<PAGE>
Supplement
dated June 28, 1995
to the
Prospectus dated November 1, 1994
of the Quest for Value Officers Fund
as supplemented February 1, 1995
The following table is added to page 3:
Quest for Value Family of Funds
OFFICERS FUND
Financial Highlights (unaudited)
November 8, 1994 (commencement of operations) to April 30, 1995
- -------------------------------------------------------------------------------
For a share outstanding throughout the period:
<TABLE>
<CAPTION>
<S> <C>
Net Asset Value, beginning of period . . . . . . . . . . . . . . . . . . . $10.00(1)
----------
Net investment income. . . . . . . . . . . . . . . . . . . . . . . . . . . 0.10
Net realized and unrealized gain on investments. . . . . . . . . . . . . . 1.00
----------
Total from investment operations . . . . . . . . . . . . . . . . . . . . 1.10
Dividends to shareholders from net investment income . . . . . . . . . . . (0.04)
----------
Net Asset Value, end of period . . . . . . . . . . . . . . . . . . . . . . $11.06
----------
----------
Total investment return* . . . . . . . . . . . . . . . . . . . . . . . . . 11.00%
----------
Net assets, end of period. . . . . . . . . . . . . . . . . . . . . . . . . $2,988.509
----------
Ratio of net operating expenses to average net assets. . . . . . . . . . . 0.00%(2,3,4)
----------
Ratio of net investment income to average net assets . . . . . . . . . . . 2.10%(2,3,4)
----------
Portfolio turnover rate. . . . . . . . . . . . . . . . . . . . . . . . . . 60%
----------
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
<FN>
(1) Offering price.
(2) During the period presented above, the Advisor has voluntarily waived all
of its fees and reimbursed the Fund for all of its operating expenses. If
such waivers and reimbursements had not been in effect, the annualized
ratio of net operating expenses to average daily net assets and the
annualized ratio of net investment income to average daily net assets would
have been 2.15% and (.05%), respectively.
(3) Average net assets for the period November 8, 1994 (commencement of
operations) to April 30, 1995 were $2,295,379.
(4) Annualized.
* Assumes reinvestment of all dividends. Aggregate (not annualized) total
return is shown.
</TABLE>
<PAGE>
February 1, 1995
QUEST FOR VALUE OFFICERS FUND
SUPPLEMENT TO THE PROSPECTUS
DATED NOVEMBER 1, 1994
The Fund may invest up to 25% of its net assets in bonds rated below Baa 3
by Moody's Investors Service, Inc. or BBB- by Standard & Poor's Corporation
(commonly known as "high yield" or "junk bonds"). Such securities may be subject
to higher risks and greater market fluctuations than are lower-yielding higher-
rated securities. Securities rated Ba by Moody's are judged to have speculative
elements; their future cannot be considered well assured and often the
protection of interest and principal payments may be very moderate. Securities
rated BB by S&P are regarded as having predominantly speculative characteristics
and, while such obligations have less near-term vulnerability to default than
other speculative grade debt, they face major ongoing uncertainties or exposure
to adverse business, financial or economic conditions which could lead to
inadequate capacity to meet timely interest and principal payment. Securities
rated Caa by Moody's or CCC by S&P are considered to have predominantly
speculative characteristics with respect to capacity to pay interest and repay
principal and to be of poor standing. Securities rated Ca by Moody's are
speculative to a high degree; such issues are often in default or have other
marked shortcomings. A security rated C by Moody's has extremely poor prospects
of ever attaining real investment standing. Securities rated CI by S&P are
income bonds on which no interest is being paid, and securities rated D by S&P
are in payment default. The Fund does not intend to hold such lower-rated
securities unless the opportunities for capital appreciation and income,
combined, remain attractive. See the Appendix in the SAI for a more complete
general description of Moody's and S&P ratings. The ratings of Moody's and S&P
represent their opinions as to the quality of the obligations which they
undertake to rate. It should be emphasized, however, that ratings are relative
and subjective and although ratings may be useful in evaluating the safety of
interest and principal payments, they do not evaluate the market risk of these
securities. Therefore, although these ratings may be an initial criterion for
selection of such investments, Quest Advisors also will evaluate these
securities and the ability of the issuers of such securities to pay interest and
principal. The Fund's ability to achieve its investment objectives may be more
dependent on Quest Advisors' credit analysis than might be the case for a fund
that invested in higher rated securities. The market price and yield of
securities rated Ba or lower by Moody's and BB or lower by S&P are more volatile
than those of higher rated securities. Factors adversely affecting the market
price and yield of these securities will adversely affect the Fund's net asset
value. In addition, the retail secondary market for these securities may be less
liquid than that of higher rated securities; adverse market conditions could
make it difficult at times for the Fund to sell certain securities. The market
values of certain lower rated debt securities tend to reflect individual
corporate developments to a greater extent than do higher rated securities,
which react primarily to fluctuations in the general level of interest rates,
and tend to be more sensitive to economic conditions than higher rated
securities. Companies that issue such securities are often highly leveraged and
may not have available to them more traditional methods of financing.
Consequently, the risk associated with acquiring the securities of such issuers
is greater than with higher rated securities. The Fund is not obliged to dispose
of securities due to changes by the rating agencies. The Fund may invest in
bonds which are in default, which could result in increased costs associated
with the sale or recovery of such bonds.
______________________________
<PAGE>
QUEST FOR VALUE -SM-
OFFICERS FUND
Quest for Value Officers Fund (the "Fund") is an open-end diversified
management investment company managed by Quest for Value Advisors ("Quest
Advisors"). The Fund is a portfolio of Quest for Value Family of Funds. Total
assets under the management of Quest Advisors and its parent, Oppenheimer
Capital, amounted to approximately $29.8 billion on July 30, 1994.
This Prospectus sets forth basic information about the Fund, including
applicable sales and distribution fees, that you should understand before
investing. You should read it carefully and retain it for future reference. A
Statement of Additional Information dated November 1, 1994 for the Fund (the
"SAI"), has been filed with the Securities and Exchange Commission and is
incorporated by reference in this Prospectus. You can obtain a copy of the SAI
without charge by contacting Quest for Value Distributors, at the address or
telephone number listed on the back cover.
SHARES IN THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY ANY BANK AND THE SHARES OF THE FUND ARE NOT FEDERALLY INSURED BY THE
FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER
AGENCY.
The Fund offers three separate classes of shares: Class A, B and C shares.
Initially, only shares of Class A will be offered to officers, directors and
employees of Oppenheimer Capital and its affiliates, their relatives or any
trust, pension, profit sharing or other benefit plan for any of them. Shares of
each Class represent an identical interest in the investment portfolio of the
Fund, and generally have the same rights, but are offered under different sales
charge and distribution fee arrangements. The offering of Class A, B and C
shares presents the investor with the opportunity to choose the sales charge and
distribution fee arrangement which is most beneficial, depending on the amount
of purchase, the length of time the investor expects to hold the shares, and
other circumstances.
Shares of each Class are offered at the net asset value next determined after
receipt of your purchase order plus an initial ("front-end") sales charge for
purchases of Class A shares, or a deferred sales charge for purchases of Class B
or Class C shares. (See "How to Buy Shares," p. 5) Class B and C shares bear a
higher ongoing distribution fee than Class A shares, and investors should
understand that over time the accumulated distribution charges on Class B and C
shares may exceed the amount of the initial sales charge and ongoing
distribution fee on Class A shares. (See "Distribution Plan," p. 16)
November 1, 1994
- --------------------------------------------------------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THE PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
- --------------------------------------------------------------------------------
QUEST FOR VALUE is a registered service mark of Oppenheimer Capital
<PAGE>
- --------------------------------------------------------------------------------
SUMMARY OF FUND EXPENSES
<TABLE>
<CAPTION>
QUEST FOR VALUE OFFICERS FUND
CLASS OF SHARES: A B C
- ------------------------------------------------------------------------- ---------- ---------- ----------
<S> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSE
Maximum Initial Sales Load Imposed on Purchase (as a % of offering
price).................................................................. 5.50% none none
Maximum Deferred Sales Load(1)........................................... none 5.00% 1.00%
Maximum Sales Load Imposed On Reinvested Dividends....................... none none none
Redemption Fee........................................................... none none none
Exchange Fee............................................................. $ 5.00 $ 5.00 $ 5.00
ANNUAL FUND OPERATING EXPENSES (AS % OF AVERAGE NET ASSETS) (ESTIMATED)
Management Fee(2) (after waiver)......................................... 0 % 0 % 0 %
12b-1 Fee (including service fees of.25%) (3) (after waiver) 0 % 0 % 0 %
Other Expenses(4)........................................................ 2.50% 2.50% 2.50%
---------- ---------- ----------
TOTAL FUND OPERATING EXPENSES AFTER WAIVER AND/OR EXPENSE
ASSUMPTIONS(3).......................................................... 2.50% 2.50% 2.50%
---------- ---------- ----------
---------- ---------- ----------
EXAMPLE 1: You would pay the following expenses over the indicated periods in the Fund on a $1,000 investment
assuming (a) payment of the maximum sales charge, (b) a 5% annual return, and (c) retention of shares at the
end of the time period. 10-year figures for Class B shares assume conversion to Class A shares after eight
years.
1 Year................................................................... $ 78.92 $ 25.31 $ 25.31
3 Years.................................................................. 128.57 77.85 77.85
5 Years.................................................................. 180.73 133.25 133.25
10 Years................................................................. 322.97 283.59 283.59
EXAMPLE 2: You would pay the following expenses over the indicated periods in the Fund on a $1,000 investment
assuming (a) payment of the maximum sales charge, (b) a 5% annual return, and (c) redemption at the end of
the time period. 10-year figures for Class B shares assume conversion to Class A shares after eight years.
1 Year................................................................... $ 78.92 $ 75.31 $ 35.31
3 Years.................................................................. 128.57 107.85 77.85
5 Years.................................................................. 180.73 143.05 133.05
10 Years................................................................. 322.97 283.59 283.59
</TABLE>
THE EXAMPLES SHOULD NOT BE CONSIDERED INDICATIONS OF PAST OR FUTURE EXPENSES OR
PERFORMANCE, AND ACTUAL EXPENSES OR PERFORMANCE MAY VARY FROM THOSE SHOWN.
The purpose of the table is to assist you in understanding the various costs
and expenses that you would bear, whether directly or indirectly. For more
complete descriptions of the various costs and expenses, see "How to Buy
Shares," "Investment Management Agreement" and "Distribution Plan".
Investors should be aware that over time, Class B and C shareholders may pay
more than the equivalent of the maximum front-end sales charges permitted by the
National Association of Securities Dealers Rules of Fair Practice.
(1) Purchases of Class A shares of $1 million or more are not subject to
front-end sales charges, but a contingent deferred sales charge ("CDSC")
is imposed on the proceeds of such shares equal to 1% if the shares are redeemed
within the first 12 months after the end of the calendar month of their
purchase. See "How to Buy Shares."
(2) Although the Fund's Investment Advisory Agreement authorizes the Fund to
pay a management fee of 1.00% of average daily net assets, the entire fee
is being waived during the initial offering period.
(3) See "Distribution Plan." Although the Fund's Distribution Plan and
Agreement ("Plan") authorizes the Fund to pay a maximum service fee of
.25% of average daily net assets and a distribution fee of .25% of average daily
net assets for Class A shares and a maximum service fee of .25% of average daily
net assets and a distribution fee of .75% of average daily net assets for Class
B and Class C shares, the fee is being waived during the initial offering
period.
(4) The expenses of the Fund are currently limited by Quest Advisors so that
Total Fund Operating Expenses as a percentage of average net assets do
not exceed .2.50%.
2
<PAGE>
- ----------------------------------------
INVESTMENT OBJECTIVES OF THE FUND
Quest Advisors manages the Fund in accordance with its investment
objectives described below. Quest Advisors' equity investment policy is
overseen by George Long, Managing Director and Chief Investment Officer for
Oppenheimer Capital, the parent of Quest Advisors. Mr. Long has been with
Oppenheimer Capital since 1982.
QUEST FOR VALUE OFFICERS FUND seeks capital appreciation through investment in
securities (primarily equity securities) of companies believed by Quest Advisors
to be undervalued in the marketplace in relation to factors such as the
companies' assets, earnings, growth potential and cash flows. Under normal
conditions, the Fund will invest at least 65% of its assets in equity securities
of companies with market capitalizations between $500 million and $5 billion.
The Fund may invest up to 35% of its assets in equity securities of companies
with no limit as to market capitalization. For the purposes of this Prospectus
the term equity securities is defined as common stocks and preferred stocks;
bonds, debentures and notes convertible into common stocks; and depository
receipts for such securities. Investments of the Fund are managed by Jeffrey C.
Whittington, Senior Vice President of Oppenheimer Capital. He has been Portfolio
Manager of the Fund since its inception. Mr. Whittington has been a portfolio
manager at Oppenheimer Capital since August, 1994, and from June, 1986 to May,
1991. From August, 1993 to July, 1994 he was a portfolio manager with Neuberger
& Berman. From October, 1991 to July, 1993 he was a portfolio manager with
Oppenheimer & Co., Inc.
---------------------
To provide liquidity for the purchase of new instruments and to effect
redemptions of shares, the Fund typically invests a part of its assets in
various types of U.S. government securities and high quality, short-term debt
securities with remaining maturities of one year or less such as government
obligations, certificates of deposit, bankers' acceptances, commercial paper,
short-term corporate securities and repurchase agreements ("money market
instruments"). For temporary defensive purposes, the Fund may invest up to 100%
of its assets in such securities. At any time that the Fund for temporary
defensive purposes invests in such securities, to the extent of such
investments, it is not pursuing its investment objectives.
In the future, the Fund may endeavor to achieve its investment objective by
investing its assets in a no-load diversified open-end management investment
company which has the same portfolio manager and substantially the same
investment objective as the Fund. Shareholders will receive prior notice with
respect to the commencement of any such investment.
Except as indicated, the investment objectives and policies described above
are fundamental and may not be changed without a vote of the shareholders.
- ----------------------------------------
RISK FACTORS
The value of the Fund's shares will fluctuate and on redemption the value
of your shares may be more or less than your investment.
There are two types of risk generally associated with owning equity
securities: market risk and financial risk. Market risk is the risk associated
with the movement of the stock market in general. Financial risk is associated
with the financial condition and profitability of the underlying company.
Smaller capitalization companies may experience higher growth rates and higher
failure rates than do larger capitalization companies. The trading volume of
securities of smaller capitalization companies is normally less than that of
larger capitalization companies and, therefore, may disproportionately affect
their market price, tending to make them rise more in response to buying demand
and fall more in response to selling pressure than is the case with larger
capitalization companies. The Fund may invest up to 15% of its net assets in the
securities of companies that have operated less than three years, including the
operation of predecessors. Securities of unseasoned companies may have a limited
trading market, which may adversely
3
<PAGE>
affect their disposition by the Fund and can result in their shares being priced
at a lower level than might otherwise be the case.
There are two types of risk associated with owning debt securities: interest
rate risk and credit risk. Interest rate risk relates to fluctuations in market
value arising from changes in interest rates. If interest rates rise, the value
of debt securities will normally decline and if interest rates fall, the value
of debt securities will normally increase. All debt securities, including U.S.
government securities, which are generally considered to be the most
creditworthy of all debt obligations, are subject to interest rate risk.
Securities with longer maturities generally will have a more pronounced reaction
to interest rate changes than shorter term securities.
Credit risk relates to the ability of the issuer to make periodic interest
payments and ultimately repay principal at maturity. Bonds rated Baa3 by Moody's
or BBB- by S&P, which the Fund may acquire, are described by those rating
agencies as having speculative elements. If a debt security is rated below
investment grade by one rating agency and as investment grade by a different
rating agency, Quest Advisors will make a determination as to the debt
security's investment grade quality. It is the present intention of the Fund to
invest no more than 5% of its assets in bonds rated below Baa3 by Moody's or
BBB- by S&P (commonly known as "high yield" or "junk bonds"). In the event that
the Fund intends in the future to invest more than 5% of its assets in such
bonds, appropriate disclosures will be made to existing and prospective
shareholders.
ADDITIONAL RISKS OF FOREIGN SECURITIES: The Fund may purchase foreign securities
that are listed on a domestic or foreign securities exchange, traded in domestic
or foreign over-the counter markets or represented by American Depositary
Receipts. There is no limit to the amount of such foreign securities the Fund
may acquire. Certain factors and risks are presented by investment in foreign
securities which are in addition to the usual risks inherent in domestic
securities. Foreign companies are not necessarily subject to uniform accounting,
auditing and financial reporting standards or other regulatory requirements
comparable to those applicable to U.S. companies. Thus, there may be less
available information concerning non-U.S. issuers of securities held by the Fund
than is available concerning U.S. companies. In addition, with respect to some
foreign countries, there is the possibility of nationalization, expropriation or
confiscatory taxation; income earned in the foreign nation being subject to
taxation, including withholding taxes on interest and dividends (see "Tax
Status"), or other taxes imposed with respect to investments in the foreign
nation; limitations on the removal of securities, property or other assets of a
fund; difficulties in pursuing legal remedies and obtaining judgments in foreign
courts, or political or social instability or diplomatic developments which
could affect U.S. investments in those countries. For a description of the risks
of possible losses through holding of securities in foreign custodian banks and
depositories, see "Risk Factors and Special Considerations" in the SAI.
Securities of many non-U.S. companies may be less liquid and their prices more
volatile than securities of comparable U.S. companies. Non-U.S. stock exchanges
and brokers are generally subject to less governmental supervision and
regulation than in the U.S. and commissions on foreign stock exchanges are
generally higher than negotiated commissions on U.S. transactions. In addition,
there may in certain instances be delays in the settlement of non-U.S. stock
exchange transactions. Certain countries restrict foreign investments in their
securities markets. These restrictions may limit or preclude investment in
certain countries, industries or market sectors, or may increase the cost of
investing in securities of particular companies. Purchasing the shares of
investment companies which invest in securities of a given country may be the
only or the most efficient way to invest in that country. This may require the
payment of a premium above the net asset value of such investment companies and
the return will be reduced by the operating expenses of those investment
companies.
A decline in the value of the U.S. dollar against the value of any particular
currency will cause an increase in the U.S. dollar value of a Fund's holdings
denominated in such
4
<PAGE>
currency. Conversely, a decline in the value of any particular currency against
the U.S. dollar will cause a decline in the U.S. dollar value of the Fund's
holdings of securities denominated in such currency. Some foreign currency
values may be volatile and there is the possibility of governmental controls on
currency exchange or governmental intervention in currency markets which could
adversely affect the Fund. The Fund does not intend to speculate in foreign
currency in connection with the purchase or sale of securities on a foreign
securities exchange but may enter into foreign currency contracts to hedge their
foreign currency exposure. While those transactions may minimize the impact of
currency appreciation and depreciation, the Fund will bear a cost for entering
into the transaction and such transactions do not protect against a decline in
the security's value relative to other securities denominated in that currency.
The Fund may invest its assets in American Depository Receipts ("ADRs"),
European Depository Receipts ("EDRs") or Global Depository Receipts ("GDRs")
which are U.S. dollar-denominated receipts that represent and may be converted
into the underlying foreign security. ADRs, GDRs or EDRs are issued by persons
other than the underlying issuer, typically a domestic bank or trust company.
Issuers of the stock of ADRs, EDRs or GDRs sponsored by banks or trust companies
are not obligated to disclose material information in the United States and
therefore, there may not be a correlation between such information and the
market value of such ADRs, GDRs or EDRs.
OPTIONS AND FUTURES: Different uses of futures and options have different risk
and return characteristics. Generally, selling futures contracts, purchasing put
options and writing call options are strategies designed to protect against
falling security prices and can limit potential gains if prices rise. Purchasing
futures contracts, purchasing call options and writing put options are
strategies whose returns tend to rise and fall together with securities prices
and can cause losses if prices fall. If securities prices remain unchanged over
time, option writing strategies tend to be profitable while option buying
strategies tend to be unprofitable. The Fund intends to engage in futures
contracts, options on futures contracts or options on stock indexes for bona
fide hedging or other non-speculative purposes, may write covered call options
and purchase put options, and may write covered call options on individual
securities. The Fund will not enter into any leveraged futures transactions.
REPURCHASE AGREEMENTS AND REVERSE REPURCHASE AGREEMENTS: The Fund may acquire
securities subject to repurchase agreements and reverse repurchase agreements.
Repurchase agreements and reverse repurchase agreements involve certain risks.
For a further description of options and futures, repurchase agreements and
reverse repurchase agreements and other investment techniques used by the Fund,
see "Investment Restrictions and Techniques."
- ----------------------------------------
HOW TO BUY SHARES
The Fund offers Class A, Class B and Class C shares for all investors.
Initially, only Class A shares will be sold to officers, directors and
employees of Oppenheimer Capital and its affiliates, their relatives or any
trust, pension, profit sharing or other benefit plan for any of them. Class A
shares are sold with an initial sales charge that declines for larger orders.
Purchases of $1 million or more of Class A shares of the Fund are sold
without an initial sales charge but are subject to a CDSC if held less than
one year. Class B shares are sold without an initial sales charge but are
subject to a CDSC if held for less than six years. Class B shares are
available only to investors purchasing less than $250,000 in the aggregate.
Class C shares are sold without an initial sales charge but are subject to a
CDSC if held less than one year. Each class is described below in greater
detail. The different classes provide you with alternative methods of
acquiring shares and you should determine which class best meets your
individual needs. Dealers may be compensated at different rates for selling
Class A, Class B or Class C shares.
Your initial purchase of either Class A, B or C shares must be made through a
broker or dealer having a sales agreement with Quest
5
<PAGE>
Distributors, an affiliate of Quest Advisors. Subsequent purchases of shares may
also be made through your broker or dealer by mailing your payment to the Fund's
Transfer Agent, State Street Bank and Trust Company ("State Street"), P.O. Box
8505, Boston, MA 02266. During the initial offering period the initial
investment must be at least $10,000. Thereafter, your initial investment must be
at least $1,000 and subsequent investments must be at least $250. There are no
minimums for shares purchased under an Automatic Investment Plan or under
employee benefit plans.
Some investors may qualify to purchase Class A shares at net asset value
without a sales charge. (See "Reduced Sales Charges-- Net Asset Value
Purchases," and "Additional Information--Purchases by Former Shareholders of AMA
Family of Funds and Unified Funds.") Class B and C shares will not be sold to
investors who qualify to purchase Class A shares at net asset value, as
described on pages 7 and 19.
Sales of all classes of shares will be suspended during any period when the
determination of net asset value is suspended, and may be suspended by the Board
of the Fund whenever the Board judges it to be in the best interest of the Fund
to do so. Quest Distributors, in its sole discretion, may accept or reject any
purchase order.
BUYING CLASS A SHARES. Purchases of Class A shares will be processed at the net
asset value next determined after receipt of your purchase order, plus the
applicable front-end sales charge, if any, as set forth in the following table
SALES CHARGE TABLE*--CLASS A SHARES
<TABLE>
<CAPTION>
QUEST FOR VALUE OFFICERS FUND
- ----------------------------------------------------------------------------------
OFFERING PRICE
AS A % OF % OF NET ASSET RE-ALLOWED TO
OFFERING PRICE VALUE PER SHARE SELLING DEALER AMOUNT OF PURCHASE
- ----------------- ------------------- ----------------- -----------------------
<S> <C> <C> <C>
5.50% 5.82% 4.75% Less than $50,000
4.75% 4.99% 4.25% $50,000 - 99,999
4.00% 4.17% 3.50% $100,000 - 249,999
3.00% 3.09% 2.75% $250,000 - 499,999
2.00% 2.04% 1.75% $500,000 - 499,999
** ** ** $1 million or more**
<FN>
- -------------
* The entire sales charge may be re-allowed to dealers who achieve certain
levels of sales or who have rendered coordinated sales support efforts. Such
dealers may be deemed to be "underwriters."
**Purchases of Class A Shares of $1 Million or More
</TABLE>
On purchases by a single purchaser aggregating $1 million or more, the investor
will not pay an initial sales charge, and Quest Distributors will pay authorized
dealers an amount equal to .9 of 1% of the first $2 million of such purchases,
plus .8 of 1% of the next $1 million, plus .35 of 1% on amounts over $3 million.
A CDSC will be imposed on the proceeds of the redemption of shares of the Fund
in amounts aggregating $1 million or more if they are redeemed within 12 months
of the end of the calendar month of their purchase in an amount equal to 1% of
the lesser of (a) the net asset value of the shares at the time of purchase or
(b) the net asset value of the shares at the time of redemption. The CDSC will
be deducted from the redemption proceeds otherwise payable to the shareholder
and will be retained by Quest Distributors.
REDUCED SALES CHARGES: There are several ways you may qualify for reduced sales
charges when buying Class A Shares. You should notify the Transfer Agent or your
Dealer if you qualify.
COMBINED PURCHASE: Purchases by related accounts may be combined to determine
the appropriate sales charge. Related accounts are: all accounts in your name
and/or of your spouse or children under 21 years of age, all accounts of a
fiduciary purchasing for a single
6
<PAGE>
trust, and all accounts for which a single person (e.g., investment advisor,
trust department, etc.) exercises investment discretion. Qualified employee
benefit trusts of an employer and its consolidated subsidiaries will be
considered a single trust.
RIGHTS OF ACCUMULATION: In determining the applicable level of sales charge, the
value of shares you purchase will be added to the greater of cost or market
value of the Class A, B or C shares you hold of any Quest Fund, provided that
any such Class A shares were purchased with a sales charge, were acquired by
exchange for shares on which a sales charge was paid, or were subject to a CDSC.
LETTER OF INTENT: If you intend to purchase shares valued at $50,000 or more
during a 13-month period, you may make the purchase under a Letter of Intent so
that the initial shares you purchase qualify for the reduced sales charge
applicable to the aggregate amount of your projected purchase. Your initial
purchase must be at least 5% of the intended purchase. An appropriate number of
shares will be held by the Transfer Agent to cover any sales charge due if you
purchase less than the indicated amount during the 13-month period.
GROUP AND ASSOCIATION PURCHASES AND PURCHASES BY QUALIFIED RETIREMENT PLANS: The
following table sets forth the applicable sales charge for purchases of Class A
shares made through a single broker or dealer by qualified retirement plans
including 401(k), 403(b) plans, SEP/IRA and IRA plans of a single employer, and
by members of associations formed for any purpose other than the purchase of
securities:
<TABLE>
<CAPTION>
NUMBER OF
ELIGIBLE AS A % OF AS A % OF NET PERCENT OF OFFERING
EMPLOYEES OR OFFERING ASSET VALUE PRICE RE-ALLOWED TO
MEMBERS PRICE PER SHARE SELLING DEALERS
- ---------------- ------------- ------------- -------------------
<S> <C> <C> <C>
9 or less....... 3.00% 3.09% 2.60%
Between 10 & 2.00% 2.04% 1.65%
49.............
Between 50 &
149............ 1.25% 1.27% 1.00%
150 or more..... 0.00%
see "Purchases of Class A shares
of $1,000,000 or more," p. 6
</TABLE>
Purchases made under the Group Purchase provision will qualify for the lower
of the sales charge computed according to the table based on the number of
eligible employees in a plan or members of an association or the sales charge
level under the Rights of Accumulation described above. Purchases by retirement
plans covering 150 or more employees or by associations or groups with 150 or
more members shall be entitled to the sales charge waiver applicable to
purchases of $1 million or more described above. In addition, purchases by
401(k) plans can qualify for this sales charge waiver if, in the opinion of
Quest Distributors, the initial purchase plus projected contributions to be
invested in Quest Funds for the following 12 months will exceed $1,000,000. In
determining the appropriate sales charge level for a 401(k) plan, money invested
in a Quest money market fund (which does not impose a sales charge) shall be
taken into account. Individuals who qualify for reduced sales charges as members
of associations, groups or eligible employees in plans as set forth in the above
table may also purchase shares for their individual or custodial accounts at the
same sales charge level.
NET ASSET VALUE PURCHASES: No sales charge will be applied to the following
transactions in Class A shares: purchases by persons who for at least 60 days
have been directors, trustees, officers or full-time employees of any of the
Funds distributed by Quest Distributors, or of Quest Advisors, Quest
Distributors, or of their affiliates, their relatives or any trust, pension,
profit sharing or other benefit plan for any of them; purchases by any account
advised by Oppenheimer Capital, the parent of Quest Advisors, or by persons who
are directors or trustees of such accounts; purchases made with the proceeds of
maturing principal of any Quest Unit Investment Laddered Trust Series
("QUILTS"); purchases by an employee of a broker-dealer or bank having a dealer
or agency agreement pertaining to Fund shares; purchases by trust companies and
bank trust departments for funds over which they exercise exclusive
discretionary investment authority and charge an account management fee and
which are held in a fiduciary, agency, advisory, custodial or similar capacity;
purchases by registered investment advisors for their clients for whom they
charge an account management fee; accounts opened for shareholders by dealers
where the amounts invested represent the redemption
7
<PAGE>
proceeds from investment companies distributed by an entity other than Quest
Distributors if such redemption has occurred no more than 60 days prior to the
purchase of shares of the Funds and the shareholder paid an initial sales charge
on the redeemed account or was subject to a contingent deferred sales charge.
Shares sold at net asset value will be included in the asset base upon which
payments under the Fund's Distribution Plan and Agreement are determined. The
CDSC does not apply to purchases of Class A shares at net asset value described
herein.
BUYING CLASS B SHARES. Purchases of Class B shares will be processed at the net
asset value next determined after receipt of your purchase order for less than
$250,000. While not subject to a front-end sales charge, Class B shares may be
subject to a CDSC upon redemption.
If Class B Shares of the Fund are redeemed within six years after the end of
the calendar month in which a purchase order for Class B shares was accepted, a
CDSC will be imposed by applying the appropriate percentage indicated below to
the lesser of: (1) the net asset value of such shares at the time of purchase or
(2) the net asset value of such shares at the time of redemption. The CDSC will
be deducted from the redemption proceeds otherwise payable to the shareholder
and will be retained by Quest Distributors. The CDSC to be imposed on such share
redemptions will be assessed according to the following schedule:
<TABLE>
<CAPTION>
YEARS SINCE PURCHASE APPLICABLE CLASS B
ORDER OF LESS THAN CONTINGENT DEFERRED
$250,000 WAS ACCEPTED SALES CHARGE
- ------------------------------ ------------------------
<S> <C>
Up to one year................ 5.00%
One year or more but less than
2 years...................... 4.00%
Two years or more but less
than 4 years................. 3.00%
Four years or more but less
than 5 years................. 2.00%
Five years or more but less
than 6 years................. 1.00%
6 or more years............... None
</TABLE>
CONVERSION OF CLASS B SHARES. Class B shares will automatically convert to Class
A shares of the Fund eight years after the end of the calendar month in which
the purchase order for Class B shares was accepted, on the basis of the relative
net asset values of the two classes and subject to the following terms: Class B
shares acquired through the reinvestment of dividends and distributions
("reinvested Class B shares") will be converted to Class A shares on a pro-rata
basis only when Class B shares not acquired through reinvestment of dividends or
distributions ("purchased Class B shares") are converted. The portion of
reinvested Class B shares to be converted will be determined by the ratio that
the purchased Class B shares eligible for conversion bear to the total amount of
purchased Class B shares in the shareholder's account. For the purposes of
calculating the holding period, Class B shares will be deemed to have been
issued on the sooner of: (a) the date on which the issuance of Class B shares
occurred, or (b) for Class B shares obtained by an exchange or series of
exchanges, the date on which the issuance of the original Class B shares
occurred. This conversion to Class A shares will relieve Class B shares that
have been outstanding for at least eight years (a period of time sufficient for
Quest Distributors to have been compensated for distribution expenses related to
such Class B shares) from the higher ongoing distribution fee paid by Class B
shares. Only Class B shares have this conversion feature. Conversion of Class B
shares to Class A shares is contingent on the continuing availability of a
private letter revenue ruling from the Internal Revenue Service affirming that
such conversion does not constitute a taxable event for the shareholder under
the Internal Revenue Code. If such revenue ruling or an opinion of counsel is no
longer available, conversion of Class B shares to Class A shares would have to
be suspended, and Class B shares would continue to be subject to the Class B
distribution fee until redeemed.
BUYING CLASS C SHARES. Purchases of Class C shares will be processed at the net
asset value next determined after receipt of your purchase order. Class C shares
are not subject to a front-end sales charge, but may be subject to a CDSC upon
redemption.
If Class C shares are redeemed within one year after the end of the calendar
month in which a purchase order for Class C shares was accepted, a CDSC of 1.00%
would be imposed
8
<PAGE>
on the lesser of (1) the net asset value of such shares at the time of purchase
or (2) the net asset value of such shares at the time of redemption. The CDSC
will be deducted from the redemption proceeds otherwise payable to the
shareholder and will be retained by Quest Distributors.
EXEMPTIONS FROM CLASS A, B AND C CDSC. No CDSC will be imposed when a
shareholder redeems Class A, B or C shares in the following instances: (a)
shares or amounts representing increases in the value of an account above the
net cost of the investment due to increases in the net asset value per share;
(b) shares acquired through reinvestment of income dividends or capital gains
distributions; (c) shares acquired by exchange from any Quest Fund, other than a
money market fund, where the exchanged shares would not have been subject to a
CDSC upon redemption; and (d) Class A shares of the Fund purchased in the amount
of $1 million or more if held for more than 12 months, Class B shares held for
more than six years or Class C shares held for more than one year from the end
of the calendar month in which the purchase order was accepted.
The CDSC does not apply to purchases of Class A shares at net asset value
described under "Net Asset Value Purchases" above and will be waived in the case
of redemptions of Class A, B or C shares in connection with (i) distributions to
participants or beneficiaries of plans qualified under Section 401(a) of the
Internal Revenue Code ("IRC") or from custodial accounts under IRC Section
403(b)(7), individual retirement accounts under IRC Section 408(a), deferred
compensation plans under IRC section 457 and other employee benefit plans
("plans"), and returns of excess contributions made to these plans, (ii)
withdrawals under an automatic withdrawal plan where the annual withdrawal does
not exceed 10% of the opening value of the account (only for Class B and C
shares); and (iii) liquidation of a shareholder's account if the aggregate net
asset value of shares held in the account is less than the required minimum. A
shareholder will be credited with any CDSC paid in connection with the
redemption of any Class A, B or C shares if within 90 days after such
redemption, the proceeds are invested in the same Class of shares in the same
and/ or another Quest Fund.
In determining whether the Class A, B or C CDSC is payable, it will be assumed
that shares not subject to a CDSC are redeemed first and that other shares are
then redeemed in the order purchased. No CDSC will be imposed on exchanges to
purchase shares of another Quest Fund although a CDSC will be imposed on shares
of the acquired Quest Fund purchased by exchange of shares subject to a CDSC if
the acquired shares are then redeemed within 24 months if the exchanged shares
were Class A Shares of the Fund, six years if the exchanged shares were Class B
Shares or one year if the exchanged shares were Class C shares after the end of
the calendar month in which the exchanged shares were purchased.
SPECIAL FIDUCIARY RELATIONSHIPS. The CDSC will not apply with respect to
purchases of Class A shares for which the selling dealer is not permitted to
receive a sales load or redemption fee imposed on a shareholder with whom such
dealer has a fiduciary relationship in accordance with provisions of the
Employee Retirement Income Security Act and regulations thereunder. If such
dealer agrees to the reimbursement provision described below, no sales charge
will be imposed on sales of $1,000,000 or more and Quest Distributors will pay
to the selling dealer a commission described above in "Purchases of Class A
Shares of $1 Million or More."
For the period of 13 months from the date of the sales referred to in the
above paragraph, the distribution fee payable by the Fund to Quest Distributors
pursuant to the Fund's Distribution Plan in connection with such shares will be
retained by Quest Distributors. In the event of a redemption of any such shares
within 24 months of purchase, the selling dealer will reimburse Quest
Distributors for the amount of commission paid less the amount of the
distribution fee with respect to such shares.
OTHER DEALER COMPENSATION. After the initial offering, Quest Distributors will
provide additional compensation to dealers in connection with sales of shares of
the Fund and other
9
<PAGE>
mutual funds distributed by Quest Distributors ("Quest Funds") including
promotional gifts (which may include gift certificates, dinners and other
items), financial assistance to dealers in connection with conferences, sales or
training programs for their employees, seminars for the public and advertising
campaigns. In some instances, these incentives may be made available only to
dealers whose representatives have sold or are expected to sell significant
amounts of shares.
- ----------------------------------------
DETERMINING NET ASSET VALUE
The value of shares is determined by adding up the value of all security
holdings and other assets of the Fund, deducting the value of the
liabilities, and dividing the result by the number of shares outstanding. The
value of the Fund's portfolio securities and other assets is based on market
values determined by procedures established by the Board of the Fund. Securities
listed on a national securities exchange or designated as national market system
securities are valued at the last sale price or, if there has been no sale that
day, at the last bid price. Debt and equity securities actively traded in the
over-the-counter market but not designated as national market system securities
are valued at the most recent bid price. Valuations may be provided by a pricing
service or from independent securities dealers. Short-term investments with
remaining maturities of less than 60 days are valued at amortized cost so long
as the Board determines in good faith that such method reflects fair value.
Other securities are valued by methods that the Board of the Fund believes
accurately reflect fair value. The calculation is made at the close of the
regular trading session ("Close") of the New York Stock Exchange ("NYSE")
(currently 4:00 p.m. Eastern Time) each day the NYSE is open. The value that is
calculated is known as the net asset value per share, which will fluctuate
daily. Although the legal rights of Class A, B and C shares are identical, the
different expenses borne by each class may result in differing net asset values
and dividends for each Class.
Generally, trading in foreign securities is substantially completed each day
at various times prior to the Close of the NYSE. The values of such securities
used in computing the net asset value of the Fund's shares are determined as of
such times. Foreign currency exchange rates are also generally determined prior
to the Close of the NYSE. If events materially affecting the value of such
securities and exchange rates occur between the time of such determination
and/or the Close of the NYSE, then these securities will be valued at their fair
value as determined in good faith under procedures established by and under the
supervision of the Fund's Board. See "Determination of Net Asset Value" in the
SAI.
- ----------------------------------------
HOW TO REDEEM SHARES
You may redeem shares on any day the Fund is open for business--normally
when the New York Stock Exchange ("NYSE") is open--using the Procedures
described below. See "Determination of Net Asset Value" in the SAI for the days
on which the NYSE will be closed.
DEALER REDEMPTION: Your redemption requests may be handled by your securities
dealer who is responsible for providing the necessary documentation to the
Transfer Agent and who may impose a charge for its services. Requests received
by your dealer prior to the Close of the NYSE and transmitted to the Transfer
Agent by its close of business that day will receive that day's net asset value
per share.
REGULAR REDEMPTION: You may send a redemption request by mail to the Transfer
Agent and will receive the net asset value of the shares being redeemed which is
next determined after your request is received in "good form". "Good form" means
the request is signed in the name in which the account is registered and the
signature is guaranteed by an eligible guarantor. Eligible guarantors include
member firms of a national securities exchange, banks, savings associations and
credit unions, as defined by the Federal Deposit Insurance Act. Special
requirements may exist for corporations, trusts and similar accounts. If you
hold stock certificates,
10
<PAGE>
you should call the Transfer Agent for instructions on the appropriate
redemption procedure.
EXPEDITED REDEMPTIONS: You and your account representative will automatically
receive the ability to redeem or exchange shares by telephone unless you
indicate otherwise on the application. You may also authorize certain other
expedited redemption procedures. BY TELEPHONE (minimum $1,000). The proceeds of
redemption will either be mailed to you or wired to the account of any bank that
is a member of the Federal Reserve wire system. This account must be designated
on your application. If you change the bank account, you must let us know in
writing with a signature guarantee. BY AUTOMATIC WITHDRAWAL PLAN (minimum $50).
If your account has a value of at least $5,000 you may arrange an automatic
withdrawal plan so that the amount you specify (minimum $50) will be sent to you
on a monthly or quarterly basis. Dividends and distributions on your shares must
be reinvested.
Your redemption proceeds, from which any applicable CDSC will have been
deducted, will normally be mailed or wired the day after your redemption is
processed. Payments for redemption of shares that you purchased by check may be
delayed until the check has cleared, which may take up to 15 days. To avoid this
collection period, you can wire federal funds to pay for purchases.
REINSTATEMENT PRIVILEGE: If you reinvest in a Quest Fund within 60 days of
redemption, you will be reinstated as a shareholder with the same privileges
regarding the non-payment of sales charges that apply to exchanges. You may
exercise this privilege only once each calendar year. The redemption may produce
a gain or loss for tax purposes.
The Fund may suspend redemption procedures and postpone redemption payments
during any period when the NYSE is closed other than for customary weekend or
holiday closing or the SEC has determined an emergency exists or has otherwise
permitted such suspension or postponement. The Fund reserves the right to redeem
your account if its value is less than $500 due to redemptions. Your Fund will
give you 30 days' notice to increase your account value to at least $500.
Redemption proceeds will be mailed.
- ----------------------------------------
EXCHANGING SHARES
An exchange represents the sale of shares of one fund and the purchase of
shares of another, which may produce a gain or loss for tax purposes.
Your exchange will be processed at the net asset value next determined after
the Transfer Agent receives your exchange request. A service fee (currently $5)
will be charged for administrative services in connection with an exchange. You
will receive a prospectus along with your confirmation if you exchange into a
Fund not offered in this Prospectus. The exchange feature may be modified or
discontinued at any time, upon notice to shareholders in accordance with
applicable rules adopted by the Securities and Exchange Commission ("SEC"). Your
exchange may be processed only if the shares of the fund to be acquired are
eligible for sale in your state and if the amount of your transaction meets the
minimum requirements for that fund. The exchange privilege is only available in
states in which it may be legally offered.
EXCHANGES OF CLASS A SHARES: You may exchange your Class A shares for Class A
shares of any mutual fund (except as described below with respect to exchanges
from the Global Income Fund) distributed by Quest Distributors ("Quest Fund")
and for shares of Quest Cash Reserves, Inc. ("QCR"), a single-class money market
fund with five different portfolios. You need not pay any sales charge
differential between Quest Funds on the exchange of Class A shares purchased
with a front-end sales charge if:
1. You have held the shares being exchanged
for at least 31 days;
2. The shares being exchanged were acquired
through the reinvestment of dividends or distributions; or
3. The shares being exchanged were
themselves the proceeds of an exchange from a fund with the same or higher
sales charge.
11
<PAGE>
If you exchange Class A shares of the Global Income Fund into another Quest
Fund within six months of your purchase of Class A shares of the Global Income
Fund, you will have to pay the difference between the sales charge paid on your
purchase of Class A shares of the Global Income Fund and the sales charge that
would have been charged if you had originally purchased Class A shares of the
Fund into which you are exchanging.
EXCHANGES OF CLASS B SHARES: Class B shares of all Quest Funds are exchangeable
for Class B shares of any other Quest Fund. Class B shares of any Quest Fund
cannot be exchanged for Class A or C shares of any Quest Fund.
EXCHANGES OF CLASS C SHARES: Class C shares of all Quest Funds are exchangeable
for Class C shares of any other Quest Fund. Class C shares of any Quest Fund
cannot be exchanged for Class A or B shares of any Quest Fund.
Because excessive trading (including short-term "market timing" trading) can
hurt a Fund's performance, the Fund may refuse any exchange orders (1) if they
appear to be market-timing transactions involving significant portions of a
Fund's assets or (2) from any shareholder account if the shareholder or his or
her broker-dealer has been advised that previous use of the exchange privilege
is considered excessive. Accounts under common ownership or control, including
those with the same taxpayer ID number and those administered so as to redeem or
purchase shares based upon certain predetermined market indicators, will be
considered one account for this purpose.
------------------------
Quest Distributors and the Fund's transfer agent will employ reasonable
procedures for telephone redemptions and exchanges to confirm that the
instructions received from shareholders or their account representatives are
genuine, and if they do not, Quest Distributors or the transfer agent may be
liable for any losses due to unauthorized or fraudulent instructions.
Shareholders will be required to provide their name, address, social security
number and other identifying information. Account representatives must identify
themselves and their firm and Quest Distributors will confirm that such firm has
a valid selling agreement with Quest Distributors and that the representative is
authorized to act on behalf of the firm.
IF YOU HAVE ANY QUESTIONS ON EXCHANGE OR REDEMPTION PROCEDURES, CALL YOUR DEALER
OR OUR TRANSFER AGENT.
- ----------------------------------------
INVESTMENT RESTRICTIONS AND TECHNIQUES
The Fund is subject to certain investment restrictions which are
fundamental policies changeable only by shareholder vote. The restrictions
in a, b and c below do not apply to U.S. government securities. The Fund may not
(except that in the future the Fund may invest all or part of its assets in an
open-end management investment company with substantially the same respective
investment objective and restrictions): (a) Purchase more than 10% of the voting
securities of any one issuer (with respect to 75% of its respective total
assets); (b) Purchase more than 10% of any class of security of any issuer, with
all outstanding debt securities and all preferred stock of an issuer each being
considered as one class; (c) Concentrate its investments in any particular
industry, but if deemed appropriate for attaining its investment objective, the
Fund may invest up to 25% of its total assets (valued at the time of investment)
in any one industry classification used by the Fund for investment purposes (for
this purpose, a foreign government is considered an industry). Concentration of
investment in securities of one issuer may tend to increase a Fund's financial
risk (See "Risk Factors," p.3); (d) Borrow money in excess of 33 1/3% of the
value of the Fund's total assets; the Fund may borrow only from banks and only
as a temporary measure for extraordinary or emergency purposes and will make no
additional investments while such borrowings exceed 5% of the total assets; and
(e) Invest more than 15% of the Fund's total assets in illiquid securities,
including securities for which there is no readily available market, repurchase
agreements which have a maturity
12
<PAGE>
of longer than seven days, securities subject to legal or contractual
restrictions and certain over-the-counter options. Notwithstanding investment
restriction (e) above, the Fund may purchase securities which are not registered
under the Securities Act of 1933 ("1933 Act") but which can be sold to
"qualified institutional buyers" in accordance with Rule 144A under the 1933
Act. Any such security will not be considered illiquid so long as it is
determined by the Board of Trustees or Quest Advisors, acting under guidelines
approved and monitored by the Board, which has the ultimate responsibility for
any determination regarding liquidity, that an adequate trading market exists
for that security. This investment practice could have the effect of increasing
the level of illiquidity in the Fund during any period that qualified
institutional buyers become uninterested in purchasing these restricted
securities. The ability to sell to qualified institutional buyers under Rule
144A is a recent development and it is not possible to predict how this market
will develop. The Board will carefully monitor any investments by the Fund in
these securities. Other investment restrictions are described in the SAI.
The investment techniques or instruments described below are used for the
investment program of the Fund.
REPURCHASE AGREEMENTS AND REVERSE REPURCHASE AGREEMENTS: The Fund may acquire
securities subject to repurchase agreements. Under a typical repurchase
agreement, the Fund acquires a debt security for a relatively short period
(usually for one day and very seldom for more than one week) subject to an
obligation of the seller to repurchase (and the Fund's obligation to resell) the
security at an agreed-upon higher price, thereby establishing a fixed investment
return during the holding period. Pending such repurchase, the seller of the
instrument maintains securities as collateral equal in market value to the
repurchase price. Repurchase agreements may be characterized as loans
collateralized by the underlying securities.
In the event a seller defaulted on its repurchase obligation, the Fund might
suffer a loss to the extent that the proceeds from the sale of the collateral
were less than the repurchase price. In the event of a seller's bankruptcy, a
Fund might be delayed in, or prevented from, selling the collateral for the
Fund's benefit.
The Fund may enter into reverse repurchase agreements. Under a reverse
repurchase agreement, the Fund sells securities and agrees to repurchase them at
a mutually agreed date and price. At the time the Fund enters into a reverse
repurchase agreement, it will establish and maintain a segregated account with
an approved custodian containing liquid high grade securities having a value not
less than the repurchase price (including accrued interest). Reverse repurchase
agreements involve the risk that the market value of the securities retained in
lieu of sale by the Fund may decline more than or appreciate less than the
securities the Fund has sold but is obligated to repurchase. In the event the
buyer of securities under a reverse repurchase agreement files for bankruptcy or
becomes insolvent, such buyer or its trustee or receiver may receive an
extension of time to determine whether to enforce the Fund's obligation to
repurchase the securities and the Fund's use of the proceeds of the reverse
repurchase agreements may effectively be restricted pending such decisions.
Reverse repurchase agreements create leverage, a speculative factor, and will be
considered borrowings for purposes of the Fund's limitation on borrowing.
LOANS OF PORTFOLIO SECURITIES: The Fund may lend portfolio securities if
collateral (cash, U.S. Government or agency obligations or letters of credit)
securing such loans is maintained daily in an amount at least equal to the
market value of the securities loaned and if the Fund does not incur any fees
(except transaction fees of the custodian bank) in connection with such loans.
The value of the securities loaned, if any, is not expected to exceed 33 1/3% of
the value of the total assets of the Fund. There is a risk that the borrower of
the securities may default and the Fund may have difficulty in reacquiring the
loaned securities.
OPTIONS AND FUTURES: The Fund may buy and sell options on stock indexes, futures
13
<PAGE>
contracts and options on futures to hedge its investments against changes in
value or as a temporary substitute for purchases or sales of actual securities.
The Fund may write covered call options on individual securities. When the Fund
anticipates a significant market or market sector advance, the purchase of a
futures contract affords a hedge against not participating in the advance at a
time when the Fund is not fully invested ("anticipatory hedge"). Such a purchase
of a futures contract would serve as a temporary substitute for the purchase of
individual securities, which may be purchased in an orderly fashion once the
market has stabilized. As individual securities are purchased, an equivalent
amount of futures contracts could be terminated by offsetting sales. The Fund
may sell futures contracts in anticipation of or in a general market or market
sector decline or increase in interest rates that may adversely affect the
market value of the Fund's securities
("defensive hedge"). To the extent that the Fund's portfolio of securities
changes in value in correlation with the underlying security or index, the sale
of futures contracts would substantially reduce the risk to the Fund of a market
decline and by so doing, provide an alternative to the liquidation of securities
positions in the Fund with attendant transaction costs. All options purchased or
sold by the Fund will be traded on a U.S. or foreign commodities exchange or
will result from separate, privately negotiated transactions with a primary
government securities dealer recognized by the Board of Governors of the Federal
Reserve System or with other broker-dealers approved by the Fund's Board.
Options on securities, futures contracts and options on futures contracts that
are traded on foreign exchanges are subject to the risk of governmental action
affecting trading in or the prices of foreign currencies or securities. The
value of such positions also could be adversely affected by (i) other complex
foreign political and economic factors, (ii) lesser availability than in the
United States of data on which to make trading decisions (iii) delays in the
Fund's ability to act upon economic events occurring in foreign markets during
nonbusiness hours in the United States, (iv) the imposition of different
exercise and settlement terms and procedures and margin requirements than in the
United States, (v) lesser trading volume and (vi) in certain circumstances,
currency fluctuations. In addition, the Fund may write covered call options on
individual securities.
So long as Commodities Futures Trading Commission rules so require, the Fund
will not enter into any financial futures or options contract unless such
transactions are for bona-fide hedging purposes or for other purposes only if
the aggregate initial margins and premiums required to establish such non-
hedging positions would not exceed 5% of the liquidation value of the Fund's
total assets. A call option written or sold by the Fund is "covered" if the Fund
owns the underlying security covered by the call or has an absolute and
immediate right to acquire that security without additional cash consideration
(or for additional cash consideration held in a segregated account by its
custodian) upon conversion or exchange of other securities held in its
portfolio. A call option is also covered if the Fund holds a call on the same
security and in the same principal amount as the call written where the exercise
price of the call held (a) is equal to or less than the exercise price of the
call written or (b) is greater than the exercise price of the call written if
the difference is maintained by the Fund in cash, U.S. Government Securities or
other liquid high-grade debt securities in a segregated account with its
custodian. A put option written or sold by the Fund is "covered" if the Fund
maintains cash, U.S. Government securities or other liquid high-grade debt
securities with a value equal to the exercise price in a segregated account with
its custodian, or else holds a put on the same security and in the same
principal amount as the put written where the exercise price of the put held is
equal to or greater than the exercise price of the put written. As a result, the
Fund forgoes the opportunity of trading the segregated assets or writing calls
against those assets. There may not be a complete correlation between the price
of options or futures and the market prices of the underlying securities. The
Fund may lose the ability to profit from an increase in the market value of the
underlying securities or may lose its premium payment. If due to a lack of a
market the Fund could not effect a closing
14
<PAGE>
purchase transaction with respect to an OTC option, it would have to hold the
callable securities until the call lapsed or was exercised.
WHEN-ISSUED AND DELAYED DELIVERY SECURITIES AND FIRM COMMITMENTS: The Fund may
purchase securities on a "when-issued" or "delayed delivery" basis or may either
purchase or sell securities on a "firm commitment basis", whereby the price is
fixed at the time of commitment but delivery and payment may be as much as a
month or more later. The underlying securities are subject to market
fluctuations and no interest accrues prior to delivery of the securities. The
Fund will maintain cash, U.S. Government securities or other liquid high grade
debt obligations in a segregated account with its custodian bank equal in value
to its obligations to purchase such securities.
RIGHTS AND WARRANTS: The Fund may invest up to 5% of its total assets in rights
or warrants which entitle the holder to buy equity securities at a specific
price for a specific period of time. The 5% limitation is not a fundamental
policy.
- ----------------------------------------
DIVIDENDS AND DISTRIBUTIONS
The Fund declares and pay dividends from net investment income on an
annual basis following the end of its fiscal year (October 31). The Fund
may at times make payments from sources other than income or net capital gains.
Payments from such sources would, in effect, represent a return of each
shareholders's investment. All or a portion of such payments would not be
taxable to shareholders.
Distributions from net long-term capital gains, if any, for the Fund normally
are declared and paid annually, subsequent to the end of its fiscal year.
Distributions from net short-term capital gains, if any, will be made annually.
Short-term capital gains include the gains from the disposition of securities
held less than one year, a portion of the premiums from expired put and call
options written by the Fund and net gains from closing transactions with respect
to such options. If required by tax laws to avoid excise or other taxes,
dividends and/or capital gains distributions may be made more frequently.
Dividends paid by the Fund with respect to Class A, B and C shares, to the
extent any dividends are paid, will be calculated in the same manner at the same
time on the same day, with each class bearing its own distribution and other
class-related expenses. Accordingly, the higher distribution fees paid by Class
B and C shares and the higher resulting expense ratio will cause such shares to
be paid lower per share dividends than those paid on Class A shares. However, a
Class B or C shareholder will receive more shares at the time of purchase than a
Class A shareholder investing the same dollar amount since no sales charge is
deducted from the amount invested in Class B or C shares.
REINVESTMENT OPTIONS: You can receive your dividends and capital gains
distributions either in cash or in additional Fund shares without a sales
charge. You will be subject to tax on such distributions. See the SAI for a
description of how to change your election.
- ----------------------------------------
TAX STATUS
The Fund intends to qualify for taxation as regulated investment companies
under the provisions of Subchapter M of the Internal Revenue Code. As
such, the Fund will not be taxed on its net investment income or net realized
capital gains, if any, to the extent they have been distributed to their
shareholders. Distributions from the Fund's income and short-term capital gains
are taxed as ordinary income while long-term capital gains distributions by the
Fund are taxed to you as long-term capital gains, regardless of how long you
have held your shares. For purposes of Federal income tax, futures contracts and
certain options, if any, held by the Fund at the end of its fiscal year
generally will be treated as having been sold at market value. As a general rule
any gain or loss on such contracts will be treated as 60% long-term and 40%
short-term. See the SAI for more detail on the tax aspects of Hedging
Instruments. Dividends will qualify for the dividends received deduction for
corporations only to the extent of the Fund's qualifying
15
<PAGE>
dividend income. Shortly after the end of each calendar year, the Fund will send
you a statement of the amount and nature of net income and capital gains.
Dividends, interest and gains on foreign securities may give rise to withholding
and other taxes imposed by foreign countries, reducing the amount distributable
to you. Tax conventions between certain countries and the United States may
reduce or eliminate such taxes.
The above information is a summary of the tax treatment that will be applied
to the Fund and its distributions. If you have any questions, you should contact
your tax adviser, particularly in connection with state and local taxes.
- ----------------------------------------
INVESTMENT MANAGEMENT AGREEMENT
The day-to-day management of the Fund is the responsibility of Quest
Advisors, operating under the supervision of the Board of Trustees of the
Fund. Quest Advisors is a majority-owned subsidiary of Oppenheimer Capital, a
registered investment advisor, whose employees perform all investment
advisory services provided to the Fund by Quest Advisors. For its services
the Fund is authorized to pay Quest Advisors a monthly fee at the annual rate
of 1.00% of the Fund's daily net assets. This fee is higher than that paid by
most other investment companies. The Fund also is authorized to reimburse
Quest Advisors on a cost basis for bookkeeping and accounting services
performed on behalf of the Fund.
The Fund is responsible for bearing certain expenses attributable to the Fund
but not to a particular class ("Fund Expenses"), including deferred organization
expenses; taxes; registration fees; typesetting of prospectuses and financial
reports required for distribution to shareholders; brokerage commissions; fees
and related expenses of trustees or directors who are not interested persons;
legal, accounting and audit expenses; custodian fees; insurance premiums; and
trade association dues. Fund Expenses will be allocated based on the total net
assets of each class.
Each class of shares of the Fund will also be responsible for certain expenses
attributable only to that class ("Class Expenses"). These Class Expenses may
include distribution and service fees, transfer and shareholder servicing agent
fees, professional fees, printing and postage expenses for materials distributed
to current shareholders, state registration fees and shareholder meeting
expenses. Such items are considered Class Expenses provided such fees and
expenses relate solely to such Class.
A portion of printing expenses, such as typesetting costs, will be a Fund
Expense, while other printing expenses, such as the number of copies printed,
will be considered Class Expenses.
Quest Advisors will assume expenses of each class of the Fund in the event
that aggregate ordinary operating expenses incurred in any fiscal year exceed
the most restrictive expense limitations imposed upon the Fund in states in
which shares are then eligible for sale. Currently the most restrictive expense
limitation, which excludes certain distribution fees from operating expenses, is
2 1/2% of the first $30 million of average net assets, 2% of the next $70
million of average net assets and 1 1/2% of the remaining average net assets.
Quest Advisors has agreed to waive its entire management fee during the initial
offering period of the Fund's shares; this waiver is voluntary and may be
discontinued at any time.
Oppenheimer Financial Corp., a holding company holds a 33% interest in
Oppenheimer Capital, a registered investment advisor, and Oppenheimer Capital,
L.P., a Delaware limited partnership whose units are traded on the New York
Stock Exchange and of which Oppenheimer Financial Corp. is the sole general
partner, owns the remaining 67% interest. Oppenheimer Capital has operated as an
investment advisor since 1968.
- ----------------------------------------
DISTRIBUTION PLAN
Each Class of shares of the Fund has adopted a Distribution Plan and
Agreement (the "Plan(s)") pursuant to Rule 12b-1 under the he Investment
Company
16
<PAGE>
Act of 1940. Under the Plans, Class A, B and C shares of the Fund are authorized
to pay Quest Distributors a distribution fee for expenses incurred in connection
with the distribution of shares of the Fund and for shareholder servicing. Quest
Distributors has agreed to waive its distribution fee during the initial
offering period of the Fund's shares; the waiver is voluntary and may be
discontinued at any time.
CLASS A SHARES. Class A shares of each Fund are authorized to pay Quest
Distributors a distribution fee at the annual rate of .25% of the Fund's average
daily net assets. The Fund's Class A Shares also are authorized to pay a service
fee at the annual rate of .25% of average daily net assets.
CLASS B AND C SHARES. Class B and C shares of the Fund are authorized to pay
Quest Distributors a distribution fee at the annual rate of .75% of the Fund's
average daily net assets. Class B and C shares of the Fund are also authorized
to pay a service fee at the annual rate of .25% of each Fund's average daily net
assets.
USE OF DISTRIBUTION AND SERVICE FEES. All or a portion of the distribution fees
paid by either Class A, B or C shares may be used by Quest Distributors to pay
costs of printing reports and prospectuses for potential investors and all or a
portion of the distribution and/or service fees may be paid to broker-dealers or
others for the provision of personal continuing services to shareholders,
including such matters as responding to shareholder inquiries concerning the
status of their accounts and assistance in account maintenance matters such as
changes in address. Payments under the Plan are not limited to amounts actually
paid or expenses actually incurred by Quest Distributors but cannot exceed the
maximum rate set by the Plan or by the Board. It is, therefore, possible that
Quest Distributors may realize a profit in a particular year as a result of
these payments. The Plans have the effect of increasing the Fund's expenses from
what they otherwise would be. The Board of the Fund reviews the Fund's
distribution payments and may reduce or eliminate the fee at any time without
further obligation of the Fund. Investors should understand that the purpose and
function of the distribution fee and CDSC applicable to Class B and C shares are
the same as the sales charge and distribution fee applicable to Class A shares,
i.e., to compensate Quest Distributors for expenses incurred in distributing
shares of the Fund. The SAI contains more information about the Investment
Management Agreement and the Plans.
- ----------------------------------------
PORTFOLIO TRANSACTIONS AND TURNOVER
Quest Advisors may select its affiliate Oppenheimer & Co., Inc. ("Opco"),
a registered broker-dealer to execute transactions for the Fund, provided
that the commissions, fees or other remuneration received by Opco are reasonable
and fair compared to those paid to other brokers in connection with comparable
transactions. When selecting broker-dealers other than Opco, Quest Advisors may
consider their record of sales of shares of the Fund. (For a further discussion
of portfolio trading, see the SAI, "Investment Objectives, Policies and
Restrictions"). Although Quest Advisors cannot accurately predict the Fund's
annual turnover rate, it is anticipated that the Fund will have an annual
turnover rate (excluding turnover of securities having a maturity of one year or
less) of 100% or less. Brokerage costs are not incurred in connection with debt
obligations or U.S. government securities transactions; however, mark-ups to
dealers are paid. These may be considered transaction costs which will be
increased by any increase in turnover rate. Options and futures may increase the
turnover rate. To the extent that higher portfolio turnover increases capital
gains, more taxes will be payable. See "Tax Status".
- ----------------------------------------
ADDITIONAL INFORMATION
ORGANIZATION OF THE FUNDS. The Fund is a portfolio of Quest for Value Family
of Funds (the "Trust"), an open-end management investment company organized
as a Massachusetts business trust on April 17, 1987. The Trust's other
portfolios are the Small Capitalization, U.S. Government Income,
17
<PAGE>
Investment Quality Income, Opportunity, Growth and Income, National Tax-Exempt,
California Tax-Exempt and New York Tax-Exempt Funds. The Trust may establish
additional portfolios which may have different investment objectives from those
stated in this prospectus.
The Fund is not required to hold annual shareholder meetings, although special
meetings may be called as required by applicable law or as requested in writing
by holders of 10% or more of the outstanding shares of the Fund for the purpose
of voting upon the question of removal of a director or trustee. The Fund will
assist shareholders in communicating with one another in connection with such a
meeting. For matters affecting only one portfolio of Quest for Value Family of
Funds, only the shareholders of that portfolio are entitled to vote. For matters
affecting all the portfolios, but affecting them differently, separate votes by
portfolio are required. No stock certificates will be issued unless specifically
requested in writing.
Under Massachusetts law shareholders of the Trust could, in certain
circumstances, be held personally liable as partners for obligations of the
Trust. The Declaration of Trust contains an express disclaimer of shareholder
liability for acts or obligations of the Trust and its portfolios and requires
that notice of such disclaimer be given in each instrument entered into or
executed by the Trust on behalf of its portfolios. The Declaration of Trust also
provides indemnification out of the Trust's property for any shareholder held
personally liable for any of the obligations of the Trust. Thus, the risk of
loss to a shareholder from being held personally liable for the obligations of
the Trust is limited to the unlikely circumstance in which the Trust would be
unable to meet its obligations.
Each class of shares represents identical interests in the applicable Fund's
investment portfolio. As such, they have the same rights, privileges and
preferences, except with respect to the: (a) designation of each class, (b)
effect of the respective sales charges, if any, for each class, (c) distribution
fees borne by each class, (d) expenses allocable exclusively to each class, (e)
voting rights on matters exclusively affecting a single class and (f) exchange
privilege of each class.
PERFORMANCE INFORMATION: From time to time the Fund may advertise yield and
total return figures, based on historical earnings. The figures are not intended
to indicate future performance. "Yield" is calculated by dividing the net
investment income for the stated period (exclusive of gains, if any, from
options and financial futures transactions) by the value, at maximum offering
price on the last day of the period, of the average number of shares entitled to
receive dividends during the period. The yield formula assumes that net
investment income is earned at a constant rate and reinvested semi-annually.
"Total Return" refers to the average annual compounded rates of return over some
representative period that would equate an initial amount invested at the
beginning of a stated period to the ending redeemable value of the investment,
after giving effect to the reinvestment of all dividends and distributions and
deductions of expenses during the period. The Fund also may advertise its total
return over different periods of time by means of aggregate, average, year by
year or other types of total return figures. In addition, reference in
advertisements may be made to ratings and rankings among similar funds by
independent evaluators such as Lipper Analytical Services, Inc. or Morningstar
and the performance of the Fund may be compared to recognized indices of market
performance. Performance data will be computed separately for each Class of
shares in accordance with formulas specified by the SEC.
POSSIBLE CONFLICTS OF INTEREST BETWEEN CLASSES. The Board of the Fund has
determined that currently no conflict of interest exists between Class A, B
and/or C shares of the Fund. On an ongoing basis, the Board shall monitor the
Fund for the existence of any material conflicts between the interests of the
classes of outstanding shares. The Board shall take such action as is reasonably
necessary to eliminate any such conflicts that may develop, up to and including
establishing a new Fund.
CUSTODIAN, TRANSFER AGENT AND SHAREHOLDER SERVICING AGENT. The custodian of the
assets,
18
<PAGE>
transfer agent and shareholder servicing agent for the Fund is State Street Bank
and Trust Company, whose principal business address is P.O. Box 8505, Boston, MA
02266. Cash balances of the Fund with the Custodian in excess of $100,000 are
unprotected by Federal deposit insurance. Such uninsured balances may at times
be substantial.
SHAREHOLDER INQUIRIES. You may telephone 1-800-232-FUND for inquiries concerning
the Fund, including purchase and sale of shares of the Fund, as well as
inquiries concerning dividends and account statements. If you prefer, you may
write to Quest for Value Shareholder Services, P.O. Box 3567, Church Street
Station, New York, NY, 10277-1296. Written inquiries concerning management and
investment policies of the Fund may be directed to Quest for Value Advisors, One
World Financial Center, New York, New York 10281.
SHAREHOLDER SERVICING AGENT FOR CERTAIN SHAREHOLDERS. Unified Management
Corporation (1-800-346-4601) is the shareholder servicing agent for former
shareholders of the AMA Family of Funds and clients of AMA Investment Advisers,
L.P. who acquire shares of any Quest Fund, and for former shareholders of the
Unified Funds and Liquid Green Trusts, accounts which participated or
participate in a retirement plan for which Unified Investment Advisers, Inc. or
an affiliate acts as custodian or trustee, accounts which have a Money Manager
brokerage account, and other accounts for which Unified Management Corporation
is the dealer of record.
SPECIAL ARRANGEMENTS FOR FORMER SHAREHOLDERS OF AMA FAMILY OF FUNDS AND UNIFIED
FUNDS:
PURCHASES BY FORMER SHAREHOLDERS OF AMA FAMILY OF FUNDS. All shareholders of the
AMA Family of Funds who acquired shares of any Quest Funds pursuant to the
combination of a Quest Fund with a portfolio of the AMA Family of Funds who were
shareholders of the AMA Family of Funds on February 28, 1991, will be able to
make future purchases of Class A shares of the Funds at net asset value without
a sales charge, provided they continuously have owned shares of a Quest Fund.
PURCHASES BY FORMER SHAREHOLDERS OF THE UNIFIED FUNDS. Shareholders who acquired
shares of any Quest Fund pursuant to the combination of several Quest Funds
(including the Growth and Income and Quest for Value Funds) with portfolios of
the Unified Funds will be able to make future purchases of Class A shares of any
Quest Fund at net asset value without a sales charge, provided that such
shareholders continuously have owned shares of a Quest Fund subsequent to their
acquisition of shares of a Quest Fund in the above described transactions.
REDEMPTIONS BY FORMER SHAREHOLDERS OF AMA FAMILY OF FUNDS AND UNIFIED
FUNDS. While they have no present intention to do so, in the event that Quest
Distributors imposes a redemption fee in the future, no redemption fees will be
imposed upon redemption of shares of any Quest Fund by former shareholders of
the Unified Funds who are entitled to purchase Class A shares of shares of Quest
Funds at net asset value (see Purchases by Former Shareholders of the Unified
Funds, above).
EXCHANGES BY FORMER SHAREHOLDERS OF AMA FAMILY OF FUNDS AND UNIFIED FUNDS. All
former shareholders of the AMA Family of Funds who acquired shares of any Quest
Fund pursuant to the combination of a Quest Fund with a portfolio of the AMA
Family of Funds who were shareholders of the AMA Family of Funds on February 28,
1991 and former shareholders of the Unified Funds who qualify to purchase shares
of Quest Funds at net asset value (see Purchases by Former Shareholders of the
Unified Funds), will be able to make exchanges into any other Quest Fund without
a sales charge provided they continuously own shares of a Quest Fund. They will
pay a service fee (currently $5) for administrative services in connection with
an exchange into a non-money market fund.
19
<PAGE>
APPLICATION TERMS AND CONDITIONS
IMPORTANT INFORMATION ABOUT TAXPAYER IDENTIFICATION NUMBERS. Because of
important changes made to the Internal Revenue Code, we must be certain that we
have a record of your correct Social Security Number or other taxpayer
identification number. If you have not certified that you have provided us with
the correct number, your account will be subject to special Federal income tax
withholding (called "backup withholding"); the law will then require us to
withhold 31% of each taxable dividend or capital gain distribution paid to you
in cash or reinvested in your account and will require us to withhold 31% of any
redemption. The amount withheld is paid to the Internal Revenue Service toward
the amount of Federal income taxes you owe. The Funds will not return to you an
amount withheld due to your failure to provide a correct certified number. In
addition, you may be subject to a $50.00 I.R.S. penalty. THEREFORE, PLEASE
INCLUDE YOUR CORRECT SOCIAL SECURITY NUMBER OR TAXPAYER IDENTIFICATION NUMBER ON
EACH FUND APPLICATION.
The following sets forth examples of what identification number to list:
<TABLE>
<CAPTION>
TYPE OF ACCOUNT TAXPAYER NUMBER TO BE
REGISTRATION USED
- ------------------------ ------------------------
<S> <C>
Individual Account Social Security Number
of Applicant
Joint Account Social Security Number
of Person Reporting Tax
Custodian Account for Social Security Number
Minor of a Minor
Corporation, Taxpayer Identification
Partnership, Trust, Number
Estate, Pension, Broker,
Etc.
Nonresident Alien None Required
</TABLE>
LETTER OF INTENT. Shares currently owned can be applied toward completion of a
Letter of Intent and will be valued at net asset value on the effective date.
That value will remain as such for the life of this Letter of Intent. Only
shares purchased after the effective date (which can be up to 90 days prior to
signing) can qualify for the reduced offering price.
Shares equal to 5% of the dollar amount specified in the Letter of Intent will
be retained by the Transfer Agent by placing a restriction against transfer or
redemption of such shares, until the total purchases equal the aggregate amount
specified in the Letter, or, if the total purchases are less than such amount,
until the additional sales charge is paid. At that time, the shares will be
released. However, purchases of shares disposed of prior to completion of the
purchase requirement under the Letter of Intent will be disregarded in
determining the amount required to complete the Investment Commitment.
If the intended investment is not completed, the purchaser must pay Quest
Distributors an amount equal to the difference between the amounts paid for
these purchases and the amounts that would have been paid in applicable sales
charges. If the shareholder does not pay the additional amount within 20 days
after written request by Quest Distributors or the Investor's broker, Quest
Distributors will redeem an appropriate number of the retained shares that will
realize the additional amount. Quest Distributors is hereby and irrevocably
appointed attorney to give instructions to redeem any or all of such retained
shares, with full power of substitution in the premises.
The registered owner, whether or not the person who signed the Letter or
purchased the shares (for example, the donee of a gift), holds the shares
registered in his or her name subject to the terms of the Letter of Intent.
Share purchases of Quest Cash Reserves, Inc. and those of other Quest funds
made without a sales charge are not eligible to be included.
A Letter of Intent must be referred to by any broker when placing orders for
the purchaser or any related parties. Quest Distributors must be notified of any
change in the broker of record.
WITHDRAWAL PLAN PROVISIONS. Periodic withdrawal payments will be made by
redemption of shares held in uncertificated form two business days before the
end of the month. Payments will be mailed on the first business day of the next
month. Redemption of shares
20
<PAGE>
will reduce or may even liquidate your account. For this reason, payments cannot
be considered a yield or income on the Investment. Income dividends and capital
gains distributions will be received in shares at net asset value. Total payout
option involves payments of varying amounts. Each payment is calculated by
dividing the current net asset value of the shares in the account by the number
of payments remaining to the end of the period selected. Payments from the total
payout option will cease at the end of the period selected and the account will
be completely exhausted.
You may terminate the Plan at any time by written notice to State Street Bank
and Trust Company ("State Street"), or State Street may terminate the Plan at
any time upon receiving directions to that effect from the Fund. State Street
will also terminate the Plan upon receipt of evidence satisfactory to it of your
death or legal incapacity. Upon termination of the Plan by you, State Street, or
the Fund, shares remaining unredeemed will be held in an uncertificated account
in your name, and the account will continue as a dividend-reinvestment
uncertificated account unless and until proper instructions are received from
you, your executor or guardian, or as otherwise appropriate.
State Street shall incur no liability to you for any action taken or omitted
by State Street in good faith. In the event that State Street shall cease to act
as transfer agent for the Fund, you will be deemed to have appointed any
successor transfer agent as your Agent in administering the Plan.
MISCELLANEOUS. These terms shall be construed according to the laws of the State
of New York.
The broker-dealer represented on the Application must have an effective sales
agreement with Quest for Value Distributors signed by a principal of the firm.
The broker further represents that it has informed the investor of the terms and
conditions relating to the options elected.
If the investor does not sign the Application, the broker represents that the
form is completed in accordance with the investor's instructions and agrees to
indemnify the Fund, its servicing agent, and Quest for Value for any loss or
liability resulting from acting upon such instructions.
21
<PAGE>
QUEST FOR VALUE -SM- OFFICERS FUND
TWO WORLD FINANCIAL CENTER QUEST FOR VALUE -SM-
NEW YORK, NEW YORK 10080 OFFICERS FUND
TABLE OF CONTENTS
<TABLE>
<S> <C>
Summary of Fund Expenses................. 2 QUEST FOR
Investment Objectives of the Fund........ 3 VALUE -SM- OFFICERS FUND
Risk Factors............................. 3
How to Buy Shares........................ 5
Determining Net Asset Value.............. 10
How to Redeem Shares..................... 10
Exchanging Shares........................ 11
Investment Restrictions and Techniques... 12
Dividends and Distributions.............. 15
Tax Status............................... 15
Investment Management Agreement.......... 16
Distribution Plan........................ 16
Portfolio Transactions and Turnover...... 17
Additional Information................... 17
Application Terms and Conditions......... 20
</TABLE>
INVESTMENT ADVISOR:
QUEST FOR VALUE ADVISORS
ONE WORLD FINANCIAL CENTER
NEW YORK, NEW YORK 10281
(800) 232-FUND
TRANSFER AGENT:
STATE STREET BANK AND TRUST COMPANY
BOSTON, MA 02266-8505
GENERAL DISTRIBUTOR: NOVEMBER 1, 1994
QUEST FOR VALUE DISTRIBUTORS PROSPECTUS
P.O. BOX 3567
CHURCH STREET STATION
NEW YORK, NY 10277-1296
(800) 232-FUND
<PAGE>
Statement of Additional Information
QUEST FOR VALUE- OFFICERS FUND
One World Financial Center
New York, New York 10281
(800) 232-FUND
This Statement of Additional Information (the "Additional Statement") is not a
Prospectus. Investors should understand that this Additional Statement should be
read in conjunction with the Prospectus dated November 1, 1994, as supplemented
February 1, 1995 and June 28, 1995 (the "Prospectus") of Quest for Value
Officers Fund(the "Fund"), which may be obtained by written request to State
Street Bank and Trust Company ("State Street"), P.O. Box 8505, Boston, MA
02266-8505 or by calling State Street at (800) 232-FUND.
The date of this Additional Statement is June 28, 1995.
QUEST FOR VALUE is a registered service mark of Oppenheimer Capital
<PAGE>
TABLE OF CONTENTS
Investment Policies and Special Investment Methods.............................2
Risks of Stock Index Futures and Related Options...............................6
Investment Restrictions........................................................8
Principal Holders of Securities................................................9
Trustees and Officers.........................................................10
Investment Management Services................................................13
Distribution Expense Plan.....................................................14
Brokerage.....................................................................15
Description of Brokerage Practices............................................16
Execution of Transactions.....................................................16
Determination of Net Asset Value..............................................17
Total Return and Tax Information..............................................18
Additional Information........................................................21
Appendix-Ratings.............................................................A-1
Appendix-Financial Statements................................................B-1
INVESTMENT POLICIES AND SPECIAL INVESTMENT METHODS
The investment objectives and policies of the Fund are described in the
Prospectus. In seeking to achieve its objectives, the Fund may use the following
investment methods.
BORROWING. The Fund may from time to time increase its ownership of
securities above the amounts otherwise possible by borrowing from banks on an
unsecured basis at fixed rates of interest and investing the borrowed funds. Any
such borrowing will be made only from banks, and will only be made to the extent
that the value of the Fund's assets, less its liabilities (other than such
borrowings) is
2
<PAGE>
equal to at least 300% of all borrowings including the proposed borrowing. If
the value of the Fund's assets computed as above should fail to meet the 300%
coverage described above, the Fund, within three days, is required to reduce its
bank debt to the extent necessary to meet such asset coverage and may have to
sell a portion of its investments at a time when independent investment
judgement would not dictate such action.
Interest paid on money borrowed is an expense of the Fund which it
would not otherwise incur so that it may have little or no net investment income
when its borrowings are substantial.
Borrowing for investment increases both investment opportunity and
investment risk. Since substantially all of the Fund's assets fluctuate in
value, and the obligation resulting from borrowing is fixed, the net asset value
per share of the Fund will tend to increase more when the portfolio assets
increase in value, and decrease more when the portfolio assets decrease in
value, than would otherwise be the case if no borrowing had been done. This is
the speculative factor known as leverage; such borrowings will be used only for
the purchase of securities.
INVESTMENT IN WARRANTS. The Fund may not invest more than 5% of its
total assets at the time of purchase in warrants (other than those that have
been acquired in units or attached to other securities). Of such 5%, not more
than 2% of the total assets at the time of purchase may be invested in warrants
that are not listed on the New York or American Stock Exchanges. Warrants are
pure speculation in that they have no voting rights, pay no dividends, and have
no rights with respect to the assets of the corporation issuing them. Warrants
are basically an option to purchase equity securities at a specific price valid
for a specific period of time. They do not represent ownership of the
securities, but only the right to buy them. The prices of warrants do not
necessarily move parallel to the prices of the underlying securities.
RESTRICTED SECURITIES. From time to time, the Fund may invest in
securities the disposition of which would be subject to legal restrictions. It
may be difficult to sell such securities at a price representing, in the opinion
of the Advisor, their fair value until such time as such securities may be sold
publicly. Whether the Fund or the issuer or seller of the restricted securities
will pay the expenses of their registration under the Securities Act of 1933
will in each case be the subject of negotiation at the time the securities are
purchased. The Fund will ordinarily acquire the right to have such securities
registered within some specified period of time.
When registration is required, a considerable period may elapse between
a decision to sell the securities and the time when the Fund would be permitted
to sell. Thus, the Fund may not be able to obtain as favorable a price as that
prevailing at the time of the decision to sell. The Fund may also acquire
securities through private placements under which it may agree to contractual
restrictions on the resale of such securities. Such restrictions might prevent
the sale of such securities at a time when such sale would otherwise be
desirable.
No restricted securities for which there is no readily available market
("illiquid securities") will be acquired which at the time of acquisition will
cause the aggregate current value of restricted securities (including private
placements and repurchase transactions maturing beyond seven days) to exceed 15%
of the value of the Fund's net assets. When as a result of either the increase
in the value of some or all of the restricted and illiquid securities held, or
the diminution in the value of unrestricted marketable securities in the
portfolio, the restricted and illiquid securities come to represent a larger
3
<PAGE>
percentage of the value of the Fund's net assets, the Fund's Advisor will
consider appropriate steps to protect the Fund's flexibility.
INVESTMENT IN SMALL UNSEASONED COMPANIES. Assets of the Fund may be
invested in securities of small, unseasoned companies as well as those of large
and well-known companies. The former may have a limited trading market, which
may adversely affect their disposition by the Fund and can result in their
shares being priced at a lower level than might otherwise be the case. In
addition, there are other investment companies (including those advised by the
Advisor's affiliates) and other investment media engaged in trading this type of
security and, to the extent that these organizations trade in the same
securities, the Fund may be forced to dispose of its holdings at prices lower
than might otherwise be obtained. The Fund will not make investments that will
result in more than 15% of the Fund's net assets (at the time of purchase) being
invested in securities of companies that have operated less than three years,
including the operation of predecessors.
INVESTMENT IN FOREIGN SECURITIES. The Fund may purchase foreign
securities provided that they are listed on a domestic or foreign securities
exchange or represented by American depository receipts listed on a domestic
securities exchange or traded in the United States' over-the-counter market.
There is no limit on the amount of such foreign securities that the Fund might
acquire. The Fund does not intend to speculate in foreign currency nor invest in
foreign currency contracts. The Fund will only hold foreign currency in
connection with the purchase or sale of securities on a foreign securities
exchange. To the extent that foreign currency is so held, there may be a risk
due to foreign currency exchange rate fluctuations. Such foreign currency and
foreign securities will be held by the Fund's custodian bank, or by a foreign
branch of a U.S. bank, acting as subcustodian. The custodian bank will hold such
foreign securities pursuant to such arrangements as are permitted by applicable
foreign and domestic law and custom. In connection with purchases on foreign
securities exchanges, although the Fund may purchase securities issued by
companies in any country, developed or underdeveloped, the Fund does not
presently intend to purchase securities issued by companies in underdeveloped
countries.
Investments in foreign companies involve certain considerations which
are not typically associated with investing in domestic companies. An investment
may be affected by changes in currency rates and in exchange control regulations
(e.g. currency blockage). The Fund may bear a transaction charge in connection
with the exchange of currency. There may be less publicly available information
about a foreign company than about a domestic company. Foreign companies are
generally not subject to uniform accounting, auditing and financial reporting
standards comparable to those applicable to domestic companies. Most foreign
stock markets have substantially less volume than the New York Stock Exchange
and securities of some foreign companies are less liquid and more volatile than
securities of comparable domestic companies. There is generally less government
regulation of foreign stock exchanges, brokers, and listed companies than there
is in the United States. In addition, with respect to certain foreign countries,
there is a possibility of expropriation or confiscatory taxation, political or
social instability, or diplomatic developments which could adversely affect
investment in securities of issuers located in those countries. Individual
foreign economies may differ favorably or unfavorably from the United States
economy in such respects as growth of gross national product, rate of inflation,
capital reinvestment, resource self-sufficiency and balance of payments
position. If it should become necessary, the Fund would normally encounter
greater difficulties in commencing a lawsuit against the issuer of a foreign
security that it would against a United States issuer.
4
<PAGE>
RISKS OF OPTIONS ON INDICES. The Fund's purchase and sale of options on
indices will be subject to certain risks, notwithstanding the use of such
options solely to hedge the value of the Fund's equity portfolio. The index
option hedging strategy to be employed by the Advisor will involve primarily the
purchase of put options against indices which, in the Advisor's opinion, will be
affected by market conditions in a substantially similar fashion to the Fund's
equity portfolio. Put options will be sold only to close out long positions.
Price movements in the Fund's portfolio probably will not correlate exactly to
movements in the level of the index and, therefore, the Fund bears the risk that
the price of the securities held by the Fund may decrease more than the
corresponding value of the long index put option position may increase. It is
also possible that the price of the index may rise while the value of the Fund
portfolio may fall. If this happened the Fund would experience a loss on the
value of its portfolio which is not offset by an increase in the value of its
hedging option position. However, the Advisor believes that the value of a
diversified Fund portfolio, will, over time, tend to move in the same direction
as the market and that movements in the value of the Fund in the opposite
direction as the market will be likely to occur only for a short period or to a
small degree.
Index prices may be distorted if trading or certain stocks included in
the indices is interrupted. Trading in index options also may be interrupted in
certain circumstances such as if trading is halted in a substantial number of
stocks included in the index. If this occurred the Fund would not be able to
close out options which it had purchased, which could result in losses to the
Fund if the underlying index moved adversely before trading resumed. However, it
is the Fund's policy to purchase options only on indices which include a
sufficient number of stocks so that the likelihood of a trading halt in the
index is minimized.
The purchase of an index option may also be subject to a timing risk.
If an option is exercised before final determination of the closing index value
for that day, the risk exists that the level of the underlying index may
subsequently change. If such a change caused the exercised option to fall out of
the money (i.e. the exercising of the option would result in a loss not a gain)
the holder would be required to pay the difference between the closing index
value and the exercise price of the option (times the applicable multiple) to
the assigned writer. Although the Fund may be able to minimize this risk by
withholding exercise instructions until just before the daily cutoff time, it
may not be possible to eliminate the risk entirely because the exercise cutoff
time for index options may be different than those fixed for other types of
options and may occur before definitive closing index values are announced.
Alternatively, when the index level is close to the exercise price, the Fund may
sell rather than exercise its option.
Although the markets for certain option contracts have developed
rapidly, the markets for other index options are still relatively illiquid. The
ability to establish and close out positions on such options will be subject to
the development and maintenance of a liquid secondary market. It is not certain
that this market will develop in all index option contracts. The Fund will not
purchase or sell any index option contract unless and until, in the opinion of
the Advisor, the market for such option has developed sufficiently that the risk
in connection with such transactions is no greater than the risk in connection
with options on stocks.
LOWER RATED BONDS. The Fund may invest up to 25% of its assets in bonds
rated below Baa3 by Moody's Investors Service Inc. ("Moody's") or BBB by
Standard & Poor's Corporation ("S&P") (commonly known as "junk bonds").
Securities rated less than Baa by Moody's or BBB by S&P are classified as
non-investment grade securities and are considered speculative by those rating
agencies. Junk bonds may be issued as a consequence of corporate restructurings,
such as leveraged buyouts, mergers, acquisitions, debt recapitalizations, or
similar events or by smaller or highly
5
<PAGE>
leveraged companies. Although the growth of the high yield securities market in
the 1980s had paralleled a long economic expansion, recently many issuers have
been affected by adverse economic and market conditions. It should be recognized
that an economic downturn or increase in interest rates is likely to have a
negative effect on (i) the high yield bond market, (ii) the value of high yield
securities and (iii) the ability of the securities' issuers to service their
principal and interest payment obligations, to meet their projected business
goals or to obtain additional financing. The market for junk bonds may be less
liquid than the market for investment grade bonds. In periods of reduced market
liquidity, junk bond prices may become more volatile and may experience sudden
and substantial price declines. Also, there may be significant disparities in
the prices quoted for junk bonds by various dealers. Under such conditions, the
Fund may have to use subjective rather than objective criteria to value its junk
bond investments accurately and rely more heavily on the judgment of the Fund's
Board of Trustees. Prices for junk bonds also may be affected by legislative and
regulatory developments. For example, new federal rules require that savings and
loans gradually reduce their holdings of high-yield securities. Also, from time
to time, Congress has considered legislation to restrict or eliminate the
corporate tax deduction for interest payments or to regulate corporate
restructurings such as takeovers, mergers or leveraged buyouts. Such
legislation, if enacted, may depress the prices of outstanding junk bonds.
ADDITIONAL RISKS. Securities in which the Fund may invest are subject
to the provisions of bankruptcy, insolvency and other laws affecting the rights
and remedies of creditors and shareholders, such as the federal Bankruptcy Code,
and laws, if any, which may be enacted by Congress or the state legislatures
extending the time for payment of principal or interest, or both or imposing
other constraints upon enforcement of such obligations.
INVESTMENT IN OTHER INVESTMENT COMPANIES. The Fund has no present
intention of investing in the securities of other investment companies.
SECURITIES LOANS. The Fund may loan its portfolio securities. The Fund
may call the loans at any time on three days notice and reacquire the underlying
securities. The Fund would receive the cash equivalent of the interest or
dividends paid by the issuer on the securities loan and would have the right
to receive the interest on investment of the cash collateral in short-term debt
instruments. A portion of either or both kinds of such interest may be paid to
the borrower of such securities. The Fund would continue to retain any voting
rights with respect to the securities.
REPURCHASE AGREEMENTS. The Fund's Board of Trustees has established
procedures pursuant to which Quest Advisors will monitor the creditworthiness of
dealers and banks with which the Fund enters into repurchase agreement
transactions.
RISKS OF STOCK INDEX FUTURES AND RELATED OPTIONS
Unlike when the Fund purchases or sells a security, no price is paid or
received by the Fund upon the purchase or sale of a futures contract. Instead,
the Fund will be required to deposit with its broker an amount of cash or U.S.
Treasury bills equal to approximately 5% of the contract amount. This is known
as initial margin. Such initial margin is in the nature of a performance bond or
good faith deposit on the contract which is returned to the Fund upon
termination of the futures contract assuming all contractual obligations have
been satisfied. In addition, because under current futures industry practice
daily variations in gains and losses on open contracts are required to be
reflected in cash in the form of variation margin payments, the Fund may be
required to make additional payments during the term of the contract to its
broker. Such payments would be required where during the term of a stock index
futures contract purchased by the Fund, the price of the underlying stock index
6
<PAGE>
declined, thereby making the Fund's position less valuable. In all instances
involving the purchase of stock index futures contracts by the Fund resulting in
a net long position, an amount of cash and cash equivalents equal to the market
value of the futures contracts will be deposited in a segregated account with
the Fund's custodian to collateralize the position and thereby insure that the
use of such futures is unleveraged. At any time prior to the expiration of the
futures contract, the Fund may elect to close the position by taking an opposite
position which will operate to terminate the Fund's position in the futures
contract.
There are several risks in connection with the use of stock index
futures in the Fund as a hedging device. One risk arises because of the
imperfect correlation between the price of the stock index future and the price
of the securities which are the subject of the hedge. This risk of imperfect
correlation increases as the composition of the Fund portfolio diverges from the
securities included in the applicable stock index. The price of the stock index
future may move more than or less than the price of the securities being hedged.
If the price of the stock index future moves less than the price of the
securities which are the subject of the hedge, the hedge will not be fully
effective, but, if the price of the securities being hedged has moved in an
unfavorable direction, the Fund would be in a better position than if it had not
hedged at all. If the price of the securities being hedged has moved in a
favorable direction this advantage will be partially offset by the future. If
the price of the futures moves more than the price of the stock the Fund will
experience a loss or a gain on the future which will be completely offset by
movement in the price of the securities which are the subject of the hedge. To
compensate for the imperfect correlation of movements in the price of securities
being hedged and movements in the price of the stock index futures, the Fund may
buy or sell stock index futures in a greater dollar amount than the dollar
amount of the securities being hedged if the historical volatility of the prices
of such securities has been greater than the historical volatility of the index.
Conversely, the Fund may buy or sell fewer stock index futures contracts if the
historical volatility of the price of the securities being hedged is less than
the historical volatility of the stock index. It is possible that where the Fund
has sold futures to hedge its portfolio against a decline in the market, the
market may advance and the Fund's portfolio may decline. If this occurred, the
Fund would lose money on the futures and also experience a decline in the value
of its portfolio securities. While this should occur, if at all, for a very
brief period or to a very small degree, the Advisor believes that over time the
value of a diversified portfolio will tend to move in the same direction as the
market indices upon which the futures are based. It is also possible that if the
Fund has hedged against the possibility of a decline in the market adversely
affecting stocks held in its portfolio and stock prices increase instead, the
Fund will lose part or all of the benefit of the increased value of its stock
which it had hedged because it will have offsetting losses in its futures
positions. In addition, in such situations, if the Fund has insufficient cash,
it may have to sell securities to meet daily variation margin requirements. Such
sales of securities may be but will not necessarily be, at increased prices
which reflect the rising market. The Fund may also have to sell securities at a
time when it may be disadvantageous to do so.
Where futures are purchased to hedge against a possible increase in the
price of stocks before the Fund is able to invest its cash (or cash equivalents)
in stock (or options) in an orderly fashion, it is possible the market may
decline instead. If the Fund then concluded to not invest in stock or options at
the time because of concern as to possible further market decline or for other
reasons, the Fund will realize a loss on the futures contract that is not offset
by a reduction in the price of securities purchased.
In addition to the possibility that there may be an imperfect
correlation or no correlation at all between movements in the stock index future
and the portion of the portfolio being hedged, the price of stock index futures
may not correlate perfectly with movements in the stock index due to certain
7
<PAGE>
market distortions. 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 index and
futures markets. Moreover, the deposit requirements in the futures market are
less onerous than margin requirements in the securities market and may therefore
cause increased participation by speculators in the market. Such increased
participation may also cause temporary price distortions. Due to the possibility
of price distortion in the futures market and because of the imperfect
correlation between movements in the stock index and movements in the price of
stock index futures, the value of stock index futures contracts as a hedging
device may be reduced.
Currently, stock index futures contracts can be purchased or sold with
respect to several different stock indices, each based on a different measure of
market performance. Positions in stock index futures may be closed out only on
an exchange or board of trade which provides a secondary market for such
futures. Although the Fund intends to purchase or sell futures only on exchanges
or boards of trade where there appears to be an active secondary market, as with
stock options, there is no assurance that a liquid secondary market or an
exchange or board of trade will exist for any particular contract or at any
particular time. In such event it may not be possible to close a futures
position and in the event of adverse price movements, the Fund would continue to
be required to make daily cash payments of variation margin. However, in the
event futures contracts have been used to hedge portfolio securities, such
securities will not be sold until the futures contract can be terminated. In
such circumstances, an increase in the price of the securities, if any, may
partially or completely offset losses on the futures contract. However, as
described above, there is no guarantee that the price of securities will, in
fact, correlate with the price movements in the futures contract and thus
provide an offset to losses on a futures contract.
In addition, if the Fund has insufficient cash it may at times have to
sell securities to meet variation margin requirements. Such sales may have to be
effected at a time when it is disadvantageous to do so.
INVESTMENT RESTRICTIONS
The Fund's significant investment restrictions are described in the
Prospectus. The following are also fundamental policies and cannot be changed
without shareholder approval. Under these additional restrictions, the Fund
cannot:
(a) Invest in real estate or interests in real estate (including
limited partnership interests), but may purchase readily
marketable securities of companies holding real estate or
interests therein;
(b) Purchase securities on margin;
(c) Underwrite securities of other companies, except insofar as it
might be deemed to be an underwriter for purposes of the
Securities Act of 1933 in the resale of any securities held in
its own portfolio (except that the Fund may in the future
invest all of its investable assets in an open-end management
investment company with substantially the same investment
objective and restrictions as the Fund);
(d) Mortgage, hypothecate or pledge any of its assets;
8
<PAGE>
(e) Invest or hold securities of any issuer if those Officers and
Trustees of the Fund or its Advisor owning individually more
then 1/2 of 1% of the securities of such issuer together own
more than 5% of the securities of such issuer; or
(f) Invest in companies for the primary purpose of acquiring
control or management thereof (except that the Fund may in the
future invest all of its investable assets in an open-end
management investment company with substantially the same
investment objective and restrictions as the Fund);
(g) Invest in physical commodities or physical commodity
contracts, or speculate in financial commodity contracts, but
may purchase and sell stock futures contracts and options on
such futures contracts exclusively for hedging purposes;
(h) Write, purchase or sell puts, calls, or combinations thereof
on individual stocks, but may purchase or sell exchange traded
put and call options on stock indices to protect the Fund's
assets.
In addition, the Fund may not, with respect to 75% of its assets,
invest more than 5% of the value of its total assets in the securities of any
one issuer (except that the Fund may in the future invest all of its investable
assets in an open-end management investment company with substantially the same
investment objective and restrictions as the Fund). Although not a fundamental
policy, in order to comply with a state's securities laws, the Fund has agreed
not to make loans to any person or individual (except that portfolio securities
may be loaned within the limitations set forth in the Prospectus), not to make
short sales of securities except "against-the-box" and not to invest in
interests in oil, gas or other mineral exploration or development programs or
leases.
PRINCIPAL HOLDERS OF SECURITIES
The following table sets forth the name, address and percentage of
ownership of each person that to the knowledge of the Fund owns of record or
beneficially 5 percent or more of the shares of the Fund as of June 1, 1995:
<TABLE>
<CAPTION>
Name and Address of 5% Owner Percentage of Ownership
<S> <C>
Joseph M. La Motta 7.52%
RR2 Box 51
Pound Ridge, NY
Thomas O'Donnell 7.19%
311 S. Wacker Drive
Chicago, IL 60606
Jeffrey C. Whittington 7.16%
P.O. Box 1367
Wainscott, NY 11975
George Tilghman 5.32%
33 Valentine's Lane
Old Brookville, NY 11545
</TABLE>
9
<PAGE>
TRUSTEES AND OFFICERS
The Fund is a series portfolio of Quest for Value Family of Funds (the
"Trust"). The Trustees and Officers of the Trust (except other
officers/portfolio managers of other portfolios of the Trust), and their
principal occupations during the past five years, are set forth below. Trustees
who are "interested persons", as defined in the 1940 Act, are denoted by an
asterisk. The business address of each is One World Financial Center, New York,
New York 10281, except as noted. As of June 1, 1995, Mr. La Motta owned 7.52% of
the outstanding shares of the Fund, Mr. Whittington owned 7.16% of the
outstanding shares of the Fund, Mr. George Tilghman, Vice President and
Portfolio Manager of the Trust, owned 5.32% of the outstanding shares of the
Fund and Ms. Kaback owned less than 1% of the outstanding shares of the Fund.
JOSEPH M. LA MOTTA, CHAIRMAN OF THE BOARD OF TRUSTEES AND PRESIDENT*
Chairman and President of Oppenheimer Capital and Chairman of Quest for Value
Advisors, registered investment advisers; Chairman of the Board and President of
Quest Cash Reserves, Inc., Quest for Value Accumulation Trust, Quest for Value
Family of Funds, Quest for Value Global Equity Fund, Inc. and Quest for Value
Global Funds, Inc., open-end investment companies, and Quest For Value Dual
Purpose Fund, Inc., a closed-end investment company and Chairman of The Saratoga
Advantage Trust, an open-end investment company.
PAUL Y. CLINTON, TRUSTEE
946 Morris Avenue
Bryn Mawr, Pennsylvania 19010
Director, External Affairs, Kravco Corporation, a national real estate owner and
property management corporation; formerly President of Essex Management
Corporation, a management consulting company; Trustee of Capital Cash Management
Trust, Prime Cash Fund and Short Term Asset Reserves, each of which is a
money-market fund; Director of Quest Cash Reserves, Inc., Quest for Value Global
Equity Fund, Inc. and Quest for Value Global Funds, Inc., Trustee of Quest for
Value Accumulation Trust and Quest for Value Family of Funds, all of which are
open-end investment companies. Formerly a general partner of Capital Growth
Fund, a venture capital partnership; formerly a general partner of Essex Limited
Partnership, an investment partnership; formerly President of Geneve Corp., a
venture capital fund; formerly Chairman of Woodland Capital Corp., a small
business investment company; formerly Vice President of W.R. Grace & Co.
THOMAS W, COURTNEY, C.F.A., TRUSTEE
P.O. Box 580
Sewickley, Pennsylvania 15143
Principal of Courtney Associates, Inc., a venture capital firm; former General
Partner of Trivest Venture Fund, a private venture capital fund; former
President of Investment Counseling Federated Investors, Inc.; Trustee of Cash
Assets Trust, a money market fund; Director of Quest Cash Reserves, Inc., Quest
for Value Global Equity Fund, Inc. and Quest for Value Global Funds, Inc.,
Trustee of Quest for Value Accumulation Trust and Quest for Value Family of
Funds, all of which are open-end investment companies; former President of
Boston Company Institutional Investors; Trustee of
10
<PAGE>
Hawaiian Tax-Free Trust and Tax Free Trust of Arizona, tax-exempt bond funds;
Director of several privately owned corporations; former Director of Financial
Analysts Federation.
LACY B. HERRMANN, TRUSTEE
380 Madison Avenue, Suite 2300
New York, New York 10017
President and Chairman of the Board of Aquila Management Corporation (since
1984) and of Incap Management Corporation (since 1982), the sponsoring
organizations and Administrator and/or Sub- Advisor to the following open-end
investment companies, and Chairman of the Board of Trustees and President of
each: Churchill Cash Reserves Trust (since 1985), Short Term Asset Reserves
(since 1984), Cash Assets Trust (since 1984), U.S. Treasuries Cash Assets Trust
(since 1988), Tax-Free Cash Assets Trust (since 1988), Prime Cash Fund (since
1982), Oxford Cash Management Fund (1982- 1988) and Trinity Liquid Assets Trust
(1982-1985), each of which is a money market fund, and of Churchill Tax-Free
Fund of Kentucky (since 1986), Tax-Free Fund of Colorado (since 1986), Tax- Free
Trust of Oregon (since 1985), Tax-Free Trust of Arizona (since 1985), Hawaiian
Tax-Free Trust (since 1984), Narrangansett Insured Tax Free Income Fund (since
1992) and Tax Free Fund for Utah (since 1992), each of which is a tax-free
municipal bond fund; Vice President, Director, Secretary, and formerly Treasurer
of Aquila Distributors, Inc. (since 1981), distributor of most of the above
funds; President and Chairman of the Board of Trustees of Capital Cash
Management Trust ("CCMT") a money market fund (since 1981) and an STCM
Management Company, Inc., sponsor and Sub- Advisor to CCMT; Director of Quest
Cash Reserves, Inc., Quest for Value Global Equity Fund, Inc., and Quest for
Value Global Funds, Inc., Trustee of Quest for Value Accumulation Trust, The
Saratoga Advantage Trust, and Quest for Value Family of Funds, each of which is
an open-end investment company.
GEORGE LOFT, TRUSTEE
51 Herrick Road
Sharon, Connecticut 06069
Private Investor; Director of Quest Cash Reserves, Inc., Quest for Value Global
Equity Fund, Inc. and Quest for Value Global Funds, Inc., Trustee of Quest for
Value Accumulation Trust, The Saratoga Advantage Trust and Quest for Value
Family of Funds, all of which are open-end investment companies, and Director of
Quest for Value Dual Purpose Fund, Inc., a closed-end investment company.
MARIA CAMACHO, ASSISTANT SECRETARY
Assistant Vice President of Oppenheimer Capital since 1994 and Registrations
Department Administrator with Oppenheimer Capital since 1989; Assistant
Secretary of Quest For Value Fund, Inc., The Saratoga Advantage Trust, Quest for
Value Global Equity Fund, Inc., Quest for Value Global Funds, Inc. and Quest
Cash Reserves, Inc., open-end investment companies.
THOMAS E. DUGGAN, ASSISTANT SECRETARY
General Counsel and Secretary, Oppenheimer Capital and Quest for Value Advisors,
Secretary of Quest for Value Dual Purpose Fund, Inc., a closed-end investment
company; Assistant Secretary of Quest Cash Reserves, Inc., Quest for Value
Accumulation Trust, Quest for Value Family of Funds, Quest for Value Global
Equity Fund, Inc., The Saratoga Advantage Trust and Quest for Value Global
11
<PAGE>
Funds, Inc., open-end investment companies; formerly Senior Vice President and
Associate General Counsel of Oppenheimer & Co., Inc.
BERNARD H. GARIL, VICE PRESIDENT
President and Chief Operating Officer of Quest for Value Advisors; Senior Vice
President, Oppenheimer Capital; Vice President of Quest for Value Accumulation
Trust, Quest Cash Reserves, Inc., Quest for Value Family of Funds, Quest for
Value Global Equity Fund, Inc., and Quest for Value Global Funds, Inc., open-end
investment companies, and Vice President of Quest for Value Dual Purpose Fund,
Inc., a closed-end investment company; formerly Senior Vice President of
Oppenheimer & Co, Inc., 1981-1990.
DEBORAH KABACK, SECRETARY
Senior Vice President, Oppenheimer Capital; Secretary of Quest for Value
Accumulation Trust, Quest Cash Reserves, Inc., Quest for Value Family of Funds,
Quest for Value Global Equity Fund, Inc., The Saratoga Advantage Trust and Quest
for Value Global Funds, Inc., open-end investment companies, and Assistant
Secretary of Quest for Value Dual Purpose Fund, Inc., a closed-end investment
company.
LESLIE KLEIN, ASSISTANT TREASURER
Vice President of Oppenheimer Capital; Assistant Treasurer of Quest Cash
Reserves, Inc., Quest for Value Accumulation Trust, Quest for Value Family of
Funds, Quest for Value Global Equity Fund, Inc., The Saratoga Advantage Trust
and Quest for Value Global Funds, Inc., open-end investment companies, and Quest
for Value Dual Purpose Fund, Inc., a closed-end investment company.
SHELDON M. SIEGEL, TREASURER
Managing Director of Oppenheimer Capital; Treasurer of Quest for Value Advisors;
Treasurer of Quest for Value Accumulation Trust, Quest Cash Reserves, Inc.,
Quest for Value Family of Funds, Quest for Value Global Equity Fund Inc., The
Saratoga Advantage Trust and Quest for Value Global Funds, Inc., open-end
investment companies, and Quest for Value Dual Purpose Fund, Inc., a closed-end
investment company.
JEFFREY C. WHITTINGTON, VICE PRESIDENT AND PORTFOLIO MANAGER
Senior Vice President of Oppenheimer Capital since August 1994 and from June
1986-May 1991; Portfolio Manager with Neuberger & Berman from August 1993-July
1994; Portfolio Manager with Oppenheimer & Co., Inc. from October 1991-July
1993.
REMUNERATION OF OFFICERS AND TRUSTEES. All officers of the Trust are officers or
directors of Oppenheimer Capital and receive no salary or fee from the Trust.
Until the Fund has net assets of $25 million, no trustees fees will be paid.
When the Fund has net assets of at least $25 million but not more than $50
million the noninterested Trustees will be paid an annual fee of $1,500 plus
$125 for each trustees' meeting attended and $50 for each committee meeting
attended. When the Fund has net
12
<PAGE>
assets in excess of $50 million, the noninterested Trustees will be paid an
annual fee of $3000 plus $250 for each trustees' meeting attended and $100 for
each committee meeting attended. The following table sets forth the aggregate
compensation paid by the Fund to each of the Trustees during the period November
8, 1994 (commencement of operations) to April 30, 1995 and the aggregate
compensation paid to each of the Trustees by all of the funds in the Advisor's
Fund Complex during each such fund's 1994 fiscal year
<TABLE>
<CAPTION>
Pension or Total Compensation
Aggregate Retirement Benefits Estimated Annual from the Fund and
Name of Trustee of Compensation from Accrued as Part of Benefits upon the Quest Fund
the Fund the Fund Fund Expenses Retirement Complex
<S> <C> <C> <C>
Paul Clinton 0 0 0 68,100
Thomas Courtney 0 0 0 66,600
Lacy Herrmann 0 0 0 67,350
Joseph La Motta 0 0 0 0
George Loft 0 0 0 74,800
</TABLE>
Messrs. Clinton, Courtney and Herrmann earned directors fees with
respect to 18 investment companies in the Advisor's Fund Complex and the fees
earned by Mr. Loft were with respect to 19 investment companies in the Advisor's
Fund Complex. During such periods the independent Trustees received fees from
three investment companies for which they no longer serve as directors and which
are no longer part of the Advisor's Fund Complex but for which the Advisor
currently serves as subadviser. In additon, during such periods, Mr. Clinton and
Mr. Courtney each served as director with respect to three investment companies
in the Advisor's Fund Complex for which they received no fees and Mr. Loft and
Mr. Herrmann each served as director with respect to 10 investment companies in
the Advisor's Fund Complex for which they received no fees. For the purpose of
this paragraph, a portfolio of an investment company organized in series form is
considered to be an investment company.
INVESTMENT MANAGEMENT SERVICES
Quest for Value Advisors (the "Advisor") supervises the investment
operations of the Fund and the composition of its portfolio and furnishes the
Fund advice and recommendations with respect to investments, investment
policies, and the purchase and sale of securities pursuant to an investment
advisory agreement (the "Agreement") with the Fund. The monthly management fee
payable to the Advisor under the terms of the Agreement is computed on the
average daily net assets of the Fund as of the close of business each day at an
annual rate of 1%. The management fee is higher than that paid by other
investment companies with similar investment objectives. During the initial
offering of the Fund's shares, the Advisor is waiving the entire management fee.
The Agreement requires the Advisor, at its expense, to provide the
Fund with adequate office space, facilities, and equipment as well as to provide
and supervise the activities of all administrative and clerical personnel as
shall be required to provide effective corporate administration for the Fund
including the compilation and maintenance of records with respect to its
operations, the preparation and filing of specified reports, composition of
proxy materials and registration statements for continuous public sale of shares
of the Fund and the determination of the net asset value of the Fund's shares.
The Agreement also provides that the cost of certain clerical and accounting
services incurred by the Advisor will be reimbursed by the Fund. Expenses not
expressly assumed by the Advisor under the Agreement or by the Distributor of
shares of the Fund are paid by the Fund. At present, only Class A shares of the
Fund have been issued. In the event that shares of Class B and Class C are
issued in the
13
<PAGE>
future, the Fund will be responsible for bearing certain expenses attributable
to the Fund but not to a particular class ("Fund Expenses"), including deferred
organization expenses; taxes; registration fees; typesetting of prospectuses and
financial reports required for distribution to shareholders; brokerage
commissions; fees and related expenses of directors who are not interested
persons; legal, accounting and audit expenses; custodian fees; insurance
premiums; and trade association dues. Fund Expenses will be allocated based on
the total net assets of each class. Each class of shares of each Fund will also
be responsible for certain expenses attributable only to that class ("Class
Expenses"). These Class Expenses may include distribution and service fees,
transfer and shareholder servicing agent fees, professional fees, printing and
postage expenses for materials distributed to current shareholders, state
registration fees and shareholder meeting expenses. Such items are considered
Class Expenses provided such fees and expenses relate solely to such Class. A
portion of printing expenses, such as typesetting costs, will be divided equally
among the Funds, while other printing expenses, such as the number of copies
printed, will be considered Class Expenses.
The Agreement provides that in the absence of willful misfeasance, bad
faith, gross negligence or reckless disregard for its obligation thereunder, the
Advisor is not liable for any act or omission in the course of or in connection
with the rendition of services thereunder. The Agreement permits the Advisor to
act as investment advisor for any person, firm or corporation.
The Agreement was adopted by the Trust's Board of Trustees, including
a majority of the Trustees who are not "interested persons" of the Fund as
defined in the 1940 Act and who have no direct or indirect financial interest in
the operation of the Agreement on October 25, 1994, and by the initial
shareholder of the Fund on November 1, 1994. During the period November 8, 1994
(commencement of operations) to April 30, 1995, the Advisor voluntarily waived
its advisory fee of $10,942 and rembursed the Fund for all other operating
expenses of $12,607.
DISTRIBUTION EXPENSE PLAN
Each Class of shares of the Fund has a Plan and Agreement of
Distribution (the "Plan(s)") pursuant to which it is permitted to compensate the
Distributor in connection with the distribution of Fund shares. Each Plan was
adopted in accordance with the requirements of Rule 12b-1 under the 1940 Act,
and was initially approved by the Trust's Board of Trustees (who found that
there is a reasonable likelihood that the Plan will benefit the Fund and its
shareholders), including a majority of the trustees who are not "interested
persons" of the Fund, as defined in the 1940 Act, and who have no direct or
indirect financial interest in the operation of the Plan ("Disinterested
Trustees") on October 25, 1994 and by the initial shareholder of the Fund on
November 8, 1994.
Under each Plan, each Class of shares of the Fund pays the Distributor
a monthly fee based on the average daily net assets of the Fund on an annual
basis, or at such lesser rate as the Directors may from time to time determine,
for services and expenses in connection with the distribution of Fund shares.
Such distribution fee for Class A shares is .25%; for Class B and C shares, such
fee is .75%. Each class of shares also pays a service fee of .25% of average
daily net assets. During the initial offering of the Fund's shares, the
Distributor is waiving the entire distribution fee.
Each Plan states that the Treasurer of the Fund shall provide, and
that the Disinterested Trustees shall review, quarterly reports setting forth
the amounts expended pursuant to the Plan and the purpose for which the amounts
were expended. It further provides that, as long as the Plan remains in effect,
the selection and nomination of Trustees of the Fund who are not "interested
persons" of the
14
<PAGE>
Fund shall be committed to the discretion of the Trustees then in office who are
not "interested persons" of the Fund. The Plans can be terminated at any time,
without penalty, by vote of the holders of a majority of the outstanding voting
securities of the Fund. The Plans cannot be amended to increase materially the
amount to be spent by the Fund thereunder without shareholder approval, and all
material amendments are required to be approved by the vote of the Board of
Trustees of the Trust, including a majority of the Disinterested Trustees, cast
in person at a meeting called for that purpose. The sales charge rule of the
National Association of Securities Dealers, Inc. ("NASD")is applicable to 12b-1
fees as well as front end and deferred sales charges (but excludes service fees)
and limits the total aggregate asset based, front end and deferred sales charges
to 6.25% of a fund's new gross sales.
BROKERAGE
The Agreement contains provisions relating to the selection of
broker-dealers ("brokers") for the Fund's portfolio transactions. Briefly, the
Advisor may use such brokers as may, in its best judgment based on all relevant
factors, implement the policy of the Fund to achieve "best execution" (as
defined) at reasonable expense. While the Advisor need not seek competitive
commission bidding or base its selection on posted rates, it is expected to be
aware of the current rates of most eligible brokers and to minimize the
commissions paid to the extent consistent with the interests and policies of the
Fund as established by its Board and the provisions of the Agreement. The
Agreement also provides that, consistent with obtaining "best execution" of the
Fund's portfolio transactions, the Advisor may, in the interests of the Fund,
select brokers other than Oppenheimer & Co., Inc. ("Opco") because they provide
brokerage and/or research services to the Fund and other accounts of the
Advisor. The commissions paid to such brokers may be higher than another
qualified broker would have charged if a good faith determination is made by the
Advisor that the commission is reasonable in relation to the services provided,
viewed either in terms of that transaction or the Advisor's overall
responsibilities to all its accounts. No specific dollar value need be put on
these services. To show that the determinations were made in good faith, the
Advisor must be prepared to show that the amount of such commissions paid over a
representative period selected by the Board were reasonable in relation to the
benefits to the Fund. Sales of shares of the Fund, subject to applicable rules
governing the Distributor's activities in this area, will also be considered as
a factor in the direction of portfolio transactions to brokers, but only in
conformity with the price, execution, and other considerations and practices
discussed above. The Agreement expressly anticipates that Opco will act as the
Fund's regular broker and may be a major recipient of its brokerage commissions,
but only if the commissions paid to Opco are calculated in accordance with
procedures adopted by the Fund's Board under any applicable SEC Rule
("Procedures"). The Procedures incorporate the standard contained in Rule 17e- 1
adopted by the SEC under the 1940 Act that the commissions paid must be
"reasonable and fair compared to the commission, fee or other remuneration
received or to be received by other brokers in connection with comparable
transactions involving similar securities during a comparable period of time."
Pursuant to the Procedures, the brokerage rate paid by the Fund to Opco,
determined on a quarterly basis, is the lesser of the median of the average
commission rates paid to Opco by unaffiliated mutual fund complexes, and the
average commission rate paid by Oppenheimer Capital to brokers other than Opco.
Rule 17e-1 and the Procedures also contain review requirements and require the
Advisor to furnish reports and to maintain records in connection with reviews.
Under a separate SEC Rule, Opco may be paid for effecting and executing the
Fund's portfolio transactions on an exchange of which it is a member.
15
<PAGE>
The following table presents information as to the allocation of brokerage
commissions paid by the Fund for the period from November 8, 1994 (commencement
of operations) to April 30, 1995:
<TABLE>
<CAPTION>
Total Amount of Transactions Where
Brokerage Commissions Paid to Opco Brokerage Commissions Paid to Opco
Total Brokerage
Commissions Paid Dollar Amount % Dollar Amount %
<S> <C> <C> <C> <C>
$8,197 $3,388 41% $1,664,388 44%
</TABLE>
During the period November 8, 1994 (commencement of operations) to
April 30, 1994 the Fund directed brokerage transactions because of research
services provided. The amount of such transactions was $57,195 and the related
commissions were $194.
DESCRIPTION OF BROKERAGE PRACTICES
Subject to the provisions of the Agreement, Procedures, and Rules
described above, allocation of brokerage is made by the portfolio manager of the
Fund. Allocation of brokerage business or principal business is not made to
provide any reciprocal benefits to either Opco or the Advisor. Principal
transactions are generally done with principals or market makers. The Fund will
not purchase any securities from or sell any securities to Opco acting as
principal for its own account. Brokerage commissions are paid primarily for
effecting transactions in listed securities and otherwise only if it appears
likely that a better price or execution can be obtained. Brokers other than Opco
are chosen, except as stated above, for their execution and research services on
which no dollar value can be placed. There is no formula under which any of them
are entitled to the allocation of a particular amount of commissions. The
research information received for the Fund's commissions from particular brokers
may be useful only to one or more of the other accounts of the Advisor and
research information received for the commissions of these other accounts may be
useful both to the Fund and one or more of such other accounts. Such information
may be received in written form or through direct contact with individuals and
includes information on particular companies and industries as well as market,
economic or institutional activity areas. It serves to broaden the scope and
supplement the research activities of the Advisor; to make available additional
views for consideration and comparison; and to enable the Advisor to obtain
market information for the valuation of securities held in the Fund's portfolio.
The Trust's Board, including the Disinterested Trustees, reviews the commissions
paid to brokers furnishing such services in an effort to ascertain that the
amount of such commissions was reasonable related to the value or benefit of
such services.
EXECUTION OF TRANSACTIONS
The Advisor currently serves as investment manager to a number of
clients, including other investment companies, and may in the future act as
investment manager or advisor to others. It is the practice of the Advisor to
cause purchase or sale transactions to be allocated among the Funds and others
whose assets it manages in such manner as it deems equitable. In making such
allocations among the Funds and other client accounts, the main factors
considered are the respective investment objectives, the relative size of
portfolio holdings of the same or comparable securities, the availability of
cash for investment, the size of investment commitments generally held and the
opinions of the persons
16
<PAGE>
responsible for managing the portfolios of each Fund and other clients 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
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 ("free trades") usually will have its order executed first. Purchases are
combined where possible for the purpose of negotiating brokerage commissions,
which in some cases might have a detrimental effect on the price or volume of
the security in a particular transaction as far as the Fund is concerned. Orders
placed by accounts that direct trades to a specific broker will generally be
executed after the free trades. All orders placed on behalf of the Fund are
considered free trades. However, having an order placed first in the market does
not necessarily guarantee the most favorable price.
DETERMINATION OF NET ASSET VALUE
The net asset value per share of the Fund is determined each day the
New York Stock Exchange (the "Exchange") is open, as of the close of the regular
trading session of the Exchange (currently 4:00 p.m., Eastern Time) that day, by
dividing the value of the Fund's net assets by the total number of its shares
outstanding. The Exchange's most recent annual announcement (which is subject to
change) states that it will close on New Year's Day, Presidents' Day, Good
Friday, Memorial Day, July 4, Labor Day, Thanksgiving and Christmas Day. It may
also close on other days. Although the legal rights of Class A, B and C shares
are identical, the different expenses borne by each class may result in
differing net asset values and dividends for each class.
Securities listed on a national securities exchange or designated as
national market system securities are valued at the last reported sale price on
that day or, if there has been no sale on such day or on the previous day on
which the Exchange was open (if a week has not elapsed between such days), then
the value of such security is taken to be the reported bid price at the time of
which the value is being ascertained. Securities actively traded in the
over-the-counter market but not designated as national market system securities
are valued at the last quoted bid price. Any securities or other assets for
which current market quotations are not readily available are valued at their
fair value as determined in good faith under procedures established by and under
general supervision and responsibility of the Fund's Board of Trustees. Debt
securities having remaining maturities in excess of sixty days when purchased
and debt securities originally purchased with maturities in excess of sixty days
but which currently have maturities of sixty days or less are valued at cost
adjusted for amortization of premiums and accretion of discounts. Accumulated
unrealized appreciation or depreciation on the sixty-first day, if any, is
amortized to maturity.
Concerning the valuation of an open short sale against-the-box, the
Fund would value securities covering such a sale at the market price thereof and
offset such value by the short position.
Investors should be aware that because of the difference between the
bid and asked prices of the over-the-counter securities which the Fund may
invest in, there may be an immediate reduction in the net asset value of the
shares of the Fund after the Fund has completed a purchase of such securities.
17
<PAGE>
TOTAL RETURN AND TAX INFORMATION
TOTAL RETURN CALCULATION. Total returns quoted in advertising reflect all
aspects of the Fund's return, including the effect of reinvesting dividends and
capital gain distributions, and any change in the Fund's net asset value per
share over the period. Average annual returns are calculated by determining the
growth or decline in value of a hypothetical investment in the Fund over a
stated period, and then calculating the annually compounded percentage rate that
would have produced the same result if the rate of growth or decline in value
had been constant over the period. For example, a cumulative return of 100% over
ten years would produce an average annual return of 7.18%, which is the steady
annual return that would result in 100% growth on a compounded basis in ten
years.
Total return information may be useful to investors in reviewing the
Fund's performance. However, certain factors should be considered before using
this information as a basis for comparison with alternative investments. No
adjustment is made for taxes payable on distributions. The total return for any
given past period is not an indication or representation by the Fund of future
rates of return on its shares. When comparing the Fund's total return with that
of other alternatives, investors should understand that as the Fund is an equity
fund seeking capital appreciation, its shares are subject to greater market
risks than shares of funds having other investment objectives and that the Fund
is designed for investors who are willing to accept greater risk of loss in the
hope of realizing greater gains.
Average annual total return is calculated according to the following formula:
n
P (1+t) = ERV
Where: P = a hypothetical initial investment of $1,000
t = average annual total return
n = number of years
ERV = ending redeemable value of P at the end of each period.
In addition to average annual returns, each class of shares of the
Fund may quote unaveraged or cumulative total returns reflecting the simple
change in value of an investment over a stated period. Average annual and
cumulative total returns may be quoted as a percentage or as a dollar amount and
may be calculated for a single investment, a series of investments and/or a
series of redemptions over any time period. Total returns and other performance
information may be quoted numerically or in a table, graph, or similar
illustration. Total returns may be quoted with or without taking the Fund's
sales charge into account. Excluding the Fund's sales charge from a total return
calculation produces a higher total return figure.
The aggregate total return on an investment made in shares of the Fund
for the period November 8, 1994 (commencement of operations) to April 30, 1995
was 11:00%. The annualization of interim performance may have a tendency to
distort performance as it imputs a level of continuous performance which may
have a positive or negative effect. Accordingly, only inception to date
aggregate total return for the Fund is being shown. The total return for the
period November 8, 1994 (commencement of operations) to April 30, 1995 reflects
the waiver of management fees and the assumption of all expenses by the Advisor.
Without such waivers and expense assumptions, the total return for the Fund
would have been lower.
18
<PAGE>
From time to time the Fund may refer in advertisements to rankings and
performance statistics published by (1) recognized mutual fund performance
rating services including but not limited to Lipper Analytical Services, Inc.
and Morningstar, Inc.; (2) recognized indexes including but not limited to the
Standard & Poor's Composite Stock Price Index, Standard & Poor's 400 Mid-Cap
Index, Consumer Price Index and Dow Jones Industrial Average; and (3) Money
Magazine and other financial publications including magazines, newspapers and
newsletters. Performance statistics may include total returns, measures of
volatility, standard deviation or other methods of performance based on the
method used by the publishers of the information. Advertising materials for the
Fund may also compare the Fund's total return to money market fund yields and
rates on certificates of deposit, U.S. Government Securities and corporate
bonds, may compare growth stocks to value stocks and may refer to current or
historic financial or economic trends or conditions.
The performance of the Fund may be compared to the performance of
other mutual funds in general, or to the performance of particular types of
mutual funds. These comparisons may be expressed as mutual fund rankings
prepared by Lipper Analytical Services, Inc. (Lipper), an independent service
located in Summit, New Jersey that monitors the performance of mutual funds.
Lipper generally ranks funds on the basis of total return, assuming reinvestment
of distributions, but does not take sales charges or redemption fees into
consideration, and rankings are prepared without regard to tax consequences. In
addition to the mutual fund rankings, performance may be compared to mutual fund
performance indices prepared by Lipper.
From time to time, the Fund's performance also may be compared to
other mutual funds tracked by financial or business publications and
periodicals. For example, the Fund may quote Morningstar, Inc. in its
advertising materials. Morningstar, Inc. is a mutual fund rating service that
rates mutual funds on the basis of risk-adjusted performance.
Quest for Value Distributors may provide information designed to help
individuals understand their investment goals and explore various financial
strategies such as general principles of investing, asset allocation,
diversification, risk tolerance; goal setting; and a questionnaire designed to
help create a personal financial profile.
Ibbotson Associates of Chicago, Illinois (Ibbotson) provides
historical returns of the capital markets in the United States, including common
stocks, small capitalization stocks, long-term corporate bonds,
intermediate-term government bonds, long-term government bonds, Treasury bills,
the U.S. rate of inflation (based on CPI), and combinations of various capital
markets which may be used for comparative or illustrative purposes. The
performance of these capital markets is based on the returns of different
indices.
Quest for Value Distributors may use the performance of these capital
markets in order to demonstrate general risk-versus-reward investment scenarios.
Performance comparisons may also include the value of a hypothetical investment
in any of these capital markets. The risks associated with the security types in
any capital market may or may not correspond directly to those of the Fund. The
Fund may also compare performance to that of other compilations or indices that
may be developed and made available in the future.
In advertising materials, Quest for Value Distributors may reference
or discuss its products and services, which may include: other Quest funds;
retirement investing; brokerage products and services; the effects of
dollar-cost averaging and saving for college; and the risks of market timing. In
addition, Quest for Value Distributors may quote financial or business
publications and periodicals, including
19
<PAGE>
model portfolios or allocations, as they relate to fund management, investment
philosophy, and investment techniques. Quest for Value Distributors may also
reprint, and use as advertising and sales literature, articles from re:Quest, a
quarterly newsletter provided free of charge to Quest fund shareholders.
The Fund may present its fund number, Quotron number, CUSIP number,
and discuss or quote their current portfolio manager.
Volatility. The Fund may quote various measures of volatility and
benchmark correlation in advertising. In addition, the Fund may compare these
measures to those of other funds. Measures of volatility seek to compare a
fund's historical share price fluctuations or total returns to those of a
benchmark. Measures of benchmark correlation indicate how valid a comparative
benchmark may be. All measures of volatility and correlation are calculated
using averages of historical data.
Momentum Indicators indicate the Fund's price movements over specific
periods of time. Each point on the momentum indicator represents the Fund's
percentage change in price movements over that period.
The Fund may advertise examples of the effects of periodic investment
plans, including the principle of dollar cost averaging. In such a program, an
investor invests a fixed dollar amount in a fund at periodic intervals, thereby
purchasing fewer shares when prices are high and more shares when prices are
low. While such a strategy does not assure a profit or guard against a loss in a
declining market, the investor's average cost per share can be lower than if
fixed numbers of shares are purchased at the same intervals. In evaluating such
a plan, investors should consider their ability to continue purchasing shares
during periods of low price levels.
The Fund may be available for purchase through retirement plans or
other programs offering deferral of or exemption from income taxes, which may
produce superior after-tax returns over time. For example, a $1,000 investment
earning a taxable return of 10% annually would have an after-tax value of $1,949
after ten years, assuming tax was deducted from the return each year at a 28%
rate. An equivalent tax-deferred investment would have an after-tax value of
$2,100 after ten years, assuming tax was deducted at a 31% rate from the
tax-deferred earnings at the end of the ten-year period.
TAX STATUS OF THE FUND'S DIVIDENDS AND DISBURSEMENTS. The Federal tax treatment
of the Fund's dividends and distributions is explained in the Prospectus under
the caption "Tax Status." The Code provides for a 70% dividends-received
deduction (the "deduction") by corporations. Special provisions are contained in
the Code as to the eligibility of payments to shareholders made by mutual funds
for the deduction. Long-term capital gains distributions are not eligible for
the deduction. In addition, the amount of dividends paid by the Fund which may
qualify for the deduction is limited to the aggregate amount of qualifying
dividends which the Fund derives from its portfolio investments which the Fund
has held for a minimum period, usually 46 days. It should also be noted that a
shareholder will not be eligible for the deduction on dividends received with
respect to shares which are held by the shareholder for 45 days or less. The
Fund will be subject to a nondeductible 4% excise tax to the extent that it
fails to distribute by the end of any calendar year substantially all its
ordinary income for that year and capital gain net income for the one year
period ending on October 31 of that year.
20
<PAGE>
ADDITIONAL INFORMATION
DESCRIPTION OF THE TRUST. The Trust was formed under the laws of
Massachusetts on April 17, 1987. It is not contemplated that regular annual
meetings of shareholders will be held. Shareholders of the Fund have the right,
upon the declaration in writing or vote by a majority of the outstanding shares
of the Fund, to remove a Trustee. The Trustees will call a meeting of
shareholders to vote on the removal of a Trustee upon the written request of the
record holders (for at least six months) of 10% of its outstanding shares. In
addition, 10 shareholders holding the lesser of $25,000 or 1% of the Fund's
outstanding shares may advise the Trustees in writing that they wish to
communicate with other shareholders of that Fund for the purpose of requesting a
meeting to remove a Trustee. The Trustees will then either give the applicants
access to the Fund's shareholder list or mail the applicants' communication to
all other shareholders at the applicants' expense.
When issued, shares of each class are fully paid and have no
preemptive, conversion or other subscription rights. Each class of shares
represents identical interests in the Fund's investment portfolio. As such, they
have the same rights, privileges and preferences, except with respect to: (a)
the designation of each class, (b) the effect of the respective sales charges,
if any, for each class, (c) the distribution fees borne by each class, (d) the
expenses allocable exclusively to each class, (e) voting rights on matters
exclusively affecting a single class and (f) the exchange privilege of each
class. Upon liquidation of the Trust or the Fund, shareholders of each class of
shares of the Fund are entitled to share pro rata in the net assets of that
class available for distribution to shareholders after all debts and expenses
have been paid. The shares do not have cumulative voting rights.
The assets received by the Trust on the sale of shares of the Fund and
all income, earnings, profits and proceeds thereof, subject only to the rights
of creditors, are allocated to the Fund, and constitute the assets of the Fund.
The assets of the Fund are required to be segregated on the Trust's books of
account. Expenses not otherwise identified with a particular Fund will be
allocated fairly among two or more Funds by the Board of Trustees. The Trust's
Board of Trustees has agreed to monitor the portfolio transactions and
management of each of the Funds and to consider and resolve any conflict that
may arise.
The Declaration of Trust contains an express disclaimer of shareholder
liability for each Fund's obligations, and provides that each Fund shall
indemnify any shareholder who is held personally liable for the obligations of
that Fund. It also provides that each Fund shall assume, upon request, the
defense of any claim made against any shareholder for any act or obligation of
that Fund and shall satisfy any judgment thereon. Thus, while Massachusetts law
permits a shareholder of a trust (such as the Trust) to be held personally
liable as a partner under certain circumstances, the risk of a shareholder
incurring any financial loss on account of shareholder liability is limited to
the relatively remote circumstance in which a Fund itself would be unable to
meet the obligations described above.
The Fund may in the future seek to achieve its investment objective by
investing all of its investable assets in a no-load diversified open-end
management investment company with the same portfolio manager, investment
objective and investment restrictions. Such investment would only be made if the
Trustees feel that the aggregate per share expenses of the Fund and such other
investment company would be less than or approximately equal to the expenses
which the Fund would incur if the Fund were to continue its present investment
policies. It is expected that such an investment in another investment company
will have no preference, preemptive, conversion or similar rights, and will be
fully-paid and non-assessable. It is expected that the investment company will
not be required to hold
21
<PAGE>
annual meetings, but will hold special meetings of shareholders when, in the
judgment of the Trustees, it is necessary or desirable to submit matters for
shareholder vote.
POSSIBLE ADDITIONAL PORTFOLIO SERIES. If additional Funds are created
by the Board of Trustees, shares of each such Fund will be entitled to vote as a
group only to the extent permitted by the 1940 Act (see below) or as permitted
by the Board of Trustees.
Under Rule 18f-2 of the 1940 Act, any matter required to be submitted
to a vote of shareholders of any investment company which has two or more series
outstanding is not deemed to have been effectively acted upon unless approved by
the holders of a "majority" (as defined in that Rule) of the voting securities
of each series affected by the matter. Such separate voting requirements do not
apply to the election of trustees or the ratification of the selection of
accountants. Approval of an investment management or distribution plan and a
change in fundamental policies would be regarded as matters requiring separate
voting by each Fund. The Rule contains provisions for cases in which an advisory
contract is approved by one or more, but not all, series. A change in investment
policy may go into effect as to one or more series whose holders so approve the
change even though the required vote is not obtained as to the holders of other
affected series.
INDEPENDENT AUDITORS. KPMG Peat Marwick LLP, 345 Park Avenue, New York, New
York, are the independent auditors of the Fund. Their services include auditing
the financial statements of the Fund as well as other related services.
CUSTODIAN. State Street Bank and Trust Company acts as custodian of the assets,
transfer agent, and shareholder servicing agent for the Fund.
DISTRIBUTION OPTIONS. Shareholders may change their distribution options by
giving the Transfer Agent three days prior notice in writing.
SHAREHOLDER SERVICING AGENT FOR CERTAIN SHAREHOLDERS. Unified Management
Corporation (1-800- 346-4601) is the shareholder servicing agent for former
shareholders of the AMA Family of Funds and clients of AMA Investment Advisers,
Inc. (which acted as the investment advisor to the AMA Family of Funds) who
acquire shares of any Quest Fund, and for former shareholders of the Unified
Funds and Liquid Green Trusts, accounts which participated or participate in a
retirement plan for which Unified Investment Advisers, Inc. or an affiliate acts
as custodian or trustee, accounts which have a Money Manager brokerage account,
and other accounts for which Unified Management Corporation is the dealer of
record.
OTHER. Oppenheimer Capital, the parent of Quest for Value Advisors and a leading
institutional investment manager with over $33 billion in assets under
management, has been an investment advisor to the American Medical Association's
pension fund since the 1960's.
RETIREMENT PLANS. Quest for Value Distributors may print advertisements and
brochures concerning retirement plans, lump sum distributions, and 401-k plans.
These materials may include descriptions of tax rules, strategies for reducing
risk, and descriptions of the 401-k program offered by Quest for Value
Distributors. From time to time, hypothetical investment programs illustrating
various tax-deferred investment strategies will be used in brochures, sales
literature, and omitting prospectuses. The following example illustrates the
general approaches that will be followed. These hypotheticals will be modified
with different investment amounts, reflecting the amounts that can be invested
in
22
<PAGE>
different types of retirement programs, different assumed tax rates, and assumed
rates of return. They should not be viewed as indicative of past or future
performance of any Quest for Value product.
23
<PAGE>
EXAMPLES
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
Benefits of Long Term Tax-Free Compounding - Benefits of Long Term Tax-Free Compounding -
Single Sum Periodic Investment
- -------------------------------------------------------------------------------------------------------------------
Amount of Contribution: $100,000 Amount Invested Annually: $2000
- -------------------------------------------------------------------------------------------------------------------
Rates of Return Rates of Return
-------------------------------------------- -------------------------------------
Years Years
-------------------------------------------- -------------------------------------
8.00% 10.00% 12.00% 8.00% 10.00% 12.00%
-------------------------------------------- -------------------------------------
Value at end Value at End
<S> <C> <C> <C> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------------
5 $146,933 $161,051 $176,234 5 $ 12,672 $ 13,431 $ 14,230
- --------------------------------------------------------------------------------------------------------------------
10 $215,892 $259,374 $310,585 10 $ 31,291 $ 35,062 $ 39,309
- --------------------------------------------------------------------------------------------------------------------
15 $317,217 $417,725 $547,357 15 $ 58,649 $ 69,899 $ 83,507
- --------------------------------------------------------------------------------------------------------------------
20 $466,096 $672,750 $964,629 20 $ 98,846 $126,005 $161,397
- --------------------------------------------------------------------------------------------------------------------
25 $684,848 $1,083,471 $1,700,006 25 $157,909 $216,364 $298,668
- --------------------------------------------------------------------------------------------------------------------
30 $1,006,266 $1,744,940 $2,995,992 30 $244,692 $361,887 $540,585
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------
Comparison of Taxable and Tax-Free Investing -- Periodic Investments
(Assumed Tax Rate : 28%)
- ----------------------------------------------------------------------------------------------------------
Amount of Annual Contribution (Pre-Tax): $2,000 Annual Contribution (After Tax): $1,440
- ----------------------------------------------------------------------------------------------------------
Tax Deferred Rates of Return Fully Taxed Rates of Return
------------------------------------ ------------------------------------
Years Years
8.00% 10.00% 12.00% 5.76% 7.20% 8.64%
------------------------------------ ------------------------------------
Value at end Value at End
<S> <C> <C> <C> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------
5 $ 12,672 $ 13,431 $ 14,230 5 $ 8,544 $ 8,913 $ 9,296
- ----------------------------------------------------------------------------------------------------------
10 $ 31,291 $ 35,062 $ 39,309 10 $ 19,849 $ 21,531 $ 23,364
- ----------------------------------------------------------------------------------------------------------
15 $ 58,649 $ 69,899 $ 83,507 15 $ 34,807 $ 39,394 $ 44,654
- ----------------------------------------------------------------------------------------------------------
20 $ 98,846 $126,005 $161,397 20 $ 54,598 $ 64,683 $ 76,874
- ----------------------------------------------------------------------------------------------------------
25 $157,909 $216,364 $298,668 25 $ 80,785 $100,485 $125,635
- ----------------------------------------------------------------------------------------------------------
30 $244,692 $361,887 $540,585 30 $115,435 $151,171 $199,429
- ----------------------------------------------------------------------------------------------------------
</TABLE>
24
<PAGE>
<TABLE>
<CAPTION>
------------------------------------------------------
Comparison of Tax Deferred Investing
-- Deducting Taxes at End
(Assumed Tax Rate at End: 28%)
------------------------------------------------------
Amount of Annual Contribution: $2,000
------------------------------------------------------
Tax Deferred Rates of Return
------------------------------------------
Years
8.00% 10.00% 12.00%
------------------------------------------
Value at End
<S> <C> <C> <C>
------------------------------------------------------
5 $ 11,924 $ 12,470 $ 13,046
------------------------------------------------------
10 $ 28,130 $ 30,485 $ 33,903
------------------------------------------------------
15 $ 50,627 $ 58,728 $ 68,525
------------------------------------------------------
20 $ 82,369 $101,924 $127,406
------------------------------------------------------
25 $127,694 $169,782 $229,041
------------------------------------------------------
30 $192,978 $277,359 $406,021
------------------------------------------------------
</TABLE>
25
<PAGE>
APPENDIX A -- RATINGS
DESCRIPTION OF MOODY'S CORPORATE RATINGS
Aaa. Bonds which are rated Aaa are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred to as
"gilt edged." 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, such changes as can be visualized are most unlikely to
impair the fundamentally strong position of such issues.
Aa. Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally known
as high grade bonds. They are rated lower than the best bonds because margins
of protection may not be as large as in Aaa securities, or fluctuation of
protective elements may be of greater amplitude, or there may be other elements
present which made the long-term risks appear somewhat larger than in Aaa
securities.
A. Bonds which are rated A possess many favorable investment attributes
and are to be considered as upper medium grade obligations. Factors giving
security to principal and interest are considered adequate, but elements may be
present which suggest a susceptibility to impairment sometime in the future.
Baa. Bonds which are rated Baa are considered as medium grade obligations,
(i.e.; they are neither highly protected nor poorly secured). Interest payments
and principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.
Ba. Bonds which are rated Ba are judges to have speculative elements and
their future cannot be considered as well assured. Often the protection of
interest and principal payments may be very moderate, and therefore not well
safeguarded during both good and bad times. Uncertainty of position
characterizes bonds in this class.
B. Bonds which are rated B generally lack the characteristics of a
desirable investment. Assurance of interest and principal payments or of other
terms of the contract over long periods may be small.
Caa. Bonds which are rated Caa are of poor standing. Such issues may be in
default or there may be elements of danger present with respect to principal or
interest.
Ca. Bonds which are rated Ca represent obligations which are speculative
in a high degree. Such issues are often in default or have other marked
shortcomings.
C. Bonds which are rated C are the lowest rated class of bonds and issues
so rated can be regarded as having extremely poor prospects of ever attaining
any real investment standing.
A-1
<PAGE>
DESCRIPTION OF S&P'S CORPORATE RATINGS
AAA. Debt rated AAA has the highest rating assigned by S&P. Capacity to
pay interest and repay principal is extremely strong.
AA. Debt rated AA has a very strong capacity to pay interest and repay
principal and differs from the highest rated issues only in small degree.
A. Debt rated A has a strong capacity to pay interest and repay principal
and differs from the higher rated issues only in small degree.
BBB. Debt rated BBB is regarded as having adequate capacity to pay
interest and repay principal. Whereas it normally exhibits adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
debt in this category.
BB. Debt rated BB has less near-term vulnerability to default than other
speculative grade debt. However, it faces major ongoing uncertainties or
exposure to adverse business, financial or economic conditions which could lead
to inadequate capacity to meet timely interest and principal payment. The BB
rating category is also used for debt subordinated to senior debt that is
assigned an actual or implied BBB- rating.
B. Debt rated B has a greater vulnerability to default but presently has
the capacity to meet interest and principal payments. Adverse business,
financial or economic conditions would likely impair capacity or willingness to
pay interest and repay principal. The B rating category is also used for debt
subordinated to senior debt that is assigned an actual or implied BB or BB-
rating
CCC. Debt rated CCC has a current identifiable vulnerability to default
and is dependent upon favorable business, financial and economic conditions to
meet timely payments of principal. In the event of adverse business, financial
or economic conditions, it is not likely to have the capacity to pay interest
and repay principal. The CCC rating category is also used for debt subordinated
to senior debt that is assigned an actual or implied CCC rating.
CC. The rating CC is typically applied to debt subordinated to senior debt
that is assigned an actual or implied CCC rating.
C. The rating C is typically applied to debt subordinated to senior debt
that is assigned an actual or implied CCC- debt rating. The C rating may be
used to cover a situation where a bankruptcy petition has been filed, but debt
service payments are continued.
CI. The rating CI is reserved for income bonds on which no interest is
being paid.
D. Debt rated D is in payment default. The D rating category is used when
interest payments or principal payments are not made on the date due even if the
applicable grace period has not expired, unless S & P believes that such
payments will be made during such grace period. The D rating also will be used
upon the filing of a bankruptcy petition if debt service payments are
jeopardized.
A-2
<PAGE>
DESCRIPTION OF COMMERCIAL PAPER RATINGS
Commercial paper rated Prime-1 by Moody's are judged by Moody's to be of
the best quality. Their short-term debt obligations carry the smallest degree
of investment risk. Margins of support for current indebtedness are large or
stable with cash flow and asset protection well assured. Current liquidity
provides ample coverage of near-term liabilities and unused alternative
financing arrangements are generally available. While protective elements may
change over the intermediate or longer term, such changes are most unlikely to
impair the fundamentally strong position of short-term obligations.
Issuers (or related supporting institutions) rated Prime-2 have a strong
capacity for repayment of short-term promissory obligations. This will normally
be evidenced by many of the characteristics cited above but to a lesser degree.
Earnings trends and coverage ratios, while sound, will be more subject to
variation. Capitalization characteristics, while still appropriate, may be more
affected by external conditions. Ample alternate liquidity is maintained.
Commercial paper rated A by S&P have the following characteristics.
Liquidity ratios are better than industry average. Long-term debt rating is A
or better. The issuer has access to at least two additional channels of
borrowing. Basic earnings and cash flow are in an upward trend. Typically, the
issuer is a strong company in a well-established industry and has superior
management. Issuers rated A are further refined by use of numbers 1, 2, and 3
to denote relative strength within this highest classification. Those issuers
rated A-1 that are determined by S&P to possess overwhelming safety
characteristics are denoted with a plus (+) sign designation.
Fitch's commercial paper ratings represent Fitch's assessment of the
issuer's ability to meet its obligations in a timely manner. The assessment
places emphasis on the existence of liquidity. Ratings range from F-1+ which
represents exceptionally strong credit quality to F-4 which represents weak
credit quality.
Duff & Phelps' short-term ratings apply to all obligations with maturities
of under one year, including commercial paper, the uninsured portion of
certificates of deposit, unsecured bank loans, master notes, bankers
acceptances, irrevocable letters of credit and current maturities of long-term
debt. Emphasis is placed on liquidity. Ratings range from Duff 1+ for the
highest quality to Duff 5 for the lowest, issuers in default. Issues rated Duff
1+ are regarded as having the highest certainty of timely payment. Issues rated
Duff 1 are regarded as having very high certainty of timely payment.
A-3
<PAGE>
QUEST FOR VALUE FAMILY OF FUNDS
OFFICERS FUND
SEMI-ANNUAL REPORT (UNAUDITED)
APRIL 30, 1995
B-1
<PAGE>
QUEST FOR VALUE FAMILY OF FUNDS
OFFICERS FUND
SCHEDULE OF INVESTMENTS (UNAUDITED)
APRIL 30, 1995
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
----------- ------------
<S> <C> <C>
U.S. GOVERNMENT AGENCY-11.4%
$340,000 Federal Farm Credit Bank
5.86%, 5/03/95
(cost--$339,890)............................................ $339,890
------------
SHORT-TERM CORPORATE NOTE-11.3%
MISCELLANEOUS FINANCIAL SERVICES
$340,000 Federal National Mortgage Association
5.86%, 5/09/95
(cost--$339,557)............................................ $339,557
------------
SHARES COMMON STOCKS-75.8%
------------
AEROSPACE-5.1%
8,300 Coltec Industries, Inc.* ....................................... $151,475
------------
CASINOS/GAMING-5.0%
3,900 Promus Companies, Inc.* ........................................ 150,150
------------
CONTAINERS-4.6%
3,200 Sealed Air Corp.* .............................................. 136,800
------------
DRUGS & MEDICAL PRODUCTS-3.3%
5,000 Alza Corp.* .................................................... 97,500
------------
ENTERTAINMENT-5.0%
3,700 King World Productions, Inc.* .................................. 148,925
------------
HEALTHCARE SERVICES-4.5%
3,200 Columbia/HCA Healthcare Corp. .................................. 134,400
------------
INSURANCE-22.9%
6,000 EXEL Ltd. ...................................................... 273,000
5,000 Mid Ocean Ltd.* ................................................ 143,125
7,100 Progressive Corp., Ohio ........................................ 268,025
------------
684,150
------------
MISCELLANEOUS FINANCIAL SERVICES-11.2%
9,000 Countrywide Credit Industries, Inc. ............................ 165,375
9,500 North American Mortgage Co. .................................... 171,000
------------
336,375
------------
OIL/GAS-5.3%
4,100 Triton Energy Corp.* ........................................... 157,850
------------
TOBACCO/BEVERAGES/FOOD PRODUCTS-4.2%
4,500 UST, Inc. ...................................................... 126,562
------------
TOYS/GAMES/HOBBY-4.7%
4,400 Hasbro, Inc. ................................................... 139,700
------------
Total Common Stocks
(cost--$2,044,358).......................................... $2,263,887
------------
Total Investments
(cost--$2,723,805)........................................ 98.5% $2,943,334
Other Assets in Excess of
Other Liabilities.......................................... 1.5 45,175
--------- ------------
TOTAL NET ASSETS.............................................. 100.0% $2,988,509
--------- ------------
--------- ------------
<FN>
*Non-income producing security.
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
B-2
<PAGE>
QUEST FOR VALUE FAMILY OF FUNDS
OFFICERS FUND
STATEMENT OF ASSETS AND LIABILITIES (UNAUDITED)
APRIL 30, 1995
ASSETS
<TABLE>
<S> <C> <C>
Investments, at value (cost--$2,723,805).................... $2,943,334
Cash........................................................ 20,727
Receivable for shares of beneficial interest sold........... 37,520
Receivable from adviser..................................... 12,606
Deferred organization expenses.............................. 6,850
Dividends receivable........................................ 2,241
Prepaid expenses............................................ 684
----------
Total Assets.............................................. $3,023,962
LIABILITIES
Payable for shares of beneficial interest redeemed.......... 16,869
Deferred organization expenses payable...................... 7,572
Other payables and accrued expenses......................... 11,012
----------
Total Liabilities......................................... 35,453
----------
NET ASSETS
Shares of beneficial interest at par........................ 2,703
Paid-in-surplus............................................. 2,718,398
Accumulated undistributed net investment income............. 15,542
Accumulated undistributed net realized gain on investments.. 32,337
Net unrealized appreciation on investments.................. 219,529
----------
Total Net Assets.......................................... $2,988,509
----------
----------
Shares of beneficial interest outstanding (unlimited
authorized, $.01 par value per share)................. 270,289
----------
Net asset value per share............................... $11.06
----------
----------
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
- -------------------------------------------------------------------------------
B-3
<PAGE>
QUEST FOR VALUE FAMILY OF FUNDS
OFFICERS FUND
STATEMENT OF OPERATIONS (UNAUDITED)
FOR THE PERIOD NOVEMBER 8, 1994 (COMMENCEMENT OF OPERATIONS) TO APRIL 30, 1995
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
Interest................................................ $ 12,086
Dividends............................................... 10,922
--------
Total investment income............................... $23,008
EXPENSES:
Investment advisory fee (note 2a)....................... $ 10,942
Auditing, consulting and tax return preparation fees.... 4,131
Custodian fees.......................................... 3,000
Transfer and dividend disbursing agent fees............. 1,378
Reports and notices to shareholders..................... 972
Registration fees....................................... 952
Legal fees.............................................. 729
Amortization of deferred organization expenses (note 1c) 722
Miscellaneous........................................... 723
--------
Total operating expenses.............................. 23,549
Less: Investment advisory fees waived and
expense reimbursements (note 2a)..................... (23,549)
--------
Net operating expenses.............................. 0
--------
Net investment income............................... 23,008
--------
REALIZED AND UNREALIZED GAIN
ON INVESTMENTS - NET:
Net realized gain on investments......................... $ 32,337
Net unrealized appreciation on investments............... 219,529
--------
Net realized gain and net unrealized appreciation
on investments.......................................... 251,866
--------
Net increase in net assets resulting from operations..... $274,874
--------
--------
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
- -------------------------------------------------------------------------------
B-4
<PAGE>
QUEST FOR VALUE FAMILY OF FUNDS
OFFICERS FUND
STATEMENT OF CHANGES IN NET ASSETS (UNAUDITED)
FOR THE PERIOD NOVEMBER 8, 1994 (COMMENCEMENT OF OPERATIONS) TO APRIL 30, 1995
<TABLE>
<S> <C>
OPERATIONS
Net investment income............................................. $23,008
Net realized gain on investments.................................. 32,337
Net unrealized appreciation on investments........................ 219,529
----------
Net increase in net assets resulting from operations............ 274,874
----------
DIVIDENDS TO SHAREHOLDERS OF BENEFICIAL INTEREST
Net investment income ($.037 per share)........................... (7,466)
----------
SHARE TRANSACTIONS OF BENEFICIAL INTEREST
Net proceeds from sales........................................... 2,928,833
Reinvestment of dividends......................................... 7,226
Cost of shares redeemed........................................... (214,958)
----------
Net increase in net assets from share transactions of
beneficial interest.......................................... 2,721,101
----------
Total increase in net assets................................... 2,988,509
NET ASSETS:
Beginning of period.............................................. 0
----------
End of period (including undistributed net investment income
of $15,542).................................................. $2,988,509
----------
----------
SHARES OF BENEFICIAL INTEREST ISSUED AND REDEEMED
Issued............................................................ 289,659
Issued from reinvestment of dividends............................. 713
Redeemed.......................................................... (20,083)
----------
Net increase.................................................... 270,289
----------
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
- -------------------------------------------------------------------------------
B-5
<PAGE>
QUEST FOR VALUE FAMILY OF FUNDS
OFFICERS FUND
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
APRIL 30, 1995
(1) ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
The Quest for Value Officers Fund (the "Fund") is one of nine portfolios
currently in the Quest for Value Family of Funds, a Massachusetts business
trust. The Fund is an open-end management investment company registered
under the Investment Company Act of 1940, as amended, and commenced
operations on November 8, 1994. Quest for Value Advisors (the "Adviser")
serves as the Fund's investment adviser and provides accounting and
administrative services to the Fund. Quest for Value Distributors (the
"Distributor") serves as the Fund's distributor. Both the Advisor and
Distributor are majority-owned (99%) subsidiaries of Oppenheimer Capital.
The Fund is authorized to issue three separate classes of shares; Class
A, Class B and Class C shares. Initially, only shares of Class A will be
offered to officers, directors (trustees) and employees of Oppenheimer
Capital and its affiliates, their relatives or any trust, pension, profit
sharing or other benefit plan for any of them. Shares of each Class
represent an identical interest in the investment portfolio of the Fund, and
generally have the same rights, but are offered under different sales charge
and distribution fee arrangements. Furthermore, Class B shares will
automatically convert to Class A shares of the same fund eight years after
their respective purchase.
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements:
(a) VALUATION OF INVESTMENTS
Investment securities listed on a national securities exchange and
securities traded in the over-the-counter National Market System are valued
at the last reported sale price on the valuation date; if there are no such
reported sales, the securities are valued at their last quoted bid price.
Other securities traded over-the-counter and not part of the National Market
System are valued at the last quoted bid price. Short-term debt securities
having a remaining maturity of sixty days or less are valued at amortized
cost or amortized value, which approximates market value. Any securities or
other assets for which market quotations are not readily available are valued
at their fair value as determined in good faith under procedures established
by the Board of Trustees.
(b) FEDERAL INCOME TAXES
It is the Fund's policy to comply with the requirements of the Internal
Revenue Code applicable to regulated investment companies and to distribute
substantially all of its taxable income to its shareholders; accordingly,
no Federal income tax provision is required.
(c) DEFERRED ORGANIZATION EXPENSES
Costs incurred by the Fund in connection with its organization
approximated $7,600. These costs have been deferred and are being
amortized to expense on a straight line basis over sixty months from
commencement of operations.
(d) SECURITIES TRANSACTIONS AND OTHER INCOME
Security transactions are accounted for on the trade date. In determining
the gain or loss from the sale of securities, the cost of securities sold has
been determined on the basis of identified cost. Dividend income is
recorded on the ex-dividend date and interest income is accrued as earned.
Discounts or premiums on debt securities purchased are accreted or
amortized to interest income over the lives of the respective securities.
(e) DIVIDENDS AND DISTRIBUTIONS
It is the Fund's policy to declare and pay dividends from net investment
income and to make distributions from net realized capital gains annually.
The Fund records dividends and distributions to its shareholders on the
ex-dividend date.
(2) INVESTMENT ADVISORY FEE, DISTRIBUTION FEE AND OTHER TRANSACTIONS WITH
AFFILIATES
(a) The investment advisory fee is payable monthly to the Adviser and is
computed as percentage of the Fund's net assets as of the close of business
each day at an annual rate of 1.00%.
For the period November 8, 1994 (commencements of operations) to April 30,
1995, the Adviser has voluntarily waived its investment advisory fee of
$10,942 and reimbursed the Fund for all other operating expenses of $12,607.
B-6
<PAGE>
QUEST FOR VALUE FAMILY OF FUNDS
OFFICERS FUND
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
APRIL 30, 1995
(b) The Fund has adopted a Plan and Agreement of Distribution (the "Plan")
pursuant to which the Fund is permitted to compensate the Distributor in
connection with the distribution of shares of beneficial interest. Under
the Plan, the Distributor may enter into agreements with securities dealers
and other financial institutions and organizations to obtain various
sales-related services in rendering distribution assistance. To compensate
the Distributor for the services it and other dealers under the Plan
provide and for the expenses they bear under the Plan, the Fund pays the
Distributor compensation accrued daily and payable monthly at an annual rate
of .25% of average daily net assets for Class A. Class A also pays a
service fee at an annual rate of .25%. Compensation for Class B and Class
C shares of the Fund is at an annual rate of .75% of average daily net
assets. The Fund's Class B and Class C shares also pay a service fee at an
annual rate of .25%. Distribution and service fees may be paid by the
Distributor to broker dealers or others for providing personal service,
maintenance of accounts and ongoing sales or shareholder support functions
in connection with the distribution of shares of beneficial interest.
While payments under the Plan may not exceed the stated percentage of average
daily net assets on an annual basis, the payments are not limited to the
amounts actually incurred by the Distributor.
For the period November 8, 1994 (commencement of operations) to April 30,
1995, the Distributor has waived any and all distribution-related expenses
without compensation from the Fund.
(c) Total brokerage commissions paid by the Fund amounted to $8,197 of
which $3,388 was paid to Oppenheimer & Co., Inc., an affiliate of the
Adviser.
(3) PURCHASES AND SALES OF SECURITIES
For the period November 8, 1994 (commencement of operations) to April 30,
1995, purchases and sales of investment securities, other than short-term
securities, aggregated $3,128,430 and $1,116,416, respectively.
(4) UNREALIZED APPRECIATION (DEPRECIATION) AND COST OF INVESTMENTS FOR FEDERAL
INCOME TAX PURPOSES
At April 30, 1995, the cost of investments for Federal income tax purposes
was the same as the cost of investments for financial statement purposes.
Aggregate gross unrealized appreciation (all investments in which there is
an excess of value over tax cost) amounted to $250,264 and aggegrate gross
unrealized depreciation (all investments in which there is an excess of tax
cost over value) amounted to $30,735, resulting in net unrealized
appreciation of $219,529.
B-7
<PAGE>
QUEST FOR VALUE FAMILY OF FUNDS
OFFICERS FUND
FINANCIAL HIGHLIGHTS (UNAUDITED)
NOVEMBER 8, 1994 (COMMENCEMENT OF OPERATIONS) TO APRIL 30, 1995
<TABLE>
<S> <C>
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD:
Net Asset Value, beginning of period....................................... $10.00 (1)
-----------
Net investment income...................................................... 0.10
Net realized and unrealized gain on investments............................ 1.00
-----------
Total from investment operations........................................ 1.10
Dividends to shareholders from net investment income....................... (0.04)
-----------
Net Asset Value, end of period............................................. $11.06
-----------
-----------
Total investment return*................................................... 11.00%
-----------
Net assets, end of period.................................................. $2,988,509
-----------
Ratio of net operating expenses to average net assets...................... 0.00%(2,3,4)
-----------
Ratio of net investment income to average net assets....................... 2.10%(2,3,4)
-----------
Portfolio turnover rate.................................................... 60%
-----------
<FN>
- -------------------------------------------------------------------------------
(1) Offering price.
(2) During the period presented above, the Adviser has voluntarily waived
all of its fees and reimbursed the Fund for all of its operating
expenses. If such waivers and reimbursements had not been in effect, the
annualized ratio of net operating expenses to average daily net
assets and the annualized ratio of net investment income to average
daily net assets would have been 2.15% and (.05%), respectively.
(3) Average net assets for the period November 8, 1994 (commencement of
operations) to April 30, 1995 were $2,295,379.
(4) Annualized.
* Assumes reinvestment of all dividends. Aggregate (not annualized) total
return is shown.
</TABLE>
B-8
