. Share 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.
Shares will be redeemed to make withdrawal payments at the net asset value
per share determined on the redemption date. Checks or AccountLink payments
representing the proceeds of Plan withdrawals will normally be transmitted three
business days prior to the date selected for receipt of the payment, according
to the choice specified in writing by the Planholder. Receipt of payment on the
date selected cannot be guaranteed.
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 after 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 to redeem all, or any part of, the
shares held under the Plan. That notice must be in proper form in accordance
with the requirements of the then-current Prospectus of the Fund. In that case,
the Transfer Agent will redeem the number of shares requested at the net asset
value per share in effect and will mail a check for the proceeds to the
Planholder.
The Planholder may terminate a Plan at any time by writing to the Transfer
Agent. The Fund may also give directions to the Transfer Agent to terminate a
Plan. The Transfer Agent will also terminate a Plan upon its receipt of evidence
satisfactory to it that the Planholder has died or is legally incapacitated.
Upon termination of a Plan by the Transfer Agent or the Fund, shares that have
not been redeemed will be held in uncertificated form in the name of the
Planholder. The account will continue as a dividend-reinvestment, uncertificated
account unless and until proper instructions are received from the Planholder,
his or her executor or guardian, or another 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. 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 Oppenheimer funds that have
a single class without a class designation are deemed "Class A" shares for this
purpose. You can obtain a current list showing which funds offer which classes
by calling the Distributor at 1-800-525-7048.
o All of the Oppenheimer funds currently offer Class A, B and C shares except
Oppenheimer Money Market Fund, Inc., Centennial Money Market Trust,
Centennial Tax Exempt Trust, Centennial Government Trust, Centennial New York
Tax Exempt Trust, Centennial California Tax Exempt Trust, and Centennial
America Fund, L.P., which only offer Class A shares. Oppenheimer Main Street
California Municipal Fund currently offers only Class A and Class B shares.
o 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.
o Only certain Oppenheimer Funds currently offer Class Y shares. Class Y shares
of Oppenheimer Real Asset Fund may not be exchanged for shares of any other
Fund.
o Class M Shares of Oppenheimer Convertible Securities Fund may be exchanged
only for Class A shares of other Oppenheimer funds. They may not be acquired
by exchange of share of any class of any other Oppenheimer funds except Class
A shares of Oppenheimer Money Market Fund or Oppenheimer Cash Reserves
acquired by exchange of Class M shares.
o Class A shares of Senior Floating Rate Fund are not available by exchange of
Class A shares of other Oppenheimer funds. Class A shares of Senior Floating
Rate Fund that are exchanged for shares of the other Oppenheimer funds may
not be exchanged for Class A shares of Senior Floating Rate Fund.
o Class X shares of Limited Term New York Municipal Fund can be exchanged only
for Class B shares of other Oppenheimer funds and no exchanges may be made to
Class X shares.
o Shares of Oppenheimer Capital Preservation Fund may not be exchanged for
shares of Oppenheimer Money Market Fund, Inc., Oppenheimer Cash Reserves or
Oppenheimer Limited-Term Government Fund. Only participants in certain
retirement plans may purchase shares of Oppenheimer Capital Preservation
Fund, and only those participants may wxchange shares of other Oppenheimer
funds for shares of Oppenheimer Capital Preservation Fund.
Class A shares of Oppenheimer funds may be exchanged at net asset value
for shares of any money market fund offered by the Distributor. 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. They may also be used to purchase shares of Oppenheimer funds subject to
any early withdrawal charge or contingent deferred sales charge.
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 30 days prior to that
purchase may subsequently be exchanged for shares of other Oppenheimer funds
without being subject to an initial sales charge or contingent deferred sales
charge. To qualify for that privilege at the time the shares of Oppenheimer
Money Market Fund, Inc. are purchased. If requested, they must supply proof of
entitlement to this privilege.
Shares of the Fund acquired by reinvestment of dividends or distributions
from any of the other Oppenheimer funds 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.
|X| How Exchanges Affect Contingent Deferred Sales Charges. 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 18
months of the end of the calendar month of the initial purchase of the exchanged
Class A shares, the Class A contingent deferred sales charge is imposed on the
redeemed shares. The Class B contingent deferred sales charge is imposed on
Class B shares acquired by exchange if they are redeemed within 6 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 or the Class C contingent deferred sales charge will be followed
in determining the order in which the shares are exchanged. Before exchanging
shares, shareholders should take into account how the exchange may affect 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 which class of shares they wish to exchange.
|_| Limits on Multiple Exchange Orders. 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.
|_| Telephone Exchange Requests. When exchanging shares by telephone, a
shareholder must have an existing account in the fund to which the exchange is
to be made. Otherwise, the investors must obtain a Prospectus of that fund
before the exchange request may be submitted. When you exchange some or all of
your shares from one fund to another, any special account features such as an
Asset Builder Plan or Automatic Withdrawal Plan will be switched to the new fund
account unless you tell the Transfer Agent not to do so. However, special
redemption and exchange features such as Automatic Exchange Plans and Automatic
Withdrawal Plans cannot be switched to an account in Oppenheimer Senior Floating
Rate Fund. 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.
|_| Processing 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 Fund may refuse the
request. For full or partial exchanges of an account made by telephone, any
special account features such as Asset Builder Plans and Automatic Withdrawal
Plans will be switched to the new account unless the Transfer Agent is
instructed otherwise.
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.
The different Oppenheimer funds available for exchange have different
investment objectives, policies and risks. 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.
Dividends, Capital Gains and Taxes
Dividends and Distributions. The Fund has no fixed dividend rate and there can
be no assurance as to the payment of any dividends or the realization of any
capital gains. The dividends and distributions paid by a class of shares will
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.
Dividends are calculated in the same manner, at the same time, and on the same
day for each class of shares. However, dividends on Class B and Class C shares
are expected to be lower than dividends on Class A shares. That is because of
the effect of the higher asset-based sales charge on Class B and Class C shares.
Those dividends will also differ in amount as a consequence of any difference in
the net asset values of each class of shares.
Dividends, distributions and 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.
Reinvestment will be made 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. Unclaimed accounts may be subject to state escheatment
laws, and the Fund and the Transfer Agent will not be liable to shareholders or
their representatives for compliance with those laws in good faith.
Tax Status of the Fund's Dividends and Distributions. The federal tax treatment
of the Fund's dividends and capital gains distributions is briefly highlighted
in the Prospectus.
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. The amount of dividends paid by the Fund that may qualify for the
deduction is limited to the aggregate amount of qualifying dividends that the
Fund derives from 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. If it
does not, the Fund must pay an excise tax on the amounts not distributed. It is
presently anticipated that the Fund will meet those requirements. However, the
Board of Directors and the Manager might determine in a particular year that it
would be in the best interests 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.
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 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). If the Fund qualifies as a "regulated investment company" under the
Internal Revenue Code, it will not be liable for federal income taxes on amounts
paid by it as dividends and distributions. The Fund qualified as a regulated
investment company in its last fiscal year. The Internal Revenue Code contains a
number of complex tests relating to qualification which the Fund might not meet
in any particular year. If it did not so qualify, the Fund would be treated for
tax purposes as an ordinary corporation and receive no tax deduction for
payments made to shareholders.
If prior distributions made by the Fund must be re-characterized as a
non-taxable return of capital at the end of the fiscal year as a result of the
effect of the Fund's investment policies, they will be identified as such in
notices sent to shareholders.
Dividend Reinvestment in Another Fund. Shareholders of the Fund may elect to
reinvest all dividends and/or capital gains distributions in shares of the same
class of any of the other Oppenheimer funds listed above. Reinvestment will be
made without sales charge at the net asset value per share in effect at the
close of business on the payable date of the dividend or distribution. To elect
this option, the shareholder must notify the Transfer Agent in writing and must
have an existing account in the fund selected for reinvestment. Otherwise the
shareholder first must obtain a prospectus for that fund and an application from
the Distributor to establish an account. Dividends and/or distributions from
shares of certain other Oppenheimer funds (other than Oppenheimer Cash Reserves)
may be invested in shares of this Fund on the same basis.
Additional Information About the Fund
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 shares of the other Oppenheimer
funds and is sub-distributor for funds managed by a subsidiary of the Manager.
The Transfer Agent. OppenheimerFunds Services, the Fund's Transfer Agent, is a
division of the Manager. It is responsible for maintaining the Fund's
shareholder registry and shareholder accounting records, and for paying
dividends and distributions to shareholders. It also handles shareholder
servicing and administrative functions. The Fund pays the Transfer Agent a fixed
annual maintenance fee for each shareholder account and reimburses the Transfer
Agent for its out-of-pocket expenses. It also acts as shareholder servicing
agent for the other Oppenheimer funds. Shareholders should direct inquiries
about their accounts to the Transfer Agent at the address and toll-free numbers
shown on the back cover.
The Custodian. Citibank, N.A. is the custodian of the Fund's assets. The
custodian's responsibilities include safeguarding and controlling the Fund's
portfolio securities and handling the delivery of such securities to and from
the Fund. It will be the practice of the Fund to deal with the custodian in a
manner uninfluenced by any banking relationship the custodian may have with the
Manager and its affiliates. The Fund's cash balances with the custodian in
excess of $100,000 are not protected by Federal deposit insurance. Those
uninsured balances at times may be substantial.
Independent Accountants. PricewaterhouseCoopers LLP are the independent
accountants of the Fund. They audit the Fund's financial statements and perform
other related audit services. They also act as accountants for certain other
funds advised by the Manager and its affiliates. Commencing March 2000, KPMG LLP
will serve as the Fund's independent accountants.
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
- --------------------------------------------------------------------------------
================================================================================
TO 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 statement 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. (the Fund) at October 31, 1999, and the results of its operations for
the year then ended, the changes in its net assets for each of the two years in
the period then ended and the financial highlights for each of the 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, 1999, by correspondence with the custodian, provide a reasonable basis for
the opinion expressed above.
/s/ PriceWaternouseCoopers LLP
PRICEWATERHOUSECOOPERS LLP
Denver, Colorado
November 19, 1999
<PAGE>
FINANCIALS
- --------------------------------------------------------------------------------
11 OPPENHEIMER QUEST CAPITAL VALUE FUND, INC.
<PAGE>
STATEMENT OF INVESTMENTS October 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MARKET VALUE
SHARES SEE NOTE 1
================================================================================
<S> <C> <C>
COMMON STOCKS--94.1%
- --------------------------------------------------------------------------------
BASIC MATERIALS--2.0%
- --------------------------------------------------------------------------------
CHEMICALS--2.0%
Du Pont (E.I.) De Nemours & Co. 76,000 $ 4,897,250
- --------------------------------------------------------------------------------
CAPITAL GOODS--1.4%
- --------------------------------------------------------------------------------
ELECTRICAL EQUIPMENT--1.4%
Jabil Circuit, Inc.(1) 65,000 3,396,250
- --------------------------------------------------------------------------------
COMMUNICATION SERVICES--17.5%
- --------------------------------------------------------------------------------
TELECOMMUNICATIONS: LONG DISTANCE--17.5%
MCI WorldCom, Inc.(1) 500,000 42,906,250
- --------------------------------------------------------------------------------
CONSUMER CYCLICALS--17.0%
- --------------------------------------------------------------------------------
CONSUMER SERVICES--11.1%
H&R Block, Inc. 475,000 20,217,187
- --------------------------------------------------------------------------------
Young & Rubicam, Inc. 154,000 7,045,500
-------------
27,262,687
- --------------------------------------------------------------------------------
MEDIA--5.9%
WPP Group plc, Sponsored ADR 132,000 14,503,500
- --------------------------------------------------------------------------------
CONSUMER STAPLES--20.7%
- --------------------------------------------------------------------------------
BROADCASTING--12.7%
AMFM, Inc.(1) 263,000 18,410,000
- --------------------------------------------------------------------------------
AT&T--Liberty Media Group, Series A(1) 197,000 7,818,437
- --------------------------------------------------------------------------------
Emmis Communications Corp., Cl. A(1) 67,000 4,832,375
-------------
31,060,812
- --------------------------------------------------------------------------------
ENTERTAINMENT--6.3%
McDonald's Corp. 140,000 5,775,000
- --------------------------------------------------------------------------------
Tricon Global Restaurants, Inc.(1) 239,000 9,604,812
-------------
15,379,812
- --------------------------------------------------------------------------------
FOOD & DRUG RETAILERS--1.7%
Kroger Co.(1) 200,000 4,162,500
- --------------------------------------------------------------------------------
FINANCIAL--20.9%
- --------------------------------------------------------------------------------
DIVERSIFIED FINANCIAL--10.0%
Countrywide Credit Industries, Inc. 391,300 13,279,744
- --------------------------------------------------------------------------------
Household International, Inc. 255,000 11,379,375
-------------
24,659,119
- --------------------------------------------------------------------------------
INSURANCE--10.9%
ACE Ltd. 375,000 7,289,063
- --------------------------------------------------------------------------------
XL Capital Ltd., Cl. A 363,870 19,535,271
- --------------------------------------------------------------------------------
26,824,334
</TABLE>
12 OPPENHEIMER QUEST CAPITAL VALUE FUND, INC.
<PAGE>
<TABLE>
<CAPTION>
MARKET VALUE
SHARES SEE NOTE 1
- --------------------------------------------------------------------------------
<S> <C> <C>
HEALTHCARE--3.1%
- --------------------------------------------------------------------------------
HEALTHCARE/SUPPLIES & SERVICES--3.1%
Cardinal Health, Inc. 174,039 $ 7,505,432
- --------------------------------------------------------------------------------
TECHNOLOGY--6.6%
- --------------------------------------------------------------------------------
COMPUTER SOFTWARE--4.4%
Computer Associates International, Inc. 193,000 10,904,500
- --------------------------------------------------------------------------------
ELECTRONICS--2.2%
Flextronics International Ltd.(1) 76,000 5,396,000
- --------------------------------------------------------------------------------
TRANSPORTATION--4.9%
- --------------------------------------------------------------------------------
RAILROADS & TRUCKERS--4.9%
Canadian Pacific Ltd. 509,000 11,993,313
-------------
Total Common Stocks (Cost $157,499,664) 230,851,759
<CAPTION>
FACE
AMOUNT
================================================================================
<S> <C> <C>
SHORT-TERM NOTES--4.0%(2)
Federal Home Loan Bank, 5.16%, 11/1/99
(Cost $9,687,000) $9,687,000 9,687,000
- --------------------------------------------------------------------------------
TOTAL INVESTMENTS, AT VALUE
(COST $167,186,664) 98.1% 240,538,759
- --------------------------------------------------------------------------------
OTHER ASSETS NET OF LIABILITIES 1.9 4,721,585
- --------------------------------------------------------------------------------
NET ASSETS 100.0% $245,260,344
==========================
</TABLE>
FOOTNOTES TO STATEMENT OF INVESTMENTS
1. Non-income-producing security.
2. 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.
13 OPPENHEIMER QUEST CAPITAL VALUE FUND, INC.
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES October 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
================================================================================
<S> <C>
ASSETS
Investments, at value (cost $167,186,664)
--see accompanying statement $ 240,538,759
- --------------------------------------------------------------------------------
Cash 1,811
- --------------------------------------------------------------------------------
Receivables and other assets:
Investments sold 6,584,175
Shares of capital stock sold 128,370
Interest and dividends 61,153
Other 18,554
--------------
Total assets 247,332,822
================================================================================
LIABILITIES
Payables and other liabilities:
Shares of capital stock redeemed 1,822,763
Shareholder reports 78,671
Distribution and service plan fees 49,930
Transfer and shareholder servicing agent fees 33,153
Directors' compensation 27,503
Other 60,458
--------------
Total liabilities 2,072,478
================================================================================
NET ASSETS $245,260,344
==============
================================================================================
COMPOSITION OF NET ASSETS
Par value of shares of capital stock $ 730
- --------------------------------------------------------------------------------
Additional paid-in capital 131,168,440
- --------------------------------------------------------------------------------
Overdistributed net investment income (27,348)
- --------------------------------------------------------------------------------
Accumulated net realized gain on investments and
foreign currency transactions 40,766,427
- --------------------------------------------------------------------------------
Net unrealized appreciation on investments 73,352,095
--------------
Net assets $245,260,344
==============
================================================================================
NET ASSET VALUE PER SHARE
Class A Shares:
Net asset value and redemption price per share
(based on net assets of $224,994,660 and 6,684,899
shares of capital stock outstanding) $33.66
Maximum offering price per share (net asset value
plus sales charge of 5.75% of offering price) $35.71
- --------------------------------------------------------------------------------
Class B Shares:
Net asset value, redemption price (excludes
applicable contingent deferred sales charge)
and offering price per share (based on net
assets of $15,633,921 and 472,713 shares of
capital stock outstanding) $33.07
- --------------------------------------------------------------------------------
Class C Shares:
Net asset value, redemption price (excludes
applicable contingent deferred sales charge)
and offering price per share (based on net
assets of $4,631,763 and 139,956 shares of
capital stock outstanding) $33.09
</TABLE>
See accompanying Notes to Financial Statements.
14 OPPENHEIMER QUEST CAPITAL VALUE FUND, INC.
<PAGE>
STATEMENT OF OPERATIONS For the Year Ended October 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
================================================================================
<S> <C>
INVESTMENT INCOME
Dividends (net of foreign withholding taxes of $52,027) $2,245,551
- --------------------------------------------------------------------------------
Interest 1,606,923
--------------
Total income 3,852,474
================================================================================
EXPENSES
Management fees 2,747,591
- --------------------------------------------------------------------------------
Distribution and service plan fees:
Class A 1,282,754
Class B 140,949
Class C 41,121
- --------------------------------------------------------------------------------
Transfer and shareholder servicing agent fees 297,795
- --------------------------------------------------------------------------------
Directors' compensation 36,655
- --------------------------------------------------------------------------------
Custodian fees and expenses 13,928
- --------------------------------------------------------------------------------
Other 231,188
--------------
Total expenses 4,791,981
Less expenses paid indirectly (5,018)
Less reimbursement of expenses by OppenheimerFunds, Inc. (341,587)
--------------
Net expenses 4,445,376
================================================================================
NET INVESTMENT LOSS (592,902)
================================================================================
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) on:
Investments 40,777,820
Foreign currency transactions (95)
--------------
Net realized gain 40,777,725
- --------------------------------------------------------------------------------
Net change in unrealized appreciation or depreciation on
investments (17,928,558)
--------------
Net realized and unrealized gain 22,849,167
================================================================================
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $22,256,265
==============
</TABLE>
See accompanying Notes to Financial Statements.
15 OPPENHEIMER QUEST CAPITAL VALUE FUND, INC.
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31, 1999 1998
===================================================================================================================
<S> <C> <C>
OPERATIONS
Net investment income (loss) $ (592,902) $ 327,290
- -------------------------------------------------------------------------------------------------------------------
Net realized gain 40,777,725 8,958,278
- -------------------------------------------------------------------------------------------------------------------
Net change in unrealized appreciation or depreciation (17,928,558) 27,834,805
------------------------------------
Net increase in net assets resulting from operations 22,256,265 37,120,373
===================================================================================================================
DIVIDENDS AND/OR DISTRIBUTIONS TO SHAREHOLDERS
Dividends from net investment income:
Class A (307,305) (1,033,878)
Class B -- (2,195)
Class C -- (816)
- -------------------------------------------------------------------------------------------------------------------
Dividends in excess of net investment income:
Class A (9,331) --
- -------------------------------------------------------------------------------------------------------------------
Distributions from net realized gain:
Class A (8,501,109) (111,344,042)
Class B (348,968) (438,272)
Class C (104,618) (247,999)
===================================================================================================================
CAPITAL STOCK TRANSACTIONS
Net increase (decrease) in net assets resulting from
capital stock transactions:
Class A (50,247,046) (5,120,973)
Class B 5,772,397 8,589,646
Class C 1,547,304 2,372,167
===================================================================================================================
NET ASSETS
Total decrease (29,942,411) (70,105,989)
- -------------------------------------------------------------------------------------------------------------------
Beginning of period 275,202,755 345,308,744
------------------------------------
End of period [including undistributed (overdistributed) net investment
income of $(27,348) and $307,305, respectively] $245,260,344 $275,202,755
====================================
</TABLE>
See accompanying Notes to Financial Statements.
16 OPPENHEIMER QUEST CAPITAL VALUE FUND, INC.
<PAGE>
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR YEAR
ENDED ENDED
OCT. 31, DEC. 31,
CLASS A 1999 1998 1997(1) 1996 1995 1994
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING DATA
Net asset value, beginning of period $32.11 $41.63 $37.25 $33.65 $25.79 $27.09
- -----------------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income (loss) (.06) .05 .44 -- -- --
Net realized and unrealized gain (loss) 2.70 4.28 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 2.64 4.33 4.38 3.60 7.89 (.91)
- -----------------------------------------------------------------------------------------------------------------------------------
Dividends and distributions to shareholders:
Dividends from net investment income (.04) (.13) -- -- -- --
Dividends in excess of net investment income --(2) -- -- -- -- --
Distributions from net realized gain (1.05) (13.72) -- -- -- --
Distributions from net realized short-term gain -- -- -- -- (.03) (.39)
--------------------------------------------------------------------------------
Total dividends and distributions to shareholders (1.09) (13.85) -- -- (.03) (.39)
- -----------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $33.66 $32.11 $41.63 $37.25 $33.65 $25.79
================================================================================
Market value, end of period N/A N/A N/A $36.13 $31.88 $23.00
================================================================================
===================================================================================================================================
TOTAL RETURN, AT NET ASSET VALUE(3) 8.47% 13.28% 11.76% 20.46%(4) 36.68%(4) (1.29)%(4)
===================================================================================================================================
TOTAL RETURN, AT MARKET VALUE(5) N/A N/A N/A 23.63% 45.58% 0.89%
===================================================================================================================================
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in thousands) $224,995 $262,669 $343,329 $879,934 $815,179 $673,742
- -----------------------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $256,450 $280,821 $434,401 $883,395 N/A N/A
- -----------------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets:(6)
Net investment income (loss) (0.17)% 0.13% 1.28%(7) 2.82% 3.20% 3.47%
Expenses, before voluntary assumption
or reimbursement 1.71% 1.67%(8) 1.54%(7,8) 0.72%(8) 0.73%(8) 0.74%
Expenses, after voluntary assumption
or reimbursement 1.58% 1.29% 1.11%(7) N/A N/A N/A
- -----------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate(9) 79% 30% 34% 74% 72% 45%
</TABLE>
1. 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.
2. Less than $0.005 per share.
3. Assumes a $1,000 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.
See accompanying Notes to Financial Statements.
17 OPPENHEIMER QUEST CAPITAL VALUE FUND, INC.
<PAGE>
FINANCIAL HIGHLIGHTS Continued
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS B YEAR ENDED OCTOBER 31, 1999 1998 1997(10)
=====================================================================================================================
<S> <C> <C> <C>
PER SHARE OPERATING DATA
Net asset value, beginning of period $31.71 $41.41 $37.04
- ---------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income (loss) (.19) (.06) .01
Net realized and unrealized gain (loss) 2.60 4.15 4.36
Provision/reduction for corporate income taxes
on net realized long-term capital gain -- -- --
--------------------------------------
Total income (loss) from investment operations 2.41 4.09 4.37
- ---------------------------------------------------------------------------------------------------------------------
Dividends and distributions to shareholders:
Dividends from net investment income -- (.07) --
Dividends in excess of net investment income --(2) -- --
Distributions from net realized gain (1.05) (13.72) --
Distributions from net realized short-term gain -- -- --
--------------------------------------
Total dividends and distributions to shareholders (1.05) (13.79) --
- ---------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $33.07 $31.71 $41.41
======================================
Market value, end of period N/A N/A N/A
======================================
=====================================================================================================================
TOTAL RETURN, AT NET ASSET VALUE(3) 7.83% 12.54% 11.80%
=====================================================================================================================
TOTAL RETURN, AT MARKET VALUE(5) N/A N/A N/A
=====================================================================================================================
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in thousands) $15,634 $9,562 $1,208
- ---------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $14,112 $4,586 $ 552
- ---------------------------------------------------------------------------------------------------------------------
Ratios to average net assets:(6)
Net investment income (loss) (0.80)% (0.57)% 0.07%
Expenses, before voluntary assumption
or reimbursement 2.27% 2.24%(8) 2.14%(8)
Expenses, after voluntary assumption
or reimbursement 2.19% 2.01% 1.86%
- ---------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate(9) 79% 30% 34%
</TABLE>
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 and 1994 would have been 18.25%, 34.20% and (3.11)%, respectively.
5. 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).
6. Annualized for periods of less than one full year.
7. 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.
See accompanying Notes to Financial Statements.
18 OPPENHEIMER QUEST CAPITAL VALUE FUND, INC.
<PAGE>
<TABLE>
<CAPTION>
CLASS C YEAR ENDED OCTOBER 31, 1999 1998 1997(10)
=====================================================================================================================
<S> <C> <C> <C>
PER SHARE OPERATING DATA
Net asset value, beginning of period $31.73 $41.42 $37.04
- ---------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income (loss) (.17) (.13) .01
Net realized and unrealized gain (loss) 2.58 4.21 4.37
Provision/reduction for corporate income taxes
on net realized long-term capital gain -- -- --
--------------------------------------
Total income (loss) from investment operations 2.41 4.08 4.38
- ---------------------------------------------------------------------------------------------------------------------
Dividends and distributions to shareholders:
Dividends from net investment income -- (.05) --
Dividends in excess of net investment income --(2) -- --
Distributions from net realized gain (1.05) (13.72) --
Distributions from net realized short-term gain -- -- --
--------------------------------------
Total dividends and distributions to shareholders (1.05) (13.77) --
- ---------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $33.09 $31.73 $41.42
======================================
Market value, end of period N/A N/A N/A
======================================
=====================================================================================================================
TOTAL RETURN, AT NET ASSET VALUE(3) 7.82% 12.49% 11.82%
=====================================================================================================================
TOTAL RETURN, AT MARKET VALUE(5) N/A N/A N/A
=====================================================================================================================
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in thousands) $4,632 $2,972 $773
- ---------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $4,117 $1,582 $372
- ---------------------------------------------------------------------------------------------------------------------
Ratios to average net assets:(6)
Net investment income (loss) (0.80)% (0.58)% 0.06%
Expenses, before voluntary assumption
or reimbursement 2.26% 2.23%(8) 2.13%(8)
Expenses, after voluntary assumption
or reimbursement 2.18% 2.01% 1.85%
- ---------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate(9) 79% 30% 34%
</TABLE>
8. Expense ratio reflects the effect of expenses paid indirectly by the Fund.
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, 1999, were $198,537,189 and $210,338,096, respectively.
10. For the period from March 3, 1997 (inception of offering of shares) to
October 31, 1997.
See accompanying Notes to Financial Statements.
19 OPPENHEIMER QUEST CAPITAL VALUE FUND, INC.
<PAGE>
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
================================================================================
1. SIGNIFICANT ACCOUNTING POLICIES
Oppenheimer Quest Capital Value Fund, Inc. (the Fund) is registered under the
Investment Company Act of 1940, as amended, as a diversified open-end management
investment company. The Fund's investment objective is to seek capital
appreciation. The Fund's investment advisor is OppenheimerFunds, Inc. (the
Manager). The Manager has entered into a sub-advisory agreement with OpCap
Advisors. The Fund offers Class A, Class B and Class C shares. Class A shares
are sold with a front-end sales charge on investments up to $1 million. Class B
and Class C shares may be subject to a contingent deferred sales charge (CDSC).
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.
- --------------------------------------------------------------------------------
SECURITIES 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. Foreign currency exchange contracts are valued based on the
closing prices of the foreign currency contract rates in the London foreign
exchange markets on a daily basis as provided by a reliable bank or dealer.
Options are valued based upon the last sale price on the principal exchange on
which the option is traded or, in the absence of any transactions that day, the
value is based upon the last sale price on the prior trading date if it is
within the spread between the closing bid and asked prices. If the last sale
price is outside the spread, the closing bid is used.
- --------------------------------------------------------------------------------
ALLOCATION OF INCOME, EXPENSES, GAINS AND LOSSES. Income, expenses (other than
those attributable to a specific class), 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.
20 OPPENHEIMER QUEST CAPITAL VALUE FUND, INC.
<PAGE>
- --------------------------------------------------------------------------------
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.
- --------------------------------------------------------------------------------
DIRECTORS' COMPENSATION. The Fund has adopted a nonfunded retirement plan for
the Fund's independent Directors. Benefits are based on years of service and
fees paid to each director during the years of service. During the year ended
October 31, 1999, a provision of $21,533 was made for the Fund's projected
benefit obligations, resulting in an accumulated liability of $27,350 as of
October 31, 1999.
The Board of Directors has adopted a deferred compensation plan for
independent Directors that enables Directors to elect to defer receipt of all or
a portion of annual compensation they are entitled to receive from the Fund.
Under the plan, the compensation deferred is periodically adjusted as though an
equivalent amount had been invested for the Directors 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 affect the net assets
of the Fund, and will not materially affect the Fund's assets, liabilities or
net income per share.
- --------------------------------------------------------------------------------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS. Dividends and distributions to
share-holders, which are determined in accordance with income tax regulations,
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 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 adjusts the classification of distributions to shareholders to
reflect the differences between financial statement amounts and distributions
determined in accordance with income tax regulations. Accordingly, during the
year ended October 31, 1999, amounts have been reclassified to reflect a
decrease in additional paid-in capital of $574,980, a decrease in
overdistributed net investment income of $574,885, and an increase in
accumulated net realized gain on investments of $95.
- --------------------------------------------------------------------------------
EXPENSE OFFSET ARRANGEMENTS. Expenses paid indirectly represent a reduction of
custodian fees for earnings on cash balances maintained by the Fund.
21 OPPENHEIMER QUEST CAPITAL VALUE FUND, INC.
<PAGE>
NOTES TO FINANCIAL STATEMENTS Continued
- --------------------------------------------------------------------------------
================================================================================
1. SIGNIFICANT ACCOUNTING POLICIES Continued
OTHER. Investment transactions are accounted for as of trade date and dividend
income is recorded on the ex-dividend date. Foreign dividend income is often
recorded on the payable date. 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 $.0001 par value capital stock.
Transactions in shares of capital stock were as follows:
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31, 1999 YEAR ENDED OCTOBER 31, 1998
SHARES AMOUNT SHARES AMOUNT
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
CLASS A
Sold 894,668 $ 30,627,545 945,259 $ 29,059,913
Dividends and/or
distributions reinvested 144,048 4,517,359 1,567,868 46,330,517
Redeemed (2,534,704) (85,391,950) (2,579,261) (80,511,403)
-------------------------------------------------------------------------
Net decrease (1,495,988) $(50,247,046) (66,134) $ (5,120,973)
=========================================================================
- --------------------------------------------------------------------------------------------------------------------
CLASS B
Sold 261,960 $ 8,822,662 356,498 $ 11,089,979
Dividends and/or
distributions reinvested 10,930 338,535 13,702 402,300
Redeemed (101,752) (3,388,800) (97,788) (2,902,633)
-------------------------------------------------------------------------
Net increase 171,138 $ 5,772,397 272,412 $ 8,589,646
=========================================================================
- --------------------------------------------------------------------------------------------------------------------
CLASS C
Sold 91,282 $ 3,067,730 85,612 $ 2,722,308
Dividends and/or
distributions reinvested 3,016 93,518 5,959 175,123
Redeemed (48,008) (1,613,944) (16,559) (525,264)
-------------------------------------------------------------------------
Net increase 46,290 $ 1,547,304 75,012 $ 2,372,167
=========================================================================
</TABLE>
================================================================================
3. UNREALIZED GAINS AND LOSSES ON SECURITIES
As of October 31, 1999, net unrealized appreciation on securities of $73,352,095
was composed of gross appreciation of $74,488,960, and gross depreciation of
$1,136,865.
22 OPPENHEIMER QUEST CAPITAL VALUE FUND, INC.
<PAGE>
================================================================================
4. MANAGEMENT FEES AND OTHER TRANSACTIONS WITH AFFILIATES
MANAGEMENT FEES. 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 annual net assets of the Fund, 0.90% of the
next $400 million and 0.85% of average annual net assets in excess of $800
million. Pursuant to the Agreement, until February 28, 1999, the Manager waived
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. For the
year ended October 31, 1999, the waiver amounted to $208,335. The Fund's
management fee for the year ended October 31, 1999 was 1.00% of the average
annual net assets for each class of shares, before the voluntary waiver of the
Manager.
- --------------------------------------------------------------------------------
SUB-ADVISOR FEES. The Manager pays OpCap Advisors (the Sub-Advisor) based on the
fee schedule set forth in the Prospectus. For the year ended October 31, 1999,
the Manager paid $1,015,666 to the Sub-Advisor.
- --------------------------------------------------------------------------------
TRANSFER AGENT FEES. OppenheimerFunds Services (OFS), a division of the Manager,
is the transfer and shareholder servicing agent for the Fund and other
Oppenheimer funds. The Fund pays OFS an annual maintenance fee of $18.00 for
each Fund shareholder account and reimburses OFS for its out-of-pocket expenses.
During the year ended October 31, 1999, the Fund paid OFS $286,570.
- --------------------------------------------------------------------------------
DISTRIBUTION AND SERVICE PLAN FEES. Under its General Distributor's Agreement
with the Manager, the Distributor acts as the Fund's principal underwriter in
the continuous public offering of the different classes of shares of the Fund.
The compensation paid to (or retained by) the Distributor from the sale of
shares or on the redemption of shares is shown in the table below for the period
indicated.
<TABLE>
<CAPTION>
AGGREGATE CLASS A COMMISSIONS COMMISSIONS COMMISSIONS
FRONT-END FRONT-END ON CLASS A ON CLASS B ON CLASS C
SALES CHARGES SALES CHARGES SHARES SHARES SHARES
ON CLASS A RETAINED BY ADVANCED BY ADVANCED BY ADVANCED BY
YEAR ENDED SHARES DISTRIBUTOR DISTRIBUTOR(1) DISTRIBUTOR(1) DISTRIBUTOR(1)
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
October 31, 1999 $275,544 $66,902 $72,675 $253,910 $22,634
</TABLE>
1. The Distributor advances commission payments to dealers for certain sales of
Class A shares and for sales of Class B and Class C shares from its own
resources at the time of sale.
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
CONTINGENT DEFERRED CONTINGENT DEFERRED CONTINGENT DEFERRED
SALES CHARGES SALES CHARGES SALES CHARGES
YEAR ENDED RETAINED BY DISTRIBUTOR RETAINED BY DISTRIBUTOR RETAINED BY DISTRIBUTOR
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
October 31, 1999 $2,081 $37,829 $4,146
</TABLE>
23 OPPENHEIMER QUEST CAPITAL VALUE FUND, INC.
<PAGE>
NOTES TO FINANCIAL STATEMENTS Continued
- -----------------------------------------------------------------------------
================================================================================
4. MANAGEMENT FEES AND OTHER TRANSACTIONS WITH AFFILIATES Continued
The Fund has adopted Distribution and Service Plans for Class A, Class B and
Class C shares under Rule 12b-1 of the Investment Company Act. Under those plans
the Fund pays the Distributor for all or a portion of its costs incurred in
connection with the distribution and/or servicing of the shares of the
particular class.
- --------------------------------------------------------------------------------
CLASS A DISTRIBUTION AND SERVICE PLAN FEES. Under the plan the Fund pays an
asset-based sales charge to the Distributor at an annual rate of 0.25% of
average annual net assets of Class A shares of the Fund. The Fund also pays a
service fee to the Distributor of 0.25% of the average annual net assets of
Class A shares. The Distributor currently uses the fees it receives from the
Fund to pay brokers, dealers and other financial institutions. The Distributor
makes payments to plan recipients quarterly at an annual rate not to exceed
0.25% of the average annual net assets consisting of Class A shares of the Fund.
The Distributor had voluntarily agreed to waive 0.15% of the distribution fee
payable under the plan until February 28, 1999. For the year ended October 31,
1999, the waiver amounted to $133,252. For the fiscal year ended October 31,
1999, payments under the Class A Plan totaled $1,149,502, all of which was paid
by the Distributor to recipients. That included $6,019 paid to an affiliate of
the Distributor's parent company. Any unreimbursed expenses the Distributor
incurs with respect to Class A shares in any fiscal year cannot be recovered in
subsequent years.
- --------------------------------------------------------------------------------
CLASS B AND CLASS C DISTRIBUTION AND SERVICE PLAN FEES. Under each plan, service
fees and distribution 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 Class B and Class C plans provide for the
Distributor to be compensated at a flat rate, whether the Distributor's
distribution expenses are more or less than the amounts paid by the Fund under
the plan during the period for which the fee is paid.
The Distributor retains the asset-based sales charge on Class B shares. The
Distributor retains the asset-based sales charge on Class C shares during the
first year the shares are outstanding. The asset-based sales charges on Class B
and Class C shares allow investors to buy shares without a front-end sales
charge while allowing the Distributor to compensate dealers that sell those
shares.
24 OPPENHEIMER QUEST CAPITAL VALUE FUND, INC.
<PAGE>
The Distributor's actual expenses in selling Class B and Class C shares may
be more than the payments it receives from the contingent deferred sales charges
collected on redeemed shares and from the Fund under the plans. If either the
Class B or the Class C plan is terminated by the Fund, the Board of Directors
may allow the Fund to continue payments of the asset-based sales charge to the
Distributor for distributing shares before the plan was terminated. The plans
allow for the carry-forward of distribution expenses to be recovered from
asset-based sales charges in subsequent fiscal periods.
Distribution fees paid to the Distributor for the year ended October 31, 1999,
were as follows:
<TABLE>
<CAPTION>
DISTRIBUTOR'S DISTRIBUTOR'S
AGGREGATE UNREIMBURSED
UNREIMBURSED EXPENSES AS %
TOTAL PAYMENTS AMOUNT RETAINED EXPENSES OF NET ASSETS
UNDER PLAN BY DISTRIBUTOR UNDER PLAN OF CLASS
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class B Plan $140,949 $127,676 $539,009 3.45%
Class C Plan 41,121 27,656 51,019 1.10
=================================================================================================================
</TABLE>
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 0.45%. 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 0.08%
per annum.
The Fund had no borrowings outstanding during the year ended October 31,
1999.
<PAGE>
Appendix A
- ------------------------------------------------------------------------------
RATINGS DEFINITIONS
- ------------------------------------------------------------------------------
Below are summaries of the rating definitions used by the nationally-recognized
rating agencies listed below for municipal securities. Those ratings represent
the opinion of the agency as to the credit quality of issues that they rate. The
summaries below are based upon publicly-available information provided by the
rating organizations.
Moody's Investors Service, Inc.
- ------------------------------------------------------------------------------
Long-Term Bond Ratings
Aaa: Bonds rated Aaa are judged to be the best quality. They 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 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 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 rated Baa are considered medium grade obligations; that is, 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 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 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 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 rated Ca represent obligations which are speculative in a high
degree and are often in default or have other marked shortcomings.
C: Bonds rated C are the lowest class of rated bonds and can be regarded as
having extremely poor prospects of ever attaining any real investment standing.
Con. (...): Bonds for which the security depends on the completion of some act
or the fulfillment of some condition are rated conditionally. These bonds are
secured by (a) earnings of projects under construction, (b) earnings of projects
unseasoned in operating experience, (c) rentals that begin when facilities are
completed, or (d) payments to which some other limitation attaches.
Parenthetical rating denotes probable credit stature upon completion of
construction or elimination of basis of condition. Moody's applies numerical
modifiers 1, 2, and 3 in each generic rating classification from Aa through Caa.
The modifier "1" indicates that the obligation ranks in the higher end of its
category; the modifier "2" indicates a mid-range ranking and the modifier "3"
indicates a ranking in the lower end of the category. Advanced refunded issues
that are secured by certain assets are identified with a # symbol.
Short-Term Ratings - U.S. Tax-Exempt Municipals
There are four ratings below for short-term obligations that are investment
grade. Short-term speculative obligations are designated SG. For variable rate
demand obligations, a two-component rating is assigned. The first (MIG) element
represents an evaluation by Moody's of the degree of risk associated with
scheduled principal and interest payments, and the other (VMIG) represents an
evaluation of the degree of risk associated with the demand feature.
MIG 1/VMIG 1: Denotes best quality. There is strong protection by established
cash flows, superior liquidity support or demonstrated broad-based access to the
market for refinancing..
MIG 2/VMIG 2: Denotes high quality. Margins of protection are ample although not
as large as in the preceding group.
MIG 3/VMIG 3: Denotes favorable quality. All security elements are accounted for
but there is lacking the undeniable strength of the preceding grades. Liquidity
and cash flow protection may be narrow and market access for refinancing is
likely to be less well established.
MIG 4/VMIG 4: Denotes adequate quality. Protection commonly regarded as required
of an investment security is present and although not distinctly or
predominantly speculative, there is specific risk.
SG: Denotes speculative quality. Debt instruments in this category lack
margins of protection.
Standard & Poor's Rating Services
- ------------------------------------------------------------------------------
Long-Term Credit Ratings
AAA: Bonds rated "AAA" have the highest rating assigned by Standard & Poor's.
The obligor's capacity to meet its financial commitment on the obligation is
extremely strong.
AA: Bonds rated "AA" differ from the highest rated obligations only in small
degree. The obligor's capacity to meet its financial commitment on the
obligation is very strong.
A: Bonds rated "A" are somewhat more susceptible to adverse effects of changes
in circumstances and economic conditions than obligations in higher-rated
categories. However, the obligor's capacity to meet its financial commitment on
the obligation is still strong.
BBB: Bonds rated BBB exhibit adequate protection parameters. However, adverse
economic conditions or changing circumstances are more likely to lead to a
weakened capacity of the obligor to meet its financial commitment on the
obligation.
Bonds rated BB, B, CCC, CC and C are regarded as having significant speculative
characteristics. BB indicates the least degree of speculation and C the highest.
While such obligations will likely have some quality and protective
characteristics, these may be outweighed by large uncertainties or major
exposures to adverse conditions.
BB: Bonds rated BB are less vulnerable to nonpayment than other speculative
issues. However, these face major uncertainties or exposure to adverse business,
financial, or economic conditions which could lead to the obligor's inadequate
capacity to meet its financial commitment on the obligation.
B: A bond rated B is more vulnerable to nonpayment than an obligation rated BB,
but the obligor currently has the capacity to meet its financial commitment on
the obligation.
CCC: A bond rated CCC is currently vulnerable to nonpayment, and is dependent
upon favorable business, financial, and economic conditions for the obligor to
meet its financial commitment on the obligation. In the event of adverse
business, financial or economic conditions, the obligor is not likely to have
the capacity to meet its financial commitment on the obligation.
CC: An obligation rated CC is currently highly vulnerable to nonpayment.
C: The C rating may used where a bankruptcy petition has been filed or similar
action has been taken, but payments on this obligation are being continued.
D: Bonds rated D are in default. Payments on the obligation are not being
made on the date due.
The ratings from AA to CCC may be modified by the addition of a plus (+) or
minus (-) sign to show relative standing within the major rating categories. The
"r" symbol is attached to the ratings of instruments with significant noncredit
risks.
Short-Term Issue Credit Ratings
A-1: Rated in the highest category. The obligor's capacity to meet its financial
commitment on the obligation is strong. Within this category, a plus (+) sign
designation indicates the issuer's capacity to meet its financial obligation is
very strong.
A-2: Obligation is somewhat more susceptible to the adverse effects of changes
in circumstances and economic conditions than obligations in higher rating
categories. However, the obligor's capacity to meet its financial commitment on
the obligation is satisfactory.
A-3: Exhibits adequate protection parameters. However, adverse economic
conditions or changing circumstances are more likely to lead to a weakened
capacity of the obligor to meet its financial commitment on the obligation.
B: Regarded as having significant speculative characteristics. The obligor
currently has the capacity to meet its financial commitment on the obligation.
However, it faces major ongoing uncertainties which could lead to the obligor's
inadequate capacity to meet its financial commitment on the obligation.
C: Currently vulnerable to nonpayment and is dependent upon favorable
business, financial, and economic conditions for the obligor to meet its
financial commitment on the obligation.
D: In payment default. Payments on the obligation have not been made on the
due date. The rating may also be used if a bankruptcy petition has been filed
or similar actions jeopardize payments on the obligation.
Fitch IBCA, Inc.
- ------------------------------------------------------------------------------
International Long-Term Credit Ratings
Investment Grade:
AAA: Highest Credit Quality. "AAA" ratings denote the lowest expectation of
credit risk. They are assigned only in the case of exceptionally strong
capacity for timely payment of financial commitments. This capacity is highly
unlikely to be adversely affected by foreseeable events.
AA: Very High Credit Quality. "AA" ratings denote a very low expectation of
credit risk. They indicate a very strong capacity for timely payment of
financial commitments. This capacity is not significantly vulnerable to
foreseeable events.
A: High Credit Quality. "A" ratings denote a low expectation of credit risk.
The capacity for timely payment of financial commitments is considered
strong. This capacity may, nevertheless, be more vulnerable to changes in
circumstances or in economic conditions than is the case for higher ratings.
BBB: Good Credit Quality. "BBB" ratings indicate that there is currently a
low expectation of credit risk. The capacity for timely payment of financial
commitments is considered adequate, but adverse changes in circumstances and
in economic conditions are more likely to impair this capacity. This is the
lowest investment-grade category.
Speculative Grade:
BB: Speculative. "BB" ratings indicate that there is a possibility of credit
risk developing, particularly as the result of adverse economic change over
time. However, business or financial alternatives may be available to allow
financial commitments to be met.
B: Highly Speculative. "B" ratings indicate that significant credit risk is
present, but a limited margin of safety remains. Financial commitments are
currently being met. However, capacity for continued payment is contingent
upon a sustained, favorable business and economic environment.
CCC, CC C: High Default Risk. Default is a real possibility. Capacity for
meeting financial commitments is solely reliant upon sustained, favorable
business or economic developments. A "CC" rating indicates that default of
some kind appears probable. "C" ratings signal imminent default.
DDD, DD, and D: Default. Securities are not meeting current obligations and
are extremely speculative. "DDD" designates the highest potential for
recovery of amounts outstanding on any securities involved.
Plus (+) and minus (-) signs may be appended to a rating symbol to denote
relative status within the rating category. Plus and minus signs are not added
to the "AAA" category or to categories below "CCC."
International Short-Term Credit Ratings
F1: Highest credit quality. Strongest capacity for timely payment. May have
an added "+" to denote exceptionally strong credit feature.
F2: Good credit quality. A satisfactory capacity for timely payment, but
the margin of safety is not as great as in higher ratings.
F3: Fair credit quality. Capacity for timely payment is adequate. However,
near-term adverse changes could result in a reduction to non-investment grade.
B: Speculative. Minimal capacity for timely payment, plus vulnerability to
near-term adverse changes in financial and economic conditions.
C: High default risk. Default is a real possibility, Capacity for
meeting financial commitments is solely reliant upon a sustained, favorable
business and economic environment.
D: Default. Denotes actual or imminent payment default.
Duff & Phelps Credit Rating Co. Ratings
Long-Term Debt and Preferred Stock
AAA: Highest credit quality. The risk factors are negligible, being only
slightly more than for risk-free U.S. Treasury debt.
AA+, AA, AA-: High credit quality. Protection factors are strong. Risk is
modest but may vary slightly from time to time because of economic conditions.
A+, A & A-: Protection factors are average but adequate. However, risk
factors are more variable in periods of greater economic stress.
BBB+, BBB & BBB-: Below average protection factors but still considered
sufficient for prudent investment. Considerable variability in risk during
economic cycles.
BB+, BB & BB-: Below investment grade but deemed likely to meet obligations when
due. Present or prospective financial protection factors fluctuate according to
industry conditions. Overall quality may move up or down frequently within the
category.
B+, B & B-: Below investment grade and possessing risk that obligations will not
be met when due. Financial protection factors will fluctuate widely according to
economic cycles, industry conditions and/or company fortunes. Potential exists
for frequent changes in the rating within this category or into a higher of
lower rating grade.
CCC: Well below investment-grade securities. Considerable uncertainty exists as
to timely payment of principal, interest or preferred dividends. Protection
factors are narrow and risk can be substantial with unfavorable
economic/industry conditions, and/or with unfavorable company developments.
DD: Defaulted debt obligations. Issuer failed to meet scheduled principal
and/or interest payments.
DP: Preferred stock with dividend arrearages.
Short-Term Debt:
High Grade:
D-1+: Highest certainty of timely payment. Safety is just below risk-free
U.S. Treasury short-term debt.
D-1: Very high certainty of timely payment. Risk factors are minor.
D-1-: High certainty of timely payment. Risk factors are very small.
Good Grade:
D-2: Good certainty of timely payment. Risk factors are small.
Satisfactory Grade:
D-3: Satisfactory liquidity and other protection factors qualify issues as to
investment grade. Risk factors are larger and subject to more variation.
Nevertheless, timely payment is expected.
Non-Investment Grade:
D-4: Speculative investment characteristics. Liquidity is not sufficient to
insure against disruption in debt service.
Default:
D-5: Issuer failed to meet scheduled principal and/or interest payments.
<PAGE>
Appendix B
Industry Classifications
Aerospace/Defense Food and Drug Retailers
Air Transportation Gas Utilities
Asset-Backed Health Care/Drugs
Auto Parts and Equipment Health Care/Supplies & Services
Automotive Homebuilders/Real Estate
Bank Holding Companies Hotel/Gaming
Banks Industrial Services
Beverages Information Technology
Broadcasting Insurance
Broker-Dealers Leasing & Factoring
Building Materials Leisure
Cable Television Manufacturing
Chemicals Metals/Mining
Commercial Finance Nondurable Household Goods
Communication Equipment Office Equipment
Computer Hardware Oil - Domestic
Computer Software Oil - International
Conglomerates Paper
Consumer Finance Photography
Consumer Services Publishing
Containers Railroads & Truckers
Convenience Stores Restaurants
Department Stores Savings & Loans
Diversified Financial Shipping
Diversified Media Special Purpose Financial
Drug Wholesalers Specialty Printing
Durable Household Goods Specialty Retailing
Education Steel
Electric Utilities Telecommunications - Long Distance
Electrical Equipment Telephone - Utility
Electronics Textile, Apparel & Home Furnishings
Energy Services Tobacco
Entertainment/Film Trucks and Parts
Environmental Wireless Services
Food
<PAGE>
Appendix C
OppenheimerFunds Special Sales Charge Arrangements and Waivers
In certain cases, the initial sales charge that applies to purchases of Class A
shares1 of the Oppenheimer funds or the contingent deferred sales charge that
may apply to Class A, Class B or Class C shares may be waived.2 That is because
of the economies of sales efforts realized by OppenheimerFunds Distributor,
Inc., (referred to in this document as the "Distributor"), or by dealers or
other financial institutions that offer those shares to certain classes of
investors.
Not all waivers apply to all funds. For example, waivers relating to Retirement
Plans do not apply to Oppenheimer municipal funds, because shares of those funds
are not available for purchase by or on behalf of retirement plans. Other
waivers apply only to shareholders of certain funds.
For the purposes of some of the waivers described below and in the Prospectus
and Statement of Additional Information of the applicable Oppenheimer funds, the
term "Retirement Plan" refers to the following types of plans: (1) plans
qualified under Sections 401(a) or 401(k) of the Internal Revenue
Code,
(2) non-qualified deferred compensation plans, (3) employee benefit plans3 (4)
Group Retirement Plans4 (5) 403(b)(7) custodial plan accounts (6) Individual
Retirement Accounts ("IRAs"), including traditional IRAs,
Roth IRAs, SEP-IRAs, SARSEPs or SIMPLE plans
The interpretation of these provisions as to the applicability of a special
arrangement or waiver in a particular case is in the sole discretion of the
Distributor or the transfer agent (referred to in this document as the "Transfer
Agent") of the particular Oppenheimer fund. These waivers and special
arrangements may be amended or terminated at any time by a particular fund, the
Distributor, and/or OppenheimerFunds, Inc. (referred to in this document as the
"Manager").
Waivers that apply at the time shares are redeemed must be requested by the
shareholder and/or dealer in the redemption request.
- --------------
1. Certain waivers also apply to Class M shares of Oppenheimer Convertible
Securities Fund.
2. In the case of Oppenheimer Senior Floating Rate Fund, a continuously-offered
closed-end fund, references to contingent deferred sales charges mean the
Fund's Early Withdrawal Charges and references to "redemptions" mean
"repurchases" of shares.
3. An "employee benefit plan" means any plan or arrangement, whether or not it
is "qualified" under the Internal Revenue Code, under which Class A shares of
an Oppenheimer fund or funds are purchased by a fiduciary or other
administrator for the account of participants who are employees of a single
employer or of affiliated employers. These may include, for example, medical
savings accounts, payroll deduction plans or similar plans. The fund accounts
must be registered in the name of the fiduciary or administrator purchasing
the shares for the benefit of participants in the plan.
4. The term "Group Retirement Plan" means any qualified or non-qualified
retirement plan for employees of a corporation or 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 has made special arrangements with the Distributor and all members of
the group participating in (or who are eligible to participate in) the plan
purchase Class A shares of an Oppenheimer fund or funds through a single
investment dealer, broker or other financial institution designated by the
group. Such plans include 457 plans, SEP-IRAs, SARSEPs, SIMPLE
5. plans and 403(b) plans other than plans for public school employees. The term
"Group Retirement Plan" also includes qualified retirement plans and
non-qualified deferred compensation plans and IRAs that purchase Class A
shares of an Oppenheimer fund or funds through a single investment dealer,
broker or other financial institution that has made special arrangements with
the Distributor enabling those plans to purchase Class A shares at net asset
value but subject to the Class A contingent deferred sales charge.
I. Applicability of Class A Contingent Deferred Sales Charges in Certain Cases
Purchases of Class A Shares of Oppenheimer Funds That Are Not Subject to Initial
Sales Charge but May Be Subject to the Class A Contingent Deferred Sales Charge
(unless a waiver applies).
There is no initial sales charge on purchases of Class A shares of any of
the Oppenheimer funds in the cases listed below. However, these purchases may be
subject to the Class A contingent deferred sales charge if redeemed within 18
months of the end of the calendar month of their purchase, as described in the
Prospectus (unless a waiver described elsewhere in this Appendix applies to the
redemption). Additionally, on shares purchased under these waivers that are
subject to the Class A contingent deferred sales charge, the Distributor will
pay the applicable commission described in the Prospectus under "Class A
Contingent Deferred Sales Charge."2 This waiver provision applies to:
|_| Purchases of Class A shares aggregating $1 million or more. |_| Purchases by
a Retirement Plan (other than an IRA or 403(b)(7)
custodial plan) that:
(1) buys shares costing $500,000 or more, or
(2) has, at the time of purchase, 100 or more eligible employees or total
plan assets of $500,000 or more, or
(3) certifies to the Distributor that it projects to have annual plan
purchases of $200,000 or more.
|_| Purchases by an OppenheimerFunds-sponsored 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 those
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.
|_| Purchases of Class A shares by Retirement Plans that have any of the
following record-keeping arrangements:
(1) The record keeping is performed by Merrill Lynch Pierce Fenner & Smith,
Inc. ("Merrill Lynch") on a daily valuation basis for the
Retirement Plan. On the date the plan sponsor signs the
record-keeping service agreement with Merrill Lynch, the Plan
must have $3 million or more of its assets invested in (a)
mutual funds, other than those advised or managed by Merrill
Lynch Asset Management, L.P. ("MLAM"), that are made available
under a Service Agreement between Merrill Lynch and the mutual
fund's principal underwriter or distributor, and (b) funds
advised or managed by MLAM (the funds described in (a) and (b)
are referred to as "Applicable Investments").
(2) The record keeping for the Retirement Plan is performed on a daily
valuation basis by a 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 record
keeping service agreement with Merrill Lynch, the Plan must
have $3 million or more of its assets (excluding assets
invested in money market funds) invested in Applicable
Investments.
(3) The record keeping for a Retirement Plan is handled under a
service agreement with Merrill Lynch and on the date the plan
sponsor signs that agreement, the Plan has 500 or more eligible
employees (as determined by the Merrill Lynch plan conversion
manager).
|_| Purchases by a Retirement Plan whose record keeper had a
cost-allocation agreement with the Transfer Agent on or before May 1,
1999.
<PAGE>
II. Waivers of Class A Sales Charges of Oppenheimer Funds
A. 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 (and no commissions are paid by the Distributor on such
purchases):
|_| The Manager or its affiliates.
|_| Present or former officers, directors, trustees and employees (and
their "immediate families") of the Fund, the Manager and its
affiliates, and retirement plans established by them for their
employees. The term "immediate family" refers to one's spouse,
children, grandchildren, grandparents, parents, parents-in-law,
brothers and sisters, sons- and daughters-in-law, a sibling's
spouse, a spouse's siblings, aunts, uncles, nieces and nephews;
relatives by virtue of a remarriage (step-children, step-parents,
etc.) are included.
|_| Registered management investment companies, or separate accounts of
insurance companies having an agreement with the Manager or the
Distributor for that purpose.
|_| 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.
|_| 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
which are identified as such 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).
|_| Dealers, brokers, banks or registered investment advisors 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, bank or advisor for the
purchase or sale of Fund shares.
|_| Investment advisors 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.
|_| "Rabbi trusts" that buy shares for their own accounts, if the purchases
are made through a broker or agent or other financial intermediary that
has made special arrangements with the Distributor for those purchases.
|_| Clients of investment advisors 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 advisor 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.
|_| Directors, trustees, officers or full-time employees of OpCap Advisors
or its affiliates, their relatives or any trust, pension, profit
sharing or other benefit plan which beneficially owns shares for those
persons.
|_| Accounts for which Oppenheimer Capital (or its successor) is the
investment advisor (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.
|_| A unit investment trust that has entered into an appropriate agreement
with the Distributor.
|_| Dealers, brokers, banks, or registered investment advisers that have
entered into an agreement with the Distributor to sell shares to
defined contribution employee retirement plans for which the dealer,
broker or investment adviser provides administration services.
|_| Retirement Plans and deferred compensation plans and trusts used to
fund those plans (including, for example, plans qualified or created
under sections 401(a), 401(k), 403(b) or 457 of the Internal Revenue
Code), in each case if those purchases are made through a broker, agent
or other financial intermediary that has made special arrangements with
the Distributor for those purchases.
|_| 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.
|_| A qualified Retirement Plan 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, if that
arrangement was consummated and share purchases commenced by December
31, 1996.
B. 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 sales charges (and no commissions are paid by the Distributor on such
purchases):
|_| Shares issued in plans of reorganization, such as mergers, asset
acquisitions and exchange offers, to which the Fund is a party.
|_| 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.
|_| Shares purchased through a broker-dealer that has entered into a
special agreement with the Distributor to allow the broker's
customers to purchase and pay for shares of Oppenheimer funds using
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 shares of
the Fund, and the Distributor may require evidence of qualification
for this waiver.
|_| Shares purchased with the proceeds of maturing principal units of any
Qualified Unit Investment Liquid Trust Series.
|_| Shares purchased by the reinvestment of loan repayments by a
participant in a Retirement Plan for which the Manager or an affiliate
acts as sponsor.
C. 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:
|_| To make Automatic Withdrawal Plan payments that are limited annually to
no more than 12% of the account value adjusted annually.
|_| Involuntary redemptions of shares by operation of law or involuntary
redemptions of small accounts (please refer to "Shareholder Account
Rules and Policies," in the applicable fund Prospectus).
|_| 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.3
(5) Under a Qualified Domestic Relations Order, as defined in the Internal
Revenue Code, or, in the case of an IRA, a divorce or separation
agreement described in Section 71(b) of the Internal Revenue Code.
(6) To meet the minimum distribution requirements of the Internal Revenue
Code.
(7) To make "substantially equal periodic payments" as described in
Section 72(t) of the Internal Revenue Code.
(8) For loans to participants or beneficiaries.
(9) Separation from service.4
(10) Participant-directed redemptions to purchase shares of a mutual
fund (other than a fund managed by the Manager or a subsidiary of
the Manager) if the plan has made special arrangements with the
Distributor.
(11) Plan termination or "in-service distributions," if the redemption
proceeds are rolled over directly to an OppenheimerFunds-sponsored
IRA.
|_| For distributions from Retirement Plans having 500 or more eligible
employees, except distributions due to termination of all of the
Oppenheimer funds as an investment option under the Plan.
|_| For distributions from 401(k) plans sponsored by broker-dealers that
have entered into a special agreement with the Distributor allowing
this waiver.
III. Waivers of Class B and Class C Sales Charges of Oppenheimer Funds
The Class B and Class C contingent deferred sales charges will not be applied
to shares purchased in certain types of transactions or redeemed in
certain circumstances described below.
A. 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: |_| Shares redeemed involuntarily,
as described in "Shareholder Account
Rules and Policies," in the applicable Prospectus.
|_| 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.
|_| Distributions from accounts for which the broker-dealer of record has
entered into a special agreement with the Distributor allowing this
waiver.
|_| Redemptions of Class B shares 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.
|_| Redemptions of Class C shares of Oppenheimer U.S. Government Trust from
accounts of clients of financial institutions that have entered into a
special arrangement with the Distributor for this purpose.
|_| Redemptions requested in writing by a Retirement Plan sponsor of Class
C shares of an Oppenheimer fund in amounts of $1 million or more held
by the Retirement Plan for more than one year, if the redemption
proceeds are invested in Class A shares of one or more Oppenheimer
funds.
|_| Distributions from Retirement 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 in an Oppenheimer fund.
(2) To return excess contributions made to a participant's account.
(3) To return contributions made due to a mistake of fact.
(4) To make hardship withdrawals, as defined in the plan.5
(5) To make distributions required under a Qualified Domestic Relations
Order or, in the case of an IRA, a divorce or separation agreement
described in Section 71(b) of the Internal Revenue Code.
(6) To meet the minimum distribution requirements of the Internal Revenue
Code.
(7) To make "substantially equal periodic payments" as described in
Section 72(t) of the Internal Revenue Code.
(8) For loans to participants or beneficiaries.6 (9) On account of the
participant's separation from service.7 (10) Participant-directed redemptions to
purchase shares of a mutual fund
(other than a fund managed by the Manager or a subsidiary of the
Manager) offered as an investment option in a Retirement Plan if
the plan has made special arrangements with the Distributor.
(11) Distributions made on account of a plan termination or
"in-service" distributions, if the redemption proceeds are rolled
over directly to an OppenheimerFunds-sponsored IRA.
(12) Distributions from Retirement Plans having 500 or more eligible
employees, but excluding distributions made because of the Plan's
elimination as investment options under the Plan of all of the
Oppenheimer funds that had been offered.
(13) For distributions from a participant's account under an Automatic
Withdrawal Plan after the participant reaches age 59 1/2, as long
as the aggregate value of the distributions does not exceed 10% of
the account's value, adjusted annually.
(14) Redemptions of Class B shares under an Automatic Withdrawal Plan
for an account other than a Retirement Plan, if the aggregate
value of the redeemed shares does not exceed 10% of the account's
value, adjusted annually.
|_|Redemptions of Class B shares or Class C shares under an Automatic
Withdrawal Plan from an account other than a Retirement Plan if the
aggregate value of the redeemed shares does not exceed 10% of the
account's value annually.
B. 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: |_| Shares sold to the Manager or
its affiliates.
|_| 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.
|_| Shares issued in plans of reorganization to which the Fund is a party. |_|
Shares sold to present or former officers, directors, trustees or
employees (and their "immediate families" as defined above in
Section I.A.) of the Fund, the Manager and its affiliates and
retirement plans established by them for their employees.
IV. Special Sales Charge Arrangements for Shareholders of Certain Oppenheimer
Funds Who Were Shareholders of Former
Quest for Value Funds
The initial and contingent deferred sales charge rates and waivers for Class A,
Class B and Class C shares described in the Prospectus or Statement of
Additional Information of the Oppenheimer funds are modified as described below
for certain persons who were shareholders of the former Quest for Value Funds.
To be eligible, those persons must have been shareholders on November 24, 1995,
when OppenheimerFunds, Inc. became the investment advisor to those former Quest
for Value Funds. Those funds include:
<PAGE>
Oppenheimer Quest Value Fund, Inc. Oppenheimer Quest Small Cap
Value Fund
Oppenheimer Quest Balanced Value Fund Oppenheimer Quest Global Value
Fund
Oppenheimer Quest Opportunity Value
Fund
These arrangements also apply to shareholders of the following funds when
they merged (were reorganized) into various Oppenheimer funds on November 24,
1995:
Quest for Value U.S. Government Quest for Value New York Tax-Exempt
Income Fund Fund
Quest for Value Investment Quality Quest for Value National Tax-Exempt
Income Fund Fund
Quest for Value Global Income Fund Quest for Value California Tax-Exempt
Fund
All of the funds listed above are referred to in this Appendix as the
"Former Quest for Value Funds." The waivers of initial and contingent deferred
sales charges described in this Appendix apply to shares of an Oppenheimer fund
that are either:
|_| acquired by such shareholder pursuant to an exchange of shares of an
Oppenheimer fund that was one of the Former Quest for Value Funds, or
|_| purchased by such shareholder by exchange of shares of another
Oppenheimer fund that were acquired pursuant to the merger of any of
the Former Quest for Value Funds into that other Oppenheimer fund on
November 24, 1995.
A. Reductions or Waivers of Class A Sales Charges.
|X| Reduced Class A Initial Sales Charge Rates for Certain
Former Quest for Value Funds Shareholders.
Purchases by Groups and Associations. The following table sets forth the initial
sales charge rates for Class A shares purchased by members of "Associations"
formed for any purpose other than the purchase of securities. The rates in the
table apply if 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.
- --------------------------------------------------------------------------------
Initial Sales Initial Sales
Number of Eligible Charge as a % of Charge as a % of Commission as %
Employees or Members Offering Price Net Amount Invested of Offering Price
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
9 or Fewer 2.50% 2.56% 2.00%
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
At least 10 but not 2.00% 2.04% 1.60%
more than 49
- --------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
For purchases by 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 in the applicable fund's Prospectus.
Purchases made under this arrangement qualify for the lower of either the
sales charge rate in the table based on the number of members of an Association,
or the sales charge rate that applies under the Right of Accumulation described
in the applicable fund's Prospectus and Statement of Additional Information.
Individuals who qualify under this arrangement for reduced sales charge rates as
members of Associations also may purchase shares for their individual or
custodial accounts at these reduced sales charge rates, upon request to the
Distributor.
|X| Waiver of Class A Sales Charges for Certain Shareholders. Class A
shares purchased by the following investors are not subject to any Class A
initial or contingent deferred sales charges:
|_| Shareholders 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.
|_| Shareholders who acquired shares of any Former Quest for Value Fund
by merger of any of the portfolios of the Unified Funds.
|X| 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 purchased by the following investors who were
shareholders of any Former Quest for Value Fund:
Investors who purchased Class A shares from a dealer that is 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.
B. Class A, Class B and Class C Contingent Deferred Sales Charge Waivers.
|X| 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 an Oppenheimer fund. The
shares must have been acquired by the merger of a Former Quest for Value Fund
into the fund or by exchange from an Oppenheimer fund that was a Former Quest
for Value Fund or into which such fund merged. Those shares must have been
purchased prior to March 6, 1995 in connection with:
|_| 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 value, adjusted annually,
and
|_| 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.
|X| 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 an Oppenheimer fund. The shares must have been acquired by the merger
of a Former Quest for Value Fund into the fund or by exchange from an
Oppenheimer fund that was a Former Quest For Value Fund or into which such
Former Quest for Value Fund merged. Those shares must have been purchased on or
after March 6, 1995, but prior to November 24, 1995: |_| redemptions following
the death or disability of the shareholder(s) (as
evidenced by a determination of total disability by the U.S.
Social Security Administration);
|_| 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 value; adjusted annually, and
|_| 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 Oppenheimer fund described in this section if the proceeds are
invested in the same Class of shares in that fund or another Oppenheimer fund
within 90 days after redemption.
V. Special Sales Charge Arrangements for Shareholders of Certain
Oppenheimer Funds Who Were Shareholders of Connecticut Mutual Investment
Accounts, Inc.
The initial and contingent deferred sale charge rates and waivers for Class A
and Class B shares described in the respective Prospectus (or this Appendix) of
the following Oppenheimer funds (each is referred to as a "Fund" in this
section):
o Oppenheimer U. S. Government Trust,
o Oppenheimer Bond Fund,
o Oppenheimer Disciplined Value Fund and
o Oppenheimer Disciplined Allocation Fund
are modified as described below for those Fund shareholders who were
shareholders of the following funds (referred to as the "Former Connecticut
Mutual Funds") on March 1, 1996, when OppenheimerFunds, Inc. became the
investment adviser to the Former Connecticut Mutual Funds:
Connecticut Mutual Liquid Account Connecticut Mutual Total Return
Account
Connecticut Mutual Government Securities CMIA LifeSpan Capital Appreciation
Account Account
Connecticut Mutual Income Account CMIA LifeSpan Balanced Account
Connecticut Mutual Growth Account CMIA Diversified Income Account
A. Prior Class A CDSC and Class A Sales Charge Waivers.
|_| Class A Contingent Deferred Sales Charge. Certain shareholders of a
Fund and the other Former Connecticut Mutual Funds are entitled to continue to
make additional purchases of Class A shares at net asset value without a Class A
initial sales charge, but subject to the Class A contingent deferred sales
charge that was in effect prior to March 18, 1996 (the "prior Class A CDSC").
Under the prior Class A CDSC, if any of those shares are redeemed within one
year of purchase, they will be assessed a 1% contingent deferred sales charge on
an amount equal to the current market value or the original purchase price of
the shares sold, whichever is smaller (in such redemptions, any shares not
subject to the prior Class A CDSC will be redeemed first).
Those shareholders who are eligible for the prior Class A CDSC are: (1)
persons whose purchases of Class A shares of a Fund and other Former
Connecticut Mutual Funds were $500,000 prior to March 18, 1996, as a
result of direct purchases or purchases pursuant to the Fund's
policies on Combined Purchases or Rights of Accumulation, who still
hold those shares in that Fund or other Former Connecticut Mutual
Funds, and
(2) persons whose intended purchases under a Statement of Intention
entered into prior to March 18, 1996, with the former general
distributor of the Former Connecticut Mutual Funds to purchase shares
valued at $500,000 or more over a 13-month period entitled those
persons to purchase shares at net asset value without being subject
to the Class A initial sales charge.
Any of the Class A shares of a Fund and the other Former Connecticut
Mutual Funds that were purchased at net asset value prior to March 18, 1996,
remain subject to the prior Class A CDSC, or if any additional shares are
purchased by those shareholders at net asset value pursuant to this arrangement
they will be subject to the prior Class A CDSC.
|_| Class A Sales Charge Waivers. Additional Class A shares of a Fund may
be purchased without a sales charge, by a person who was in one (or more) of the
categories below and acquired Class A shares prior to March 18, 1996, and still
holds Class A shares:
(1) any purchaser, provided the total initial amount invested in the Fund
or any one or more of the Former Connecticut Mutual Funds
totaled $500,000 or more, including investments made pursuant
to the Combined Purchases, Statement of Intention and Rights of
Accumulation features available at the time of the initial
purchase and such investment is still held in one or more of
the Former Connecticut Mutual Funds or a Fund into which such
Fund merged;
(2) any participant in a qualified plan, provided that the total
initial amount invested by the plan in the Fund or any one or more
of the Former Connecticut Mutual Funds totaled $500,000 or more;
(3) Directors of the Fund or any one or more of the Former Connecticut
Mutual Funds and members of their immediate families;
(4) employee benefit plans sponsored by Connecticut Mutual Financial
Services, L.L.C. ("CMFS"), the prior distributor of the Former
Connecticut Mutual Funds, and its affiliated companies;
(5) one or more members of a group of at least 1,000 persons (and
persons who are retirees from such group) engaged in a common
business, profession, civic or charitable endeavor or other
activity, and the spouses and minor dependent children of such
persons, pursuant to a marketing program between CMFS and such
group; and
(6) an institution acting as a fiduciary on behalf of an individual or
individuals, if such institution was directly compensated by the
individual(s) for recommending the purchase of the shares of the
Fund or any one or more of the Former Connecticut Mutual Funds,
provided the institution had an agreement with CMFS.
Purchases of Class A shares made pursuant to (1) and (2) above may be
subject to the Class A CDSC of the Former Connecticut Mutual Funds described
above.
Additionally, Class A shares of a Fund may be purchased without a sales
charge by any holder of a variable annuity contract issued in New York State by
Connecticut Mutual Life Insurance Company through the Panorama Separate Account
which is beyond the applicable surrender charge period and which was used to
fund a qualified plan, if that holder exchanges the variable annuity contract
proceeds to buy Class A shares of the Fund.
B. Class A and Class B Contingent Deferred Sales Charge Waivers.
In addition to the waivers set forth in the Prospectus and in this Appendix,
above, the contingent deferred sales charge will be waived for redemptions of
Class A and Class B shares of a Fund and exchanges of Class A or Class B shares
of a Fund into Class A or Class B shares of a Former Connecticut Mutual Fund
provided that the Class A or Class B shares of the Fund to be redeemed or
exchanged were (i) acquired prior to March 18, 1996 or (ii) were acquired by
exchange from an Oppenheimer fund that was a Former Connecticut Mutual Fund.
Additionally, the shares of such Former Connecticut Mutual Fund must have been
purchased prior to March 18, 1996:
(1) by the estate of a deceased shareholder;
(2) upon the disability of a shareholder, as defined in Section 72(m)(7) of
the Internal Revenue Code;
(3) for retirement distributions (or loans) to participants or
beneficiaries from retirement plans qualified under Sections 401(a)
or 403(b)(7)of the Code, or from IRAs, deferred compensation plans
created under Section 457 of the Code, or other employee benefit
plans;
(4) as tax-free returns of excess contributions to such retirement or
employee benefit plans;
(5) in whole or in part, in connection with shares sold to any state,
county, or city, or any instrumentality, department, authority, or
agency thereof, that is prohibited by applicable investment laws from
paying a sales charge or commission in connection with the purchase
of shares of any registered investment management company;
(6) in connection with the redemption of shares of the Fund due to a
combination with another investment company by virtue of a merger,
acquisition or similar reorganization transaction;
(7) in connection with the Fund's right to involuntarily redeem or
liquidate the Fund;
(8) in connection with automatic redemptions of Class A shares and Class
B shares in certain retirement plan accounts pursuant to an Automatic
Withdrawal Plan but limited to no more than 12% of the original value
annually; or
(9) as involuntary redemptions of shares by operation of law, or under
procedures set forth in the Fund's Articles of Incorporation, or as
adopted by the Board of Directors of the Fund.
VI. Special Reduced Sales Charge for Former Shareholders of
Advance America Funds, Inc.
Shareholders of Oppenheimer Municipal Bond Fund, Oppenheimer U.S. Government
Trust, Oppenheimer Strategic Income Fund and Oppenheimer Equity Income
Fund who acquired (and still hold) shares of those funds as a result of
the reorganization of series of Advance America Funds, Inc. into those
Oppenheimer funds on October 18, 1991, and who held shares of Advance
America Funds, Inc. on March 30, 1990, may purchase Class A shares of
those four Oppenheimer funds at a maximum sales charge rate of 4.50%.
VII. Sales Charge Waivers on Purchases of Class M Shares of
Oppenheimer Convertible Securities Fund
Oppenheimer Convertible Securities Fund (referred to as the "Fund" in this
section) may sell Class M shares at net asset value without any initial sales
charge to the classes of investors listed below who, prior to March 11, 1996,
owned shares of the Fund's then-existing Class A and were permitted to purchase
those shares at net asset value without sales charge: |_| the Manager and its
affiliates, |_| present or former officers, directors, trustees and employees
(and
their "immediate families" as defined in the Fund's Statement of
Additional Information) of the Fund, the Manager and its affiliates,
and retirement plans established by them or the prior investment
advisor of the Fund for their employees,
|_| registered management investment companies or separate accounts of
insurance companies that had an agreement with the Fund's prior
investment advisor or distributor for that purpose,
|_| 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,
|_| employees and registered representatives (and their spouses) of dealers
or brokers described in the preceding section or financial institutions
that have entered into sales arrangements with those dealers or brokers
(and whose identity is made known to the Distributor) or with the
Distributor, but only if the purchaser certifies to the Distributor at
the time of purchase that the purchaser meets these qualifications,
|_| dealers, brokers, or registered investment advisors that had entered
into an agreement with the Distributor or the prior distributor of the
Fund specifically providing for the use of Class M shares of the Fund
in specific investment products made available to their clients, and
|_| dealers, brokers or registered investment advisors that had entered
into an agreement with the Distributor or prior distributor of the
Fund's shares to sell shares to defined contribution employee
retirement plans for which the dealer, broker, or investment advisor
provides administrative services.
<PAGE>
- ------------------------------------------------------------------------------
Oppenheimer Quest Capital Value Fund, Inc.
- ------------------------------------------------------------------------------
Internet Web Site:
www.oppenheimerfunds.com
Investment Advisor
OppenheimerFunds, Inc.
Two World Trade Center
New York, New York 10048-0203
Sub-Advisor
OpCap Advisors
1345 Avenue of the Americas, 49th Floor
New York, New York 10105-4800
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 Bank
Citibank, N.A.
111 Wall Street
New York, New York 10005
Independent Accountants
PricewaterhouseCoopers LLP
950 Seventeenth Street
Denver, Colorado 80202
Legal Counsel
Mayer Brown & Platt
1675 Broadway
New York, New York 10019-5820
PX835.0200
- --------
1 No commission will be paid on sales of Class A shares purchased with the
redemption proceeds of shares of another 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 Oppenheimer funds are added as an
investment option under that plan.
2 However, that commission will not be paid on purchases of shares in amounts of
$1 million or more (including any right of accumulation) by a Retirement Plan
that pays for the purchase with the redemption proceeds of Class C shares of one
or more Oppenheimer funds held by the Plan for more than one year.
3 This provision does not apply to IRAs.
4 This provision does not apply to 403(b)(7) custodial plans if the
participant is less than age 55, nor to IRAs.
5 This provision does not apply to IRAs.
6 This provision does not apply to loans from 403(b)(7) custodial plans. 7 This
provision does not apply to 403(b)(7) custodial plans if the participant is less
than age 55, nor to IRAs.
<PAGE>
OPPENHEIMER QUEST CAPITAL VALUE FUND, INC.
FORM N-1A
PART C
OTHER INFORMATION
Item 23. Exhibits
(a) Articles of Amendment and Restatement of the Fund dated 3/3/97:
Previously filed with Registrant's Pret-Effective Amendment No. 2, 2/21/97,
and incorporated herein by reference.
(b) (i) By-Laws revised as of 2/28/97 of the Fund: Previously filed with
Registrant's Post-Effective Amendment No. 1, 11/25/97, and incorporated
herein by reference.
(ii) Amendment No. 1 to By-Laws of the Fund dated 2/4/97: Previously
filed with Registrant's Post-Effective Amendment No. 1, 11/25/97, and
incorporated herein by reference.
(iii) Amendment No. 2 to By-Laws of the Fund dated 7/22/98: Previously
filed with Registrant's Post-Effective Amendment No. 3, 12/22/98, and
incorporated herein by reference.
(c) (i) Specimen Class A Share Certificate: Previously filed with
Registrant's Registration Statement on Form N-1A, 11/27/96, and
incorporated herein by reference.
(ii) Specimen Class B Share Certificate: Previously filed with
Registrant's Registration Statement on Form N-1A, 11/27/96, and
incorporated herein by reference.
(iii) Specimen Class C Share Certificate: Previously filed with
Registrant's Registration Statement on Form N-1A, 11/27/96, and
incorporated herein by reference.
(d) (i) Investment Advisory Agreement dated 2/28/97: Previously filed with
Registrant's Post-Effective Amendment No. 1, 11/25/97, and incorporated
herein by reference.
(ii) Subadvisory Agreement dated 11/5/97: Previously filed with
Registrant's Post-Effective Amendment No. 1, 11/25/97, and incorporated
herein by reference.
(e) (i) General Distributor's Agreement dated 2/28/97: Previously
filed with Registrant's Post-Effective Amendment No. 1, 11/25/97, and
incorporated herein by reference.
(ii) Form of Dealer Agreement of OppenheimerFunds Distributor,
Inc.: Previously filed with Post-Effective Amendment No. 14 of Oppenheimer
Main Street Funds, Inc. (Reg. No. 33-17850), 9/30/94, and incorporated herein
by reference.
(iii) Form of OppenheimerFunds Distributor, Inc. Broker Agreement: Previously
filed with Post-Effective Amendment No. 14 of Oppenheimer Main Street
Funds, Inc. (Reg. No. 33-17850), 9/30/94, and incorporated herein by
reference.
(iv) Form of OppenheimerFunds Distributor, Inc. Agency Agreement: Previously
filed with Post-Effective Amendment No. 14 of Oppenheimer Main Street
Funds, Inc. (Reg. No. 33-17850), 9/30/94, and incorporated herein by
reference.
(v) Broker Agreement between OppenheimerFunds Distributor, Inc. and
Newbridge Securities dated 10/1/86: Previously 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.
(f) (i) Form of Deferred Compensation Plan for Disinterested
Trustees/Directors: Previously filed with Post-Effective Amendment No. 43 of
Oppenheimer Quest For Value Funds, 12/21/98, and incorporated herein by
reference.
(ii) Form of Individual Retirement Account Trust Agreement: Previously
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.
(iii)Form of prototype Standardized and Non-Standardized Profit-Sharing
Plan and Money Purchase Pension Plan for self-employed persons and corporations:
Previously 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.
(iv) Form of Tax-Sheltered Retirement Plan and Custody Agreement for
employees of public schools and tax-exempt organizations: Previously 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.
(v) Form of Simplified Employee Pension IRA: Previously 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.
(vi) Form of SAR-SEP Simplified Employee Pension IRA: Previously 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.
(vii) Form of Prototype 401(k) plan: Previously 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.
(viii) Retirement Plan for Non-Interested Trustees or Directors:
Previously filed with Post-Effective Amendment No. 43 of Oppenheimer Quest
For Value Funds, 12/21/98, and incorporated herein by reference.
(g) (i) Custody Agreement dated 1/1/89: Filed with Registrant's
Pre-Effective Amendment No. 2, 2/21/97, and incorporated herein by reference.
(ii) Foreign Custody Agreement between Registrant and Citibank, N.A.
dated 9/14/98: Previously filed with Post-Effective Amendment No. 43 of
Oppenheimer Quest For Value Funds, 12/21/98, and incorporated herein by
reference.
(iii) Global Custodian Services Agreement between Registrant and
Citibank, N.A. dated 9/14/98: Previously filed with Post-Effective Amendment
No. 22 of Oppenheimer Quest Global Value Fund, Inc., 1/28/99, and
incorporated herein by reference.
(h) Not applicable.
(i) (a) Opinion and Consent of Counsel dated 2/13/87: Previously filed as
Exhibit 10 to Registrant's Pre-Effective Amendment No. 1 and incorporated
herein by reference.
(b) Opinion and Consent of Counsel dated 2/21/97: Previously filed
with Registrant's Pre-Effective Amendment No. 2, 2/21/97, and incorporated
herein by reference.
(j) Independent Auditors Consent & Report: Filed herewith.
(k) Not applicable.
(l) (i) Investment Letter dated 12/4/86 from OppenheimerFunds, Inc. to
Registrant: Previously filed with Registrant's Post-Effective Amendment
No. 1, 11/25/97, and incorporated herein by reference.
(ii) Investment Letter dated 2/28/97 from Quest for Value Advisors,
Inc.: Previously filed as Exhibit 1 to Registrant's Post-Effective
Amendment No. 2, 2/21/97, and incorporated herein by reference.
(m) (i) Amended and Restated Distribution and Service Plan and
Agreement for Class A shares dated 2/3/98: Previously filed with Registrant's
Post-Effective Amendment No. 3, 12/22/98, and incorporated herein by
reference.
(ii) Amended and Restated Distribution and Service Plan and
Agreement for Class B shares dated 2/3/98: Previously filed with Registrant's
Post-Effective Amendment No. 3, 12/22/98, and incorporated herein by
reference.
(iii) Amended and Restated Distribution and Service Plan and
Agreement for Class C shares dated 2/3/98: Previously filed with Registrant's
Post-Effective Amendment No. 3, 12/22/98, and incorporated herein by
reference.
(n) Oppenheimer Funds Multiple Class Plan under Rule 18f-3 updated through
8/24/99: Previously filed with Pre-Effective Amendment No. 1 to the
Registration Statement of Oppenheimer Senior Floating Rate Fund (Reg. No.
333-82579), 8/27/99, and incorporated herein by reference.
- -- Powers of Attorney (including Certified Board resolutions): Previously
filed with Registrant's Post-Effective Amendment No. 1, 11/25/97, and
incorporated herein by reference.
- -- Power of Attorney (including Certified Board resolution) for Robert G.
Galli: Previously filed with Post-Effective Amendment No. 43 of Oppenheimer
Quest For Value Funds, 12/21/98, and incorporated herein by reference.
- -- Power of Attorney (including Certified Board resolution) for Brian W.
Wixted: Filed herewith.
Item 24. Persons Controlled by or Under Common Control with the Fund
- ---------------------------------------------------------------------
None.
Item 25. Indemnification
Reference is made to the provisions of Article Seven of Registrant's
Articles of Amendment and Restatement filed as Exhibit 23(a) to this
Registration Statement, and incorporated herein by reference.
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 director, 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 26. Business and Other Connections of the 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 investment
companies, including without limitation those described in Parts A and B hereof
and listed in Item 26(b) below.
(a)(1) The directors and executive officers of OpCap Advisors, their positions
and their other business affiliations and business experience for the past two
years are listed in Item 26(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 Other Business and Connections
with OppenheimerFunds, Inc. During the Past Two Years
Charles E. Albers,
Senior Vice President An officer and/or portfolio manager of
certain Oppenheimer funds (since April
1998); a Chartered Financial Analyst;
formerly, a Vice President and portfolio
manager for Guardian Investor Services,
the investment management subsidiary of
The Guardian Life Insurance Company
(since 1972).
Edward Amberger,
Assistant Vice President Formerly Assistant Vice President,
Securities Analyst for Morgan Stanley
Dean Witter (May 1997 - April 1998); and
Research Analyst (July 1996 - May 1997),
Portfolio Manager (February 1992 - July
1996) and Department Manager (June 1988
to February 1992) for The Bank of New
York.
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; 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; he was also
responsible for managing the common stock
department and common stock investments
of Connecticut Mutual Life Insurance Co.
Victor Babin,
Senior Vice President None.
Bruce Bartlett,
Senior 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.
George Batejan,
Executive Vice President,
Chief Information Officer Formerly Senior Vice
President, Group Executive, and Senior
Systems Officer for American International
Group (October 1994 - May 1998).
Richard Bayha,
Senior Vice President None.
John R. Blomfield,
Vice President Formerly Senior Product Manager
(November 1995 - August 1997) of
International Home Foods and American Home
Products (March 1994 - October 1996).
Connie Bechtolt,
Assistant Vice President None.
Kathleen Beichert,
Vice President 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 OppenheimerFunds,
Inc./Mutual Fund Accounting (April 1994 -
May 1996), and a Fund Controller for
OppenheimerFunds, Inc.
Mark Binning None.
Assistant Vice President
Chad Boll,
Assistant Vice President None
Scott Brooks,
Vice President None.
Kevin Brosmith,
Vice President None.
Jeffrey Burns
Vice President Stradley, Ronan Stevens and Young, LLP
(February 1998-September 1999)
Morgan Lewis and Bockius, LLP (April
1995- February 1998)
Adele Campbell,
Assistant Vice President & Assistant
Treasurer: Rochester Division Formerly, Assistant Vice President of
Rochester Fund Services, Inc.
Christopher Capot,
Assistant Vice President Assistant Vice President of Public
Relations at Webster Financial
Corporation (December 1995 - December 1998).
Michael Carbuto,
Vice President An officer and/or portfolio manager of
certain Oppenheimer funds; Vice President
of Centennial Asset Management
Corporation.
John Cardillo,
Assistant Vice President None.
Mark Curry,
Assistant Vice President None.
H.C. Digby Clements,
Vice President:
Rochester Division None.
O. Leonard Darling,
Executive Vice President
and Chief Investment
Officer Chief Investment Officer (since 6/99); Chief
Executive Officer and Senior Manager of
HarbourView Asset Management Corporation;
Trustee (1993 - present) of Awhtolia College
- Greece; formerly Chief Executive Officer
(1993-June 1999).
William DeJianne, None.
Assistant Vice President
Robert A. Densen,
Senior Vice President None.
Sheri Devereux,
Vice President None.
Craig P. Dinsell
Executive Vice President Formerly, Senior Vice President of Human
Resources for Fidelity Investments-Retail
Division (January 1995 - January 1996),
Fidelity Investments FMR Co. (January
1996 - June 1997) and Fidelity
Investments FTPG (June 1997 - January
1998).
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 Asset Management
Corporation Shareholder Services, Inc.,
Shareholder Financial Services, Inc. and
Oppenheimer Partnership Holdings, Inc.
since (September 1995); President and a
director of Centennial Asset Management
Corporation (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
Oppenheimer Acquisition Corp.; Vice
President and Director of
OppenheimerFunds International, Ltd. and
Oppenheimer Millennium Funds plc (since
October 1997); an officer of other
Oppenheimer funds.
Bruce Dunbar, None.
Vice President
Daniel Engstrom,
Assistant Vice President None.
George Evans,
Vice President An officer and/or portfolio
manager of certain Oppenheimer funds.
Edward Everett,
Vice President None.
George Fahey,
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 OppenheimerFunds,
Inc./Mutual Fund Accounting (April 1994 -
May 1996), and a Fund Controller for
OppenheimerFunds, Inc.
Leslie A. Falconio,
Vice President An officer and/or portfolio
manager of certain Oppenheimer funds (since
6/99).
Katherine P. Feld,
Vice President and Secretary Vice President and Secretary of the
Distributor; Secretary of HarbourView
Asset Management Corporation, and
Centennial Asset Management Corporation;
Secretary, Vice President and Director of
Centennial Capital Corporation; Vice
President and Secretary of Oppenheimer
Real Asset Management, Inc.
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. 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.
David Foxhoven,
Assistant Vice President Formerly Manager, Banking Operations
Department (July 1996 - November 1998).
Jennifer Foxson,
Vice President None.
Dan Gangemi,
Vice President None.
Erin Gardiner,
Assistant Vice President None.
Daniel Garrity,
Vice President None.
Charles Gilbert,
Assistant Vice President None.
Alan Gilston,
Vice President Formerly, Vice President (1987 - 1997)
for Schroder Capital Management
International.
Jill Glazerman,
Vice President None.
Robyn Goldstein-Liebler
Assistant Vice President None.
Mikhail Goldverg
Assistant Vice President None.
Jeremy Griffiths,
Executive Vice President,
Chief Financial Officer and
Director Chief Financial Officer and Treasurer
(since March 1998) of Oppenheimer
Acquisition Corp.; a Member and Fellow of
the Institute of Chartered Accountants;
formerly, an accountant for Arthur Young
(London, U.K.).
Robert Grill,
Senior Vice President Formerly, Marketing Vice
President for Bankers Trust Company (1993 -
1996); Steering Committee Member,
Subcommittee Chairman for American Savings
Education Council (1995 - 1996).
Robert Haley
Assistant Vice President Formerly, Vice President of
Information Services for Bankers Trust
Company (January 1991 - November 1997).
Thomas B. Hayes,
Vice President None.
Barbara Hennigar,
Chairman of OppenheimerFunds Formerly Executive Vice President and
Services, a Division of OFI Chief Executive Officer of
OppenheimerFunds Services,
a division of the Manager
.
Dorothy Hirshman, None.
Assistant Vice President
Merryl Hoffman,
Vice President and None.
Senior Counsel
Merrell Hora,
Assistant Vice President Research Fellow for the University of
Minnesota (July 1997- July 1998).
Scott T. Huebl,
Vice President None.
James Hyland,
Assistant Vice President Formerly Manager of Customer
Research for Prudential Investments
(February 1998 - July 1999).
Kathleen T. Ives,
Vice President None.
William Jaume,
Vice President None.
Frank Jennings,
Vice President An officer and/or portfolio
manager of certain Oppenheimer funds.
Andrew Jordan,
Assistant Vice President None.
Deborah Kaback
Vice President Senior Vice President and Deputy General
Counsel of Oppenheimer Capital (April
1989-November 1999).
Lewis Kamman
Vice President
Senior Consultant for Bell Atlantic
Network Integration, Inc. (June
1997-December 1998) and
Vice President for JP Morgan, Inc.
(August 1994-June 1997).
Thomas W. Keffer,
Senior Vice President None.
Erica Klein,
Assistant Vice President None.
Walter Konops,
Assistant Vice President None.
Avram Kornberg,
Vice President None.
Jimmy Kourkoulakos,
Assistant Vice President. None.
John Kowalik,
Senior Vice President An officer and/or portfolio
manager for certain OppenheimerFunds;
formerly, Managing Director and Senior
Portfolio Manager at Prudential Global
Advisors (1989 - 1998).
Joseph Krist,
Assistant Vice President None.
Michael Levine,
Vice President None.
Shanquan Li,
Vice President None.
Stephen F. Libera,
Vice President An officer and/or portfolio manager for
certain Oppenheimer funds; a Chartered
Financial Analyst; a Vice President of
HarbourView Asset Management Corporation;
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,
Vice President None.
Steve Macchia,
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 Asset Management
Corporation; and a director of
Shareholder Services, Inc. (since August
1994), and Shareholder Financial
Services, Inc. (September 1995);
President (since September 1995) and a
director (since October 1990) of
Oppenheimer Acquisition Corp.; President
(since September 1995) and a director
(since November 1989) of Oppenheimer
Partnership Holdings, Inc., a holding
company subsidiary of OppenheimerFunds,
Inc.; a director of Oppenheimer Real
Asset Management, Inc. (since July 1996);
President and a director (since October
1997) of OppenheimerFunds International
Ltd., an offshore fund manager subsidiary
of OppenheimerFunds, Inc. and Oppenheimer
Millennium Funds plc (since October
1997); President and a director of other
Oppenheimer funds; a director of
Hillsdown Holdings plc (a U.K. food
company); formerly, an Executive Vice
President of OFI.
Philip T. Masterson,
Vice President Formerly an Associate at Davis,
Graham, & Stubbs (January 1998 - July 1998);
Associate; Myer, Swanson, Adams & Wolf, P.C.
(May 1996 - June 1998).
Loretta McCarthy,
Executive Vice President None.
Beth Michnowski,
Assistant Vice President Formerly Senior Marketing
Manager (May 1996 - June 1997) and Director
of Product Marketing (August 1992 - May
1996) with Fidelity Investments.
Lisa Migan,
Assistant Vice President None.
Andrew J. Mika
Senior Vice President Formerly a Second Vice
President for Guardian Investments (June
1990 - October 1999).
Denis R. Molleur,
Vice President and
Senior Counsel None.
Nikolaos Monoyios,
Vice President A Vice President and/or portfolio manager
of certain Oppenheimer funds (since April
1998); a Certified Financial Analyst;
formerly, a Vice President and portfolio
manager for Guardian Investor Services,
the management subsidiary of The Guardian
Life Insurance Company (since 1979).
Linda Moore,
Vice President Formerly, Marketing Manager (July 1995
-November 1996) for Chase Investment
Services Corp.
Kenneth Nadler,
Vice President None.
David Negri,
Senior Vice President An officer and/or portfolio
manager of certain Oppenheimer funds.
Barbara Niederbrach,
Assistant Vice President None.
Robert A. Nowaczyk,
Vice President None.
Ray Olson,
Assistant Vice President None.
Richard M. O'Shaugnessy,
Assistant Vice President:
Rochester Division None.
Gina M. Palmieri,
Vice President An officer and/or portfolio
manager of certain Oppenheimer funds (since
6/99).
Robert E. Patterson,
Senior Vice President An officer and/or portfolio
manager of certain Oppenheimer funds.
Frank Pavlak,
Vice President Branch Chief of Investment Company
Examinations at U.S. Securities and
Exchange Commission (January 1981 -
December 1998).
James Phillips
Assistant Vice President None.
David Pellegrino Vice President.
Stephen Puckett,
Vice President None.
Jane Putnam,
Vice President An officer and/or portfolio
manager of certain Oppenheimer funds.
Michael Quinn,
Assistant Vice President Formerly, Assistant Vice
President (April 1995 - January 1998) of Van
Kampen American Capital.
Julie Radtke,
Vice President Formerly Assistant Vice President and
Business Analyst for Pershing, Jersey
City (August 1997 -November 1997); Senior
Business Consultant, American
International Group (January 1996 - July
1997).
Russell Read,
Senior Vice President Vice President of Oppenheimer Real Asset
Management, Inc. (since March 1995).
Thomas Reedy,
Vice President An officer and/or portfolio
manager of certain Oppenheimer funds;
formerly, a Securities Analyst for the
Manager.
John Reinhardt,
Vice President: Rochester Division None
Jeffrey Rosen,
Vice President None.
Michael S. Rosen,
Vice President An officer and/or portfolio
manager of certain Oppenheimer funds.
Marci Rossell,
Vice President and
Corporate Economist Economist with
Federal Reserve Bank of Dallas (April
1996 - March 1999).
Richard H. Rubinstein,
Senior Vice President An officer and/or portfolio
manager of certain Oppenheimer funds.
Lawrence Rudnick,
Assistant Vice President None.
James Ruff,
Executive Vice President & Director None.
Andrew Ruotolo
Executive Vice President of
Oppenheimer Funds Services, a
division of OFI Formerly Chief Operations Officer for
American
International Group (1997-August 1999).
Rohit Sah,
Assistant Vice President None.
Valerie Sanders,
Vice President None.
Jeff Schneider,
Vice President Director, Personal Decisions
International.
Ellen Schoenfeld,
Assistant Vice President None.
David Schultz,
Senior Vice President
and Chief Executive Officer Senior Managing
Director, President (since April 1999) and
Chief Executive Officer of HarbourView Asset
Management Corporation (since June 1999).
Stephanie Seminara,
Vice President None.
Martha Shapiro,
Assistant Vice President None.
Christian D. Smith
Senior Vice President Formerly Co-head of the
Municipal Portfolio Management Team,
Portfolio Manager for Prudential Global
Asset Management (January 1990 - September
1999).
Connie Song,
Assistant Vice President None.
Richard Soper,
Vice President None.
Keith Spencer Equity trader.
Vice President
Cathleen Stahl,
Vice President Assistant Vice President & Manager of
Women & Investing Program
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.
Jayne Stevlingson,
Vice President None.
Marlo Stil,
Vice President Investment Specialist and Career
Agent/Registered
Representative for MML Investor Services,
Inc.
John Stoma,
Senior Vice President None.
Michael C. Strathearn,
Vice President An officer and/or portfolio
manager of certain Oppenheimer funds; a
Chartered Financial Analyst; a Vice
President of HarbourView Asset Management
Corporation.
Kevin Surrett,
Assistant Vice President Assistant Vice President of Product
Development At Evergreen Investor
Services, Inc. (June 1995 -
May 1999).
Wayne Strauss,
Assistant Vice President: Rochester
Division Formerly Senior Editor, West Publishing
Company (January 1997 - March 1997).
James C. Swain,
Vice Chairman of the Board Chairman, CEO and Trustee, Director or
Managing Partner of the Denver-based
Oppenheimer Funds; formerly, President
and Director of Centennial Asset
Management Corporation and Chairman of
the Board of Shareholder Services, Inc.
Susan Switzer,
Assistant Vice President None.
Anthony A. Tanner,
Vice President: Rochester Division None.
Jay Tracey,
Vice President An officer and/or portfolio
manager of certain Oppenheimer funds.
James Turner,
Assistant Vice President None.
Angela Uttaro,
Assistant Vice President None.
Mark Vandehey,
Vice President None.
Maureen VanNorstrand,
Assistant Vice President None.
Annette Von Brandis,
Assistant Vice President None.
Phillip Vottiero,
Vice President Chief Financial officer for the Sovlink
Group (April 1996 - June 1999).
Teresa Ward,
Vice President None.
Jerry Webman,
Senior Vice President Director of New York-based tax-exempt
fixed income Oppenheimer 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 Asset Management Corporation.
William L. Wilby,
Senior Vice President An officer and/or portfolio manager of
certain Oppenheimer funds; Vice President
of HarbourView Asset Management
Corporation.
Donna Winn, Senior Vice
President/Distribution Marketing.
Senior Vice President
Brian W. Wixted,
Senior Vice President
and Treasurer Formerly Principal and Chief Operating
Officer, Bankers Trust Company - Mutual
Fund Services Division (March 1995 -
March 1999); Vice President and Chief
Financial Officer of CS First Boston
Investment Management Corp. (September
1991 - March 1995); and Vice President
and Accounting Manager, Merrill Lynch
Asset Management (November 1987 -
September 1991).
Carol Wolf,
Vice President An officer and/or portfolio manager of
certain Oppenheimer funds; Vice President
of Centennial Asset Management
Corporation; Vice President, Finance and
Accounting; Point of Contact: Finance
Supporters of Children; Member of the
Oncology Advisory Board of the Childrens
Hospital.
Caleb Wong,
Vice President An officer and/or portfolio manager of
certain Oppenheimer funds (since 6/99) .
Robert G. Zack,
Senior Vice President and
Assistant Secretary, Associate
General Counsel Assistant Secretary of Shareholder
Services, Inc. (since May 1985),
Shareholder Financial Services, Inc.
(since November 1989), OppenheimerFunds
International Ltd. (since 1998),
Oppenheimer Millennium Funds plc (since
October 1997); an officer of other
Oppenheimer funds.
Jill Zachman,
Assistant Vice President:
Rochester Division None.
Mark Zavanelli,
Assistant Vice President None.
Arthur J. Zimmer,
Senior Vice President An officer and/or portfolio manager of
certain Oppenheimer funds; Vice President
of Centennial Asset Management
Corporation.
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 California Municipal Fund Oppenheimer Capital Appreciation Fund
Oppenheimer Capital Preservation Fund Oppenheimer Developing Markets Fund
Oppenheimer Discovery Fund Oppenheimer Enterprise Fund Oppenheimer Europe Fund
Oppenheimer Global Fund Oppenheimer Global Growth & Income Fund Oppenheimer Gold
& Special Minerals Fund Oppenheimer Growth Fund Oppenheimer International Growth
Fund Oppenheimer International Small Company Fund Oppenheimer Large Cap Growth
Fund Oppenheimer Money Market Fund, Inc. Oppenheimer Multi-Sector Income Trust
Oppenheimer Multi-State Municipal Trust Oppenheimer Multiple Strategies Fund
Oppenheimer Municipal Bond Fund Oppenheimer New York Municipal Fund Oppenheimer
Series Fund, Inc. Oppenheimer Trinity Core Fund Oppenheimer Trinity Growth Fund
Oppenheimer Trinity Value Fund Oppenheimer U.S. Government Trust Oppenheimer
World Bond Fund
Quest/Rochester Funds
Limited Term New York Municipal Fund
Oppenheimer Convertible Securities Fund
Oppenheimer MidCap Fund
Oppenheimer Quest Capital Value Fund, Inc.
Oppenheimer Quest For Value Funds
Oppenheimer Quest Global Value Fund, Inc.
Oppenheimer Quest Value Fund, Inc.
Rochester Fund Municipals
Denver-based Oppenheimer Funds
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 Oppenheimer Cash Reserves Oppenheimer Champion
Income Fund Oppenheimer Capital Income Fund Oppenheimer High Yield Fund
Oppenheimer Integrity Funds Oppenheimer International Bond Fund Oppenheimer
Limited-Term Government Fund Oppenheimer Main Street Small Cap Fund Oppenheimer
Main Street Funds, Inc. Oppenheimer Municipal Fund Oppenheimer Real Asset Fund
Oppenheimer Senior Floating Rate Fund Oppenheimer Strategic Income Fund
Oppenheimer Total Return Fund, Inc. Oppenheimer Variable Account Funds Panorama
Series Fund, Inc.
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 80112.
The address of the Rochester-based funds is 350 Linden Oaks, Rochester, New York
14625-2807.
Name & Current Position Other Business and Connections
with OpCap Advisors During the Past Two Years
Mark Degenhart,
Vice President and Portfolio Manager
Linda S. Ferrante,
Portfolio Manager Managing Director of Oppenheimer Capital.
John Giusio,
Vice President and Portfolio Manager Vice President of Oppenheimer
Capital.
Richard J. Glasebrook, II,
Vice President and Portfolio Manager Managing Director of Oppenheimer
Capital.
Colin Glinsman,
Vice President and Portfolio Manager Managing Director of Oppenheimer
Capital.
Louis Goldstein,
Vice President and Portfolio Manager Senior Vice President of
Oppenheimer Capital.
Matthew Greenwald,
Portfolio Manager Senior Vice President of Oppenheimer
Capital.
Alan Gutmann,
Vice President and Portfolio Manager Senior Vice President of
Oppenheimer Capital.
Benjamin Gutstein,
Vice President and Portfolio Manager Assistant Vice President of
Oppenheimer Capital.
Vikki Y. Hanges,
Vice President and Portfolio Manager Senior Vice President of
Oppenheimer Capital.
Francis A. LeCates, Jr.,
Director of Research Managing Director of Oppenheimer Capital.
Elisa A. Mazen,
Vice President and Portfolio Manager Senior Vice President of
Oppenheimer Capital International
Division.
Timothy McCormack,
Vice President and Portfolio Manager Senior 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.
Eric Retzlaff,
Senior Vice President Senior Vice President of Oppenheimer
Capital.
Anthony Orlando
Treasurer and Chief Financial
Officer .
Frank Poli
Secretary Chief Legal Officer of PIMCO Advisors,
L.P.; Secretary of Oppenheimer Capital
Kenneth M. Poovey
Chief Executive Officer Chief Executive Officer of Oppenheimer
Capital; Chief Operating Officer of PIMCO
Advisors, L.P.
Elliot Weiss
Vice President Vice President of Oppenheimer Capital.
Jeffrey Whittington,
Portfolio Manager Senior Vice President of Oppenheimer
Capital.
The address of OpCap Advisors is 1345 Avenue of the Americas, 49th Floor, New
York, New York 10105-4800.
For information as to the business, profession, vocation or employment of a
substantial nature of the officers of OpCap Advisors and Oppenheimer Capital,
reference is made to their respective Forms ADV filed under the Investment
Advisers Act of 1940, which are incorporated herein by reference.
Item 27. 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 26(b) above (except Oppenheimer Multi-Sector
Income Trust and Panorama Series Fund, Inc.) and for MassMutual Institutional
Funds.
(b) The directors and officers of the Registrant's principal underwriter
are:
Name & Principal Positions & Offices Positions & Offices
Business Address with Underwriter with Registrant
Jason Bach Vice President None
31 Racquel Drive
Marietta, GA 30064
Peter Beebe Vice President None
876 Foxdale Avenue
Winnetka, IL 60093
Douglas S. Blankenship Vice President None
17011 Woodbank
Spring, TX 77379
Peter W. Brennan Vice President None
8826 Amberton Lane
Charlotte, NC 28226
Susan Burton(2) Vice President None
Erin Cawley(2) Assistant Vice President None
Robert Coli Vice President None
12 White Tail Lane
Bedminster, NJ 07921
William Coughlin Vice President None
1730 N. Clark Street
#3203
Chicago, IL 60614
Mary Crooks(1)
Daniel Deckman Vice President None
12252 Rockledge Circle
Boca Raton, FL 33428
Christopher DeSimone Vice President None
5105 Aldrich Avenue South
Minneapolis, MN 55419
Joseph DiMauro Vice President None
244 McKinley Avenue
Grosse Pointe Farms, MI 48236
Rhonda Dixon-Gunner(1) Assistant Vice President None
Andrew John Donohue(2) Executive Vice Secretary of the
President, Director Oppenheimer funds.
and General Counsel
John Donovan Vice President None
868 Washington Road
Woodbury, CT 06798
Kenneth Dorris Vice President None
4104 Harlanwood Drive
Fort Worth, TX 76109
Wendy H. Ehrlich Vice President None
4 Craig Street
Jericho, NY 11753
Kent Elwell Vice President None
35 Crown Terrace
Yardley, PA 19067
George Fahey Vice President None
141 Breon Lane
Elkton, MD 21921
Eric Fallon Vice President None
10 Worth Circle
Newton, MA 02158
Katherine P. Feld(2) Vice President None
& Secretary & Senior Counsel
Mark Ferro Vice President None
43 Market Street
Breezy Point, NY 11697
Ronald H. Fielding(3) Vice President None
John ("J") Fortuna(2) Vice President None
Ronald R. Foster Senior Vice President None
11339 Avant Lane
Cincinnati, OH 45249
Patricia Gadecki-Wells Vice President None
4734 Highland Place Center
Lakeland, FL 33813
Luiggino Galleto Vice President None
10302 Reisling Court
Charlotte, NC 28277
Michelle Gans Vice President None
8327 Kimball Drive
Eden Prairie, MN 55347
L. Daniel Garrity Vice President None
27 Covington Road
Avondale, GA 30002
Lucio Giliberti Vice President None
78 Metro Vista Drive
Hawthorne, NJ 07506
Ralph Grant(2) Vice President/National None
Sales Manager
Michael Guman Vice President None
3913 Pleasent Avenue
Allentown, PA 18103
Linda Harding Vice President/FID None
6229 Love Drive
#413
Irving, TX 75039
Webb Heidinger Vice President None
138 Gates Street
Portsmouth, NH 03801
Phillip Hemery Vice President None
184 Park Avenue
Rochester, NY 14607
Tammy Hospodar Vice President None
30864 Paloma Court
Westlake Village, CA 91362
Edward Hrybenko (2) Vice President None
Richard L. Hymes (2) Vice President None
Byron Ingram(1) Assistant Vice President None
Kathleen T. Ives(1) Vice President None
Lynn Jensen Vice President None
5120 Patterson Street
Long Beach, CA 90815
Eric K. Johnson Vice President None
3665 Clay Street
San Francisco, CA 94118
Mark D. Johnson Vice President None
409 Sundowner Ridge Court
Wildwood, MO 63011
Elyse Jurman Vice President None
1194 Hillsboro Mile, #51
Hillsboro Beach, FL 33062
Michael Keogh(2) Vice President None
Brian Kelly Vice President None
60 Larkspur Road
Fairfield, CT 06430
Richard Klein Vice President None
4820 Fremont Avenue So.
Minneapolis, MN 55409
Brent Krantz Vice President None
2609 SW 149th Place
Seattle, WA 98166
Oren Lane Vice President None
5286 Timber Bend Drive
Brighton, MI 48116
Todd Lawson Vice President None
10687 East Ida Avenue
Englewood, CO 80111
Dawn Lind Vice President None
7 Maize Court
Melville, NY 11747
James Loehle Vice President None
30 Wesley Hill Lane
Warwick, NY 10990
Steve Manns Vice President None
1941 W. Wolfram Street
Chicago, IL 60657
Todd Marion Vice President None
3 St. Marks Place
Cold Spring Harbor, NY 11724
LuAnn Mascia(2) Assistant Vice President None
Marie Masters Vice President None
8384 Glen Eagle Drive
Manlius, NY 13104
Theresa-Marie Maynier Vice President None
2421 Charlotte Drive
Charlotte, NC 28203
Anthony Mazzariello Vice President None
704 Beaver Road
Leetsdale, PA 15056
John McDonough Vice President None
3812 Leland Street
Chevy Chase, MD 20815
Kent McGowan Vice President None
18424 12th Avenue West
Lynnwood, WA 98037
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
Denise-Marie Nakamura Vice President None
4111 Colony Plaza
Newport, CA 92660
John Nesnay Vice President None
3410 East County Line
#17
Highlands Ranch, CO 80126
Chad V. Noel Vice President None
2408 Eagleridge Drive
Henderson, NV 89014
Joseph Norton Vice President None
2518 Fillmore Street
San Francisco, CA 94115
Kevin Parchinski Vice President None
8409 West 116th Terrace
Overland Park, KS 66210
Gayle Pereira Vice President None
2707 Via Arboleda
San Clemente, CA 92672
Charles K. Pettit Vice President None
22 Fall Meadow Drive
Pittsford, NY 14534
Bill Presutti Vice President None
130 E. 63rd Street, #10E
New York, NY 10021
Steve Puckett Vice President None
5297 Soledad Mountain Road
San Diego, CA 92109
Elaine Puleo(2) Senior Vice President None
Christopher L. Quinson (2) Vice President/ None
Variable Annuities
Minnie Ra Vice President None
100 Delores Street, #203
Carmel, CA 93923
Dustin Raring Vice President None
378 Elm Street
Denver, CO 80220
Michael Raso Vice President None
16 N. Chatsworth Ave.
Apt. 301
Larchmont, NY 10538
Douglas Rentschler Vice President None
677 Middlesex Road
Grosse Pointe Park, MI 48230
Ruxandra Risko(2) Vice President None
Michael S. Rosen(2) Vice President None
Kenneth Rosenson Vice President None
3505 Malibu Country Drive
Malibu, CA 90265
James Ruff(2) President & Director None
Alfredo Scalzo Vice President None
19401 Via Del Mar, #303
Tampa, FL 33647
Timothy Schoeffler Vice President None
1717 Fox Hall Road
Washington, DC 77479
Michael Sciortino Vice President None
785 Beau Chene Drive
Mandeville, LA 70471
Eric Sharp Vice President None
862 McNeill Circle
Woodland, CA 95695
Michelle Simone(2) Assistant Vice President None
Stuart Speckman(2) Vice President None
Timothy J. Stegner Vice President None
794 Jackson Street
Denver, CO 80206
Marlo Stil Vice President None
8579 Prestwick Drive
La Jolla, CA 92037
Peter Sullivan Vice President None
21445 S. E 35th Street
Issaquah, WA 98029
David Sturgis Vice President None
81 Surrey Lane
Boxford, MA 01921
Scott Such(1) Senior Vice President None
Brian Summe Vice President None
239 N. Colony Drive
Edgewood, KY 41017
George Sweeney Vice President None
5 Smokehouse Lane
Hummelstown, PA 17036
Andrew Sweeny Vice President None
5967 Bayberry Drive
Cincinnati, OH 45242
Scott McGregor Tatum Vice President None
704 Inwood
Southlake, TX 76092
David G. Thomas Vice President None
2200 North Wilson Blvd.
Suite 102-176
Arlington, VA 22201
Sarah Turpin Vice President None
3517 Milton Avenue
Dallas, TX 75205
Mark Vandehey(1) Vice President None
Brian Villec (2) Vice President None
Andrea Walsh(1) Vice President None
Suzanne Walters(1) Assistant Vice President None
James Wiaduck Vice President None
935 Wood Run Court
South Lyon, MI 48178
Michael Weigner Vice President None
5722 Harborside Drive
Tampa, FL 33615
Donn Weise Vice President None
3249 Earlmar Drive
Los Angeles, CA 90064
Marjorie Williams Vice President None
6930 East Ranch Road
Cave Creek, AZ 85331
Brian W. Wixted (1) Vice President
&Treasurer Vice President &
Treasurer
(1) 6803 South Tucson Way, Englewood, CO 80112
(2) Two World Trade Center, New York, NY 10048
(3) 350 Linden Oaks, Rochester, NY 14623
(c) Not applicable.
Item 28. 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.
Item 29. Management Services
Not applicable
Item 30. Undertakings
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) of 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 18th day of February, 2000.
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 on
the dates indicated:
Signatures Title Date
/s/ Bridget A. Macaskill* Chairman of the Board, February 18, 2000
- ------------------------------------- President (Principal
Bridget A. Macaskill Executive Officer) and
Director
/s/ Brian W. Wixted
- ------------------------------------ Treasurer (Principal
February 18, 2000
Brian W. Wixted Financial Officer)
/s/ Paul Y. Clinton* Director February 18, 2000
- -------------------------------------
Paul Y. Clinton
/s/ Thomas W. Courtney* Director February 18, 2000
- -------------------------------------
Thomas W. Courtney
/s/ Robert G. Galli
- -------------------------------------- Director
February 18, 2000
Robert G. Galli
/s/ Lacy B. Herrmann* Director February 18, 2000
- -------------------------------------
Lacy B. Herrmann
/s/ George Loft* Director February 18, 2000
- -------------------------------------
George Loft
*By: /s/ Robert G. Zack
---------------------------------------------
Robert G. Zack, Attorney-in-fact
<PAGE>
OPPENHEIMER QUEST CAPITAL VALUE FUND, INC.
EXHIBIT INDEX
Exhibit No. Description
23 (j) Independent Auditors Consent
23 (n) Power of Attorney (including Certified Board
Resolutions) for Brian W. Wixted
835partc.b00
Consent of Independent Accountants
We hereby consent to the use in this Registration Statement on Form N-1A of our
report dated November 19, 1999, relating to the financial statements and
financial highlights of Oppenheimer Quest Capital Value Fund, Inc., which appear
in Registration Statement. We also consent to the reference to us under the
heading "Independent Accountants" and "Financial Highlights" and "Independent
Accountants" in such Registration Statement.
/s/ PricewaterhouseCoopers LLP
- --------------------------------
PricewaterhouseCoopers LLP
Denver, Colorado
February 18, 2000
835con.00b
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned constitutes and
appoints Andrew J. Donohue or Robert G. Zack, and each of them, his true and
lawful attorneys-in-fact and agents, with full power of substitution and
resubstitution, for him and in his capacity as Treasurer of OPPENHEIMER QUEST
FOR VALUE FUNDS, on behalf of Oppenheimer Quest Opportunity Value Fund,
Oppenheimer Quest Balanced Value Fund, and Oppenheimer Quest Small Cap Value
Fund; OPPENHEIMER QUEST GLOBAL VALUE FUND, INC., OPPENHEIMER QUEST CAPITAL VALUE
FUND, INC., AND OPPENHEIMER QUEST VALUE FUND, INC. (the "Funds"), to sign on his
behalf any and all Registration Statements (including any post-effective
amendments to Registration Statements) under the Securities Act of 1933, the
Investment Company Act of 1940 and any amendments and supplements thereto, and
other documents in connection thereunder, and to file the same, with all
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents, and each of them, full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about the
premises, as fully as to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that said attorneys-in-fact and
agents, and each of them, may lawfully do or cause to be done by virtue hereof.
Dated this 27th day of April, 1999.
/s/ Brian W. Wixted
- ------------------------
Brian W. Wixted
i:\power\wixted.QUEST
<PAGE>
OPPENHEIMER QUEST FOR VALUE FUNDS
(on behalf of OPPENHEIMER QUEST OPPORTUNITY VALUE FUND,
OPPENHEIMER QUEST BALANCED VALUE FUND, OPPENHEIMER QUEST
SMALL CAP VALUE FUND ) OPPENHEIMER QUEST GLOBAL VALUE FUND,
INC.
OPPENHEIMER QUEST CAPITAL VALUE FUND, INC.
OPPENHEIMER QUEST VALUE FUND, INC.
OPPENHEIMER MIDCAP FUND
BOND FUND SERIES - OPPENHEIMER CONVERTIBLE SECURITIES FUND
ROCHESTER FUND MUNICIPALS
ROCHESTER PORTFOLIO SERIES - LIMITED TERM NEW YORK MUNICIPAL FUND
BOARD RESOLUTIONS
The undersigned hereby certifies that the resolutions set forth below were
duly adopted by the Boards of Trustees and Directors of the above-referenced
funds at a meeting held on April 13, 1999:
"RESOLVED, that Andrew J. Donohue and Robert G. Zack be, and each of them
hereby is, appointed the attorney-in-fact and agent of Brian W. Wixted,
Treasurer of the Funds, with full power of substitution and
resubstitution, to sign on the behalf of such officer of each of the Funds
any and all Registration Statements (including any post-effective
amendments to such Registration Statements) under the Securities Act of
1933 and the Investment Company Act of 1940 and any amendments and
supplements thereto, and other documents in connection thereunder, and to
file the same, with all exhibits thereto, and other documents in
connection therewith, with the Securities and Exchange Commission; and be
it further
RESOLVED, that Andrew J. Donohue and Robert G. Zack be, and each of them
hereby is, authorized, empowered and directed, in the name and on behalf
of the Funds, to take such additional action and to execute and deliver
such additional documents and instruments as any of them may deem
necessary or appropriate to implement the provisions of the foregoing
resolution, the authority for the taking of such action and the execution
and delivery of such documents and instruments to be conclusively
evidenced thereby."
IN WITNESS WHEREOF, the undersigned has hereunto set his hand as of this
27th day of April, 1999.
/s/ Andrew. J. Donohue
Andrew J. Donohue
Secretary
i:\powers\wixted.bdreso
