OPPENHEIMER QUEST GROWTH & INCOME VALUE FUND
Supplement dated February 15, 1996 to the
Prospectus dated February 15, 1996
The Prospectus is changed as follows:
In addition to paying dealers the regular commission for (1)
sales of Class A shares stated in the sales charge table in "Buying
Class A Shares," (2) sales of Class B shares described in
"Distribution and Service Plan for Class B Shares," or (3) sales of
Class C shares described in "Distribution and Service Plan for
Class C Shares," the Distributor will pay additional commission to
each participating broker, dealer and financial institution that
has a sales agreement with the Distributor (these are referred to
as "participating firms") for Class A, B and C shares of the Fund
sold in "qualifying transactions" (the "promotion"). The
additional commission will be .75% of the offering price of shares
of the Fund sold by a registered representative or sales
representative of a participating firm during the promotion. If
the additional commission is paid on the sale of Class A shares of
$1 million or more and those shares are redeemed within 13 months
from the end of the month in which they were purchased, the
participating firm will be required to return the additional
commission.
"Qualifying transactions" are sales of Class A, Class B and/or
Class C shares of any one or more of the Oppenheimer funds (except
money market funds and tax-exempt funds) for (1) new Individual
Retirement Accounts ("IRAs"), using the OppenheimerFunds prototype
IRA agreement, including rollover IRAs, SEP IRAs and SAR-SEP IRAs,
where the IRA is established and the purchase payment is received
during the period from January 1, 1996 through April 15, 1996 (the
"promotion period") or, (2) IRAs using the A.G. Edwards & Sons,
Inc. prototype IRA agreement, including rollover IRAs, SEP IRAs and
SAR-SEP IRAs, where the purchase payment is received during the
promotion period. "Qualifying transactions" also include
purchases of shares of Oppenheimer funds for existing
OppenheimerFunds or A.G. Edwards & Sons, Inc. prototype IRAs,
rollover IRAs, SEP IRAs and SAR-SEP IRAs effected through a
rollover from an investor, or through a direct rollover or trustee-
to-trustee transfer from another retirement plan trustee, of IRA
assets or other employee benefit plan assets from an account or
investment other than an account or investment in the Oppenheimer
funds. To qualify, the payment for the shares purchased for a
rollover to an OppenheimerFunds prototype IRA or for a rollover,
direct rollover or trustee-to-trustee transfer to an A.G. Edwards
& Sons, Inc. prototype IRA must be received during the promotion
period, or the acceptance of a direct rollover or trustee-to-
trustee transfer to an OppenheimerFunds prototype IRA must be
acknowledged by the trustee of the OppenheimerFunds prototype IRA
during the promotion period. "Qualifying transactions" do not
include (1) purchases of Class A shares intended but not yet made
under a Letter of Intent, and (2) purchases of Class A, Class B
and/or Class C shares with the redemption proceeds from an existing
OppenheimerFunds account.
February 15, 1996 PS0257.003
<PAGE>
OPPENHEIMER
QUEST GROWTH & INCOME VALUE FUND
Prospectus dated February 15, 1996
Oppenheimer Quest Growth & Income Value Fund (the "Fund"), a series
of Oppenheimer Quest for Value Funds, is a mutual fund that seeks
to achieve a combination of growth of capital and investment income
with growth of capital as the primary objective, by investing in
securities that are believed by OpCap Advisors ("the Sub-Adviser")
to be undervalued in the marketplace and to offer the possibility
of increased value. Ordinarily, the Fund invests its assets in
common stocks (with emphasis on dividend paying stocks), preferred
stocks, securities convertible into common stock, and debt
securities. The Fund may invest in lower-quality, high-yielding
convertible debt securities and other debt securities, and
currently intends to limit its investments in such lower quality
securities to no more than 25% of its assets. In an uncertain
investment environment, the Fund may stress defensive investment
methods. Please refer to "Investment Restrictions and Techniques"
for more information about the types of securities in which the
Fund invests, its investment methods and the risks of investing in
the Fund.
This Prospectus explains concisely what you should know before
investing in the Fund. Please read this Prospectus carefully and
keep it for future reference. You can find more detailed
information about the Fund in the February 15, 1996, Statement of
Additional Information. For a free copy, call OppenheimerFunds
Services, the Fund's Transfer Agent, at 1-800-525-7048, or write to
the Transfer Agent at the address on the back cover. The Statement
of Additional Information has been filed with the Securities and
Exchange Commission and is incorporated into this Prospectus by
reference (which means that it is legally part of this Prospectus).
(OppenheimerFunds logo)
Shares of the Fund are not deposits or obligations of any bank, are
not guaranteed by any bank, and are not insured by the F.D.I.C. or
any other agency, and involve investment risks, including the
possible loss of the principal amount invested.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION 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.
<PAGE>
Contents
ABOUT THE FUND
Expenses
A Brief Overview of the Fund
Financial Highlights
Investment Objective and Policies
How the Fund is Managed
Performance of the Fund
ABOUT YOUR ACCOUNT
How to Buy Shares
Class A Shares
Class B Shares
Class C Shares
Special Investor Services
AccountLink
Automatic Withdrawal and Exchange Plans
Reinvestment Privilege
Retirement Plans
How to Sell Shares
By Mail
By Telephone
How to Exchange Shares
Shareholder Account Rules and Policies
Dividends, Capital Gains and Taxes
Appendix A: Special Sales Charge Arrangements for
Shareholders of the Fund Who Were Shareholders of the
Former Quest for Value Funds
Appendix B: Description of Ratings
<PAGE>
A B O U T T H E F U N D
Expenses
The Fund pays a variety of expenses directly for management of
its assets, administration, distribution of its shares and other
services, and those expenses are subtracted from the Fund's assets
to calculate the Fund's net asset value per share. All shareholders
therefore pay those expenses indirectly. Shareholders pay other
expenses directly, such as sales charges and account transaction
charges. The following tables are provided to help you understand
your direct expenses of investing in the Fund and your share of the
Fund's business operating expenses that you might expect to bear
indirectly. The numbers below are based on the Fund's expenses
during its last fiscal year ended October 31, 1995.
-- Shareholder Transaction Expenses are charges you pay when
you buy or sell shares of the Fund. Please refer to "About Your
Account" from pages __ through __ for an explanation of how and
when these charges apply.
<TABLE>
<CAPTION>
Class A Class B Class C
Shares Shares Shares
- ------------------------------------------------------------------------
<S> <C> <C> <C>
Maximum Sales 5.75% None None
Charge on Purchases
(as a % of offering price)
- ------------------------------------------------------------------------
Sales Charge on None None None
Reinvested Dividends
- ------------------------------------------------------------------------
Deferred Sales Charge None(1) 5% in the first 1.0% if
(as a % of the lower of the year, declining shares are
original purchase price or to 1% in the redeemed
redemption proceeds) sixth year and within 12
eliminated months of
thereafter(2) purchase(2)
- ------------------------------------------------------------------------
Exchange Fee None None None
</TABLE>
(1)If you invest $1 million or more ($500,000 or more for purchases
by OppenheimerFunds prototype 401(k) plans), in Class A shares, you
may have to pay a sales charge of up to 1% if you sell your shares
within 18 calendar months from the end of the calendar month during
which you purchased those shares, depending upon when you purchased
such shares. See "How to Buy Shares - Buying Class A Shares,"
below. Class A shares of the Fund purchased without an initial
sales charge on or before November 24, 1995 will continue to be
subject to the applicable contingent deferred sales charge in
effect as of that date as set forth in the then-current prospectus
for such fund.
(2)See "How to Buy Shares - Buying Class B Shares" and "How to Buy
Shares - Buying Class C Shares," below, for more information on the
contingent deferred sales charges.
-- Annual Fund Operating Expenses are paid out of the Fund's
assets and represent the Fund's expenses of operating its business.
For example, the Fund pays management fees to its investment
adviser, OppenheimerFunds, Inc. (which is referred to in this
Prospectus as the "Manager"). The rates of the Manager's fees are
set forth in "How the Fund is Managed," below. The Fund has other
regular expenses for services, such as transfer agent fees,
custodial fees paid to the bank that holds its portfolio
securities, audit fees and legal expenses. Those expenses are
detailed in the Fund's Financial Statements included in the
Statement of Additional Information.
The numbers in the chart below are projections of the Fund's
business expenses based on the Fund's expenses in its fiscal year
ended October 31, 1995. These amounts are shown as a percentage of
the average net assets of each class of the Fund's shares for that
year. The "Management Fees" and "Total Fund Operating Expenses"
have been restated to reflect the elimination, concurrently with
the acquisition by the Manager described below under "How the Fund
is Managed - The Sub-Adviser", of a voluntary management fee
waiver. Had the voluntary fee waiver remained in effect, the
"Management Fees" would have been 0.82%, 0.83% and 0.81% for Class
A, Class B and Class C shares, respectively, and "Total Fund
Operating Expenses" would have been 1.96%, 2.57% and 2.84% for
Class A, Class B and Class C shares, respectively.
The "12b-1 Distribution Plan Fees" for Class A shares are the
service plan fees (the maximum fee is 0.25% of average annual net
assets of that class), and a distribution fee of 0.15% of the
average annual net assets of that class. For Class B and Class C
shares, the "12b-1 Distribution Plan Fees" are the service plan
fees of 0.25% of average annual net assets of the class, and the
asset-based sales charge of 0.75% of the average annual net assets
of the class. These plans are described in greater detail in "How
to Buy Shares."
The actual expenses for each class of shares in future years
may be more or less than the numbers in the chart, depending on a
number of factors, including the actual value of the Fund's assets
represented by each class of shares.
Class A Class B Class C
Shares Shares Shares
- ---------------------------------------------------------------
Management Fees 0.85% 0.85% 0.85%
- ---------------------------------------------------------------
12b-1 Distribution
Plans Fees 0.40% 1.00% 1.00%
- ---------------------------------------------------------------
Other Expenses 0.74% 0.74% 1.03%
- ---------------------------------------------------------------
Total Fund
Operating Expenses 1.99% 2.59% 2.88%
-- Examples. To try to show the effect of these expenses on
an investment over time, we have created the hypothetical examples
shown below. Assume that you make a $1,000 investment in each class
of shares of the Fund, that the Fund's annual return is 5%, that
its operating expenses for each class are the ones shown in the
Annual Fund Operating Expenses chart above and that Class B shares
automatically convert into Class A shares six years after purchase.
If you were to redeem your shares at the end of each period shown
below, your investment would incur the following expenses by the
end of 1, 3, 5 and 10 years:
1 year 3 years 5 years 10 years(1)
- --------------------------------------------------------------
Class A Shares $77 $116 $159 $276
Class B Shares $76 $111 $158 $265
Class C Shares $ $ $ $320
If you did not redeem your investment, it would incur the
following expenses:
1 year 3 years 5 years 10 years(1)
- --------------------------------------------------------------
Class A Shares $77 $116 $159 $276
Class B Shares $26 $ 81 $138 $265
Class C Shares $29 $ 89 $152 $320
(1)The Class B expenses in years 7 through 10 are based on the Class
A expenses shown above, because the Fund automatically converts
Class B shares into Class A shares after 6 years. Because of the
effect of the asset-based sales charge and the contingent deferred
sales charge on Class B and Class C shares, long-term Class B and
Class C shareholders could pay the economic equivalent of more than
the maximum front-end sales charge allowed under applicable
regulations. For Class B shareholders, the automatic conversion of
Class B shares to Class A shares is designed to minimize the
likelihood that this will occur. Please refer to "How to Buy
Shares - Buying Class B Shares" for more information.
These examples show the effect of expenses on an investment,
but are not meant to state or predict actual or expected costs or
investment returns of the Fund, all of which will vary.
A Brief Overview of the Fund
Some of the important facts about the Fund are summarized
below, with references to the section of this Prospectus where more
complete information can be found. You should carefully read the
entire Prospectus before making a decision about investing in the
Fund. Keep the Prospectus for reference after you invest,
particularly for information about your account, such as how to
sell or exchange shares.
-- What is the Fund's Investment Objective? The Fund's
investment objective is to achieve a combination of growth of
capital and investment income with growth of capital as the primary
objective, by investing in securities that are believed by the Sub-
Adviser to be undervalued in the marketplace and to offer the
possibility of increased value.
-- What does the Fund Invest In? The Fund may invest in
common stocks (with an emphasis on dividend paying stocks),
preferred stocks, securities convertible into common stock, and
debt securities. By focusing its purchases of equity securities on
those issued by mature companies that the Fund believes are
undervalued, the Fund seeks to achieve both its objectives of
capital appreciation as well as income from dividends. The Fund's
purchases of convertible securities also gives it the potential of
capital growth and investment income prior to conversion. The
Fund's purchases of debt securities further the objective of
investment income and offer potential for capital appreciation in
an economic environment of declining interest rates or as a result
of improved issuer credit quality. The Fund may invest up to 25%
of its total assets in lower-grade, high yield debt securities
(commonly known as "junk bonds"). It is anticipated that the Fund
will be generally less volatile than the market as a result of its
investment approach. The Fund may assume a temporary defensive
position when appropriate to do so by investing in money market
instruments as defined herein. These investments and investment
methods are more fully explained in "Investment Objective and
Policies," starting on page ___.
-- Who Manages the Fund? The Fund's investment adviser (the
"Manager") is OppenheimerFunds, Inc. The Manager (including a
subsidiary) manages investment company portfolios having over $40
billion in assets. The Manager handles the day-to-day business of
the Fund. The Fund also has a sub-adviser, OpCap Advisors (the
"Sub-Adviser") which is responsible for choosing the Fund's
investments. The Manager is paid an advisory fee by the Fund. The
Manager, not the Fund, pays the Sub-Adviser. The Fund has a
portfolio manager, Mr. Colin Glinsman, who is employed by the Sub-
Adviser and is primarily responsible for the selection of the
Fund's securities. The Fund's Board of Trustees, elected by
shareholders, oversees the investment adviser and the portfolio
manager. Please refer to "How the Fund is Managed" starting on
page __ for more information about the Manager, the Sub-Adviser and
their fees.
-- How Risky is the Fund? All investments carry risks to some
degree. The Fund's investments in stocks and bonds, including
convertible bonds, are subject to changes in their value from a
number of factors such as changes in general bond and stock market
movements, or the change in value of particular stocks or bonds
because of an event affecting the issuer. Changes in interest
rates can affect stock and bond prices. These changes affect the
value of the Fund's investments and its price per share. The Fund
may invest up to 25% of its total assets in high yield, lower-grade
securities (commonly known as "junk bonds"). Those securities may
be subject to greater market fluctuations and risk of loss of
income and principal than higher-grade securities and may be
considered to have certain speculative characteristics. The Fund's
investments in foreign securities involve additional risks not
associated with investments in domestic securities, including risks
associated with changes in currency rates.
While the Manager tries to reduce risks by diversifying
investments, by carefully researching securities before they are
purchased for the Fund's portfolio, and in some cases by using
hedging techniques, there is no guarantee of success in achieving
the Fund's investment objective and your shares may be worth more
or less than their original cost when you redeem them. The Fund's
investment allocation mix among equity securities, convertible
securities and debt securities, which will change from time to
time, is anticipated to result in the Fund being generally less
volatile than the market. Please refer to "Investment Objective and
Policies" starting on page __ for a more complete discussion of the
Fund's investment risks.
-- How Can I Buy Shares? You can buy shares through your
dealer or financial institution, or you can purchase shares
directly through OppenheimerFunds Distributor, Inc. (the
"Distributor") by completing an Application or by using an
Automatic Investment Plan under AccountLink. Please refer to "How
to Buy Shares" on page __ for more details.
-- Will I Pay a Sales Charge to Buy Shares? The Fund offers
the individual investor three classes of shares. Each class has
the same investment portfolio but different expenses. Class A
shares are offered with a front-end sales charge, starting at
5.75%, and reduced for larger purchases. Class B and Class C
shares are offered without a front-end sales charge, but may be
subject to a contingent deferred sales charge if redeemed within 6
years or 12 months of purchase, respectively. There is also an
annual asset-based sales charge on Class B and Class C shares.
Please review "How to Buy Shares" starting on page __ for more
details, including a discussion about which class may be
appropriate for you.
-- How Can I Sell My Shares? Shares can be redeemed by mail
or by telephone call to the Transfer Agent on any business day, or
through your dealer. Please refer to "How to Sell Shares" on page
__. The Fund also offers exchange privileges to other Oppenheimer
funds, described in "How to Exchange Shares" on page __.
-- How Has the Fund Performed? The Fund measures its
performance by quoting its average annual total returns and
cumulative total returns, which measure historical performance.
Those returns can be compared to the returns (over similar periods)
of other funds. Of course, other funds may have different
objectives, investments, and levels of risk. The Fund's
performance can also be compared to a broad-based market index,
which we have done on pages 22 and 23. Please remember that past
performance does not guarantee future results.
Financial Highlights
The table on the following pages presents selected financial
information about the Fund, including per share data, expense
ratios and other data based on the Fund's average net assets. This
information has been audited by Price Waterhouse LLP, the Fund's
independent accountants, whose report on the Fund's financial
statements for the fiscal year ended October 31, 1995, is included
in the Statement of Additional Information.
<PAGE>
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
CLASS A CLASS B
---------------------------------------------- -----------------------------------
PERIOD PERIOD
ENDED ENDED
YEAR ENDED OCTOBER 31, OCT. 31, YEAR ENDED OCTOBER 31, OCT. 31,
1995 1994 1993 1992(2) 1995 1994 1993(1)
===========================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING DATA:
Net asset value,
beginning of period $10.09 $11.24 $10.80 $10.00(3) $10.07 $11.23 $11.21(3)
- ---------------------------------------------------------------------------------------------------------------------------
Income from investment
operations:
Net investment income(4) .27 .32 .30 .28 .19 .25 .04
Net realized and
unrealized gain on
investments 1.27 .55 .73 .80 1.28 .56 .05
------ ------ ------ ------ ------ ------ ------
Total income from
investment operations 1.54 .87 1.03 1.08 1.47 .81 .09
- ---------------------------------------------------------------------------------------------------------------------------
Dividends and
distributions to
shareholders:
Dividends from net
investment income (.29) (.32) (.26) (.28) (.24) (.27) (.07)
Distributions from
net realized gain
on investments (.42) (1.70) (.33) -- (.42) (1.70) --
------ ------ ------ ------ ------ ------ ------
Total dividends and
distributions to
shareholders (.71) (2.02) (.59) (.28) (.66) (1.97) (.07)
- ---------------------------------------------------------------------------------------------------------------------------
Net asset value,
end of period $10.92 $10.09 $11.24 $10.80 $10.88 $10.07 $11.23
====== ====== ====== ====== ====== ====== ======
===========================================================================================================================
TOTAL RETURN, AT
NET ASSET VALUE(5) 16.35% 8.64% 9.93% 10.84% 15.65% 7.96% 0.81%
===========================================================================================================================
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of
period (in thousands) $37,082 $30,576 $28,466 $8,057 $7,623 $2,928 $319
- ---------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets:
Net investment income(6,7) 2.60% 3.16% 2.66% 2.73%(8) 1.71% 2.53% 1.83%(8)
Expenses(6,7) 1.99% 1.86% 1.90% 2.23%(8) 2.59% 2.47% 2.49%(8)
- ---------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate(9) 130.0% 113.0% 192.0% 77.0% 130.0% 113.0% 192.0%
</TABLE>
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS CLASS C
---------------------------------
PERIOD
ENDED
YEAR ENDED OCTOBER 31, OCT. 31,
1995 1994 1993(1)
====================================================================
<S> <C> <C>
PER SHARE OPERATING DATA:
Net asset value,
beginning of period $10.07 $11.23 $11.21(3)
- --------------------------------------------------------------------
Income from investment
operations:
Net investment income(4) .15 .24 .04
Net realized and
unrealized gain on
investments 1.30 .56 .05
------ ------ ------
Total income from
investment operations 1.45 .80 .09
- --------------------------------------------------------------------
Dividends and
distributions to
shareholders:
Dividends from net
investment income (.21) (.26) (.07)
Distributions from
net realized gain
on investments (.42) (1.70) --
------ ------ ------
Total dividends and
distributions to
shareholders (.63) (1.96) (.07)
- --------------------------------------------------------------------
Net asset value,
end of period $10.89 $10.07 $11.23
====== ====== ======
====================================================================
TOTAL RETURN, AT
NET ASSET VALUE(5) 15.38% 7.91% 0.81%
====================================================================
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of
period (in thousands) $1,828 $455 $102
- --------------------------------------------------------------------
Ratios to average net assets:
Net investment income(6,7) 1.39% 2.39% 2.18%(8)
Expenses(6,7) 2.88% 2.62% 2.49%(8)
- --------------------------------------------------------------------
Portfolio turnover rate(9) 130.0% 113.0% 192.0%
</TABLE>
1. Initial offering of Class B and Class C shares. For the period from
September 2, 1993 (inception of offering) to October 31, 1993.
2. For the period from November 4, 1991 (commencement of operations) to October
31, 1992.
3. Offering price.
4. Based on average shares outstanding for the period.
5. Assumes reinvestment of all dividends and distributions, but does not
reflect deductions for sales charges. Aggregate (not annualized) total
return is shown for any period shorter than one year.
6. Average net assets for the year ended October 31, 1995 for Classes A, B and
C were $33,396,923, $4,845,598 and $967,910, respectively.
7. During the periods presented above, the Adviser voluntarily waived a portion
of its fees. If such waivers had not been in effect, the ratios of net
investment income to average net assets and the ratios of expenses to average
net assets for Class A would have been 2.57% and 2.02%, respectively, for the
year ended October 31, 1995, 2.70% and 2.32%, respectively, for the year ended
October 31, 1994, 2.38% and 2.18%, respectively, for the year ended October 31,
1993, and 1.98% and 2.98%, annualized, respectively, for the period November 4,
1991 (commencement of operations) to October 31, 1992. The ratios of net
investment income to average net assets and the ratios of expenses to average
net assets would have been 1.73% and 2.57%, respectively, for Class B and 1.43%
and 2.84%, respectively, for Class C, for the year ended October 31, 1995,
2.07% and 2.93%, respectively, for Class B and 1.91% and 3.10%, respectively,
for Class C, for the year ended October 31, 1994 and 1.44% and 2.88%,
annualized, respectively, for Class B and 1.80% and 2.87%, annualized,
respectively, for Class C, for the period September 2, 1993 (initial offering)
to October 31, 1993.
8. Annualized.
9. The lesser of purchases or sales of portfolio securities for a period,
divided by the monthly average of the market value of portfolio securities
owned during the period. Securities with a maturity or expiration date at the
time of acquisition of one year or less are excluded from the calculation.
Purchases and sales of investment securities (excluding short-term securities)
for the period ended October 31, 1995 were $54,163,330 and $41,657,071,
respectively.
<PAGE>
Investment Objective and Policies
Objective. The Fund seeks to achieve a combination of growth of
capital and investment income with growth of capital as the primary
objective, by investing in securities that are believed by the Sub-
Adviser to be undervalued in the marketplace and to offer the
possibility of increased value.
Investment Policies and Strategies. The Fund invests in marketable
securities traded on national securities exchanges and in the over-
the-counter market. The Fund generally invests its assets in
common stocks (with emphasis on dividend-paying stocks), preferred
stocks, securities convertible into common stock, and debt
securities. By focusing its purchases of equity securities on
those issued by mature companies that the Sub-Adviser believes are
undervalued, the Fund seeks to achieve both its objectives of
capital appreciation as well as income from dividends. The Fund's
purchases of convertible securities also give it the potential of
capital growth and investment income prior to conversion. The
Fund's purchases of debt securities further the objective of
investment income and offer potential for capital appreciation in
an economic environment of declining interest rates or as a result
of improved issuer credit quality. As a non-fundamental policy,
the Fund may invest up to 25% of its total assets in lower-grade,
high yield debt securities (commonly known as "junk bonds"). It
is anticipated that the Fund will be generally less volatile than
the market as a result of its investment approach.
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 money market instruments. At any time that
the Fund invests in money market instruments for temporary
defensive purposes, to the extent of such investments, it is not
pursuing its investment objective.
-- Can the Fund's Investment Objective and Policies Change?
The Fund has an investment objective, which is described above, as
well as investment policies it follows to try to achieve its
objective. Additionally, the Fund uses certain investment
techniques and strategies in carrying out those policies. Except
as indicated, the investment objective and policies described above
are fundamental policies.
Fundamental policies are those that cannot be changed without
the approval of a "majority" of the Fund's outstanding voting
shares. The term "majority" is defined in the Investment Company
Act of 1940 to be a particular percentage of outstanding voting
shares (and this term is explained in the Statement of Additional
Information). The Fund's Board of Trustees may change non-
fundamental policies without shareholder approval, although
significant changes will be described in amendments to this
Prospectus.
-- Stock Investment Risks. Because the Fund may invest a
substantial portion of its assets in stocks, the value of the
Fund's portfolio will be affected by changes in the stock markets.
At times, the stock markets can be volatile, and stock prices can
change substantially. This market risk will affect the Fund's net
asset values per share, which will fluctuate as the values of the
Fund's portfolio securities change. Not all stock prices change
uniformly or at the same time, not all stock markets move in the
same direction at the same time, and other factors can affect a
particular stock's prices (for example, poor earnings reports by an
issuer, loss of major customers, major litigation against an
issuer, and changes in government regulations affecting an
industry). Not all of these factors can be predicted.
The Fund attempts to limit market risks by diversifying its
investments, that is, by not holding a substantial amount of the
stock of any one company and by not investing too great a
percentage of the Fund's assets in any one company. In addition,
the Fund's asset allocation mix, among equity securities,
convertible securities and debt securities, which will change from
time to time, is anticipated to result in the Fund being generally
less volatile than the market. Because changes in market prices
can occur at any time, there is no assurance that the Fund will
achieve its investment objective, and when you redeem your shares,
they may be worth more or less than what you paid for them.
-- Risks of Fixed-Income Securities. In addition to credit
risks, described below, debt securities are subject to changes in
their value due to changes in prevailing interest rates. When
prevailing interest rates fall, the value of already-issued debt
securities generally rise. When interest rates rise, the values of
already-issued debt securities generally decline. The magnitude of
these fluctuations will often be greater for longer-term debt
securities than shorter-term debt securities. Changes in the value
of securities held by the Fund mean that the Fund's share prices
can go up or down when interest rates change because of the effect
of the change on the value of the Fund's portfolio of debt
securities. Credit risk relates to the ability of the issuer to
meet interest or principal payments on a security as they become
due. Generally, higher yielding lower-grade bonds, described
below, are subject to credit risks to a greater extent than lower
yielding, investment-grade bonds.
-- Special Risks of Lower-Grade Securities. The Fund may
invest up to 25% of its total assets in "lower grade" debt
securities. "Lower-grade" debt securities are those rated below
"investment grade," which means they have a rating lower than "Baa"
by Moody's Investors Service, Inc. or lower than "BBB" by Standard
& Poor's Corporation, or similar ratings by other rating
organizations, or if unrated, are determined by the Sub-Adviser to
be of comparable quality to debt securities rated below investment
grade. Lower-grade high yield debt securities are commonly known
as "junk bonds." The Fund does not intend to hold such lower-rated
securities unless the opportunities for capital appreciation and
income, combined, remain attractive. The Fund may invest in
securities rated as low as "Caa" by Moody's or "CCC" by Standard &
Poor's. A reduction in the rating of a security after its purchase
by the Fund will not require the Fund to dispose of the security.
Once the rating of a security has been changed, the Fund will
consider all circumstances deemed relevant in determining whether
to continue to hold the security. Appendix B to this Prospectus
describes these rating categories.
High yield, lower-grade securities, whether rated or unrated,
often have speculative characteristics. Lower-grade securities
have special risks that make them riskier investments than
investment grade securities. They may be subject to greater market
fluctuations and risk of loss of income and principal than lower
yielding, investment-grade securities. There may be less of a
market for them and therefore they may be harder to sell at an
acceptable price. There is a relatively greater possibility that
the issuer's earnings may be insufficient to make the payments of
interest due on the bonds. The issuer's low creditworthiness may
increase the potential for its insolvency.
These risks mean that the Fund may not achieve the expected
income from lower-grade securities, and that the Fund's net asset
value per share may be affected by declines in value of these
securities. However, the Fund's limitations on investments in
these types of securities may reduce some of the risk, as will the
Fund's policy of diversifying its investments. Also, convertible
securities may be less subject to some of these risks than other
debt securities, to the extent they can be converted into stock,
which may be more liquid and less affected by these other risk
factors.
-- U.S. Government Obligations, including Mortgage-Backed
Securities. U.S. Government obligations are obligations supported
by any of the following: (a) the full faith and credit of the
U.S. Government, such as obligations of Government National
Mortgage Association ("Ginnie Mae"), (b) the right of the issuer
to borrow an amount limited to a specific line of credit from the
U.S. Government, such as obligations of Federal National Mortgage
Association ("Fannie Mae"), and (c) the credit of this U.S.
Government instrumentality, such as obligations of Federal Home
Loan Mortgage Corporation ("Freddie Mac").
The Fund may invest in mortgage-backed securities issued by
the U.S. Government, its agencies or instrumentalities, including
Ginnie Mae, Fannie Mae or Freddie Mac. Also known as pass-through
securities, the homeowner's principal and interest payments pass
from the originating bank or savings and loan through the
appropriate governmental agency to investors, net of service
charges.
The effective maturity of a mortgage-backed security may be
shortened by unscheduled or early payment of principal and interest
on the underlying mortgages, which may affect the effective yield
of such securities. The principal that is returned may be invested
in instruments having a higher or lower yield than the prepaid
instruments depending on then-current market conditions.
The Fund may invest in collateralized mortgage obligations
("CMOs") that are issued or guaranteed by the U.S. Government or
its agencies or instrumentalities, or that are collateralized by a
portfolio of mortgages or mortgage-related securities guaranteed by
such an agency or instrumentality. Payment of the interest and
principal generated by the pool of mortgages is passed through to
the holders as the payments are received by the issuer of the CMO.
CMOs may be issued in a variety of classes or series ("tranches")
that have different maturities. The principal value of certain CMO
tranches may be more volatile than other types of mortgage-related
securities, because of the possibility that the principal value of
the CMO may be prepaid earlier than the maturity of the CMO as a
result of prepayments of the underlying mortgage loans by the
borrowers.
-- Foreign Securities. The Fund may purchase foreign
securities that are listed on a domestic or foreign securities
exchange, traded in domestic or foreign over-the counter markets or
represented by American Depository Receipts. There is no limit to
the amount of such foreign securities the Fund may acquire. The
Fund may buy securities in any country, including emerging market
countries. The Fund presently does not intend to purchase
securities issued by emerging market countries, or by companies
located in those countries. Foreign currency will be held by the
Fund only in connection with the purchase or sale of foreign
securities.
Foreign securities have special risks. For example, foreign
issuers are not subject to the same accounting and disclosure
requirements that U.S. companies are subject to. The value of
foreign investments may be affected by changes in foreign currency
rates, exchange control regulations, expropriation or
nationalization of a company's assets, foreign taxes, delays in
settlement of transactions, changes in governmental economic or
monetary policy in the U.S. or abroad, or other political and
economic factors. Foreign investment in certain emerging market
countries is restricted or controlled to varying degrees. In the
past, securities in emerging countries have experienced greater
price movement, both positive and negative, than securities of
companies located in developed countries. More information about
the risks and potential rewards of investing in foreign securities
is contained in the Statement of Additional Information.
-- Warrants and Rights. As a non-fundamental policy, 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.
-- Portfolio Turnover. A change in the securities held by the
Fund is known as "portfolio turnover." The Fund may engage in
short-term trading to try to achieve its objective. The Fund's
annual portfolio turnover rate may be up to 250%. The "Financial
Highlights," above, show the Fund's portfolio turnover rate during
past fiscal years. High turnover and short-term trading may cause
the Fund to have relatively larger commission expenses and
transaction costs than funds that do not engage in short-term
trading. Additionally, high portfolio turnover may affect the
ability of the Fund to qualify, as a "regulated investment company"
under the Internal Revenue Code, for tax deductions for dividends
and capital gain distributions the Fund pays to shareholders. The
Fund qualified in its last fiscal year and intends to do so in the
coming year, although there is no guarantee that it will qualify.
Other Investment Techniques and Strategies. The Fund may also use
the investment techniques and strategies described below. These
techniques involve certain risks. The Statement of Additional
Information contains more information about these practices,
including limitations on their use that may help reduce some of the
risks.
-- Temporary Defensive Investments. In times of unstable
market or economic conditions, when the Sub-Adviser determines it
appropriate to do so to attempt to reduce fluctuations in the value
of the Fund's net assets, the Fund may assume a temporary defensive
position and invest an unlimited amount of assets in money market
instruments of the type identified on page 10 under "Investment
Policies and Strategies."
-- When-Issued and Delayed Delivery Transactions. The Fund
may purchase securities on a "when-issued" basis, and may purchase
or sell such securities on a "delayed delivery" basis. These terms
refer to securities whose terms and indenture are available and for
which a market exists, but which are not available for immediate
delivery. The Fund does not intend to make such purchases for
speculative purposes. During the period between the purchase and
settlement, the underlying securities are subject to market
fluctuations and no interest prior to delivery of the securities.
-- Repurchase Agreements. The Fund may enter into repurchase
agreements. They are primarily used for cash liquidity purposes.
In a repurchase transaction, the Fund buys a security and
simultaneously sells it to the vendor for delivery at a future
date. Repurchase agreements must be fully collateralized. However,
if the vendor fails to pay the resale price on the delivery date,
the Fund may incur costs in disposing of the collateral and may
experience losses if there is any delay in its ability to do so.
There is no limit on the amount of the Fund's net assets that may
be subject to repurchase agreements of seven days or less.
Repurchase agreements with a maturity beyond seven days are subject
to the Fund's limitations on investments in illiquid and restricted
securities, discussed below.
-- Illiquid Securities. Under the policies established by the
Board of Trustees, the Manager determines the liquidity of the
Fund's investments. Investments may be illiquid because of the
absence of an active trading market, making it difficult to value
them or dispose of them promptly at an acceptable price. As a
fundamental policy, the Fund will not invest more than 10% of its
total assets in illiquid securities. Restricted securities are
considered illiquid securities for purposes of this restriction.
A restricted security is one that has a contractual restriction on
its resale or which cannot be sold publicly until it is registered
under the Securities Act of 1933. Certain restricted securities,
eligible for resale to qualified institutional purchasers, are not
subject to that limit.
-- Loans of Portfolio Securities. To attempt to increase its
total return, the Fund may lend its portfolio securities to certain
types of eligible borrowers approved by the Board of Trustees.
Each loan must be collateralized in accordance with applicable
regulatory requirements. After any loan, the value of the
securities loaned is not expected to exceed 33-1/3% of the Fund's
total assets. There are some risks in connection with securities
lending. The Fund might experience a delay in receiving additional
collateral to secure a loan or a delay in recovery of the loaned
securities.
-- Hedging. As described below, the Fund may purchase and
sell certain kinds of futures contracts, put and call options,
forward contracts, and options on futures and broadly-based stock
indices. These are all referred to as "hedging instruments." The
Fund does not use hedging instruments for speculative purposes, and
has limits on the use of them, described below. The hedging
instruments the Fund may use are described below and in greater
detail in "Other Investment Techniques and Strategies" in the
Statement of Additional Information.
The Fund may buy and sell options, futures and forward
contracts for a number of purposes. It may do so to try to manage
its exposure to the possibility that the prices of its portfolio
securities may decline, or to establish a position in the
securities market as a temporary substitute for purchasing
individual securities. It may do so to try to manage its exposure
to changing interest rates. Some of these strategies, such as
selling futures, buying puts and writing covered calls, hedge the
Fund's portfolio against price fluctuations. Other hedging
strategies, such as buying futures and call options, tend to
increase the Fund's exposure to the securities market.
Forward contracts are used to try to manage foreign currency
risks on the Fund's foreign investments. Foreign currency options
are used to try to protect against declines in the dollar value of
foreign securities the Fund owns, or to protect against an increase
in the dollar cost of buying foreign securities. Writing covered
call options may also provide income to the Fund for liquidity
purposes or to raise cash to distribute to shareholders.
- Futures. The Fund may buy and sell futures contracts that
relate to broadly-based stock indices (these are referred to as
Stock Index Futures) or foreign currencies (these are called
Forward Contracts). 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 related option premiums would not exceed 5% of
the Fund's total assets.
- Put and Call Options. The Fund may buy and sell certain
kinds of put options (puts) and call options (calls). Calls the
Fund buys or sells must be listed on a securities or commodities
exchange, or quoted on the automated quotation system of NASDAQ, or
traded in the over-the-counter market. In the case of puts and
calls on a foreign currency, they must be traded on a securities or
commodities exchange or in the over-the-counter market, or must be
quoted by recognized dealers in those options.
The Fund may buy calls only on securities, broadly-based stock
indices, foreign currencies or Stock Index Futures. The Fund may
buy calls to terminate its obligation on a call the Fund previously
wrote.
The Fund may write (that is, sell) covered call options. Each
call the Fund writes must be "covered" while it is outstanding.
That means the Fund must own the investment on which the call was
written. The Fund may write calls on Futures contracts it owns,
but these calls must be covered by securities or other liquid
assets the Fund owns and segregated to enable it to satisfy its
obligations if the call is exercised. When the Fund writes a call,
it receives cash (called a premium). The call gives the buyer the
ability to buy the investment on which the call was written from
the Fund at the call price during the period in which the call may
be exercised. If the value of the investment does not rise above
the call price, it is likely that the call will lapse without being
exercised, while the Fund keeps the cash premium (and the
investment).
The Fund may purchase and sell put options. Buying a put on
an investment gives the Fund the right to sell the investment at a
set price to a seller of a put on that investment. The Fund can
buy only those puts that relate to securities that the Fund owns,
broadly-based stock indices, foreign currencies or Stock Index
Futures. The Fund can buy a put on a Stock Index Future whether or
not the Fund owns the particular Stock Index Future in its
portfolio.
The Fund may write puts on securities, broadly-based stock
indices, foreign currencies or Stock Index Futures, but only if
those puts are covered by segregated liquid assets.
- Forward Contracts. Forward contracts are foreign currency
exchange contracts. They are used to buy or sell foreign currency
for future delivery at a fixed price. The Fund uses them to try to
"lock in" the U.S. dollar price of a security denominated in a
foreign currency that the Fund has bought or sold, or to protect
against possible losses from changes in the relative values of the
U.S. dollar and foreign currency. The Fund limits its exposure in
foreign currency exchange contracts in a particular foreign
currency to the amount of its assets denominated in that currency
or in a closely-correlated currency.
- Hedging instruments can be volatile investments and may
involve special risks. The use of hedging instruments requires
special skills and knowledge of investment techniques that are
different than what is required for normal portfolio management.
If the Manager uses a hedging instrument at the wrong time or
judges market conditions incorrectly, hedging strategies may reduce
the Fund's return. The Fund could also experience losses if the
prices of its futures and options positions were not correlated
with its other investments or if it could not close out a position
because of an illiquid market for the future or option.
Options trading involves the payment of premiums and has
special tax effects on the Fund. There are also special risks in
particular hedging strategies. If a covered call written by the
Fund is exercised on an investment that has increased in value, the
Fund will be required to sell the investment at the call price and
will not be able to realize any profit if the investment has
increased in value above the call price. In writing a put, there
is a risk that the Fund may be required to buy the underlying
security at a disadvantageous price. The use of forward contracts
may reduce the gain that would otherwise result from a change in
the relationship between the U.S. dollar and a foreign currency.
These risks are described in greater detail in the Statement of
Additional Information.
Other Investment Restrictions.
The Fund has certain investment restrictions that are
fundamental policies. Under these fundamental policies the Fund
cannot do any of the following:
- With respect to 75% of its total assets, invest more than 5%
of the value of its total assets in the securities of any one
issuer;
- With respect to 75% of its total assets, purchase more than
10% of the voting securities of any one issuer (other than the U.S.
Government or any of its agencies or instrumentalities);
- 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);
- 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
temporary measure for extraordinary or emergency purposes and will
make no additional investments while such borrowings exceed 5% of
the Fund's total assets; or
- Invest more than 10% 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 of
longer than seven days, securities subject to legal or contractual
restrictions and certain over-the-counter options.
As a non-fundamental policy, the Fund may not invest more than
5% of the Fund's total assets in securities of issuers having a
record, together with predecessors, of less than three years
continuous operation.
Notwithstanding the above restriction on illiquid securities,
the Fund may purchase securities which are not registered under the
Securities Act of 1933 (the "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,
provided that the Sub-Advisor, under guidelines established by the
Fund's Board of Trustees, determines that an adequate trading
market exists for that security.
The Fund has undertaken, in connection with the qualification
of its shares for sale in certain states, to limit investments in
restricted securities to 5% of its total assets excluding
restricted securities that may be resold to "qualified
institutional buyers". This undertaking will terminate if the Fund
ceases to qualify its shares for sale in those states, or if the
applicable state rules or regulations are amended.
All of the percentage restrictions described above and
elsewhere in this Prospectus and in the Statement of Additional
Information apply only at the time the Fund purchases a security,
and the Fund need not dispose of a security merely because the size
of the Fund's assets has changed or the security has increased in
value relative to the size of the Fund. There are other fundamental
policies discussed in the Statement of Additional Information.
How the Fund is Managed
Organization and History. The Fund is one of four portfolios of
Oppenheimer Quest For Value Funds, an open-end management
investment company organized as a Massachusetts business trust in
April, 1987. The Fund is an open-end, diversified management
investment company, with an unlimited number of authorized shares
of beneficial interest.
The Fund is governed by a Board of Trustees, which is
responsible under Massachusetts law for protecting the interests of
shareholders. The Trustees meet periodically throughout the year
to oversee the Fund's activities, review its performance, and
review the actions of the Manager. "Trustees and Officers of the
Fund" in the Statement of Additional Information names the Trustees
and provides more information about them and the officers of the
Fund. Although the Fund is not required by law to hold annual
meetings, it may hold shareholder meetings from time to time on
important matters, and shareholders have the right under certain
circumstances to call a meeting to remove a Trustee or to take
other action described in the Fund's Declaration of Trust.
The Board of Trustees has the power, without shareholder
approval, to divide unissued shares of the Fund into two or more
classes. The Board has done so, and the Fund currently has three
classes of shares, Class A, Class B and Class C. All classes
invest in the same investment portfolio. Each class has its own
dividends and distributions and pays certain expenses which may be
different for the different classes. Each class may have a
different net asset value. Each share has one vote at shareholder
meetings, with fractional shares voting proportionally on matters
submitted to the vote of shareholders. Only shares of a particular
class vote as a class on matters that affect that class alone.
Shares are freely transferrable.
The Manager. The Fund is managed by the Manager, OppenheimerFunds,
Inc., which supervises the Fund's investment program and handles
its day-to-day business. The Manager carries out its duties,
subject to the policies established by the Board of Trustees, under
an Investment Advisory Agreement with the Fund which states the
Manager's responsibilities. The Agreement sets forth the fees paid
by the Fund to the Manager and describes the expenses that the Fund
pays to conduct its business.
The Manager has operated as an investment adviser since 1959.
The Manager (including a subsidiary) currently manages investment
companies, including other Oppenheimer funds, with assets of more
than $40 billion as of December 31, 1995, and with more than 2.8
million shareholder accounts. The Manager is owned by Oppenheimer
Acquisition Corp., a holding company that is owned in part by
senior officers of the Manager and controlled by Massachusetts
Mutual Life Insurance Company.
The Sub-Adviser. The Manager has retained OpCap Advisors (the
"Sub-Adviser") to provide day-to-day portfolio management of the
Fund. OpCap 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 OpCap
Advisors. Oppenheimer Financial Corp., a holding company, holds a
33% interest in Oppenheimer Capital, a registered investment
advisor. 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.
Prior to November 22, 1995, OpCap Advisors was named Quest for
Value Advisors and was the investment adviser to the Fund.
Effective November 22, 1995, the Manager acquired the investment
advisory and other contracts and business relationships and certain
assets and liabilities of Quest for Value Advisors, Quest for Value
Distributors and Oppenheimer Capital relating to twelve Quest for
Value mutual funds, including the Fund. Pursuant to this
acquisition and Fund shareholder approval received on November 3,
1995, the Fund entered into the following agreements, effective
November 22, 1995: the Investment Advisory Agreement between the
Fund and the Manager, and the distribution and service plans and
agreements between the Fund and the Distributor. Further, the
Manager entered into a subadvisory agreement with the Sub-Adviser
for the benefit of the Fund. These agreements are described below.
-- Portfolio Manager. The portfolio manager of the Fund is
Mr. Colin Glinsman, who is also a Senior Vice President of
Oppenheimer Capital. He has been the Fund's portfolio manager
since December, 1992. Mr. Glinsman has been a securities analyst
with Oppenheimer Capital since 1989.
-- Fees and Expenses. Under the Investment Advisory
Agreement, the Fund pays the Manager an annual fee based on the
Fund's daily net assets at the rate of 0.85% of net assets. The
Fund also reimburses the Manager for bookkeeping and accounting
services performed on behalf of the Fund.
The Manager pays OpCap Advisors an annual fee based on the
average daily net assets of the Fund equal to 40% of the advisory
fee collected by the Manager based on the total net assets of the
Fund as of November 22, 1995 (the "Base Amount") plus 30% of the
investment advisory fee collected by the Manager based on the total
net assets of the Fund that exceed the Base Amount.
OpCap 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, OpCap
Advisors may consider their record of sales of shares of the Fund.
Further information about the Fund's brokerage policies and
practices is set forth in "Brokerage Policies of the Fund" in the
Statement of Additional Information.
Distributor. The Fund's shares are sold through dealers and
brokers that have a sales agreement with OppenheimerFunds
Distributor, Inc., a subsidiary of the Manager that acts as the
Distributor. The Distributor also distributes the shares of other
mutual funds managed by the Manager (the "Oppenheimer funds") and
is sub-distributor for funds managed by a subsidiary of the
Manager.
Transfer Agent and Shareholder Servicing Agent. The transfer agent
and shareholder servicing agent is OppenheimerFunds Services.
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
the 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 and other accounts for which
Unified Management Corporation is the dealer of record.
Performance of the Fund
Explanation of Performance Terminology. The Fund uses the terms
"total return" and "average annual total return" to illustrate its
performance. The performance of each class of shares is shown
separately, because the performance of each class will usually be
different as a result of the different kinds of expenses each class
bears. These returns measure the performance of a hypothetical
investment in the Fund over various periods, and do not show the
performance of each shareholder's investment (which will vary if
dividends are received in cash or shares are sold or additional
shares are purchased). The Fund's performance information may help
you see how well your Fund has done over time and to compare it to
other funds or market indices, as we have done below.
It is important to understand that the Fund's total returns
represent past performance and should not be considered to be
predictions of future returns or performance. This performance
data is described below, but more detailed information about how
total returns are calculated is contained in the Statement of
Additional Information, which also contains information about other
ways to measure and compare the Fund's performance. The Fund's
investment performance will vary over time, depending on market
conditions, the composition of the portfolio, expenses and which
class of shares you purchase.
-- Total Returns. There are different types of total returns
used to measure the Fund's performance. Total return is the change
in value of a hypothetical investment in the Fund over a given
period, assuming that all dividends and capital gains distributions
are reinvested in additional shares. The cumulative total return
measures the change in value over the entire period (for example,
ten years). An average annual total return shows the average rate
of return for each year in a period that would produce the
cumulative total return over the entire period. However, average
annual total returns do not show the Fund's actual year-by-year
performance.
When total returns are quoted for Class A shares, they reflect
the payment of the current maximum initial sales charge. When
total returns are shown for Class B shares, they reflect the effect
of the contingent deferred sales charge that applies to the period
for which total return is shown. When total returns are shown for
a one-year period (or less) for Class C shares, they reflect the
effect of the contingent deferred sales charge. Total returns may
also be quoted "at net asset value," without considering the effect
of the sales charge, and those returns would be reduced if sales
charges were deducted.
How Has the Fund Performed? Below is a discussion of the Fund's
performance during its last fiscal year ended October 31, 1995,
followed by a graphical comparison of the Fund's performance to
appropriate broad-based market indices. Prior to November 22,
1995, the Fund was known as Quest for Value Growth & Income Fund,
and the Sub-Adviser was the Fund's investment manager.
-- Management's Discussion of Performance. The Fund's
portfolio is structured around three broad segments: common stocks,
which provide growth potential and some income; higher-yielding
bonds, which generate relatively more income but are also selected
for their potential for capital appreciation; and fixed income
securities which are convertible into common stocks. The Fund's
investment strategy during the fiscal year ended October 31, 1995
was dominated by its emphasis on protecting principal in a risky
stock market environment. While typically the Fund might invest at
least two-thirds of its assets in common stocks, stocks represented
approximately 50% of the portfolio for certain periods during the
fiscal year. As a result, the Fund did not participate fully in a
rising market, and its total return for the year was relatively
less than that of most other growth and income funds. However,
because the Fund had relatively larger holdings of fixed income
securities than usual, the Fund generated a relatively greater rate
of income for its shareholders than did many other growth and
income funds. The Fund increased its holdings of common stocks in
the second half of the year.
-- Comparing the Fund's Performance to the Market. The graphs
below show the performance of a hypothetical $10,000 investment in
each class of shares of the Fund held until October 31, 1995. In
the case of Class A shares, performance is measured from the
commencement of operations on November 1, 1991, and in the case of
Class B and Class C shares, from inception of those classes on
September 1, 1993.
The Fund's performance is compared to the performance of the
Standard & Poor's ("S&P") 500 Index. The S&P 500 Index is a broad
based index of equity securities widely regarded as the general
measure of the performance of the U.S. equity securities market.
Index performance reflects the reinvestment of dividends but
does not consider the effect of capital gains or transaction costs,
and none of the data in the graphs below shows the effect of taxes.
Moreover, index performance data does not reflect any assessment of
the risk of the investments included in the index. The Fund's
performance reflects the effect of Fund business and operating
expenses. While index comparisons may be useful to provide a
benchmark for the Fund's performance, it must be noted that the
Fund's investments are not limited to the securities in the indices
shown.
Oppenheimer Quest Growth & Income Value Fund
Comparison of Change in Value of
$10,000 Hypothetical Investments in
Oppenheimer Quest Growth & Income Value Fund and
the S&P 500 Index
[Graph]
Past Performance is not predictive of future performance.
Oppenheimer Quest Growth & Income Value Fund
Average Annual Total Returns of the Fund at 10/31/95
- ----------------------------------------------------
Class A Shares(1)
- -----------------
1-Year Life
------ ----
9.66% 9.78%
Class B Shares(2)
- -----------------
1-Year Life
------ ----
10.65% 10.02%
Class C Shares(3)
- -----------------
1-Year Life
------ ----
14.38% 11.07%
- ---------------------
Total returns and the ending account values in the graphs reflect
reinvestment of all dividends and capital gains distributions.
Total returns are based upon inception of the Fund (for Class A
shares) or date of first public offering (for Class B and Class C
shares).
(1) The commencement of operations of the Fund (Class A shares) was
11/4/91. Class A returns are shown net of the current applicable
5.75% maximum initial sales charge.
(2) Class B shares of the Fund were first publicly offered on
9/01/93. Returns are shown net of the applicable 5% and 3%
contingent deferred sales charge, respectively, for the 1-year
period and life of the class. The ending account value in the
graph is net of the applicable 3% contingent deferred sales charge.
(3) Class C shares of the Fund were first publicly offered on
9/01/93. The 1-year return is shown net of the applicable 1%
contingent deferred sales charge.
About Your Account
How to Buy Shares
Classes of Shares. The Fund offers investors three different
classes of shares. The different classes of shares represent
investments in the same portfolio of securities but are subject to
different expenses and will likely have different share prices.
-- Class A Shares. If you buy Class A shares, you may pay an
initial sales charge on investments up to $1 million (up to
$500,000 for purchases by OppenheimerFunds prototype 401(k) plans).
If you purchase Class A shares as part of an investment of at least
$1 million ($500,000 for OppenheimerFunds prototype 401(k) plans)
in shares of one or more Oppenheimer funds or former Quest Funds,
you will not pay an initial sales charge, but if you sell any of
those shares within 18 months of buying them, you may pay a
contingent deferred sales charge in an amount that depends upon
when you bought such shares. The amount of that sales charge will
vary depending on the amount you invested. Class A shares of the
Fund purchased subject to a contingent deferred sales charge on or
prior to November 24, 1995 will be subject to a contingent deferred
sales charge at the applicable rate set forth in Appendix A to this
Prospectus. Sales charges are described in "Buying Class A Shares"
below.
-- Class B Shares. If you buy Class B shares, you pay no
sales charge at the time of purchase, but if you sell your shares
within six years you will normally pay a contingent deferred sales
charge that varies, depending on how long you have owned your
shares. It is described in "Buying Class B Shares" below.
-- Class C Shares. When you buy Class C shares, you pay no
sales charge at the time of purchase, but if you sell your shares
within 12 months of buying them, you will normally pay a contingent
deferred sales charge of 1%. It is described in "Buying Class C
Shares" below.
Which Class of Shares Should You Choose? Once you decide that the
Fund is an appropriate investment for you, the decision as to which
class of shares is better suited to your needs depends on a number
of factors which you should discuss with your financial advisor.
The Fund's operating costs that apply to a class of shares and the
effect of the different types of sales charges on your investment
will vary your investment results over time. The most important
factors are how much you plan to invest and how long you plan to
hold your investment. If your goals and objectives change over
time and you plan to purchase additional shares, you should re-
evaluate those factors to see if you should consider another class
of shares.
In the following discussion, to help provide you and your
financial advisor with a framework in which to choose a class, we
have made some assumptions using a hypothetical investment in the
Fund. We used the sales charge rates that apply to each class, and
considered the effect of the asset-based sales charges on Class B
and Class C expenses (which will affect your investment return).
For the sake of comparison, we have assumed that there is a 10%
rate of appreciation in the investment each year. Of course, the
actual performance of your investment cannot be predicted and will
vary, based on the Fund's actual investment returns and the
operating expenses borne by each class of shares, and which class
of shares you invest in.
The factors discussed below are not intended to be investment
advice or recommendations, because each investor's financial
considerations are different. The discussion below of the factors
to consider in purchasing a particular class of shares assumes that
you will purchase only one class of shares and not a combination of
shares of different classes.
-- How Long Do You Expect to Hold Your Investment? While
future financial needs cannot be predicted with certainty, knowing
how long you expect to hold your investment will assist you in
selecting the appropriate class of shares. Because of the effect
of class-based expenses, your choice will also depend on how much
you plan to invest. For example, the reduced sales charges
available for larger purchases of Class A shares may, over time,
offset the effect of paying an initial sales charge on your
investment (which reduces the amount of your investment dollars
used to buy shares for your account), compared to the effect over
time of higher class-based expenses on Class B or Class C shares
for which no initial sales charge is paid.
Investing for the Short Term. If you have a short-term
investment horizon (that is, you plan to hold your shares for not
more than six years), you should probably consider purchasing Class
A or Class C shares rather than Class B shares, because of the
effect of the Class B contingent deferred sales charge if you
redeem within 6 years, as well as the effect of the Class B asset-
based sales charge on the investment return for that class in the
short-term. Class C shares might be the appropriate choice
(especially for investments of less than $100,000), because there
is no initial sales charge on Class C Shares, and the contingent
deferred sales charge does not apply to amounts you sell after
holding them one year.
However, if you plan to invest more than $100,000 for the
shorter term, then the more you invest and the more your investment
horizon increases toward six years, Class C shares might not be as
advantageous as Class A shares. That is because the annual asset-
based sales charge on Class C shares will have a greater impact on
your account over the longer term than the reduced front-end sales
charge available for larger purchases of Class A shares. For
example, Class A might be more advantageous than Class C (as well
as Class B) for investments of more than $100,000 expected to be
held for 5 or 6 years (or more). For investments over $250,000
expected to be held 4 to 6 years (or more), Class A shares may
become more advantageous than Class C (and Class B). If investing
$500,000 or more, Class A may be more advantageous as your
investment horizon approaches 3 years or more.
And for most investors who invest $1 million or more, in most
cases Class A shares will be the most advantageous choice, no
matter how long you intend to hold your shares. For that reason,
the Distributor normally will not accept purchase orders of
$500,000 or $1 million or more of Class B or Class C shares,
respectively, from a single investor.
Investing for the Longer Term. If you are investing for the
longer term, for example, for retirement, and do not expect to need
access to your money for seven years or more, Class B shares may be
an appropriate consideration, if you plan to invest less than
$100,000. If you plan to invest more than $100,000 over the long
term, Class A shares will likely be more advantageous than Class B
shares or Class C shares, as discussed above, because of the effect
of the expected lower expenses for Class A shares and the reduced
initial sales charges available for larger investments in Class A
shares under the Fund's Right of Accumulation.
Of course, these examples are based on approximations of the
effect of current sales charges and expenses on a hypothetical
investment over time, using the assumed annual performance return
stated above, and therefore should not be relied on as rigid
guidelines.
-- Are There Differences in Account Features That Matter to
You? Because some account features may not be available for Class
B or Class C shareholders, you should carefully review how you plan
to use your investment account before deciding which class of
shares is better for you. For example, share certificates are not
available for Class B or Class C shares, and if you are considering
using your shares as collateral for a loan, that may be a factor to
consider. Additionally, dividends payable to Class B and Class C
shareholders will be reduced by the additional expenses borne
solely by those classes, such as the asset-based sales charges
described below and in the Statement of Additional Information.
-- How Does It Affect Payments to My Broker? A salesperson,
such as a broker or any other person who is entitled to receive
compensation for selling Fund shares, may receive different
compensation for selling one class rather than another class. It
is important that investors understand that the purpose of the
contingent deferred sales charges and asset-based sales charges for
Class B and Class C shares are the same as the purpose of the
front-end sales charge on sales of Class A shares: to compensate
the Distributor for commissions it pays to dealers and financial
institutions for selling shares.
How Much Must You Invest? You can open a Fund account with a
minimum initial investment of $1,000 and make additional
investments at any time with as little as $25. There are reduced
minimum investments under special investment plans:
With Asset Builder Plans, Automatic Exchange Plans, 403(b)(7)
custodial plans and military allotment plans, you can make initial
and subsequent investments of as little as $25; and subsequent
purchases of at least $25 can be made by telephone through
AccountLink.
Under pension and profit-sharing plans and Individual
Retirement Accounts (IRAs), you can make an initial investment of
as little as $250 (if your IRA is established under an Asset
Builder Plan, the $25 minimum applies), and subsequent investments
may be as little as $25.
There is no minimum investment requirement if you are buying
shares by reinvesting dividends from the Fund or other Oppenheimer
funds (a list of them appears in the Statement of Additional
Information, or you can ask your dealer or call the Transfer
Agent), or by reinvesting distributions from unit investment trusts
that have made arrangements with the Distributor.
-- How Are Shares Purchased? You can buy shares several ways:
through any dealer, broker or financial institution that has a
sales agreement with the Distributor, directly through the
Distributor, or automatically from your bank account through an
Asset Builder Plan under the OppenheimerFunds AccountLink service.
When you buy shares, be sure to specify Class A, Class B or Class
C shares. If you do not choose, your investment will be made in
Class A shares.
-- Buying Shares Through Your Dealer. Your dealer will place
your order with the Distributor on your behalf.
-- Buying Shares Through the Distributor. Complete an
OppenheimerFunds New Account Application and return it with a check
payable to "OppenheimerFunds Distributor, Inc." Mail it to P.O. Box
5270, Denver, Colorado 80217. If you don't list a dealer on the
application, the Distributor will act as your agent in buying the
shares. However, we recommend that you discuss your investment
first with a financial advisor, to be sure it is appropriate for
you.
-- Buying Shares Through OppenheimerFunds AccountLink. You
can use AccountLink to link your Fund account with an account at a
U.S. bank or other financial institution that is an Automated
Clearing House (ACH) member, to transmit funds electronically to
purchase shares, to have the Transfer Agent send redemption
proceeds, or to transmit dividends and distributions.
Shares are purchased for your account on AccountLink on the
regular business day the Distributor is instructed by you to
initiate the ACH transfer to buy shares. You can provide those
instructions automatically, under an Asset Builder Plan, described
below, or by telephone instructions using OppenheimerFunds
PhoneLink, also described below. You should request AccountLink
privileges on the application or dealer settlement instructions
used to establish your account. Please refer to "AccountLink" below
for more details.
-- Asset Builder Plans. You may purchase shares of the Fund
(and up to four other Oppenheimer funds) automatically each month
from your account at a bank or other financial institution under an
Asset Builder Plan with AccountLink. Details are on the Application
and in the Statement of Additional Information.
-- At What Price Are Shares Sold? Shares are sold at the
public offering price based on the net asset value (and any initial
sales charge that applies) that is next determined after the
Distributor receives the purchase order in Denver, Colorado. In
most cases, to enable you to receive that day's offering price, the
Distributor must receive your order by the time of day The New York
Stock Exchange closes, which is normally 4:00 P.M., New York time,
but may be earlier on some days (all references to time in this
Prospectus mean "New York time"). The net asset value of each
class of shares is determined as of that time on each day The New
York Stock Exchange is open (which is a "regular business day").
If you buy shares through a dealer, the dealer must receive
your order by the close of business of The New York Stock Exchange
on a regular business day and transmit it to the Distributor so
that it is received before the Distributor's close of business that
day, which is normally 5:00 P.M. The Distributor may reject any
purchase order for the Fund's shares, in its sole discretion.
Special Sales Charge Arrangements for Certain Persons. Appendix A
to this Prospectus sets forth conditions for the waiver of, or
exemption from, sales charges or the special sales charge rates
that apply to purchases of shares of the Fund (including purchases
by exchange) by a person who was a shareholder of one of the Former
Quest for Value Funds (as defined in that Appendix).
Buying Class A Shares. Class A shares are sold at their offering
price, which is normally net asset value plus an initial sales
charge. However, in some cases, described below, where purchases
are not subject to an initial sales charge, the offering price may
be net asset value. In some cases, reduced sales charges may be
available, as described below. Out of the amount you invest, the
Fund receives the net asset value to invest for your account. The
sales charge varies depending on the amount of your purchase. A
portion of the sales charge may be retained by the Distributor and
allocated to your dealer as commission. The current sales charge
rates and commissions paid to dealers and brokers are as follows:
- ----------------------------------------------------------------
Front-End Sales Charge Commission
As a Percentage of as Percentage
Offering Amount of Offering
Amount of Purchase Price Invested Price
- ----------------------------------------------------------------
Less than $25,000 5.75% 6.10% 4.75%
$25,000 or more but
less than $50,000 5.50% 5.82% 4.75%
$50,000 or more but
less than $100,000 4.75% 4.99% 4.00%
$100,000 or more but
less than $250,000 3.75% 3.90% 3.00%
$250,000 or more but
less than $500,000 2.50% 2.56% 2.00%
$500,000 or more but
less than $1 million 2.00% 2.04% 1.60%
The Distributor reserves the right to reallow the entire commission
to dealers. If that occurs, the dealer may be considered an
"underwriter" under Federal securities laws.
-- Class A Contingent Deferred Sales Charge. There is no
initial sales charge on purchases of Class A shares of any one or
more of the Oppenheimer funds in the following cases:
- Purchases aggregating $1 million or more, or
- Purchases by an OppenheimerFunds prototype 401(k) plan that:
(1) buys shares costing $500,000 or more, or (2) has, at the time
of purchase, 100 or more eligible participants, or (3) certifies
that it projects to have annual plan purchases of $200,000 or more.
Shares of any class of the Oppenheimer funds that offer only
one class of shares that has no designation are considered "Class
A shares" for this purpose. The Distributor pays dealers of record
commissions on those purchases in an amount equal to the sum of
1.0% of the first $2.5 million, plus 0.50% of the next $2.5
million, plus 0.25% of purchases over $5 million. That commission
will be paid only on the amount of those purchases in excess of $1
million ($500,000 for purchases by OppenheimerFunds 401(k)
prototype plans) that were not previously subject to a front-end
sales charge and dealer commission.
If you redeem any of those shares within 18 months of the end
of the calendar month of their purchase, a contingent deferred
sales charge (called the "Class A contingent deferred sales
charge") will be deducted from the redemption proceeds. That sales
charge will be equal to 1.0% of either (1) the aggregate net asset
value of the redeemed shares (not including shares purchased by
reinvestment of dividends or capital gain distributions) or (2) the
original cost of the shares, whichever is less. However, the Class
A contingent deferred sales charge will not exceed the aggregate
commissions the Distributor paid to your dealer on all Class A
shares of all Oppenheimer funds you purchased subject to the Class
A contingent deferred sales charge. Class A shares of the Fund
purchased subject to a contingent deferred sales charge on or prior
to November 24, 1995 will be subject to a contingent deferred sales
charge at the applicable rate set forth in Appendix A to this
Prospectus.
In determining whether a contingent deferred sales charge is
payable, the Fund will first redeem shares that are not subject to
the sales charge, including shares purchased by reinvestment of
dividends and capital gains, and then will redeem other shares in
the order that you purchased them. The Class A contingent deferred
sales charge is waived in certain cases described in "Waivers of
Class A Sales Charges" below.
No Class A contingent deferred sales charge is charged on
exchanges of shares under the Fund's exchange privilege (described
below). However, if the shares acquired by exchange are redeemed
within 18 months of the end of the calendar month of the purchase
of the exchanged shares, the sales charge will apply.
-- Special Arrangements With Dealers. The Distributor may
advance up to 13 months' commissions to dealers that have
established special arrangements with the Distributor for Asset
Builder Plans for their clients. Dealers whose sales of Class A
shares of Oppenheimer funds (other than money market funds) under
OppenheimerFunds-sponsored 403(b)(7) custodial plans exceed $5
million per year (calculated per quarter), will receive monthly
one-half of the Distributor's retained commissions on those sales,
and if those sales exceed $10 million per year, those dealers will
receive the Distributor's entire retained commission on those
sales.
Reduced Sales Charges for Class A Share Purchases. You may be
eligible to buy Class A shares at reduced sales charge rates in one
or more of the following ways:
-- Right of Accumulation. To qualify for the lower sales
charge rates that apply to larger purchases of Class A shares, you
and your spouse can add together Class A and Class B shares you
purchase for your individual accounts, or jointly, or for trust or
custodial accounts on behalf of your children who are minors. A
fiduciary can count all shares purchased for a trust, estate or
other fiduciary account (including one or more employee benefit
plans of the same employer) that has multiple accounts.
Additionally, you can add together current purchases of Class
A and Class B shares of the Fund and other Oppenheimer funds to
reduce the sales charge rate that applies to current purchases of
Class A shares. You can also count Class A and Class B shares of
Oppenheimer funds you previously purchased subject to an initial or
contingent deferred sales charge to reduce the sales charge rate
for current purchases of Class A shares, provided that you still
hold that investment in one of the Oppenheimer funds. The value of
those shares will be based on the greater of the amount you paid
for the shares or their current value (at offering price). The
Oppenheimer funds are listed in "Reduced Sales Charges" in the
Statement of Additional Information, or a list can be obtained from
the Transfer Agent. The reduced sales charge will apply only to
current purchases and must be requested when you buy your shares.
-- Letter of Intent. Under a Letter of Intent, if you
purchase Class A shares or Class A and Class B shares of the Fund
and other Oppenheimer funds during a 13-month period, you can
reduce the sales charge rate that applies to your purchases of
Class A shares. The total amount of your intended purchases of
both Class A and Class B shares will determine the reduced sales
charge rate for the Class A shares purchased during that period.
This can include purchases made up to 90 days before the date of
the Letter. More information is contained in the Application and
in "Reduced Sales Charges" in the Statement of Additional
Information.
-- Waivers of Class A Sales Charges. The Class A sales
charges are not imposed in the circumstances described below.
There is an explanation of this policy in "Reduced Sales Charges"
in the Statement of Additional Information.
Waivers of Initial and Contingent Deferred Sales Charges for
Certain Purchasers. Class A shares purchased by the following
investors are not subject to any Class A sales charges:
- the Manager or its affiliates;
- present or former officers, directors, trustees and
employees (and their "immediate families" as defined in "Reduced
Sales Charges" in the Statement of Additional Information) of the
Fund, the Manager and its affiliates, and retirement plans
established by them for their employees;
- registered management investment companies, or separate
accounts of insurance companies having an agreement with the
Manager or the Distributor for that purpose;
- dealers or brokers that have a sales agreement with the
Distributor, if they purchase shares for their own accounts or for
retirement plans for their employees;
- employees and registered representatives (and their spouses)
of dealers or brokers described above or financial institutions
that have entered into sales arrangements with such dealers or
brokers (and are identified to the Distributor) or with the
Distributor; the purchaser must certify to the Distributor at the
time of purchase that the purchase is for the purchaser's own
account (or for the benefit of such employee's spouse or minor
children);
- dealers, brokers or registered investment advisers that have
entered into an agreement with the Distributor (1) providing
specifically for the use of shares of the Fund in particular
investment products made available to their clients (those clients
may be charged a transaction fee by their dealer, broker or advisor
for the purchase or sale of Fund shares) and (2) to sell shares of
defined contribution employee retirement plans for which the
dealer, broker or investment adviser provides administrative
services;
- directors, trustees, officers or full-time employees of
OpCap Advisors or its affiliates, their relatives or any trust,
pension, profit sharing or other benefit plan which beneficially
owns shares for those persons;
- accounts for which Oppenheimer Capital is the investment
adviser (the Distributor must be advised of this arrangement) and
persons who are directors or trustees of the company or trust which
is the beneficial owner of such accounts;
- any unit investment trust that has entered into an
appropriate agreement with the Distributor;
- a TRAC-2000 401(k) plan (sponsored by the former Quest for
Value Advisors) whose Class B or Class C shares of a Former Quest
for Value Fund were exchanged for Class A shares of that Fund due
to the termination of the Class B and Class C TRAC-2000 program on
November 24, 1995; or
- qualified retirement plans that had agreed with the former
Quest for Value Advisors to purchase shares of any of the Former
Quest for Value Funds at net asset value, with such shares to be
held through DCXchange, a sub-transfer agency mutual fund
clearinghouse, provided that such arrangements are consummated and
share purchases commence by March 31, 1996.
Waivers of Initial and Contingent Deferred Sales Charges in
Certain Transactions. Class A shares issued or purchased in the
following transactions are not subject to Class A sales charges:
- shares issued in plans of reorganization, such as mergers,
asset acquisitions and exchange offers, to which the Fund is a
party;
- shares purchased by the reinvestment of loan repayments by
a participant in a retirement plan for which the Manager or its
affiliates acts as sponsor;
- shares purchased by the reinvestment of dividends or other
distributions reinvested from the Fund or other Oppenheimer funds
(other than Oppenheimer Cash Reserves) or unit investment trusts
for which reinvestment arrangements have been made with the
Distributor;
- shares purchased and paid for with the proceeds of shares
redeemed in the prior 12 months from a mutual fund (other than a
fund managed by the Manager or any of its subsidiaries) on which an
initial sales charge or contingent deferred sales charge was paid
(this waiver also applies to shares purchased by exchange of shares
of Oppenheimer Money Market Fund, Inc. that were purchased and paid
for in this manner); this waiver must be requested when the
purchase order is placed for your shares of the Fund, and the
Distributor may require evidence of your qualification for this
waiver; or
- purchased with the proceeds of maturing principal of units
of any Qualified Unit Investment Liquid Trust Series.
Waivers of the Class A Contingent Deferred Sales Charge for
Certain Redemptions. The Class A contingent deferred sales charge
does not apply to purchases of Class A shares at net asset value
without sales charge as described in the two sections above. It is
also waived if shares that would otherwise be subject to the
contingent deferred sales charge are redeemed in the following
cases:
- for retirement distributions or loans to participants or
beneficiaries from qualified retirement plans, deferred
compensation plans or other employee benefit plans, including
OppenheimerFunds prototype 401(k) plans (these are all referred to
as "Retirement Plans");
- to return excess contributions made to Retirement Plans;
- to make Automatic Withdrawal Plan payments that are limited
annually to no more than 12% of the original account value;
- involuntary redemptions of shares by operation of law or
involuntary redemptions of small accounts (see "Shareholder Account
Rules and Policies," below);
- if, at the time a purchase order is placed for Class A
shares that would otherwise be subject to the Class A contingent
deferred sales charge, the dealer agrees to accept the dealer's
portion of the commission payable on the sale in installments of
1/18th of the commission per month (and no further commission will
be payable if the shares are redeemed within 18 months of
purchase); or
- for distributions from OppenheimerFunds prototype 401(k)
plans for any of the following cases or purposes: (1) following
the death or disability (as defined in the Internal Revenue Code)
of the participant or beneficiary (the death or disability must
occur after the participant's account was established); (2)
hardship withdrawals, as defined in the plan; (3) under a
Qualified Domestic Relations Order, as defined in the Internal
Revenue Code; (4) to meet the minimum distribution requirements of
the Internal Revenue Code; (5) to establish "substantially equal
periodic payments" as described in Section 72(t) of the Internal
Revenue Code, or (6) separation from service.
-- Distribution and Service Plan for Class A Shares. The Fund
has adopted a Distribution and Service Plan for Class A shares to
reimburse the Distributor for a portion of its costs incurred in
connection with the personal service and maintenance of shareholder
accounts that hold Class A shares. Under the Plan, the Fund pays
an annual asset-based sales charge to the Distributor of 0.15% of
the average annual net assets of the class. The Fund also pays a
service fee to the Distributor of 0.25% of the average annual net
assets of the class. The Distributor uses all of the service fee
and a portion of the asset-based sales charge (equal to 0.10%
annually) to compensate dealers, brokers, banks and other financial
institutions quarterly for providing personal service and
maintenance of accounts of their customers that hold Class A
shares. The Distributor retains the balance of the asset-based
sales charge to reimburse itself for its other expenditures under
the Plan.
Services to be provided include, among others, answering
customer inquiries about the Fund, assisting in establishing and
maintaining accounts in the Fund, making the Fund's investment
plans available and providing other services at the request of the
Fund or the Distributor. The payments under the Plan increase the
annual expenses of Class A shares. For more details, please refer
to "Distribution and Service Plans" in the Statement of Additional
Information.
Buying Class B Shares. Class B shares are sold at net asset value
per share without an initial sales charge. However, if Class B
shares are redeemed within 6 years of their purchase, a contingent
deferred sales charge will be deducted from the redemption
proceeds. That sales charge will not apply to shares purchased by
the reinvestment of dividends or capital gains distributions. The
charge will be assessed on the lesser of the net asset value of the
shares at the time of redemption or the original purchase price.
The contingent deferred sales charge is not imposed on the amount
of your account value represented by the increase in net asset
value over the initial purchase price (including increases due to
the reinvestment of dividends and capital gains distributions). The
Class B contingent deferred sales charge is paid to the Distributor
to reimburse its expenses of providing distribution-related
services to the Fund in connection with the sale of Class B shares.
To determine whether the contingent deferred sales charge
applies to a redemption, the Fund redeems shares in the following
order: (1) shares acquired by reinvestment of dividends and capital
gains distributions, (2) shares held for over 6 years, and (3)
shares held the longest during the 6-year period.
The amount of the contingent deferred sales charge will depend
on the number of years since you invested and the dollar amount
being redeemed, according to the following schedule:
Years Since Contingent Deferred Sales Charge
Beginning of Month In Which on Redemptions in that Year
Purchase Order was Accepted (As % of Amount Subject to Charge)
0 - 1 5.0%
1 - 2 4.0%
2 - 3 3.0%
3 - 4 3.0%
4 - 5 2.0%
5 - 6 1.0%
6 and following None
In the table, a "year" is a 12-month period. All purchases are
considered to have been made on the first regular business day of
the month in which the purchase was made.
-- Automatic Conversion of Class B Shares. Six years after
you purchase Class B shares, those shares will automatically
convert to Class A shares. This conversion feature relieves Class
B shareholders of the asset-based sales charge that applies to
Class B shares under the Class B Distribution and Service Plan,
described below. The conversion is based on the relative net asset
value of the two classes, and no sales load or other charge is
imposed. When Class B shares convert, any other Class B shares that
were acquired by the reinvestment of dividends and distributions on
the converted shares will also convert to Class A shares. The
conversion feature is subject to the continued availability of a
tax ruling described in "Alternative Sales Arrangements - Class A,
Class B and Class C Shares" in the Statement of Additional
Information.
-- Distribution and Service Plan for Class B Shares. The Fund
has adopted a Distribution and Service Plan for Class B shares to
compensate the Distributor for distributing Class B shares and
servicing accounts. This Plan is described below under "Buying
Class C Shares - Distribution and Service Plans for Class B and
Class C Shares."
-- Waivers of Class B Sales Charges. The Class B contingent
deferred sales charge will not apply to shares purchased in certain
types of transactions, nor will it apply to shares redeemed in
certain circumstances, as described below under "Buying Class C
Shares - Waivers of Class B and Class C Sales Charges."
Buying Class C Shares. Class C shares are sold at net asset value
per share without an initial sales charge. However, if Class C
shares are redeemed within 12 months of their purchase, a
contingent deferred sales charge of 1.0% will be deducted from the
redemption proceeds. That sales charge will not apply to shares
purchased by the reinvestment of dividends or capital gains
distributions. The charge will be assessed on the lesser of the net
asset value of the shares at the time of redemption or the original
purchase price. The contingent deferred sales charge is not imposed
on the amount of your account value represented by the increase in
net asset value over the initial purchase price (including
increases due to the reinvestment of dividends and capital gains
distributions). The Class C contingent deferred sales charge is
paid to the Distributor to reimburse its expenses of providing
distribution-related services to the Fund in connection with the
sale of Class C shares.
To determine whether the contingent deferred sales charge
applies to a redemption, the Fund redeems shares in the following
order: (1) shares acquired by reinvestment of dividends and capital
gains distributions, (2) shares held for over 12 months, and (3)
shares held the longest during the 12-month period.
-- Distribution and Service Plans for Class B and Class C
Shares. The Fund has adopted Distribution and Service Plans for
Class B and Class C shares to compensate the Distributor for
distributing Class B and Class C shares and servicing accounts.
Under the Plans, the Fund pays the Distributor an annual "asset-
based sales charge" of 0.75% per year on Class B shares that are
outstanding for 6 years or less and on Class C shares. The
Distributor also receives a service fee of 0.25% per year.
Under each Plan, both fees are computed on the average of the
net asset value of shares in the respective class, determined as of
the close of each regular business day during the period. The
asset-based sales charge allows investors to buy Class B or Class
C shares without a front-end sales charge while allowing the
Distributor to compensate dealers that sell those shares.
The Distributor uses the service fees to compensate dealers
for providing personal services for accounts that hold Class B or
Class C shares. Those services are similar to those provided under
the Class A Service Plan, described above. The Distributor pays
the 0.25% service fees to dealers in advance for the first year
after Class B or Class C shares have been sold by the dealer and
retains the service fee paid by the Fund in that year. After the
shares have been held for a year, the Distributor pays the service
fees to dealers on a quarterly basis.
The Distributor currently pays sales commissions of 3.75% of
the purchase price to dealers from its own resources at the time of
sale of Class B shares. The total commission paid by the
Distributor to the dealer at the time of sales of Class B shares is
4.00% of the purchase price. The Fund pays the asset-based sales
charge to the Distributor for its services rendered in connection
with the distribution of Class B shares. Those payments, retained
by the Distributor, are at a fixed rate which is not related to the
Distributor's expenses. The services rendered by the Distributor
include paying and financing the payment of sales commissions,
service fees, and other costs of distributing and selling Class B
shares.
The Distributor currently pays sales commissions of 0.75% of
the purchase price to dealers from its own resources at the time of
sale of Class C shares. The total commission paid by the
Distributor to the dealer at the time of sale of Class C shares is
1.00% of the purchase price. The Distributor retains the asset-
based sales charge during the first year Class C shares are
outstanding to recoup sales commissions it has paid, the advances
of service fee payments it has made, and its financing costs and
other expenses. The Distributor plans to pay the asset-based sales
charge as an ongoing commission to the dealer on Class C shares
that have been outstanding for a year or more. If either Plan is
terminated by the Fund, the Board of Trustees may allow the Fund to
continue payments of the service fee and/or asset-based sales
charge to the Distributor for distributing Class B or Class C
shares, as appropriate, before the Plan was terminated.
-- Waivers of Class B and Class C Sales Charges. The Class B
and Class C contingent deferred sales charges will not be applied
to shares purchased in certain types of transactions nor will it
apply to Class B and Class C shares redeemed in certain
circumstances as described below. The reasons for this policy are
in "Reduced Sales Charges" in the Statement of Additional
Information.
Waivers for Redemptions in Certain Cases. The Class B and
Class C contingent deferred sales charges will be waived for
redemptions of shares in the following cases if the Transfer Agent
is notified that these conditions apply to the redemption:
- distributions to participants or beneficiaries from
Retirement Plans, if the distributions are made (a) under an
Automatic Withdrawal Plan after the participant reaches age 59-1/2,
as long as the payments are no more than 10% of the account value
annually (measured from the date the Transfer Agent received the
request), or (b) following the death or disability (as defined in
the Internal Revenue Code ("IRC")) of the participant or
beneficiary (the death or disability must have occurred after the
account was established);
- redemptions from accounts other than Retirement Plans
following the death or disability of the last surviving shareholder
(the death or disability must have occurred after the account was
established, and for disability you must provide evidence of a
determination of disability by the Social Security Administration);
- returns of excess contributions to Retirement Plans;
- distributions from IRAs (including SEP-IRAs and SAR/SEP
accounts) before the participant is age 59-1/2, and distributions
from 403(b)(7) custodial plans or pension or profit sharing plans
before the participant is age 59-1/2 but only after the participant
has separated from service, if the distributions are made in
substantially equal periodic payments over the life (or life
expectancy) of the participant or the joint lives (or joint life
and last survivor expectancy) of the participant and the
participant's designated beneficiary (and the distributions must
comply with other requirements for such distributions under the IRC
and may not exceed 10% of the account value annually, measured from
the date the Transfer Agent received the request);
- shares redeemed involuntarily, as described in "Shareholder
Account Rules and Policies," below; or
- distributions from OppenheimerFunds prototype 401(k) plans:
(1) for hardship withdrawals; (2) under a Qualified Domestic
Relations Order, as defined in the IRC; (3) to meet minimum
distribution requirements as defined in the IRC; (4) to make
"substantially equal periodic payments" as described in Section
72(t) of the IRC; (5) for separation from service.
Waivers for Shares Sold or Issued in Certain Transactions.
The contingent deferred sales charge is also waived on Class B and
Class C shares sold or issued in the following cases:
- shares sold to the Manager or its affiliates;
- shares sold to registered management investment companies or
separate accounts of insurance companies having an agreement with
the Manager or the Distributor for that purpose; or
- shares issued in plans or reorganization to which the Fund
is a party.
Special Investor Services
AccountLink. OppenheimerFunds AccountLink links your Fund account
to your account at your bank or other financial institution to
enable you to send money electronically between those accounts to
perform a number of types of account transactions. These include
purchases of shares by telephone (either through a service
representative or by PhoneLink, described below), automatic
investments under Asset Builder Plans, and sending dividends and
distributions or Automatic Withdrawal Plan payments directly to
your bank account. Please refer to the Application for details or
call the Transfer Agent for more information.
AccountLink privileges should be requested on the Application
you use to buy shares, or on your dealer's settlement instructions
if you buy your shares through your dealer. After your account is
established, you can request AccountLink privileges on signature-
guaranteed instructions to the Transfer Agent. AccountLink
privileges will apply to each shareholder listed in the
registration on your account as well as to your dealer
representative of record unless and until the Transfer Agent
receives written instructions terminating or changing those
privileges. After you establish AccountLink for your account, any
change of bank account information must be made by signature-
guaranteed instructions to the Transfer Agent signed by all
shareholders who own the account.
-- Using AccountLink to Buy Shares. Purchases may be made by
telephone only after your account has been established. To purchase
shares in amounts up to $250,000 through a telephone
representative, call the Distributor at 1-800-852-8457. The
purchase payment will be debited from your bank account.
-- PhoneLink. PhoneLink is the OppenheimerFunds automated
telephone system that enables shareholders to perform a number of
account transactions automatically using a touch-tone phone.
PhoneLink may be used on already-established Fund accounts after
you obtain a Personal Identification Number (PIN), by calling the
special PhoneLink number: 1-800-533-3310.
- Purchasing Shares. You may purchase shares in amounts up to
$100,000 by phone, by calling 1-800-533-3310. You must have
established AccountLink privileges to link your bank account with
the Fund, to pay for these purchases.
- Exchanging Shares. With the OppenheimerFunds exchange
privilege, described below, you can exchange shares automatically
by phone from your Fund account to another Oppenheimer funds
account you have already established by calling the special
PhoneLink number. Please refer to "How to Exchange Shares," below,
for details.
- Selling Shares. You can redeem shares by telephone
automatically by calling the PhoneLink number and the Fund will
send the proceeds directly to your AccountLink bank account.
Please refer to "How to Sell Shares," below, for details.
Automatic Withdrawal and Exchange Plans. The Fund has several plans
that enable you to sell shares automatically or exchange them to
another Oppenheimer funds account on a regular basis:
-- Automatic Withdrawal Plans. If your Fund account is $5,000
or more, you can establish an Automatic Withdrawal Plan to receive
payments of at least $50 on a monthly, quarterly, semi-annual or
annual basis. The checks may be sent to you or sent automatically
to your bank account on AccountLink. You may even set up certain
types of withdrawals of up to $1,500 per month by telephone. You
should consult the Application and Statement of Additional
Information for more details.
-- Automatic Exchange Plans. You can authorize the Transfer
Agent to exchange an amount you establish in advance automatically
for shares of up to five other Oppenheimer funds on a monthly,
quarterly, semi-annual or annual basis under an Automatic Exchange
Plan. The minimum purchase for each other Oppenheimer funds
account is $25. These exchanges are subject to the terms of the
exchange privilege, described below.
Reinvestment Privilege. If you redeem some or all of your Class A
shares, you have up to 6 months to reinvest all or part of the
redemption proceeds in Class A shares of the Fund or other
Oppenheimer funds without paying a sales charge. This privilege
applies to Class A shares that you purchased subject to an initial
sales charge and to Class A shares on which you paid a contingent
deferred sales charge when you redeemed them. It does not apply to
Class C shares. Please consult the Statement of Additional
Information for more details.
Retirement Plans. Fund shares are available as an investment for
your retirement plans. If you participate in a plan sponsored by
your employer, the plan trustee or administrator must make the
purchase of shares for your retirement plan account. The
Distributor offers a number of different retirement plans that can
be used by individuals and employers:
- Individual Retirement Accounts including rollover IRAs, for
individuals and their spouses
- 403(b)(7) Custodial Plans for employees of eligible tax-
exempt organizations, such as schools, hospitals and charitable
organizations
- SEP-IRAs (Simplified Employee Pension Plans) for small
business owners or people with income from self-employment,
including SAR/SEP IRAs
- Pension and Profit-Sharing Plans for self-employed persons
and small business owners
- 401(k) prototype retirement plans for businesses
Please call the Distributor for the OppenheimerFunds plan
documents, which contain important information and applications.
How to Sell Shares
You can arrange to take money out of your account by selling
(redeeming) some or all of your shares on any regular business day.
Your shares will be sold at the next net asset value calculated
after your order is received and accepted by the Transfer Agent.
The Fund offers you a number of ways to sell your shares: in
writing or by telephone. You can also set up Automatic Withdrawal
Plans to redeem shares on a regular basis, as described above. If
you have questions about any of these procedures, and especially if
you are redeeming shares in a special situation, such as due to the
death of the owner, or from a retirement plan, please call the
Transfer Agent first, at 1-800-525-7048, for assistance.
-- Retirement Accounts. To sell shares in an OppenheimerFunds
retirement account in your name, call the Transfer Agent for a
distribution request form. There are special income tax withholding
requirements for distributions from retirement plans and you must
submit a withholding form with your request to avoid delay. If your
retirement plan account is held for you by your employer, you must
arrange for the distribution request to be sent by the plan
administrator or trustee. There are additional details in the
Statement of Additional Information.
-- Certain Requests Require A Signature Guarantee. To protect
you and the Fund from fraud, certain redemption requests must be in
writing and must include a signature guarantee in the following
situations (there may be other situations also requiring a
signature guarantee):
- You wish to redeem more than $50,000 worth of shares and
receive a check
- The redemption check is not payable to all shareholders
listed on the account statement
- The redemption check is not sent to the address of record on
your account statement
- Shares are being transferred to a Fund account with a
different owner or name
- Shares are redeemed by someone other than the owners (such
as an Executor)
-- Where Can I Have My Signature Guaranteed? The Transfer
Agent will accept a guarantee of your signature by a number of
financial institutions, including: a U.S. bank, trust company,
credit union or savings association, or by a foreign bank that has
a U.S. correspondent bank, or by a U.S. registered dealer or broker
in securities, municipal securities or government securities, or by
a U.S. national securities exchange, a registered securities
association or a clearing agency. If you are signing as a fiduciary
or on behalf of a corporation, partnership or other business, you
must also include your title in the signature.
Selling Shares by Mail. Write a "letter of instructions" that
includes:
- Your name
- The Fund's name
- Your Fund account number (from your account statement)
- The dollar amount or number of shares to be redeemed
- Any special payment instructions
- Any share certificates for the shares you are selling
- The signatures of all registered owners exactly as the
account is registered, and
- Any special requirements or documents requested by the
Transfer Agent to assure proper authorization of the person asking
to sell shares.
Use the following address for Send courier or Express Mail
request by mail: requests to:
OppenheimerFunds Services OppenheimerFunds Services
P.O. Box 5270 10200 E. Girard Ave., Building D
Denver, Colorado 80217 Denver, Colorado 80231
Selling Shares by Telephone. You and your dealer representative of
record may also sell your shares by telephone. To receive the
redemption price on a regular business day, your call must be
received by the Transfer Agent by the close of The New York Stock
Exchange that day, which is normally 4:00 P.M. but may be earlier
on some days. Shares held in an OppenheimerFunds retirement plan
or under a share certificate may not be redeemed by telephone.
- To redeem shares through a service representative, call 1-
800-852-8457
- To redeem shares automatically on PhoneLink, call 1-800-533-
3310
Whichever method you use, you may have a check sent to the
address on the account statement, or, if you have linked your Fund
account to your bank account on AccountLink, you may have the
proceeds wired to that bank account.
-- Telephone Redemptions Paid by Check. Up to $50,000 may be
redeemed by telephone in any 7-day period. The check must be
payable to all owners of record of the shares and must be sent to
the address on the account. This service is not available within
30 days of changing the address on an account.
-- Telephone Redemptions Through AccountLink. There are no
dollar limits on telephone redemption proceeds sent to a bank
account designated when you establish AccountLink. Normally the ACH
wire to your bank is initiated on the business day after the
redemption. You do not receive dividends on the proceeds of the
shares you redeemed while they are waiting to be wired.
Selling Shares Through Your Dealer. The Distributor has made
arrangements to repurchase Fund shares from dealers and brokers on
behalf of their customers. Brokers or dealers may charge for that
service. Please refer to "Special Arrangements for Repurchase of
Shares from Dealers and Brokers" in the Statement of Additional
Information for more details.
How to Exchange Shares
Shares of the Fund may be exchanged for shares of certain
Oppenheimer funds at net asset value per share at the time of
exchange, without sales charge. To exchange shares, you must meet
several conditions:
- Shares of the fund selected for exchange must be available
for sale in your state of residence
- The prospectuses of this Fund and the fund whose shares you
want to buy must offer the exchange privilege
- You must hold the shares you buy when you establish your
account for at least 7 days before you can exchange them; after the
account is open 7 days, you can exchange shares every regular
business day
- You must meet the minimum purchase requirements for the fund
you purchase by exchange
- Before exchanging into a fund, you should obtain and read
its prospectus
Shares of a particular class may be exchanged only for shares
of the same class in the other Oppenheimer funds. For example, you
can exchange Class A shares of this Fund only for Class A shares of
another fund. At present, Oppenheimer Money Market Fund, Inc.
offers only one class of shares, which are considered Class A
shares for this purpose. In some cases, sales charges may be
imposed on exchange transactions. Please refer to "How to Exchange
Shares" in the Statement of Additional Information for more
details.
Exchanges may be requested in writing or by telephone:
-- Written Exchange Requests. Submit an OppenheimerFunds
Exchange Request form, signed by all owners of the account. Send
it to the Transfer Agent at the addresses listed in "How to Sell
Shares."
-- Telephone Exchange Requests. Telephone exchange requests
may be made either by calling a service representative at 1-800-
852-8457 or by using PhoneLink for automated exchanges, by calling
1-800-533-3310. Telephone exchanges may be made only between
accounts that are registered with the same name(s) and address.
Shares held under certificates may not be exchanged by telephone.
You can find a list of Oppenheimer funds currently available
for exchanges in the Statement of Additional Information or by
calling a service representative at 1-800-525-7048. Exchanges of
shares involve a redemption of the shares of the fund you own and
a purchase of shares of the other fund.
There are certain exchange policies you should be aware of:
- Shares are normally redeemed from one fund and purchased
from the other fund in the exchange transaction on the same regular
business day on which the Transfer Agent receives an exchange
request that is in proper form by the close of The New York Stock
Exchange that day, which is normally 4:00 P.M. but may be earlier
on some days. However, either fund may delay the purchase of
shares of the fund you are exchanging into up to 7 days if it
determines it would be disadvantaged by a same-day transfer of the
proceeds to buy shares. For example, the receipt of multiple
exchange requests from a dealer in a "market-timing" strategy might
require the disposition of securities at a time or price
disadvantageous to the Fund.
- Because excessive trading can hurt fund performance and harm
shareholders, the Fund reserves the right to refuse any exchange
request that will disadvantage it, or to refuse multiple exchange
requests submitted by a shareholder or dealer.
- The Fund may amend, suspend or terminate the exchange
privilege at any time. Although the Fund will attempt to provide
you notice whenever it is reasonably able to do so, it may impose
these changes at any time.
- If the Transfer Agent cannot exchange all the shares you
request because of a restriction cited above, only the shares
eligible for exchange will be exchanged.
Shareholder Account Rules and Policies
-- Net Asset Value Per Share is determined for each class of
shares as of the close of The New York Stock Exchange, which is
normally 4:00 P.M. but may be earlier on some days, on each day the
Exchange is open by dividing the value of each Fund's net assets
attributable to a class by the number of shares of that class that
are outstanding. The Fund's Board of Trustees has established
procedures to value each Fund's securities to determine net asset
value. In general, securities values are based on market value.
There are special procedures for valuing illiquid and restricted
securities and obligations for which market values cannot be
readily obtained. These procedures are described more completely
in the Statement of Additional Information.
-- The offering of shares may be suspended during any period
in which the determination of net asset value is suspended, and the
offering may be suspended by the Board of Trustees at any time the
Board believes it is in the Fund's best interest to do so.
-- Telephone Transaction Privileges for purchases, redemptions
or exchanges may be modified, suspended or terminated by the Fund
at any time. If an account has more than one owner, the Fund and
the Transfer Agent may rely on the instructions of any one owner.
Telephone privileges apply to each owner of the account and the
dealer representative of record for the account unless and until
the Transfer Agent receives cancellation instructions from an owner
of the account.
-- The Transfer Agent will record any telephone calls to
verify data concerning transactions and has adopted other
procedures to confirm that telephone instructions are genuine, by
requiring callers to provide tax identification numbers and other
account data or by using PINs, and by confirming such transactions
in writing. If the Transfer Agent does not use reasonable
procedures it may be liable for losses due to unauthorized
transactions, but otherwise neither the Transfer Agent nor the Fund
will be liable for losses or expenses arising out of telephone
instructions reasonably believed to be genuine. If you are unable
to reach the Transfer Agent during periods of unusual market
activity, you may not be able to complete a telephone transaction
and should consider placing your order by mail.
-- Redemption or transfer requests will not be honored until
the Transfer Agent receives all required documents in proper form.
From time to time, the Transfer Agent in its discretion may waive
certain of the requirements for redemptions stated in this
Prospectus.
-- Dealers that can perform account transactions for their
clients by participating in NETWORKING through the National
Securities Clearing Corporation are responsible for obtaining their
clients' permission to perform those transactions and are
responsible to their clients who are shareholders of the Fund if
the dealer performs any transaction erroneously.
-- The redemption price for shares will vary from day to day
because the value of the securities in each Fund's portfolio
fluctuates, and the redemption price, which is the net asset value
per share, will normally be different for Class A, Class B and
Class C shares. Therefore, the redemption value of your shares may
be more or less than their original cost.
-- Payment for redeemed shares is made ordinarily in cash and
forwarded by check or through AccountLink (as elected by the
shareholder under the redemption procedures described above) within
7 days after the Transfer Agent receives redemption instructions in
proper form, except under unusual circumstances determined by the
Securities and Exchange Commission delaying or suspending such
payments. For accounts registered in the name of a broker-dealer,
payment will be forwarded within 3 business days. The Transfer
Agent may delay forwarding a check or processing a payment via
AccountLink for recently purchased shares, but only until the
purchase payment has cleared. That delay may be as much as 10 days
from the date the shares were purchased. That delay may be avoided
if you purchase shares by certified check or arrange with your bank
to provide telephone or written assurance to the Transfer Agent
that your purchase payment has cleared.
-- Involuntary redemptions of small accounts may be made by
the Fund if the account value has fallen below $500 for reasons
other than the fact that the market value of shares has dropped,
and in some cases involuntary redemptions may be made to repay the
Distributor for losses from the cancellation of share purchase
orders.
-- Under unusual circumstances, shares of a Fund may be
redeemed "in kind", which means that the redemption proceeds will
be paid with securities from the Fund's portfolio. Please refer to
the Statement of Additional Information for more details.
-- "Backup Withholding" of Federal income tax may be applied
at the rate of 31% from dividends, distributions and redemption
proceeds (including exchanges) if you fail to furnish the Fund a
certified Social Security or taxpayer identification number when
you sign your application, or if you violate Internal Revenue
Service regulations on tax reporting of dividends.
-- The Fund does not charge a redemption fee, but if your
dealer or broker handles your redemption, they may charge a fee.
That fee can be avoided by redeeming your Fund shares directly
through the Transfer Agent. Under the circumstances described in
"How to Buy Shares," you may be subject to a contingent deferred
sales charges when redeeming certain Class A, Class B and Class C
shares.
-- To avoid sending duplicate copies of materials to
households, the Fund will mail only one copy of each annual and
semi-annual report to shareholders having the same last name and
address on the Fund's records. However, each shareholder may call
the Transfer Agent at 1-800-525-7048 to ask that copies of those
materials be sent personally to that shareholder.
Dividends, Capital Gains and Taxes
Dividends. The Fund declares and pays dividends separately for
Class A, Class B and Class C shares from net investment income on
a quarterly basis. Dividends paid on Class A shares generally are
expected to be higher than for Class B and Class C shares because
expenses allocable to Class B and Class C shares will generally be
higher than for Class A shares. There is no fixed dividend rate
and there can be no assurance as to the payment of any dividends.
Capital Gains. The Fund may make distributions annually in December
out of any net short-term or long-term capital gains, and the Fund
may make supplemental distributions of dividends and capital gains
following the end of its fiscal year, which is October 31. Short-
term capital gains are treated as dividends for tax purposes. Long-
term capital gains will be separately identified in the tax
information the Fund sends you after the end of the calendar year.
There can be no assurances that the Fund will pay any capital gains
distributions in a particular year.
Distribution Options. When you open your account, specify on your
application how you want to receive your distributions. For
OppenheimerFunds retirement accounts, all distributions are
reinvested. For other accounts, you have four options:
-- Reinvest All Distributions in the Fund. You can elect to
reinvest all dividends and long-term capital gains distributions in
additional shares of the Fund.
-- Reinvest Capital Gains Only. You can elect to reinvest
long-term capital gains in the Fund while receiving dividends by
check or sent to your bank account on AccountLink.
-- Receive All Distributions in Cash. You can elect to receive
a check for all dividends and long-term capital gains distributions
or have them sent to your bank on AccountLink.
-- Reinvest Your Distributions in Another Oppenheimer Fund
Account. You can reinvest all distributions in another Oppenheimer
fund account you have established.
Taxes. If your account is not a tax-deferred retirement account,
you should be aware of the following tax implications of investing
in the Fund. Long-term capital gains are taxable as long-term
capital gains when distributed to shareholders. It does not matter
how long you held your shares. Dividends paid from short-term
capital gains and net investment income are taxable as ordinary
income. Distributions are subject to federal income tax and may be
subject to state or local taxes. Your distributions are taxable
when paid, whether you reinvest them in additional shares or take
them in cash. Every year the Fund will send you and the IRS a
statement showing the amount of each taxable distribution you
received in the previous year.
-- "Buying a Dividend". When the Fund goes ex-dividend, its
share price is reduced by the amount of the distribution. If you
buy shares on or just before the ex-dividend date, or just before
the Fund declares a capital gains distribution, you will pay the
full price for the shares and then receive a portion of the price
back as a taxable dividend or capital gain.
-- Taxes on Transactions. Share redemptions, including
redemptions for exchanges, are subject to capital gains tax. A
capital gain or loss is the difference between the price you paid
for the shares and the price you received when you sold them.
-- Returns of Capital. In certain cases distributions made by
a Fund may be considered a non-taxable return of capital to
shareholders. If that occurs, it will be identified in notices to
shareholders. A non-taxable return of capital may reduce your tax
basis in your Fund shares.
This information is only a summary of certain federal tax
information about your investment. More information is contained
in the Statement of Additional Information, and in addition you
should consult with your tax adviser about the effect of an
investment in the Fund on your particular tax situation.
<PAGE>
APPENDIX A
Special Sales Charge Arrangements for Shareholders of the Fund
Who Were Shareholders of the Former Quest for Value Funds
The initial and contingent deferred sales charge rates and
waivers for Class A, Class B and Class C shares of the Fund
described elsewhere in this Prospectus are modified as described
below for those shareholders of (i) Quest for Value Fund, Inc.,
Quest for Value Growth and Income Fund, Quest for Value Opportunity
Fund, Quest for Value Small Capitalization Fund and Quest for Value
Global Equity Fund, Inc. on November 24, 1995, when
OppenheimerFunds, Inc. became the investment adviser to those
funds, and (ii) Quest for Value U.S. Government Income Fund, Quest
for Value Investment Quality Income Fund, Quest for Value Global
Income Fund, Quest for Value New York Tax-Exempt Fund, Quest for
Value National Tax-Exempt Fund and Quest for Value California Tax-
Exempt Fund when those funds merged into various Oppenheimer funds
on November 24, 1995. The funds listed above are referred to in
this Prospectus as the "Former Quest for Value Funds." The waivers
of initial and contingent deferred sales charges described in this
Appendix apply to shares of the Fund (i) acquired by such
shareholder pursuant to an exchange of shares of one of the
Oppenheimer funds that was one of the Former Quest for Value Funds
or (ii) received by such shareholder pursuant to the merger of any
of the Former Quest for Value Funds into an Oppenheimer fund on
November 24, 1995.
Class A Sales Charges
- -- Reduced Class A Initial Sales Charge Rates for Certain Former
Quest Shareholders
- - Purchases by Groups, Associations and Certain Qualified
Retirement Plans. The following table sets forth the initial sales
charge rates for Class A shares purchased by a "Qualified
Retirement Plan" through a single broker, dealer or financial
institution, or by members of "Associations" formed for any purpose
other than the purchase of securities if that Qualified Retirement
Plan or that Association purchased shares of any of the Former
Quest for Value Funds or received a proposal to purchase such
shares from OCC Distributors prior to November 24, 1995. For this
purpose only, a "Qualified Retirement Plan" includes any 401(k)
plan, 403(b) plan, and SEP/IRA or IRA plan for employees of a
single employer.
Front-End Front-End
Sales Sales Commission
Charge Charge as
Number of as a as a Percentage
Eligible Percentage Percentage of
Employees of Offering of Amount Offering
or Members Price Invested Price
- --------------------------------------------------------------
9 or fewer 2.50% 2.56% 2.00%
- --------------------------------------------------------------
At least 10 but not
more than 49 2.00% 2.04% 1.60%
For purchases by Qualified Retirement plans and Associations
having 50 or more eligible employees or members, there is no
initial sales charge on purchases of Class A shares, but those
shares are subject to the Class A contingent deferred sales charge
described on pages 28 and 29 of this Prospectus.
Purchases made under this arrangement qualify for the lower of
the sales charge rate in the table based on the number of eligible
employees in a Qualified Retirement Plan or members of an
Association or the sales charge rate that applies under the Rights
of Accumulation described above in the Prospectus. In addition,
purchases by 401(k) plans that are Qualified Retirement Plans
qualify for the waiver of the Class A initial sales charge if they
qualified to purchase shares of any of the Former Quest For Value
Funds by virtue of projected contributions or investments of $1
million or more each year. Individuals who qualify under this
arrangement for reduced sales charge rates as members of
Associations, or as eligible employees in Qualified Retirement
Plans also may purchase shares for their individual or custodial
accounts at these reduced sales charge rates, upon request to the
Fund's Distributor.
- -- Special Class A Contingent Deferred Sales Charge Rates
Class A shares of the Fund purchased by exchange of shares of other
Oppenheimer funds that were acquired as a result of the merger of
Former Quest for Value Funds into those Oppenheimer funds, and
which shares were subject to a Class A contingent deferred sales
charge prior to November 24, 1995 will be subject to a contingent
deferred sales charge at the following rates: if they are redeemed
within 18 months of the end of the calendar month in which they
were purchased, at a rate equal to 1.0% if the redemption occurs
within 12 months of their initial purchase and at a rate of 0.50 of
1.0% if the redemption occurs in the subsequent six months. Class
A shares of any of the Former Quest for Value Funds purchased
without an initial sales charge on or before November 22, 1995 will
continue to be subject to the applicable contingent deferred sales
charge in effect as of that date as set forth in the then-current
prospectus for such fund.
- -- Waiver of Class A Sales Charges for Certain Shareholders
Class A shares of the Fund purchased by the following investors are
not subject to any Class A initial or contingent deferred sales
charges:
- Shareholders of the Fund who were shareholders of the AMA
Family of Funds on February 28, 1991 and who acquired shares of any
of the Former Quest for Value Funds by merger of a portfolio of the
AMA Family of Funds.
- Shareholders of the Fund who acquired shares of any Former
Quest for Value Fund by merger of any of the portfolios of the
Unified Funds.
- -- Waiver of Class A Contingent Deferred Sales Charge in Certain
Transactions
The Class A contingent deferred sales charge will not apply to
redemptions of Class A shares of the Fund purchased by the
following investors who were shareholders of any Former Quest for
Value Fund:
- Investors who purchased Class A shares from a dealer that is
or was not permitted to receive a sales load or redemption fee
imposed on a shareholder with whom that dealer has a fiduciary
relationship under the Employee Retirement Income Security Act of
1974 and regulations adopted under that law.
- Participants in Qualified Retirement Plans that purchased
shares of any of the Former Quest For Value Funds pursuant to a
special "strategic alliance" with the distributor of those funds.
The Fund's Distributor will pay a commission to the dealer for
purchases of Fund shares as described above in "Class A Contingent
Deferred Sales Charge."
Class A, Class B and Class C Contingent Deferred Sales Charge
Waivers
- -- Waivers for Redemptions of Shares Purchased Prior to March 6,
1995
In the following cases, the contingent deferred sales charge will
be waived for redemptions of Class A, Class B or Class C shares of
the Fund acquired by merger of a Former Quest for Value Fund into
the Fund or by exchange from an Oppenheimer fund that was a Former
Quest for Value Fund or into which such fund merged, if those
shares were purchased prior to March 6, 1995: in connection with
(i) distributions to participants or beneficiaries of plans
qualified under Section 401(a) of the Internal Revenue Code or from
custodial accounts under Section 403(b)(7) of the Code, Individual
Retirement Accounts, deferred compensation plans under Section 457
of the Code, and other employee benefit plans, and returns of
excess contributions made to each type of plan, (ii) withdrawals
under an automatic withdrawal plan holding only either Class B or
Class C shares if the annual withdrawal does not exceed 10% of the
initial value of the account, and (iii) liquidation of a
shareholder's account if the aggregate net asset value of shares
held in the account is less than the required minimum value of such
accounts.
- -- Waivers for Redemptions of Shares Purchased on or After March 6,
1995 but Prior to November 24, 1995.
In the following cases, the contingent deferred sales charge will
be waived for redemptions of Class A, Class B or Class C shares of
the Fund acquired by merger of a Former Quest for Value Fund into
the Fund or by exchange from an Oppenheimer fund that was a Former
Quest For Value Fund or into which such fund merged, if those
shares were purchased on or after March 6, 1995, but prior to
November 24, 1995: (1) distributions to participants or
beneficiaries from Individual Retirement Accounts under
Section 408(a) of the Internal Revenue Code or retirement plans
under Section 401(a), 401(k), 403(b) and 457 of the Code, if those
distributions are made either (a) to an individual participant as
a result of separation from service or (b) following the death or
disability (as defined in the Code) of the participant or
beneficiary; (2) returns of excess contributions to such retirement
plans; (3) redemptions other than from retirement plans following
the death or disability of the shareholder(s) (as evidenced by a
determination of total disability by the U.S. Social Security
Administration); (4) withdrawals under an automatic withdrawal plan
(but only for Class B or C shares) where the annual withdrawals do
not exceed 10% of the initial value of the account; and
(5) liquidation of a shareholder's account if the aggregate net
asset value of shares held in the account is less than the required
minimum account value. A shareholder's account will be credited
with the amount of any contingent deferred sales charge paid on the
redemption of any Class A, Class B or Class C shares of the Fund
described in this section if within 90 days after that redemption,
the proceeds are invested in the same Class of shares in this Fund
or another Oppenheimer fund.
Special Dealer Arrangements
Dealers who sold Class B shares of a Former Quest for Value Fund to
Quest for Value prototype 401(k) plans that were maintained on the
TRAC-2000 recordkeeping system and that were transferred to an
OppenheimerFunds prototype 401(k) plan shall be eligible for an
additional one-time payment by the Distributor of 1% of the value
of the plan assets transferred, but that payment may not exceed
$5,000 as to any one plan.
Dealers who sold Class C shares of a Former Quest for Value Fund to
Quest for Value prototype 401(k) plans that were maintained on the
TRAC-2000 recordkeeping system and (i) the shares held by those
plans were exchanged for Class A shares, or (ii) the plan assets
were transferred to an OppenheimerFunds prototype 401(k) plan,
shall be eligible for an additional one-time payment by the
Distributor of 1% of the value of the plan assets transferred, but
that payment may not exceed $5,000.
<PAGE>
Appendix B
Description of Ratings
Bond Ratings
- -- Moody's Investors Service, Inc.
Aaa: Bonds which are rated "Aaa" are judged to be the best quality
and to carry the smallest degree of investment risk. Interest
payments are protected by a large or by an exceptionally stable
margin and principal is secure. While the various protective
elements are likely to change, the changes that can be expected are
most unlikely to impair the fundamentally strong position of such
issues.
Aa: Bonds which are rated "Aa" are judged to be of high quality by
all standards. Together with the "Aaa" group, they comprise what
are generally known as "high-grade" bonds. They are rated lower
than the best bonds because margins of protection may not be as
large as with "Aaa" securities or fluctuation of protective
elements may be of greater amplitude or there may be other elements
present which make the long-term risks appear somewhat larger than
those of "Aaa" securities.
A: Bonds which are rated "A" possess many favorable investment
attributes and are to be considered as upper-medium grade
obligations. Factors giving security to principal and interest are
considered adequate but elements may be present which suggest a
susceptibility to impairment sometime in the future.
Baa: Bonds which are rated "Baa" are considered medium grade
obligations, i.e., they are neither highly protected nor poorly
secured. Interest payments and principal security appear adequate
for the present but certain protective elements may be lacking or
may be characteristically unreliable over any great length of time.
Such bonds lack outstanding investment characteristics and have
speculative characteristics as well.
Ba: Bonds which are rated "Ba" are judged to have speculative
elements; their future cannot be considered well-assured. Often
the protection of interest and principal payments may be very
moderate and not well safeguarded during both good and bad times
over the future. Uncertainty of position characterizes bonds in
this class.
B: Bonds which are rated "B" generally lack characteristics of
desirable investment. Assurance of interest and principal payments
or of maintenance of other terms of the contract over any long
period of time may be small.
Caa: Bonds which are rated "Caa" are of poor standing and may be in
default or there may be present elements of danger with respect to
principal or interest.
Ca: Bonds which are rated "Ca" represent obligations which are
speculative in a high degree and are often in default or have other
marked shortcomings.
C: Bonds which are rated "C" can be regarded as having extremely
poor prospects of ever retaining any real investment standing.
- -- Standard & Poor's Corporation
AAA: "AAA" is the highest rating assigned to a debt obligation and
indicates an extremely strong capacity to pay principal and
interest.
AA: Bonds rated "AA" also qualify as high quality debt obligations.
Capacity to pay principal and interest is very strong, and in the
majority of instances they differ from "AAA" issues only in small
degree.
A: Bonds rated "A" have a strong capacity to pay principal and
interest, although they are somewhat more susceptible to adverse
effects of change in circumstances and economic conditions.
BBB: Bonds rated "BBB" are regarded as having an adequate capacity
to pay principal and interest. Whereas they normally exhibit
protection parameters, adverse economic conditions or changing
circumstances are more likely to lead to a weakened capacity to pay
principal and interest for bonds in this category than for bonds in
the "A" category.
BB, B, CCC, CC: Bonds rated "BB," "B," "CCC" and "CC" are regarded,
on balance, as predominantly speculative with respect to the
issuer's capacity to pay interest and repay principal in accordance
with the terms of the obligation. "BB" indicates the lowest degree
of speculation and "CC" the highest degree. While such bonds will
likely have some quality and protective characteristics, these are
outweighed by large uncertainties or major risk exposures to
adverse conditions.
C, D: Bonds on which no interest is being paid are rated "C."
Bonds rated "D" are in default and payment of interest and/or
repayment of principal is in arrears.
- -- Fitch Investors Service, Inc.
AAA Bonds considered to be investment grade and of the highest
credit quality. The obligor has an exceptionally strong ability to
pay interest and repay principal, which is unlikely to be affected
by reasonably foreseeable events.
AA Bonds considered to be investment grade and of very high credit
quality. The obligor's ability to pay interest and repay principal
is very strong, although not quite as strong as bonds rated "AAA."
Because bonds rated in the "AAA" and "AA" categories are not
significantly vulnerable to foreseeable future developments, short-
term debt of these issuers is generally rated "F-1+."
A Bonds considered to be investment grade and of high credit
quality. The obligor's ability to pay interest and repay principal
is considered to be strong, but may be more vulnerable to adverse
changes in economic conditions and circumstances than bonds with
higher ratings.
BBB Bonds considered to be investment grade and of satisfactory
credit quality. The obligor's ability to pay interest and repay
principal is considered to be adequate. Adverse changes in
economic conditions and circumstances, however, are more likely to
have adverse impact on these bonds, and therefore impair timely
payment. The likelihood that the ratings of these bonds will fall
below investment grade is higher than for bonds with higher
ratings.
BB Bonds are considered speculative. The obligor's ability to pay
interest and repay principal may be affected over time by adverse
economic changes. However, business and financial alternatives can
be identified which could assist the obligor in satisfying its debt
service requirements.
B Bonds are considered highly speculative. While bonds in this
class are currently meeting debt service requirements, the
probability of continued timely payment of principal and interest
reflects the obligor's limited margin of safety and the need for
reasonable business and economic activity through the life of the
issue.
CCC Bonds have certain identifiable characteristics which, if not
remedied, may lead to default. The ability to meet obligations
requires an advantageous business and economic environment.
CC Bonds are minimally protected. Default in payment of interest
and/or principal seems probable over time.
C Bonds are in imminent default in payment of interest or
principal.
DDD, DD, and D Bonds are in default on interest and/or principal
payments. Such bonds are extremely speculative and should be
valued on the basis of their ultimate recovery value in liquidation
or reorganization of the obligor. "DDD" represents the highest
potential for recovery of these bonds, and "D" represents the
lowest potential for recovery.
Plus (+) Minus (-) Plus and minus signs are used with a rating
symbol to indicate the relative position of a credit within the
rating category. Plus and minus signs, however, are not used in
the "DDD," "DD," or "D" categories.
Short-Term Debt Ratings.
- -- Moody's Investors Service, Inc. The following rating
designations for commercial paper (defined by Moody's as promissory
obligations not having original maturity in excess of nine months),
are judged by Moody's to be investment grade, and indicate the
relative repayment capacity of rated issuers:
Prime-1: Superior capacity for repayment. Capacity will normally
be evidenced by the following characteristics: (a) leveling market
positions in well-established industries; (b) high rates of return
on funds employed; (c) conservative capitalization structures with
moderate reliance on debt and ample asset protection; (d) broad
margins in earning coverage of fixed financial charges and high
internal cash generation; and (e) well established access to a
range of financial markets and assured sources of alternate
liquidity.
Prime-2: Strong capacity for repayment. This will normally be
evidenced by many of the characteristics cited above but to a
lesser degree. Earnings trends and coverage ratios, while sound,
will be more subject to variation. Capitalization characteristics,
while still appropriate, may be more affected by external
conditions. Ample alternate liquidity is maintained.
Moody's ratings for state and municipal short-term obligations are
designated "Moody's Investment Grade" ("MIG"). Short-term notes
which have demand features may also be designated as "VMIG". These
rating categories are as follows:
MIG1/VMIG1: Best quality. There is present strong protection by
established cash flows, superior liquidity support or demonstrated
broadbased access to the market for refinancing.
MIG2/VMIG2: High quality. Margins of protection are ample
although not so large as in the preceding group.
- -- Standard & Poor's Corporation ("S&P"): The following ratings by
S&P for commercial paper (defined by S&P as debt having an original
maturity of no more than 365 days) assess the likelihood of
payment:
A-1: Strong capacity for timely payment. Those issues determined
to possess extremely strong safety characteristics are denoted with
a plus sign (+) designation.
A-2: Satisfactory capacity for timely payment. However, the
relative degree of safety is not as high as for issues designated
"A-1".
S&P's ratings for Municipal Notes due in three years or less are:
SP-1: Very strong or strong capacity to pay principal and
interest. Those issues determined to possess overwhelming safety
characteristics will be given a plus (+) designation.
SP-2: Satisfactory capacity to pay principal and interest.
S&P assigns "dual ratings" to all municipal debt issues that have
a demand or double feature as part of their provisions. The first
rating addresses the likelihood of repayment of principal and
interest as due, and the second rating addresses only the demand
feature. With short-term demand debt, S&P's note rating symbols
are used with the commercial paper symbols (for example, "SP-1+/A-
1+").
- -- Fitch Investors Service, Inc. Fitch assigns the following
short-term ratings to debt obligations that are payable on demand
or have original maturities of generally up to three years,
including commercial paper, certificates of deposit, medium-term
notes, and municipal and investment notes:
F-1+: Exceptionally strong credit quality; the strongest degree of
assurance for timely payment.
F-1: Very strong credit quality; assurance of timely payment is
only slightly less in degree than issues rated "F-1+".
F-2: Good credit quality; satisfactory degree of assurance for
timely payment, but the margin of safety is not as great as for
issues assigned "F-1+" or "F-1" ratings.
- -- Duff & Phelps, Inc. The following ratings are for commercial
paper (defined by Duff & Phelps as obligations with maturities,
when issued, of under one year), asset-backed commercial paper, and
certificates of deposit (the ratings cover all obligations of the
institution with maturities, when issued, of under one year,
including bankers' acceptance and letters of credit):
Duff 1+: Highest certainty of timely payment. Short-term
liquidity, including internal operating factors and/or access to
alternative sources of funds, is outstanding, and safety is just
below risk-free U.S. Treasury short-term obligations.
Duff 1: Very high certainty of timely payment. Liquidity factors
are excellent and supported by good fundamental protection factors.
Risk factors are minor.
Duff 1-: High certainty of timely payment. Liquidity factors are
strong and supported by good fundamental protection factors. Risk
factors are very small.
Duff 2: Good certainty of timely payment. Liquidity factors and
company fundamentals are sound. Although ongoing funding needs may
enlarge total financing requirements, access to capital markets is
good. Risk factors are small.
- -- IBCA Limited or its affiliate IBCA Inc. Short-term ratings,
including commercial paper (with maturities up to 12 months), are
as follows:
A1+: Obligations supported by the highest capacity for timely
repayment.
A1: Obligations supported by a very strong capacity for timely
repayment.
A2: Obligations supported by a strong capacity for timely
repayment, although such capacity may be susceptible to adverse
changes in business, economic, or financial conditions.
- -- Thomson BankWatch, Inc. The following short-term ratings apply
to commercial paper, certificates of deposit, unsecured notes, and
other securities having a maturity of one year or less.
TBW-1: The highest category; indicates the degree of safety
regarding timely repayment of principal and interest is very
strong.
TBW-2: The second highest rating category; while the degree of
safety regarding timely repayment of principal and interest is
strong, the relative degree of safety is not as high as for issues
rated "TBW-1".
<PAGE>
SCHEDULE TO PROSPECTUS OF
OPPENHEIMER QUEST GROWTH & INCOME VALUE FUND
Graphic material included in Prospectus of Oppenheimer Quest
Growth & Income Value Fund: "Comparison of Total Return of
Oppenheimer Quest Growth & Income Value Fund with the S&P 500 Index
- - Change in Value of $10,000 Hypothetical Investments in Class A,
Class B and Class C Shares of Oppenheimer Quest Growth & Income
Value Fund and the S&P 500 Index."
Linear graphs will be included in the Prospectus of
Oppenheimer Quest Growth & Income Value Fund (the "Fund") depicting
the initial account value and subsequent account value of a
hypothetical $10,000 investment in the Fund. In the case of the
Fund's Class A shares, that graph will cover the period from
inception (11/1/91) through 10/31/95, and in the case of the Fund's
Class B and Class C shares, will cover the period from the
inception of the class (9/1/93) through 10/31/95. The graph will
compare such values with hypothetical $10,000 investments over the
same time periods in the S&P 500 Index. Set forth below are the
relevant data points that will appear on the linear graph.
Additional information with respect to the foregoing, including a
description of the S&P 500 Index, is set forth in the Prospectus
under "Performance of the Fund - Comparing the Fund's Performance
to the Market."
Oppenheimer Quest
Fiscal Growth & Income S&P 500
Period Ended Fund A Index
- ------------ ----------------- -------
11/01/91 $ 9,425 $10,000
10/31/92 $10,447 $11,028
10/31/93 $11,484 $12,675
10/31/94 $12,476 $13,164
10/31/95 $14,516 $16,645
Oppenheimer Quest
Fiscal Growth & Income S&P 500
Period Ended Fund B Index
- ------------ ----------------- -------
9/01/93(2) $10,000 $10,000
10/31/93 $10,081 $10,136
10/31/94 $10,884 $10,526
10/31/95 $12,296 $13,312
Oppenheimer Quest
Fiscal Growth & Income S&P 500
Period Ended Fund C Index
- ------------ ----------------- -------
9/01/93(2) $10,000 $10,000
10/31/93 $10,081 $10,136
10/31/94 $10,879 $10,528
10/31/95 $12,551 $13,312
- ---------------------
(2) Class B shares of the Fund were first publicly offered on
9/01/93.
(3) Class C shares of the Fund were first publicly offered on
9/01/93.
<PAGE>
Oppenheimer Quest Growth & Income Value Fund
Two World Trade Center
New York, New York 10048-0203
1-800-525-7048
Investment Adviser
OppenheimerFunds, Inc.
Two World Trade Center
New York, New York 10048-0203
Sub-Adviser
OpCap Advisors
One World Financial Center
New York, New York 10281
Distributor
OppenheimerFunds Distributor, Inc.
Two World Trade Center
New York, New York 10048-0203
Transfer Agent
OppenheimerFunds Services
P.O. Box 5270
Denver, Colorado 80217
1-800-525-7048
Custodian of Portfolio Securities
State Street Bank and Trust Company
P.O. Box 8505
Boston, Massachusetts 02266-8505
Independent Accountants
Price Waterhouse LLP
950 Seventeenth Street
Denver, Colorado 80202
Legal Counsel
Gordon Altman Butowsky Weitzen Shalov & Wein
114 West 47th Street
New York, New York 10036
No dealer, broker, salesperson or any other person has been
authorized to give any information or to make any representations
other than those contained in this Prospectus or the Statement of
Additional Information, and if given or made, such information and
representations must not be relied upon as having been authorized
by the Fund, OppenheimerFunds, Inc., OppenheimerFunds Distributor,
Inc. or any affiliate thereof. This Prospectus does not constitute
an offer to sell or a solicitation of an offer to buy any of the
securities offered hereby in any state to any person to whom it is
unlawful to make such an offer in such state.
prosp\q257psp
<PAGE>
OPPENHEIMER QUEST GROWTH & INCOME VALUE FUND
Two World Trade Center, New York, New York 10048
1-800-525-7048
Statement of Additional Information dated February 15, 1996
This document contains additional information about Oppenheimer
Quest Growth & Income Value Fund (the "Fund") and supplements
information in the Prospectus dated February 15, 1996. It should
be read together with the Prospectus, which may be obtained upon
written request to the Fund's Transfer Agent, OppenheimerFunds
Services at P.O. Box 5270, Denver, Colorado 80217, or by calling
the Transfer Agent at the toll-free number shown above.
<TABLE>
<CAPTION>
Contents
Page
<S> <C>
About the Fund
Investment Objective and Policies. . . . . . . . . . . . . . . 2
Investment Policies and Strategies. . . . . . . . . . . 2
Other Investment Techniques and Strategies. . . . . . . 6
Other Investment Restrictions . . . . . . . . . . . . . 15
How the Fund is Managed . . . . . . . . . . . . . . . . . . . 16
Organization and History. . . . . . . . . . . . . . . . 16
Trustees and Officers of the Trust. . . . . . . . . . . 17
The Manager and Its Affiliates. . . . . . . . . . . . . 22
Brokerage Policies of the Fund . . . . . . . . . . . . . . . . 25
Performance of the Fund. . . . . . . . . . . . . . . . . . . . 27
Distribution and Service Plans . . . . . . . . . . . . . . . . 30
About Your Account
How To Buy Shares. . . . . . . . . . . . . . . . . . . . . . . 32
How To Sell Shares . . . . . . . . . . . . . . . . . . . . . . 39
How To Exchange Shares . . . . . . . . . . . . . . . . . . . . 43
Dividends, Capital Gains and Taxes . . . . . . . . . . . . . . 45
Additional Information About the Fund. . . . . . . . . . . . . 46
Financial Information About the Fund
Independent Auditors' Report . . . . . . . . . . . . . . . . . 48
Financial Statements . . . . . . . . . . . . . . . . . . . . . 50
Appendix A: Corporate Industry Classifications . . . . . . . . A-1
</TABLE>
<page)
ABOUT THE FUND
Investment Objective and Policies
Investment Policies and Strategies. The investment objective and
policies of the Fund are described in the Prospectus. The Fund is
one of four portfolios of Oppenheimer Quest for Value Funds (the
"Trust"). Set forth below is supplemental information about those
policies and the types of securities in which the Fund invests, as
well as the strategies the Fund may use to try to achieve its
objective. Capitalized terms used in this Statement of Additional
Information have the same meaning as those terms have in the
Prospectus.
-- Foreign Securities. The Fund may invest in securities
(which may be denominated in U.S. dollars or non-U.S. currencies)
issued or guaranteed by foreign corporations, certain supranational
equities (described below) and foreign governments or their
agencies or instrumentalities, and in securities issued by U.S.
corporations denominated in non-U.S. currencies. All such
securities are referred to as "foreign securities."
Investing in foreign securities offers potential benefits not
available from investing solely in securities of domestic issuers,
including the opportunity to invest in foreign issuers that appear
to offer growth potential, or in foreign countries with economic
policies or business cycles different from those of the U.S., or to
reduce fluctuations in portfolio value by taking advantage of
foreign stock markets that do not move in a manner parallel to U.S.
markets. If the Fund's portfolio securities are held abroad, the
countries in which they may be held and the sub-custodians or
depositories holding them must be approved by the Trust's Board of
Trustees to the extent that approval is required under applicable
rules of the Securities and Exchange Commission.
- Risks of Foreign Investing. Investments in foreign
securities present special additional risks and considerations not
typically associated with investments in domestic securities:
reduction of income by foreign taxes; fluctuation in value of
foreign portfolio investments due to changes in currency rates and
control regulations (e.g., currency blockage); transaction charges
for currency exchange; lack of public information about foreign
issuers; lack of uniform accounting, auditing and financial
reporting standards comparable to those applicable to domestic
issuers; less volume on foreign exchanges than on U.S. exchanges;
greater volatility and less liquidity on foreign markets than in
the U.S.; less regulation of foreign issuers, stock exchanges and
brokers than in the U.S.; greater difficulties in commencing
lawsuits and obtaining judgments in foreign courts; higher
brokerage commission rates than in the U.S.; increased risks of
delays in settlement of portfolio transactions or loss of
certificates for portfolio securities; possibilities in some
countries of expropriation, confiscatory taxation, political,
financial or social instability or adverse diplomatic developments;
and unfavorable differences between the U.S. economy and foreign
economies. In the past, U.S. Government policies have discouraged
certain investments abroad by U.S. investors, through taxation or
other restrictions, and it is possible that such restrictions could
be re-imposed.
- Emerging Market Countries: Certain developing countries may
have relatively unstable governments, economies based on only a few
industries that are dependent upon international trade, and reduced
secondary market liquidity. Foreign investment in certain emerging
market countries is restricted or controlled in varying degrees.
In the past, securities in these countries have experienced greater
price movement, both positive and negative, than securities of
companies located in developed countries. Lower-rated high-
yielding emerging market securities may be considered to have
speculative elements.
-- U.S. Government Securities. Obligations of U.S. Government
agencies or instrumentalities (including mortgage-backed
securities) may or may not be guaranteed or supported by the "full
faith and credit" of the United States. Some are backed by the
right of the issuer to borrow from the U.S. Treasury; others, by
discretionary authority of the U.S. Government to purchase the
agencies' obligations; while others are supported only by the
credit of the instrumentality. All U.S. Treasury obligations are
backed by the full faith and credit of the United States. If the
securities are not backed by the full faith and credit of the
United States, the owner of the securities must look principally to
the agency issuing the obligation for repayment and may not be able
to assert a claim against the United States in the event that the
agency or instrumentality does not meet its commitment. The Fund
will invest in U.S. Government Securities of such agencies and
instrumentalities only when the Manager is satisfied that the
credit risk with respect to such instrumentality is minimal.
- Mortgage-Backed Securities. Also known as pass-through
securities, the homeowner's principal and interest payments pass
from the originating bank or savings and loan through the
appropriate governmental agency to investors, net of service
charges. These pass-through securities include participation
certificates of Ginnie Mae, Freddie Mac and Fannie Mae.
The investment characteristics of mortgage-backed securities
differ from those of traditional debt securities. The effective
maturity of a mortgage-backed security may be shortened by
unscheduled or early payment of principal and interest on the
underlying mortgages, which may affect the effective yield of such
securities. The principal that is returned may be invested in
instruments having a higher or lower yield than the prepaid
instruments depending on then-current market conditions. Such
securities therefore may be less effective as a means of "locking
in" attractive long-term interest rates and may have less potential
for appreciation during periods of declining interest rates than
conventional bonds with comparable stated maturities. These
differences can result in significantly greater price and yield
volatility than is the case with traditional debt securities. If
the Fund purchases mortgage-backed securities at a premium, a
prepayment rate that is faster than expected will reduce both the
market value and the yield to maturity from that which was
anticipated, while a prepayment rate that is slower than expected
will have the opposite effect of increasing yield to maturity and
market value. Conversely, if the Fund purchases mortgage-backed
securities at a discount, faster than expected prepayments will
increase, while slower than expected prepayments will reduce, yield
to maturity and market value.
The Fund may invest in collateralized mortgage obligations
("CMOs") that are issued or guaranteed by the U.S. Government or
its agencies or instrumentalities, or that are collateralized by a
portfolio of mortgages or mortgage-related securities guaranteed by
such an agency or instrumentality. Payment of the interest and
principal generated by the pool of mortgages is passed through to
the holders as the payments are received by the issuer of the CMO.
CMOs may be issued in a variety of classes or series ("tranches")
that have different maturities. The principal value of certain CMO
tranches may be more volatile than other types of mortgage-related
securities, because of the possibility that the principal value of
the CMO may be prepaid earlier than the maturity of the CMO as a
result of prepayments of the underlying mortgage loans by the
borrowers.
As with other bond investments, the value of U.S. Government
Securities and mortgage-backed securities will tend to rise when
interest rates fall and to fall when interest rates rise. The
value of mortgage-backed securities may also be affected by changes
in the market's perception of the creditworthiness of the entity
issuing or guaranteeing them or by changes in government
regulations and tax policies. Because of these factors, the Fund's
share value and yield are not guaranteed and will fluctuate, and
there can be no assurance that the Fund's objective will be
achieved. The magnitude of these fluctuations generally will be
greater when the average maturity of the Fund's portfolio
securities is longer. Because the yields on U.S. Government
Securities are generally lower than on corporate debt securities,
the Fund may attempt to increase the income it can earn from U.S.
Government Securities by writing covered call options against them,
when market conditions are appropriate. Writing covered call
options is explained below, under "Other Investment Techniques and
Strategies."
-- Money Market Securities. As stated in the Prospectus, the
Fund typically invests a part of its assets in money market
securities, and may invest up to 100% of its total assets in money
market securities for temporary defensive purposes. Money market
securities in which the Fund may invest include the following:
- Time Deposits and Variable Rate Notes. The Fund may invest
in fixed time deposits, whether or not subject to withdrawal
penalties. However, investment in such deposits which are subject
to withdrawal penalties, other than overnight deposits, are subject
to the 10% limit on illiquid investments set forth in the
Prospectus for the Fund.
The commercial paper obligations which the Fund may buy are
unsecured and may include variable rate notes. The nature and
terms of a variable rate note (i.e., a "Master Note") permit the
Fund to invest fluctuating amounts at varying rates of interest
pursuant to a direct arrangement between the Fund as lender, and
the issuer, as borrower. It permits daily changes in the amounts
borrowed. The Fund has the right at any time to increase, up to
the full amount stated in the note agreement, or to decrease the
amount outstanding under the note. The issuer may prepay at any
time and without penalty any part or the full amount of the note.
The note may or may not be backed by one or more bank letters of
credit. Because these notes are direct lending arrangements
between the Fund and the issuer, it is not generally contemplated
that they will be traded; moreover, there is currently no secondary
market for them. Except as specifically provided in the Prospectus
for each Fund, there is no limitation on the type of issuer from
whom these notes will be purchased. However, in connection with
such purchase and on an ongoing basis, OpCap Advisors (the
"Sub-Adviser") will consider the earning power, cash flow and other
liquidity ratios of the issuer, and its ability to pay principal
and interest on demand, including a situation in which all holders
of such notes made demand simultaneously. The Fund will not invest
more than 5% of its total assets in variable rate notes. Variable
rate notes are subject to the Fund's investment restriction on
illiquid securities unless such notes can be put back to the issuer
on demand within seven days.
- Insured Bank Obligations. The Federal Deposit Insurance
Corporation ("FDIC") insures the deposits of federally insured
banks and savings and loan associations (collectively referred to
as "banks") up to $100,000. The Fund may, within the limits set
forth in the Prospectus, purchase bank obligations which are fully
insured as to principal by the FDIC. Currently, to remain fully
insured as to principal, these investments must be limited to
$100,000 per bank. If the principal amount and accrued interest
together exceed $100,000, the excess principal and accrued interest
will not be insured. Insured bank obligations may have limited
marketability. Unless the Board of Trustees determines that a
readily available market exists for such obligations, the Fund will
treat such obligations as subject to the 10% limit for illiquid
investments set forth in the Prospectus for the Fund unless such
obligations are payable at principal amount plus accrued interest
on demand or within seven days after demand.
-- Convertible Securities. The Fund may invest in fixed-
income securities which are convertible into common stock.
Convertible securities rank senior to common stocks in a
corporation's capital structure and, therefore, entail less risk
than the corporation's common stock. The value of a convertible
security is a function of its "investment value" (its value as if
it did not have a conversion privilege), and its "conversion value"
(the security's worth if it were to be exchanged for the underlying
security, at market value, pursuant to its conversion privilege).
To the extent that a convertible security's "investment value"
is greater than its "conversion value," its price will be primarily
a reflection of such "investment value" and its price will be
likely to increase when interest rates fall and decrease when
interest rates rise, as with a fixed-income security. The credit
standing of the issuer and other factors may also have an effect on
the convertible security value. If the "conversion value" exceeds
the investment value, the price of the convertible security will
rise above its "investment value" and, in addition, will sell at
some premium over its "conversion value." This premium represents
the price investors are willing to pay for the privilege of
purchasing a fixed-income security with a possibility of capital
appreciation due to the conversion privilege. At such times the
price of the convertible security will tend to fluctuate directly
with the price of the underlying equity security. Convertible
securities may be purchased by the Fund at varying price levels
above their "investment values" and/or their "conversion values" in
keeping with the Fund's objectives.
-- Investment Risks of Fixed-Income Securities. All fixed-
income securities are subject to two types of risks: credit risk
and interest rate risk. Credit risk relates to the ability of the
issuer to meet interest or principal payments on a security as they
become due. Generally, higher yielding lower-grade bonds are
subject to credit risk to a greater extent than lower yielding,
investment grade bonds. Interest rate risk refers to the
fluctuations in value of fixed-income securities resulting solely
from the inverse relationship between price and yield of
outstanding fixed-income securities. An increase in prevailing
interest rates will generally reduce the market value of already-
issued fixed-income investments, and a decline in interest rates
will tend to increase their value. In addition, debt securities
with longer maturities, which tend to produce higher yields, are
subject to potentially greater changes in their prices from changes
in interest rates than obligations with shorter maturities.
Fluctuations in the market value of fixed-income securities after
the Fund buys them will not affect the interest payable on those
securities, nor the cash income from such securities. However,
those price fluctuations will be reflected in the valuations of
these securities and therefore the Fund's net asset values.
The Fund may invest in securities rated as low as "Caa" by
Moody's or "CCC" by Standard and Poor's, although it does not
intend to do so. The Manager will not rely solely on the ratings
assigned by rating services and may invest, without limit, in
unrated securities which offer, in the opinion of the Manager,
yields and risks comparable to those of rated securities in which
the Fund may invest.
Some of the principal risks of lower-grade, high yield
securities include: (i) limited liquidity and secondary market
support, (ii) substantial market price volatility resulting from
changes in prevailing interest rates, (iii) subordination of the
holder's claims to the prior claims of banks and other senior
lenders in bankruptcy proceedings, (iv) the operation of mandatory
sinking fund or call/redemption provisions during periods of
declining interest rates, whereby the holder might receive
redemption proceeds at times when only lower-yielding portfolio
securities are available for investment, (v) the possibility that
earnings of the issuer may be insufficient to meet its debt
service, and (vi) the issuer's low creditworthiness and potential
for insolvency during periods of rising interest rates and economic
downturn. Some high yield bonds pay interest in kind rather than
in cash.
As a result of the limited liquidity of high yield securities,
their prices have at times experienced significant and rapid
decline when a significant number of holders of high yield
securities simultaneously decided to sell them. A decline is also
likely in the high yield bond market during an economic downturn.
An economic downturn or an increase in interest rates could
severely disrupt the market for high yield securities and adversely
affect the value of outstanding securities and the ability of the
issuers to repay principal and interest. In addition, in recent
years there have been several Congressional attempts to limit the
use or limit tax and other advantages of high yield bonds. If
enacted, such proposals could adversely affect the value of these
securities and consequently the Fund's net asset value per share.
For example, federally insured savings and loan associations have
been required to divest their investments in high yield securities.
-- Rights and Warrants. Warrants basically are options to
purchase equity securities at specific prices valid for a specific
period of time. Their prices do not necessarily move parallel to
the prices of the underlying securities. Rights are similar to
warrants, but normally have a short duration and are distributed
directly by the issuer to its shareholders. Rights and warrants
have no voting rights, receive no dividends and have no rights with
respect to the assets of the issuer.
Other Investment Techniques and Strategies.
-- When-Issued Securities. The Fund may take advantage of
offerings of eligible portfolio securities on a "when-issued" basis
where delivery of and payment for such securities takes place
sometime after the transaction date on terms established on such
date. Normally, settlement on U.S. Government securities takes
place within ten days. The Fund only will make when-issued
commitments on eligible securities with the intention of actually
acquiring the securities. If the Fund chooses to dispose of the
right to acquire a when-issued security prior to its acquisition,
it could, as with the disposition of any other portfolio
obligation, incur a gain or loss due to market fluctuation. When-
issued commitments will not be made if, as a result, more than 15%
of the net assets of the Fund would be so committed.
-- Repurchase Agreements. The Fund may acquire securities
subject to repurchase agreements for liquidity purposes to meet
anticipated redemptions, or pending the investment of the proceeds
from sales of Fund shares, or pending the settlement of purchases
of portfolio securities.
In a repurchase transaction, the Fund acquires a security
from, and simultaneously agrees to resell it to, an approved
vendor. An "approved vendor" is a U.S. commercial bank or the U.S.
branch of a foreign bank or a broker-dealer that has been
designated a primary dealer in government securities, that must
meet credit requirements set by the Trust's Board of Trustees from
time to time. The resale price exceeds the purchase price by an
amount that reflects an agreed-upon interest rate effective for the
period during which the repurchase agreement is in effect. The
majority of these transactions run from day to day, and delivery
pursuant to the resale typically will occur within one to five days
of the purchase. Repurchase agreements are considered "loans"
under the Investment Company Act, collateralized by the underlying
security. The Fund's repurchase agreements require that at all
times while the repurchase agreement is in effect, the value of the
collateral must equal or exceed the repurchase price to fully
collateralize the repayment obligation. Additionally, the Manager
will impose creditworthiness requirements to confirm that the
vendor is financially sound and will continuously monitor the
collateral's value.
-- Illiquid and Restricted Securities. To enable the Fund to
sell restricted securities not registered under the Securities Act
of 1933, the Fund may have to cause those securities to be
registered. The expenses of registration of restricted securities
may be negotiated by the Fund with the issuer at the time such
securities are purchased by the Fund, if such registration is
required before such securities may be sold publicly. When
registration must be arranged because the Fund wishes to sell the
security, a considerable period may elapse between the time the
decision is made to sell the securities and the time the Fund would
be permitted to sell them. The Fund would bear the risks of any
downward price fluctuation during that period. The Fund may also
acquire, through private placements, securities having contractual
restrictions on their resale, which might limit the Fund's ability
to dispose of such securities and might lower the amount realizable
upon the sale of such securities.
The Fund has percentage limitations that apply to purchases of
restricted securities, as stated in the Prospectus. Those
percentage restrictions do not limit purchases of restricted
securities that are eligible for sale to qualified institutional
purchasers pursuant to Rule 144A under the Securities Act of 1933,
provided that those securities have been determined to be liquid by
the Board of Trustees of the Trust or by the Sub-Advisor under
Board-approved guidelines. Those guidelines take into account the
trading activity for such securities and the availability of
reliable pricing information, among other factors. If there is a
lack of trading interest in a particular Rule 144A security, the
Fund's holding of that security may be deemed to be illiquid.
-- Loans of Portfolio Securities. The Fund may lend its
portfolio securities subject to the restrictions stated in the
Prospectus. Under applicable regulatory requirements (which are
subject to change), the loan collateral on each business day must
at least equal the value of the loaned securities and must consist
of cash, bank letters of credit or securities of the U.S.
Government (or its agencies or instrumentalities). To be
acceptable as collateral, letters of credit must obligate a bank to
pay amounts demanded by the Fund if the demand meets the terms of
the letter. Such terms and the issuing bank must be satisfactory
to the Fund. When it lends securities, the Fund receives amounts
equal to the dividends or interest on loaned securities and also
receives one or more of (a) negotiated loan fees, (b) interest on
securities used as collateral, and (c) interest on short-term debt
securities purchased with such loan collateral. Either type of
interest may be shared with the borrower. The Fund may also pay
reasonable finder's, custodian and administrative fees. The terms
of the Fund's loans must meet applicable tests under the Internal
Revenue Code and must permit the Fund to reacquire loaned
securities on five days' notice or in time to vote on any important
matter.
-- Hedging With Options and Futures Contracts. The Fund may
employ one or more types of Hedging Instruments for the purposes
described in the Prospectus. When hedging to attempt to protect
against declines in the market value of the Fund's portfolio, or to
permit the Fund to retain unrealized gains in the value of
portfolio securities which have appreciated, or to facilitate
selling securities for investment reasons, the Fund may: (i) sell
Stock Index Futures, (ii) buy puts, or (iii) write covered calls on
securities held by it or on Stock Index Futures (as described in
the Prospectus). When hedging to establish a position in the
equity securities markets as a temporary substitute for the
purchase of individual equity securities the Fund may: (i) buy
Stock Index Futures, or (ii) buy calls on Stock Index Futures or
securities. Normally, the Fund would then purchase the equity
securities and terminate the hedging portion.
The Fund's strategy of hedging with Futures and options on
Futures will be incidental to the Fund's investment activities in
the underlying cash market. In the future, the Fund may employ
hedging instruments and strategies that are not presently
contemplated but which may be subsequently developed, to the extent
such investment methods are consistent with the Fund's investment
objective, and are legally permissible and disclosed in the
Prospectus. Additional information about the hedging instruments
the Fund may use is provided below.
- Writing Call Options. As described in the Prospectus, the
Fund may write covered calls. When the Fund writes a call on an
investment, it receives a premium and agrees to sell the callable
investment to a purchaser of a corresponding call during the call
period (usually not more than 9 months) at a fixed exercise price
(which may differ from the market price of the underlying
investment) regardless of market price changes during the call
period. To terminate its obligation on a call it has written, the
Fund may purchase a corresponding call in a "closing purchase
transaction." A profit or loss will be realized, depending upon
whether the net of the amount of option transaction costs and the
premium received on the call the Fund has written is more or less
than the price of the call the Fund subsequently purchased. A
profit may also be realized if the call lapses unexercised because
the Fund retains the underlying investment and the premium
received. Those profits are considered short-term capital gains
for Federal income tax purposes, as are premiums on lapsed calls,
and when distributed by the Fund are taxable as ordinary income.
If the Fund could not effect a closing purchase transaction due to
the lack of a market, it would have to hold the callable investment
until the call lapsed or was exercised.
The Fund may also write calls on Futures without owning a
futures contract or deliverable securities, provided that at the
time the call is written, the Fund covers the call by segregating
in escrow an equivalent dollar value of deliverable securities or
liquid assets. The Fund will segregate additional liquid assets if
the value of the escrowed assets drops below 100% of the current
value of the Future. In no circumstances would an exercise notice
as to a Future put the Fund in a short futures position.
- Writing Put Options. A put option on securities gives the
purchaser the right to sell, and the writer the obligation to buy,
the underlying investment at the exercise price during the option
period. Writing a put covered by segregated liquid assets equal to
the exercise price of the put has the same economic effect to the
Fund as writing a covered call. The premium the Fund receives from
writing a put option represents a profit, as long as the price of
the underlying investment remains above the exercise price.
However, the Fund has also assumed the obligation during the option
period to buy the underlying investment from the buyer of the put
at the exercise price, even though the value of the investment may
fall below the exercise price. If the put expires unexercised, the
Fund (as the writer of the put) realizes a gain in the amount of
the premium less transaction costs. If the put is exercised, the
Fund must fulfill its obligation to purchase the underlying
investment at the exercise price, which will usually exceed the
market value of the investment at that time. In that case, the
Fund may incur a loss, equal to the sum of the sale price of the
underlying investment and the premium received minus the sum of the
exercise price and any transaction costs incurred.
When writing put options on securities or on foreign
currencies, to secure its obligation to pay for the underlying
security, the Fund will deposit in escrow liquid assets with a
value equal to or greater than the exercise price of the underlying
securities. The Fund therefore forgoes the opportunity of
investing the segregated assets or writing calls against those
assets. As long as the obligation of the Fund as the put writer
continues, it may be assigned an exercise notice by the exchange or
broker-dealer through whom such option was sold, requiring the Fund
to exchange currency at the specified rate of exchange or to take
delivery of the underlying security against payment of the exercise
price. The Fund may have no control over when it may be required
to purchase the underlying security, since it may be assigned an
exercise notice at any time prior to the termination of its
obligation as the writer of the put. This obligation terminates
upon expiration of the put, or such earlier time at which the Fund
effects a closing purchase transaction by purchasing a put of the
same series as that previously sold. Once the Fund has been
assigned an exercise notice, it is thereafter not allowed to effect
a closing purchase transaction.
The Fund may effect a closing purchase transaction to realize
a profit on an outstanding put option it has written or to prevent
an underlying security from being put. Furthermore, effecting such
a closing purchase transaction will permit the Fund to write
another put option to the extent that the exercise price thereof is
secured by the deposited assets, or to utilize the proceeds from
the sale of such assets for other investments by the Fund. The
Fund will realize a profit or loss from a closing purchase
transaction if the cost of the transaction is less or more than the
premium received from writing the option. As above for writing
covered calls, any and all such profits described herein from
writing puts are considered short-term capital gains for Federal
tax purposes, and when distributed by the Fund, are taxable as
ordinary income.
The Trustees have adopted a non-fundamental policy that the
Fund may write covered call options or write covered put options
with respect to not more than 5% of the value of its net assets.
Similarly, the Fund may only purchase call options and put options
with a value of up to 5% of its net assets.
- Purchasing Puts and Calls. The Fund may purchase calls to
protect against the possibility that the Fund's portfolio will not
participate in an anticipated rise in the securities market. When
the Fund purchases a call (other than in a closing purchase
transaction), it pays a premium and, except as to calls on stock
indices, has the right to buy the underlying investment from a
seller of a corresponding call on the same investment during the
call period at a fixed exercise price. In purchasing a call, the
Fund benefits only if the call is sold at a profit or if, during
the call period, the market price of the underlying investment is
above the sum of the exercise price, transaction costs, and the
premium paid, and the call is exercised. If the call is not
exercised or sold (whether or not at a profit), it will become
worthless at its expiration date and the Fund will lose its premium
payment and the right to purchase the underlying investment. When
the Fund purchases a call on a stock index, it pays a premium, but
settlement is in cash rather than by delivery of the underlying
investment to the Fund.
When the Fund purchases a put, it pays a premium and, except
as to puts on stock indices, has the right to sell the underlying
investment to a seller of a corresponding put on the same
investment during the put period at a fixed exercise price. Buying
a put on an investment the Fund owns (a "protective put") enables
the Fund to attempt to protect itself during the put period against
a decline in the value of the underlying investment below the
exercise price by selling the underlying investment at the exercise
price to a seller of a corresponding put. If the market price of
the underlying investment is equal to or above the exercise price
and as a result the put is not exercised or resold, the put will
become worthless at its expiration and the Fund will lose the
premium payment and the right to sell the underlying investment.
However, the put may be sold prior to expiration (whether or not at
a profit).
Puts and calls on broadly-based stock indices or Stock Index
Futures are similar to puts and calls on securities or futures
contracts except that all settlements are in cash and gain or loss
depends on changes in the index in question (and thus on price
movements in the stock market generally) rather than on price
movements of individual securities or futures contracts. When the
Fund buys a call on a stock index or Stock Index Future, it pays a
premium. If the Fund exercises the call during the call period, a
seller of a corresponding call on the same investment will pay the
Fund an amount of cash to settle the call if the closing level of
the stock index or Future upon which the call is based is greater
than the exercise price of the call. That cash payment is equal to
the difference between the closing price of the call and the
exercise price of the call times a specified multiple (the
"multiplier") which determines the total dollar value for each
point of difference. When the Fund buys a put on a stock index or
Stock Index Future, it pays a premium and has the right during the
put period to require a seller of a corresponding put, upon the
Fund's exercise of its put, to deliver cash to the Fund to settle
the put if the closing level of the stock index or Stock Index
Future upon which the put is based is less than the exercise price
of the put. That cash payment is determined by the multiplier, in
the same manner as described above as to calls.
When the Fund purchases a put on a stock index, or on a Stock
Index Future not owned by it, the put protects the Fund to the
extent that the index moves in a similar pattern to the securities
the Fund holds. The Fund can either resell the put or, in the case
of a put on a Stock Index Future, buy the underlying investment and
sell it at the exercise price. The resale price of the put will
vary inversely with the price of the underlying investment. If the
market price of the underlying investment is above the exercise
price, and as a result the put is not exercised, the put will
become worthless on the expiration date. In the event of a decline
in price of the underlying investment, the Fund could exercise or
sell the put at a profit to attempt to offset some or all of its
loss on its portfolio securities.
The Fund's option activities may affect its portfolio turnover
rate and brokerage commissions. The exercise of calls written by
the Fund may cause the Fund to sell related portfolio securities,
thus increasing its turnover rate. The exercise by the Fund of
puts on securities will cause the sale of underlying investments,
increasing portfolio turnover. Although the decision whether to
exercise a put it holds is within the Fund's control, holding a put
might cause the Fund to sell the related investments for reasons
that would not exist in the absence of the put. The Fund will pay
a brokerage commission each time it buys or sells a call, put or an
underlying investment in connection with the exercise of a put or
call. Those commissions may be higher than the commissions for
direct purchases or sales of the underlying investments.
Premiums paid for options are small in relation to the market
value of the underlying investments and, consequently, put and call
options offer large amounts of leverage. The leverage offered by
trading in options could result in the Fund's net asset value being
more sensitive to changes in the value of the underlying
investments.
- Stock Index Futures. As described in the Prospectus, the
Fund may invest in Stock Index Futures only if they relate to
broadly-based stock indices. A stock index is considered to be
broadly-based if it includes stocks that are not limited to issuers
in any particular industry or group of industries. A stock index
assigns relative values to the common stocks included in the index
and fluctuates with the changes in the market value of those
stocks. Stock indices cannot be purchased or sold directly.
Stock index futures are contracts based on the future value of
the basket of securities that comprise the underlying stock index.
The contracts obligate the seller to deliver, and the purchaser to
take, cash to settle the futures transaction or to enter into an
offsetting contract. No physical delivery of the securities
underlying the index is made on settling the futures obligation. No
monetary amount is paid or received by the Fund on the purchase or
sale of a Stock Index Future. Upon entering into a Futures
transaction, the Fund will be required to deposit an initial margin
payment, in cash or U.S. Treasury bills, with the futures
commission merchant (the "futures broker"). Initial margin
payments will be deposited with the Fund's Custodian in an account
registered in the futures broker's name; however, the futures
broker can gain access to that account only under certain specified
conditions. As the Future is marked to market (that is, its value
on the Fund's books is changed) to reflect changes in its market
value, subsequent margin payments, called variation margin, will be
paid to or by the futures broker on a daily basis.
At any time prior to the expiration of the Future, the Fund
may elect to close out its position by taking an opposite position,
at which time a final determination of variation margin is made and
additional cash is required to be paid by or released to the Fund.
Any gain or loss is then realized by the Fund on the Future for tax
purposes. Although Stock Index Futures by their terms call for
settlement by the delivery of cash, in most cases the settlement
obligation is fulfilled without such delivery by entering into an
offsetting transaction. All futures transactions are effected
through a clearing house associated with the exchange on which the
contracts are traded.
- Regulatory Aspects of Hedging Instruments. The Fund is
required to operate within certain guidelines and restrictions with
respect to its use of futures and options thereon as established by
the Commodities Futures Trading Commission ("CFTC"). In
particular, the Fund is excluded from registration as a "commodity
pool operator" if it complies with the requirements of Rule 4.5
adopted by the CFTC. Under this Rule, the Fund is not limited
regarding the percentage of its assets committed to futures margins
and related options premiums subject to a hedge position. However,
aggregate initial futures margins and related options premiums are
limited to 5% or less of the Fund's net asset value for other than
bona fide hedging strategies employed by the Fund within the
meaning and intent of applicable provisions of the Commodity
Exchange Act and CFTC regulations thereunder.
Transactions in options by the Fund are subject to limitations
established by option exchanges governing the maximum number of
options that may be written or held by a single investor or group
of investors acting in concert, regardless of whether the options
were written or purchased on the same or different exchanges or are
held in one or more accounts or through one or more different
exchanges or through one or more brokers. Thus the number of
options which the Fund may write or hold may be affected by options
written or held by other entities, including other investment
companies having the same adviser as the Fund (or an adviser that
is an affiliate of the Fund's adviser). The exchanges also impose
position limits on Futures transactions. An exchange may order the
liquidation of positions found to be in violation of those limits
and may impose certain other sanctions.
Due to requirements under the Investment Company Act, when the
Fund purchases a Stock Index Future, the Fund will maintain, in a
segregated account or accounts with its custodian, cash or readily-
marketable, short-term (maturing in one year or less) debt
instruments in an amount equal to the market value of the
securities underlying such Future, less the margin deposit
applicable to it.
- Additional Information About Hedging Instruments and Their
Use. The Fund's Custodian, or a securities depository acting for
the Custodian, will act as the Fund's escrow agent, through the
facilities of the Options Clearing Corporation ("OCC"), as to the
investments on which the Fund has written options traded on
exchanges or as to other acceptable escrow securities, so that no
margin will be required for such transactions. OCC will release
the securities on the expiration of the option or upon the Fund's
entering into a closing transaction. An option position may be
closed out only on a market which provides secondary trading for
options of the same series, and there is no assurance that a liquid
secondary market will exist for any particular option.
When the Fund writes an over-the-counter("OTC") option, it
will enter into an arrangement with a primary U.S. Government
securities dealer, which would establish a formula price at which
the Fund would have the absolute right to repurchase that OTC
option. That formula price would generally be based on a multiple
of the premium received for the option, plus the amount by which
the option is exercisable below the market price of the underlying
security (that is, the extent to which the option is "in-the-
money"). When the Fund writes an OTC option, it will treat as
illiquid (for purposes of the limit on its assets that may be
invested in the illiquid securities, stated in the Prospectus) the
mark-to-market value of any OTC option held by it. The Securities
and Exchange Commission ("SEC") is evaluating whether OTC options
should be considered liquid securities, and the procedure described
above could be affected by the outcome of that evaluation.
The Fund's option activities may affect its turnover rate and
brokerage commissions. The exercise by the Fund of puts on
securities will cause the sale of related investments, increasing
portfolio turnover. Although such exercise is within the Fund's
control, holding a put might cause the Fund to sell the related
investments for reasons which would not exist in the absence of the
put. The Fund will pay a brokerage commission each time it buys a
put or call, sells a call, or buys or sells an underlying
investment in connection with the exercise of a put or call. Such
commissions may be higher than those which would apply to direct
purchases or sales of such underlying investments. Premiums paid
for options are small in relation to the market value of the
related investments, and consequently, put and call options offer
large amounts of leverage. The leverage offered by trading options
could result in the Fund's net asset value being more sensitive to
changes in the value of the underlying investments.
- Tax Aspects of Covered Calls and Hedging Instruments. The
Fund intends to qualify as a "regulated investment company" under
the Internal Revenue Code (although there is no guarantee that it
will qualify). That qualification enables the Fund to "pass
through" its income and realized capital gains to shareholders
without having to pay tax on them. This avoids a "double tax" on
that income and capital gains, since shareholders normally will be
taxed on the dividends and capital gains they receive from the Fund
(unless the Fund's shares are held in a retirement account or the
shareholder is otherwise exempt from tax). One of the tests for
the Fund's qualification as a regulated investment company is that
less than 30% of its gross income must be derived from gains
realized on the sale of securities held for less than three months.
To comply with this 30% cap, the Fund will limit the extent to
which it engages in the following activities, but will not be
precluded from them: (i) selling investments, including Stock Index
Futures, held for less than three months, whether or not they were
purchased on the exercise of a call held by the Fund; (ii)
purchasing options which expire in less than three months; (iii)
effecting closing transactions with respect to calls or puts
written or purchased less than three months previously; (iv)
exercising puts or calls held by the Fund for less than three
months; or (v) writing calls on investments held less than three
months.
Certain foreign currency exchange contracts ("Forward
Contracts") in which the Fund may invest are treated as "section
1256 contracts." Gains or losses relating to section 1256
contracts generally are characterized under the Internal Revenue
Code as 60% long-term and 40% short-term capital gains or losses.
However, foreign currency gains or losses arising from certain
section 1256 contracts (including Forward Contracts) generally are
treated as ordinary income or loss. In addition, section 1256
contracts held by the Fund at the end of each taxable year are
"marked-to-market" with the result that unrealized gains or losses
are treated as though they were realized. These contracts also may
be marked-to-market for purposes of the excise tax applicable to
investment company distributions and for other purposes under rules
prescribed pursuant to the Internal Revenue Code. An election can
be made by the Fund to exempt these transactions from this marked-
to-market treatment.
Certain Forward Contracts entered into by the Fund may result
in "straddles" for Federal income tax purposes. The straddle rules
may affect the character of gains (or losses) realized by the Fund
on straddle positions. Generally, a loss sustained on the
disposition of a position making up a straddle is allowed only to
the extent such loss exceeds any unrecognized gain in the
offsetting positions making up the straddle. Disallowed loss is
generally allowed at the point where there is no unrecognized gain
in the offsetting positions making up the straddle, or the
offsetting position is disposed of.
Under the Internal Revenue Code, gains or losses attributable
to fluctuations in exchange rates that occur between the time the
Fund accrues interest or other receivables or accrues expenses or
other liabilities denominated in a foreign currency and the time
the Fund actually collects such receivables or pays such
liabilities generally are treated as ordinary income or ordinary
loss. Similarly, on disposition of debt securities denominated in
a foreign currency and on disposition foreign currency forward
contracts, gains or losses attributable to fluctuations in the
value of a foreign currency between the date of acquisition of the
security or contract and the date of the disposition also are
treated as an ordinary gain or loss. Currency gains and losses are
offset against market gains and losses on each trade before
determining a net "section 988" gain or loss under the Internal
Revenue Code, which may ultimately increase or decrease the amount
of the Fund's investment company income available for distribution
to its shareholders.
- Additional Risk Factors in Hedging. In addition to the
risks with respect to options discussed in the Prospectus and
above, there is a risk in using short hedging by (i) selling Stock
Index Futures or (ii) purchasing puts on stock indices or Stock
Index Futures to attempt to protect against declines in the value
of the Fund's equity securities. The risk is that the prices of
Stock Index Futures will correlate imperfectly with the behavior of
the cash (i.e., market value) prices of the Fund's equity
securities. The ordinary spreads between prices in the cash and
futures markets are subject to distortions, due to differences in
the natures of those markets. First, all participants in the
futures markets are subject to margin deposit and maintenance
requirements. Rather than meeting additional margin deposit
requirements, investors may close out futures contracts through
offsetting transactions which could distort the normal relationship
between the cash and futures markets. Second, the liquidity of the
futures markets depends on participants entering into offsetting
transactions rather than making or taking delivery. To the extent
participants decide to make or take delivery, liquidity in the
futures markets could be reduced, thus producing distortion.
Third, from the point of view of speculators, the deposit
requirements in the futures markets are less onerous than margin
requirements in the securities markets. Therefore, increased
participation by speculators in the futures markets may cause
temporary price distortions.
The risk of imperfect correlation increases as the composition
of the Fund's portfolio diverges from the securities included in
the applicable index. To compensate for the imperfect correlation
of movements in the price of the equity securities being hedged and
movements in the price of the hedging instruments, the Fund may use
hedging instruments in a greater dollar amount than the dollar
amount of equity securities being hedged if the historical
volatility of the prices of the equity securities being hedged is
more than the historical volatility of the applicable index. It is
also possible that if the Fund has used hedging instruments in a
short hedge, the market may advance and the value of equity
securities held in the Fund's portfolio may decline. If that
occurred, the Fund would lose money on the hedging instruments and
also experience a decline in value in its portfolio securities.
However, while this could occur for a very brief period or to a
very small degree, over time the value of a diversified portfolio
of equity securities will tend to move in the same direction as the
indices upon which the hedging instruments are based.
If the Fund uses hedging instruments to establish a position
in the equities markets as a temporary substitute for the purchase
of individual equity securities (long hedging) by buying Stock
Index Futures and/or calls on such Futures, on securities or on
stock indices, it is possible that the market may decline. If the
Fund then concludes not to invest in equity securities at that time
because of concerns as to a possible further market decline or for
other reasons, the Fund will realize a loss on the hedging
instruments that is not offset by a reduction in the price of the
equity securities purchased.
Other Investment Restrictions
The Fund's most significant investment restrictions are set
forth in the Prospectus. There are additional investment
restrictions that the Fund must follow that are also fundamental
policies. Fundamental policies and the Fund's investment objective
cannot be changed without the vote of a "majority" of the Fund's
outstanding voting securities. Under the Investment Company Act of
1940, such a majority vote is defined as the vote of the holders of
the lesser of: (i) 67% or more of the shares present or represented
by proxy at a shareholder meeting, if the holders of more than 50%
of the outstanding shares are present or represented by proxy, or
(ii) more than 50% of the outstanding shares.
Under these additional restrictions, the Fund cannot:
- invest in physical commodities or physical commodity
contracts or speculate in financial commodity contracts, but the
Fund is authorized to purchase and sell financial futures contracts
and options on such futures contracts exclusively for hedging and
other non-speculative purposes to the extent specified in the
Prospectus;
- invest in real estate or real estate limited partnerships
(direct participation programs); however, the Fund may purchase
securities of issuers which engage in real estate operations and
securities which are secured by real estate or interests therein;
- purchase securities on margin (except for such short-term
loans as are necessary for the clearance of purchases of portfolio
securities) or make short sales of securities except "against the
box" (collateral arrangements in connection with transactions in
futures and options are not deemed to be margin transactions);
- underwrite securities of other companies except in so far as
the Fund may be deemed to be an underwriter under the Securities
Act of 1933 in disposing of a security ;
- invest in securities of other investment companies except in
connection with a merger, consolidation, reorganization or
acquisition of assets;
- invest in interests in oil, gas or other mineral exploration
or development programs or leases;
- purchase warrants if as a result the Fund would then have
either more than 5% of its total assets (determined at the time of
investment) invested in warrants or more than 2% of its total
assets invested in warrants not listed on the New York or American
Stock Exchange;
- invest in securities of any issuer if, to the knowledge of
the Trust, any officer or trustee of the Trust or any officer or
director of the Manager or Sub-Adviser owns more than 1/2 of 1% of
the outstanding securities of such issuer, and such officers,
trustees and directors who own more than 1/2 of l% own in the
aggregate more than 5% of the outstanding securities of such
issuer;
- pledge its assets or assign or otherwise encumber its assets
in excess of 10% of its net assets (taken at market value at the
time of pledging) and then only to secure borrowings effected
within the limitations set forth in the Prospectus;
- invest for the purpose of exercising control or management
of another company;
- issue senior securities as defined in the 1940 Act except
insofar as the Fund may be deemed to have issued a senior security
by reason of: (a) entering into any repurchase agreement; (b)
borrowing money in accordance with restrictions described above; or
(c) lending portfolio securities; or
- make loans to any person or individual except that portfolio
securities may be loaned by the Fund within the limitations set
forth in the Prospectus.
For purposes of the Fund's policy not to concentrate its
assets described in the Prospectus, the Fund has adopted, as a
matter of non-fundamental policy, the corporate industry
classifications set forth in Appendix A to this Statement of
Additional Information.
How the Fund is Managed
Organization and History. Oppenheimer Quest Growth & Income Value
Fund (referred to as the "Fund") is one of four portfolios of
Oppenheimer Quest for Value Funds (the "Trust"), a Massachusetts
business trust. This Statement of Additional Information may be
used with the Fund's Prospectus only to offer shares of the Fund.
The Trustees are authorized to create new series and classes
of series. The Trustees may reclassify unissued shares of the
Trust or its series or classes into additional series or classes of
shares. The Trustees may also divide or combine the shares of a
class into a greater or lesser number of shares without thereby
changing the proportionate beneficial interest of a shareholder in
the Fund. Shares do not have cumulative voting rights or
preemptive or subscription rights. Shares may be voted in person
or by proxy.
As a Massachusetts business trust, the Fund is not required to
hold, and does not plan to hold, regular annual meetings of
shareholders. The Fund will hold meetings when required to do so by
the Investment Company Act or other applicable law, or when a
shareholder meeting is called by the Trustees or upon proper
request of the shareholders. Shareholders have the right, upon the
declaration in writing or vote of two-thirds 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 of 10% of its outstanding
shares. In addition, if the Trustees receive a request from at
least 10 shareholders (who have been shareholders for at least six
months) holding shares of the Fund valued at $25,000 or more or
holding at least 1% of the Fund's outstanding shares, whichever is
less, stating that they wish to communicate with other shareholders
to request a meeting to remove a Trustee, the Trustees will then
either make the Fund's shareholder list available to the applicants
or mail their communication to all other shareholders at the
applicants' expense, or the Trustees may take such other action as
set forth under Section 16(c) of the Investment Company Act.
The Fund's Declaration of Trust contains an express disclaimer
of shareholder or Trustee liability for the Fund's obligations, and
provides for indemnification and reimbursement of expenses out of
its property for any shareholder held personally liable for its
obligations. The Declaration of Trust also provides that the Fund
shall, upon request, assume the defense of any claim made against
any shareholder for any act or obligation of the Fund and satisfy
any judgment thereon. Thus, while Massachusetts law permits a
shareholder of a business trust (such as the Fund) to be held
personally liable as a "partner" under certain circumstances, the
risk of a Fund shareholder incurring financial loss on account of
shareholder liability is limited to the relatively remote
circumstances in which the Fund would be unable to meet its
obligations described above. Any person doing business with the
Trust, and any shareholder of the Trust, agrees under the Trust's
Declaration of Trust to look solely to the assets of the Trust for
satisfaction of any claim or demand which may arise out of any
dealings with the Trust, and the Trustees shall have no personal
liability to any such person, to the extent permitted by law.
Trustees and Officers of the Trust. The Trust's Trustees and
officers, and the Fund's portfolio manager (who is not an officer),
are listed below, together with principal occupations and business
affiliations during the past five years. Each Trustee is also a
Trustee of Oppenheimer Quest Small Cap Value Fund, Oppenheimer
Quest Opportunity Value Fund, Oppenheimer Quest Officers Fund,
Oppenheimer Quest Value Fund, Inc., Oppenheimer Quest Global Value
Fund, Inc. (collectively, the "Oppenheimer Quest Funds"), Rochester
Portfolio Series - Limited-Term New York Municipal Fund, Rochester
Fund Series - The Bond Fund For Growth and Rochester Fund
Municipals (collectively, the "Rochester Funds"). The address of
each is Two World Trade Center, New York, New York 10048, except as
noted. As of January 25, 1996, the trustees and officers of the
Trust as a group owned less than 1% of the outstanding shares of
each class of the Fund.
Bridget A. Macaskill, Chairman of the Board of Trustees and
President* Age: 47.
President, Chief Executive Officer and Chief Operating Officer of
OppenheimerFunds, Inc. (the "Manager"); prior thereto, Executive
Vice President and Chief Operating Officer of the Manager. Vice
President and a Director of Oppenheimer Acquisition Corp., Director
of Oppenheimer Partnership Holdings, Inc., Chairman and a Director
of Shareholder Services, Inc., Director of Main Street Advisers,
Inc., and Director of HarbourView Asset Management Corporation, all
of which are subsidiaries of the Manager; President and a Trustee
of the Oppenheimer funds.
- ------------------
*A Trustee who is an "interested person" as defined in the
Investment Company Act.
Paul Y. Clinton, Trustee; Age: 64
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 Oppenheimer Quest Value Fund, Inc., Oppenheimer
Quest Global Value Fund, Inc., and Quest Cash Reserves, Inc. and
Trustee of Quest For Value Accumulation Trust, 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, Trustee; Age: 62
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., Oppenheimer Quest Value
Fund, Inc. and Oppenheimer Quest Global Value Fund, Inc. and
Trustee of Quest for Value Accumulation Trust, all of which are
open-end investment companies; former President of Boston Company
Institutional Investors; Trustee of Hawaiian Tax-Free Trust and Tax
Free Trust of Arizona, tax-exempt bond funds; Director of several
privately owned corporations; former Director of Financial Analysts
Federation.
Lacy B. Herrmann, Trustee; Age: 66
380 Madison Avenue, Suite 2300, New York, New York 10017
President and Chairman of the Board of Aquila Management
Corporation, the sponsoring organization and Administrator and/or
Sub-Adviser to the following open-end investment companies, and
Chairman of the Board of Trustees and President of each: Churchill
Cash Reserves Trust, Short Term Asset Reserves, Pacific Capital
Cash Assets Trust, Pacific Capital U.S. Treasuries Cash Assets
Trust, Pacific Capital Tax-Free Cash Assets Trust, Prime Cash Fund,
Narragansett Insured Tax-Free Income Fund, Tax-Free Fund For Utah,
Churchill Tax-Free Fund of Kentucky, Tax-Free Fund of Colorado,
Tax-Free Trust of Oregon, Tax-Free Trust of Arizona, Hawaiian Tax-
Free Trust, and Aquila Rocky Mountain Equity Fund; Vice President,
Director, Secretary, and formerly Treasurer of Aquila Distributors,
Inc., distributor of the above funds; President and Chairman of the
Board of Trustees of Capital Cash Management Trust ("CCMT"), and an
Officer and Trustee/Director of its predecessors; President and
Director of STCM Management Company, Inc., sponsor and adviser to
CCMT; Chairman, President and a Director of InCap Management
Corporation, formerly sub-adviser and administrator of Prime Cash
Fund and Short Term Asset Reserves; Director or Trustee of Quest
Cash Reserves, Inc., Oppenheimer Quest Global Value Fund, Inc. and
Oppenheimer Quest Value Fund, Inc. and Trustee of Quest for Value
Accumulation Trust and The Saratoga Advantage Trust, each of which
is an open-end investment company; Trustee of Brown University.
George Loft, Trustee; Age: 80
51 Herrick Road, Sharon, Connecticut 06069
Private Investor; Director of Quest Cash Reserves, Inc.,
Oppenheimer Quest Value Fund, Inc. and Oppenheimer Quest Global
Value Fund, Inc. and Trustee of Quest for Value Accumulation Trust
and The Saratoga Advantage Trust, all of which are open-end
investment companies, and Director of the Quest for Value Dual
Purpose Fund, Inc., a closed-end investment company.
Robert C. Doll, Jr., Vice President; Age: 41
Executive Vice President and Director of Equity Investments of the
Manager; an officer and Portfolio Manager of other Oppenheimer
funds.
Andrew J. Donohue, Secretary; Age: 45
Executive Vice President and General Counsel of the Manager and the
Distributor; President and a director of Centennial Asset
Management Corporation, an investment advisory subsidiary of the
Manager; an officer of other Oppenheimer funds; formerly Senior
Vice President and Associate General Counsel of the Manager and the
Distributor, partner in Kraft & McManimon (a law firm), an officer
of First Investors Corporation (a broker-dealer) and First
Investors Management Company, Inc. (broker-dealer and investment
adviser), and a director and an officer of First Investors Family
of Funds and First Investors Life Insurance Company.
George C. Bowen, Treasurer; Age: 59
3410 South Galena Street Denver, Colorado 80231
Senior Vice President and Treasurer of the Manager; Vice President
and Treasurer of the Distributor and HarbourView Asset Management
Corporation; Senior Vice President, Treasurer, Assistant Secretary
and a director of Centennial Asset Management Corporation, an
investment advisory subsidiary of the Manager; Vice President,
Treasurer and Secretary of the Transfer Agent and Shareholder
Financial Services, Inc., a transfer agent subsidiary of the
Manager; an officer of other Oppenheimer funds.
Colin Glinsman, Portfolio Manager; Age 38
Two World Financial Center, 225 Liberty Street, New York, New York
10080
Senior Vice President of Oppenheimer Capital.
Robert Bishop, Assistant Treasurer; Age: 37
3410 South Galena Street, Denver, Colorado 80231
Assistant Vice President of the Manager/Mutual Fund Accounting; an
officer of other Oppenheimer funds; formerly a Fund Controller for
the Manager, prior to which he was an Accountant for Yale &
Seffinger, P.C., an accounting firm, and previously an Accountant
and Commissions Supervisor for Stuart James Company Inc., a broker-
dealer.
Scott Farrar, Assistant Treasurer; Age: 30
3410 South Galena Street, Denver, Colorado 80231
Assistant Vice President of the Manager/Mutual Fund Accounting; an
officer of other Oppenheimer funds; formerly a Fund Controller for
the Manager, prior to which he was an International Mutual Fund
Supervisor for Brown Brothers, Harriman Co., a bank, and previously
a Senior Fund Accountant for State Street Bank & Trust Company.
Robert G. Zack, Assistant Secretary; Age: 47
Senior Vice President and Associate General Counsel of the Manager;
Assistant Secretary of SSI and SFSI; an officer of other
Oppenheimer funds.
-- Remuneration of Trustees. All officers of the Trust and
Ms. Macaskill, a Trustee, are officers or directors of the Manager
and receive no salary or fee from the Fund. The Trustees of the
Fund (excluding Ms. Macaskill, who was not a Trustee prior to
November 22, 1995) received the total amounts shown below from (i)
the Fund during its fiscal period ended to October 31, 1995 and
(ii) other investment companies (or series thereof) managed by
OpCap Advisors (previously named Quest for Value Advisors), or an
affiliate thereof, during the fiscal year ended October 31, 1995
(the "Fund Complex"). OpCap Advisors, or an affiliate thereof,
served as the investment adviser to the Fund Complex prior to
November 22, 1995. Effective as of such date, the Manager acquired
the investment advisory and other contracts and business
relationships and certain assets and liabilities of OpCap Advisors,
Quest for Value Distributors and Oppenheimer Capital relating to
twelve Quest for Value mutual funds (or series thereof) included in
the Fund Complex.
<TABLE>
<CAPTION>
Pension or
Retirement
Aggregate Benefits Estimated Total
Compensation Accrued as Annual Compensation
from the Part of Fund Benefits Upon From Fund
Name of Person Fund Expenses Retirement Complex
<S> <C> <C> <C> <C>
Paul Y. Clinton $2,100 None None $61,650
Thomas W. Courtney $2,100 None None $60,900
Lacy B. Herrmann $2,100 None None $61,650
George Loft $2,100 None None $61,650
</TABLE>
Messrs. Clinton, Courtney and Herrmann earned directors fees
with respect to 18 investment companies in the Fund Complex and the
fees earned by Mr. Loft were with respect to 19 investment
companies in the Fund Complex. During such period the non-
interested Trustees received fees from three investment companies
for which they no longer serve as directors and which are no longer
part of the Fund Complex but for which OpCap Advisors currently
serves as subadviser. In addition, during such periods, Mr.
Clinton and Mr. Courtney each served as director with respect to
three investment companies in the 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 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.
- AMA Family of Funds Indemnification. In connection with the
combination of each of the U.S. Government Income Fund and the
Growth and Income Fund with a portfolio of AMA Family of Funds,
Inc., each Fund has agreed to assume the obligation of such
portfolio of the AMA Family of Funds to indemnify the directors of
the AMA Family of Funds, Inc. to the fullest extent permitted by
law and the By-Laws of the AMA Family of Funds, Inc.
- Unified Funds Indemnification. In connection with the
combination of Growth and Income Fund with Unified Income Fund and
Unified Mutual Shares, Growth and Income Fund has agreed to assume
the obligation of Unified Income Fund and Unified Mutual Shares to
indemnify the directors of such Unified Funds to the fullest extent
permitted by law and the By-Laws of such Unified Funds.
-- Major Shareholders. As of January 26, 1996, the only
persons who owned of record or were known by the Fund to own
beneficially 5% or more of the Fund's outstanding Class A, Class B
or Class C shares were the following:
Number and Class
of Shares Owned Percentage
Beneficially of Record Name & Address of Class
Class A 1,904,045.92 Unified Advisors, Inc. 52.53%
Attn.: Control Group
429 N. Pennsylvania St.
Indianapolis, IN 46204-1873
Class C 29,006.017 City Distributing Co., Inc. 16.82%
PSP AN
Attn.: Carolyn Nimmo
P.O. Box 4130
Petersburg, VA 23803-0130
Class C 13,260.974 RPSS TR IRA 7.67%
FBO Robert B. Delano
RR 3 Box 1955
Warsaw, VA 22572-9204
Class C 11,264.776 Jeff McClusky & Assoc. 6.53%
Attn.: Mr Tony Lucenti
401(k) Plan
719 W. Willow St.
Chicago, IL 60614-5107
The Manager and its Affiliates. The Manager is wholly-owned by
Oppenheimer Acquisition Corp. ("OAC"), a holding company controlled
by Massachusetts Mutual Life Insurance Company. OAC is also owned
in part by certain of the Manager's directors and officers, some of
whom also serve as officers of the Fund and one of whom (Ms.
Macaskill) also serves as an officer and a Trustee of the Fund.
The Manager and the Trust has a Code of Ethics. In addition
to having its own Code of Ethics, the Sub-Adviser is subject to a
reporting obligation to the Manager under its Code of Ethics. The
Code of Ethics is designed to detect and prevent improper personal
trading by certain employees, including the Fund's portfolio
manager, who is an employee of the Sub-Adviser, that would compete
with or take advantage of the Funds' portfolio transactions.
Compliance with the Code of Ethics is carefully monitored and
strictly enforced by the Manager.
-- The Investment Advisory Agreement. The Manager acts as
investment adviser to the Funds pursuant to the terms of an
Investment Advisory Agreement dated as of November 22, 1995. OpCap
Advisors, the Fund's Sub-Adviser, served as the Fund's investment
adviser from its inception to November 22, 1995.
Under the Investment Advisory Agreement, the Manager acts as
the investment adviser for the Fund and supervises the investment
program of the Fund. The Investment Advisory Agreement provides
that the Manager will provide administrative services for the Fund,
including completion and maintenance of records, preparation and
filing of reports required by the Securities and Exchange
Commission, reports to shareholders, and composition of proxy
statements and registration statements required by Federal and
state securities laws. The Manager will furnish the Fund with
office space, facilities and equipment and arrange for its
employees to serve as officers of the Trust. The administrative
services to be provided by the Manager under the Investment
Advisory Agreement will be at its own expense, except that each
class of shares of the Fund will pay the Manager an annual fee for
calculating the Fund's daily net asset value as follows: Class A -
$25,000; Class B - $18,000; and Class C - $12,000.
Expenses not assumed by the Manager under the Investment
Advisory Agreement or paid by the Distributor under the General
Distributor's Agreement will be paid by the Fund. Expenses with
respect to the Trust's four portfolios, including the Fund, are
allocated in proportion to the net assets of the respective
portfolio, except where allocations of direct expenses could be
made. Certain expenses are further allocated to certain classes of
shares of a series as explained in the Prospectus and under "How to
Buy Shares," below. The Investment Advisory Agreement lists
examples of expenses paid by the Fund, including interest, taxes,
brokerage commissions, insurance premiums, fees of non-interested
Trustees, legal and audit expenses, transfer agent and custodian
expenses, share issuance costs, certain printing and registration
costs, and non-recurring expenses, including litigation.
The Investment Advisory Agreement contains no expense
limitation. However, independently of the Investment Advisory
Agreement, the Manager has voluntarily undertaken that the Fund's
total expenses in any fiscal year (including the investment
advisory fee but exclusive of taxes, interest, brokerage
commissions, distribution plan payments and any extraordinary non-
recurring expenses, including litigation) shall not exceed the most
stringent state regulatory limitation application to the Fund. At
present, that limitation is imposed by California and limits
expenses (with specified exclusions) to 2.5% of the first $30
million of average annual net assets, 2% of the next $70 million
and 1.5% of average annual net assets in excess of $100 million.
Pursuant to the undertaking, the Manager's fee at the end of
any month will be reduced or eliminated such that there will not be
any accrued but unpaid liability under this expense limitation.
The Manager reserves the right to terminate or amend the
undertaking at any time. Any assumption of the Fund's expenses
under this undertaking would lower the Fund's overall expense ratio
and increase its total return during any period in which expenses
are limited.
The Investment Advisory Agreement provides that in the absence
of willful misfeasance, bad faith, or gross negligence in the
performance of its duty, or reckless disregard for its obligations
and duties under the advisory agreement, the Manager is not liable
for any loss resulting from good faith errors or omissions on its
part with respect to any of its duties thereunder. The Investment
Advisory Agreement permits the Manager to act as investment adviser
for any other person, firm or corporation and to use the name
"Oppenheimer" in connection with its other investment companies for
which it may act as an investment adviser or general distributor.
If the Manager shall no longer act as investment adviser to a Fund,
the right of the Fund to use "Oppenheimer" as part of its name may
be withdrawn.
-- Fees Paid Under the Prior Investment Advisory Agreement.
OpCap Advisors served as investment adviser to the Fund from its
inception until November 22, 1995. Under the prior Investment
Advisory Agreement, the total advisory fees accrued or paid by the
Fund were as follows: For the fiscal year ended October 31, 1993,
the total advisory fee accrued or paid by the Fund was $202,511, of
which $66,413 was waived by OpCap Advisors. For the fiscal year
ended October 31, 1994, the total advisory fee accrued or paid by
the Fund was $263,469, of which $142,772 was waived by OpCap
Advisors. For the fiscal year ended October 31, 1995, the total
advisory fee accrued or paid by the Fund was $333,289, of which
$8,286 was waived by OpCap Advisors.
For the fiscal years ended October 31, 1993, 1994 and 1995,
the Fund paid or accrued accounting services fees to OpCap
Advisors in the amounts of $14,723, $68,117 and $57,800,
respectively. Commencing in 1993, the Trust retained the services
of State Street Bank and Trust Company ("State Street") to
calculate the net asset value of each class of shares and to
prepare the books and records. For such services, the Fund accrued
or paid fees for the fiscal years ended October 31, 1993, 1994 and
1995 in the amounts of $27,918, $55,000 and $55,000, respectively.
The Investment Advisory Agreement provides that the Manager
may enter into sub-advisory agreements with other affiliated or
unaffiliated registered investment advisers in order to obtain
specialized services for the Funds provided that the Fund is not
required to pay any additional fees for such services. The Manager
has retained OpCap Advisors (previously named Quest for Value
Advisors) pursuant to a separate Subadvisory Agreement dated as of
November 22, 1995 with respect to the Fund.
-- The Subadvisory Agreement. The Subadvisory Agreement
provides that OpCap Advisors shall regularly provide investment
advice with respect to the Fund and invest and reinvest cash,
securities and the property comprising the assets of the Fund.
Under the Subadvisory Agreement, OpCap Advisors agrees not to
change the Portfolio Manager of the Fund without the written
approval of the Manager and to provide assistance in the
distribution and marketing of the Fund. The Subadvisory Agreement
was approved by the Board of Trustees, including a majority of the
Trustees who are not "interested persons" of the Trust (as defined
in the Investment Company Act) and who have no direct or indirect
financial interest in such agreements on June 22, 1995 and by the
shareholders of the Fund at a meeting held for that purpose on
November 3, 1995.
Under the Subadvisory Agreement, the Manager will pay OpCap
Advisors an annual fee payable monthly, based on the average daily
net assets of the Fund, equal to 40% of the investment advisory fee
collected by the Manager from the Fund based on the total net
assets of the Fund as of the effective date of the Subadvisory
Agreement (the "Base Amount") plus 30% of the investment advisory
fee collected by the Manager based on the total net assets of the
Fund that exceed the Base Amount.
The Subadvisory Agreement provides that in the absence of
willful misfeasance, bad faith, negligence or reckless disregard of
its duties or obligations, OpCap Advisors shall not be liable to
the Manager for any act or omission in the course of or connected
with rendering services under the Subadvisory Agreement or for any
losses that may be sustained in the purchase, holding or sale of
any security.
-- The Distributor. Under a General Distributor's Agreement
with the Trust dated as of November 22, 1995, the Distributor acts
as the Fund's principal underwriter in the continuous public
offering of its Class A, Class B and Class C shares but is not
obligated to sell a specific number of shares. Expenses normally
attributable to sales, including advertising and the cost of
printing and mailing prospectuses, other than those furnished to
existing shareholders, are borne by the Distributor. During the
Fund's fiscal year ended October 31, 1995, the aggregate amount of
sales charges on sales of the Fund's Class A shares was $35,000, of
which Quest for Value Distributors, the Fund's distributor prior to
November 22, 1995, retained $0 and an affiliated broker-dealer
retained $0, respectively. During the fiscal years ended October
31, 1995, Quest for Value Distributors received contingent deferred
sales charges of $7,337 upon redemption of Class B shares, and
received contingent deferred sales charges of $136 upon redemption
of Class C shares. For additional information about distribution
of the Fund's shares and the expenses connected with such
activities, please refer to "Distribution and Service Plans" below.
-- The Transfer Agent. OppenheimerFunds Services acts as the
Fund's Transfer Agent pursuant to a Transfer Agency and Service
Agency Agreement dated November 22, 1995. Pursuant to the
Agreement, the Transfer Agent is responsible for maintaining the
Fund's shareholder registry and shareholder accounting records and
for shareholder servicing and administrative functions. As
compensation therefor, the Fund is obligated to pay the Transfer
Agent an annual maintenance fee for each Fund shareholder account
and reimburse the Transfer Agent for its out of pocket expenses.
- Shareholder Servicing Agent for Certain Shareholders.
Unified Management Corporation (1-800-346-4601) is the shareholder
servicing agent of the Fund for former shareholders of the AMA
Family of Funds and clients of AMA Investment Advisers, Inc. (which
had been the investment adviser of AMA Family of Funds) who acquire
shares of any Oppenheimer Quest Fund, and for (i) former
shareholders of the Unified Funds and Liquid Green Trusts, (ii)
accounts which participated or participate in a retirement plan for
which Unified Investment Advisers, Inc. or an affiliate acts as
custodian or trustee, (iii) accounts which have a Money Manager
brokerage account, and (iv) other accounts for which Unified
Management Corporation is the dealer of record.
Brokerage Policies of the Fund
Brokerage Provisions of the Investment Advisory and Subadvisory
Agreement. The Investment Advisory Agreement contains provisions
relating to the selection of broker-dealers ("brokers") for the
Fund's portfolio transactions. The Manager and the Sub-Adviser may
use such brokers as may, in their best judgment based on all
relevant factors, implement the policy of the Fund to achieve best
execution of portfolio transactions. While the Manager need not
seek advance competitive bidding or base its selection on posted
rates, it is expected to be aware of the current rates of most
eligible brokers and to minimize the commissions paid to the extent
consistent with the interests and policies of the Fund as
established by its Board and the provisions of the Investment
Advisory Agreement.
The Investment Advisory Agreement also provides that,
consistent with obtaining the best execution of the Fund's
portfolio transactions, the Manager and the Sub-Adviser, in the
interest of the Fund, may select brokers other than affiliated
brokers, because they provide brokerage and/or research services to
the Fund and/or other accounts of the Manager or the Sub-Adviser.
The commissions paid to such brokers may be higher than another
qualified broker would have charged if a good faith determination
is made by the Manager or the Sub-Adviser that the commissions are
reasonable in relation to the services provided, viewed either in
terms of that transaction or the Manager's or the Sub-Adviser's
overall responsibilities to all its accounts. No specific dollar
value need be put on the services, some of which may or may not be
used by the Manager or the Sub-Adviser for the benefit of the Fund
or other of its advisory clients. To show that the determinations
were made in good faith, the Manager or any Sub-Adviser must be
prepared to show that the amount of such commissions paid over a
representative period selected by the Board was reasonable in
relation to the benefits to the Fund. The Investment Advisory
Agreement recognizes that an affiliated broker-dealer may act as
one of the regular brokers for the Fund provided that any
commissions paid to such broker are calculated in accordance with
procedures adopted by the Trust's Board under applicable rules or
the Securities and Exchange Commission ("SEC").
In addition, the Subadvisory Agreement permits the Sub-Adviser
to enter into "soft dollar" arrangements through the agency of
third parties to obtain services for the Fund. Pursuant to these
arrangements, the Sub-Adviser will undertake to place brokerage
business with broker-dealers who pay third parties that provide
services. Any such "soft dollar" arrangements will be made in
accordance with policies adopted by the Board of the Trust and in
compliance with applicable law.
Description of Brokerage Practices. Portfolio decisions are based
upon recommendations of the portfolio manager and the judgment of
the portfolio managers. The Fund will pay brokerage commissions on
transactions in listed options and equity securities. Prices of
portfolio securities purchased from underwriters of new issues
include a commission or concession paid by the issuer to the
underwriter, and prices of debt securities purchased from dealers
include a spread between the bid and asked prices.
Transactions may be directed to dealers during the course of
an underwriting in return for their brokerage and research
services, which are intangible and on which no dollar value can be
placed. There is no formula for such allocation. The research
information may or may not be useful to one or more of the Fund
and/or other accounts of the Manager or the Sub-Adviser;
information received in connection with directed orders of other
accounts managed by the Manager or Sub-Adviser or its affiliates
may or may not be useful to one or more of the Funds. Such
information may be in written or oral form and includes information
on particular companies and industries as well as market, economic
or institutional activity areas. It serves to broaden the scope
and supplement the research activities of the Manager or the Sub-
Adviser, to make available additional views for consideration and
comparison, and to enable the Manager or the Sub-Adviser to obtain
market information for the valuation of securities held in the
Fund's assets.
Sales of shares of the Fund, subject to applicable rules
covering the Distributor's activities in this area, will also be
considered as a factor in the direction of portfolio transactions
to dealers, but only in conformity with the price, execution and
other considerations and practices discussed above. The Fund will
not purchase any securities from or sell any securities to an
affiliated broker-dealer including Oppenheimer & Co., Inc.
("Opco"), an affiliate of the Sub-Adviser, acting as principal for
its own account.
The Sub-Adviser currently serves as investment manager to a
number of clients, including other investment companies, and may in
the future act as investment manager or advisor to others. It is
the practice of Sub-Adviser to cause purchase or sale transactions
to be allocated among the Fund and others whose assets it manages
in such manner as it deems equitable. In making such allocations
among the Fund and other client accounts, the main factors
considered are the respective investment objectives, the relative
size of portfolio holdings of the same or comparable securities,
the availability of cash for investment, the size of investment
commitments generally held and the opinions of the persons
responsible for managing the portfolios of each Fund and other
client accounts.
When orders to purchase or sell the same security on identical
terms are placed by more than one of the funds and/or other
advisory accounts managed by the Sub-Adviser or its affiliates, the
transactions are generally executed as received, although a fund or
advisory account that does not direct trades to a specific broker
("free trades") usually will have its order executed first.
Purchases are combined where possible for the purpose of
negotiating brokerage commissions, which in some cases might have
a detrimental effect on the price or volume of the security in a
particular transaction as far as the Fund is concerned. Orders
placed by accounts that direct trades to a specific broker will
generally be executed after the free trades. All orders placed on
behalf of the Fund are considered free trades. However, having an
order placed first in the market does not necessarily guarantee the
most favorable price.
The following table presents information as to the allocation
of brokerage commissions paid by the Fund for the fiscal years
ended October 31, 1993, 1994 and 1995:
<TABLE>
<CAPTION>
Total Amount of Transactions
For the Total Brokerage Commissions Where Brokerage Commissions
Fiscal Year Brokerage Paid to Opco Paid to Opco
Ended Commissions Dollar Dollar
October 31, Paid Amounts % Amounts %
<S> <C> <C> <C> <C> <C>
1993 $108,617 $91,522 84.3% $54,968,280 86.0%
1994 $ 74,334 $55,911 75.2% $38,409,929 77.5%
1995 $112,411 $54,131 48.2% $29,045,570 48.9%
</TABLE>
During the Fund's fiscal year ended October 31, 1995, $10,200
was paid by the Fund to brokers as commissions in return for
research services; the aggregate dollar amount of those
transactions was $4,551,914.
Performance of the Fund
Total Return Information. As described in the Prospectus, from
time to time the "average annual total return," "cumulative total
return" and "total return at net asset value" of an investment in
a class of shares of the Fund may be advertised. An explanation of
how these total returns are calculated for each class and the
components of those calculations is set forth below.
The Fund's advertisements of its performance data must, under
applicable SEC rules, include the average annual total returns for
each class of shares of the Fund for the 1, 5, and 10-year periods
(or the life of the class, if less) ending as of the most recently-
ended calendar quarter prior to the publication of the
advertisement. This enables an investor to compare the Fund's
performance to the performance of other funds for the same periods.
However, a number of factors should be considered before using such
information as a basis for comparison with other investments. An
investment in the Fund is not insured; its returns and share prices
are not guaranteed and normally will fluctuate on a daily basis.
When redeemed, an investor's shares may be worth more or less than
their original cost. Returns for any given past period are not a
prediction or representation by the Fund of future returns. The
returns of Class A, Class B and Class C shares of the Fund are
affected by portfolio quality, the type of investments the Fund
holds and its operating expenses allocated to the particular class.
-- Average Annual Total Returns. The "average annual total
return" of each class is an average annual compounded rate of
return for each year in a specified number of years. It is the
rate of return based on the change in value of a hypothetical
initial investment of $1,000 ("P" in the formula below) held for a
number of years ("n") to achieve an Ending Redeemable Value ("ERV")
of that investment, according to the following formula:
1/n
(ERV)
(---) -1 = Average Annual Total Return
( P )
The "average annual total returns" on an investment in Class
A shares of the Fund (using the method described above) for the one
year period ended October 31, 1995 and for the period from November
4, 1991 (commencement of operations) to October 31, 1995 were 9.66%
and 9.76%, respectively.
The average annual total return on Class B shares for the one-
year period ended October 31, 1995 and for the period September 1,
1993 (commencement of the public offering of the class) through
October 31, 1995 were 10.66% and 10.01%, respectively.
The average annual total return on Class C shares for the one-
year period ended October 31, 1995 and for the period September 1,
1993 (commencement of the public offering of the class) through
October 31, 1995 were 14.38% and 11.06%, respectively.
-- Cumulative Total Returns. The cumulative "total return"
calculation measures the change in value of a hypothetical
investment of $1,000 over an entire period of years. Its
calculation uses some of the same factors as average annual total
return, but it does not average the rate of return on an annual
basis. Cumulative total return is determined as follows:
ERV - P
------- = Total Return
P
In calculating total returns for Class A shares, the current
maximum sales charge of 5.75% (as a percentage of the offering
price) is deducted from the initial investment ("P") (unless the
return is shown at net asset value, as described below). Prior to
November 24, 1995, the maximum initial sales charge on Class A
shares was 5.50%. For Class B shares, the payment of the
applicable contingent deferred sales charge (5% for the first year,
4% for the second year, 3% for the third and fourth years, 2% for
the fifth year, 1% for the sixth year, and none thereafter) is
applied to the investment result for the period shown (unless the
total return is shown at net asset value, as described below). For
Class C shares, the 1.0% contingent deferred sales charge is
applied to the investment result for the one-year period (or less).
Total returns also assume that all dividends and capital gains
distributions during the period are reinvested to buy additional
shares at net asset value per share, and that the investment is
redeemed at the end of the period.
The "cumulative total return" on Class A shares for the period
from November 4, 1991 (commencement of operations) to October 31,
1995 was 45.16%. The cumulative total return on Class B shares for
the period from September 1, 1993 (commencement of the public
offering of the class) through October 31, 1995 was 22.97%. The
cumulative total return on Class C shares for the period from
September 1, 1993 (commencement of the public offering of the
class) through October 31, 1995 was 25.51%.
-- Total Returns at Net Asset Value. From time to time the
Fund may also quote an "average annual total return at net asset
value" or a "cumulative total return at net asset value" for Class
A, Class B or Class C shares. Each is based on the difference in
net asset value per share at the beginning and the end of the
period for a hypothetical investment in that class of shares
(without considering front-end or contingent deferred sales
charges) and takes into consideration the reinvestment of dividends
and capital gains distributions.
The average annual total returns at net asset value on the
Fund's Class A shares for the one year period ended October 31,
1995 and for the period from November 4, 1991 (commencement of
operations) to October 31, 1995 were 16.35% and 11.40%,
respectively. The cumulative total return at net asset value on
the Fund's Class A shares for the period November 4, 1991 through
October 31, 1995 was 54.01%.
The average annual total returns at net asset value on the
Fund's Class B shares for the one year period ended October 31,
1995 and for the period from September 1, 1993 (commencement of the
public offering of the class) through October 31, 1995 were 15.66%
and 11.21%, respectively. The cumulative total return at net asset
value on the Fund's Class B shares for the period September 1, 1993
through October 31, 1995 was 25.88%.
The average annual total returns at net asset value on the
Fund's Class C shares for the one-year period ended October 31,
1995 and for the period September 1, 1993 (commencement of the
public offering of the class) through October 31, 1995 were 15.38%
and 11.06%, respectively. The cumulative total return at net asset
value on the Fund's Class C shares for the period September 1, 1993
through October 31, 1995 was 25.51%.
Other Performance Comparisons. From time to time the Fund may
publish the ranking of its Class A, Class B or Class C shares by
Lipper Analytical Services, Inc. ("Lipper"), a widely-recognized
independent mutual fund monitoring service. Lipper monitors the
performance of regulated investment companies, including the Fund,
and ranks their performance for various periods based on categories
relating to investment objectives. The performance of the Fund is
ranked against (i) all other funds and (ii) all other growth &
income funds. The Lipper performance rankings are based on total
returns that include the reinvestment of capital gain distributions
and income dividends but do not take sales charges or taxes into
consideration.
From time to time the Fund may publish the ranking of the
performance of its Class A, Class B or Class C shares by
Morningstar, Inc., an independent mutual fund monitoring service
that ranks mutual funds, including the Fund, monthly in broad
investment categories (equity, taxable bond, municipal bond and
hybrid) based on risk-adjusted investment return. Investment
return measures a fund's three, five and ten-year average annual
total returns (when available) in excess of 90-day U.S. Treasury
bill returns after considering sales charges and expenses. Risk
measures fund performance below 90-day U.S. Treasury bill monthly
returns. Risk and investment return are combined to produce star
rankings reflecting performance relative to the average fund in a
fund's category. Five stars is the "highest" ranking (top 10%),
four stars is "above average" (next 22.5%), three stars is
"average" (next 35%), two stars is "below average" (next 22.5%) and
one star is "lowest" (bottom 10%). Morningstar ranks the Fund in
relation to other rated growth and income funds. Rankings are
subject to change.
The total return on an investment in the Fund's Class A, Class
B or Class C shares may be compared with performance for the same
period of the S&P 500 Index as described in the Prospectus. The
performance of the index includes a factor for the reinvestment of
income dividends, but does not reflect reinvestment of capital
gains, expenses or taxes.
The performance of the Fund's Class A, Class B, or Class C
shares may also be compared in publications to (i) the performance
of various market indices or to other investments for which
reliable performance data is available, and (ii) to averages,
performance rankings or other benchmarks prepared by recognized
mutual fund statistical services.
Investors may also wish to compare the Fund's Class A, Class
B or Class C return to the returns on fixed income investments
available from banks and thrift institutions, such as certificates
of deposit, ordinary interest-paying checking and savings accounts,
and other forms of fixed or variable time deposits, and various
other instruments such as Treasury bills. However, the Fund's
returns and share price are not guaranteed by the FDIC or any other
agency and will fluctuate daily, while bank depository obligations
may be insured by the FDIC and may provide fixed rates of return,
and Treasury bills are guaranteed as to principal and interest by
the U.S. government.
From time to time, the Fund's Manager may publish rankings or
ratings of the Manager (or Transfer Agent) or the investor services
provided by them to shareholders of the Oppenheimer funds, other
than performance rankings of the Oppenheimer funds themselves.
Those ratings or rankings of shareholder/investor services by third
parties may compare the Oppenheimer funds' services to those of
other mutual fund families selected by the rating or ranking
services and may be based upon the opinions of the rating or
ranking service itself, based on its research or judgment, or based
upon surveys of investors, brokers, shareholders or others.
Distribution and Service Plans
The Trust has adopted separate Distribution and Service Plans
for Class A, Class B and Class C shares of the Fund under Rule
12b-1 of the Investment Company Act pursuant to which the Fund will
make payments to the Distributor in connection with the
distribution and/or servicing of the shares of that class, as
described in the Prospectus. Each Plan has been approved by a vote
of (i) the Board of Trustees of the Trust, including a majority of
the Trustees who are not "interested persons" (as defined in the
Investment Company Act) of the Fund and who have no direct or
indirect financial interest in the operation of the Fund's 12b-1
plans or in any related agreement ("Independent Trustees"), cast in
person at a meeting on June 22, 1995 called for the purpose, among
others, of voting on that Plan, and (ii) the holders of a
"majority" (as defined in the Investment Company Act) of the shares
of each class at a meeting on November 3, 1995.
In addition, under the Plans the Manager and the Distributor,
in their sole discretion, from time to time may use their own
resources (which, in the case of the Manager, may include profits
from the advisory fee it receives from the Fund) to make payments
to brokers, dealers or other financial institutions (each is
referred to as a "Recipient" under the Plans) for distribution and
administrative services they perform. The Distributor and the
Manager may, in their sole discretion, increase or decrease the
amount of payments they make from their own resources to
Recipients.
Unless terminated as described below, each plan continues in
effect from year to year but only as long as such continuance is
specifically approved at least annually by the Trust's Board of
Trustees and its "Independent Trustees" by a vote cast in person at
a meeting called for the purpose of voting on such continuance.
Any Plan may be terminated at any time by the vote of a majority of
the Independent Trustees or by the vote of the holders of a
"majority" (as defined in the Investment Company Act) of the
outstanding shares of that class. No Plan may be amended to
increase materially the amount of payments to be made unless such
amendment is approved by shareholders of the class affected by the
amendment. In addition, because Class B shares of the Fund
automatically convert into Class A shares after six years, the Fund
is required to obtain the approval of Class B as well as Class A
shareholders for a proposed material amendment to the Class A Plan
that would materially increase payments under the Plan. Such
approval must be by a "majority" of the Class A and Class B shares
(as defined in the Investment Company Act), voting separately by
class. All material amendments must be approved by the Board of
Trustees and the Independent Trustees.
While the Plans are in effect, the Treasurer of the Trust
shall provide separate written reports to the Trust's Board of
Trustees at least quarterly on the amount of all payments made
pursuant to each Plan, the purpose for which the payments were made
and the identity of each Recipient that received any such payment.
The reports shall also include the distribution costs for that
quarter, and such costs for previous fiscal periods that are
carried forward, as explained in the Prospectus and below. Those
reports, including the allocations on which they are based, will be
subject to the review and approval of the Independent Trustees in
the exercise of their fiduciary duty. Each Plan further provides
that while it is in effect, the selection and nomination of those
Trustees of the Trust who are not "interested persons" of the Trust
is committed to the discretion of the Independent Trustees. This
does not prevent the involvement of others in such selection and
nomination if the final decision on any such selection or
nomination is approved by a majority of the Independent Trustees.
Under the Plans, no payment will be made to any Recipient in
any quarter if the aggregate net asset value of all Fund shares
held by the Recipient for itself and its customers did not exceed
a minimum amount, if any, that may be determined from time to time
by a majority of the Trust's Independent Trustees. Initially, the
Board of Trustees has set the fee at the maximum rate and set no
requirement for a minimum amount.
The Plans allow the service fee payments to be paid by the
Distributor to Recipients in advance for the first year shares are
outstanding, and thereafter on a quarterly basis, as described in
the Prospectus. The advance payment is based on the net assets of
shares of that class sold. An exchange of shares does not entitle
the Recipient to an advance service fee payment. In the event
shares are redeemed during the first year such shares are
outstanding, the Recipient will be obligated to repay a pro rata
portion of such advance payment to the Distributor.
Although the Plans permit the Distributor to retain both the
asset-based sales charge and the service fee, or to pay Recipients
the service fee on a quarterly basis, without payment in advance,
the Distributor presently intends to pay the service fee to
Recipients in the manner described above. A minimum holding period
may be established from time to time under the Plans by the Board.
Initially, the Board has set no minimum holding period. All
payments under the Plans are subject to the limitations imposed by
the Rules of Fair Practice of the National Association of
Securities Dealers, Inc. on payments of asset-based sales charges
and service fees.
The Plans provide for the Distributor to be compensated at a
flat rate, whether the Distributor's expenses are more or less than
the amounts paid by the Fund during that period. The asset-based
sales charges paid to the Distributor by the Fund under the Plans
are intended to allow the Distributor to recoup the cost of sales
commissions paid to authorized brokers and dealers at the time of
sale, plus financing costs, as described in the Prospectus. Such
payments may also be used to pay for the following expenses in
connection with the distribution of shares: (i) financing the
advance of the service fee payment to Recipients under the Plans,
(ii) compensation and expenses of personnel employed by the
Distributor to support distribution of shares, and (iii) costs of
sales literature, advertising and prospectuses (other than those
furnished to current shareholders).
- The Prior Plans. From the inception date of the Fund
through November 22, 1995, OCC Distributors (formerly known as
Quest for Value Distributors) served as Distributor to the Fund.
OCC Distributors provided distribution services for the Fund's
Class A, Class B and Class C shares pursuant to separate plans
adopted for each class under the Investment Company Act (the "Prior
Plans"). The total distribution fees accrued or paid by Class A,
Class B and Class C shares of the Fund under the Prior Plans for
the fiscal year ended October 31, 1995 were $133,588, $48,455 and
$9,680, respectively.
ABOUT YOUR ACCOUNT
How To Buy Shares
Alternative Sales Arrangements - Class A, Class B and Class C
Shares. The availability of three classes of shares permits the
individual investor to choose the method of purchasing shares that
is more beneficial to the investor depending on the amount of the
purchase, the length of time the investor expects to hold shares
and other relevant circumstances. Investors should understand that
the purpose and function of the deferred sales charge and asset-
based sales charge with respect to Class B and Class C shares are
the same as those of the initial sales charge with respect to Class
A shares. Any salesperson or other person entitled to receive
compensation for selling Fund shares may receive different
compensation with respect to one class of shares than another. The
Distributor will not accept any order for $500,000 or $1 million or
more of Class B or Class C shares, respectively, on behalf of a
single investor (not including dealer "street name" or omnibus
accounts) because generally it will be more advantageous for that
investor to purchase Class A shares of the Fund instead.
The three classes of shares each represent an interest in the
same portfolio investments of the Fund. However, each class has
different shareholder privileges and features. The net income
attributable to Class B and Class C shares and the dividends
payable on Class B and Class C shares will be reduced by
incremental expenses borne solely by that class, respectively,
including the asset-based sales charges to which Class B and Class
C shares are subject.
The conversion of Class B shares to Class A shares is subject
to the continuing availability of a private letter ruling from the
Internal Revenue Service, or an opinion of counsel or tax adviser,
to the effect that the conversion of Class B shares does not
constitute a taxable event for the holder under Federal income tax
law. If such a revenue ruling or opinion is no longer available,
the automatic conversion feature may be suspended, in which event
no further conversions of Class B shares would occur while such
suspension remained in effect. Although Class B shares could then
be exchanged for Class A shares on the basis of relative net asset
value of the two classes, without the imposition of a sales charge
or fee, such exchange could constitute a taxable event for the
holder, and absent such exchange, Class B shares might continue to
be subject to the asset-based sales charge for longer than six
years.
The methodology for calculating the net asset value, dividends
and distributions of the Fund's Class A, Class B and Class C shares
recognizes two types of expenses. General expenses that do not
pertain specifically to either class are allocated pro rata to the
shares of each class, based on the percentage of the net assets of
such class to the Fund's total assets, and then equally to each
outstanding share within a given class. Such general expenses
include (i) management fees, (ii) legal, bookkeeping and audit
fees, (iii) printing and mailing costs of shareholder reports,
Prospectuses, Statements of Additional Information and other
materials for current shareholders, (iv) fees to Independent
Trustees, (v) custodian expenses, (vi) share issuance costs, (vii)
organization and start-up costs, (viii) interest, taxes and
brokerage commissions, and (ix) non-recurring expenses, such as
litigation costs. Other expenses that are directly attributable to
a class are allocated equally to each outstanding share within that
class. Such expenses include (i) Distribution and Service Plan
fees, (ii) incremental transfer and shareholder servicing agent
fees and expenses, (iii) registration fees and (iv) shareholder
meeting expenses, to the extent that such expenses pertain to a
specific class rather than to the Fund as a whole.
Determination of Net Asset Values Per Share. The net asset values
per share of Class A, Class B and Class C shares of the Fund are
determined as of the close of business of The New York Stock
Exchange (the "Exchange") on each day that the Exchange is open, by
dividing the value of the Fund's net assets attributable to that
class by the total number of Fund shares of that class outstanding.
The Exchange normally closes at 4:00 P.M. New York time, but may
close earlier on some days (for example, in case of weather
emergencies or days falling before a holiday). The Exchange's most
recent annual holiday schedule (which is subject to change) states
that it will close on New Year's Day, President's Day, Good Friday,
Memorial Day, Independence Day, Labor Day, Thanksgiving Day and
Christmas Day. It may also close on other days. The Fund may
invest a substantial portion of its assets in foreign securities
primarily listed on foreign exchanges which may trade on Saturdays
or customary U.S. business holidays on which the Exchange is
closed. Because the Fund's net asset values will not be calculated
on those days, the Fund's net asset value per share may be
significantly affected on such days when shareholders may not
purchase or redeem shares.
The Trust's Board of Trustees has established procedures for
the valuation of the Fund's securities generally as follows: (i)
equity securities traded on a U.S. securities exchange or on NASDAQ
for which last sale information is regularly reported are valued at
the last reported sale price on their primary exchange or NASDAQ
that day (or, in the absence of sales that day, at values based on
the last sale prices of the preceding trading day or closing bid
and asked prices); (ii) securities actively traded on a foreign
securities exchange are valued at the last sales price available to
the pricing service approved by the Trust's Board of Trustees or to
the Manager as reported by the principal exchange on which the
security is traded; (iii) unlisted foreign securities or listed
foreign securities not actively traded are valued as in (i) above,
if available, or at the mean between "bid" and "asked" prices
obtained from active market makers in the security on the basis of
reasonable inquiry; (iv) long-term debt securities having a
remaining maturity in excess of 60 days are valued at the mean
between the "bid" and "asked" prices determined by a portfolio
pricing service approved by the Trust's Board of Trustees or
obtained from active market makers in the security on the basis of
reasonable inquiry; (v) debt instruments having a maturity of more
than one year when issued, and non-money market type instruments
having a maturity of one year or less when issued, which have a
remaining maturity of 60 days or less are valued at the mean
between the "bid" and "asked" prices determined by a pricing
service approved by the Trust's Board of Trustees or obtained from
active market makers in the security on the basis of reasonable
inquiry; (vi) money market-type debt securities having a maturity
of less than one year when issued that having a remaining maturity
of 60 days or less are valued at cost, adjusted for amortization of
premiums and accretion of discounts; and (vii) securities
(including restricted securities) not having readily-available
market quotations are valued at fair value under the Board's
procedures and (viii) securities traded on foreign exchanges are
valued at the closing or last sales prices reported on a principal
exchange, or, if none, at the mean between closing bid and asked
prices and reflect prevailing rates of exchange taken from the
closing price on the London Foreign exchange market that day as
provided by a reliable bank, dealer or pricing service.
Trading in securities on European and Asian exchanges and
over-the-counter markets is normally completed before the close of
the Exchange. Events affecting the values of foreign securities
traded in such markets that occur between the time their prices are
determined and the close of the Exchange will not be reflected in
the Fund's calculation of its net asset value unless the Board of
Trustees or the Manager, under procedures established by the Board,
determines that the particular event would materially affect the
Fund's net asset values, in which case an adjustment would be made.
Foreign currency, including forward contracts, will be valued at
the closing price in the London foreign exchange market that day as
provided by a reliable bank, dealer or pricing service. The values
of securities denominated in foreign currency will be converted to
U.S. dollars at the closing price in the London foreign exchange
market that day as provided by a reliable bank, dealer or pricing
service. In the case of U.S. government securities and corporate
bonds, where last sale information is not generally available, such
pricing procedures may include "matrix" comparisons to the prices
for comparable instruments on the basis of quality, yield, maturity
and other special factors involved. The Trustees will monitor the
accuracy of pricing services by comparing prices used for portfolio
evaluation to actual sales prices of selected securities.
Puts, calls and Futures are valued at the last sales price on
the principal exchanges on which they are traded or on NASDAQ, as
applicable, as determined by a pricing service approved by the
Board of Trustees or by the Manager, or, if there are no sales that
day, in accordance with (i) above. When the Fund writes an option,
an amount equal to the premium received by the Fund is included in
the Fund's Statement of Assets and Liabilities as an asset, and an
equivalent deferred credit is included in the liability section.
The deferred credit is adjusted ("marked-to-market") to reflect the
current market value of the option. If a call written by the Fund
is exercised, the proceeds are increased by the premium received.
AccountLink. When shares are purchased through AccountLink, each
purchase must be at least $25.00. Shares will be purchased on the
regular business day the Distributor is instructed to initiate the
Automated Clearing House ("ACH") transfer to buy the shares.
Dividends will begin to accrue on shares purchased by the proceeds
of ACH transfers on the business day the Fund receives Federal
Funds for the purchase through the ACH system before the close of
The New York Stock Exchange. The Exchange normally closes at 4:00
P.M., but may close earlier on certain days. If Federal Funds are
received on a business day after the close of the Exchange, the
shares will be purchased and dividends will begin to accrue on the
next regular business day. The proceeds of ACH transfers are
normally received by the Fund 3 days after the transfers are
initiated. The Distributor and the Fund are not responsible for
any delays in purchasing shares resulting from delays in ACH
transmissions.
Reduced Sales Charges. As discussed in the Prospectus, a reduced
sales charge rate may be obtained for Class A shares under Rights
of Accumulation and Letters of Intent because of the economies of
sales efforts and reduction in expenses realized by the
Distributor, dealers and brokers making such sales. No sales
charge is imposed in certain other circumstances described in the
Prospectus because the Distributor or dealer or broker incurs
little or no selling expenses. The term "immediate family" refers
to one's spouse, children, grandchildren, parents, grandparents,
parents-in-law, sons- and daughters-in-law, siblings, a sibling's
spouse and a spouse's siblings.
-- The Oppenheimer Funds. The Oppenheimer funds are those
mutual funds for which the Distributor acts as the distributor or
the sub-distributor and include the following:
Oppenheimer Tax-Free Bond Fund
Oppenheimer New York Tax-Exempt Fund
Oppenheimer California Tax-Exempt Fund
Oppenheimer Intermediate Tax-Exempt Fund
Oppenheimer Insured Tax-Exempt Fund
Oppenheimer Main Street California Tax-Exempt Fund
Oppenheimer Florida Tax-Exempt Fund
Oppenheimer Pennsylvania Tax-Exempt Fund
Oppenheimer New Jersey Tax-Exempt Fund
Oppenheimer Fund
Oppenheimer Discovery Fund
Oppenheimer Target Fund
Oppenheimer Growth Fund
Oppenheimer Equity Income Fund
Oppenheimer Value Stock Fund
Oppenheimer Asset Allocation Fund
Oppenheimer Total Return Fund, Inc.
Oppenheimer Main Street Income & Growth Fund
Oppenheimer High Yield Fund
Oppenheimer Champion Income Fund
Oppenheimer Bond Fund
Oppenheimer U.S. Government Trust
Oppenheimer Limited-Term Government Fund
Oppenheimer Global Fund
Oppenheimer Global Emerging Growth Fund
Oppenheimer Global Growth & Income Fund
Oppenheimer Gold & Special Minerals Fund
Oppenheimer Strategic Income Fund
Oppenheimer Strategic Income & Growth Fund
Oppenheimer International Bond Fund
Oppenheimer Enterprise Fund
Oppenheimer Quest Opportunity Value Fund
Oppenheimer Quest Growth & Income Value Fund
Oppenheimer Quest Small Cap Value Fund
Oppenheimer Quest Officers Value Fund
Oppenheimer Quest Global Value Fund, Inc.
Oppenheimer Quest Value Fund, Inc.
Rochester Portfolio Series - Limited-Term New York Municipal
Fund*
Rochester Fund Series - The Bond Fund For Growth*
Rochester Fund Municipals*
__________________
* Shares of the Fund are not presently exchangeable for shares of
this fund.
and the following "Money Market Funds":
Oppenheimer Money Market Fund, Inc.
Oppenheimer Cash Reserves
Centennial Money Market Trust
Centennial Tax Exempt Trust
Centennial Government Trust
Centennial New York Tax Exempt Trust
Centennial California Tax Exempt Trust
Centennial America Fund, L.P.
Daily Cash Accumulation Fund, Inc.
There is an initial sales charge on the purchase of Class A
shares of each of the Oppenheimer funds except Money Market Funds
(under certain circumstances described herein, redemption proceeds
of Money Market Fund shares may be subject to a contingent
deferred sales charge).
-- Letters of Intent. A Letter of Intent ("Letter") is the
investor's statement of intention to purchase Class A and Class B
shares (or shares of either class) of the Fund (and other eligible
Oppenheimer funds) during the 13-month period from the investor's
first purchase pursuant to the Letter (the "Letter of Intent
period"), which may, at the investor's request, include purchases
made up to 90 days prior to the date of the Letter. The Letter
states the investor's intention to make the aggregate amount of
purchases (excluding any purchases made by reinvestment of
dividends or distributions or purchases made at net asset value
without sales charge), which together with the investor's holdings
of such funds (calculated at their respective public offering
prices calculated on the date of the Letter) will equal or exceed
the amount specified in the Letter. This enables the investor to
count the shares to be purchased under the Letter of Intent to
obtain the reduced sales charge rate (as set forth in the
Prospectus) that applies under the Right of Accumulation to current
purchases of Class A shares. Each purchase of Class A shares under
the Letter will be made at the public offering price (including the
sales charge) that applies to a single lump-sum purchase of shares
in the amount intended to be purchased under the Letter.
In submitting a Letter, the investor makes no commitment to
purchase shares, but if the investor's purchases of shares within
the Letter of Intent period, when added to the value (at offering
price) of the investor's holdings of shares on the last day of that
period, do not equal or exceed the intended purchase amount, the
investor agrees to pay the additional amount of sales charge
applicable to such purchases, as set forth in "Terms of Escrow,"
below (as those terms may be amended from time to time). The
investor agrees that shares equal in value to 5% of the intended
purchase amount will be held in escrow by the Transfer Agent
subject to the Terms of Escrow. Also, the investor agrees to be
bound by the terms of the Prospectus, this Statement of Additional
Information and the Application used for such Letter of Intent, and
if such terms are amended, as they may be from time to time by the
Fund, that those amendments will apply automatically to existing
Letters of Intent.
For purchases of shares of the Fund and other Oppenheimer
funds by OppenheimerFunds prototype 401(k) plans under a Letter of
Intent, the Transfer Agent will not hold shares in escrow. If the
intended purchase amount under the Letter entered into by an
OppenheimerFunds prototype 401(k) plan is not purchased by the plan
by the end of the Letter of Intent period, there will be no
adjustment of commissions paid to the broker-dealer or financial
institution of record for accounts held in the name of that plan.
If the total eligible purchases made during the Letter of
Intent period do not equal or exceed the intended purchase amount,
the commissions previously paid to the dealer of record for the
account and the amount of sales charge retained by the Distributor
will be adjusted to the rates applicable to actual purchases. If
total eligible purchases during the Letter of Intent period exceed
the intended purchase amount and exceed the amount needed to
qualify for the next sales charge rate reduction set forth in the
applicable prospectus, the sales charges paid will be adjusted to
the lower rate, but only if and when the dealer returns to the
Distributor the excess of the amount of commissions allowed or paid
to the dealer over the amount of commissions that apply to the
actual amount of purchases. The excess commissions returned to the
Distributor will be used to purchase additional shares for the
investor's account at the net asset value per share in effect on
the date of such purchase, promptly after the Distributor's receipt
thereof.
In determining the total amount of purchases made under a
Letter, shares redeemed by the investor prior to the termination of
the Letter of Intent period will be deducted. It is the
responsibility of the dealer of record and/or the investor to
advise the Distributor about the Letter in placing any purchase
orders for the investor during the Letter of Intent period. All
of such purchases must be made through the Distributor.
- Terms of Escrow That Apply to Letters of Intent.
1. Out of the initial purchase (or subsequent purchases if
necessary) made pursuant to a Letter, shares of the Fund equal in
value up to 5% of the intended purchase amount specified in the
Letter shall be held in escrow by the Transfer Agent. For example,
if the intended purchase amount is $50,000, the escrow shall be
shares valued in the amount of $2,500 (computed at the public
offering price adjusted for a $50,000 purchase). Any dividends and
capital gains distributions on the escrowed shares will be credited
to the investor's account.
2. If the intended purchase amount specified under the
Letter is completed within the thirteen-month Letter of Intent
period, the escrowed shares will be promptly released to the
investor.
3. If, at the end of the thirteen-month Letter of Intent
period the total purchases pursuant to the Letter are less than the
intended purchase amount specified in the Letter, the investor must
remit to the Distributor an amount equal to the difference between
the dollar amount of sales charges actually paid and the amount of
sales charges which would have been paid if the total amount
purchased had been made at a single time. Such sales charge
adjustment will apply to any shares redeemed prior to the
completion of the Letter. If such difference in sales charges is
not paid within twenty days after a request from the Distributor or
the dealer, the Distributor will, within sixty days of the
expiration of the Letter, redeem the number of escrowed shares
necessary to realize such difference in sales charges. Full and
fractional shares remaining after such redemption will be released
from escrow. If a request is received to redeem escrowed shares
prior to the payment of such additional sales charge, the sales
charge will be withheld from the redemption proceeds.
4. By signing the Letter, the investor irrevocably
constitutes and appoints the Transfer Agent as attorney-in-fact to
surrender for redemption any or all escrowed shares.
5. The shares eligible for purchase under the Letter (or the
holding of which may be counted toward completion of a Letter)
include (a) Class A shares sold with a front-end sales charge or
subject to a Class A contingent deferred sales charge, (b) Class B
shares acquired subject to a contingent deferred sales charge, and
(c) Class A shares or Class B shares acquired in exchange for
either (i) Class A shares of one of the other Oppenheimer funds
that were acquired subject to a Class A initial or contingent
deferred sales charge or (ii) Class B shares of one of the other
Oppenheimer funds that were acquired subject to a contingent
deferred sales charge.
6. Shares held in escrow hereunder will automatically be
exchanged for shares of another fund to which an exchange is
requested, as described in the section of the Prospectus entitled
"How to Exchange Shares," and the escrow will be transferred to
that other fund.
Asset Builder Plans. To establish an Asset Builder Plan from a
bank account, a check (minimum $25) for the initial purchase must
accompany the application. Shares purchased by Asset Builder Plan
payments from bank accounts are subject to the redemption
restrictions for recent purchases described in "How To Sell
Shares," in the Prospectus. Asset Builder Plans also enable
shareholders of Oppenheimer Cash Reserves to use those accounts for
monthly automatic purchases of shares of up to four other
Oppenheimer funds.
There is a front-end sales charge on the purchase of certain
Oppenheimer funds, or a contingent deferred sales charge may apply
to shares purchased by Asset Builder payments. An application
should be obtained from the Distributor, completed and returned,
and a prospectus of the selected fund(s) should be obtained from
the Distributor or your financial advisor before initiating Asset
Builder payments. The amount of the Asset Builder investment may
be changed or the automatic investments may be terminated at any
time by writing to the Transfer Agent. A reasonable period
(approximately 15 days) is required after the Transfer Agent's
receipt of such instructions to implement them. The Fund reserves
the right to amend, suspend, or discontinue offering such plans at
any time without prior notice.
Cancellation of Purchase Orders. Cancellation of purchase orders
for the Fund's shares (for example, when a purchase check is
returned to the Fund unpaid) causes a loss to be incurred when the
net asset value of the Fund's shares on the cancellation date is
less than on the purchase date. That loss is equal to the amount
of the decline in the net asset value per share multiplied by the
number of shares in the purchase order. The investor is
responsible for that loss. If the investor fails to compensate the
Fund for the loss, the Distributor will do so. The Fund may
reimburse the Distributor for that amount by redeeming shares from
any account registered in that investor's name, or the Fund or the
Distributor may seek other redress.
How to Sell Shares
Information on how to sell shares of the Fund is stated in the
Prospectus. The information below supplements the terms and
conditions for redemptions set forth in the Prospectus.
-- Involuntary Redemptions. The Board of Directors has the
right to cause the involuntary redemption of the shares held in any
Fund account if the aggregate net asset value of those shares is
less than $200 or such lesser amount as the Board may fix. The
Board of Directors will not cause the involuntary redemption of
shares in an account if the aggregate net asset value of the shares
has fallen below the stated minimum solely as a result of market
fluctuations. Should the Board elect to exercise this right, it
may also fix, in accordance with the Investment Company Act, the
requirements for any notice to be given to the shareholders in
question (not less than 30 days), or the Board may set requirements
for granting permission to the Shareholder to increase the
investment, and set other terms and conditions so that the shares
would not be involuntarily redeemed.
Reinvestment Privilege. Within six months of a redemption, a
shareholder may reinvest all or part of the redemption proceeds of
(i) Class A shares, or (ii) Class B shares that were subject to the
Class B contingent deferred sales charge when redeemed. This
privilege does not apply to Class C shares. The reinvestment may
be made without sales charge only in Class A shares of the Fund or
any of the other Oppenheimer funds into which shares of the Fund
are exchangeable as described below, at the net asset value next
computed after the Transfer Agent receives the reinvestment order.
The shareholder must ask the Distributor for that privilege at the
time of reinvestment. Any capital gain that was realized when the
shares were redeemed is taxable, and reinvestment will not alter
any capital gains tax payable on that gain. If there has been a
capital loss on the redemption, some or all of the loss may not be
tax deductible, depending on the timing and amount of the
reinvestment. Under the Internal Revenue Code, if the redemption
proceeds of Fund shares on which a sales charge was paid are
reinvested in shares of the Fund or another of the Oppenheimer
funds within 90 days of payment of the sales charge, the
shareholder's basis in the shares of the Fund that were redeemed
may not include the amount of the sales charge paid. That would
reduce the loss or increase the gain recognized from the
redemption. However, in that case the sales charge would be added
to the basis of the shares acquired by the reinvestment of the
redemption proceeds. The Fund may amend, suspend or cease offering
this reinvestment privilege at any time as to shares redeemed after
the date of such amendment, suspension or cessation.
Transfers of Shares. Shares are not subject to the payment of a
contingent deferred sales charge of any class at the time of
transfer to the name of another person or entity (whether the
transfer occurs by absolute assignment, gift or bequest, not
involving, directly or indirectly, a public sale). The transferred
shares will remain subject to the contingent deferred sales charge,
calculated as if the transferee shareholder had acquired the
transferred shares in the same manner and at the same time as the
transferring shareholder. If less than all shares held in an
account are transferred, and some but not all shares in the account
would be subject to a contingent deferred sales charge if redeemed
at the time of transfer, the priorities described in the Prospectus
under "How to Buy Shares" for the imposition of the Class B and
Class C contingent deferred sales charge will be followed in
determining the order in which shares are transferred.
Distributions From Retirement Plans. Requests for distributions
from OppenheimerFunds-sponsored IRAs, 403(b)(7) custodial plans,
401(k) plans, or pension or profit-sharing plans should be
addressed to "Trustee, OppenheimerFunds Retirement Plans," c/o the
Transfer Agent at its address listed in "How To Sell Shares" in the
Prospectus or on the back cover of this Statement of Additional
Information. The request must: (i) state the reason for the
distribution; (ii) state the owner's awareness of tax penalties if
the distribution is premature; and (iii) conform to the
requirements of the plan and the Fund's other redemption
requirements. Participants, other than self-employed persons
maintaining a plan account in their own name, in OppenheimerFunds-
sponsored prototype pension or profit-sharing or 401(k) plans may
not directly redeem or exchange shares held for their account under
those plans. The employer or plan administrator must sign the
request. Distributions from pension, profit sharing plans are
subject to special requirements under the Internal Revenue Code and
certain documents (available from the Transfer Agent) must be
completed before the distribution may be made. Distributions from
retirement plans are subject to withholding requirements under the
Internal Revenue Code, and IRS Form W-4P (available from the
Transfer Agent) must be submitted to the Transfer Agent with the
distribution request, or the distribution may be delayed. Unless
the shareholder has provided the Transfer Agent with a certified
tax identification number, the Internal Revenue Code requires that
tax be withheld from any distribution even if the shareholder
elects not to have tax withheld. The Fund, the Manager, the
Distributor, the Trustee and the Transfer Agent assume no
responsibility to determine whether a distribution satisfies the
conditions of applicable tax laws and will not be responsible for
any tax penalties assessed in connection with a distribution.
Special Arrangements for Repurchase of Shares from Dealers and
Brokers. The Distributor is the Fund's agent to repurchase its
shares from authorized dealers or brokers. The repurchase price
per share will be the net asset value next computed after the
Distributor receives the order placed by the dealer or broker,
except that if the Distributor receives a repurchase order from the
dealer or broker after the close of The New York Stock Exchange on
a regular business day, it will be processed at that day's net
asset value, if the order was received by the dealer or broker from
its customer prior to the time the Exchange closes (normally, that
is 4:00 P.M., but may be earlier on some days) and the order was
transmitted to and received by the Distributor prior to its close
of business that day (normally 5:00 P.M.). Ordinarily, for
accounts redeemed by a broker-dealer under this procedure, payment
will be made within three business days after the shares have been
redeemed upon the Distributor's receipt of the required redemption
documents in proper form, with the signature(s) of the registered
owners guaranteed on the redemption document as described in the
Prospectus.
Automatic Withdrawal and Exchange Plans. Investors owning shares
of the Fund valued at $5,000 or more can authorize the Transfer
Agent to redeem shares (minimum $50) automatically on a monthly,
quarterly, semi-annual or annual basis under an Automatic
Withdrawal Plan. Shares will be redeemed three business days prior
to the date requested by the shareholder for receipt of the
payment. Automatic withdrawals of up to $1,500 per month may be
requested by telephone if payments are to be made by check payable
to all shareholders of record and sent to the address of record for
the account (and if the address has not been changed within the
prior 30 days). Required minimum distributions from
OppenheimerFunds-sponsored retirement plans may not be arranged on
this basis. Payments are normally made by check, but shareholders
having AccountLink privileges (see "How To Buy Shares") may arrange
to have Automatic Withdrawal Plan payments transferred to the bank
account designated on the OppenheimerFunds New Account Application
or signature-guaranteed instructions. The Fund cannot guarantee
receipt of a payment on the date requested and reserves the right
to amend, suspend or discontinue offering such plans at any time
without prior notice. Because of the sales charge assessed on
Class A share purchases, shareholders should not make regular
additional Class A share purchases while participating in an
Automatic Withdrawal Plan. Class B and Class C shareholders should
not establish withdrawal plans because of the imposition of the
contingent deferred sales charges on such withdrawals (except where
the Class B and Class C contingent deferred sales charges are
waived as described in the Prospectus under "Waivers of Class B and
Class C Contingent Deferred Sales Charges").
By requesting an Automatic Withdrawal or Exchange Plan, the
shareholder agrees to the terms and conditions applicable to such
plans, as stated below and in the provisions of the Oppenheimer
funds Application relating to such Plans, as well as the
Prospectus. These provisions may be amended from time to time by
the Fund and/or the Distributor. When adopted, such amendments
will automatically apply to existing Plans.
-- Automatic Exchange Plans. Shareholders can authorize the
Transfer Agent (on the OppenheimerFunds Application or signature-
guaranteed instructions) to exchange a pre-determined amount of
shares of the Fund for shares (of the same class) of other
Oppenheimer funds automatically on a monthly, quarterly, semi-
annual or annual basis under an Automatic Exchange Plan. The
minimum amount that may be exchanged to each other fund account is
$25. Exchanges made under these plans are subject to the
restrictions that apply to exchanges as set forth in "How to
Exchange Shares" in the Prospectus and below in this Statement of
Additional Information.
-- Automatic Withdrawal Plans. Fund shares will be redeemed
as necessary to meet withdrawal payments. Shares acquired without
a sales charge will be redeemed first and shares acquired with
reinvested dividends and capital gains distributions will be
redeemed next, followed by shares acquired with a sales charge, to
the extent necessary to make withdrawal payments. Depending upon
the amount withdrawn, the investor's principal may be depleted.
Payments made under withdrawal plans should not be considered as a
yield or income on your investment. It may not be desirable to
purchase additional Class A shares while making automatic
withdrawals because of the sales charges that apply to purchases
when made. Accordingly, a shareholder normally may not maintain an
Automatic Withdrawal Plan while simultaneously making regular
purchases of Class A shares.
The Transfer Agent will administer the investor's Automatic
Withdrawal Plan (the "Plan") as agent for the investor (the
"Planholder") who executed the Plan authorization and application
submitted to the Transfer Agent. The Transfer Agent and the Fund
shall incur no liability to the Planholder for any action taken or
omitted by the Transfer Agent in good faith to administer the Plan.
Certificates will not be issued for shares of the Fund purchased
for and held under the Plan, but the Transfer Agent will credit all
such shares to the account of the Planholder on the records of the
Fund. Any share certificates held by a Planholder may be
surrendered unendorsed to the Transfer Agent with the Plan
application so that the shares represented by the certificate may
be held under the Plan.
For accounts subject to Automatic Withdrawal Plans,
distributions of capital gains must be reinvested in shares of the
Fund, which will be done at net asset value without a sales charge.
Dividends on shares held in the account may be paid in cash or
reinvested.
Redemptions of shares needed to make withdrawal payments will
be made at the net asset value per share determined on the
redemption date. Checks or ACH transfer payments of the proceeds
of Plan withdrawals will normally be transmitted three business
days prior to the date selected for receipt of the payment (receipt
of payment on the date selected cannot be guaranteed), according to
the choice specified in writing by the Planholder.
The amount and the interval of disbursement payments and the
address to which checks are to be mailed or AccountLink payments
are to be sent may be changed at any time by the Planholder by
writing to the Transfer Agent. The Planholder should allow at
least two weeks' time in mailing such notification for the
requested change to be put in effect. The Planholder may, at any
time, instruct the Transfer Agent by written notice (in proper form
in accordance with the requirements of the then-current Prospectus
of the Fund) to redeem all, or any part of, the shares held under
the Plan. In that case, the Transfer Agent will redeem the number
of shares requested at the net asset value per share in effect in
accordance with the Fund's usual redemption procedures and will
mail a check for the proceeds to the Planholder.
The Plan may be terminated at any time by the Planholder by
writing to the Transfer Agent. A Plan may also be terminated at
any time by the Transfer Agent upon receiving directions to that
effect from the Fund. The Transfer Agent will also terminate a
Plan upon receipt of evidence satisfactory to it of the death or
legal incapacity of the Planholder. Upon termination of a Plan by
the Transfer Agent or the Fund, shares that have not been redeemed
from the account will be held in uncertificated form in the name of
the Planholder, and the account will continue as a dividend-
reinvestment, uncertificated account unless and until proper
instructions are received from the Planholder or his or her
executor or guardian, or other authorized person.
To use shares held under the Plan as collateral for a debt,
the Planholder may request issuance of a portion of the shares in
certificated form. Upon written request from the Planholder, the
Transfer Agent will determine the number of shares for which a
certificate may be issued without causing the withdrawal checks to
stop because of exhaustion of uncertificated shares needed to
continue payments. However, should such uncertificated shares
become exhausted, Plan withdrawals will terminate.
If the Transfer Agent ceases to act as transfer agent for the
Fund, the Planholder will be deemed to have appointed any successor
transfer agent to act as agent in administering the Plan.
How To Exchange Shares
The Rochester Funds are not Eligible Funds for purposes of the
exchange privilege set forth in the Prospectus. As stated in the
Prospectus, shares of a particular class of Oppenheimer funds
having more than one class of shares may be exchanged only for
shares of the same class of other Oppenheimer funds. Shares of the
Oppenheimer funds that have a single class without a class
designation are deemed "Class A" shares for this purpose. All of
the Oppenheimer funds offer Class A, B and C shares except
Oppenheimer Money Market Fund, Inc., Centennial Money Market Trust,
Centennial Tax Exempt Trust, Centennial Government Trust,
Centennial New York Tax Exempt Trust, Centennial California Tax
Exempt Trust, Centennial America Fund, L.P., and Daily Cash
Accumulation Fund, Inc., which only offer Class A shares, and
Oppenheimer Main Street California Tax-Exempt Fund which only
offers Class A and Class B shares (Class B and Class C shares of
Oppenheimer Cash Reserves are generally available only by exchange
from the same class of shares of other Oppenheimer funds or through
OppenheimerFunds sponsored 401(k) plans). A list showing which
funds offer which classes can be obtained by calling the
distributor at 1-800-525-7048.
Class A shares of Oppenheimer funds may be exchanged at net
asset value for shares of any Money Market Fund. Shares of any
Money Market Fund purchased without a sales charge may be exchanged
for shares of Oppenheimer funds offered with a sales charge upon
payment of the sales charge (or, if applicable, may be used to
purchase shares of Oppenheimer funds subject to a contingent
deferred sales charge). However, shares of Oppenheimer Money
Market Fund, Inc. purchased with the redemption proceeds of shares
of other mutual funds (other than funds managed by the Manager or
its subsidiaries) redeemed within the 12 months prior to that
purchase may subsequently be exchanged for shares of other
Oppenheimer funds without being subject to an initial or contingent
deferred sales charge, whichever is applicable. To qualify for
that privilege, the investor or the investor's dealer must notify
the Distributor of eligibility for this privilege at the time the
shares of Oppenheimer Money Market Fund, Inc. are purchased, and,
if requested, must supply proof of entitlement to this privilege.
Shares of this Fund acquired by reinvestment of dividends or
distributions from any other of the Oppenheimer funds or from any
unit investment trust for which reinvestment arrangements have been
made with the Distributor may be exchanged at net asset value for
shares of any of the Oppenheimer funds. No contingent deferred
sales charge is imposed on exchanges of shares of either class
purchased subject to a contingent deferred sales charge. However,
when Class A shares acquired by exchange of Class A shares of other
Oppenheimer funds purchased subject to a Class A contingent
deferred sales charge are redeemed within 18 months of the end of
the calendar month of the initial purchase of the exchanged Class
A shares, the Class A contingent deferred sales charge is imposed
on the redeemed shares (see "Class A Contingent Deferred Sales
Charge" in the Prospectus). The Class B contingent deferred sales
charge is imposed on Class B shares acquired by exchange if they
are redeemed within six years of the initial purchase of the
exchanged Class B shares. The Class C contingent deferred sales
charge is imposed on Class C shares acquired by exchange if they
are redeemed within 12 months of the initial purchase of the
exchanged Class C shares.
When Class B or Class C shares are redeemed to effect an
exchange, the priorities described in "How To Buy Shares" in the
Prospectus for the imposition of the Class B and Class C contingent
deferred sales charges will be followed in determining the order in
which the shares are exchanged. Shareholders should take into
account the effect of any exchange on the applicability and rate of
any contingent deferred sales charge that might be imposed in the
subsequent redemption of remaining shares. Shareholders owning
shares of more than one class must specify whether they intend to
exchange Class A, Class B or Class C shares.
The Fund reserves the right to reject telephone or written
exchange requests submitted in bulk by anyone on behalf of 10 or
more accounts. The Fund may accept requests for exchanges of up to
50 accounts per day from representatives of authorized dealers that
qualify for this privilege. In connection with any exchange
request, the number of shares exchanged may be less than the number
requested if the exchange or the number requested would include
shares subject to a restriction cited in the Prospectus or this
Statement of Additional Information or would include shares covered
by a share certificate that is not tendered with the request. In
those cases, only the shares available for exchange without
restriction will be exchanged.
When exchanging shares by telephone, a shareholder must either
have an existing account in, or obtain and acknowledge receipt of
a prospectus of, the fund to which the exchange is to be made. For
full or partial exchanges of an account made by telephone, any
special account features such as Asset Builder Plans, Automatic
Withdrawal Plans and retirement plan contributions will be switched
to the new account unless the Transfer Agent is instructed
otherwise. If all telephone lines are busy (which might occur, for
example, during periods of substantial market fluctuations),
shareholders might not be able to request exchanges by telephone
and would have to submit written exchange requests.
Shares to be exchanged are redeemed on the regular business
day the Transfer Agent receives an exchange request in proper form
(the "Redemption Date"). Normally, shares of the fund to be
acquired are purchased on the Redemption Date, but such purchases
may be delayed by either fund up to five business days if it
determines that it would be disadvantaged by an immediate transfer
of the redemption proceeds. The Fund reserves the right, in its
discretion, to refuse any exchange request that may disadvantage it
(for example, if the receipt of multiple exchange requests from a
dealer might require the disposition of portfolio securities at a
time or at a price that might be disadvantageous to the Fund).
The different Oppenheimer funds available for exchange have
different investment objectives, policies and risks, and a
shareholder should assure that the Fund selected is appropriate for
his or her investment and should be aware of the tax consequences
of an exchange. For federal income tax purposes, an exchange
transaction is treated as a redemption of shares of one fund and a
purchase of shares of another. "Reinvestment Privilege," above,
discusses some of the tax consequences of reinvestment of
redemption proceeds in such cases. The Fund, the Distributor, and
the Transfer Agent are unable to provide investment, tax or legal
advice to a shareholder in connection with an exchange request or
any other investment transaction.
Dividends, Capital Gains and Taxes
Tax Status of the Fund's Dividends and Distributions. The Federal
tax treatment of the Fund's dividends and capital gains
distributions is explained in the Prospectus under the caption
"Dividends, Capital Gains and Taxes." Special provisions of the
Internal Revenue Code govern the eligibility of the Fund's
dividends for the dividends-received deduction for corporate
shareholders. Long-term capital gains distributions are not
eligible for the deduction. In addition, the amount of dividends
paid by the Fund which may qualify for the deduction is limited to
the aggregate amount of qualifying dividends that the Fund derives
from its portfolio investments that the Fund has held for a minimum
period, usually 46 days. A corporate shareholder will not be
eligible for the deduction on dividends paid on Fund shares held
for 45 days or less. To the extent the Fund's dividends are
derived from gross income from option premiums, interest income or
short-term gains from the sale of securities or dividends from
foreign corporations, those dividends will not qualify for the
deduction.
Under the Internal Revenue Code, by December 31 each year, the
Fund must distribute 98% of its taxable investment income earned
from January 1 through December 31 of that year and 98% of its
capital gains realized in the period from November 1 of the prior
year through October 31 of the current year, or else the Fund must
pay an excise tax on the amounts not distributed. While it is
presently anticipated that the Fund will meet those requirements,
the Board of Directors and the Manager might determine in a
particular year that it would be in the best interest of
shareholders for the Fund not to make such distributions at the
required levels and to pay the excise tax on the undistributed
amounts. That would reduce the amount of income or capital gains
available for distribution to shareholders.
If the Fund qualifies as a "regulated investment company"
under the Internal Revenue Code, it will not be liable for Federal
income taxes on amounts paid by it as dividends and distribution.
The Fund qualified during its last fiscal year, and intends to
qualify in current and future years, but reserves the right not to
do so. The Internal Revenue Code contains a number of complex
tests to determine whether the Fund will qualify, and the Fund
might not meet those tests in a particular year. For example, if
the Fund derives 30% or more of its gross income from the sale of
securities held less than three months, it may fail to qualify (see
"Tax Aspects of Covered Calls and Hedging Instruments," above). If
it did not so qualify, the Fund would be treated for tax purposes
as an ordinary corporation and receive no tax deduction for
payments made to shareholders.
The amount of a class's distributions may vary from time to
time depending on market conditions, the composition of the Fund's
portfolio, and expenses borne by the Fund or borne separately by a
class, as described in "Alternative Sales Arrangements -- Class A,
Class B and Class C Shares," above. Dividends are calculated in
the same manner, at the same time and on the same day for shares of
each class. However, dividends on Class B and Class C shares are
expected to be lower as a result of the asset-based sales charge on
Class B and Class C shares, and Class B and Class C dividends will
also differ in amount as a consequence of any difference in net
asset value between the classes.
Dividends, distributions and the proceeds of the redemption of
Fund shares represented by checks returned to the Transfer Agent by
the Postal Service as undeliverable will be invested in shares of
Oppenheimer Money Market Fund, Inc., as promptly as possible after
the return of such checks to the Transfer Agent, to enable the
investor to earn a return on otherwise idle funds.
Dividend Reinvestment in Another Fund. Shareholders of the Fund
may elect to reinvest all dividends and/or capital gains
distributions in shares of the same class of any of the other
Oppenheimer funds listed in "Reduced Sales Charges," above, at net
asset value without sales charge. To elect this option, a
shareholder must notify the Transfer Agent in writing and either
have an existing account in the fund selected for reinvestment or
must obtain a prospectus for that fund and an application from the
Distributor to establish an account. The investment will be made
at the net asset value per share in effect at the close of business
on the payable date of the dividend or distribution. Dividends
and/or distributions from certain of the Oppenheimer funds may be
invested in shares of this Fund on the same basis.
Additional Information About the Fund
The Custodian. State Street Bank and Trust Company acts as
custodian of the assets of the Trust. The Fund's cash balances in
excess of $100,000 are not protected by Federal deposit insurance.
Such uninsured balances may be substantial.
Independent Accountants. Price Waterhouse LLP are the
independent accountants of the Fund. Their services include
examining the annual financial statements of the Fund as well as
other related services.
Retirement Plans. The Distributor 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 the Distributor. 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 examples illustrate the
general approaches that will be followed. These hypotheticals will
be modified with different investment amounts, reflecting the
amounts that can be invested in 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 perfor-
mance of any OppenheimerFunds products.
<TABLE>
<CAPTION>
Benefits of Long Term Tax-Free Benefits of Long Term Tax-Free
Compounding - Single Sum Compounding - Periodic Investment
Amount of Contribution: $100,000 Amount Invested Annually: $2,000
Rates of Return Rates of Return
Years 8.00% 10.00% 12.00% Years 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 8.00% 10.00% 12.00% Years 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 $199,492
</TABLE>
<TABLE>
<CAPTION>
Comparison of Tax Deferred Investing -- Deducting Taxes at End
(Amount of Tax Rate as 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>
<PAGE>
- --------------------------------------------------------------------------------
INDEPENDENT AUDITORS' REPORT
To the Shareholders and Board of Directors of
Quest for Value Fund, Inc.:
We have audited the accompanying statement of assets and liabilities of Quest
for Value Fund, Inc., including the schedule of investments, as of October 31,
1995, and the related statement of operations for the year then ended, the
statements of changes in net assets for each of the years in the two year period
then ended and the financial highlights for each of the years in the five year
period then ended. These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
October 31, 1995 by correspondence with the custodian and brokers. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of Quest
for Value Fund, Inc. as of October 31, 1995, the results of its operations for
the year then ended, the changes in its net assets for each of the years in the
two year period then ended, and the financial highlights for each of the years
in the five year period then ended in conformity with generally accepted
accounting principles.
KPMG Peat Marwick LLP
New York, New York
December 20, 1995
41
<PAGE>
- --------------------------------------------------------------------------------
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and Trustees of
Quest for Value Family of Funds:
In our opinion, the accompanying statements of assets and liabilities, including
the schedules of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of the Opportunity Fund, the Small
Capitalization Fund, the Growth and Income Fund, the U.S. Government Income
Fund, and the Investment Quality Income Fund (constituting part of Quest for
Value Family of Funds, hereafter referred to as the "Fund") at October 31, 1995,
the results of each of their operations for the year then ended, the changes in
each of their net assets for each of the two years in the period then ended and
the financial highlights for each of the periods indicated, in conformity with
generally accepted accounting principles. These financial statements and
financial highlights (hereafter referred to as "financial statements") are the
responsibility of the Fund's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these financial statements in accordance with generally accepted
auditing standards which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits, which included confirmation of securities at October 31, 1995 by
correspondence with the custodian and brokers, provide a reasonable basis for
the opinion expressed above.
PRICE WATERHOUSE LLP
1177 Avenue of the Americas
New York, New York 10036
December 20, 1995
<PAGE>
OCTOBER 31, 1995
- --------------------------------------------------------------------------------
SCHEDULES OF INVESTMENTS
QUEST FOR VALUE FUND, INC.
<TABLE>
<CAPTION>
- ------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
- ------------------------------------------------------
SHORT-TERM CORPORATE NOTES -- 19.9%
AUTOMOTIVE -- 6.0%
Ford Motor Credit Co.
$ 2,400,000 5.72%, 11/20/95 $ 2,392,755
6,600,000 5.73%, 11/27/95 6,572,687
General Motors Acceptance Corp.
335,000 5.74%, 11/20/95 333,985
10,700,000 5.77%, 11/20/95 10,667,415
------------
19,966,842
------------
BANKING -- 1.4%
4,700,000 Norwest Financial, Inc.
5.73%, 11/13/95 4,691,023
------------
COMPUTERS -- 0.1%
430,000 IBM Credit Corp.
5.70%, 11/06/95 429,660
------------
MACHINERY & ENGINEERING -- 2.1%
Deere (John) Capital Corp.
3,300,000 5.71%, 11/13/95 3,293,719
3,600,000 5.75%, 11/13/95 3,593,100
------------
6,886,819
------------
MISCELLANEOUS FINANCIAL SERVICES -- 10.1%
Beneficial Corp.
1,300,000 5.72%, 11/27/95 1,294,629
225,000 5.74%, 11/27/95 224,067
800,000 CIT Group Holdings, Inc.
5.73%, 11/13/95 798,472
Household Finance Corp.
14,200,000 5.72%, 12/04/95 14,125,545
1,000,000 5.73%, 11/27/95 995,862
Merrill Lynch & Co., Inc.
500,000 5.72%, 11/06/95 499,603
15,345,000 5.75%, 11/06/95 15,332,745
------------
33,270,923
------------
OIL/GAS -- 0.2%
500,000 Chevron Oil Finance Co.
5.71%, 11/08/95 499,445
------------
Total Short-Term Corporate Notes
(cost -- $65,744,712) $ 65,744,712
------------
<CAPTION>
- ------------------------------------------------------
<C> <S> <C>
PRINCIPAL
AMOUNT VALUE
- ------------------------------------------------------
CONVERTIBLE CORPORATE BONDS -- 0.7%
REAL ESTATE
$ 2,330,921 Security Capital Realty, Inc. (A)
12.00%, 6/30/14
(cost -- $2,198,259) $ 2,330,921
------------
<CAPTION>
- ------------------------------------------------------
<C> <S> <C>
SHARES VALUE
- ------------------------------------------------------
COMMON STOCKS -- 79.3%
AEROSPACE -- 6.0%
127,000 AlliedSignal, Inc. $ 5,397,500
177,000 McDonnell Douglas Corp. 14,469,750
------------
19,867,250
------------
APPAREL -- 1.4%
202,600 Warnaco Group, Inc. (Class A)* 4,710,450
------------
BANKING -- 3.4%
110,000 Citicorp 7,136,250
81,215 Mellon Bank Corp. 4,070,902
------------
11,207,152
------------
CHEMICALS -- 4.5%
60,000 du Pont (E.I.) de Nemours & Co. 3,742,500
81,000 Hercules, Inc. 4,323,375
64,000 Monsanto Co. 6,704,000
------------
14,769,875
------------
CONGLOMERATES -- 1.7%
90,200 General Electric Co. 5,705,150
------------
CONSUMER PRODUCTS -- 1.5%
149,000 Reebok International Ltd. 5,066,000
------------
CONTAINERS -- 2.2%
160,000 Temple - Inland, Inc. 7,280,000
------------
COSMETICS/TOILETRIES -- 1.5%
67,800 Avon Products, Inc. 4,822,275
------------
DRUGS & MEDICAL PRODUCTS -- 4.8%
179,000 Becton, Dickinson & Co. 11,635,000
48,000 Warner-Lambert Co. 4,086,000
------------
15,721,000
------------
</TABLE>
* Non-income producing security.
15
<PAGE>
OCTOBER 31, 1995
- --------------------------------------------------------------------------------
SCHEDULES OF INVESTMENTS
<TABLE>
<CAPTION>
- ------------------------------------------------------
SHARES VALUE
<C> <S> <C>
- ------------------------------------------------------
ELECTRONICS -- 5.3%
177,000 Arrow Electronics, Inc.* $ 8,982,750
122,000 Intel Corp. 8,524,750
------------
17,507,500
------------
HEALTHCARE SERVICES -- 2.4%
440,000 Tenet Healthcare Corp. 7,865,000
------------
INSURANCE -- 17.2%
216,200 Ace Ltd. 7,350,800
35,300 AFLAC, Inc. 1,438,475
99,000 American International Group, Inc. 8,353,125
464,200 EXEL Ltd. 24,834,700
197,000 Progressive Corp., Ohio 8,175,500
101,000 Transamerica Corp. 6,842,750
------------
56,995,350
------------
METALS/MINING -- 2.7%
66,333 Freeport McMoRan, Inc. 2,479,208
8,518 Freeport McMoRan, Copper & Gold
(Class A) 194,849
279,290 Freeport McMoRan, Copper & Gold
(Class B) 6,353,848
------------
9,027,905
------------
MISCELLANEOUS FINANCIAL SERVICES -- 8.8%
200,000 American Express Co. 8,125,000
290,000 Countrywide Credit Industries, Inc. 6,416,250
214,000 Federal Home Loan Mortgage Corp. 14,819,500
------------
29,360,750
------------
PAPER PRODUCTS -- 1.9%
120,000 Champion International Corp. $ 6,420,000
------------
<CAPTION>
- ------------------------------------------------------
<C> <S> <C>
SHARES VALUE
- ------------------------------------------------------
REAL ESTATE -- 0.8%
3,050 Security Capital Realty, Inc. (A) 2,689,844
------------
RETAIL -- 6.3%
373,000 May Department Stores Co. 14,640,250
140,000 Mercantile Stores Co., Inc. 6,282,500
------------
20,922,750
------------
TELECOMMUNICATIONS -- 2.6%
344 Bell Atlantic Corp. 21,887
225,200 Sprint Corp. 8,670,200
------------
8,692,087
------------
TEXTILES -- 1.3%
340,000 Shaw Industries, Inc. 4,335,000
------------
TOYS/GAMES/HOBBY -- 0.9%
92,000 Hasbro, Inc. 2,806,000
------------
TRANSPORTATION -- 2.1%
84,000 CSX Corp. 7,035,000
------------
Total Common Stocks
(cost -- $190,764,443) $262,806,338
------------
</TABLE>
<TABLE>
<S> <C> <C>
Total Investments
(cost -- $258,707,414)) 99.9% $330,881,971
Other Assets in Excess of
Other Liabilities 0.1 429,932
------ ------------
TOTAL NET ASSETS 100.0 % $331,311,903
------ ------------
------ ------------
</TABLE>
* Non-income producing security.
(A) Restricted Securities (the Fund will not bear any costs, including those
involved in registration under the Securities Act of 1933, in connection
with the disposition of these securities):
<TABLE>
<CAPTION>
UNIT
VALUATION
AS
DATE OF UNIT OF OCTOBER
DESCRIPTION ACQUISITION PAR AMOUNT SHARES COST 31, 1995
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Security Capital
Realty, Inc.
12.00%, 6/30/14 9/15/94 $2,330,921 -- $ 94 $ 100
Security Capital
Realty, Inc.
Common Stock 9/15/94 -- 3,050 926 882
</TABLE>
16
<PAGE>
- --------------------------------------------------------------------------------
OPPORTUNITY FUND
<TABLE>
<CAPTION>
- ------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
- ------------------------------------------------------
SHORT-TERM CORPORATE NOTES -- 15.6%
AUTOMOTIVE -- 2.4%
$15,000,000 General Motors Acceptance Corp.
5.77%, 11/20/95 $ 14,954,321
------------
BANKING -- 2.8%
Norwest Financial, Inc.
1,800,000 5.73%, 11/13/95 1,796,562
16,000,000 5.73%, 11/27/95 15,933,787
------------
17,730,349
------------
COMPUTERS -- 0.2%
1,490,000 IBM Credit Corp.
5.70%, 11/06/95 1,488,820
------------
MACHINERY & ENGINEERING -- 3.0%
Deere (John) Capital Corp.
13,600,000 5.71%, 11/13/95 13,574,115
5,235,000 5.74%, 11/13/95 5,224,984
------------
18,799,099
------------
MISCELLANEOUS FINANCIAL SERVICES -- 7.1%
Beneficial Corp.
1,200,000 5.72%, 11/20/95 1,196,377
10,455,000 5.73%, 11/20/95 10,423,382
1,800,000 CIT Group Holdings, Inc.
5.73%, 11/13/95 1,796,562
15,980,000 Household Finance Corp.
5.73%, 11/08/95 15,962,196
Merrill Lynch & Co., Inc.
4,500,000 5.75%, 11/02/95 4,499,281
11,475,000 5.75%, 11/06/95 11,465,836
------------
45,343,634
------------
OIL/GAS -- 0.1%
491,000 Chevron Oil Finance Co.
5.71%, 11/08/95 490,455
------------
Total Short-Term Corporate Notes
(cost -- $98,806,678) $ 98,806,678
------------
<CAPTION>
- ------------------------------------------------------
<C> <S> <C>
PRINCIPAL
AMOUNT VALUE
- ------------------------------------------------------
U.S. TREASURY NOTES -- 0.5%
$ 1,000,000 7.50%, 11/15/01 $ 1,081,410
1,000,000 7.50%, 5/15/02 1,086,410
550,000 7.875%, 4/15/98 577,241
550,000 7.875%, 8/15/01 603,537
------------
Total U.S. Treasury Notes
(cost -- $3,143,397) $ 3,348,598
------------
<CAPTION>
- ------------------------------------------------------
<C> <S> <C>
SHARES VALUE
- ------------------------------------------------------
COMMON STOCKS -- 85.0%
AEROSPACE -- 9.0%
100,000 Loral Corp. $ 2,962,500
525,000 McDonnell Douglas Corp. 42,918,750
200,000 Northrop Grumman Corp. 11,450,000
------------
57,331,250
------------
AIRLINES -- 1.0%
100,000 AMR Corp.* 6,600,000
------------
BANKING -- 13.6%
525,000 Citicorp 34,059,375
34,100 First Empire State Corp. 6,709,175
450,000 Mellon Bank Corp. 22,556,250
110,000 Wells Fargo & Co. 23,113,750
------------
86,438,550
------------
CASINOS/GAMING -- 2.9%
750,000 Harrahs Entertainment, Inc. 18,562,500
------------
CHEMICALS -- 4.4%
260,000 du Pont (E.I.) de Nemours & Co. 16,217,500
220,000 Hercules, Inc. 11,742,500
------------
27,960,000
------------
CONSUMER PRODUCTS -- 3.2%
600,000 Reebok International Ltd. 20,400,000
------------
COSMETICS/TOILETRIES -- 0.7%
60,600 Avon Products, Inc. 4,310,175
------------
DRUGS & MEDICAL PRODUCTS -- 2.8%
275,000 Becton, Dickinson & Co. 17,875,000
------------
</TABLE>
* Non-income producing security.
17
<PAGE>
OCTOBER 31, 1995
- --------------------------------------------------------------------------------
SCHEDULES OF INVESTMENTS
<TABLE>
<CAPTION>
- ------------------------------------------------------
SHARES VALUE
<C> <S> <C>
- ------------------------------------------------------
ELECTRONICS -- 8.1%
460,000 Intel Corp. $ 32,142,500
200,000 National Semiconductor Corp.* 4,875,000
50,000 Raychem Corp. 2,318,750
440,000 Unitrode Corp.* 11,825,000
------------
51,161,250
------------
INSURANCE -- 3.2%
300,000 EXEL Ltd. 16,050,000
60,000 Transamerica Corp. 4,065,000
------------
20,115,000
------------
METALS/MINING -- 5.2%
83,333 Freeport McMoRan, Inc. 3,114,583
1,302,100 Freeport McMoRan Copper & Gold
(Class B) 29,622,775
------------
32,737,358
------------
MISCELLANEOUS FINANCIAL SERVICES -- 10.5%
250,000 American Express Co. 10,156,250
500,000 Countrywide Credit Industries, Inc. 11,062,500
500,000 Federal Home Loan Mortgage Corp. 34,625,000
100,000 Federal National Mortgage Assoc. 10,487,500
------------
66,331,250
------------
OIL/GAS -- 6.0%
80,000 Mapco, Inc. 4,120,000
610,000 Tenneco, Inc. 26,763,750
149,300 Triton Energy Corp.* 6,961,113
------------
37,844,863
------------
PAPER PRODUCTS -- 7.2%
535,000 Champion International Corp. 28,622,500
325,000 Scott Paper Co. 17,306,250
------------
45,928,750
------------
TELECOMMUNICATIONS -- 1.8%
300,000 Sprint Corp. 11,550,000
------------
TEXTILES -- 2.4%
155,000 Collins & Aikman Corp.* $ 1,240,000
1,100,000 Shaw Industries, Inc. 14,025,000
------------
15,265,000
------------
<CAPTION>
- ------------------------------------------------------
<C> <S> <C>
SHARES VALUE
- ------------------------------------------------------
TOYS/GAMES/HOBBY -- 2.7%
600,000 Mattel, Inc. 17,250,000
------------
OTHER -- 0.3%
40,000 Alliant Techsystems, Inc.* 1,860,000
------------
Total Common Stocks
(cost -- $440,332,557) $539,520,946
------------
<CAPTION>
- ------------------------------------------------------
WARRANTS VALUE
- ------------------------------------------------------
<C> <S> <C>
WARRANTS -- 0.0%
HEALTHCARE SERVICES
34 Laboratory Corp. of America
Holdings
(cost -- $81) $ 21
------------
</TABLE>
<TABLE>
<S> <C> <C>
Total Investments
(cost -- $542,282,713) 101.1% $641,676,243
Other Liabilities in Excess of
Other Assets (1.1) (7,165,129)
------ ------------
TOTAL NET ASSETS 100.0% $634,511,114
------ ------------
------ ------------
</TABLE>
SMALL CAPITALIZATION FUND
<TABLE>
<CAPTION>
- ------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
- ------------------------------------------------------
SHORT-TERM CORPORATE NOTES -- 15.1%
AUTOMOTIVE -- 1.8%
$ 2,758,000 General Motors Acceptance Corp.
5.81%, 11/06/95 $ 2,755,774
------------
BANKING -- 4.0%
6,000,000 Norwest Financial, Inc.
5.73%, 11/14/95 5,987,585
------------
INSURANCE -- 4.7%
7,000,000 Prudential Funding Corp.
5.73%, 11/27/95 6,971,031
------------
</TABLE>
* Non-income producing security.
18
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- ------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
- ------------------------------------------------------
MACHINERY & ENGINEERING -- 1.8%
Deere (John) Capital Corp.
$ 1,560,000 5.71%, 11/13/95 $ 1,557,031
1,074,000 5.75%, 11/13/95 1,071,942
------------
2,628,973
------------
MISCELLANEOUS FINANCIAL SERVICES -- 2.8%
3,635,000 Beneficial Corp.
5.73%, 11/22/95 3,622,850
575,000 Household Finance Corp.
5.72%, 11/13/95 573,904
------------
4,196,754
------------
Total Short-Term Corporate Notes
(cost -- $22,540,117) $ 22,540,117
------------
CORPORATE NOTES & BONDS -- 0.4%
AUTOMOTIVE -- 0.0%
$ 62,950 Collins Industries, Inc.
8.75%, 1/11/00 $ 57,577
------------
OIL/GAS -- 0.4%
500,000 Global Marine, Inc.
12.75%, 12/15/99 552,500
------------
Total Corporate Notes & Bonds
(cost -- $585,111) $ 610,077
------------
CONVERTIBLE CORPORATE BONDS -- 0.9%
REAL ESTATE
$ 1,404,189 Security Capital Realty, Inc. (A)
12.00%, 6/30/14
(cost -- $1,325,889) $ 1,404,189
------------
<CAPTION>
- ------------------------------------------------------
<C> <S> <C>
SHARES VALUE
- ------------------------------------------------------
CONVERTIBLE PREFERRED STOCKS -- 0.2%
RETAIL
36,000 Family Bargain Corp.
$0.95 Conv. Pfd.
(cost -- $360,000) $ 220,500
------------
COMMON STOCKS -- 84.4%
ADVERTISING -- 6.2%
77,600 Katz Media Group, Inc.* $ 1,396,800
30,000 Omnicom Group, Inc. 1,916,250
292,400 True North Communications 5,921,100
------------
9,234,150
------------
<CAPTION>
- ------------------------------------------------------
<C> <S> <C>
SHARES VALUE
- ------------------------------------------------------
AEROSPACE -- 0.5%
97,500 BE Aerospace, Inc.* $ 767,813
------------
AUTOMOTIVE -- 1.7%
126,000 Collins Industries, Inc.* 259,875
120,100 Masland Corp. 1,681,400
70,000 Sudbury, Inc.* 586,250
------------
2,527,525
------------
BUILDING & CONSTRUCTION -- 5.8%
57,300 Carlisle Cos., Inc. 2,356,462
190,547 D.R. Horton, Inc. 2,119,835
26,500 Insituform Technologies (Class A)* 331,250
204,000 Martin Marietta Materials, Inc. 3,876,000
------------
8,683,547
------------
CHEMICALS -- 1.7%
86,400 OM Group, Inc. 2,505,600
------------
COMPUTER SERVICES -- 3.6%
149,900 BancTec, Inc.* 2,810,625
52,000 DST Systems, Inc. 1,092,000
114,000 Exabyte Corp.* 1,474,875
------------
5,377,500
------------
CONTAINERS -- 1.9%
169,000 Shorewood Packaging Corp.* 2,830,750
------------
DRUGS & MEDICAL PRODUCTS -- 1.9%
49,900 Amerisource Health Corp. (Class A) 1,359,775
33,900 Sybron International Corp. -
Wisconsin* 1,440,750
------------
2,800,525
------------
ELECTRONICS -- 8.9%
35,700 Arrow Electronics, Inc* 1,811,775
174,900 EG&G, Inc. 3,257,512
146,500 Marshall Industries* 5,164,125
111,000 Oak Industries, Inc.* 2,317,125
26,200 Unitrode Corp.* 704,125
------------
13,254,662
------------
</TABLE>
* Non-income producing security.
19
<PAGE>
OCTOBER 31, 1995
- --------------------------------------------------------------------------------
SCHEDULES OF INVESTMENTS
<TABLE>
<CAPTION>
- ------------------------------------------------------
SHARES VALUE
<C> <S> <C>
- ------------------------------------------------------
ENTERTAINMENT -- 0.2%
25,000 Hollywood Park, Inc.* $ 243,750
------------
FOOD SERVICES -- 1.0%
70,000 IHOP Corp.* 1,505,000
------------
HEALTHCARE SERVICES -- 2.8%
16,000 Charter Medical Corp.* 288,000
20,000 Community Health Systems, Inc.* 635,000
51,900 Dentsply International, Inc. 1,790,550
54,000 SpaceLabs Medical, Inc.* 1,390,500
------------
4,104,050
------------
HOUSEHOLD PRODUCTS -- 2.4%
120,000 Singer Co. 2,820,000
35,000 The Rival Co. 682,500
------------
3,502,500
------------
INSURANCE -- 5.3%
47,000 Ace Ltd. 1,598,000
62,800 Capsure Holdings Corp.* 855,650
119,400 E.W. Blanch Holdings, Inc. 2,298,450
112,500 Guaranty National Corp. 1,603,125
7,000 Horace Mann Educators Corp. 186,375
64,200 Prudential Reinsurance Holdings,
Inc. 1,308,075
------------
7,849,675
------------
LEASING -- 1.1%
101,700 Interpool, Inc.* 1,627,200
------------
<CAPTION>
- ------------------------------------------------------
<C> <S> <C>
SHARES VALUE
- ------------------------------------------------------
MACHINERY & ENGINEERING -- 6.0%
50,000 Baldwin Technologies Co., Inc
(Class A)* $ 268,750
40,000 Briggs & Stratton Corp. 1,615,000
52,100 BW/IP Holdings, Inc. (Class A) 872,675
145,000 Crane Co. 5,129,375
67,400 Harmon Industries, Inc. 994,150
------------
8,879,950
------------
MANUFACTURING -- 1.9%
94,000 North American Watch Corp. 1,703,750
50,000 Pall Corp. 1,218,750
------------
2,922,500
------------
METALS/MINING -- 0.4%
70,000 Olympic Steel, Inc.* 568,750
------------
OFFICE EQUIPMENT -- 0.8%
60,600 Nu-Kote Holdings, Inc. (Class A)* 1,257,450
------------
OIL/GAS -- 6.4%
92,800 Aquila Gas Pipeline Corp. 1,020,800
84,000 Belden & Blake Corp.* 1,219,313
200,000 Global Natural Resources, Inc.* 2,000,000
137,500 Noble Drilling Corp.* 962,500
165,000 Petroleum Heat & Power Co., Inc.
(Class A) 1,278,750
105,400 St. Mary Land & Exploration Co. 1,409,725
34,000 Triton Energy Corp.* 1,585,250
------------
9,476,338
------------
PAPER PRODUCTS -- 1.8%
422,000 Repap Enterprises, Inc.* 2,663,875
------------
PRINTING/PUBLISHING -- 1.4%
69,000 International Imaging Materials,
Inc. 1,742,250
20,000 Merrill Corp. 320,000
------------
2,062,250
------------
</TABLE>
* Non-income producing security.
20
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- ------------------------------------------------------
SHARES VALUE
<C> <S> <C>
- ------------------------------------------------------
REAL ESTATE -- 8.7%
151,800 Cousins Properties, Inc. $ 2,637,525
44,000 Post Properties, Inc. 1,320,000
231,600 Security Capital Industrial Trust,
Inc. 3,792,450
199,363 Security Capital Pacific Trust,
Inc. 3,563,614
1,800 Security Capital Realty, Inc. (A) 1,587,600
------------
12,901,189
------------
RETAIL -- 0.7%
10,900 Blair Corp. 321,550
60,000 The Maxim Group, Inc.* 780,000
------------
1,101,550
------------
TELECOMMUNICATIONS -- 1.2%
94,500 ECI Telecommunications Ltd. 1,795,500
------------
TEXTILES -- 4.8%
89,000 Collins & Aikman Corp.* 712,000
64,000 Culp, Inc. 624,000
42,700 Fab Industries, Inc. 1,248,975
149,600 Mohawk Industries, Inc.* 2,244,000
110,500 WestPoint Stevens, Inc.* 2,334,313
------------
7,163,288
------------
TOBACCO/BEVERAGES/FOOD PRODUCTS -- 2.6%
55,900 Morningstar Group, Inc.* 433,225
111,800 Ralcorp Holdings, Inc. 2,571,400
84,700 Sylvan, Inc.* 899,937
------------
3,904,562
------------
TRANSPORTATION -- 0.1%
8,000 MTL, Inc.* 117,000
------------
UTILITIES -- 1.5%
34,600 Sithe Energies, Inc.* 246,525
96,000 UGI Corp. 2,016,000
------------
2,262,525
------------
<CAPTION>
- ------------------------------------------------------
<C> <S> <C>
SHARES VALUE
- ------------------------------------------------------
OTHER -- 1.1%
93,300 McGrath RentCorp. $ 1,632,750
------------
Total Common Stocks
(cost -- $116,900,149) $125,523,724
------------
</TABLE>
<TABLE>
<S> <C> <C>
Total Investments
(cost -- $141,711,266) 101.0% $150,298,607
Other Liabilities in Excess of
Other Assets (1.0) (1,483,609)
------ ------------
TOTAL NET ASSETS 100.0% $148,814,998
------ ------------
------ ------------
</TABLE>
GROWTH AND INCOME FUND
<TABLE>
<CAPTION>
- ------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
- ------------------------------------------------------
SHORT-TERM CORPORATE NOTES -- 1.9%
AUTOMOTIVE -- 0.4%
$ 200,000 Ford Motor Credit Co.
5.73%, 11/06/95 $ 199,841
------------
MISCELLANEOUS FINANCIAL SERVICES -- 1.5%
Beneficial Corp.
447,000 5.72%, 11/02/95 446,929
230,000 5.74%, 11/15/95 229,486
------------
676,415
------------
Total Short-Term Corporate Notes
(cost -- $876,256) $ 876,256
------------
CORPORATE NOTES & BONDS -- 18.2%
CASINOS/GAMING -- 1.9%
$ 1,000,000 Harrah's Jazz Co.
14.25%, 11/15/01 $ 875,000
------------
COSMETICS/TOILETRIES -- 3.8%
2,000,000 Playtex Family Products Corp.
9.00%, 12/15/03 1,790,000
------------
</TABLE>
* Non-income producing security.
(A) Restricted Securities (the Fund will not bear any costs, including those
involved in registration under the Securities Act of 1933, in connection
with the disposition of these securities):
<TABLE>
<CAPTION>
UNIT
VALUATION
AS
DATE OF UNIT OF OCTOBER
DESCRIPTION ACQUISITION PAR AMOUNT SHARES COST 31, 1995
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Security Capital
Realty, Inc.
12.00%, 6/30/14 6/16/94 $1,404,189 -- $ 94 $ 100
Security Capital
Realty, Inc.
Common Stock 8/02/93 -- 1,800 684 882
</TABLE>
21
<PAGE>
OCTOBER 31, 1995
- --------------------------------------------------------------------------------
SCHEDULES OF INVESTMENTS
<TABLE>
<CAPTION>
- ------------------------------------------------------
PRINCIPAL VALUE
AMOUNT
- ------------------------------------------------------
<C> <S> <C>
ENTERTAINMENT -- 3.7%
$ 5,000,000 Time Warner, Inc.
Zero Coupon, 12/17/12 $ 1,725,000
------------
FOOD SERVICES -- 0.9%
1,000,000 Shoney's, Inc.
Zero Coupon, 4/11/04 402,500
------------
OIL/GAS -- 3.7%
2,000,000 Triton Energy Corp.
Zero Coupon, 11/01/97 1,700,000
------------
TELECOMMUNICATIONS -- 4.2%
1,000,000 Comcast Corp.
10.625%, 7/15/12 1,097,500
1,500,000 Nextel Communications, Inc.
0.00/11.50%, 9/01/03** 870,000
------------
1,967,500
------------
Total Corporate Notes & Bonds
(cost -- $8,705,038) $ 8,460,000
------------
CONVERTIBLE CORPORATE BONDS -- 6.5%
MANUFACTURING
$ 4,000,000 Mascotech, Inc.
4.50%, 12/15/03
(cost -- $3,042,591) $ 3,040,000
------------
<CAPTION>
- ------------------------------------------------------
<C> <S> <C>
SHARES VALUE
- ------------------------------------------------------
COMMON STOCKS -- 72.6%
AEROSPACE -- 4.4%
25,000 McDonnell Douglas Corp. $ 2,043,750
------------
AUTOMOTIVE -- 3.8%
40,000 General Motors Corp. 1,750,000
------------
BANKING -- 7.6%
32,000 Citicorp 2,076,000
50,000 U.S. Bancorp 1,481,250
------------
3,557,250
------------
CHEMICALS -- 2.7%
20,000 du Pont (E.I.) de Nemours & Co. 1,247,500
------------
COMPUTER SOFTWARE -- 1.1%
5,000 Microsoft Corp.* $ 500,000
------------
<CAPTION>
- ------------------------------------------------------
<C> <S> <C>
SHARES VALUE
- ------------------------------------------------------
CONGLOMERATES -- 3.4%
100,000 Canadian Pacific Ltd. 1,600,000
------------
CONTAINERS -- 3.9%
40,000 Temple-Inland, Inc. 1,820,000
------------
ELECTRONICS -- 0.2%
1,000 Intel Corp. 69,875
------------
HEALTHCARE SERVICES -- 1.0%
10,000 Columbia/HCA Healthcare Corp. 491,250
------------
HOUSEHOLD PRODUCTS -- 4.0%
40,000 Premark International, Inc. 1,850,000
------------
INSURANCE -- 6.8%
15,000 Ace, Ltd. 510,000
10,000 AFLAC, Inc. 407,500
30,000 Progressive Corp., Ohio 1,245,000
20,000 Travelers, Inc. 1,010,000
------------
3,172,500
------------
MACHINERY & ENGINEERING -- 3.9%
45,000 Briggs & Stratton Corp. 1,816,875
------------
MEDIA/BROADCASTING -- 4.0%
20,000 Tele-Communications Liberty Media
Group (Series A)* 492,500
80,000 Tele-Communications TCI Group
(Series A)* 1,360,000
------------
1,852,500
------------
METALS/MINING -- 6.6%
133,687 Freeport McMoRan, Copper & Gold
(Class A) 3,058,090
------------
MISCELLANEOUS FINANCIAL SERVICES -- 0.5%
1,000 Countrywide Credit Industries, Inc. 22,125
3,000 Federal Home Loan Mortgage Corp. 207,750
------------
229,875
------------
OIL/GAS -- 1.6%
10,000 Triton Energy Corp.* $ 466,250
15,000 Union Texas Petroleum Holdings,
Inc. 270,000
------------
736,250
------------
</TABLE>
* Non-income producing security.
** Represents a step-up floater which will receive 0.00% interest until 9/01/98,
then will "step-up" to 11.50% until maturity.
22
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- ------------------------------------------------------
SHARES VALUE
<C> <S> <C>
- ------------------------------------------------------
PAPER PRODUCTS -- 4.0%
35,000 Champion International Corp. 1,872,500
------------
TELECOMMUNICATIONS -- 4.5%
55,000 Sprint Corp. 2,117,500
------------
TEXTILES -- 8.6%
20,000 Shaw Industries, Inc. 255,000
50,000 Unifi, Inc. 1,125,000
55,000 VF Corp. 2,633,125
------------
4,013,125
------------
Total Common Stocks
(cost -- $30,820,524) $ 33,798,840
------------
</TABLE>
<TABLE>
<S> <C> <C>
Total Investments
(cost -- $43,444,409) 99.2% $ 46,175,096
Other Assets in Excess of
Other Liabilities 0.8 358,263
------ ------------
TOTAL NET ASSETS 100.0 % $ 46,533,359
------ ------------
------ ------------
</TABLE>
U.S. GOVERNMENT INCOME FUND
<TABLE>
<CAPTION>
- ------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
- ------------------------------------------------------
REPURCHASE AGREEMENT -- 24.6%
$28,300,000 J.P. Morgan, 5.85%, 11/01/95
(proceeds at maturity:
$28,304,599, collateralized by
$27,265,000 par, $28,866,819
value, U.S. Treasury Notes,
7.50%, 10/31/99)
(cost -- $28,300,000) $ 28,300,000
------------
FEDERAL HOME LOAN MORTGAGE
CORPORATION -- 0.6%
$ 652,460 9.50%, 12/01/02 - 11/01/03
(cost -- $657,455) $ 679,981
------------
<CAPTION>
- ------------------------------------------------------
<C> <S> <C>
PRINCIPAL
AMOUNT VALUE
- ------------------------------------------------------
GOVERNMENT NATIONAL MORTGAGE
ASSOCIATION I -- 43.6%
$19,729,923 7.00%, 2/15/22 - 11/15/23 $ 19,594,181
10,813,268 7.50%, 2/15/22 - 5/15/24 10,955,138
7,998,232 8.00%, 4/15/02 - 5/15/25 8,250,767
10,522,241 8.50%, 6/15/01 - 9/15/24 10,956,944
449,937 10.50%, 1/15/98 - 12/15/00 472,573
------------
Total Government National Mortgage
Association I (cost -- $50,865,933) $ 50,229,603
------------
U.S. TREASURY NOTES -- 30.4%
$15,000,000 5.875%, 8/15/98 $ 15,070,350
5,000,000 6.125%, 5/31/97 5,035,950
14,000,000 7.75%, 11/30/99 14,975,660
------------
Total U.S. Treasury Notes
(cost -- $34,397,838) $ 35,081,960
------------
</TABLE>
<TABLE>
<C> <S> <C> <C>
Total Investments
(cost -- $114,221,226) 99.2% $114,291,544
------ ------------
- ------------------------------------------------
PRINCIPAL
AMOUNT
SUBJECT
TO PUT VALUE
- ------------------------------------------------------
WRITTEN PUT OPTIONS OUTSTANDING -- (0.1%)
$25,000,000 U.S. Treasury Notes, 6.125%,
9/30/00, expiring Nov. '95, strike
@ $101.3125
(premium received: $132,812) $ (117,188)
------------
Other Assets in Excess of
Other Liabilities 0.9 1,067,411
------ ------------
TOTAL NET ASSETS 100.0 % $115,241,767
------ ------------
------ ------------
</TABLE>
* Non-income producing security.
23
<PAGE>
OCTOBER 31, 1995
- --------------------------------------------------------------------------------
SCHEDULES OF INVESTMENTS
INVESTMENT QUALITY INCOME FUND
<TABLE>
<CAPTION>
<C> <S> <C>
- ------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
- ------------------------------------------------------
SHORT-TERM CORPORATE NOTES -- 4.5%
MISCELLANEOUS FINANCIAL SERVICES
$ 1,800,000 Beneficial Corp.
5.75%, 11/06/95 $ 1,798,563
570,000 Household Finance Corp.
5.73%, 11/06/95 569,546
425,000 Merrill Lynch & Co., Inc.
5.75%, 11/02/95 424,932
------------
Total Short-Term Corporate Notes
(cost -- $2,793,041) $ 2,793,041
------------
CORPORATE NOTES & BONDS -- 93.6%
AEROSPACE -- 3.4%
$ 2,000,000 Boeing Co.
7.50%, 8/15/42 $ 2,092,300
------------
AIRLINES -- 2.9%
1,000,000 American Airlines
9.73%, 9/29/14 1,133,870
550,000 Delta Air Lines, Inc.
10.375%, 2/01/11 650,551
------------
1,784,421
------------
AUTOMOTIVE -- 3.6%
2,000,000 Ford Motor Credit Co. (A)
8.875%, 11/15/22 2,234,600
------------
BANKING -- 6.5%
70,000 NatWest Bancorp, Inc.
9.375%, 11/15/03 81,979
1,300,000 NCNB Corp.
10.20%, 7/15/15 1,680,731
500,000 RBSG Capital Corp.
10.125%, 3/01/04 606,020
1,500,000 Westpac Banking Corp.
9.125%, 8/15/01 1,680,810
------------
4,049,540
------------
CHEMICALS -- 1.0%
500,000 Rohm & Haas Co.
9.50%, 4/01/21 607,720
------------
CONGLOMERATES -- 4.0%
2,000,000 Canadian Pacific Ltd.
9.45%, 8/01/21 2,517,380
------------
ENTERTAINMENT -- 5.2%
3,000,000 Time Warner, Inc.
9.15%, 2/01/23 3,253,800
------------
<CAPTION>
- ------------------------------------------------------
<C> <S> <C>
PRINCIPAL
AMOUNT VALUE
- ------------------------------------------------------
INSURANCE -- 11.6%
$ 1,000,000 Aetna Life & Casualty Co.
8.00%, 1/15/17 $ 1,015,020
1,200,000 Capital Holding Corp.
8.75%, 1/15/17 1,263,636
2,000,000 CNA Financial Corp.
7.25%, 11/15/23 1,900,200
3,000,000 Torchmark, Inc.
7.875%, 5/15/23 3,064,440
------------
7,243,296
------------
LEASING -- 2.7%
1,600,000 Ryder Systems, Inc.
8.75%, 3/15/17 1,712,464
------------
MACHINERY & ENGINEERING -- 3.3%
1,750,000 Caterpillar, Inc.
9.75%, 6/01/19 2,056,373
------------
MISCELLANEOUS FINANCIAL SERVICES -- 11.4%
20,000 Beneficial Corp.
12.875%, 8/01/13 24,110
1,500,000 BHP Finance USA Ltd.
8.50%, 12/01/12 1,700,430
Lehman Brothers, Inc.
865,000 9.875%, 10/15/00 955,280
115,000 10.00%, 5/15/99 127,045
205,000 Midland American Capital Corp.
12.75%, 11/15/03 240,533
3,000,000 Prudential Funding Corp.
6.75%, 9/15/23 (B) 2,672,760
1,250,000 Source One Mortgage Services Corp.
9.00%, 6/01/12 1,363,087
------------
7,083,245
------------
OIL/GAS -- 5.9%
3,000,000 Occidental Petroleum Corp.
11.125%, 6/01/19 3,677,430
------------
PAPER PRODUCTS -- 0.2%
100,000 Union Camp Corp.
10.00%, 5/01/19 113,709
------------
PIPELINES -- 3.1%
1,500,000 TransCanada Pipelines Ltd.
9.875%, 1/01/21 1,930,965
------------
RETAIL -- 1.3%
May Department Stores Co.
250,000 9.875%, 6/01/17 276,337
405,000 10.625%, 11/01/10 541,542
------------
817,879
------------
</TABLE>
24
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- ------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
- ------------------------------------------------------
TELECOMMUNICATIONS -- 11.8%
$ 2,500,000 New York Telephone Co.
9.375%, 7/15/31 $ 2,965,900
2,000,000 Pacific Bell
8.50%, 8/15/31 2,191,900
2,000,000 Southern New England Telephone Co.
8.70%, 8/15/31 2,168,720
------------
7,326,520
------------
TOBACCO/BEVERAGES/FOOD PRODUCTS -- 3.5%
2,000,000 American Brands, Inc.
7.875%, 1/15/23 2,153,300
------------
UTILITIES -- 7.0%
2,000,000 Hydro-Quebec
8.50%, 12/01/29 2,203,280
2,000,000 Southern California Edison Co.
8.875%, 6/01/24 2,140,540
------------
4,343,820
------------
<CAPTION>
- ------------------------------------------------------
<C> <S> <C>
PRINCIPAL
AMOUNT VALUE
- ------------------------------------------------------
OTHER -- 5.2%
$ 1,447,305 DLJ Mortgage Acceptance Corp.
8.75%, 11/25/24 $ 1,471,276
1,500,000 Nova Scotia (Province of)
8.875%, 7/01/19 1,733,370
------------
3,204,646
------------
Total Corporate Notes & Bonds
(cost -- $54,144,780) $ 58,203,408
------------
</TABLE>
<TABLE>
<S> <C> <C>
Total Investments
(cost -- $56,937,821) 98.1 % $ 60,996,449
Other Assets in Excess of
Other Liabilities 1.9 1,192,720
------ ------------
TOTAL NET ASSETS 100.0 % $ 62,189,169
------ ------------
------ ------------
</TABLE>
(A) Security segregated (partial) as collateral for open futures contracts. The
aggregate market value of such security is $558,650.
(B) Resale of the security is restricted to qualified institutional investors.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
25
<PAGE>
OCTOBER 31, 1995
- --------------------------------------------------------------------------------
STATEMENTS OF ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
QUEST FOR SMALL GROWTH U.S. INVESTMENT
VALUE FUND, OPPORTUNITY CAPITALIZATION AND GOVERNMENT QUALITY
INC. FUND FUND INCOME FUND INCOME FUND INCOME FUND
------------ ------------ ------------ ----------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Investments, at value (cost --
$258,707,414, $542,282,713,
$141,711,266, $43,444,409,
$85,921,226 and $56,937,821,
respectively)...................... $330,881,971 $641,676,243 $150,298,607 $46,175,096 $ 85,991,544 $60,996,449
Repurchase agreement
(cost -- $28,300,000).............. -- -- -- -- 28,300,000 --
Cash................................ 45,640 547,052 554,656 43,048 147,175 59,556
Receivable for fund shares sold..... 530,951 3,886,531 429,526 135,588 112,467 66,286
Dividends receivable 243,046 997,122 50,222 40,770 -- --
Interest receivable................. 70,681 80,486 85,156 232,993 1,100,769 1,428,564
Receivable for investments sold..... -- 3,775,999 1,519,249 -- -- --
Receivable for mortgage
prepayments........................ -- -- -- -- 9,512 --
Deferred organization expenses...... -- -- -- 19,361 -- 1,598
Other assets........................ 39,549 22,478 12,365 17,891 30,144 12,304
------------ ------------ ------------ ----------- ------------ -----------
Total Assets...................... 331,811,838 650,985,911 152,949,781 46,664,747 115,691,611 62,564,757
------------ ------------ ------------ ----------- ------------ -----------
LIABILITIES
Written put options outstanding, at
value (premiums received:
$132,812).......................... -- -- -- -- 117,188 --
Payable for fund shares redeemed.... 246,415 541,931 381,171 39,485 94,741 182,432
Distribution fee payable............ 57,478 218,953 31,207 9,227 13,696 14,560
Investment advisory fee payable..... 54,437 103,767 24,467 6,603 11,374 6,111
Payable for investments purchased... -- 15,310,750 3,596,750 -- -- --
Dividends payable................... -- -- -- -- 100,543 79,161
Payable for futures variation
margin............................. -- -- -- -- -- 33,750
Other payables and accrued
expenses........................... 141,605 299,396 101,188 76,073 112,302 59,574
------------ ------------ ------------ ----------- ------------ -----------
Total Liabilities................. 499,935 16,474,797 4,134,783 131,388 449,844 375,588
------------ ------------ ------------ ----------- ------------ -----------
NET ASSETS
Par value........................... 22,865,787 259,205 86,170 42,633 102,228 57,180
Paid-in-surplus..................... 211,941,042 523,701,982 131,509,611 41,486,396 124,603,694 59,929,025
Accumulated undistributed net
investment income (loss)........... 2,115,981 3,043,582 817,130 62,229 (100,543) (1,302)
Accumulated undistributed net
realized gain (loss) on
investments........................ 22,214,536 8,112,815 7,814,746 2,211,414 (9,449,554) (1,441,862)
Net unrealized appreciation on
investments........................ 72,174,557 99,393,530 8,587,341 2,730,687 85,942 3,646,128
------------ ------------ ------------ ----------- ------------ -----------
Total Net Assets.................. $331,311,903 $634,511,114 $148,814,998 $46,533,359 $115,241,767 $62,189,169
------------ ------------ ------------ ----------- ------------ -----------
------------ ------------ ------------ ----------- ------------ -----------
CLASS A:
Fund shares outstanding............. 19,476,461 14,934,153 6,717,417 3,395,059 9,111,820 4,144,692
------------ ------------ ------------ ----------- ------------ -----------
Net asset value per share........... $ 14.51 $ 24.59 $ 17.31 $ 10.92 $ 11.27 $ 10.88
------------ ------------ ------------ ----------- ------------ -----------
------------ ------------ ------------ ----------- ------------ -----------
Maximum offering price per share*... $ 15.35 $ 26.02 $ 18.32 $ 11.46 $ 11.83 $ 11.42
------------ ------------ ------------ ----------- ------------ -----------
------------ ------------ ------------ ----------- ------------ -----------
CLASS B:
Fund shares outstanding............. 2,682,851 8,945,500 1,369,612 700,417 855,263 1,207,703
------------ ------------ ------------ ----------- ------------ -----------
Net asset value and offering price
per share.......................... $ 14.37 $ 24.33 $ 17.11 $ 10.88 $ 11.27 $ 10.88
------------ ------------ ------------ ----------- ------------ -----------
------------ ------------ ------------ ----------- ------------ -----------
CLASS C:
Fund shares outstanding............. 706,475 2,040,801 529,946 167,833 255,735 365,603
------------ ------------ ------------ ----------- ------------ -----------
Net asset value and offering price
per share.......................... $ 14.35 $ 24.31 $ 17.11 $ 10.89 $ 11.27 $ 10.88
------------ ------------ ------------ ----------- ------------ -----------
------------ ------------ ------------ ----------- ------------ -----------
</TABLE>
*Sales charges decrease on purchases of $50,000 or higher.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
26
<PAGE>
YEAR ENDED OCTOBER 31, 1995
- --------------------------------------------------------------------------------
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
GROWTH
QUEST FOR SMALL AND U.S. INVESTMENT
VALUE OPPORTUNITY CAPITALIZATION INCOME GOVERNMENT QUALITY
FUND, INC. FUND FUND FUND INCOME FUND INCOME FUND
----------- ----------- ------------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
INVESTMENT INCOME
Dividends*................... $4,933,153 $5,805,392 $ 1,902,266 $ 693,240 $ -- $
- --
Interest..................... 2,545,437 4,798,092 1,684,966 1,089,203 8,894,940 4,872,959
----------- ----------- ------------- ---------- ----------- -----------
Total investment income.... 7,478,590 10,603,484 3,587,232 1,782,443 8,894,940 4,872,959
----------- ----------- ------------- ---------- ----------- -----------
OPERATING EXPENSES
Investment advisory fees
(note 2a)................... 2,893,435 3,923,159 1,456,594 333,289 755,883 351,860
Distribution fees (note
2c)......................... 1,607,236 2,665,031 859,394 191,723 455,179 311,219
Transfer and dividend
disbursing agent fees (note
1i)......................... 330,355 410,006 206,267 73,852 130,367 71,201
Accounting service fees (note
2b)......................... -- 103,747 108,951 112,800 121,310 105,362
Registration fees............ 54,800 141,636 34,952 34,042 32,098 33,871
Custodian fees............... 40,216 47,751 22,819 18,724 70,657 21,556
Reports and notices to
shareholders................ 40,057 44,869 27,492 8,814 17,517 10,688
Auditing, consulting and tax
return preparation fees..... 24,597 18,515 18,514 14,435 40,367 17,355
Directors'(Trustees') fees
and expenses................ 17,270 17,270 17,270 8,870 17,270 17,270
Legal fees................... 11,749 10,120 7,222 4,721 6,836 5,236
Amortization of deferred
organization expenses (note
1c)......................... -- -- -- 19,148 -- 12,374
Miscellaneous................ 19,575 13,337 9,189 4,500 14,726 5,566
----------- ----------- ------------- ---------- ----------- -----------
Total operating expenses... 5,039,290 7,395,441 2,768,664 824,918 1,662,210 963,558
Less: Investment advisory
fees waived (note 2a)..... -- -- -- (8,286) -- (42,245)
----------- ----------- ------------- ---------- ----------- -----------
Net operating expenses... 5,039,290 7,395,441 2,768,664 816,632 1,662,210 921,313
----------- ----------- ------------- ---------- ----------- -----------
Net investment income.... 2,439,300 3,208,043 818,568 965,811 7,232,730 3,951,646
----------- ----------- ------------- ---------- ----------- -----------
REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS -- NET
Net realized gain (loss) on
security transactions....... 22,321,532 8,125,065 8,630,413 2,227,731 (3,475,568) (24,232)
Net realized loss on option
transactions (note 1f).... -- -- -- -- (267,734) --
Net realized loss on futures
transactions (note 1g)...... -- -- (86,670) -- -- (464,750)
----------- ----------- ------------- ---------- ----------- -----------
Net realized gain (loss) on
investments............... 22,321,532 8,125,065 8,543,743 2,227,731 (3,743,302) (488,982)
Net change in unrealized
appreciation (depreciation)
on investments.............. 39,322,642 85,013,107 3,040,965 2,324,387 9,332,957 7,336,722
----------- ----------- ------------- ---------- ----------- -----------
Net realized gain (loss)
and change in unrealized
appreciation
(depreciation) on
investments............... 61,644,174 93,138,172 11,584,708 4,552,118 5,589,655 6,847,740
----------- ----------- ------------- ---------- ----------- -----------
Net increase in net assets
resulting from operations... $64,083,474 $96,346,215 $ 12,403,276 $5,517,929 $12,822,385 $10,799,386
----------- ----------- ------------- ---------- ----------- -----------
----------- ----------- ------------- ---------- ----------- -----------
<FN>
* Net of withholding taxes of $6,473, $732 and $1,752 for Quest for Value, Small
Capitalization and Growth and Income, respectively.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
</TABLE>
27
<PAGE>
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
QUEST FOR VALUE FUND,
INC. OPPORTUNITY FUND
YEAR ENDED OCTOBER 31, YEAR ENDED OCTOBER 31,
------------------------ ------------------------
1995 1994 1995 1994
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
OPERATIONS
Net investment income (loss).............................. $ 2,439,300 $ 1,726,225 $ 3,208,043 $ 1,397,364
Net realized gain (loss) on investments................... 22,321,532 16,664,331 8,125,065 7,139,720
Net change in unrealized appreciation (depreciation) on
investments.............................................. 39,322,642 (6,250,090) 85,013,107 4,721,481
----------- ----------- ----------- -----------
Net increase (decrease) in net assets resulting from
operations............................................. 64,083,474 12,140,466 96,346,215 13,258,565
----------- ----------- ----------- -----------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS*
Net investment income -- Class A.......................... (1,649,576) (819,873) (1,066,642) (2,269,483)
Net investment income -- Class B.......................... (108,497) (11,801) (335,822) (98,258)
Net investment income -- Class C.......................... (29,366) (2,040) (56,920) (21,098)
Net realized gains -- Class A............................. (15,501,438) (9,227,704) (5,314,298) (1,498,248)
Net realized gains -- Class B............................. (1,014,005) (115,604) (1,562,718) (30,484)
Net realized gains -- Class C............................. (255,884) (11,081) (267,734) (11,476)
Tax return of capital -- Class A.......................... -- -- -- --
Tax return of capital -- Class B.......................... -- -- -- --
Tax return of capital -- Class C.......................... -- -- -- --
----------- ----------- ----------- -----------
Total dividends and distributions to shareholders....... (18,558,766) (10,188,103) (8,604,134) (3,929,047)
----------- ----------- ----------- -----------
FUND SHARE TRANSACTIONS
CLASS A
Net proceeds from sales................................... 53,027,793 61,908,256 201,988,591 90,332,759
Reinvestment of dividends and distributions............... 16,047,556 9,385,655 6,034,648 3,405,284
Cost of shares redeemed................................... (64,462,161) (80,014,950) (60,771,127) (65,200,453)
----------- ----------- ----------- -----------
Net increase (decrease) -- Class A...................... 4,613,188 (8,721,039) 147,252,112 28,537,590
----------- ----------- ----------- -----------
CLASS B
Net proceeds from sales................................... 22,392,431 12,409,864 160,670,137 40,604,196
Reinvestment of dividends and distributions............... 1,045,812 123,599 1,804,130 124,021
Cost of shares redeemed................................... (3,681,109) (544,061) (14,031,965) (1,026,439)
----------- ----------- ----------- -----------
Net increase -- Class B................................. 19,757,134 11,989,402 148,442,302 39,701,778
----------- ----------- ----------- -----------
CLASS C
Net proceeds from sales................................... 6,835,837 3,521,667 40,882,367 6,945,412
Reinvestment of dividends and distributions............... 280,898 13,020 314,274 32,567
Cost of shares redeemed................................... (1,738,997) (271,901) (4,067,767) (254,081)
----------- ----------- ----------- -----------
Net increase -- Class C................................. 5,377,738 3,262,786 37,128,874 6,723,898
----------- ----------- ----------- -----------
Total net increase (decrease) in net assets from fund
share transactions....................................... 29,748,060 6,531,149 332,823,288 74,963,266
----------- ----------- ----------- -----------
Total increase (decrease) in net assets................. 75,272,768 8,483,512 420,565,369 84,292,784
NET ASSETS
Beginning of year......................................... 256,039,135 247,555,623 213,945,745 129,652,961
----------- ----------- ----------- -----------
End of year (including undistributed net investment income
(loss) of $2,115,981, $1,464,120; $3,043,582, $1,291,867;
$817,130, ($238,336); $62,229, $127,460; ($100,543), $0
and ($1,302), $0, respectively).......................... $331,311,903 $256,039,135 $634,511,114 $213,945,745
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
<FN>
*Certain figures have been restated to conform to current year presentation for
Opportunity, Growth and Income and U.S. Government.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
</TABLE>
28
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SMALL CAPITALIZATION U.S. GOVERNMENT INCOME
FUND GROWTH AND INCOME FUND FUND INVESTMENT QUALITY
INCOME FUND
YEAR ENDED OCTOBER 31, YEAR ENDED OCTOBER 31, YEAR ENDED OCTOBER 31, YEAR ENDED OCTOBER 31,
- -------------------------- ------------------------ -------------------------- ------------------------
1995 1994 1995 1994 1995 1994 1995 1994
- ------------ ------------ ----------- ----------- ------------ ------------ ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
$ 818,568 $ (238,336) $ 965,811 $ 966,108 $ 7,232,730 $ 8,291,969 $ 3,951,646 $ 3,846,353
8,543,743 3,366,835 2,227,731 1,768,686 (3,743,302) (4,366,839) (488,982) (952,880)
3,040,965 (3,118,979) 2,324,387 (189,442) 9,332,957 (11,007,688) 7,336,722 (9,068,979)
- ------------ ------------ ----------- ----------- ------------ ------------ ----------- -----------
12,403,276 9,520 5,517,929 2,545,352 12,822,385 (7,082,558) 10,799,386 (6,175,506)
- ------------ ------------ ----------- ----------- ------------ ------------ ----------- -----------
-- -- (917,781) (936,128) (6,680,576) (8,071,564) (3,164,967) (3,482,793)
-- -- (105,700) (41,545) (464,033) (196,735) (586,935) (244,424)
-- -- (17,697) (7,305) (89,583) (39,362) (199,744) (119,136)
(3,010,761) (8,036,736) (1,275,011) (4,278,474) -- (3,218,859) -- (367,910)
(434,007) (160,831) (129,812) (152,311) -- (42,833) -- (10,112)
(91,772) (19,543) (20,124) (19,378) -- (7,144) -- (637)
-- -- -- -- (140,061) -- -- --
-- -- -- -- (8,675) -- -- --
-- -- -- -- (1,431) -- -- --
- ------------ ------------ ----------- ----------- ------------ ------------ ----------- -----------
(3,536,540) (8,217,110) (2,466,125) (5,435,141) (7,384,359) (11,576,497) (3,951,646) (4,225,012)
- ------------ ------------ ----------- ----------- ------------ ------------ ----------- -----------
38,194,245 127,081,752 8,471,883 5,937,491 18,642,107 17,007,814 8,023,597 12,621,718
2,840,961 7,215,556 2,097,137 5,008,623 5,896,557 9,588,703 2,288,961 2,758,350
(52,052,199) (111,134,238) (6,705,888) (6,040,040) (50,011,121) (74,313,512) (17,520,761) (20,364,228)
- ------------ ------------ ----------- ----------- ------------ ------------ ----------- -----------
(11,016,993) 23,163,070 3,863,132 4,906,074 (25,472,457) (47,716,995) (7,208,203) (4,984,160)
- ------------ ------------ ----------- ----------- ------------ ------------ ----------- -----------
10,160,304 15,275,222 4,674,731 2,763,975 5,110,647 6,748,251 7,327,816 6,440,954
408,265 148,570 217,205 188,513 319,245 187,137 462,628 185,172
(4,495,109) (811,203) (533,417) (260,750) (3,026,400) (964,994) (2,363,759) (800,932)
- ------------ ------------ ----------- ----------- ------------ ------------ ----------- -----------
6,073,460 14,612,589 4,358,519 2,691,738 2,403,492 5,970,394 5,426,685 5,825,194
- ------------ ------------ ----------- ----------- ------------ ------------ ----------- -----------
6,393,572 3,345,761 1,497,250 341,819 2,026,463 1,424,484 1,204,849 3,141,700
88,907 18,810 36,149 26,593 85,658 46,127 93,152 93,436
(1,180,484) (229,505) (232,677) (4,696) (533,211) (289,465) (285,205) (422,838)
- ------------ ------------ ----------- ----------- ------------ ------------ ----------- -----------
5,301,995 3,135,066 1,300,722 363,716 1,578,910 1,181,146 1,012,796 2,812,298
- ------------ ------------ ----------- ----------- ------------ ------------ ----------- -----------
358,462 40,910,725 9,522,373 7,961,528 (21,490,055) (40,565,455) (768,722) 3,653,332
- ------------ ------------ ----------- ----------- ------------ ------------ ----------- -----------
9,225,198 32,703,135 12,574,177 5,071,739 (16,052,029) (59,224,510) 6,079,018 (6,747,186)
139,589,800 106,886,665 33,959,182 28,887,443 131,293,796 190,518,306 56,110,151 62,857,337
- ------------ ------------ ----------- ----------- ------------ ------------ ----------- -----------
$148,814,998 $139,589,800 $46,533,359 $33,959,182 $115,241,767 $131,293,796 $62,189,169 $56,110,151
- ------------ ------------ ----------- ----------- ------------ ------------ ----------- -----------
- ------------ ------------ ----------- ----------- ------------ ------------ ----------- -----------
</TABLE>
29
<PAGE>
OCTOBER 31, 1995
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
Quest for Value Funds are registered under the Investment Company Act of
1940, as diversified, open-end management investment companies. Quest for Value
Fund, Inc. ("Quest for Value") is a Maryland corporation. Opportunity Fund
("Opportunity"), Small Capitalization Fund ("Small Capitalization"), Growth and
Income Fund ("Growth and Income"), U.S. Government Income Fund ("U.S.
Government") and Investment Quality Income Fund ("Investment Quality") are five
of nine funds offered in the Quest for Value Family of Funds, a Massachusetts
business trust. Quest for Value Advisors (the "Adviser") serves as investment
adviser and provides accounting and administrative services to each fund. Quest
for Value Distributors (the "Distributor") serves as each fund's distributor.
Both the Adviser and Distributor are majority-owned (99%) subsidiaries of
Oppenheimer Capital.
Prior to September 1, 1993, the funds issued only one class of shares which
were redesignated Class A shares. Subsequent to that date all funds were
authorized to issue Class A, Class B and Class C shares. Shares of each Class
represent an identical interest in the investment portfolio of their respective
fund and generally have the same rights, but are offered under different sales
charges 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 each 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 securites are valued at the 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. Investment debt securities (other than
short-term obligations) are valued each day by an independent pricing service
approved by the Board of Directors (Trustees) using methods which include
current market quotations from major market makers in the securities and
trader-reviewed "matrix" prices. Futures contracts are valued based upon their
daily settlement value as of the close of the exchange upon which they trade.
OTC options are valued based upon formulas which utilize the market value of the
underlying securities, strike prices and expiration dates of the options.
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 values as determined in good faith under
procedures established by each fund's Board of Directors (Trustees). The ability
of issuers of debt securities held by the funds to meet their obligations may be
affected by economic or political development in a specific state, industry or
region.
(B) FEDERAL INCOME TAXES
It is each 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
The following approximate costs were incurred in connection with their
organization: Growth and Income -- $96,000 and Investment Quality -- $62,000.
These costs have been deferred and are being amortized to expense on a
straight-line basis over sixty months from commencement of each fund's
operations.
(D) SECURITY 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 is
determined on the basis of identified cost. Dividend income is recorded on the
ex-dividend
30
<PAGE>
- --------------------------------------------------------------------------------
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. Net investment income, other than class specific
expenses and unrealized gains and losses are allocated daily to each class of
shares based upon the relative proportion of net assets, as defined, of each
class.
(E) DIVIDENDS AND DISTRIBUTIONS
The following table summarizes each fund's dividend and capital gain
declaration policy:
<TABLE>
<CAPTION>
SHORT-TERM LONG-TERM
INCOME CAPITAL CAPITAL
DIVIDENDS GAINS GAINS
---------- ---------- ----------
<S> <C> <C> <C>
Quest for Value annually annually annually
Opportunity annually annually annually
Small Capitalization annually annually annually
Growth and Income quarterly annually annually
U.S. Government daily * quarterly annually
Investment Quality daily * annually annually
* paid monthly.
</TABLE>
Each fund records dividends and distributions to its shareholders on the
ex-dividend date. The amount of dividends and distributions from net investment
income and net realized capital gains are determined in accordance with federal
income tax regulations, which may differ from generally accepted accounting
principles. These "book-tax" differences are either considered temporary or
permanent in nature. To the extent these differences are permanent in nature,
such amounts are reclassified within the capital accounts based on their federal
tax-basis treatment; temporary differences do not require reclassification.
Dividends and distributions which exceed net investment income and net realized
capital gains for financial reporting purposes but not for tax purposes are
reported as dividends in excess of net investment income or distributions in
excess of net realized capital gains, respectively. To the extent distributions
exceed current and accumulated earnings and profits for federal income tax
purposes, they are reported as distributions of paid-in-surplus or tax return of
capital. Accordingly, permanent book-tax differences relating to shareholder
distributions have been reclassified to paid-in-surplus. Net investment
income(loss), net realized gain(loss) and net assets were not affected.
As required by Statement of Position 93 - 2, Determination, Disclosure and
Financial Statement Presentation of Income, Capital Gain and Return of Capital
Distributions by Investment Companies, the following table discloses the
reclassifications from accumulated undistributed net investment income(loss) and
accumulated undistributed capital gain(loss) on investments to paid-in-surplus
during the fiscal year ended October 31, 1995:
<TABLE>
<CAPTION>
ACCUMULATED
UNDISTRIBUTED
NET ACCUMULATED
INVESTMENT UNDISTRIBUTED PAID
INCOME NET REALIZED IN
(LOSS) GAIN (LOSS) SURPLUS
---------- --------------- --------
<S> <C> <C> <C>
Quest for Value -- -- --
Opportunity 3,056 (5,991) 2,935
Small Capitalization 236,898 (559,292) 322,394
Growth and Income 10,136 (152,783) 142,647
U.S. Government (99,081) (407,920) 507,001
Investment Quality (1,302) -- 1,302
</TABLE>
31
<PAGE>
OCTOBER 31, 1995
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(F) WRITTEN OPTIONS ACCOUNTING POLICIES
When a fund writes a call option or a put option, an amount equal to the
premium received by the fund is included in the fund's Statement of Assets and
Liabilities as an asset and an equivalent liability. The amount of the liability
is subsequently marked-to-market to reflect the current market value of the
option written. If the option expires on its stipulated expiration date or if a
fund enters into a closing purchase transaction, the fund will realize a gain
(or loss if the cost of a closing purchase tranaction exceeds the premium
received when the option was written) without regard to any unrealized gain or
loss on the underlying security, and the liability related to such option will
be extinguished. If a call option which a fund has written is exercised, the
fund realizes a gain or loss from the sale of the underlying security and the
proceeds from such sale are increased by the premium originally received. If a
put option which a fund has written is exercised, the amount of the premium
originally received will reduce the cost of the security which the fund
purchases upon exercise of the option.
(G) FUTURES ACCOUNTING POLICIES
Futures contracts are agreements between two parties to buy and sell a
financial instrument at a set price on a future date. Upon entering into such a
contract, a fund is required to pledge to the broker an amount of cash, cash
equivalents or U.S. Government securities equal to the minimum "initial margin"
requirements of the exchange. Pursuant to the contract, a fund agrees to receive
from or pay to the broker an amount of cash equal to the daily fluctuation in
the value of the contract. Such receipts or payments are known as "variation
margin" and are recorded by the fund as unrealized appreciation or depreciation.
When a contract is closed, the fund records a realized gain or loss equal to the
difference between the value of the contract at the time it was opened and the
value at the time it was closed and reverses any unrealized appreciation or
depreciation previously recorded. At October 31, 1995, Investment Quality had
the following futures contracts open:
<TABLE>
<CAPTION>
NET
NUMBER OF UNREALIZED
TYPE CONTRACTS SHORT VALUE EXPIRATION LOSS
<S> <C> <C> <C> <C>
- ---------------------------------------------------------------------------
CBT U.S. Treasury Bond 120 $13,635,000 Dec. '95 $412,500
</TABLE>
(H) REPURCHASE AGREEMENTS
U.S. Government enters into repurchase agreements as part of its investment
program. The fund's custodian takes possession of collateral pledged by the
counterparty. The collateral is marked-to-market daily to ensure that the value,
plus accrued interest, is at least equal to the repurchase price. In the event
of default by the obligor to repurchase, the fund has the right to liquidate the
collateral and apply the proceeds in satisfaction of the obligation. Under
certain circumstances, in the event of default or bankruptcy by the other party
to the agreement, realization and/or retention of the collateral or proceeds may
be subject to legal proceedings.
(I) ALLOCATION OF EXPENSES
Expenses specifically identifiable to a particular fund or class are borne
by that fund or class. Other expenses are allocated to each fund or class based
on its net assets in relation to the total net assets of all applicable funds or
classes or on another reasonable basis. For the year ended October 31, 1995,
transfer and dividend disbursing agent fees accrued to classes A, B and C were
$279,089, $36,906 and $14,360, respectively, for Quest for Value; $236,086,
$141,736 and $32,184, respectively, for Opportunity; $146,564, $44,501 and
$15,202, respectively, for Small Capitalization; $61,191, $8,864 and $3,797,
respectively, for Growth and Income; $117,106, $8,732 and $4,529, respectively,
for U.S. Government and $58,422, $8,814 and $3,965, respectively, for Investment
Quality Income. These expenses are consolidated, by fund, in the accompanying
Statements of Operations.
32
<PAGE>
- --------------------------------------------------------------------------------
2. INVESTMENT ADVISORY FEE, ACCOUNTING SERVICES FEE, DISTRIBUTION FEE AND OTHER
TRANSACTIONS WITH AFFILIATES
(A) The investment advisory fee is payable monthly to the Adviser, and is
computed as a percentage of each fund's net assets as of the close of business
each day at the following annual rates: 1.00% for Quest for Value, Opportunity
and Small Capitalization, respectively; .85% for Growth and Income and .60% for
U.S. Government and Investment Quality, respectively. For the year ended October
31, 1995, the Adviser voluntarily waived $8,286 and $42,245 in investment
advisory fees for Growth and Income and Investment Quality, respectively.
(B) A portion of the accounting services fee for Opportunity, Small
Capitalization, Growth and Income, U.S. Government and Investment Quality is
payable monthly to the Adviser. These funds reimburse the Adviser for a portion
of the salaries of officers and employees of Oppenheimer Capital based upon the
amount of time such persons spend in providing services to each fund in
accordance with the provisions of the Investment Advisory Agreement. For the
year ended October 31, 1995, the Adviser received $48,747, $53,951, $57,800,
$56,310 and $50,362, respectively.
(C) The funds have adopted a Plan and Agreement of Distribution (the
"Plan") pursuant to which each fund is permitted to compensate the Distributor
in connection with the distribution of fund shares. Under the Plan, the
Distributor has entered 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 funds pay the Distributor compensation, accrued
daily and payable monthly on each fund's average daily net assets for Class A
shares at the following annual rates: .25% for Quest for Value, Opportunity and
Small Capitalization, .05% for U.S. Government and .15% for Investment Quality
and Growth and Income. Each fund's Class A shares also pay a service fee at the
annual rate of .25%. Compensation for Class B and Class C shares of each fund is
at an annual rate of .75% of average daily net assets. Each fund's Class B and
Class C shares also pay a service fee at the 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 fund
shares. 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 year ended October 31, 1995, distribution and service fees charged
to classes A, B and C were $1,286,200, $253,926 and $67,110, respectively, for
Quest for Value; $1,258,129, $1,165,226 and $241,676, respectively, for
Opportunity; $597,200, $201,055 and $61,139, respectively, for Small
Capitalization; $133,588, $48,455 and $9,680, respectively, for Growth and
Income; $344,839, $92,104 and $18,236, respectively, for U.S. Government and
$183,475, $95,449 and $32,295, respectively, for Investment Quality Income.
These expenses are consolidated, by fund, in the accompanying Statements of
Operations.
(D) Total brokerage commissions paid by Quest for Value, Opportunity, Small
Capitalization and Growth and Income were $309,310, $647,240, $400,477 and
$112,411, respectively, of which Oppenheimer & Co., Inc., an affiliate of the
Adviser, received $156,970, $266,868, $161,399 and $54,131, respectively, for
the year ended October 31, 1995.
(E) Oppenheimer & Co., Inc. has informed the funds that it received
approximately $390,000, $959,000, $241,000, $35,000, $162,000 and $88,000 in
connection with the sale of Class A shares for Quest for Value, Opportunity,
Small Capitalization, Growth and Income, U.S. Government and Investment Quality,
respectively, for the year ended October 31, 1995.
33
<PAGE>
OCTOBER 31, 1995
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
The Distributor has also informed the funds that it received contingent
deferred sales charges on the redemption of Class A and Class C shares of
approximately $10,000, $20,000, $10,000, $100, $6,000 and $2,000 for Quest for
Value, Opportunity, Small Capitalization, Growth and Income, U.S. Government and
Investment Quality, respectively, for the year ended October 31, 1995.
For the year ended October 31, 1995, the Distributor had assigned the right
to receive the compensation and contingent deferred sales charge on Class B
shares to a bank in return for the bank's reimbursement to the Distributor of
commissions paid by the Distributor to brokers/dealers on the sale of Class B
shares.
3. PURCHASES AND SALES OF SECURITIES
For the year ended October 31, 1995, purchases and sales of investment
securities, other than short-term securities, were as follows:
<TABLE>
<CAPTION>
QUEST FOR SMALL GROWTH AND U.S. INVESTMENT
VALUE OPPORTUNITY CAPITALIZATION INCOME GOVERNMENT QUALITY
------------ ------------- ---------------- ----------- ------------ ----------
<S> <C> <C> <C> <C> <C> <C>
Purchases $ 89,609,378 $ 350,805,248 $ 92,530,292 $54,163,330 $259,064,073 $5,329,244
Sales 116,160,440 67,743,053 99,613,323 41,657,071 304,565,951 4,275,980
</TABLE>
The following table summarizes activity in written option transactions for U.S.
Government for the year ended October 31, 1995:
<TABLE>
<CAPTION>
CONTRACTS PREMIUMS
----------- -----------
<S> <C> <C>
Option contracts written: Outstanding
beginning of year 2 $ 142,188
Options written 47 3,306,327
Options terminated in closing purchase
transactions (25) (1,788,359)
Options exercised (15) (920,313)
Options expired (8) (607,031)
--- -----------
Option contracts written: Outstanding end of
year 1 $ 132,812
--- -----------
--- -----------
</TABLE>
34
<PAGE>
- --------------------------------------------------------------------------------
4. FUND SHARE TRANSACTIONS
The following tables summarize the fund share activity for the two years
ended October 31, 1995:
<TABLE>
<CAPTION>
QUEST FOR VALUE OPPORTUNITY SMALL CAPITALIZATION
------------------------- ------------------------- -------------------------
YEAR ENDED OCTOBER 31, YEAR ENDED OCTOBER 31, YEAR ENDED OCTOBER 31,
------------------------- ------------------------- -------------------------
1995 1994 1995 1994 1995 1994
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
CLASS A
Issued................................ 4,045,256 5,077,999 9,028,138 4,781,210 2,307,655 7,804,081
Dividends and distributions
reinvested........................... 1,440,961 797,941 328,864 186,714 181,647 450,409
Redeemed.............................. (4,924,606) (6,566,112) (2,718,312) (3,470,990) (3,125,095) (6,835,042)
----------- ----------- ----------- ----------- ----------- -----------
Net increase (decrease)............. 561,611 (690,172) 6,638,690 1,496,934 (635,793) 1,419,448
----------- ----------- ----------- ----------- ----------- -----------
CLASS B
Issued................................ 1,718,575 1,020,362 7,259,921 2,145,988 620,242 936,328
Dividends and distributions
reinvested........................... 94,418 10,514 98,923 6,821 26,272 9,286
Redeemed.............................. (277,524) (44,566) (624,721) (54,500) (271,244) (50,575)
----------- ----------- ----------- ----------- ----------- -----------
Net increase........................ 1,535,469 986,310 6,734,123 2,098,309 375,270 895,039
----------- ----------- ----------- ----------- ----------- -----------
CLASS C
Issued................................ 523,083 289,679 1,828,198 367,367 389,503 205,454
Dividends and distributions
reinvested........................... 25,381 1,106 17,240 1,789 5,721 1,176
Redeemed.............................. (127,913) (22,509) (176,839) (13,680) (71,284) (13,923)
----------- ----------- ----------- ----------- ----------- -----------
Net increase........................ 420,551 268,276 1,668,599 355,476 323,940 192,707
----------- ----------- ----------- ----------- ----------- -----------
Total net increase................ 2,517,631 564,414 15,041,412 3,950,719 63,417 2,507,194
----------- ----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- ----------- -----------
</TABLE>
<TABLE>
<CAPTION>
GROWTH AND INCOME U.S. GOVERNMENT INVESTMENT QUALITY
------------------------- ------------------------- -------------------------
YEAR ENDED OCTOBER 31, YEAR ENDED OCTOBER 31, YEAR ENDED OCTOBER 31,
------------------------- ------------------------- -------------------------
1995 1994 1995 1994 1995 1994
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
CLASS A
Issued................................ 790,817 591,037 1,685,034 1,484,549 777,291 1,194,443
Dividends and distributions
reinvested........................... 216,701 506,743 534,322 839,276 222,241 263,168
Redeemed.............................. (641,530) (600,435) (4,526,190) (6,552,668) (1,706,041) (1,940,417)
----------- ----------- ----------- ----------- ----------- -----------
Net increase (decrease)............. 365,988 497,345 (2,306,834) (4,228,843) (706,509) (482,806)
----------- ----------- ----------- ----------- ----------- -----------
CLASS B
Issued................................ 438,682 269,571 467,177 594,901 708,238 614,495
Dividends and distributions
reinvested........................... 22,368 19,104 28,912 16,698 44,636 18,150
Redeemed.............................. (51,318) (26,407) (272,297) (86,599) (228,114) (77,488)
----------- ----------- ----------- ----------- ----------- -----------
Net increase........................ 409,732 262,268 223,792 525,000 524,760 555,157
----------- ----------- ----------- ----------- ----------- -----------
CLASS C
Issued................................ 140,694 33,894 182,514 123,553 116,706 290,357
Dividends and distributions
reinvested........................... 3,711 2,697 7,733 4,123 8,984 9,047
Redeemed.............................. (21,778) (469) (47,976) (25,877) (27,176) (41,081)
----------- ----------- ----------- ----------- ----------- -----------
Net increase........................ 122,627 36,122 142,271 101,799 98,514 258,323
----------- ----------- ----------- ----------- ----------- -----------
Total net increase (decrease)..... 898,347 795,735 (1,940,771) (3,602,044) (83,235) 330,674
----------- ----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- ----------- -----------
</TABLE>
35
<PAGE>
OCTOBER 31, 1995
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
5. UNREALIZED APPRECIATION (DEPRECIATION) AND COST OF INVESTMENTS FOR FEDERAL
INCOME TAX PURPOSES
At October 31, 1995, the composition of unrealized appreciation
(depreciation) of investment securities and the cost of investments for Federal
income tax purposes were as follows:
<TABLE>
<CAPTION>
APPRECIATION (DEPRECIATION) NET TAX COST
------------ -------------- ----------- ------------
<S> <C> <C> <C> <C>
Quest for Value $72,832,935 $ (782,009) $72,050,926 $258,831,045
Opportunity 107,623,664 (8,230,134) 99,393,530 542,282,713
Small Capitalization 13,114,205 (4,646,081) 8,468,124 141,830,483
Growth and Income 3,674,355 (1,106,543) 2,567,812 43,607,284
U.S. Government 852,086 (2,085,345) (1,233,259) 115,524,803
Investment Quality 4,461,416 (402,788) 4,058,628 56,937,821
</TABLE>
6. AUTHORIZED FUND SHARES AND PAR VALUE PER SHARE
<TABLE>
<CAPTION>
QUEST SMALL GROWTH U.S. INVESTMENT
FOR VALUE OPPORTUNITY CAPITALIZATION AND INCOME GOVERNMENT QUALITY
---------- ----------- -------------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Authorized fund shares 35,000,000 unlimited unlimited unlimited unlimited unlimited
Par value per share $1.00 $.01 $.01 $.01 $.01 $.01
</TABLE>
7. DIVIDENDS AND DISTRIBUTIONS
The following tables summarize the per share dividends and distributions
made for the two years ended October 31, 1995:
<TABLE>
<CAPTION>
QUEST FOR SMALL
VALUE OPPORTUNITY CAPITALIZATION
-------------- -------------- --------------
YEAR ENDED YEAR ENDED YEAR ENDED
OCTOBER 31, OCTOBER 31, OCTOBER 31,
-------------- -------------- --------------
1995 1994 1995 1994 1995 1994
------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
NET INVESTMENT INCOME:
Class A.......................... $ 0.083 $ 0.040 $ 0.117 $ 0.326 -- --
Class B.......................... 0.074 0.031 0.117 0.313 -- --
Class C.......................... 0.081 0.033 0.117 0.312 -- --
NET REALIZED GAINS:
Class A.......................... $ 0.828 $ 0.469 $ 0.614 $ 0.219 $ 0.415 $ 1.331
Class B.......................... 0.828 0.469 0.614 0.219 0.415 1.331
Class C.......................... 0.828 0.469 0.614 0.219 0.415 1.331
</TABLE>
<TABLE>
<CAPTION>
GROWTH AND U.S. INVESTMENT
INCOME GOVERNMENT QUALITY
-------------- -------------- --------------
YEAR ENDED YEAR ENDED YEAR ENDED
OCTOBER 31, OCTOBER 31, OCTOBER 31,
-------------- -------------- --------------
1995 1994 1995 1994 1995 1994
------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
NET INVESTMENT INCOME:
Class A.......................... $ 0.289 $ 0.319 $ 0.639 $ 0.593 $ 0.707 $ 0.680
Class B.......................... 0.242 0.265 0.562 0.510 0.646 0.609
Class C.......................... 0.209 0.261 0.549 0.509 0.643 0.608
NET REALIZED GAINS:
Class A.......................... $ 0.422 $ 1.669 -- $ 0.213 -- $ 0.069
Class B.......................... 0.422 1.669 -- 0.213 -- 0.069
Class C.......................... 0.422 1.669 -- 0.213 -- 0.069
TAX RETURN OF CAPITAL:
Class A.......................... -- -- $ 0.013 -- -- --
Class B.......................... -- -- 0.013 -- -- --
Class C.......................... -- -- 0.013 -- -- --
</TABLE>
36
<PAGE>
- --------------------------------------------------------------------------------
8. FINANCIAL INSTRUMENTS AND ASSOCIATED RISKS
During the year ended October 31, 1995, U.S. Government wrote covered
options and Small Capitalization and Investment Quality entered into futures
contracts in order to hedge their existing portfolio securities against
fluctuations in value. Written options and futures contracts involve elements of
market risk in excess of the amounts reflected in the fund's Statements of
Assets and Liabilities. A fund, as a writer of an option, has no control over
whether the option is exercised. The underlying security may be sold and, as a
result, a fund bears the market risk of an unfavorable change in the price of
the security underlying the written option. For futures contracts, the contract
amount reflects the extent of a fund's exposure to off balance sheet risk.
Written options and futures contracts also have elements of credit risk; i.e.
the risk that the counterparty may not perform. If the option or futures
contracts are traded through a regulated exchange, the counterparty risk is
generally eliminated since the exchange interposes itself into the transaction.
If, however, the option or futures contracts are traded in the over-the-counter
market, counterparty risk can exist.
9. NET CAPITAL LOSS CARRYOVERS
For the fiscal year ended October 31, 1995, Growth and Income will utilize
$188,067 of net capital loss carryovers. Growth and Income has net capital loss
carryovers of $233,749 of which $177,811 and $55,938 will be available, to the
extent provided by regulations, to offset future net capital gains realized
through the fiscal years ending 1996 and 2000, respectively. However, due to the
acquisition of the Unified Income Fund and the Unified Mutual Shares Fund in
1992, the loss carryovers are further limited by IRC Section 382 to $188,067
annually. As a result, Growth and Income had $370,083 of net capital loss
carryover expire on October 31, 1995 which is no longer available for future
periods. In addition, U.S. Government, at October 31, 1995, had a net capital
loss carryover of $8,145,977 available, to the extent provided by regulations,
to offset future net capital gains realized before the end of fiscal year 2003.
Also at October 31, 1995, Investment Quality had a net capital loss carryover of
$1,854,362 of which $952,880 and $901,482 will be available to offset future net
capital gains realized through the fiscal years ending 2002 and 2003,
respectively. To the extent that the capital loss carryovers are used to offset
future net capital gains, it is probable that the gains so offset will not be
distributed to shareholders.
10. SUBSEQUENT EVENTS
(a) On November 22, 1995, OCC Distributors (previously Quest for Value
Distributors), OpCap Advisors (previously Quest for Value Advisors) and their
parent Oppenheimer Capital consummated a transaction with Oppenheimer Management
Corporation ("OMC") which resulted in the sale to OMC of certain mutual fund
assets of OCC Distributors and OpCap Advisors including the transfer of the
management agreements and other contracts relating to certain Quest for Value
Funds and the use of the name "Quest for Value". As part of the transaction,
certain former Quest for Value Funds, including the Quest for Value Fund and the
Opportunity Fund, the Small Capitalization Fund, the Growth and Income Fund and
the Officers Fund, portfolios of the Quest for Value Family of Funds, have
entered into an investment advisory agreement with OMC and OMC has entered into
a sub-advisory agreement with OpCap Advisors with respect to each of such funds.
Pursuant to the transaction, the U.S. Government Income Fund, the Investment
Quality Income Fund, the National Tax-Exempt Fund, the California Tax-Exempt
Fund and the New York Tax-Exempt Fund were merged, as part of a tax-free
reorganization, into the Oppenheimer U.S. Government Trust, the Oppenheimer Bond
Fund, the Oppenheimer Tax-Free Bond Fund, the Oppenheimer California Tax-Exempt
Fund and the Oppenheimer New York Tax-Exempt Fund, respectively.
(b) On November 22, 1995, U.S. Government and Investment Quality paid the
following per share net investment income dividends to shareholders of record on
the close of business November 22, 1995:
<TABLE>
<CAPTION>
CLASS CLASS CLASS
A B C
------ ------ ------
<S> <C> <C> <C>
U.S. Government $0.0352 $0.0302 $0.0298
Investment Quality 0.0384 0.0345 0.0343
</TABLE>
37
<PAGE>
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS (FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
INCOME FROM
INVESTMENT OPERATIONS DIVIDENDS AND DISTRIBUTIONS
---------------------------------- ----------------------------------
Net
Realized Distributions
and Dividends to
Unrealized to Shareholders
Net Asset Net Gain Total Shareholders from Net Total
Value, Investment (Loss) from from Net Realized Dividends
Beginning Income on Investment Investment Gain on and
of Period (Loss)* Investments Operations Income Investments Distributions
<S> <C> <C> <C> <C> <C> <C> <C>
Quest for Value Fund, Inc.
Class A,
YEAR ENDED OCTOBER 31,
1995 $ 12.59 $ 0.12 $ 2.71 $ 2.83 ($ 0.08) ($ 0.83) ($ 0.91)
1994 12.51 0.09 0.50 0.59 (0.04) (0.47) (0.51)
1993 11.71 0.05 1.34 1.39 (0.05) (0.54) (0.59)
1992 10.61 0.04 1.77 1.81 (0.07) (0.64) (0.71)
1991 7.84 0.09 2.84 2.93 (0.16) -- (0.16)
Class B,
YEAR ENDED OCTOBER 31,
1995 12.53 0.05 2.69 2.74 (0.07) (0.83) (0.90)
1994 12.51 0.02 0.50 0.52 (0.03) (0.47) (0.50)
SEPTEMBER 2, 1993 (4)
TO OCTOBER 31, 1993 12.66(3) (0.01) (0.14) (0.15) -- -- --
Class C,
YEAR ENDED OCTOBER 31,
1995 12.52 0.04 2.70 2.74 (0.08) (0.83) (0.91)
1994 12.50 0.01 0.51 0.52 (0.03) (0.47) (0.50)
SEPTEMBER 2, 1993 (4)
TO OCTOBER 31, 1993 12.66(3) (0.01) (0.15) (0.16) -- -- --
<CAPTION>
RATIOS
-----------------------------------
Ratio of
Net Ratio of
Operating Net
Net Net Expenses Investment
Asset Assets to Income
Value, End of Average (Loss) Portfolio
End of Total Period Net to Average Turnover
Period Return** (000's) Assets Net Assets Rate
<S> <C> <C> <C> <C> <C> <C>
Quest for Value Fund, Inc.
Class A,
YEAR ENDED OCTOBER 31,
1995 $14.51 24.74% $282,615 1.68%(1) 0.90%(1) 36%
1994 12.59 5.01% 238,085 1.71% 0.72% 49%
1993 12.51 12.27% 245,320 1.75% 0.40% 27%
1992 11.71 18.45% 142,939 1.75% 0.53% 41%
1991 10.61 37.94% 79,914 1.83% 1.06% 48%
Class B,
YEAR ENDED OCTOBER 31,
1995 14.37 24.08% 38,557 2.21%(1) 0.36%(1) 36%
1994 12.53 4.43% 14,373 2.24% 0.14% 49%
SEPTEMBER 2, 1993 (4)
TO OCTOBER 31, 1993 12.51 (1.19%) 2,015 2.27%(5) (1.19%)(5) 27%
Class C,
YEAR ENDED OCTOBER 31,
1995 14.35 24.10% 10,140 2.26%(1) 0.31%(1) 36%
1994 12.52 4.45% 3,581 2.28% 0.09% 49%
SEPTEMBER 2, 1993 (4)
TO OCTOBER 31, 1993 12.50 (1.26%) 221 2.27%(5) (0.90%)(5) 27%
</TABLE>
(1) AVERAGE NET ASSETS FOR THE YEAR ENDED OCTOBER 31, 1995, FOR CLASSES A, B,
AND C WERE $257,239,913, $25,392,617 AND $6,711,023, RESPECTIVELY.
Opportunity Fund
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C>
Class A,
YEAR ENDED OCTOBER 31,
1995 $ 19.69 $ 0.23 $ 5.40 $ 5.63 ($ 0.12) ($ 0.61) ($ 0.73)
1994 18.71 0.18 1.35 1.53 (0.33) (0.22) (0.55)
1993 16.73 0.35 2.02 2.37 (0.07) (0.32) (0.39)
1992 14.29 0.09 2.93 3.02 (0.03) (0.55) (0.58)
1991 9.74 0.03 4.78 4.81 (0.23) (0.03) (0.26)
Class B,
YEAR ENDED OCTOBER 31,
1995 19.59 0.11 5.36 5.47 (0.12) (0.61) (0.73)
1994 18.70 0.08 1.34 1.42 (0.31) (0.22) (0.53)
SEPTEMBER 2, 1993 (4)
TO OCTOBER 31, 1993 18.73(3) 0.02 (0.05) (0.03) -- -- --
Class C,
YEAR ENDED OCTOBER 31,
1995 19.58 0.08 5.38 5.46 (0.12) (0.61) (0.73)
1994 18.70 0.08 1.33 1.41 (0.31) (0.22) (0.53)
SEPTEMBER 2, 1993 (4)
TO OCTOBER 31, 1993 18.73(3) 0.02 (0.05) (0.03) -- -- --
<CAPTION>
Class A,
<S> <C> <C> <C> <C> <C> <C>
YEAR ENDED OCTOBER 31,
1995 $24.59 29.88% $367,240 1.69%(1) 1.02%(1) 21%
1994 19.69 8.41% 163,340 1.78% 0.96% 42%
1993 18.71 14.34% 127,225 1.83% 2.69% 24%
1992 16.73 21.93% 40,563 2.27% 0.72% 32%
1991 14.29 50.44% 8,446 2.35%(2) 0.30%(2) 88%
Class B,
YEAR ENDED OCTOBER 31,
1995 24.33 29.19% 217,663 2.21%(1) 0.48%(1) 21%
1994 19.59 7.84% 43,317 2.34% 0.43% 42%
SEPTEMBER 2, 1993 (4)
TO OCTOBER 31, 1993 18.70 (0.16%) 2,115 2.52%(5) 1.32%(5) 24%
Class C,
YEAR ENDED OCTOBER 31,
1995 24.31 29.16% 49,608 2.31%(1) 0.37%(1) 21%
1994 19.58 8.06% 7,289 2.35% 0.43% 42%
SEPTEMBER 2, 1993 (4)
TO OCTOBER 31, 1993 18.70 (0.16%) 313 2.52%(5) 1.13%(5) 24%
</TABLE>
(1) AVERAGE NET ASSETS FOR THE YEAR ENDED OCTOBER 31, 1995, FOR CLASSES A, B,
AND C WERE $251,625,672, $116,522,609 AND $24,167,608, RESPECTIVELY.
(2) DURING THE PERIOD NOTED ABOVE, THE ADVISER VOLUNTARILY WAIVED ITS FEE AND
ASSUMED A PORTION OF THE OPERATING EXPENSES. IF SUCH WAIVER AND ASSUMPTION
HAD NOT BEEN IN EFFECT, THE RATIO OF NET OPERATING EXPENSES TO AVERAGE NET
ASSETS AND THE RATIO OF NET INVESTMENT INCOME (LOSS) TO AVERAGE NET ASSETS
WOULD HAVE BEEN 3.33% AND (0.68%), RESPECTIVELY, FOR THE YEAR ENDED OCTOBER
31, 1991.
- ----------------------------------
(3) OFFERING PRICE.
(4) INITIAL OFFERING OF CLASS B AND CLASS C SHARES.
(5) ANNUALIZED.
* BASED ON AVERAGE SHARES OUTSTANDING FOR THE PERIOD.
** ASSUMES REINVESTMENT OF ALL DIVIDENDS AND DISTRIBUTIONS, BUT DOES NOT
REFLECT DEDUCTIONS FOR SALES CHARGES. AGGREGATE (NOT ANNUALIZED) TOTAL
RETURN IS SHOWN FOR ANY PERIOD SHORTER THAN ONE YEAR.
38
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INCOME FROM
INVESTMENT OPERATIONS DIVIDENDS AND DISTRIBUTIONS
---------------------------------- ----------------------------------
Net
Realized Distributions
and Dividends to
Unrealized to Shareholders
Net Asset Net Gain Total Shareholders from Net Total
Value, Investment (Loss) from from Net Realized Dividends
Beginning Income on Investment Investment Gain on and
of Period (Loss)* Investments Operations Income Investments Distributions
<S> <C> <C> <C> <C> <C> <C> <C>
Small Capitalization Fund
Class A,
YEAR ENDED OCTOBER 31,
1995 $ 16.33 $ 0.11 $ 1.29 $ 1.40 $ -- ($ 0.42) ($ 0.42)
1994 17.68 (0.03) 0.01 (0.02) -- (1.33) (1.33)
1993 14.60 (0.04) 4.26 4.22 -- (1.14) (1.14)
1992 13.52 -- 1.50 1.50 -- (0.42) (0.42)
1991 8.80 (0.05) 4.85 4.80 (0.08) -- (0.08)
Class B,
YEAR ENDED OCTOBER 31,
1995 16.24 0.02 1.27 1.29 -- (0.42) (0.42)
1994 17.66 (0.11) 0.02 (0.09) -- (1.33) (1.33)
SEPTEMBER 2, 1993 (4)
TO OCTOBER 31, 1993 17.19(3) (0.02) 0.49 0.47 -- -- --
Class C,
YEAR ENDED OCTOBER 31,
1995 16.23 0.01 1.29 1.30 -- (0.42) (0.42)
1994 17.67 (0.13) 0.02 (0.11) -- (1.33) (1.33)
SEPTEMBER 2, 1993 (4)
TO OCTOBER 31, 1993 17.19(3) (0.02) 0.50 0.48 -- -- --
<CAPTION>
RATIOS
-----------------------------------
Ratio of
Net Ratio of
Operating Net
Net Net Expenses Investment
Asset Assets to Income
Value, End of Average (Loss) Portfolio
End of Total Period Net to Average Turnover
Period Return** (000's) Assets Net Assets Rate
<S> <C> <C> <C> <C> <C> <C>
Small Capitalization Fund
Class A,
YEAR ENDED OCTOBER 31,
1995 $17.31 8.82% $116,307 1.80%(1) 0.67%(1) 76%
1994 16.33 0.04% 120,102 1.88% (0.14%) 67%
1993 17.68 30.21% 104,898 1.89% (0.36%) 74%
1992 14.60 11.60% 39,693 2.11% (0.04%) 95%
1991 13.52 55.01% 20,686 2.25%(2) (0.41%)(2) 103%
Class B,
YEAR ENDED OCTOBER 31,
1995 17.11 8.17% 23,440 2.37%(1) 0.09%(1) 76%
1994 16.24 (0.39%) 16,144 2.48% (0.70%) 67%
SEPTEMBER 2, 1993 (4)
TO OCTOBER 31, 1993 17.66 2.73% 1,754 2.57%(5) (1.15%)(5) 74%
Class C,
YEAR ENDED OCTOBER 31,
1995 17.11 8.24% 9,068 2.38%(1) 0.08%(1) 76%
1994 16.23 (0.51%) 3,344 2.59% (0.81%) 67%
SEPTEMBER 2, 1993 (4)
TO OCTOBER 31, 1993 17.67 2.79% 235 2.57%(5) (1.20%)(5) 74%
</TABLE>
(1) AVERAGE NET ASSETS FOR THE YEAR ENDED OCTOBER 31, 1995, FOR CLASSES A, B,
AND C WERE $119,440,010, $20,105,476 AND $6,113,900, RESPECTIVELY.
(2) DURING THE PERIOD NOTED ABOVE, THE ADVISER VOLUNTARILY WAIVED ITS FEE AND
ASSUMED A PORTION OF THE OPERATING EXPENSES. IF SUCH WAIVER AND ASSUMPTION
HAD NOT BEEN IN EFFECT, THE RATIO OF NET OPERATING EXPENSES TO AVERAGE NET
ASSETS AND THE RATIO OF NET INVESTMENT INCOME (LOSS) TO AVERAGE NET ASSETS
WOULD HAVE BEEN 3.27% AND (1.43%), RESPECTIVELY, FOR THE YEAR ENDED OCTOBER
31, 1991.
Growth and Income Fund
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C>
Class A,
YEAR ENDED OCTOBER 31,
1995 $ 10.09 $ 0.27 $ 1.27 $ 1.54 ($ 0.29) ($ 0.42) ($ 0.71)
1994 11.24 0.32 0.55 0.87 (0.32) (1.70) (2.02)
1993 10.80 0.30 0.73 1.03 (0.26) (0.33) (0.59)
NOVEMBER 4, 1991 (6)
TO OCTOBER 31, 1992 10.00(3) 0.28 0.80 1.08 (0.28) -- (0.28)
Class B,
YEAR ENDED OCTOBER 31,
1995 10.07 0.19 1.28 1.47 (0.24) (0.42) (0.66)
1994 11.23 0.25 0.56 0.81 (0.27) (1.70) (1.97)
SEPTEMBER 2, 1993 (4)
TO OCTOBER 31, 1993 11.21(3) 0.04 0.05 0.09 (0.07) -- (0.07)
Class C,
YEAR ENDED OCTOBER 31,
1995 10.07 0.15 1.30 1.45 (0.21) (0.42) (0.63)
1994 11.23 0.24 0.56 0.80 (0.26) (1.70) (1.96)
SEPTEMBER 2, 1993 (4)
TO OCTOBER 31, 1993 11.21(3) 0.04 0.05 0.09 (0.07) -- (0.07)
<CAPTION>
Class A,
<S> <C> <C> <C> <C> <C> <C>
YEAR ENDED OCTOBER 31,
1995 $10.92 16.35% $37,082 1.99%(1,2) 2.60%(1,2) 130%
1994 10.09 8.64% 30,576 1.86%(2) 3.16%(2) 113%
1993 11.24 9.93% 28,466 1.90%(2) 2.66%(2) 192%
NOVEMBER 4, 1991 (6)
TO OCTOBER 31, 1992 10.80 10.84% 8,057 2.23%(2,5) 2.73%(2,5) 77%
Class B,
YEAR ENDED OCTOBER 31,
1995 10.88 15.65% 7,623 2.59%(1,2) 1.71%(1,2) 130%
1994 10.07 7.96% 2,928 2.47%(2) 2.53%(2) 113%
SEPTEMBER 2, 1993 (4)
TO OCTOBER 31, 1993 11.23 0.81% 319 2.49%(2,5) 1.83%(2,5) 192%
Class C,
YEAR ENDED OCTOBER 31,
1995 10.89 15.38% 1,828 2.88%(1,2) 1.39%(1,2) 130%
1994 10.07 7.91% 455 2.62%(2) 2.39%(2) 113%
SEPTEMBER 2, 1993 (4)
TO OCTOBER 31, 1993 11.23 0.81% 102 2.49%(2,5) 2.18%(2,5) 192%
</TABLE>
(1) AVERAGE NET ASSETS FOR THE YEAR ENDED OCTOBER 31, 1995 FOR CLASSES A, B, AND
C WERE $33,396,923, $4,845,598 AND $967,910, RESPECTIVELY.
(2) DURING THE PERIODS PRESENTED ABOVE, THE ADVISER VOLUNTARILY WAIVED A PORTION
OF ITS FEES. IF SUCH WAIVERS HAD NOT BEEN IN EFFECT, THE RATIOS OF NET
OPERATING EXPENSES TO AVERAGE NET ASSETS AND THE RATIOS OF NET INVESTMENT
INCOME TO AVERAGE NET ASSETS FOR CLASS A WOULD HAVE BEEN 2.02% AND 2.57%,
RESPECTIVELY, FOR THE YEAR ENDED OCOTBER 31, 1995, 2.32% AND 2.70%,
RESPECTIVELY, FOR THE YEAR ENDED OCTOBER 31, 1994, 2.18% AND 2.38%,
RESPECTIVELY, FOR THE YEAR ENDED OCTOBER 31, 1993 AND 2.98% AND 1.98%,
ANNUALIZED, RESPECTIVELY, FOR THE PERIOD NOVEMBER 4, 1991 (COMMENCEMENT OF
OPERATIONS) TO OCTOBER 31, 1992. THE RATIOS OF NET OPERATING EXPENSES TO
AVERAGE NET ASSETS AND THE RATIOS OF NET INVESTMENT INCOME TO AVERAGE NET
ASSETS WOULD HAVE BEEN 2.57% AND 1.73%, RESPECTIVELY, FOR CLASS B AND 2.84%
AND 1.43%, RESPECTIVELY, FOR CLASS C, FOR THE YEAR ENDED OCTOBER 31, 1995,
2.93% AND 2.07%, RESPECTIVELY, FOR CLASS B AND 3.10% AND 1.91%,
RESPECTIVELY, FOR CLASS C, FOR THE YEAR ENDED OCTOBER 31, 1994 AND 2.88% AND
1.44%, ANNUALIZED, RESPECTIVELY, FOR CLASS B AND 2.87% AND 1.80%,
ANNUALIZED, RESPECTIVELY, FOR CLASS C, FOR THE PERIOD SEPTEMBER 2, 1993
(INITIAL OFFERING) TO OCTOBER 31, 1993.
- ----------------------------------
(3) OFFERING PRICE.
(4) INITIAL OFFERING OF CLASS B AND CLASS C SHARES.
(5) ANNUALIZED.
(6) COMMENCEMENT OF OPERATIONS.
* BASED ON AVERAGE SHARES OUTSTANDING FOR THE PERIOD.
** ASSUMES REINVESTMENT OF ALL DIVIDENDS AND DISTRIBUTIONS, BUT DOES NOT
REFLECT DEDUCTIONS FOR SALES CHARGES. AGGREGATE (NOT ANNUALIZED) TOTAL
RETURN IS SHOWN FOR ANY PERIOD SHORTER THAN ONE YEAR.
39
<PAGE>
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS (FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
(CONTINUED)
<TABLE>
<CAPTION>
INCOME FROM
INVESTMENT OPERATIONS DIVIDENDS AND DISTRIBUTIONS
---------------------------------- ----------------------------------
Net
Realized Distributions
and Dividends to
Unrealized to Shareholders
Net Asset Net Gain Total Shareholders from Net Tax
Value, Investment (Loss) from from Net Realized return
Beginning Income on Investment Investment Gain on of
of Period (Loss) Investments Operations Income Investments Capital
<S> <C> <C> <C> <C> <C> <C> <C>
U.S. Government Income Fund
Class A,
YEAR ENDED OCTOBER 31,
1995 $ 10.79 $ 0.64 $ 0.49 $ 1.13 ($ 0.64) $ -- ($ 0.01)
1994 12.08 0.59 (1.08) (0.49) (0.59) (0.21) --
1993 11.92 0.65 0.35 1.00 (0.68) (0.16) --
1992 11.80 0.74 0.18 0.92 (0.74) (0.06) --
1991 11.35 0.85 0.61 1.46 (0.86) (0.15) --
Class B,
YEAR ENDED OCTOBER 31,
1995 10.79 0.56 0.49 1.05 (0.56) -- (0.01)
1994 12.08 0.51 (1.08) (0.57) (0.51) (0.21) --
SEPTEMBER 2, 1993 (4)
TO OCTOBER 31, 1993 12.13(3) 0.08 (0.04) 0.04 (0.08) (0.01) --
Class C,
YEAR ENDED OCTOBER 31,
1995 10.79 0.55 0.49 1.04 (0.55) -- (0.01)
1994 12.08 0.51 (1.08) (0.57) (0.51) (0.21) --
SEPTEMBER 2, 1993 (4)
TO OCTOBER 31, 1993 12.13(3) 0.08 (0.04) 0.04 (0.08) (0.01) --
<CAPTION>
RATIOS
-----------------------------------
Ratio of
Net Ratio of
Operating Net
Net Net Expenses Investment
Asset Assets to Income
Total Value, End of Average (Loss) Portfolio
Dividends and End of Total Period Net to Average Turnover
Distributions Period Return* (000's) Assets Net Assets Rate
<S> <C> <C> <C> <C> <C> <C> <C>
U.S. Government Income Fund
Class A,
YEAR ENDED OCTOBER 31,
1995 ($0.65) $11.27 10.78% $102,718 1.26%(1) 5.81%(1) 245%
1994 (0.80) 10.79 (4.15%) 123,257 1.20%(2) 5.19%(2) 126%
1993 (0.84) 12.08 8.55% 189,091 1.15%(2) 5.33%(2) 315%
1992 (0.80) 11.92 7.98% 151,197 1.15%(2) 6.26%(2) 207%
1991 (1.01) 11.80 13.40% 82,400 1.15%(2) 7.24%(2) 309%
Class B,
YEAR ENDED OCTOBER 31,
1995 (0.57) 11.27 10.01% 9,641 1.94%(1) 5.04%(1) 245%
1994 (0.72) 10.79 (4.84%) 6,813 1.92%(2) 4.53%(2) 126%
SEPTEMBER 2, 1993 (4)
TO OCTOBER 31, 1993 (0.09) 12.08 0.29% 1,286 1.85%(2,5) 3.07%(2,5) 315%
Class C,
YEAR ENDED OCTOBER 31,
1995 (0.56) 11.27 9.89% 2,883 2.06%(1) 4.91%(1) 245%
1994 (0.72) 10.79 (4.84%) 1,224 1.94%(2) 4.57%(2) 126%
SEPTEMBER 2, 1993 (4)
TO OCTOBER 31, 1993 (0.09) 12.08 0.34% 141 1.85%(2,5) 3.89%(2,5) 315%
</TABLE>
(1) AVERAGE NET ASSETS FOR THE YEAR ENDED OCTOBER 31, 1995, FOR CLASSES A, B,
AND C WERE $114,946,501, $9,210,406 AND $1,823,599, RESPECTIVELY.
(2) DURING THE PERIODS NOTED ABOVE, THE ADVISER VOLUNTARILY WAIVED A PORTION OF
ITS FEES. IF SUCH WAIVERS HAD NOT BEEN IN EFFECT, THE RATIOS OF NET
OPERATING EXPENSES TO AVERAGE NET ASSETS AND THE RATIOS OF NET INVESTMENT
INCOME TO AVERAGE NET ASSETS FOR CLASS A WOULD HAVE BEEN 1.23% AND 5.16%,
RESPECTIVELY, FOR THE YEAR ENDED OCTOBER 31, 1994, 1.20% AND 5.28%,
RESPECTIVELY, FOR THE YEAR ENDED OCTOBER 31, 1993, 1.17% AND 6.24%,
RESPECTIVELY, FOR THE YEAR ENDED OCTOBER 31, 1992, AND 1.46% AND 6.93%,
RESPECTIVELY, FOR THE YEAR ENDED OCTOBER 31, 1991. THE RATIOS OF NET
OPERATING EXPENSES TO AVERAGE NET ASSETS AND THE RATIOS OF NET INVESTMENT
INCOME TO AVERAGE NET ASSETS WOULD HAVE BEEN 1.93% AND 4.52%, RESPECTIVELY,
FOR CLASS B AND 1.95% AND 4.56%, RESPECTIVELY, FOR CLASS C, FOR THE YEAR
ENDED OCTOBER 31, 1994 AND 1.96% AND 2.96%, ANNUALIZED, RESEPCTIVELY, FOR
CLASS B AND 1.96% AND 3.78%, ANNUALIZED, RESPECTIVELY, FOR CLASS C, FOR THE
PERIOD SEPTEMBER 2, 1993 (INITIAL OFFERING) TO OCTOBER 31, 1993.
Investment Quality Income Fund
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C>
Class A,
YEAR ENDED OCTOBER 31,
1995 $ 9.67 $ 0.71 $ 1.21 $ 1.92 ($ 0.71) $ -- $ --
1994 11.49 0.68 (1.75) (1.07) (0.68) (0.07) --
1993 10.36 0.68 1.19 1.87 (0.68) (0.06) --
1992 10.06 0.80 0.30 1.10 (0.80) -- --
DECEMBER 18, 1990 (6)
TO OCTOBER 31, 1991 10.00(3) 0.71 0.06 0.77 (0.71) -- --
Class B,
YEAR ENDED OCTOBER 31,
1995 9.67 0.65 1.21 1.86 (0.65) -- --
1994 11.49 0.61 (1.75) (1.14) (0.61) (0.07) --
SEPTEMBER 2, 1993 (4)
TO OCTOBER 31, 1993 11.52(3) 0.08 (0.03) 0.05 (0.08) -- --
Class C,
YEAR ENDED OCTOBER 31,
1995 9.67 0.64 1.21 1.85 (0.64) -- --
1994 11.49 0.61 (1.75) (1.14) (0.61) (0.07) --
SEPTEMBER 2, 1993 (4)
TO OCTOBER 31, 1993 11.52(3) 0.09 (0.03) 0.06 (0.09) -- --
<CAPTION>
Class A,
<S> <C> <C> <C> <C> <C> <C> <C>
YEAR ENDED OCTOBER 31,
1995 ($0.71) $10.88 20.49% $ 45,078 1.44%(1,2) 6.90%(1,2) 8%
1994 (0.75) 9.67 (9.61%) 46,922 1.29%(2) 6.47%(2) 33%
1993 (0.74) 11.49 18.64% 61,288 1.20%(2) 6.07%(2) 12%
1992 (0.80) 10.36 11.21% 29,701 0.95%(2) 7.62%(2) 18%
DECEMBER 18, 1990 (6)
TO OCTOBER 31, 1991 (0.71) 10.06 8.11% 17,235 0.82%(2,5) 8.25%(2,5) 19%
Class B,
YEAR ENDED OCTOBER 31,
1995 (0.65) 10.88 19.78% 13,134 2.03%(1,2) 6.15%(1,2) 8%
1994 (0.68) 9.67 (10.22%) 6,605 1.92%(2) 5.85%(2) 33%
SEPTEMBER 2, 1993 (4)
TO OCTOBER 31, 1993 (0.08) 11.49 0.45% 1,468 1.84%(2,5) 3.68%(2,5) 12%
Class C,
YEAR ENDED OCTOBER 31,
1995 (0.64) 10.88 19.72% 3,977 2.08%(1,2) 6.18%(1,2) 8%
1994 (0.68) 9.67 (10.23%) 2,583 1.90%(2) 6.01%(2) 33%
SEPTEMBER 2, 1993 (4)
TO OCTOBER 31, 1993 (0.09) 11.49 0.55% 101 1.84%(2,5) 4.83%(2,5) 12%
</TABLE>
(1) AVERAGE NET ASSETS FOR THE YEAR ENDED OCTOBER 31, 1995, FOR CLASSES A, B,
AND C WERE $45,868,837, $9,544,915 AND $3,229,501, RESPECTIVELY.
(2) DURING THE PERIODS PRESENTED ABOVE, THE ADVISER VOLUNTARILY WAIVED ALL OR A
PORTION OF ITS FEES AND ASSUMED A PORTION OF ITS OPERATING EXPENSES. IF SUCH
WAIVERS AND ASSUMPTIONS HAD NOT BEEN IN EFFECT, THE RATIOS OF NET OPERATING
EXPENSES TO AVERAGE NET ASSETS AND THE RATIOS OF NET INVESTMENT INCOME TO
AVERAGE NET ASSETS FOR CLASS A WOULD HAVE BEEN 1.52% AND 6.82%,
RESPECTIVELY, FOR THE YEAR ENDED OCTOBER 31, 1995, 1.59% AND 6.71%,
RESPECTIVELY, FOR THE YEAR ENDED OCTOBER 31, 1994, 1.50% AND 5.77%,
RESPECTIVELY, FOR THE YEAR ENDED OCTOBER 31, 1993, 1.72% AND 6.85%,
RESPECTIVELY, FOR THE YEAR ENDED OCTOBER 31, 1992, AND 2.11% AND 6.96%,
ANNUALIZED, RESPECTIVELY, FOR THE PERIOD DECEMBER 18, 1990 (COMMENCEMENT OF
OPERATIONS) TO OCTOBER 31, 1991. THE RATIOS OF NET OPERATING EXPENSES TO
AVERAGE NET ASSETS AND THE RATIOS OF NET INVESTMENT INCOME TO AVERAGE NET
AASETS WOULD HAVE BEEN 2.09% AND 6.09%, RESPECTIVELY, FOR CLASS B AND 2.15%
AND 6.11%, RESPECTIVELY FOR CLASS C, FOR THE YEAR ENDED OCTOBER 31, 1995,
2.23% AND 5.54%, RESPECTIVELY, FOR CLASS B AND 2.21% AND 5.70%,
RESPECTIVELY, FOR CLASS C, FOR THE YEAR ENDED OCTOBER 31, 1994 AND 2.07% AND
3.45%, ANNUALIZED, RESPECTIVELY, FOR CLASS B AND 2.06% AND 4.61%,
ANNUALIZED, RESPECTIVELY, FOR CLASS C FOR THE PERIOD SEPTEMBER 2, 1993
(INITIAL OFFERING) TO OCTOBER 31, 1993.
- ----------------------------------
(3) OFFERING PRICE.
(4) INITIAL OFFERING OF CLASS B AND CLASS C SHARES.
(5) ANNUALIZED.
(6) COMMENCEMENT OF OPERATIONS.
* ASSUMES REINVESTMENT OF ALL DIVIDENDS AND DISTRIBUTIONS, BUT DOES NOT
REFLECT DEDUCTIONS FOR SALES CHARGES. AGGREGATE (NOT ANNUALIZED) TOTAL
RETURN IS SHOWN FOR ANY PERIOD SHORTER THAN ONE YEAR.
<PAGE>
<PAGE>
Appendix A
Corporate Industry Classifications
Aerospace/Defense
Air Transportation
Auto Parts Distribution
Automotive
Bank Holding Companies
Banks
Beverages
Broadcasting
Broker-Dealers
Building Materials
Cable Television
Chemicals
Commercial Finance
Computer Hardware
Computer Software
Conglomerates
Consumer Finance
Containers
Convenience Stores
Department Stores
Diversified Financial
Diversified Media
Drug Stores
Drug Wholesalers
Durable Household Goods
Education
Electric Utilities
Electrical Equipment
Electronics
Energy Services & Producers
Entertainment/Film
Environmental
Food
Gas Utilities
Gold
Health Care/Drugs
Health Care/Supplies & Services
Homebuilders/Real Estate
Hotel/Gaming
Industrial Services
Insurance
Leasing & Factoring
Leisure
Manufacturing
Metals/Mining
Nondurable Household Goods
Oil - Integrated
Paper
Publishing/Printing
Railroads
Restaurants
Savings & Loans
Shipping
Special Purpose Financial
Specialty Retailing
Steel
Supermarkets
Telecommunications - Technology
Telephone - Utility
Textile/Apparel
Tobacco
Toys
Trucking
<PAGE>
PAGE
<PAGE>
Oppenheimer Quest Growth & Income Value Fund
Two World Trade Center
New York, New York 10048-0203
1-800-525-7048
Investment Adviser
OppenheimerFunds, Inc.
Two World Trade Center
New York, New York 10048-0203
Sub-Adviser
OpCap Advisors
One World Financial Center
New York, New York 10281
Distributor
OppenheimerFunds Distributor, Inc.
Two World Trade Center
New York, New York 10048-0203
Transfer Agent
OppenheimerFunds Services
P.O. Box 5270
Denver, Colorado 80217
1-800-525-7048
Custodian of Portfolio Securities
State Street Bank and Trust Company
P.O. Box 8505
Boston, Massachusetts 02266-8505
Independent Accountants
Price Waterhouse LLP
950 Seventeenth Street
Denver, Colorado 80202
Legal Counsel
Gordon Altman Butowsky Weitzen
Shalov & Wein
114 West 47th Street
New York, New York 10036
prosp\p257sai
<PAGE>
OPPENHEIMER QUEST OPPORTUNITY VALUE FUND
Supplement dated February 15, 1996 to the
Prospectus dated February 15, 1996
The Prospectus is changed as follows:
In addition to paying dealers the regular commission for (1)
sales of Class A shares stated in the sales charge table in "Buying
Class A Shares," (2) sales of Class B shares described in
"Distribution and Service Plan for Class B Shares," or (3) sales of
Class C shares described in "Distribution and Service Plan for
Class C Shares," the Distributor will pay additional commission to
each participating broker, dealer and financial institution that
has a sales agreement with the Distributor (these are referred to
as "participating firms") for Class A, B and C shares of the Fund
sold in "qualifying transactions" (the "promotion"). The
additional commission will be .75% of the offering price of shares
of the Fund sold by a registered representative or sales
representative of a participating firm during the promotion. If
the additional commission is paid on the sale of Class A shares of
$1 million or more and those shares are redeemed within 13 months
from the end of the month in which they were purchased, the
participating firm will be required to return the additional
commission.
"Qualifying transactions" are sales of Class A, Class B and/or
Class C shares of any one or more of the Oppenheimer funds (except
money market funds and tax-exempt funds) for (1) new Individual
Retirement Accounts ("IRAs"), using the OppenheimerFunds prototype
IRA agreement, including rollover IRAs, SEP IRAs and SAR-SEP IRAs,
where the IRA is established and the purchase payment is received
during the period from January 1, 1996 through April 15, 1996 (the
"promotion period") or, (2) IRAs using the A.G. Edwards & Sons,
Inc. prototype IRA agreement, including rollover IRAs, SEP IRAs and
SAR-SEP IRAs, where the purchase payment is received during the
promotion period. "Qualifying transactions" also include
purchases of shares of Oppenheimer funds for existing
OppenheimerFunds or A.G. Edwards & Sons, Inc. prototype IRAs,
rollover IRAs, SEP IRAs and SAR-SEP IRAs effected through a
rollover from an investor, or through a direct rollover or trustee-
to-trustee transfer from another retirement plan trustee, of IRA
assets or other employee benefit plan assets from an account or
investment other than an account or investment in the Oppenheimer
funds. To qualify, the payment for the shares purchased for a
rollover to an OppenheimerFunds prototype IRA or for a rollover,
direct rollover or trustee-to-trustee transfer to an A.G. Edwards
& Sons, Inc. prototype IRA must be received during the promotion
period, or the acceptance of a direct rollover or trustee-to-
trustee transfer to an OppenheimerFunds prototype IRA must be
acknowledged by the trustee of the OppenheimerFunds prototype IRA
during the promotion period. "Qualifying transactions" do not
include (1) purchases of Class A shares intended but not yet made
under a Letter of Intent, and (2) purchases of Class A, Class B
and/or Class C shares with the redemption proceeds from an existing
OppenheimerFunds account.
February 15, 1996 PS0236.003
<PAGE>
OPPENHEIMER
QUEST OPPORTUNITY VALUE FUND
Prospectus dated February 15, 1996
Oppenheimer Quest Opportunity Value Fund (the "Fund"), a series of
Oppenheimer Quest for Value Funds, is a mutual fund that seeks
growth of capital over time through investments in a diversified
portfolio of common stocks, bonds and cash equivalents, the
proportions of which will vary based upon management's assessment
of the relative values of each investment under prevailing market
conditions. In an uncertain investment environment, the Fund may
stress defensive investment methods. Please refer to "Investment
Policies and Strategies" for more information about the types of
securities in which the Fund invests, its investment methods and
the risks of investing in the Fund.
This Prospectus explains concisely what you should know before
investing in the Fund. Please read this Prospectus carefully and
keep it for future reference. You can find more detailed
information about the Fund in the February 15, 1996, Statement of
Additional Information. For a free copy, call OppenheimerFunds
Services, the Fund's Transfer Agent, at 1-800-525-7048, or write to
the Transfer Agent at the address on the back cover. The Statement
of Additional Information has been filed with the Securities and
Exchange Commission and is incorporated into this Prospectus by
reference (which means that it is legally part of this Prospectus).
(OppenheimerFunds logo)
Shares of the Fund are not deposits or obligations of any bank, are
not guaranteed by any bank, are not insured by the F.D.I.C. or any
other agency, and involve investment risks, including the possible
loss of the principal amount invested.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION 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.
PAGE
<PAGE>
Contents
ABOUT THE FUND
Expenses
A Brief Overview of the Fund
Financial Highlights
Investment Objective and Policies
How the Fund is Managed
Performance of the Fund
ABOUT YOUR ACCOUNT
How to Buy Shares
Class A Shares
Class B Shares
Class C Shares
Special Investor Services
AccountLink
Automatic Withdrawal and Exchange Plans
Reinvestment Privilege
Retirement Plans
How to Sell Shares
By Mail
By Telephone
How to Exchange Shares
Shareholder Account Rules and Policies
Dividends, Capital Gains and Taxes
Appendix A: Special Sales Charge Arrangements for
Shareholders of the Fund who were Shareholders of the
Former Quest for Value Funds
<PAGE>
A B O U T T H E F U N D
Expenses
The Fund pays a variety of expenses directly for management of
its assets, administration, distribution of its shares and other
services, and those expenses are subtracted from the Fund's assets
to calculate the Fund's net asset value per share. All shareholders
therefore pay those expenses indirectly. Shareholders pay other
expenses directly, such as sales charges and account transaction
charges. The following tables are provided to help you understand
your direct expenses of investing in the Fund and your share of the
Fund's business operating expenses that you might expect to bear
indirectly. The numbers below are based on the Fund's expenses
during its last fiscal year ended October 31, 1995.
-- Shareholder Transaction Expenses are charges you pay when
you buy or sell shares of the Fund. Please refer to "About Your
Account" from pages 22 through 39 for an explanation of how and
when these charges apply.
<TABLE>
<CAPTION>
Class A Class B Class C
Shares Shares Shares
- ---------------------------------------------------------------------
<S> <C> <C> <C>
Maximum Sales 5.75% None None
Charge on Purchases
(as a % of offering price)
- ----------------------------------------------------------------------
Sales Charge on None None None
Reinvested Dividends
- ----------------------------------------------------------------------
Deferred Sales Charge None(1) 5% in the first 1.0% if
(as a % of the lower of the year, declining shares are
original purchase price or to 1% in the redeemed
redemption proceeds) sixth year and within 12
eliminated months of
thereafter(2) purchase(2)
- ----------------------------------------------------------------------
Exchange Fee None None None
</TABLE>
(1)If you invest $1 million or more ($500,000 or more for purchases
by OppenheimerFunds prototype 401(k) plans), in Class A shares, you
may have to pay a sales charge of up to 1% if you sell your shares
within 18 calendar months from the end of the calendar month during
which you purchased those shares, depending upon when you purchased
such shares. See "How to Buy Shares - Class A Shares," below.
Class A shares of the Fund purchased without an initial sales
charge on or before November 24, 1995 will continue to be subject
to the applicable contingent deferred sales charge in effect as of
that date as set forth in the then-current prospectus for such
fund.
(2)See "How to Buy Shares - Buying Class B Shares" and "How to Buy
Shares - Buying Class C Shares," below, for more information on the
contingent deferred sales charges.
-- Annual Fund Operating Expenses are paid out of the Fund's
assets and represent the Fund's expenses of operating its business.
For example, the Fund pays management fees to its investment
adviser, OppenheimerFunds, Inc. (which is referred to in this
Prospectus as the "Manager"). The rates of the Manager's fees are
set forth in "How the Fund is Managed," below. The Fund has other
regular expenses for services, such as transfer agent fees,
custodial fees paid to the bank that holds its portfolio
securities, audit fees and legal expenses. Those expenses are
detailed in the Fund's Financial Statements included in the
Statement of Additional Information.
The numbers in the chart below are projections of the Fund's
business expenses based on the Fund's expenses in its fiscal year
ended October 31, 1995. These amounts are shown as a percentage of
the average net assets of each class of the Fund's shares for that
year. The "12b-1 Distribution Plan Fees" for Class A shares are
the service plan fees (the maximum fee is 0.25% of average annual
net assets of that class), and a distribution fee of 0.25% of the
average annual net assets of that class. For Class B and Class C
shares, the "12b-1 Distribution Plan Fees" are the service plan
fees of 0.25% of average annual net assets of the class, and the
asset-based sales charge of 0.75% of the average annual net assets
of the class. These plans are described in greater detail in "How
to Buy Shares."
The actual expenses for each class of shares in future years
may be more or less than the numbers in the chart, depending on a
number of factors, including the actual value of the Fund's assets
represented by each class of shares.
Class A Class B Class C
Shares Shares Shares
- ----------------------------------------------------------
Management Fees 1.00% 1.00% 1.00%
- ----------------------------------------------------------
12b-1 Distribution
Plan Fees 0.50% 1.00% 1.00%
- ----------------------------------------------------------
Other Expenses 0.19% 0.21% 0.31%
- ----------------------------------------------------------
Total Fund
Operating Expenses 1.69% 2.21% 2.31%
-- Examples. To try to show the effect of these expenses on
an investment over time, we have created the hypothetical examples
shown below. Assume that you make a $1,000 investment in each class
of shares of the Fund, that the Fund's annual return is 5%, that
its operating expenses for each class are the ones shown in the
Annual Fund Operating Expenses chart above and that Class B shares
automatically convert into Class A shares six years after purchase.
If you were to redeem your shares at the end of each period shown
below, your investment would incur the following expenses by the
end of 1, 3, 5 and 10 years:
1 year 3 years 5 years 10 years(1)
- -------------------------------------------------------------
Class A Shares $74 $108 $144 $246
Class B Shares $72 $ 99 $138 $229
Class C Shares $33 $ 72 $124 $265
If you did not redeem your investment, it would incur the
following expenses:
1 year 3 years 5 years 10 years(1)
- -------------------------------------------------------------
Class A Shares $74 $108 $144 $246
Class B Shares $22 $ 69 $118 $229
Class C Shares $23 $ 72 $124 $265
(1)The Class B expenses in years 7 through 10 are based on the Class
A expenses shown above, because the Fund automatically converts
Class B shares into Class A shares after 6 years. Because of the
effect of the asset-based sales charge and the contingent deferred
sales charge on Class B and Class C shares, long-term Class B and
Class C shareholders could pay the economic equivalent of more than
the maximum front-end sales charge allowed under applicable
regulations. For Class B shareholders, the automatic conversion of
Class B shares to Class A shares is designed to minimize the
likelihood that this will occur. Please refer to "How to Buy
Shares - Buying Class B Shares" for more information.
These examples show the effect of expenses on an investment,
but are not meant to state or predict actual or expected costs or
investment returns of the Fund, all of which will vary.
A Brief Overview of the Fund
Some of the important facts about the Fund are summarized
below, with references to the section of this Prospectus where more
complete information can be found. You should carefully read the
entire Prospectus before making a decision about investing in the
Fund. Keep the Prospectus for reference after you invest,
particularly for information about your account, such as how to
sell or exchange shares.
-- What is the Fund's Investment Objective? The Fund's
investment objective is to seek growth of capital over time through
investments in a diversified portfolio of common stocks, bonds and
cash equivalents, the proportions of which will vary based upon
management's assessment of the relative value of each investment
under prevailing market conditions.
-- What does the Fund Invest In? The Fund will normally
invest primarily in common stocks and securities convertible into
common stock. During periods when common stocks appear to be
overvalued or when value differentials are such that fixed-income
obligations appear to present meaningful capital growth
opportunities relative to common stocks, or pending investment in
securities with capital growth opportunities, the Fund may invest
up to 100% of its total assets in bonds and other fixed-income
obligations, including money market instruments as defined herein
which do not generate capital appreciation. The bonds in which the
Fund invests will be limited to U.S. Government obligations,
mortgage-backed securities, investment-grade corporate debt
obligations and unrated obligations, including those of foreign
issuers, which the Sub-Adviser (defined below) believes to be of
comparable quality. The Fund may assume a temporary defensive
position when appropriate to do so by investing up to 100% of its
total assets in money market securities. These investments and
investment methods are more fully explained in "Investment
Objective and Policies," starting on page 10.
-- Who Manages the Fund? The Fund's investment adviser (the
"Manager") is OppenheimerFunds, Inc. The Manager (including a
subsidiary) manages investment company portfolios having over $40
billion in assets. The Manager handles the day-to-day business of
the Fund. The Fund also has a sub-adviser, OpCap Advisors (the
"Sub-Adviser") which is responsible for choosing the Fund's
investments. The Manager is paid an advisory fee by the Fund. The
Manager, not the Fund, pays the Sub-Adviser. The Fund has a
portfolio manager, Mr. Richard J. Glasebrook II, who is employed by
the Sub-Adviser and is primarily responsible for the selection of
the Fund's securities. The Fund's Board of Trustees, elected by
shareholders, oversees the investment adviser and the portfolio
manager. Please refer to "How the Fund is Managed" starting on
page 15 for more information about the Manager, the Sub-Adviser and
their fees.
-- How Risky is the Fund? All investments carry risks to some
degree. The Fund's investments in stocks and bonds are subject to
changes in their value from a number of factors such as changes in
general bond and stock market movements, or the change in value of
particular stocks or bonds because of an event affecting the
issuer. Changes in interest rates can affect stock and bond
prices. These changes affect the value of the Fund's investments
and its price per share. The Fund's investments in foreign
securities involve additional risks not associated with investments
in domestic securities, including risks associated with changes in
currency rates.
While the Manager tries to reduce risks by diversifying
investments, by carefully researching securities before they are
purchased for the Fund's portfolio, and in some cases by using
hedging techniques, there is no guarantee of success in achieving
the Fund's investment objective and your shares may be worth more
or less than their original cost when you redeem them. Please
refer to "Investment Objective and Policies" starting on page 10
for a more complete discussion of the Fund's investment risks.
-- How Can I Buy Shares? You can buy shares through your
dealer or financial institution, or you can purchase shares
directly through OppenheimerFunds Distributor, Inc. (the
"Distributor") by completing an Application or by using an
Automatic Investment Plan under AccountLink. Please refer to "How
to Buy Shares" on page 22 for more details.
-- Will I Pay a Sales Charge to Buy Shares? The Fund offers
the individual investor three classes of shares. Each class has
the same investment portfolio but different expenses. Class A
shares are offered with a front-end sales charge, starting at
5.75%, and reduced for larger purchases. Class B and Class C
shares are offered without a front-end sales charge, but may be
subject to a contingent deferred sales charge if redeemed within 6
years or 12 months of purchase, respectively. There is also an
annual asset-based sales charge on Class B and Class C shares.
Please review "How to Buy Shares" starting on page 22 for more
details, including a discussion about which class may be
appropriate for you.
-- How Can I Sell My Shares? Shares can be redeemed by mail
or by telephone call to the Transfer Agent on any business day, or
through your dealer. Please refer to "How to Sell Shares" on page
36. The Fund also offers exchange privileges to other Oppenheimer
funds, described in "How to Exchange Shares" on page 39.
-- How Has the Fund Performed? The Fund measures its
performance by quoting its average annual total returns and
cumulative total returns, which measure historical performance.
Those returns can be compared to the returns (over similar periods)
of other funds. Of course, other funds may have different
objectives, investments, and levels of risk. The Fund's
performance can also be compared to a broad-based market index,
which we have done on pages 20 and 21. Please remember that past
performance does not guarantee future results.
Financial Highlights
The table on the following pages presents selected financial
information about the Fund, including per share data, expense
ratios and other data based on the Fund's average net assets. This
information has been audited by Price Waterhouse LLP, the Fund's
independent accountants, whose report on the Fund's financial
statements for the fiscal year ended October 31, 1995, is included
in the Statement of Additional Information.
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS CLASS A
----------------------------------------------------------------------------------
PERIOD
ENDED
YEAR ENDED OCTOBER 31, OCT. 31,
1995 1994 1993 1992 1991 1990 1989(2)
================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING DATA:
Net asset value,
beginning of period $19.69 $18.71 $16.73 $14.29 $ 9.74 $11.59 $10.00(3)
- --------------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income(4) .23 .18 .35 .09 .03 .25 .17
Net realized and unrealized gain
(loss) on investments 5.40 1.35 2.02 2.93 4.78 (1.64) 1.42
------ ------ ------ ------ ------ ------- ------
Total income (loss) from
investment operations 5.63 1.53 2.37 3.02 4.81 (1.39) 1.59
- -------------------------------------------------------------------------------------------------------------------------------
Dividends and distributions to shareholders:
Dividends from net
investment income (.12) (.33) (.07) (.03) (.23) (.22) --
Distributions from net realized
gain on investments (.61) (.22) (.32) (.55) (.03) (.24) --
------ ------ ------ ------ ------ ------- ------
Total dividends and
distributions to shareholders (.73) (.55) (.39) (.58) (.26) (.46) --
- -------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $24.59 $19.69 $18.71 $16.73 $14.29 $ 9.74 $11.59
====== ====== ====== ====== ====== ======= ======
===============================================================================================================================
TOTAL RETURN, AT NET ASSET VALUE(5) 29.88% 8.41% 14.34% 21.93% 50.44% (12.62)% 15.90%
===============================================================================================================================
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(in thousands) $367,240 $163,340 $127,225 $40,563 $8,446 $4,570 $3,868
- -------------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets:
Net investment income (loss) 1.02%(6) 0.96% 2.69% .72% .30%(7) 2.30%(7) 3.75%(7,8)
Expenses 1.69%(6) 1.78% 1.83% 2.27% 2.35%(7) 2.00%(7) 1.84%(7,8)
- -------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate(9) 21.0% 42.0% 24.0% 32.0% 88.0% 206.0% 103.0%
</TABLE>
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS CLASS B CLASS C
--------------------------------- --------------------------------
PERIOD PERIOD
ENDED ENDED
YEAR ENDED OCTOBER 31, OCT. 31, YEAR ENDED OCTOBER 31, OCT. 31,
1995 1994 1993(1) 1995 1994 1993(1)
====================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING DATA:
Net asset value,
beginning of period $19.59 $18.70 $18.73(3) $19.58 $18.70 $18.73(3)
- --------------------------------------------------------------------------------------------------------------------
Income (loss) from investment
operations:
Net investment income(4) .11 .08 .02 .08 .08 .02
Net realized and unrealized gain
(loss) on investments 5.36 1.34 (.05) 5.38 1.33 (.05)
------ ------ ----- ---- ---- -----
Total income (loss) from
investment operations 5.47 1.42 (.03) 5.46 1.41 (.03)
- --------------------------------------------------------------------------------------------------------------------
Dividends and distributions to
shareholders:
Dividends from net
investment income (.12) (.31) -- (.12) (.31) --
Distributions from net realized
gain on investments (.61) (.22) -- (.61) (.22) --
------ ------ ------ ------ ------ ------
Total dividends and
distributions to shareholders (.73) (.53) -- (.73) (.53) --
- --------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $24.33 $19.59 $18.70 $24.31 $19.58 $18.70
====== ====== ====== ====== ====== ======
====================================================================================================================
TOTAL RETURN, AT NET ASSET VALUE(5) 29.19% 7.84% (.16)% 29.16% 7.78% (.16)%
====================================================================================================================
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(in thousands) $217,663 $43,317 $2,115 $49,608 $7,289 $313
- --------------------------------------------------------------------------------------------------------------------
Ratios to average net assets:
Net investment income (loss) .48%(6) .43% 1.32%(8) .37%(6) .43% 1.13%(8)
Expenses 2.21%(6) 2.34% 2.52%(8) 2.31%(6) 2.35% 2.52%(8)
- --------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate(9) 21.0% 42.0% 24.0% 21.0% 42.0% 24.0%
</TABLE>
1. Initial offering of Class B and Class C shares. For the period from
September 2, 1993 (inception of offering) to October 31, 1993.
2. For the period from January 1, 1989 (inception of offering) to October 31,
1989.
3. Offering price.
4. Based on average shares outstanding for the period.
5. Assumes reinvestment of all dividends and distributions, but does not
reflect deductions for sales charges. Aggregate (not annualized) total
return is shown for any period shorter than one year.
6. Average net assets for the year ended October 31, 1995, for Classes A, B,
and C were $251,625,672, $116,522,609 and $24,167,608, respectively.
7. During the periods noted above, the former Adviser voluntarily waived all or
a portion of its fees and assumed some operating expenses of the Fund. Without
such waivers and assumptions, the ratios of net investment income (loss) to
average net assets and the ratios of expenses to average net assets would have
been, respectively. Class A shares--(.68)% and 3.33% for the year ended
10/31/91, .61% and 3.69% for the year ended 10/31/90, and .27% and 5.32%
(annualized) for the period ended 10/31/89.
8. Annualized.
9. The lesser of purchases or sales of portfolio securities for a period,
divided by the monthly average of the market value of portfolio securities
owned during the period. Securities with a maturity or expiration date at the
time of acquisition of one year or less are excluded from the calculation.
Purchases and sales of investment securities (excluding short-term securities)
for the period ended October 31, 1995 were $350,805,248 and $67,743,053,
respectively.
<PAGE>
Investment Objective and Policies
Objective. The Fund seeks growth of capital over time through
investments in a diversified portfolio of common stocks, bonds and
cash equivalents, the proportions of which will vary based upon
management's assessment of the relative values of each investment
under prevailing market conditions.
Investment Policies and Strategies. The Fund will normally invest
primarily in common stocks and securities convertible into common
stock. During periods when common stocks appear to be overvalued
or when value differentials are such that fixed-income obligations
appear to present meaningful capital growth opportunities relative
to common stocks, or pending investment in securities with capital
growth opportunities, the Fund may invest up to 100% of its total
assets in bonds and other fixed-income obligations, including money
market instruments as defined below which do not generate capital
appreciation. The bonds in which the Fund invests will be limited
to U.S. Government obligations, mortgage-backed securities,
investment-grade corporate debt securities and unrated obligations,
including those of foreign issuers, that the Sub-Adviser believes
to be of comparable quality.
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 money market securities. At any time that the
Fund invests in money market securities for temporary defensive
purposes, to the extent of such investments it is not pursuing its
investment objective.
-- Can the Fund's Investment Objective and Policies Change?
The Fund has an investment objective, which is described above, as
well as investment policies it follows to try to achieve its
objective. Additionally, the Fund uses certain investment
techniques and strategies in carrying out those policies. Except
as indicated, the investment objective and policies described above
are fundamental policies.
Fundamental policies are those that cannot be changed without
the approval of a "majority" of the Fund's outstanding voting
shares. The term "majority" is defined in the Investment Company
Act of 1940 to be a particular percentage of outstanding voting
shares (and this term is explained in the Statement of Additional
Information). The Fund's Board of Trustees may change non-
fundamental policies without shareholder approval, although
significant changes will be described in amendments to this
Prospectus.
-- Stock Investment Risks. Because the Fund may invest a
substantial portion of its assets in stocks, the value of the
Fund's portfolio will be affected by changes in the stock markets.
At times, the stock markets can be volatile, and stock prices can
change substantially. This market risk will affect the Fund's net
asset values per share, which will fluctuate as the values of the
Fund's portfolio securities change. Not all stock prices change
uniformly or at the same time, not all stock markets move in the
same direction at the same time, and other factors can affect a
particular stock's prices (for example, poor earnings reports by an
issuer, loss of major customers, major litigation against an
issuer, and changes in government regulations affecting an
industry). Not all of these factors can be predicted.
The Fund attempts to limit market risks by diversifying its
investments, that is, by not holding a substantial amount of the
stock of any one company, by not investing too great a percentage
of the Fund's assets in any one company, and by investing a varying
portion of its portfolio in bonds and convertible securities, as
discussed below. Because changes in market prices can occur at any
time, there is no assurance that the Fund will achieve its
investment objective, and when you redeem your shares they may be
worth more or less than what you paid for them.
-- Investments in Bonds and Convertible Securities. The Fund
may also invest in bonds, debentures and other fixed-income
securities. The Fund's investments in corporate debt obligations
will be limited to those rated investment-grade, including those of
foreign issuers, or, if unrated, determined by the Sub-Adviser to
be of comparable quality. Investment-grade rated obligations are
those rated at least "BBB" by Standard & Poor's Corporation or at
least "Baa" by Moody's Investors Service, Inc., or a comparable
rating by another rating organization. While securities rated
"BBB" by Standard & Poor's or "Baa" by Moody's are investment-
grade, they may be subject to greater market fluctuations and risks
of loss of income and principal than higher-grade securities and
may be considered to have certain speculative characteristics.
The value of a convertible security is a function of its
"investment value" and its "conversion value." If the "investment
value" exceeds the "conversion value," the security's price will
likely increase when interest rates fall and decrease when interest
rates rise, as with a fixed-income security. If the "conversion
value" exceeds the "investment value," the convertible security
will likely sell at a premium over its conversion value and its
price will tend to fluctuate directly with the price of the
underlying security.
-- Risks of Fixed-Income Securities. In addition to credit
risks, described below, debt securities are subject to changes in
their value due to changes in prevailing interest rates. When
prevailing interest rates fall, the values of already-issued debt
securities generally rise. When interest rates rise, the values of
already-issued debt securities generally decline. The magnitude of
these fluctuations will often be greater for longer-term debt
securities than shorter-term debt securities. Changes in the value
of securities held by the Fund mean that the Fund's share prices
can go up or down when interest rates change because of the effect
of the change on the value of the Fund's portfolio of debt
securities. Credit risk relates to the ability of the issuer to
meet interest or principal payments on a security as they become
due.
-- U.S. Government Obligations, including Mortgage-Backed
Securities. U.S. Government obligations are obligations supported
by any of the following: (a) the full faith and credit of the U.S.
Government, such as obligations of Government National Mortgage
Association ("Ginnie Mae"), (b) the right of the issuer to borrow
an amount limited to a specific line of credit from the U.S.
Government, such as obligations of Federal National Mortgage
Association ("Fannie Mae"), and (c) the credit of this U.S.
Government instrumentality, such as obligations of Federal Home
Loan Mortgage Corporation ("Freddie Mac").
The Fund may invest in mortgage-backed securities issued by
the U.S. Government, its agencies or instrumentalities, including
Ginnie Mae, Fannie Mae or Freddie Mac. Also known as pass-through
securities, the homeowner's principal and interest payments pass
from the originating bank or savings and loan through the
appropriate governmental agency to investors, net of service
charges.
The effective maturity of a mortgage-backed security may be
shortened by unscheduled or early payment of principal and interest
on the underlying mortgages, which may affect the effective yield
of such securities. The principal that is returned may be invested
in instruments having a higher or lower yield than the prepaid
instruments depending on then-current market conditions.
The Fund may invest in collateralized mortgage obligations
("CMOs") that are issued or guaranteed by the U.S. Government or
its agencies or instrumentalities, or that are collateralized by a
portfolio of mortgages or mortgage-related securities guaranteed by
such an agency or instrumentality. Payment of the interest and
principal generated by the pool of mortgages is passed through to
the holders as the payments are received by the issuer of the CMO.
CMOs may be issued in a variety of classes or series ("tranches")
that have different maturities. The principal value of certain CMO
tranches may be more volatile than other types of mortgage-related
securities, because of the possibility that the principal value of
the CMO may be prepaid earlier than the maturity of the CMO as a
result of prepayments of the underlying mortgage loans by the
borrowers.
- -- Foreign Securities. The Fund may purchase foreign securities
that are listed on a domestic or foreign securities exchange,
traded in domestic or foreign over-the counter markets or
represented by American Depository Receipts. There is no limit to
the amount of such foreign securities the Fund may acquire. The
Fund may buy securities in any country, including emerging market
countries. The Fund presently does not intend to purchase
securities issued by emerging market countries, or by companies
located in those countries. Foreign currency will be held by the
Fund only in connection with the purchase or sale of foreign
securities.
Foreign securities have special risks. For example, foreign
issuers are not subject to the same accounting and disclosure
requirements that U.S. companies are subject to. The value of
foreign investments may be affected by changes in foreign currency
rates, exchange control regulations, expropriation or
nationalization of a company's assets, foreign taxes, delays in
settlement of transactions, changes in governmental economic or
monetary policy in the U.S. or abroad, or other political and
economic factors. Foreign investment in certain emerging market
countries is restricted or controlled to varying degrees. In the
past, securities in emerging countries have experienced greater
price movement, both positive and negative, than securities of
companies located in developed countries. More information about
the risks and potential rewards of investing in foreign securities
is contained in the Statement of Additional Information.
-- Portfolio Turnover. A change in the securities held by the
Fund is known as "portfolio turnover." The Fund may engage in
short-term trading to try to achieve its objective. It is
anticipated that the Fund's annual portfolio turnover rate will
generally not exceed 100%. The "Financial Highlights," above, show
the Fund's portfolio turnover rate during past fiscal years. High
turnover and short-term trading may cause the Fund to have
relatively larger commission expenses and transaction costs than
funds that do not engage in short-term trading. Additionally, high
portfolio turnover may affect the ability of the Fund to qualify as
a "regulated investment company" under the Internal Revenue Code
for tax deductions for dividends and capital gain distributions the
Fund pays to shareholders. The Fund qualified in its last fiscal
year and intends to do so in the coming year, although there is no
guarantee that it will qualify.
Other Investment Techniques and Strategies. The Fund may also use
the investment techniques and strategies described below. These
techniques involve certain risks. The Statement of Additional
Information contains more information about these practices,
including limitations on their use that may help reduce some of the
risks.
-- Temporary Defensive Investments. In times of unstable
market or economic conditions, when the Sub-Adviser determines it
appropriate to do so to attempt to reduce fluctuations in the value
of the Fund's net assets, the Fund may assume a temporary defensive
position and invest an unlimited amount of assets in money market
instruments of the type identified on page 10 under "Investment
Policies and Strategies."
-- When-Issued and Delayed Delivery Transactions. The Fund
may purchase securities on a "when-issued" basis, and may purchase
or sell such securities on a "delayed delivery" basis. These terms
refer to securities whose terms and indenture are available and for
which a market exists, but which are not available for immediate
delivery. The Fund does not intend to make such purchases for
speculative purposes. During the period between the purchase and
settlement, the underlying securities are subject to market
fluctuations and no interest accrues prior to delivery of the
securities.
-- Repurchase Agreements. The Fund may enter into repurchase
agreements. They are primarily used for cash liquidity purposes.
In a repurchase transaction, the Fund buys a security and
simultaneously sells it to the vendor for delivery at a future
date. Repurchase agreements must be fully collateralized. However,
if the vendor fails to pay the resale price on the delivery date,
the Fund may incur costs in disposing of the collateral and may
experience losses if there is any delay in its ability to do so.
There is no limit on the amount of the Fund's net assets that may
be subject to repurchase agreements of seven days or less.
Repurchase agreements with a maturity beyond seven days are subject
to the Fund's limitations on investments in illiquid and restricted
securities, discussed below.
-- Illiquid Securities. Under the policies established by the
Board of Trustees, the Manager determines the liquidity of the
Fund's investments. Investments may be illiquid because of the
absence of an active trading market, making it difficult to value
them or dispose of them promptly at an acceptable price. As a
fundamental policy, the Fund will not invest more than 10% of its
total assets in illiquid securities. Restricted securities are
considered illiquid securities for purposes of this restriction.
A restricted security is one that has a contractual restriction on
its resale or which cannot be sold publicly until it is registered
under the Securities Act of 1933. Certain restricted securities,
eligible for resale to qualified institutional purchasers, are not
subject to that limit.
-- Loans of Portfolio Securities. To attempt to increase its
total return, the Fund may lend its portfolio securities to certain
types of eligible borrowers approved by the Board of Trustees.
Each loan must be collateralized in accordance with applicable
regulatory requirements. After any loan, the value of the
securities loaned is not expected to exceed 10% of the Fund's total
assets. There are some risks in connection with securities
lending. The Fund might experience a delay in receiving additional
collateral to secure a loan or a delay in recovery of the loaned
securities.
Other Investment Restrictions.
The Fund has certain investment restrictions that are
fundamental policies. Under these fundamental policies the Fund
cannot do any of the following:
- With respect to 75% of its total assets, invest more than 5%
of the value of its total assets in the securities of any one
issuer;
- Purchase more than 10% of any class of security of any
issuer (other than the U.S. Government or any of its agencies of
instrumentalities), with all outstanding debt securities and all
preferred stock of an issuer each being considered as one class;
- 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);
- Borrow money in excess of 10% of the value of the Fund's
total assets; the Fund may borrow only from banks and only as
temporary measure for extraordinary or emergency purposes and will
make no additional investments while such borrowings exceed 5% of
the Fund's total assets;
- Invest more than 10% 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 of
longer than seven days, securities subject to legal or contractual
restrictions and certain over-the-counter options; and
- Invest more than 5% of the Fund's total assets in securities
of issuers having a record, together with predecessors, of less
than three years continuous operation.
Notwithstanding the above restriction on illiquid securities,
the Fund may purchase securities which are not registered under the
Securities Act of 1933 (the "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,
provided that the Sub-Advisor, under guidelines established by the
Fund's Board of Trustees, determines that an adequate trading
market exists for that security.
The Fund has undertaken, in connection with the qualification
of its shares for sale in certain states, to limit investments in
restricted securities to 5% of its total assets, excluding
restricted securities that may be resold to "qualified
institutional buyers". This undertaking will terminate if the Fund
ceases to qualify its shares for sale in those states, or if the
applicable state rules or regulations are amended.
All of the percentage restrictions described above and
elsewhere in this Prospectus and in the Statement of Additional
Information apply only at the time the Fund purchases a security,
and the Fund need not dispose of a security merely because the size
of the Fund's assets has changed or the security has increased in
value relative to the size of the Fund. There are other fundamental
policies discussed in the Statement of Additional Information.
How the Fund is Managed
Organization and History. The Fund is one of four portfolios of
Oppenheimer Quest For Value Funds, an open-end management
investment company organized as a Massachusetts business trust in
April, 1987. The Fund is an open-end, diversified management
investment company, with an unlimited number of authorized shares
of beneficial interest.
The Fund is governed by a Board of Trustees, which is
responsible under Massachusetts law for protecting the interests of
shareholders. The Trustees meet periodically throughout the year
to oversee the Fund's activities, review its performance, and
review the actions of the Manager. "Trustees and Officers of the
Fund" in the Statement of Additional Information names the Trustees
and provides more information about them and the officers of the
Fund. Although the Fund is not required by law to hold annual
meetings, it may hold shareholder meetings from time to time on
important matters, and shareholders have the right under certain
circumstances to call a meeting to remove a Trustee or to take
other action described in the Fund's Declaration of Trust.
The Board of Trustees has the power, without shareholder
approval, to divide unissued shares of the Fund into two or more
classes. The Board has done so, and the Fund currently has three
classes of shares, Class A, Class B and Class C. All classes
invest in the same investment portfolio. Each class has its own
dividends and distributions and pays certain expenses which may be
different for the different classes. Each class may have a
different net asset value. Each share has one vote at shareholder
meetings, with fractional shares voting proportionally on matters
submitted to the vote of shareholders. Only shares of a particular
class vote as a class on matters that affect that class alone.
Shares are freely transferrable.
The Manager. The Fund is managed by the Manager, OppenheimerFunds,
Inc., which supervises the Fund's investment program and handles
its day-to-day business. The Manager carries out its duties,
subject to the policies established by the Board of Trustees, under
an Investment Advisory Agreement with the Fund which states the
Manager's responsibilities. The Agreement sets forth the fees paid
by the Fund to the Manager and describes the expenses that the Fund
pays to conduct its business.
The Manager has operated as an investment adviser since 1959.
The Manager (including a subsidiary) currently manages investment
companies, including other Oppenheimer funds, with assets of more
than $40 billion as of December 31, 1995, and with more than 2.8
million shareholder accounts. The Manager is owned by Oppenheimer
Acquisition Corp., a holding company that is owned in part by
senior officers of the Manager and controlled by Massachusetts
Mutual Life Insurance Company.
The Sub-Adviser. The Manager has retained OpCap Advisors (the
"Sub-Adviser") to provide day-to-day portfolio management of the
Fund. OpCap 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 OpCap
Advisors. Oppenheimer Financial Corp., a holding company, holds a
33% interest in Oppenheimer Capital, a registered investment
advisor. 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.
Prior to November 22, 1995, OpCap Advisors was named Quest for
Value Advisors and was the investment adviser to the Fund.
Effective November 22, 1995, the Manager acquired the investment
advisory and other contracts and business relationships and certain
assets and liabilities of Quest for Value Advisors, Quest for Value
Distributors and Oppenheimer Capital relating to twelve Quest for
Value mutual funds, including the Fund. Pursuant to this
acquisition and Fund shareholder approval received on November 3,
1995, the Fund entered into the following agreements, effective
November 22, 1995: the Investment Advisory Agreement between the
Fund and the Manager, and the distribution and service plans and
agreements between the Fund and the Distributor. Further, the
Manager entered into a subadvisory agreement with the Sub-Adviser
for the benefit of the Fund. These agreements are described below.
-- Portfolio Manager. The portfolio manager of the Fund is
Mr. Richard J. Glasebrook II, who is also a Senior Vice President
of Oppenheimer Capital. He has been the Fund's portfolio manager
since April, 1991.
-- Fees and Expenses. Under the Investment Advisory
Agreement, the Fund pays the Manager an annual fee based on the
Fund's daily net assets, as follows: 1% of the first $400 million
of net assets, 0.90% of the next $400 million, and 0.85% of net
assets over $800 million. This management fee is higher than that
paid by most other investment companies. The Fund also reimburses
the Manager for bookkeeping and accounting services performed on
behalf of the Fund.
The Manager pays OpCap Advisors an annual fee based on the
average daily net assets of the Fund equal to 40% of the advisory
fee collected by the Manager based on the total net assets of the
Fund as of November 22, 1995 (the "Base Amount") plus 30% of the
investment advisory fee collected by the Manager based on the total
net assets of the Fund that exceed the Base Amount.
OpCap 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, OpCap
Advisors may consider their record of sales of shares of the Fund.
Further information about the Fund's brokerage policies and
practices is set forth in "Brokerage Policies of the Fund" in the
Statement of Additional Information.
Distributor. The Fund's shares are sold through dealers and
brokers that have a sales agreement with OppenheimerFunds
Distributor, Inc., a subsidiary of the Manager that acts as the
Distributor. The Distributor also distributes the shares of other
mutual funds managed by the Manager (the "Oppenheimer funds") and
is sub-distributor for funds managed by a subsidiary of the
Manager.
Transfer Agent and Shareholder Servicing Agent. The transfer agent
and shareholder servicing agent for the Fund is OppenheimerFunds
Services. 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 the 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 and
other accounts for which Unified Management Corporation is the
dealer of record.
Performance of the Fund
Explanation of Performance Terminology. The Fund uses the terms
"total return" and "average annual total return" to illustrate its
performance. The performance of each class of shares is shown
separately, because the performance of each class will usually be
different as a result of the different kinds of expenses each class
bears. These returns measure the performance of a hypothetical
investment in the Fund over various periods, and do not show the
performance of each shareholder's investment (which will vary if
dividends are received in cash or shares are sold or additional
shares are purchased). The Fund's performance information may help
you see how well your Fund has done over time and to compare it to
other funds or market indices, as we have done below.
It is important to understand that the Fund's total returns
represent past performance and should not be considered to be
predictions of future returns or performance. This performance
data is described below, but more detailed information about how
total returns are calculated is contained in the Statement of
Additional Information, which also contains information about other
ways to measure and compare the Fund's performance. The Fund's
investment performance will vary over time, depending on market
conditions, the composition of the portfolio, expenses and which
class of shares you purchase.
-- Total Returns. There are different types of total returns
used to measure the Fund's performance. Total return is the change
in value of a hypothetical investment in the Fund over a given
period, assuming that all dividends and capital gains distributions
are reinvested in additional shares. The cumulative total return
measures the change in value over the entire period (for example,
ten years). An average annual total return shows the average rate
of return for each year in a period that would produce the
cumulative total return over the entire period. However, average
annual total returns do not show the Fund's actual year-by-year
performance.
When total returns are quoted for Class A shares, they reflect
the payment of the current maximum initial sales charge. When
total returns are shown for Class B shares, they reflect the effect
of the contingent deferred sales charge that applies to the period
for which total return is shown. When total returns are shown for
a one-year period (or less) for Class C shares, they reflect the
effect of the contingent deferred sales charge. Total returns may
also be quoted "at net asset value," without considering the effect
of the sales charge, and those returns would be reduced if sales
charges were deducted.
How Has the Fund Performed? Below is a discussion of the Fund's
performance during its last fiscal year ended October 31, 1995,
followed by a graphical comparison of the Fund's performance to an
appropriate broad-based market index. Prior to November 22, 1995,
the Fund was known as Quest for Value Opportunity Fund, and the
Sub-Adviser was the Fund's investment manager.
-- Management's Discussion of Performance. Although the Fund
can invest in stocks, bonds and cash equivalents, in practice it
invests primarily in common stocks based on the premise that stocks
provide the best total returns over time. The Fund seeks to invest
in quality undervalued stocks and hold them for price appreciation.
Its portfolio is generally characterized by low turnover. The Fund
sought to be fully invested throughout the fiscal year ended
October 31, 1995. The Fund's performance during that fiscal year
benefited from its significant holdings of financial service
company stocks, one of the market's strong sectors.
-- Comparing the Fund's Performance to the Market. The graphs
below show the performance of a hypothetical $10,000 investment in
each class of shares of the Fund held until October 31, 1995. In
the case of Class A shares, performance is measured from the
commencement of operations on January 3, 1989, and in the case of
Class B and Class C shares, from inception of those classes on
September 1, 1993.
The Fund's performance is compared to the performance of the
Standard & Poor's ("S&P") 500 Index. The S&P 500 Index is a broad
based index of equity securities widely regarded as the general
measure of the performance of the U.S. equity securities market.
Index performance reflects the reinvestment of dividends but
does not consider the effect of capital gains or transaction costs,
and none of the data in the graphs below shows the effect of taxes.
Moreover, index performance data does not reflect any assessment of
the risk of the investments included in the index. The Fund's
performance reflects the effect of Fund business and operating
expenses. While index comparisons may be useful to provide a
benchmark for the Fund's performance, it must be noted that the
Fund's investments are not limited to the securities in the indices
shown.
Oppenheimer Quest Opportunity Value Fund
Comparison of Change in Value
of $10,000 Hypothetical Investments in
Oppenheimer Quest Opportunity Value Fund and
the S&P 500 Index
[Graph]
Past Performance is not predictive of future performance.
Oppenheimer Quest Opportunity Value Fund
Average Annual Total Returns of the Fund at 10/31/95
- ----------------------------------------------------
Class A Shares(1)
- -----------------
1-Year 5-Year Life
------ ------ ----
22.42% 22.71% 16.37%
Class B Shares(2)
- -----------------
1-Year Life
------ ----
24.14% 15.30%
Class C Shares(3)
- -----------------
1-Year Life
------ ----
28.16% 16.42%
- ---------------------
Total returns and the ending account values in the graphs reflect
reinvestment of all dividends and capital gains distributions.
Total returns are based upon inception date of the Fund (for Class
A shares) or date of first public offering (for Class B and Class
C shares).
(1) The commencement of operations of the Fund (Class A shares) was
1/3/89. Class A returns are shown net of the current applicable
5.75% maximum initial sales charge.
(2) Class B shares of the Fund were first publicly offered on
9/01/93. Returns are shown net of the applicable 5% and 3%
contingent deferred sales charge, respectively, for the 1-year
period and life of the class. The ending account value in the
graph is net of the applicable 3% contingent deferred sales charge.
(3) Class C shares of the Fund were first publicly offered on
9/01/93. The 1-year return is shown net of the applicable 1%
contingent deferred sales charge.
About Your Account
How to Buy Shares
Classes of Shares. The Fund offers investors three different
classes of shares. The different classes of shares represent
investments in the same portfolio of securities but are subject to
different expenses and will likely have different share prices.
-- Class A Shares. If you buy Class A shares, you may pay an
initial sales charge on investments up to $1 million (up to
$500,000 for purchases by OppenheimerFunds prototype 401(k) plans).
If you purchase Class A shares as part of an investment of at least
$1 million ($500,000 for OppenheimerFunds prototype 401(k) plans)
in shares of one or more Oppenheimer funds or former Quest Funds,
you will not pay an initial sales charge, but if you sell any of
those shares within 18 months of buying them, you may pay a
contingent deferred sales charge in an amount that depends upon
when you bought such shares. The amount of that sales charge will
vary depending on the amount you invested. Class A shares of the
Fund purchased subject to a contingent deferred sales charge on or
prior to November 24, 1995 will be subject to a contingent deferred
sales charge at the applicable rate set forth in Appendix A to this
Prospectus. Sales charges are described in "Buying Class A Shares"
below.
-- Class B Shares. If you buy Class B shares, you pay no
sales charge at the time of purchase, but if you sell your shares
within six years you will normally pay a contingent deferred sales
charge that varies, depending on how long you have owned your
shares. It is described in "Buying Class B Shares" below.
-- Class C Shares. When you buy Class C shares, you pay no
sales charge at the time of purchase, but if you sell your shares
within 12 months of buying them, you will normally pay a contingent
deferred sales charge of 1%. It is described in "Buying Class C
Shares" below.
Which Class of Shares Should You Choose? Once you decide that the
Fund is an appropriate investment for you, the decision as to which
class of shares is better suited to your needs depends on a number
of factors which you should discuss with your financial advisor.
The Fund's operating costs that apply to a class of shares and the
effect of the different types of sales charges on your investment
will vary your investment results over time. The most important
factors are how much you plan to invest and how long you plan to
hold your investment. If your goals and objectives change over
time and you plan to purchase additional shares, you should re-
evaluate those factors to see if you should consider another class
of shares.
In the following discussion, to help provide you and your
financial advisor with a framework in which to choose a class, we
have made some assumptions using a hypothetical investment in the
Fund. We used the sales charge rates that apply to each class, and
considered the effect of the asset-based sales charges on Class B
and Class C expenses (which will affect your investment return).
For the sake of comparison, we have assumed that there is a 10%
rate of appreciation in the investment each year. Of course, the
actual performance of your investment cannot be predicted and will
vary, based on the Fund's actual investment returns and the
operating expenses borne by each class of shares, and which class
of shares you invest in.
The factors discussed below are not intended to be investment
advice or recommendations, because each investor's financial
considerations are different. The discussion below of the factors
to consider in purchasing a particular class of shares assumes that
you will purchase only one class of shares and not a combination of
shares of different classes.
-- How Long Do You Expect to Hold Your Investment? While
future financial needs cannot be predicted with certainty, knowing
how long you expect to hold your investment will assist you in
selecting the appropriate class of shares. Because of the effect
of class-based expenses, your choice will also depend on how much
you plan to invest. For example, the reduced sales charges
available for larger purchases of Class A shares may, over time,
offset the effect of paying an initial sales charge on your
investment (which reduces the amount of your investment dollars
used to buy shares for your account), compared to the effect over
time of higher class-based expenses on Class B or Class C shares
for which no initial sales charge is paid.
Investing for the Short Term. If you have a short-term
investment horizon (that is, you plan to hold your shares for not
more than six years), you should probably consider purchasing Class
A or Class C shares rather than Class B shares, because of the
effect of the Class B contingent deferred sales charge if you
redeem within 6 years, as well as the effect of the Class B asset-
based sales charge on the investment return for that class in the
short-term. Class C shares might be the appropriate choice
(especially for investments of less than $100,000), because there
is no initial sales charge on Class C Shares, and the contingent
deferred sales charge does not apply to amounts you sell after
holding them one year.
However, if you plan to invest more than $100,000 for the
shorter term, then the more you invest and the more your investment
horizon increases toward six years, Class C shares might not be as
advantageous as Class A shares. That is because the annual asset-
based sales charge on Class C shares will have a greater impact on
your account over the longer term than the reduced front-end sales
charge available for larger purchases of Class A shares. For
example, Class A might be more advantageous than Class C (as well
as Class B) for investments of more than $100,000 expected to be
held for 5 or 6 years (or more). For investments over $250,000
expected to be held 4 to 6 years (or more), Class A shares may
become more advantageous than Class C (and Class B). If investing
$500,000 or more, Class A may be more advantageous as your
investment horizon approaches 3 years or more.
And for most investors who invest $1 million or more, in most
cases Class A shares will be the most advantageous choice, no
matter how long you intend to hold your shares. For that reason,
the Distributor normally will not accept purchase orders of
$500,000 or $1 million or more of Class B or Class C shares,
respectively, from a single investor.
Investing for the Longer Term. If you are investing for the
longer term, for example, for retirement, and do not expect to need
access to your money for seven years or more, Class B shares may be
an appropriate consideration, if you plan to invest less than
$100,000. If you plan to invest more than $100,000 over the long
term, Class A shares will likely be more advantageous than Class B
shares or Class C shares, as discussed above, because of the effect
of the expected lower expenses for Class A shares and the reduced
initial sales charges available for larger investments in Class A
shares under the Funds' Right of Accumulation.
Of course, these examples are based on approximations of the
effect of current sales charges and expenses on a hypothetical
investment over time, using the assumed annual performance return
stated above, and therefore should not be relied on as rigid
guidelines.
-- Are There Differences in Account Features That Matter to
You? Because some account features may not be available for Class
B or Class C shareholders, you should carefully review how you plan
to use your investment account before deciding which class of
shares is better for you. For example, share certificates are not
available for Class B or Class C shares, and if you are considering
using your shares as collateral for a loan, that may be a factor to
consider. Additionally, dividends payable to Class B and Class C
shareholders will be reduced by the additional expenses borne
solely by those classes, such as the asset-based sales charges
described below and in the Statement of Additional Information.
-- How Does It Affect Payments to My Broker? A salesperson,
such as a broker or any other person who is entitled to receive
compensation for selling Fund shares, may receive different
compensation for selling one class rather than another class. It
is important that investors understand that the purpose of the
contingent deferred sales charges and asset-based sales charges for
Class B and Class C shares are the same as the purpose of the
front-end sales charge on sales of Class A shares: to compensate
the Distributor for commissions it pays to dealers and financial
institutions for selling shares.
How Much Must You Invest? You can open a Fund account with a
minimum initial investment of $1,000 and make additional
investments at any time with as little as $25. There are reduced
minimum investments under special investment plans:
With Asset Builder Plans, Automatic Exchange Plans, 403(b)(7)
custodial plans and military allotment plans, you can make initial
and subsequent investments of as little as $25; and subsequent
purchases of at least $25 can be made by telephone through
AccountLink.
Under pension and profit-sharing plans and Individual
Retirement Accounts (IRAs), you can make an initial investment of
as little as $250 (if your IRA is established under an Asset
Builder Plan, the $25 minimum applies), and subsequent investments
may be as little as $25.
There is no minimum investment requirement if you are buying
shares by reinvesting dividends from the Fund or other Oppenheimer
funds (a list of them appears in the Statement of Additional
Information, or you can ask your dealer or call the Transfer
Agent), or by reinvesting distributions from unit investment trusts
that have made arrangements with the Distributor.
-- How Are Shares Purchased? You can buy shares several ways:
through any dealer, broker or financial institution that has a
sales agreement with the Distributor, directly through the
Distributor, or automatically from your bank account through an
Asset Builder Plan under the OppenheimerFunds AccountLink service.
When you buy shares, be sure to specify Class A, Class B or Class
C shares. If you do not choose, your investment will be made in
Class A shares.
-- Buying Shares Through Your Dealer. Your dealer will place
your order with the Distributor on your behalf.
-- Buying Shares Through the Distributor. Complete an
OppenheimerFunds New Account Application and return it with a check
payable to "OppenheimerFunds Distributor, Inc." Mail it to P.O. Box
5270, Denver, Colorado 80217. If you don't list a dealer on the
application, the Distributor will act as your agent in buying the
shares. However, we recommend that you discuss your investment
first with a financial advisor, to be sure it is appropriate for
you.
-- Buying Shares Through OppenheimerFunds AccountLink. You
can use AccountLink to link your Fund account with an account at a
U.S. bank or other financial institution that is an Automated
Clearing House (ACH) member, to transmit funds electronically to
purchase shares, to have the Transfer Agent send redemption
proceeds, or to transmit dividends and distributions.
Shares are purchased for your account on AccountLink on the
regular business day the Distributor is instructed by you to
initiate the ACH transfer to buy shares. You can provide those
instructions automatically, under an Asset Builder Plan, described
below, or by telephone instructions using OppenheimerFunds
PhoneLink, also described below. You should request AccountLink
privileges on the application or dealer settlement instructions
used to establish your account. Please refer to "AccountLink" below
for more details.
-- Asset Builder Plans. You may purchase shares of the Fund
(and up to four other Oppenheimer funds) automatically each month
from your account at a bank or other financial institution under an
Asset Builder Plan with AccountLink. Details are on the Application
and in the Statement of Additional Information.
-- At What Price Are Shares Sold? Shares are sold at the
public offering price based on the net asset value (and any initial
sales charge that applies) that is next determined after the
Distributor receives the purchase order in Denver, Colorado. In
most cases, to enable you to receive that day's offering price, the
Distributor must receive your order by the time of day The New York
Stock Exchange closes, which is normally 4:00 P.M., New York time,
but may be earlier on some days (all references to time in this
Prospectus mean "New York time"). The net asset value of each
class of shares is determined as of that time on each day The New
York Stock Exchange is open (which is a "regular business day").
If you buy shares through a dealer, the dealer must receive
your order by the close of business of The New York Stock Exchange
on a regular business day and transmit it to the Distributor so
that it is received before the Distributor's close of business that
day, which is normally 5:00 P.M. The Distributor may reject any
purchase order for the Fund's shares, in its sole discretion.
Special Sales Charge Arrangements for Certain Persons. Appendix A
to this Prospectus sets forth conditions for the waiver of, or
exemption from, sales charges or the special sales charge rates
that apply to purchases of shares of the Fund (including purchases
by exchange) by a person who was a shareholder of one of the Former
Quest for Value Funds (as defined in that Appendix).
Buying Class A Shares. Class A shares are sold at their offering
price, which is normally net asset value plus an initial sales
charge. However, in some cases, described below, where purchases
are not subject to an initial sales charge, the offering price may
be net asset value. In some cases, reduced sales charges may be
available, as described below. Out of the amount you invest, the
Fund receives the net asset value to invest for your account. The
sales charge varies depending on the amount of your purchase. A
portion of the sales charge may be retained by the Distributor and
allocated to your dealer as commission. The current sales charge
rates and commissions paid to dealers and brokers are as follows:
- -------------------------------------------------------------------
Front-End Sales Charge Commission
As a Percentage of as Percentage
Offering Amount of Offering
Amount of Purchase Price Invested Price
- -------------------------------------------------------------------
Less than $25,000 5.75% 6.10% 4.75%
$25,000 or more but
less than $50,000 5.50% 5.82% 4.75%
$50,000 or more but
less than $100,000 4.75% 4.99% 4.00%
$100,000 or more but
less than $250,000 3.75% 3.90% 3.00%
$250,000 or more but
less than $500,000 2.50% 2.56% 2.00%
$500,000 or more but
less than $1 million 2.00% 2.04% 1.60%
The Distributor reserves the right to reallow the entire commission
to dealers. If that occurs, the dealer may be considered an
"underwriter" under Federal securities laws.
-- Class A Contingent Deferred Sales Charge. There is no
initial sales charge on purchases of Class A shares of any one or
more of the Oppenheimer funds in the following cases:
- Purchases aggregating $1 million or more, or
- Purchases by an OppenheimerFunds prototype 401(k) plan that:
(1) buys shares costing $500,000 or more, or (2) has, at the time
of purchase, 100 or more eligible participants, or (3) certifies
that it projects to have annual plan purchases of $200,000 or more.
Shares of any class of the Oppenheimer funds that offer only
one class of shares that has no designation are considered "Class
A shares" for this purpose. The Distributor pays dealers of record
commissions on those purchases in an amount equal to the sum of
1.0% of the first $2.5 million, plus 0.50% of the next $2.5
million, plus 0.25% of purchases over $5 million. That commission
will be paid only on the amount of those purchases in excess of $1
million ($500,000 for purchases by OppenheimerFunds 401(k)
prototype plans) that were not previously subject to a front-end
sales charge and dealer commission.
If you redeem any of those shares within 18 months of the end
of the calendar month of their purchase, a contingent deferred
sales charge (called the "Class A contingent deferred sales
charge") will be deducted from the redemption proceeds. That sales
charge will be equal to 1.0% of either (1) the aggregate net asset
value of the redeemed shares (not including shares purchased by
reinvestment of dividends or capital gain distributions) or (2) the
original cost of the shares, whichever is less. However, the Class
A contingent deferred sales charge will not exceed the aggregate
commissions the Distributor paid to your dealer on all Class A
shares of all Oppenheimer funds you purchased subject to the Class
A contingent deferred sales charge. Class A shares of the Fund
purchased subject to a contingent deferred sales charge on or prior
to November 24, 1995 will be subject to a contingent deferred sales
charge at the applicable rate set forth in Appendix A to this
Prospectus.
In determining whether a contingent deferred sales charge is
payable, the Fund will first redeem shares that are not subject to
the sales charge, including shares purchased by reinvestment of
dividends and capital gains, and then will redeem other shares in
the order that you purchased them. The Class A contingent deferred
sales charge is waived in certain cases described in "Waivers of
Class A Sales Charges" below.
No Class A contingent deferred sales charge is charged on
exchanges of shares under the Fund's exchange privilege (described
below). However, if the shares acquired by exchange are redeemed
within 18 months of the end of the calendar month of the purchase
of the exchanged shares, the sales charge will apply.
-- Special Arrangements With Dealers. The Distributor may
advance up to 13 months' commissions to dealers that have
established special arrangements with the Distributor for Asset
Builder Plans for their clients. Dealers whose sales of Class A
shares of Oppenheimer funds (other than money market funds) under
OppenheimerFunds-sponsored 403(b)(7) custodial plans exceed $5
million per year (calculated per quarter), will receive monthly
one-half of the Distributor's retained commissions on those sales,
and if those sales exceed $10 million per year, those dealers will
receive the Distributor's entire retained commission on those
sales.
Reduced Sales Charges for Class A Share Purchases. You may be
eligible to buy Class A shares at reduced sales charge rates in one
or more of the following ways:
-- Right of Accumulation. To qualify for the lower sales
charge rates that apply to larger purchases of Class A shares, you
and your spouse can add together Class A and Class B shares you
purchase for your individual accounts, or jointly, or for trust or
custodial accounts on behalf of your children who are minors. A
fiduciary can cumulate shares purchased for a trust, estate or
other fiduciary account (including one or more employee benefit
plans of the same employer) that has multiple accounts.
Additionally, you can add together current purchases of Class
A and Class B shares of the Fund and other Oppenheimer funds to
reduce the sales charge rate that applies to current purchases of
Class A shares. You can also count Class A and Class B shares of
Oppenheimer funds you previously purchased subject to an initial or
contingent deferred sales charge to reduce the sales charge rate
for current purchases of Class A shares, provided that you still
hold that investment in one of the Oppenheimer funds. The value of
those shares will be based on the greater of the amount you paid
for the shares or their current value (at offering price). The
Oppenheimer funds are listed in "Reduced Sales Charges" in the
Statement of Additional Information, or a list can be obtained from
the Transfer Agent. The reduced sales charge will apply only to
current purchases and must be requested when you buy your shares.
-- Letter of Intent. Under a Letter of Intent, if you
purchase Class A shares or Class A and Class B shares of the Fund
and other Oppenheimer funds during a 13-month period, you can
reduce the sales charge rate that applies to your purchases of
Class A shares. The total amount of your intended purchases of
both Class A and Class B shares will determine the reduced sales
charge rate for the Class A shares purchased during that period.
This can include purchases made up to 90 days before the date of
the Letter. More information is contained in the Application and
in "Reduced Sales Charges" in the Statement of Additional
Information.
-- Waivers of Class A Sales Charges. The Class A sales
charges are not imposed in the circumstances described below.
There is an explanation of this policy in "Reduced Sales Charges"
in the Statement of Additional Information.
Waivers of Initial and Contingent Deferred Sales Charges for
Certain Purchasers. Class A shares purchased by the following
investors are not subject to any Class A sales charges:
- the Manager or its affiliates;
- present or former officers, directors, trustees and
employees (and their "immediate families" as defined in "Reduced
Sales Charges" in the Statement of Additional Information) of the
Fund, the Manager and its affiliates, and retirement plans
established by them for their employees;
- registered management investment companies, or separate
accounts of insurance companies having an agreement with the
Manager or the Distributor for that purpose;
- dealers or brokers that have a sales agreement with the
Distributor, if they purchase shares for their own accounts or for
retirement plans for their employees;
- employees and registered representatives (and their spouses)
of dealers or brokers described above or financial institutions
that have entered into sales arrangements with such dealers or
brokers (and are identified to the Distributor) or with the
Distributor; the purchaser must certify to the Distributor at the
time of purchase that the purchase is for the purchaser's own
account (or for the benefit of such employee's spouse or minor
children);
- dealers, brokers or registered investment advisers that have
entered into an agreement with the Distributor (1) providing
specifically for the use of shares of the Fund in particular
investment products made available to their clients (those clients
may be charged a transaction fee by their dealer, broker or adviser
for purchase or sale of Fund shares) or (2) to sell shares of
defined contribution employee retirement plans for which the
dealer, broker or investment adviser provides administrative
services;
- directors, trustees, officers or full-time employees of
OpCap Advisors or its affiliates, their relatives or any trust,
pension, profit sharing or other benefit plan which beneficially
owns shares for those persons;
- accounts for which Oppenheimer Capital is the investment
adviser (the Distributor must be advised of this arrangement) and
persons who are directors or trustees of the company or trust which
is the beneficial owner of such accounts;
- any unit investment trust that has entered into an
appropriate agreement with the Distributor;
- a TRAC-2000 401(k) plan (sponsored by the former Quest for
Value Advisors) whose Class B or Class C shares of a Former Quest
for Value Fund were exchanged for Class A shares of that Fund due
to the termination of the Class B and Class C TRAC-2000 program on
November 24, 1995; or
- qualified retirement plans that had agreed with the former
Quest for Value Advisors to purchase shares of any of the Former
Quest for Value Funds at net asset value, with such shares to be
held through DCXchange, a sub-transfer agency mutual fund
clearinghouse, provided that such arrangements are consummated and
share purchases commence by March 31, 1996.
Waivers of Initial and Contingent Deferred Sales Charges in
Certain Transactions. Class A shares issued or purchased in the
following transactions are not subject to Class A sales charges:
- shares issued in plans of reorganization, such as mergers,
asset acquisitions and exchange offers, to which the Fund is a
party;
- shares purchased by the reinvestment of loan repayments by
a participant in a retirement plan for which the Manager or its
affiliates acts as sponsor;
- shares purchased by the reinvestment of dividends or other
distributions reinvested from the Fund or other Oppenheimer funds
(other than Oppenheimer Cash Reserves) or unit investment trusts
for which reinvestment arrangements have been made with the
Distributor;
- shares purchased and paid for with the proceeds of shares
redeemed in the prior 12 months from a mutual fund (other than a
fund managed by the Manager or any of its subsidiaries) on which an
initial sales charge or contingent deferred sales charge was paid
(this waiver also applies to shares purchased by exchange of shares
of Oppenheimer Money Market Fund, Inc. that were purchased and paid
for in this manner); this waiver must be requested when the
purchase order is placed for your shares of the Fund, and the
Distributor may require evidence of your qualification for this
waiver; or
- purchased with the proceeds of maturing principal of units
of any Qualified Unit Investment Liquid Trust Series.
Waivers of the Class A Contingent Deferred Sales Charge for
Certain Redemptions. The Class A contingent deferred sales charge
does not apply to purchases of Class A shares at net asset value
without sales charge as described in the two sections above. It is
also waived if shares that would otherwise be subject to the
contingent deferred sales charge are redeemed in the following
cases:
- for retirement distributions or loans to participants or
beneficiaries from qualified retirement plans, deferred
compensation plans or other employee benefit plans, including
OppenheimerFunds prototype 401(k) plans (these are all referred to
as "Retirement Plans");
- to return excess contributions made to Retirement Plans;
- to make Automatic Withdrawal Plan payments that are limited
annually to no more than 12% of the original account value;
- involuntary redemptions of shares by operation of law or
involuntary redemptions of small accounts (see "Shareholder Account
Rules and Policies," below);
- if, at the time a purchase order is placed for Class A
shares that would otherwise be subject to the Class A contingent
deferred sales charge, the dealer agrees to accept the dealer's
portion of the commission payable on the sale in installments of
1/18th of the commission per month (and no further commission will
be payable if the shares are redeemed within 18 months of
purchase); or
- for distributions from OppenheimerFunds prototype 401(k)
plans for any of the following cases or purposes: (1) following
the death or disability (as defined in the Internal Revenue Code)
of the participant or beneficiary (the death or disability must
occur after the participant's account was established); (2)
hardship withdrawals, as defined in the plan; (3) under a
Qualified Domestic Relations Order, as defined in the Internal
Revenue Code; (4) to meet the minimum distribution requirements of
the Internal Revenue Code; (5) to establish "substantially equal
periodic payments" as described in Section 72(t) of the Internal
Revenue Code, or (6) separation from service.
-- Distribution and Service Plan for Class A Shares. The Fund
has adopted a Distribution and Service Plan for Class A shares to
reimburse the Distributor for a portion of its costs incurred in
connection with the personal service and maintenance of shareholder
accounts that hold Class A shares. Under the Plan, the Fund pays
an annual asset-based sales charge to the Distributor of 0.25% of
the average annual net assets of the class. The Fund also pays a
service fee to the Distributor of 0.25% of the average annual net
assets of the class. The Distributor uses all of the service fee
and a portion of the asset-based sales charge (equal to 0.15% for
Class A shares purchased prior to September 1, 1993 and 0.10% for
Class A shares purchased on or after September 1, 1993) to
compensate dealers, brokers, banks and other financial institutions
quarterly for providing personal service and maintenance of
accounts of their customers that hold Class A shares. The
Distributor retains the balance of the asset-based sales charge to
reimburse itself for its other expenditures under the Plan.
Services to be provided include, among others, answering
customer inquiries about the Fund, assisting in establishing and
maintaining accounts in the Fund, making the Fund's investment
plans available and providing other services at the request of the
Fund or the Distributor. The payments under the Plan increase the
annual expenses of Class A shares. For more details, please refer
to "Distribution and Service Plans" in the Statement of Additional
Information.
Buying Class B Shares. Class B shares are sold at net asset value
per share without an initial sales charge. However, if Class B
shares are redeemed within 6 years of their purchase, a contingent
deferred sales charge will be deducted from the redemption
proceeds. That sales charge will not apply to shares purchased by
the reinvestment of dividends or capital gains distributions. The
charge will be assessed on the lesser of the net asset value of the
shares at the time of redemption or the original purchase price.
The contingent deferred sales charge is not imposed on the amount
of your account value represented by the increase in net asset
value over the initial purchase price (including increases due to
the reinvestment of dividends and capital gains distributions). The
Class B contingent deferred sales charge is paid to the Distributor
to reimburse its expenses of providing distribution-related
services to the Fund in connection with the sale of Class B shares.
To determine whether the contingent deferred sales charge
applies to a redemption, the Fund redeems shares in the following
order: (1) shares acquired by reinvestment of dividends and capital
gains distributions, (2) shares held for over 6 years, and (3)
shares held the longest during the 6-year period.
The amount of the contingent deferred sales charge will depend
on the number of years since you invested and the dollar amount
being redeemed, according to the following schedule:
Years Since Contingent Deferred Sales Charge
Beginning of Month In Which on Redemptions in that Year
Purchase Order was Accepted (As % of Amount Subject to Charge)
0 - 1 5.0%
1 - 2 4.0%
2 - 3 3.0%
3 - 4 3.0%
4 - 5 2.0%
5 - 6 1.0%
6 and following None
In the table, a "year" is a 12-month period. All purchases are
considered to have been made on the first regular business day of
the month in which the purchase was made.
-- Automatic Conversion of Class B Shares. Six years after
you purchase Class B shares, those shares will automatically
convert to Class A shares. This conversion feature relieves Class
B shareholders of the asset-based sales charge that applies to
Class B shares under the Class B Distribution and Service Plan,
described below. The conversion is based on the relative net asset
value of the two classes, and no sales load or other charge is
imposed. When Class B shares convert, any other Class B shares that
were acquired by the reinvestment of dividends and distributions on
the converted shares will also convert to Class A shares. The
conversion feature is subject to the continued availability of a
tax ruling described in "Alternative Sales Arrangements - Class A,
Class B and Class C Shares" in the Statement of Additional
Information.
-- Distribution and Service Plan for Class B Shares. The Fund
has adopted a Distribution and Service Plan for Class B shares to
compensate the Distributor for distributing Class B shares and
servicing accounts. This Plan is described below under "Buying
Class C Shares - Distribution and Service Plans for Class B and
Class C Shares."
-- Waivers of Class B Sales Charges. The Class B contingent
deferred sales charge will not apply to shares purchased in certain
types of transactions, nor will it apply to shares redeemed in
certain circumstances, as described below under "Buying Class C
Shares - Waivers of Class B and Class C Sales Charges."
Buying Class C Shares. Class C shares are sold at net asset value
per share without an initial sales charge. However, if Class C
shares are redeemed within 12 months of their purchase, a
contingent deferred sales charge of 1.0% will be deducted from the
redemption proceeds. That sales charge will not apply to shares
purchased by the reinvestment of dividends or capital gains
distributions. The charge will be assessed on the lesser of the net
asset value of the shares at the time of redemption or the original
purchase price. The contingent deferred sales charge is not imposed
on the amount of your account value represented by the increase in
net asset value over the initial purchase price (including
increases due to the reinvestment of dividends and capital gains
distributions). The Class C contingent deferred sales charge is
paid to the Distributor to reimburse its expenses of providing
distribution-related services to the Fund in connection with the
sale of Class C shares.
To determine whether the contingent deferred sales charge
applies to a redemption, the Fund redeems shares in the following
order: (1) shares acquired by reinvestment of dividends and capital
gains distributions, (2) shares held for over 12 months, and (3)
shares held the longest during the 12-month period.
-- Distribution and Service Plans for Class B and Class C
Shares. The Fund has adopted Distribution and Service Plans for
Class B and Class C shares to compensate the Distributor for
distributing Class B and Class C shares and servicing accounts.
Under the Plans, the Fund pays the Distributor an annual "asset-
based sales charge" of 0.75% per year on Class B shares that are
outstanding for 6 years or less and on Class C shares. The
Distributor also receives a service fee of 0.25% per year.
Under each Plan, both fees are computed on the average of the
net asset value of shares in the respective class, determined as of
the close of each regular business day during the period. The
asset-based sales charge allows investors to buy Class B or Class
C shares without a front-end sales charge while allowing the
Distributor to compensate dealers that sell those shares.
The Distributor uses the service fees to compensate dealers
for providing personal services for accounts that hold Class B or
Class C shares. Those services are similar to those provided under
the Class A Service Plan, described above. The Distributor pays
the 0.25% service fees to dealers in advance for the first year
after Class B or Class C shares have been sold by the dealer and
retains the service fee paid by the Fund in that year. After the
shares have been held for a year, the Distributor pays the service
fees to dealers on a quarterly basis.
The Distributor currently pays sales commissions of 3.75% of
the purchase price of Class B shares to dealers from its own
resources at the time of sale. The total commission paid by the
Distributor to the dealer at the time of sale of Class B shares is
4.00% of the purchase price. The Fund pays the asset-based sales
charge to the Distributor for its services rendered in connection
with the distribution of Class B shares. Those payments, retained
by the Distributor, are at a fixed rate which is not related to the
Distributor's expenses. The services rendered by the Distributor
include paying and financing the payment of sales commissions,
service fees, and other costs of distributing and selling Class B
shares.
The Distributor currently pays sales commissions of 0.75% of
the purchase price of Class C shares to dealers from its own
resources at the time of sale. The total commission paid by the
Distributor to the dealer at the time of sale of Class C shares is
1.00% of the purchase price. The Distributor retains the asset-
based sales charge during the first year Class C shares are
outstanding to recoup sales commissions it has paid, the advances
of service fee payments it has made, and its financing costs and
other expenses. The Distributor plans to pay the asset-based sales
charge as an ongoing commission to the dealer on Class C shares
that have been outstanding for a year or more.
If either Plan is terminated by the Fund, the Board of
Trustees may allow the Fund to continue payments of the service fee
and/or asset-based sales charge to the Distributor for distributing
Class B or Class C shares, as appropriate, before the Plan was
terminated.
-- Waivers of Class B and Class C Sales Charges. The Class B
and Class C contingent deferred sales charges will not be applied
to shares purchased in certain types of transactions nor will it
apply to Class B and Class C shares redeemed in certain
circumstances as described below. The reasons for this policy are
in "Reduced Sales Charges" in the Statement of Additional
Information.
Waivers for Redemptions in Certain Cases. The Class B and
Class C contingent deferred sales charges will be waived for
redemptions of shares in the following cases if the Transfer Agent
is notified that these conditions apply to the redemption:
- distributions to participants or beneficiaries from
Retirement Plans, if the distributions are made (a) under an
Automatic Withdrawal Plan after the participant reaches age 59-1/2,
as long as the payments are no more than 10% of the account value
annually (measured from the date the Transfer Agent received the
request), or (b) following the death or disability (as defined in
the Internal Revenue Code ("IRC")) of the participant or
beneficiary (the death or disability must have occurred after the
account was established);
- redemptions from accounts other than Retirement Plans
following the death or disability of the last surviving shareholder
(the death or disability must have occurred after the account was
established, and for disability you must provide evidence of a
determination of disability by the Social Security Administration);
- returns of excess contributions to Retirement Plans;
- distributions from IRAs (including SEP-IRAs and SAR/SEP
accounts) before the participant is age 59-1/2, and distributions
from 403(b)(7) custodial plans or pension or profit sharing plans
before the participant is age 59-1/2 but only after the participant
has separated from service, if the distributions are made in
substantially equal periodic payments over the life (or life
expectancy) of the participant or the joint lives (or joint life
and last survivor expectancy) of the participant and the
participant's designated beneficiary (and the distributions must
comply with other requirements for such distributions under the IRC
and may not exceed 10% of the account value annually, measured from
the date the Transfer Agent received the request);
- shares redeemed involuntarily, as described in "Shareholder
Account Rules and Policies," below; or
- distributions from OppenheimerFunds prototype 401(k) plans:
(1) for hardship withdrawals; (2) under a Qualified Domestic
Relations Order, as defined in the IRC; (3) to meet minimum
distribution requirements as defined in the IRC; (4) to make
"substantially equal periodic payments" as described in Section
72(t) of the IRC; (5) for separation from service.
Waivers for Shares Sold or Issued in Certain Transactions.
The contingent deferred sales charge is also waived on Class B and
Class C shares sold or issued in the following cases:
- shares sold to the Manager or its affiliates;
- shares sold to registered management investment companies or
separate accounts of insurance companies having an agreement with
the Manager or the Distributor for that purpose; or
- shares issued in plans or reorganization to which the Fund
is a party.
The Class B and Class C contingent deferred sales charge will
be waived for certain additional types of redemptions, if the
shares were purchased prior to November 24, 1995, as set forth in
Appendix A to this Prospectus.
Special Investor Services
AccountLink. OppenheimerFunds AccountLink links your Fund account
to your account at your bank or other financial institution to
enable you to send money electronically between those accounts to
perform a number of types of account transactions. These include
purchases of shares by telephone (either through a service
representative or by PhoneLink, described below), automatic
investments under Asset Builder Plans, and sending dividends and
distributions or Automatic Withdrawal Plan payments directly to
your bank account. Please refer to the Application for details or
call the Transfer Agent for more information.
AccountLink privileges should be requested on the Application
you use to buy shares, or on your dealer's settlement instructions
if you buy your shares through your dealer. After your account is
established, you can request AccountLink privileges on signature-
guaranteed instructions to the Transfer Agent. AccountLink
privileges will apply to each shareholder listed in the
registration on your account as well as to your dealer
representative of record unless and until the Transfer Agent
receives written instructions terminating or changing those
privileges. After you establish AccountLink for your account, any
change of bank account information must be made by signature-
guaranteed instructions to the Transfer Agent signed by all
shareholders who own the account.
-- Using AccountLink to Buy Shares. Purchases may be made by
telephone only after your account has been established. To purchase
shares in amounts up to $250,000 through a telephone
representative, call the Distributor at 1-800-852-8457. The
purchase payment will be debited from your bank account.
-- PhoneLink. PhoneLink is the OppenheimerFunds automated
telephone system that enables shareholders to perform a number of
account transactions automatically using a touch-tone phone.
PhoneLink may be used on already-established Fund accounts after
you obtain a Personal Identification Number (PIN), by calling the
special PhoneLink number: 1-800-533-3310.
- Purchasing Shares. You may purchase shares in amounts up to
$100,000 by phone, by calling 1-800-533-3310. You must have
established AccountLink privileges to link your bank account with
the Fund, to pay for these purchases.
- Exchanging Shares. With the OppenheimerFunds exchange
privilege, described below, you can exchange shares automatically
by phone from your Fund account to another Oppenheimer funds
account you have already established by calling the special
PhoneLink number. Please refer to "How to Exchange Shares," below,
for details.
- Selling Shares. You can redeem shares by telephone
automatically by calling the PhoneLink number and the Fund will
send the proceeds directly to your AccountLink bank account.
Please refer to "How to Sell Shares," below, for details.
Automatic Withdrawal and Exchange Plans. The Fund has several plans
that enable you to sell shares automatically or exchange them to
another Oppenheimer funds account on a regular basis:
-- Automatic Withdrawal Plans. If your Fund account is $5,000
or more, you can establish an Automatic Withdrawal Plan to receive
payments of at least $50 on a monthly, quarterly, semi-annual or
annual basis. The checks may be sent to you or sent automatically
to your bank account on AccountLink. You may even set up certain
types of withdrawals of up to $1,500 per month by telephone. You
should consult the Application and Statement of Additional
Information for more details.
-- Automatic Exchange Plans. You can authorize the Transfer
Agent to exchange an amount you establish in advance automatically
for shares of up to five other Oppenheimer funds on a monthly,
quarterly, semi-annual or annual basis under an Automatic Exchange
Plan. The minimum purchase for each other Oppenheimer funds
account is $25. These exchanges are subject to the terms of the
exchange privilege, described below.
Reinvestment Privilege. If you redeem some or all of your Class A
shares, you have up to 6 months to reinvest all or part of the
redemption proceeds in Class A shares of the Fund or other
Oppenheimer funds without paying a sales charge. This privilege
applies to Class A shares that you purchased subject to an initial
sales charge and to Class A shares on which you paid a contingent
deferred sales charge when you redeemed them. It does not apply to
Class C shares. Please consult the Statement of Additional
Information for more details.
Retirement Plans. Fund shares are available as an investment for
your retirement plans. If you participate in a plan sponsored by
your employer, the plan trustee or administrator must make the
purchase of shares for your retirement plan account. The
Distributor offers a number of different retirement plans that can
be used by individuals and employers:
- Individual Retirement Accounts including rollover IRAs, for
individuals and their spouses
- 403(b)(7) Custodial Plans for employees of eligible tax-
exempt organizations, such as schools, hospitals and charitable
organizations
- SEP-IRAs (Simplified Employee Pension Plans) for small
business owners or people with income from self-employment,
including SAR/SEP IRAs
- Pension and Profit-Sharing Plans for self-employed persons
and small business owners
- 401(k) prototype retirement plans for businesses
Please call the Distributor for the OppenheimerFunds plan
documents, which contain important information and applications.
How to Sell Shares
You can arrange to take money out of your account by selling
(redeeming) some or all of your shares on any regular business day.
Your shares will be sold at the next net asset value calculated
after your order is received and accepted by the Transfer Agent.
The Fund offers you a number of ways to sell your shares: in
writing or by telephone. You can also set up Automatic Withdrawal
Plans to redeem shares on a regular basis, as described above. If
you have questions about any of these procedures, and especially if
you are redeeming shares in a special situation, such as due to the
death of the owner, or from a retirement plan, please call the
Transfer Agent first, at 1-800-525-7048, for assistance.
-- Retirement Accounts. To sell shares in an OppenheimerFunds
retirement account in your name, call the Transfer Agent for a
distribution request form. There are special income tax withholding
requirements for distributions from retirement plans and you must
submit a withholding form with your request to avoid delay. If your
retirement plan account is held for you by your employer, you must
arrange for the distribution request to be sent by the plan
administrator or trustee. There are additional details in the
Statement of Additional Information.
-- Certain Requests Require A Signature Guarantee. To protect
you and the Fund from fraud, certain redemption requests must be in
writing and must include a signature guarantee in the following
situations (there may be other situations also requiring a
signature guarantee):
- You wish to redeem more than $50,000 worth of shares and
receive a check
- The redemption check is not payable to all shareholders
listed on the account statement
- The redemption check is not sent to the address of record on
your account statement
- Shares are being transferred to a Fund account with a
different owner or name
- Shares are redeemed by someone other than the owners (such
as an Executor)
-- Where Can I Have My Signature Guaranteed? The Transfer
Agent will accept a guarantee of your signature by a number of
financial institutions, including: a U.S. bank, trust company,
credit union or savings association, or by a foreign bank that has
a U.S. correspondent bank, or by a U.S. registered dealer or broker
in securities, municipal securities or government securities, or by
a U.S. national securities exchange, a registered securities
association or a clearing agency. If you are signing as a fiduciary
or on behalf of a corporation, partnership or other business, you
must also include your title in the signature.
Selling Shares by Mail. Write a "letter of instructions" that
includes:
- Your name
- The Fund's name
- Your Fund account number (from your account statement)
- The dollar amount or number of shares to be redeemed
- Any special payment instructions
- Any share certificates for the shares you are selling
- The signatures of all registered owners exactly as the
account is registered, and
- Any special requirements or documents requested by the
Transfer Agent to assure proper authorization of the person asking
to sell shares.
Use the following address for Send courier or Express Mail
request by mail: requests to:
OppenheimerFunds Services OppenheimerFunds Services
P.O. Box 5270 10200 E. Girard Ave., Building D
Denver, Colorado 80217 Denver, Colorado 80231
Selling Shares by Telephone. You and your dealer representative of
record may also sell your shares by telephone. To receive the
redemption price on a regular business day, your call must be
received by the Transfer Agent by the close of The New York Stock
Exchange that day, which is normally 4:00 P.M. but may be earlier
on some days. Shares held in an OppenheimerFunds retirement plan
or under a share certificate may not be redeemed by telephone.
- To redeem shares through a service representative, call 1-
800-852-8457
- To redeem shares automatically on PhoneLink, call 1-800-533-
3310
Whichever method you use, you may have a check sent to the
address on the account statement, or, if you have linked your Fund
account to your bank account on AccountLink, you may have the
proceeds wired to that bank account.
-- Telephone Redemptions Paid by Check. Up to $50,000 may be
redeemed by telephone, in any 7-day period. The check must be
payable to all owners of record of the shares and must be sent to
the address on the account. This service is not available within
30 days of changing the address on an account.
-- Telephone Redemptions Through AccountLink. There are no
dollar limits on telephone redemption proceeds sent to a bank
account designated when you establish AccountLink. Normally the ACH
wire to your bank is initiated on the business day after the
redemption. You do not receive dividends on the proceeds of the
shares you redeemed while they are waiting to be wired.
Selling Shares Through Your Dealer. The Distributor has made
arrangements to repurchase Fund shares from dealers and brokers on
behalf of their customers. Brokers or dealers may charge for that
service. Please refer to "Special Arrangements for Repurchase of
Shares from Dealers and Brokers" in the Statement of Additional
Information for more details.
How to Exchange Shares
Shares of the Fund may be exchanged for shares of certain
Oppenheimer funds at net asset value per share at the time of
exchange, without sales charge. To exchange shares, you must meet
several conditions:
- Shares of the fund selected for exchange must be available
for sale in your state of residence
- The prospectuses of this Fund and the fund whose shares you
want to buy must offer the exchange privilege
- You must hold the shares you buy when you establish your
account for at least 7 days before you can exchange them; after the
account is open 7 days, you can exchange shares every regular
business day
- You must meet the minimum purchase requirements for the fund
you purchase by exchange
- Before exchanging into a fund, you should obtain and read
its prospectus
Shares of a particular class may be exchanged only for shares
of the same class in the other Oppenheimer funds. For example, you
can exchange Class A shares of this Fund only for Class A shares of
another fund. At present, Oppenheimer Money Market Fund, Inc.
offers only one class of shares, which are considered Class A
shares for this purpose. In some cases, sales charges may be
imposed on exchange transactions. Please refer to "How to Exchange
Shares" in the Statement of Additional Information for more
details.
Exchanges may be requested in writing or by telephone:
-- Written Exchange Requests. Submit an OppenheimerFunds
Exchange Request form, signed by all owners of the account. Send
it to the Transfer Agent at the addresses listed in "How to Sell
Shares."
-- Telephone Exchange Requests. Telephone exchange requests
may be made either by calling a service representative at 1-800-
852-8457 or by using PhoneLink for automated exchanges, by calling
1-800-533-3310. Telephone exchanges may be made only between
accounts that are registered with the same name(s) and address.
Shares held under certificates may not be exchanged by telephone.
You can find a list of Oppenheimer funds currently available
for exchanges in the Statement of Additional Information or by
calling a service representative at 1-800-525-7048. Exchanges of
shares involve a redemption of the shares of the fund you own and
a purchase of shares of the other fund.
There are certain exchange policies you should be aware of:
- Shares are normally redeemed from one fund and purchased
from the other fund in the exchange transaction on the same regular
business day on which the Transfer Agent receives an exchange
request that is in proper form by the close of The New York Stock
Exchange that day, which is normally 4:00 P.M. but may be earlier
on some days. However, either fund may delay the purchase of
shares of the fund you are exchanging into up to 7 days if it
determines it would be disadvantaged by a same-day transfer of the
proceeds to buy shares. For example, the receipt of multiple
exchange requests from a dealer in a "market-timing" strategy might
require the disposition of securities at a time or price
disadvantageous to the Fund.
- Because excessive trading can hurt fund performance and harm
shareholders, the Fund reserves the right to refuse any exchange
request that will disadvantage it, or to refuse multiple exchange
requests submitted by a shareholder or dealer.
- The Fund may amend, suspend or terminate the exchange
privilege at any time. Although the Fund will attempt to provide
you notice whenever it is reasonably able to do so, it may impose
these changes at any time.
- If the Transfer Agent cannot exchange all the shares you
request because of a restriction cited above, only the shares
eligible for exchange will be exchanged.
Shareholder Account Rules and Policies
-- Net Asset Value Per Share is determined for each class of
shares as of the close of The New York Stock Exchange, which is
normally 4:00 P.M. but may be earlier on some days, on each day the
Exchange is open by dividing the value of each Fund's net assets
attributable to a class by the number of shares of that class that
are outstanding. The Fund's Board of Trustees has established
procedures to value each Fund's securities to determine net asset
value. In general, securities values are based on market value.
There are special procedures for valuing illiquid and restricted
securities and obligations for which market values cannot be
readily obtained. These procedures are described more completely
in the Statement of Additional Information.
-- The offering of shares may be suspended during any period
in which the determination of net asset value is suspended, and the
offering may be suspended by the Board of Trustees at any time the
Board believes it is in the Fund's best interest to do so.
-- Telephone Transaction Privileges for purchases, redemptions
or exchanges may be modified, suspended or terminated by the Fund
at any time. If an account has more than one owner, the Fund and
the Transfer Agent may rely on the instructions of any one owner.
Telephone privileges apply to each owner of the account and the
dealer representative of record for the account unless and until
the Transfer Agent receives cancellation instructions from an owner
of the account.
-- The Transfer Agent will record any telephone calls to
verify data concerning transactions and has adopted other
procedures to confirm that telephone instructions are genuine, by
requiring callers to provide tax identification numbers and other
account data or by using PINs, and by confirming such transactions
in writing. If the Transfer Agent does not use reasonable
procedures it may be liable for losses due to unauthorized
transactions, but otherwise neither the Transfer Agent nor the Fund
will be liable for losses or expenses arising out of telephone
instructions reasonably believed to be genuine. If you are unable
to reach the Transfer Agent during periods of unusual market
activity, you may not be able to complete a telephone transaction
and should consider placing your order by mail.
-- Redemption or transfer requests will not be honored until
the Transfer Agent receives all required documents in proper form.
From time to time, the Transfer Agent in its discretion may waive
certain of the requirements for redemptions stated in this
Prospectus.
-- Dealers that can perform account transactions for their
clients by participating in NETWORKING through the National
Securities Clearing Corporation are responsible for obtaining their
clients' permission to perform those transactions and are
responsible to their clients who are shareholders of the Fund if
the dealer performs any transaction erroneously.
-- The redemption price for shares will vary from day to day
because the value of the securities in each Fund's portfolio
fluctuates, and the redemption price, which is the net asset value
per share, will normally be different for Class A, Class B and
Class C shares. Therefore, the redemption value of your shares may
be more or less than their original cost.
-- Payment for redeemed shares is made ordinarily in cash and
forwarded by check or through AccountLink (as elected by the
shareholder under the redemption procedures described above) within
7 days after the Transfer Agent receives redemption instructions in
proper form, except under unusual circumstances determined by the
Securities and Exchange Commission delaying or suspending such
payments. For accounts registered in the name of a broker-dealer,
payment will be forwarded within 3 business days. The Transfer
Agent may delay forwarding a check or processing a payment via
AccountLink for recently purchased shares, but only until the
purchase payment has cleared. That delay may be as much as 10 days
from the date the shares were purchased. That delay may be avoided
if you purchase shares by certified check or arrange with your bank
to provide telephone or written assurance to the Transfer Agent
that your purchase payment has cleared.
-- Involuntary redemptions of small accounts may be made by
the Fund if the account value has fallen below $500 for reasons
other than the fact that the market value of shares has dropped,
and in some cases involuntary redemptions may be made to repay the
Distributor for losses from the cancellation of share purchase
orders.
-- Under unusual circumstances, shares of a Fund may be
redeemed "in kind", which means that the redemption proceeds will
be paid with securities from the Fund's portfolio. Please refer to
the Statement of Additional Information for more details.
-- "Backup Withholding" of Federal income tax may be applied
at the rate of 31% from dividends, distributions and redemption
proceeds (including exchanges) if you fail to furnish the Fund a
certified Social Security or taxpayer identification number when
you sign your application, or if you violate Internal Revenue
Service regulations on tax reporting of dividends.
-- The Fund does not charge a redemption fee, but if your
dealer or broker handles your redemption, they may charge a fee.
That fee can be avoided by redeeming your Fund shares directly
through the Transfer Agent. Under the circumstances described in
"How to Buy Shares," you may be subject to a contingent deferred
sales charges when redeeming certain Class A, Class B and Class C
shares.
-- To avoid sending duplicate copies of materials to
households, the Fund will mail only one copy of each annual and
semi-annual report to shareholders having the same last name and
address on the Fund's records. However, each shareholder may call
the Transfer Agent at 1-800-525-7048 to ask that copies of those
materials be sent personally to that shareholder.
Dividends, Capital Gains and Taxes
Dividends. The Fund declares dividends separately for Class
A, Class B and Class C shares from net investment income on an
annual basis and normally pays those dividends to shareholders
following the end of its fiscal year, which is October 31.
Dividends paid on Class A shares generally are expected to be
higher than for Class B and Class C shares because expenses
allocable to Class B and Class C shares will generally be higher
than for Class A shares. There is no fixed dividend rate and there
can be no assurance as to the payment of any dividends.
Capital Gains. The Fund may make distributions annually in December
out of any net short-term or long-term capital gains, and the Fund
may make supplemental distributions of dividends and capital gains
following the end of its fiscal year. Short-term capital gains are
treated as dividends for tax purposes. Long-term capital gains will
be separately identified in the tax information the Fund sends you
after the end of the calendar year. There can be no assurances
that the Fund will pay any capital gains distributions in a
particular year.
Distribution Options. When you open your account, specify on your
application how you want to receive your distributions. For
OppenheimerFunds retirement accounts, all distributions are
reinvested. For other accounts, you have four options:
-- Reinvest All Distributions in the Fund. You can elect to
reinvest all dividends and long-term capital gains distributions in
additional shares of the Fund.
-- Reinvest Capital Gains Only. You can elect to reinvest
long-term capital gains in the Fund while receiving dividends by
check or sent to your bank account on AccountLink.
-- Receive All Distributions in Cash. You can elect to receive
a check for all dividends and long-term capital gains distributions
or have them sent to your bank on AccountLink.
-- Reinvest Your Distributions in Another Oppenheimer Fund
Account. You can reinvest all distributions in another Oppenheimer
fund account you have established.
Taxes. If your account is not a tax-deferred retirement account,
you should be aware of the following tax implications of investing
in the Fund. Long-term capital gains are taxable as long-term
capital gains when distributed to shareholders. It does not matter
how long you held your shares. Dividends paid from short-term
capital gains and net investment income are taxable as ordinary
income. Distributions are subject to federal income tax and may be
subject to state or local taxes. Your distributions are taxable
when paid, whether you reinvest them in additional shares or take
them in cash. Every year the Fund will send you and the IRS a
statement showing the amount of each taxable distribution you
received in the previous year.
-- "Buying a Dividend". When the Fund goes ex-dividend, its
share price is reduced by the amount of the distribution. If you
buy shares on or just before the ex-dividend date, or just before
the Fund declares a capital gains distribution, you will pay the
full price for the shares and then receive a portion of the price
back as a taxable dividend or capital gain.
-- Taxes on Transactions. Share redemptions, including
redemptions for exchanges, are subject to capital gains tax. A
capital gain or loss is the difference between the price you paid
for the shares and the price you received when you sold them.
-- Returns of Capital. In certain cases distributions made by
a Fund may be considered a non-taxable return of capital to
shareholders. If that occurs, it will be identified in notices to
shareholders. A non-taxable return of capital may reduce your tax
basis in your Fund shares.
This information is only a summary of certain federal tax
information about your investment. More information is contained
in the Statement of Additional Information, and in addition you
should consult with your tax adviser about the effect of an
investment in the Fund on your particular tax situation.
<PAGE>
<PAGE>
APPENDIX A
Special Sales Charge Arrangements for Shareholders of the Fund
Who Were Shareholders of the Former Quest for Value Funds
The initial and contingent sales charge rates and waivers for
Class A, Class B and Class C shares of the Fund described elsewhere
in this Prospectus are modified as described below for those
shareholders of (i) Quest for Value Fund, Inc., Quest for Value
Growth and Income Fund, Quest for Value Opportunity Fund, Quest for
Value Small Capitalization Fund and Quest for Value Global Equity
Fund, Inc. on November 24, 1995, when OppenheimerFunds, Inc. became
the investment adviser to those funds, and (ii) Quest for Value
U.S. Government Income Fund, Quest for Value Investment Quality
Income Fund, Quest for Value Global Income Fund, Quest for Value
New York Tax-Exempt Fund, Quest for Value National Tax-Exempt Fund
and Quest for Value California Tax-Exempt Fund when those funds
merged into various Oppenheimer funds on November 24, 1995. The
funds listed above are referred to in this Prospectus as the
"Former Quest for Value Funds." The waivers of initial and
contingent deferred sales charges described in this Appendix apply
to shares of the Fund (i) acquired by such shareholder pursuant to
an exchange of shares of one of the Oppenheimer funds that was one
of the Former Quest for Value Funds or (ii) received by such
shareholder pursuant to the merger of any of the Former Quest for
Value Funds into an Oppenheimer fund on November 24, 1995.
Class A Sales Charges
- -- Reduced Class A Initial Sales Charge Rates for Certain Former
Quest Shareholders
- - Purchases by Groups, Associations and Certain Qualified
Retirement Plans. The following table sets forth the initial sales
charge rates for Class A shares purchased by a "Qualified
Retirement Plan" through a single broker, dealer or financial
institution, or by members of "Associations" formed for any purpose
other than the purchase of securities if that Qualified Retirement
Plan or that Association purchased shares of any of the Former
Quest for Value Funds or received a proposal to purchase such
shares from OCC Distributors prior to November 24, 1995. For this
purpose only, a "Qualified Retirement Plan" includes any 401(k)
plan, 403(b) plan, and SEP/IRA or IRA plan for employees of a
single employer.
Front-End Front-End
Sales Sales Commission
Charge Charge as
Number of as a as a Percentage
Eligible Percentage Percentage of
Employees of Offering of Amount Offering
or Members Price Invested Price
- --------------------------------------------------------------
9 or fewer 2.50% 2.56% 2.00%
- --------------------------------------------------------------
At least 10 but not
more than 49 2.00% 2.04% 1.60%
For purchases by Qualified Retirement plans and Associations
having 50 or more eligible employees or members, there is no
initial sales charge on purchases of Class A shares, but those
shares are subject to the Class A contingent deferred sales charge
described on pages 26 and 27 of this Prospectus.
Purchases made under this arrangement qualify for the lower of
the sales charge rates in the table based on the number of eligible
employees in a Qualified Retirement Plan or members of an
Association or the sales charge rate that applies under the Rights
of Accumulation described above in the Prospectus. In addition,
purchases by 401(k) plans that are Qualified Retirement Plans
qualify for the waiver of the Class A initial sales charge if they
qualified to purchase shares of any of the Former Quest For Value
Funds by virtue of projected contributions or investments of $1
million or more each year. Individuals who qualify under this
arrangement for reduced sales charge rates as members of
Associations, or as eligible employees in Qualified Retirement
Plans also may purchase shares for their individual or custodial
accounts at these reduced sales charge rates, upon request to the
Fund's Distributor.
- -- Special Class A Contingent Deferred Sales Charge Rates
Class A shares of the Fund purchased by exchange of shares of other
Oppenheimer funds that were acquired as a result of the merger of
Former Quest for Value Funds into those Oppenheimer funds, and
which shares were subject to a Class A contingent deferred sales
charge prior to November 24, 1995 will be subject to a contingent
deferred sales charge at the following rates: if they are redeemed
within 18 months of the end of the calendar month in which they
were purchased, at a rate equal to 1.0% if the redemption occurs
within 12 months of their initial purchase and at a rate of 0.50 of
1.0% if the redemption occurs in the subsequent six months. Class
A shares of any of the Former Quest for Value Funds purchased
without an initial sales charge on or before November 22, 1995 will
continue to be subject to the applicable contingent deferred sales
charge in effect as of that date as set forth in the then-current
prospectus for such fund.
- -- Waiver of Class A Sales Charges for Certain Shareholders
Class A shares of the Fund purchased by the following investors are
not subject to any Class A initial or contingent deferred sales
charges:
- Shareholders of the Fund who were shareholders of the AMA
Family of Funds on February 28, 1991 and who acquired shares of any
of the Former Quest for Value Funds by merger of a portfolio of the
AMA Family of Funds.
- Shareholders of the Fund who acquired shares of any Former
Quest for Value Fund by merger of any of the portfolios of the
Unified Funds.
- -- Waiver of Class A Contingent Deferred Sales Charge in Certain
Transactions
The Class A contingent deferred sales charge will not apply to
redemptions of Class A shares of the Fund purchased by the
following investors who were shareholders of any Former Quest for
Value Fund:
- Investors who purchased Class A shares from a dealer that is
or was not permitted to receive a sales load or redemption fee
imposed on a shareholder with whom that dealer has a fiduciary
relationship under the Employee Retirement Income Security Act of
1974 and regulations adopted under that law.
- Participants in Qualified Retirement Plans that purchased
shares of any of the Former Quest For Value Funds pursuant to a
special "strategic alliance" with the distributor of those funds.
The Fund's Distributor will pay a commission to the dealer for
purchases of Fund shares as described above in "Class A Contingent
Deferred Sales Charge."
Class A, Class B and Class C Contingent Deferred Sales Charge
Waivers
- -- Waivers for Redemptions of Shares Purchased Prior to March 6,
1995
In the following cases, the contingent deferred sales charge will
be waived for redemptions of Class A, Class B or Class C shares of
the Fund acquired by merger of a Former Quest for Value Fund into
the Fund or by exchange from an Oppenheimer fund that was a Former
Quest for Value Fund or into which such fund merged, if those
shares were purchased prior to March 6, 1995: in connection with
(i) distributions to participants or beneficiaries of plans
qualified under Section 401(a) of the Internal Revenue Code or from
custodial accounts under Section 403(b)(7) of the Code, Individual
Retirement Accounts, deferred compensation plans under Section 457
of the Code, and other employee benefit plans, and returns of
excess contributions made to each type of plan, (ii) withdrawals
under an automatic withdrawal plan holding only either Class B or
Class C shares if the annual withdrawal does not exceed 10% of the
initial value of the account, and (iii) liquidation of a
shareholder's account if the aggregate net asset value of shares
held in the account is less than the required minimum value of such
accounts.
- -- Waivers for Redemptions of Shares Purchased on or After March 6,
1995 but Prior to November 24, 1995.
In the following cases, the contingent deferred sales charge will
be waived for redemptions of Class A, Class B or Class C shares of
the Fund acquired by merger of a Former Quest for Value Fund into
the Fund or by exchange from an Oppenheimer fund that was a Former
Quest For Value Fund or into which such fund merged, if those
shares were purchased on or after March 6, 1995, but prior to
November 24, 1995: (1) distributions to participants or
beneficiaries from Individual Retirement Accounts under
Section 408(a) of the Internal Revenue Code or retirement plans
under Section 401(a), 401(k), 403(b) and 457 of the Code, if those
distributions are made either (a) to an individual participant as
a result of separation from service or (b) following the death or
disability (as defined in the Code) of the participant or
beneficiary; (2) returns of excess contributions to such retirement
plans; (3) redemptions other than from retirement plans following
the death or disability of the shareholder(s) (as evidenced by a
determination of total disability by the U.S. Social Security
Administration); (4) withdrawals under an automatic withdrawal plan
(but only for Class B or C shares) where the annual withdrawals do
not exceed 10% of the initial value of the account; and
(5) liquidation of a shareholder's account if the aggregate net
asset value of shares held in the account is less than the required
minimum account value. A shareholder's account will be credited
with the amount of any contingent deferred sales charge paid on the
redemption of any Class A, Class B or Class C shares of the Fund
described in this section if within 90 days after that redemption,
the proceeds are invested in the same Class of shares in this Fund
or another Oppenheimer fund.
Special Dealer Arrangements
Dealers who sold Class B shares of a Former Quest for Value Fund to
Quest for Value prototype 401(k) plans that were maintained on the
TRAC-2000 recordkeeping system and that were transferred to an
OppenheimerFunds prototype 401(k) plan shall be eligible for an
additional one-time payment by the Distributor of 1% of the value
of the plan assets transferred, but that payment may not exceed
$5,000 as to any one plan.
Dealers who sold Class C shares of a Former Quest for Value Fund to
Quest for Value prototype 401(k) plans that were maintained on the
TRAC-2000 recordkeeping system and (i) the shares held by those
plans were exchanged for Class A shares, or (ii) the plan assets
were transferred to an OppenheimerFunds prototype 401(k) plan,
shall be eligible for an additional one-time payment by the
Distributor of 1% of the value of the plan assets transferred, but
that payment may not exceed $5,000.
<PAGE>
SCHEDULE TO PROSPECTUS OF
OPPENHEIMER QUEST OPPORTUNITY VALUE FUND
Graphic material included in Prospectus of Oppenheimer Quest
Opportunity Value Fund: "Comparison of Total Return of Oppenheimer
Quest Opportunity Value Fund with the S&P 500 Index - Change in
Value of $10,000 Hypothetical Investments in Class A, Class B and
Class C Shares of Oppenheimer Quest Opportunity Value Fund and the
S&P 500 Index."
Linear graphs will be included in the Prospectus of
Oppenheimer Quest Opportunity Value Fund (the "Fund") depicting the
initial account value and subsequent account value of a
hypothetical $10,000 investment in the Fund. In the case of the
Fund's Class A shares, that graph will cover the period from
inception (1/3/89) through 10/31/95, and in the case of the Fund's
Class B and Class C shares, will cover the period from the
inception of the class (9/1/93) through 10/31/95. The graph will
compare such values with hypothetical $10,000 investments over the
same time periods in the S&P 500 Index. Set forth below are the
relevant data points that will appear on the linear graph.
Additional information with respect to the foregoing, including a
description of the S&P 500 Index, is set forth in the Prospectus
under "Performance of the Fund - Comparing the Fund's Performance
to the Market."
Oppenheimer Quest
Fiscal Opportunity Value S&P 500
Period Ended Fund A Index
- ------------ ----------------- -------
1/03/89 $ 9,425 $10,000
10/31/89 $10,924 $12,603
10/31/90 $ 9,545 $11,660
10/31/91 $14,360 $15,566
10/31/92 $17,509 $17,116
10/31/93 $20,021 $19,672
10/31/94 $21,703 $20,431
10/31/95 $28,189 $25,835
Oppenheimer Quest
Fiscal Opportunity Value S&P 500
Period Ended Fund B Index
- ------------ ----------------- -------
9/01/93(2) $10,000 $10,000
10/31/93 $ 9,984 $10,136
10/31/94 $10,766 $10,528
10/31/95 $13,609 $13,312
Oppenheimer Quest
Fiscal Opportunity Value S&P 500
Period Ended Fund C Index
- ------------ ----------------- -------
9/01/93(2) $10,000 $10,000
10/31/93 $ 9,984 $10,136
10/31/94 $10,760 $10,528
10/31/95 $13,898 $13,312
- ---------------------
(2) Class B shares of the Fund were first publicly offered on
9/01/93.
(3) Class C shares of the Fund were first publicly offered on
9/01/93.
<PAGE>
Oppenheimer Quest Opportunity Value Fund
Two World Trade Center
New York, New York 10048-0203
1-800-525-7048
Investment Adviser
OppenheimerFunds, Inc.
Two World Trade Center
New York, New York 10048-0203
Sub-Adviser
OpCap Advisors
One World Financial Center
New York, New York 10281
Distributor
OppenheimerFunds Distributor, Inc.
Two World Trade Center
New York, New York 10048-0203
Transfer Agent
OppenheimerFunds Services
P.O. Box 5270
Denver, Colorado 80217
1-800-525-7048
Custodian of Portfolio Securities
State Street Bank and Trust Company
P.O. Box 8505
Boston, Massachusetts 02266-8505
Independent Auditors
Price Waterhouse LLP
950 Seventeenth Street
Denver, Colorado 80202
Legal Counsel
Gordon Altman Butowsky Weitzen Shalov & Wein
114 West 47th Street
New York, New York 10036
No dealer, broker, salesperson or any other person has been
authorized to give any information or to make any representations
other than those contained in this Prospectus or the Statement of
Additional Information, and if given or made, such information and
representations must not be relied upon as having been authorized
by the Fund, OppenheimerFunds, Inc., OppenheimerFunds Distributor,
Inc. or any affiliate thereof. This Prospectus does not constitute
an offer to sell or a solicitation of an offer to buy any of the
securities offered hereby in any state to any person to whom it is
unlawful to make such an offer in such state.
prosp\q236psp
<PAGE>
OPPENHEIMER QUEST OPPORTUNITY VALUE FUND
Two World Trade Center, New York, New York 10048
1-800-525-7048
Statement of Additional Information dated February 15, 1996
This document contains additional information about Oppenheimer
Quest Opportunity Value Fund (the "Fund") and supplements
information in the Prospectus dated February 15, 1996. It should
be read together with the Prospectus, which may be obtained upon
written request to the Fund's Transfer Agent, OppenheimerFunds
Services at P.O. Box 5270, Denver, Colorado 80217, or by calling
the Transfer Agent at the toll-free number shown above.
<TABLE>
<CAPTION>
Contents
<S> <C>
Page
About the Fund
Investment Objective and Policies. . . . . . . . . . . . . . . 2
Investment Policies and Strategies. . . . . . . . . . . 2
Other Investment Techniques and Strategies. . . . . . . 5
Other Investment Restrictions . . . . . . . . . . . . . 7
How the Fund is Managed . . . . . . . . . . . . . . . . . . . 8
Organization and History. . . . . . . . . . . . . . . . 8
Trustees and Officers of the Trust. . . . . . . . . . . 9
The Manager and Its Affiliates. . . . . . . . . . . . . 13
Brokerage Policies of the Fund . . . . . . . . . . . . . . . . 16
Performance of the Fund. . . . . . . . . . . . . . . . . . . . 18
Distribution and Service Plans . . . . . . . . . . . . . . . . 21
About Your Account
How To Buy Shares. . . . . . . . . . . . . . . . . . . . . . . 23
How To Sell Shares . . . . . . . . . . . . . . . . . . . . . . 30
How To Exchange Shares . . . . . . . . . . . . . . . . . . . . 34
Dividends, Capital Gains and Taxes . . . . . . . . . . . . . . 36
Additional Information About the Fund. . . . . . . . . . . . . 37
Financial Information About the Fund
Independent Auditors' Report . . . . . . . . . . . . . . . . . 40
Financial Statements . . . . . . . . . . . . . . . . . . . . . 42
Appendix A: Description of Ratings . . . . . . . . . . . . . . A-1
Appendix B: Corporate Industry Classifications . . . . . . . . B-1
</TABLE>
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ABOUT THE FUND
Investment Objective and Policies
Investment Policies and Strategies. The investment objective and
policies of the Fund are described in the Prospectus. The Fund is
one of four portfolios of Oppenheimer Quest for Value Funds (the
"Trust"). Set forth below is supplemental information about those
policies and the types of securities in which the Fund invests, as
well as the strategies the Fund may use to try to achieve its
objective. Capitalized terms used in this Statement of Additional
Information have the same meaning as those terms have in the
Prospectus.
-- Foreign Securities. The Fund may invest in securities
(which may be denominated in U.S. dollars or non-U.S. currencies)
issued or guaranteed by foreign corporations, certain supranational
equities (described below) and foreign governments or their
agencies or instrumentalities, and in securities issued by U.S.
corporations denominated in non-U.S. currencies. All such
securities are referred to as "foreign securities."
Investing in foreign securities offers potential benefits not
available from investing solely in securities of domestic issuers,
including the opportunity to invest in foreign issuers that appear
to offer growth potential, or in foreign countries with economic
policies or business cycles different from those of the U.S., or to
reduce fluctuations in portfolio value by taking advantage of
foreign stock markets that do not move in a manner parallel to U.S.
markets. If the Fund's portfolio securities are held abroad, the
countries in which they may be held and the sub-custodians or
depositories holding them must be approved by the Trust's Board of
Directors to the extent that approval is required under applicable
rules of the Securities and Exchange Commission.
- Risks of Foreign Investing. Investments in foreign
securities present special additional risks and considerations not
typically associated with investments in domestic securities:
reduction of income by foreign taxes; fluctuation in value of
foreign portfolio investments due to changes in currency rates and
control regulations (e.g., currency blockage); transaction charges
for currency exchange; lack of public information about foreign
issuers; lack of uniform accounting, auditing and financial
reporting standards comparable to those applicable to domestic
issuers; less volume on foreign exchanges than on U.S. exchanges;
greater volatility and less liquidity on foreign markets than in
the U.S.; less regulation of foreign issuers, stock exchanges and
brokers than in the U.S.; greater difficulties in commencing
lawsuits and obtaining judgments in foreign courts; higher
brokerage commission rates than in the U.S.; increased risks of
delays in settlement of portfolio transactions or loss of
certificates for portfolio securities; possibilities in some
countries of expropriation, confiscatory taxation, political,
financial or social instability or adverse diplomatic developments;
and unfavorable differences between the U.S. economy and foreign
economies. In the past, U.S. Government policies have discouraged
certain investments abroad by U.S. investors, through taxation or
other restrictions, and it is possible that such restrictions could
be re-imposed.
- Emerging Market Countries: Certain developing countries may
have relatively unstable governments, economies based on only a few
industries that are dependent upon international trade, and reduced
secondary market countries is restricted or controlled in varying
degrees. In the past, securities in these countries have
experienced greater price movement, both positive and negative,
than securities of companies located in developed countries.
Lower-rated high-yielding emerging market securities may be
considered to have speculative elements.
-- U.S. Government Securities. Obligations of U.S. Government
agencies or instrumentalities (including mortgage-backed
securities) may or may not be guaranteed or supported by the "full
faith and credit" of the United States. Some are backed by the
right of the issuer to borrow from the U.S. Treasury; others, by
discretionary authority of the U.S. Government to purchase the
agencies' obligations; while others are supported only by the
credit of the instrumentality. All U.S. Treasury obligations are
backed by the full faith and credit of the United States. If the
securities are not backed by the full faith and credit of the
United States, the owner of the securities must look principally to
the agency issuing the obligation for repayment and may not be able
to assert a claim against the United States in the event that the
agency or instrumentality does not meet its commitment. The Fund
will invest in U.S. Government Securities of such agencies and
instrumentalities only when the Manager is satisfied that the
credit risk with respect to such instrumentality is minimal.
- Mortgage-Backed Securities. Also known as pass-through
securities, the homeowner's principal and interest payments pass
from the originating bank or savings and loan through the
appropriate governmental agency to investors, net of service
charges. These pass-through securities include participation
certificates of Ginnie Mae, Freddie Mac and Fannie Mae.
The investment characteristics of mortgage-backed securities
differ from those of traditional debt securities. The effective
maturity of a mortgage-backed security may be shortened by
unscheduled or early payment of principal and interest on the
underlying mortgages, which may affect the effective yield of such
securities. The principal that is returned may be invested in
instruments having a higher or lower yield than the prepaid
instruments depending on then-current market conditions. Such
securities therefore may be less effective as a means of "locking
in" attractive long-term interest rates and may have less potential
for appreciation during periods of declining interest rates than
conventional bonds with comparable stated maturities. The
differences can result in significantly greater price and yield
volatility than is the case with traditional debt securities. If
the Fund purchases mortgage-backed securities at a premium, a
prepayment rate that is faster than expected will reduce both the
market value and the yield to maturity from that which was
anticipated, while a prepayment rate that is slower than expected
will have the opposite effect of increasing yield to maturity and
market value. Conversely, if the Fund purchases mortgage-backed
securities at a discount, faster than expected prepayments will
increase, while slower than expected prepayments will reduce, yield
to maturity and market value.
The Fund may invest in collateralized mortgage obligations
("CMOs") that are issued or guaranteed by the U.S. Government or
its agencies or instrumentalities, or that are collateralized by a
portfolio of mortgages or mortgage-related securities guaranteed by
such an agency or instrumentality. Payment of the interest and
principal generated by the pool of mortgages is passed through to
the holders as the payments are received by the issuer of the CMO.
CMOs may be issued in a variety of classes or series ("tranches")
that have different maturities. The principal value of certain CMO
tranches may be more volatile than other types of mortgage-related
securities, because of the possibility that the principal value of
the CMO may be prepaid earlier than the maturity of the CMO as a
result of prepayments of the underlying mortgage loans by the
borrowers.
As with other bond investments, the value of U.S. Government
Securities and mortgage-backed securities will tend to rise when
interest rates fall and to fall when interest rates rise. The
value of mortgage-backed securities may also be affected by changes
in the market's perception of the creditworthiness of the entity
issuing or guaranteeing them or by changes in government
regulations and tax policies. Because of these factors, the Fund's
share value and yield are not guaranteed and will fluctuate, and
there can be no assurance that the Fund's objective will be
achieved. The magnitude of these fluctuations generally will be
greater when the average maturity of the Fund's portfolio
securities is longer.
Money Market Securities. As stated in the Prospectus, the
Fund typically invests a part of its assets in money market
securities, and may invest up to 100% of its total assets in money
market securities for temporary defensive purposes. Money market
securities in which the Fund may invest include the following:
- Time Deposits and Variable Rate Notes. The Fund may invest
in fixed time deposits, whether or not subject to withdrawal
penalties. However, investment in such deposits which are subject
to withdrawal penalties, other than overnight deposits, are subject
to the 10% limit on illiquid investments set forth in the
Prospectus for the Fund.
The commercial paper obligations which the Fund may buy are
unsecured and may include variable rate notes. The nature and
terms of a variable rate note (i.e., a "Master Note") permit the
Fund to invest fluctuating amounts at varying rates of interest
pursuant to a direct arrangement between the Fund as lender, and
the issuer, as borrower. It permits daily changes in the amounts
borrowed. The Fund has the right at any time to increase, up to
the full amount stated in the note agreement, or to decrease the
amount outstanding under the note. The issuer may prepay at any
time and without penalty any part or the full amount of the note.
The note may or may not be backed by one or more bank letters of
credit. Because these notes are direct lending arrangements
between the Fund and the issuer, it is not generally contemplated
that they will be traded; moreover, there is currently no secondary
market for them. Except as specifically provided in the Prospectus
for each Fund, there is no limitation on the type of issuer from
whom these notes will be purchased. However, in connection with
such purchase and on an ongoing basis, OpCap Advisors (the
"Sub-Adviser") will consider the earning power, cash flow and other
liquidity ratios of the issuer, and its ability to pay principal
and interest on demand, including a situation in which all holders
of such notes made demand simultaneously. The Fund will not invest
more than 5% of its total assets in variable rate notes. Variable
rate notes are subject to the Fund's investment restriction on
illiquid securities unless such notes can be put back to the issuer
on demand within seven days.
- Insured Bank Obligations. The Federal Deposit Insurance
Corporation ("FDIC") insures the deposits of federally insured
banks and savings and loan associations (collectively referred to
as "banks") up to $100,000. The Fund may, within the limits set
forth in the Prospectus, purchase bank obligations which are fully
insured as to principal by the FDIC. Currently, to remain fully
insured as to principal, these investments must be limited to
$100,000 per bank. If the principal amount and accrued interest
together exceed $100,000, the excess principal and accrued interest
will not be insured. Insured bank obligations may have limited
marketability. Unless the Board of Trustees determines that a
readily available market exists for such obligations, the Fund will
treat such obligations as subject to the 10% limit for illiquid
investments set forth in the Prospectus for the Fund unless such
obligations are payable at principal amount plus accrued interest
on demand or within seven days after demand.
-- Convertible Securities. The Fund may invest in fixed-
income securities which are convertible into common stock.
Convertible securities rank senior to common stocks in a
corporation's capital structure and, therefore, entail less risk
than the corporation's common stock. The value of a convertible
security is a function of its "investment value" (its value as if
it did not have a conversion privilege), and its "conversion value"
(the security's worth if it were to be exchanged for the underlying
security, at market value, pursuant to its conversion privilege).
To the extent that a convertible security's "investment value"
is greater than its "conversion value," its price will be primarily
a reflection of such "investment value" and its price will be
likely to increase when interest rates fall and decrease when
interest rates rise, as with a fixed-income security. The credit
standing of the issuer and other factors may also have an effect on
the convertible security value. If the "conversion value" exceeds
the investment value, the price of the convertible security will
rise above its "investment value" and, in addition, will sell at
some premium over its "conversion value." This premium represents
the price investors are willing to pay for the privilege of
purchasing a fixed-income security with a possibility of capital
appreciation due to the conversion privilege. At such times the
price of the convertible security will tend to fluctuate directly
with the price of the underlying equity security. Convertible
securities may be purchased by the Fund at varying price levels
above their "investment values" and/or their "conversion values" in
keeping with the Fund's objectives.
-- Investment Risks of Fixed-Income Securities. All fixed-
income securities are subject to two types of risks: credit risk
and interest rate risk. Credit risk relates to the ability of the
issuer to meet interest or principal payments on a security as they
become due. Interest rate risk refers to the fluctuations in value
of fixed-income securities resulting solely from the inverse
relationship between price and yield of outstanding fixed-income
securities. An increase in prevailing interest rates will
generally reduce the market value of already-issued fixed-income
investments, and a decline in interest rates will tend to increase
their value. In addition, debt securities with longer maturities,
which tend to produce higher yields, are subject to potentially
greater changes in their prices from changes in interest rates than
obligations with shorter maturities. Fluctuations in the market
value of fixed-income securities after the Fund buys them will not
affect the interest payable on those securities, nor the cash
income from such securities. However, those price fluctuations
will be reflected in the valuations of these securities and
therefore the Fund's net asset values.
Other Investment Techniques and Strategies.
-- When-Issued Securities. The Fund may take advantage of
offerings of eligible portfolio securities on a "when-issued" basis
where delivery of and payment for such securities takes place
sometime after the transaction date on terms established on such
date. Normally, settlement on U.S. Government securities takes
place within ten days. The Fund only will make when-issued
commitments on eligible securities with the intention of actually
acquiring the securities. If the Fund chooses to dispose of the
right to acquire a when-issued security prior to its acquisition,
it could, as with the disposition of any other portfolio
obligation, incur a gain or loss due to market fluctuation. When-
issued commitments will not be made if, as a result, more than 15%
of the net assets of the Fund would be so committed.
-- Repurchase Agreements. The Fund may acquire securities
subject to repurchase agreements for liquidity purposes to meet
anticipated redemptions, or pending the investment of the proceeds
from sales of Fund shares, or pending the settlement of purchases
of portfolio securities.
In a repurchase transaction, the Fund acquires a security
from, and simultaneously agrees to resell it to, an approved
vendor. An "approved vendor" is a U.S. commercial bank or the U.S.
branch of a foreign bank or a broker-dealer that has been
designated a primary dealer in government securities, that must
meet credit requirements set by the Trust's Board of Trustees from
time to time. The resale price exceeds the purchase price by an
amount that reflects an agreed-upon interest rate effective for the
period during which the repurchase agreement is in effect. The
majority of these transactions run from day to day, and delivery
pursuant to the resale typically will occur within one to five days
of the purchase. Repurchase agreements are considered "loans"
under the Investment Company Act, collateralized by the underlying
security. The Fund's repurchase agreements require that at all
times while the repurchase agreement is in effect, the value of the
collateral must equal or exceed the repurchase price to fully
collateralize the repayment obligation. Additionally, the Manager
will impose creditworthiness requirements to confirm that the
vendor is financially sound and will continuously monitor the
collateral's value.
-- Illiquid and Restricted Securities. To enable the Fund to
sell restricted securities not registered under the Securities Act
of 1933, the Fund may have to cause those securities to be
registered. The expenses of registration of restricted securities
may be negotiated by the Fund with the issuer at the time such
securities are purchased by the Fund, if such registration is
required before such securities may be sold publicly. When
registration must be arranged because the Fund wishes to sell the
security, a considerable period may elapse between the time the
decision is made to sell the securities and the time the Fund would
be permitted to sell them. The Fund would bear the risks of any
downward price fluctuation during that period. The Fund may also
acquire, through private placements, securities having contractual
restrictions on their resale, which might limit the Fund's ability
to dispose of such securities and might lower the amount realizable
upon the sale of such securities.
The Fund has percentage limitations that apply to purchases of
restricted securities, as stated in the Prospectus. Those
percentage restrictions do not limit purchases of restricted
securities that are eligible for sale to qualified institutional
purchasers pursuant to Rule 144A under the Securities Act of 1933,
provided that those securities have been determined to be liquid by
the Board of Trustees of the Trust or by the Sub-Advisor under
Board-approved guidelines. Those guidelines take into account the
trading activity for such securities and the availability of
reliable pricing information, among other factors. If there is a
lack of trading interest in a particular Rule 144A security, the
Fund's holding of that security may be deemed to be illiquid.
-- Loans of Portfolio Securities. The Fund may lend its
portfolio securities subject to the restrictions stated in the
Prospectus. Under applicable regulatory requirements (which are
subject to change), the loan collateral on each business day must
at least equal the value of the loaned securities and must consist
of cash, bank letters of credit or securities of the U.S.
Government (or its agencies or instrumentalities). To be
acceptable as collateral, letters of credit must obligate a bank to
pay amounts demanded by the Fund if the demand meets the terms of
the letter. Such terms and the issuing bank must be satisfactory
to the Fund. When it lends securities, the Fund receives amounts
equal to the dividends or interest on loaned securities and also
receives one or more of (a) negotiated loan fees, (b) interest on
securities used as collateral, and (c) interest on short-term debt
securities purchased with such loan collateral. Either type of
interest may be shared with the borrower. The Fund may also pay
reasonable finder's, custodian and administrative fees. The terms
of the Fund's loans must meet applicable tests under the Internal
Revenue Code and must permit the Fund to reacquire loaned
securities on five days' notice or in time to vote on any important
matter.
Other Investment Restrictions
The Fund's most significant investment restrictions are set
forth in the Prospectus. There are additional investment
restrictions that the Fund must follow that are also fundamental
policies. Fundamental policies and the Fund's investment objective
cannot be changed without the vote of a "majority" of the Fund's
outstanding voting securities. Under the Investment Company Act of
1940, such a majority vote is defined as the vote of the holders of
the lesser of: (i) 67% or more of the shares present or represented
by proxy at a shareholder meeting, if the holders of more than 50%
of the outstanding shares are present or represented by proxy, or
(ii) more than 50% of the outstanding shares.
Under these additional restrictions, the Fund cannot:
- invest in physical commodities or physical commodity
contracts or speculate in financial commodity contracts, but the
Fund is authorized to purchase and sell financial futures contracts
and options on such futures contracts exclusively for hedging and
other non-speculative purposes to the extent specified in the
Prospectus;
- invest in real estate or real estate limited partnerships
(direct participation programs); however, the Fund may purchase
securities of issuers which engage in real estate operations and
securities which are secured by real estate or interests therein;
- purchase securities on margin (except for such short-term
loans as are necessary for the clearance of purchases of portfolio
securities) or make short sales of securities except "against the
box" (collateral arrangements in connection with transactions in
futures and options are not deemed to be margin transactions);
- underwrite securities of other companies except in so far as
the Fund may be deemed to be an underwriter under the Securities
Act of 1933 in disposing of a security ;
- invest in securities of other investment companies except in
connection with a merger, consolidation, reorganization or
acquisition of assets;
- invest in interests in oil, gas or other mineral exploration
or development programs or leases;
- purchase warrants if as a result the Fund would then have
either more than 5% of its total assets (determined at the time of
investment) invested in warrants or more than 2% of its total
assets invested in warrants not listed on the New York or American
Stock Exchange;
- invest in securities of any issuer if, to the knowledge of
the Trust, any officer or trustee of the Trust or any officer or
director of the Manager or Sub-Adviser owns more than 1/2 of 1% of
the outstanding securities of such issuer, and such officers,
trustees and directors who own more than 1/2 of l% own in the
aggregate more than 5% of the outstanding securities of such
issuer;
- pledge its assets or assign or otherwise encumber its assets
in excess of 10% of its net assets (taken at market value at the
time of pledging) and then only to secure borrowings effected
within the limitations set forth in the Prospectus;
- invest for the purpose of exercising control or management
of another company;
- issue senior securities as defined in the 1940 Act except
insofar as the Fund may be deemed to have issued a senior security
by reason of: (a) entering into any repurchase agreement; (b)
borrowing money in accordance with restrictions described above; or
(c) lending portfolio securities; or
- make loans to any person or individual except that portfolio
securities may be loaned by the Fund within the limitations set
forth in the Prospectus.
For purposes of the Fund's policy not to concentrate its
assets described in the Prospectus, the Fund has adopted, as a
matter of non-fundamental policy, the corporate industry
classifications set forth in Appendix B to this Statement of
Additional Information.
How the Fund is Managed
Organization and History. Oppenheimer Quest Opportunity Value Fund
(referred to as the "Fund") is one of four portfolios of
Oppenheimer Quest for Value Funds (the "Trust"), a Massachusetts
business trust. This Statement of Additional Information may be
used with the Fund's Prospectus only to offer shares of the Fund.
The Trustees are authorized to create new series and classes
of series. The Trustees may reclassify unissued shares of the
Trust or its series or classes into additional series or classes of
shares. The Trustees may also divide or combine the shares of a
class into a greater or lesser number of shares without thereby
changing the proportionate beneficial interest of a shareholder in
the Fund. Shares do not have cumulative voting rights or
preemptive or subscription rights. Shares may be voted in person
or by proxy.
As a Massachusetts business trust, the Fund is not required to
hold, and does not plan to hold, regular annual meetings of
shareholders. The Fund will hold meetings when required to do so by
the Investment Company Act or other applicable law, or when a
shareholder meeting is called by the Trustees or upon proper
request of the shareholders. Shareholders have the right, upon the
declaration in writing or vote of two-thirds 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 of 10% of its outstanding
shares. In addition, if the Trustees receive a request from at
least 10 shareholders (who have been shareholders for at least six
months) holding shares of the Fund valued at $25,000 or more or
holding at least 1% of the Fund's outstanding shares, whichever is
less, stating that they wish to communicate with other shareholders
to request a meeting to remove a Trustee, the Trustees will then
either make the Fund's shareholder list available to the applicants
or mail their communication to all other shareholders at the
applicants' expense, or the Trustees may take such other action as
set forth under Section 16(c) of the Investment Company Act.
The Fund's Declaration of Trust contains an express disclaimer
of shareholder or Trustee liability for the Fund's obligations, and
provides for indemnification and reimbursement of expenses out of
its property for any shareholder held personally liable for its
obligations. The Declaration of Trust also provides that the Fund
shall, upon request, assume the defense of any claim made against
any shareholder for any act or obligation of the Fund and satisfy
any judgment thereon. Thus, while Massachusetts law permits a
shareholder of a business trust (such as the Fund) to be held
personally liable as a "partner" under certain circumstances, the
risk of a Fund shareholder incurring financial loss on account of
shareholder liability is limited to the relatively remote
circumstances in which the Fund would be unable to meet its
obligations described above. Any person doing business with the
Trust, and any shareholder of the Trust, agrees under the Trust's
Declaration of Trust to look solely to the assets of the Trust for
satisfaction of any claim or demand which may arise out of any
dealings with the Trust, and the Trustees shall have no personal
liability to any such person, to the extent permitted by law.
Trustees and Officers of the Trust. The Trust's Trustees and
officers, and the Fund's portfolio manager (who is not an officer),
are listed below, together with principal occupations and business
affiliations during the past five years. Each Trustee is also a
Trustee of Oppenheimer Quest Growth & Income Value Fund,
Oppenheimer Quest Small Cap Value Fund, Oppenheimer Quest Officers
Fund, Oppenheimer Quest Value Fund, Inc., Oppenheimer Quest Global
Value Fund, Inc. (collectively, the "Oppenheimer Quest Funds"),
Rochester Portfolio Series - Limited-Term New York Municipal Fund,
Rochester Fund Series - The Bond Fund For Growth and Rochester Fund
Municipals (collectively, the "Rochester Funds"). The address of
each is Two World Trade Center, New York, New York 10048, except as
noted. As of January 25, 1996, the trustees and officers of the
Trust as a group owned less than 1% of the outstanding shares of
each class of the Fund.
Bridget A. Macaskill, Chairman of the Board of Trustees and
President; Age: 47.
President, Chief Executive Officer and Chief Operating Officer of
OppenheimerFunds, Inc. (the "Manager"); President and a Trustee of
the Oppenheimer funds; prior thereto, Executive Vice President and
Chief Operating Officer of the Manager. President and a Director
of Oppenheimer Acquisition Corp., Oppenheimer Partnership Holdings,
Inc., Chairman and a Director of Shareholder Services, Inc.,
Director of Main Street Advisers, Inc., and Director of HarbourView
Asset Management Corporation, all of which are subsidiaries of the
Manager.
Paul Y. Clinton, Trustee; Age: 64
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 Oppenheimer Quest Value Fund, Inc., Oppenheimer
Quest Global Value Fund, Inc., and Quest Cash Reserves, Inc. and
Trustee of Quest For Value Accumulation Trust, 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, Trustee; Age: 62
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., Oppenheimer Quest Value
Fund, Inc. and Oppenheimer Quest Global Value Fund, Inc. and
Trustee of Quest for Value Accumulation Trust, all of which are
open-end investment companies; former President of Boston Company
Institutional Investors; Trustee of Hawaiian Tax-Free Trust and Tax
Free Trust of Arizona, tax-exempt bond funds; Director of several
privately owned corporations; former Director of Financial Analysts
Federation.
Lacy B. Herrmann, Trustee; Age: 66
380 Madison Avenue, Suite 2300, New York, New York 10017
President and Chairman of the Board of Aquila Management
Corporation, the sponsoring organization and Administrator and/or
Sub-Adviser to the following open-end investment companies, and
Chairman of the Board of Trustees and President of each: Churchill
Cash Reserves Trust, Short Term Asset Reserves, Pacific Capital
Cash Assets Trust, Pacific Capital U.S. Treasuries Cash Assets
Trust, Pacific Capital Tax-Free Cash Assets Trust, Prime Cash Fund,
Narragansett Insured Tax-Free Income Fund, Tax-Free Fund For Utah,
Churchill Tax-Free Fund of Kentucky, Tax-Free Fund of Colorado,
Tax-Free Trust of Oregon, Tax-Free Trust of Arizona, Hawaiian Tax-
Free Trust, and Aquila Rocky Mountain Equity Fund; Vice President,
Director, Secretary, and formerly Treasurer of Aquila Distributors,
Inc., distributor of the above funds; President and Chairman of the
Board of Trustees of Capital Cash Management Trust ("CCMT"), and an
Officer and Trustee/Director of its predecessors; President and
Director of STCM Management Company, Inc., sponsor and adviser to
CCMT; Chairman, President and a Director of InCap Management
Corporation, formerly sub-adviser and administrator of Prime Cash
Fund and Short Term Asset Reserves; Director or Trustee of Quest
Cash Reserves, Inc., Oppenheimer Quest Global Value Fund, Inc. and
Oppenheimer Quest Value Fund, Inc. and Trustee of Quest for Value
Accumulation Trust and The Saratoga Advantage Trust, each of which
is an open-end investment company; Trustee of Brown University.
George Loft, Trustee; Age: 80
51 Herrick Road, Sharon, Connecticut 06069
Private Investor; Director of Quest Cash Reserves, Inc.,
Oppenheimer Quest Value Fund, Inc. and Oppenheimer Quest Global
Value Fund, Inc. and Trustee of Quest for Value Accumulation Trust
and The Saratoga Advantage Trust, all of which are open-end
investment companies, and Director of the Quest for Value Dual
Purpose Fund, Inc., a closed-end investment company.
Robert C. Doll, Jr., Vice President; Age: 41
Executive Vice President and Director of Equity Investments of the
Manager; an officer and Portfolio Manager of other Oppenheimer
funds.
Andrew J. Donohue, Secretary; Age: 45
Executive Vice President and General Counsel of the Manager and the
Distributor; an officer of other Oppenheimer funds; President and
a director of Centennial Asset Management Corporation, investment
advisory subsidiary of the Manager; formerly Senior Vice President
and Associate General Counsel of the Manager and the Distributor,
partner in Kraft & McManimon (a law firm), an officer of First
Investors Corporation (a broker-dealer) and First Investors
Management Company, Inc. (broker-dealer and investment adviser),
and a director and an officer of First Investors Family of Funds
and First Investors Life Insurance Company.
George C. Bowen, Treasurer; Age: 59
3410 South Galena Street Denver, Colorado 80231
Senior Vice President and Treasurer of the Manager; Vice President
and Treasurer of the Distributor and HarbourView Asset Management
Corporation; Senior Vice President, Treasurer, Assistant Secretary
and a director of Centennial Asset Management Corporation, an
investment advisory subsidiary of the Manager; Vice President,
Treasurer and Secretary of the Transfer Agent and Shareholder
Financial Services, Inc., a transfer agent subsidiary of the
Manager; an officer of other Oppenheimer funds.
Richard J. Glasebrook, II, Portfolio Manager; Age 47
Two World Financial Center, 225 Liberty Street, New York, New York
10080
Managing Director of Oppenheimer Capital; previously a partner with
Delafield Asset Management, where he was a portfolio manager and
analyst.
Robert Bishop, Assistant Treasurer; Age: 37
3410 South Galena Street, Denver, Colorado 80231
Assistant Vice President of the Manager/Mutual Fund Accounting; an
officer of other Oppenheimer funds; formerly a Fund Controller for
the Manager, prior to which he was an Accountant for Yale &
Seffinger, P.C., an accounting firm, and previously an Accountant
and Commissions Supervisor for Stuart James Company Inc., a broker-
dealer.
Scott Farrar, Assistant Treasurer; Age: 30
3410 South Galena Street, Denver, Colorado 80231
Assistant Vice President of the Manager/Mutual Fund Accounting; an
officer of other Oppenheimer funds; formerly a Fund Controller for
the Manager, prior to which he was an International Mutual Fund
Supervisor for Brown Brothers, Harriman Co., a bank, and previously
a Senior Fund Accountant for State Street Bank & Trust Company.
Robert G. Zack, Assistant Secretary; Age: 47
Senior Vice President and Associate General Counsel of the Manager;
Assistant Secretary of SSI and SFSI; an officer of other
Oppenheimer funds.
-- Remuneration of Trustees. All officers of the Trust and
Ms. Macaskill, a Trustee, are officers or directors of the Manager
and receive no salary or fee from the Fund. The Trustees of the
Fund (excluding Ms. Macaskill, who was not a Trustee prior to
November 22, 1995) received the total amounts shown below from (i)
the Fund during its fiscal period ended October 31, 1995 and (ii)
other investment companies (or series thereof) managed by OpCap
Advisors (previously named Quest for Value Advisors), or an
affiliate thereof, during the fiscal year ended October 31, 1995
(the "Fund Complex"). OpCap Advisors, or an affiliate thereof,
served as the investment adviser to the Fund Complex prior to
November 22, 1995. Effective as of such date, the Manager acquired
the investment advisory and other contracts and business
relationships and certain assets and liabilities of OpCap Advisors,
Quest for Value Distributors and Oppenheimer Capital relating to
twelve Quest for Value mutual funds (or series thereof) included in
the Fund Complex.
<TABLE>
<CAPTION>
Pension or
Retirement Estimated
Aggregate Benefits Annual Total
Compensation Accrued as Benefits Compensation
from the Part of Fund Upon From Fund
Name of Person Fund Expenses Retirement Complex
<S> <C> <C> <C> <C>
Paul Y. Clinton $4,200 None None $61,650
Thomas W. Courtney $4,200 None None $60,900
Lacy B. Herrmann $4,200 None None $61,650
George Loft $4,200 None None $61,650
</TABLE>
Messrs. Clinton, Courtney and Herrmann earned directors fees
with respect to 18 investment companies in the Fund Complex and the
fees earned by Mr. Loft were with respect to 19 investment
companies in the Fund Complex. During such period the non-
interested Trustees received fees from three investment companies
for which they no longer serve as directors and which are no longer
part of the Fund Complex but for which OpCap Advisors currently
serves as subadviser. In addition, during such periods, Mr.
Clinton and Mr. Courtney each served as director with respect to
three investment companies in the 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 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.
-- Major Shareholders. As of January 26, 1996, the only
persons who owned of record or were known by the Fund to own
beneficially 5% or more of the Fund's outstanding Class A, Class B
or Class C shares were the following:
Number and Class
of Shares Owned Percentage
Beneficially of Record Name & Address of Class
Class A 1,122,401.868 Merrill Lynch TR CO TR
FBO QUALIFIED RETIREMENT PL S 6.39%
Attn.: Trading
265 Davidson Ave.
Somerset, NJ 08873-4120
The Manager and its Affiliates. The Manager is wholly-owned by
Oppenheimer Acquisition Corp. ("OAC"), a holding company controlled
by Massachusetts Mutual Life Insurance Company. OAC is also owned
in part by certain of the Manager's directors and officers, some of
whom also serve as officers of the Fund and one of whom (Ms.
Macaskill) also serves as an officer and a Trustee of the Fund.
The Manager and the Trust has a Code of Ethics. In addition
to having its own Code of Ethics, The Sub-Adviser is subject to a
reporting obligation to the Manager under its Code of Ethics. The
Code of Ethics is designed to detect and prevent improper personal
trading by certain employees, including the Fund's portfolio
manager, who is an employee of the Sub-Adviser, that would compete
with or take advantage of the Funds' portfolio transactions.
Compliance with the Code of Ethics is carefully monitored and
strictly enforced by the Manager.
-- The Investment Advisory Agreement. The Manager acts as
investment adviser to the Funds pursuant to the terms of an
Investment Advisory Agreement dated as of November 22, 1995, the
Fund's Sub-Adviser, served as the Fund's investment adviser from
its inception to November 22, 1995.
Under the Investment Advisory Agreement, the Manager acts as
the investment adviser for the Fund and supervises the investment
program of the Fund. The Investment Advisory Agreement provides
that the Manager will provide administrative services for the Fund,
including completion and maintenance of records, preparation and
filing of reports required by the Securities and Exchange
Commission, reports to shareholders, and composition of proxy
statements and registration statements required by Federal and
state securities laws. The Manager will furnish the Fund with
office space, facilities and equipment and arrange for its
employees to serve as officers of the Trust. The administrative
services to be provided by the Manager under the Investment
Advisory Agreement will be at its own expense, except that each
class of shares of the Fund will pay the Manager an annual fee for
calculating the Fund's daily net asset value as follows: Class A -
$25,000; Class B - $18,000; and Class C - $12,000.
Expenses not assumed by the Manager under the Investment
Advisory Agreement or paid by the Distributor under the General
Distributor's Agreement will be paid by the Fund. Expenses with
respect to the Trust's four portfolios, including the Fund, are
allocated in proportion to the net assets of the respective
portfolio, except where allocations of direct expenses could be
made. Certain expenses are further allocated to certain classes of
shares of a series as explained in the Prospectus and under "How to
Buy Shares," below. The Investment Advisory Agreement lists
examples of expenses paid by the Fund, including interest, taxes,
brokerage commissions, insurance premiums, fees of non-interested
Trustees, legal and audit expenses, transfer agent and custodian
expenses, share issuance costs, certain printing and registration
costs, and non-recurring expenses, including litigation.
The Investment Advisory Agreement contains no expense
limitation. However, independently of the Investment Advisory
Agreement, the Manager has voluntarily undertaken that the Fund's
total expenses in any fiscal year (including the investment
advisory fee but exclusive of taxes, interest, brokerage
commissions, distribution plan payments and any extraordinary non-
recurring expenses, including litigation) shall not exceed the most
stringent state regulatory limitation application to the Fund. At
present, that limitation is imposed by California and limits
expenses (with specified exclusions) to 2.5% of the first $30
million of average annual net assets, 2% of the next $70 million
and 1.5% of average annual net assets in excess of $100 million.
Pursuant to the undertaking, the Manager's fee at the end of
any month will be reduced or eliminated such that there will not be
any accrued but unpaid liability under this expense limitation.
The Manager reserves the right to terminate or amend the
undertaking at any time. Any assumption of the Fund's expenses
under this undertaking would lower the Fund's overall expense ratio
and increase its total return during any period in which expenses
are limited.
The Investment Advisory Agreement provides that in the absence
of willful misfeasance, bad faith, or gross negligence in the
performance of its duty, or reckless disregard for its obligations
and duties under the advisory agreement, the Manager is not liable
for any loss resulting from good faith errors or omissions on its
part with respect to any of its duties thereunder. The Investment
Advisory Agreement permits the Manager to act as investment adviser
for any other person, firm or corporation and to use the name
"Oppenheimer" in connection with its other investment companies for
which it may act as an investment adviser or general distributor.
If the Manager shall no longer act as investment adviser to a Fund,
the right of the Fund to use "Oppenheimer" as part of its name may
be withdrawn.
-- Fees Paid Under the Prior Investment Advisory Agreement.
OpCap Advisors served as investment adviser to the Fund from its
inception until November 22, 1995. Under the prior Investment
Advisory Agreement, the total advisory fees accrued or paid by the
Fund were $880,856 for the fiscal year ended October 31, 1993,
$1,555,447 for the fiscal year ended October 31, 1994, and
$3,923,159 for the fiscal year ended October 31, 1995.
For the fiscal years ended October 31, 1993, 1994 and 1995,
the Fund paid or accrued accounting services fees to OpCap
Advisors in the amounts of $14,798, $53,245 and $48,747,
respectively. Commencing in 1993, the Trust retained the services
of State Street Bank and Trust Company ("State Street") to
calculate the net asset value of each class of shares and to
prepare the books and records. For such services, the Fund accrued
or paid fees for the fiscal years ended October 31, 1993, 1994 and
1995 in the amounts of $27,917, $55,000 and $55,000, respectively.
The Investment Advisory Agreement provides that the Manager
may enter into sub-advisory agreements with other affiliated or
unaffiliated registered investment advisers in order to obtain
specialized services for the Funds provided that the Fund is not
required to pay any additional fees for such services. The Manager
has retained OpCap Advisors (previously named Quest for Value
Advisors) pursuant to a separate Subadvisory Agreement dated as of
November 22, 1995 with respect to the Fund.
-- The Subadvisory Agreement. The Subadvisory Agreement
provides that OpCap Advisors shall regularly provide investment
advice with respect to the Fund and invest and reinvest cash,
securities and the property comprising the assets of the Fund.
Under the Subadvisory Agreement, OpCap Advisors agrees not to
change the Portfolio Manager of the Fund without the written
approval of the Manager and to provide assistance in the
distribution and marketing of the Fund. The Subadvisory Agreement
was approved by the Board of Trustees, including a majority of the
Trustees who are not "interested persons" of the Trust (as defined
in the Investment Company Act) and who have no direct or indirect
financial interest in such agreements on June 22, 1995 and by the
shareholders of the Fund at a meeting held for that purpose on
November 3, 1995.
Under the Subadvisory Agreement, the Manager will pay OpCap
Advisors an annual fee payable monthly, based on the average daily
net assets of the Fund, equal to 40% of the investment advisory fee
collected by the Manager from the Fund based on the total net
assets of the Fund as of the effective date of the Subadvisory
Agreement (the "Base Amount") plus 30% of the investment advisory
fee collected by the Manager based on the total net assets of the
Fund that exceed the Base Amount.
The Subadvisory Agreement provides that in the absence of
willful misfeasance, bad faith, negligence or reckless disregard of
its duties or obligations, OpCap Advisors shall not be liable to
the Manager for any act or omission in the course of or connected
with rendering services under the Subadvisory Agreement or for any
losses that may be sustained in the purchase, holding or sale of
any security.
-- The Distributor. Under a General Distributor's Agreement
with the Trust dated as of November 22, 1995, the Distributor acts
as the Fund's principal underwriter in the continuous public
offering of its Class A, Class B and Class C shares but is not
obligated to sell a specific number of shares. Expenses normally
attributable to sales, including advertising and the cost of
printing and mailing prospectuses, other than those furnished to
existing shareholders, are borne by the Distributor. During the
Fund's fiscal year ended October 31, 1995, the aggregate amount of
sales charges on sales of the Fund's Class A shares was $959,000,
of which Quest for Value Distributors, the Fund's distributor prior
to November 22, 1995, retained $0, and an affiliated broker-dealer
retained $0, respectively. During the fiscal year ended October
31, 1995, Quest for Value Distributors received contingent deferred
sales charges of $264,016 upon redemption of Class B shares, and
received contingent deferred sales charges of $18,439 upon
redemption of Class C shares. For additional information about
distribution of the Fund's shares and the expenses connected with
such activities, please refer to "Distribution and Service Plans"
below.
-- The Transfer Agent. OppenheimerFunds Services acts as the
Fund's Transfer Agent pursuant to a Transfer Agency and Service
Agency Agreement dated November 22, 1995. Pursuant to the
Agreement, the Transfer Agent is responsible for maintaining the
Fund's shareholder registry and shareholder accounting records and
for shareholder servicing and administrative functions. As
compensation therefor, the Fund is obligated to pay the Transfer
Agent an annual maintenance fee for each Fund shareholder account
and reimburse the Transfer Agent for its out of pocket expenses.
- Shareholder Servicing Agent for Certain Shareholders.
Unified Management Corporation (1-800-346-4601) is the shareholder
servicing agent of the Fund for former shareholders of the AMA
Family of Funds and clients of AMA Investment Advisers, Inc. (which
had been the investment adviser of AMA Family of Funds) who acquire
shares of any Oppenheimer Quest Fund, and for (i) former
shareholders of the Unified Funds and Liquid Green Trusts, (ii)
accounts which participated or participate in a retirement plan for
which Unified Investment Advisers, Inc. or an affiliate acts as
custodian or trustee, (iii) accounts which have a Money Manager
brokerage account, and (iv) other accounts for which Unified
Management Corporation is the dealer of record.
Brokerage Policies of the Fund
Brokerage Provisions of the Investment Advisory and Subadvisory
Agreement. The Investment Advisory Agreement contains provisions
relating to the selection of broker-dealers ("brokers") for the
Fund's portfolio transactions. The Manager and the Sub-Adviser may
use such brokers as may, in their best judgment based on all
relevant factors, implement the policy of the Fund to achieve best
execution of portfolio transactions. While the Manager need not
seek advance competitive bidding or base its selection on posted
rates, it is expected to be aware of the current rates of most
eligible brokers and to minimize the commissions paid to the extent
consistent with the interests and policies of the Fund as
established by its Board and the provisions of the Investment
Advisory Agreement.
The Investment Advisory Agreement also provides that,
consistent with obtaining the best execution of the Fund's
portfolio transactions, the Manager and the Sub-Adviser, in the
interest of the Fund, may select brokers other than affiliated
brokers, because they provide brokerage and/or research services to
the Fund and/or other accounts of the Manager or the Sub-Adviser.
The commissions paid to such brokers may be higher than another
qualified broker would have charged if a good faith determination
is made by the Manager or the Sub-Adviser that the commissions are
reasonable in relation to the services provided, viewed either in
terms of that transaction or the Manager's or the Sub-Adviser's
overall responsibilities to all its accounts. No specific dollar
value need be put on the services, some of which may or may not be
used by the Manager or the Sub-Adviser for the benefit of the Fund
or other of its advisory clients. To show that the determinations
were made in good faith, the Manager or any Sub-Adviser must be
prepared to show that the amount of such commissions paid over a
representative period selected by the Board was reasonable in
relation to the benefits to the Fund. The Investment Advisory
Agreement recognizes that an affiliated broker-dealer may act as
one of the regular brokers for the Fund provided that any
commissions paid to such broker are calculated in accordance with
procedures adopted by the Trust's Board under applicable rules of
the Securities and Exchange Commission ("SEC").
In addition, the Subadvisory Agreement permits the Sub-Adviser
to enter into "soft dollar" arrangements through the agency of
third parties to obtain services for the Fund. Pursuant to these
arrangements, the Sub-Adviser will undertake to place brokerage
business with broker-dealers who pay third parties that provide
services. Any such "soft dollar" arrangements will be made in
accordance with policies adopted by the Board of the Trust and in
compliance with applicable law.
Description of Brokerage Practices. Portfolio decisions are based
upon recommendations of the portfolio manager and the judgment of
the portfolio managers. The Fund will pay brokerage commissions on
transactions in listed options and equity securities. Prices of
portfolio securities purchased from underwriters of new issues
include a commission or concession paid by the issuer to the
underwriter, and prices of debt securities purchased from dealers
include a spread between the bid and asked prices.
Transactions may be directed to dealers during the course of
an underwriting in return for their brokerage and research
services, which are intangible and on which no dollar value can be
placed. There is no formula for such allocation. The research
information may or may not be useful to one or more of the Fund
and/or other accounts of the Manager or the Sub-Adviser;
information received in connection with directed orders of other
accounts managed by the Manager or the Sub-Adviser or its
affiliates may or may not be useful to one or more of the Funds.
Such information may be in written or oral form and includes
information on particular companies and industries as well as
market, economic or institutional activity areas. It serves to
broaden the scope and supplement the research activities of the
Manager or the Sub-Adviser, to make available additional views for
consideration and comparison, and to enable the Manager or the Sub-
Adviser to obtain market information for the valuation of
securities held in the Fund's assets.
Sales of shares of the Fund, subject to applicable rules
covering the Distributor's activities in this area, will also be
considered as a factor in the direction of portfolio transactions
to dealers, but only in conformity with the price, execution and
other considerations and practices discussed above. The Fund will
not purchase any securities from or sell any securities to an
affiliated broker-dealer including Oppenheimer & Co., Inc.
("Opco"), an affiliate of the Sub-Adviser, acting as principal for
its own account.
The Sub-Adviser currently serves as investment manager to a
number of clients, including other investment companies, and may in
the future act as investment manager or advisor to others. It is
the practice of the Sub-Adviser to cause purchase or sale
transactions to be allocated among the Fund and others whose assets
it manages in such manner as it deems equitable. In making such
allocations among the Fund and other client accounts, the main
factors considered are the respective investment objectives, the
relative size of portfolio holdings of the same or comparable
securities, the availability of cash for investment, the size of
investment commitments generally held and the opinions of the
persons responsible for managing the portfolios of each Fund and
other client accounts.
When orders to purchase or sell the same security on identical
terms are placed by more than one of the funds and/or other
advisory accounts managed by the Subadvisor or its affiliates, the
transactions are generally executed as received, although a fund or
advisory account that does not direct trades to a specific broker
("free trades") usually will have its order executed first.
Purchases are combined where possible for the purpose of
negotiating brokerage commissions, which in some cases might have
a detrimental effect on the price or volume of the security in a
particular transaction as far as the Fund is concerned. Orders
placed by accounts that direct trades to a specific broker will
generally be executed after the free trades. All orders placed on
behalf of the Fund are considered free trades. However, having an
order placed first in the market does not necessarily guarantee the
most favorable price.
The following table presents information as to the allocation
of brokerage commissions paid by the Fund for the fiscal years
ended October 31, 1993, 1994 and 1995:
<TABLE>
<CAPTION>
Total Amount of Transactions
For the Total Brokerage Commissions Where Brokerage Commissions
Fiscal Year Brokerage Paid to Opco Paid to Opco
Ended Commissions Dollar Dollar
October 31, Paid Amounts % Amounts %
<S> <C> <C> <C> <C> <C>
1993 $174,608 $104,705 60.0% $ 68,765,141 61.7%
1994 $189,680 $ 94,589 49.9% $ 78,351,168 17.6%
1995 $647,240 $266,868 41.2% $177,075,785 43.0%
</TABLE>
During the Fund's fiscal year ended October 31, 1995 $49,340
was paid by the Fund to brokers as commissions in return for
research services; the aggregate dollar amount of those
transactions was $34,166,096.
Performance of the Fund
Total Return Information. As described in the Prospectus, from
time to time the "average annual total return," "cumulative total
return" and "total return at net asset value" of an investment in
a class of shares of the Fund may be advertised. An explanation of
how these total returns are calculated for each class and the
components of those calculations is set forth below.
The Fund's advertisements of its performance data must, under
applicable SEC rules, include the average annual total returns for
each class of shares of the Fund for the 1, 5, and 10-year periods
(or the life of the class, if less) ending as of the most recently-
ended calendar quarter prior to the publication of the
advertisement. This enables an investor to compare the Fund's
performance to the performance of other funds for the same periods.
However, a number of factors should be considered before using such
information as a basis for comparison with other investments. An
investment in the Fund is not insured; its returns and share prices
are not guaranteed and normally will fluctuate on a daily basis.
When redeemed, an investor's shares may be worth more or less than
their original cost. Returns for any given past period are not a
prediction or representation by the Fund of future returns. The
returns of Class A, Class B and Class C shares of the Fund are
affected by portfolio quality, the type of investments the Fund
holds and its operating expenses allocated to the particular class.
-- Average Annual Total Returns. The "average annual total
return" of each class is an average annual compounded rate of
return for each year in a specified number of years. It is the
rate of return based on the change in value of a hypothetical
initial investment of $1,000 ("P" in the formula below) held for a
number of years ("n") to achieve an Ending Redeemable Value ("ERV")
of that investment, according to the following formula:
1/n
(ERV)
(---) -1 = Average Annual Total Return
( P )
The "average annual total returns" on an investment in Class
A shares of the Fund (using the method described above) for the one
and five year periods ended October 31, 1995 and for the period
from January 3, 1989 (commencement of operations) to October 31,
1995 were 22.42%, 22.72% and 16.39%, respectively.
The average annual total returns on Class B shares for the
one-year period ended October 31, 1995 and for the period September
1, 1993 (commencement of the public offering of the class) through
October 31, 1995 were 24.19% and 15.28%, respectively.
The average annual total returns on Class C shares for the
one-year period ended October 31, 1995 and for the period September
1, 1993 (commencement of the public offering of the class) through
October 31, 1995 were 28.16% and 16.41%, respectively.
-- Cumulative Total Returns. The cumulative "total return"
calculation measures the change in value of a hypothetical
investment of $1,000 over an entire period of years. Its
calculation uses some of the same factors as average annual total
return, but it does not average the rate of return on an annual
basis. Cumulative total return is determined as follows:
ERV - P
------- = Total Return
P
In calculating total returns for Class A shares, the current
maximum sales charge of 5.75% (as a percentage of the offering
price) is deducted from the initial investment ("P") (unless the
return is shown at net asset value, as described below). Prior to
the date of this Prospectus, the maximum initial sales charge on
Class A shares was 5.50%. For Class B shares, the payment of the
applicable contingent deferred sales charge (5% for the first year,
4% for the second year, 3% for the third and fourth years, 2% for
the fifth year, 1% for the sixth year, and none thereafter) is
applied to the investment result for the period shown (unless the
total return is shown at net asset value, as described below). For
Class C shares, the 1.0% contingent deferred sales charge is
applied to the investment result for the one-year period (or less).
Total returns also assume that all dividends and capital gains
distributions during the period are reinvested to buy additional
shares at net asset value per share, and that the investment is
redeemed at the end of the period.
The "cumulative total return" on Class A shares for the period
from January 3, 1989 (commencement of operations) to October 31,
1995 was 181.89%. The cumulative total return on Class B shares
for the period from September 1, 1993 (commencement of the public
offering of the class) through October 31, 1995 was 36.09%. The
cumulative total return on Class C shares for the period from
September 1, 1993 (commencement of the public offering of the
class) through October 31, 1995 was 38.98%.
-- Total Returns at Net Asset Value. From time to time the
Fund may also quote an "average annual total return at net asset
value" or a "cumulative total return at net asset value" for Class
A, Class B or Class C shares. Each is based on the difference in
net asset value per share at the beginning and the end of the
period for a hypothetical investment in that class of shares
(without considering front-end or contingent deferred sales
charges) and takes into consideration the reinvestment of dividends
and capital gains distributions.
The average annual total returns at net asset value on the
Fund's Class A shares for the one and five year periods ended
October 31, 1995 and for the period from January 3, 1989
(commencement of operations) to October 31, 1995 were 29.89%,
24.18% and 17.40%, respectively. The cumulative total return at
net asset value on the Fund's Class A shares for the period January
1, 1989 through October 31, 1995 was 199.09%.
The average annual total returns at net asset value on the
Fund's Class B shares for the one year period ended October 31,
1995 and for the period from September 1, 1993 (commencement of the
public offering of the class) through October 31, 1995 were 29.19%
and 16.45%, respectively. The cumulative total return at net asset
value on the Fund's Class B shares for the period September 1, 1993
through October 31, 1995 was 39.09%.
The average annual total returns at net asset value on the
Fund's Class C shares for the one-year period ended October 31,
1995 and for the period September 2, 1993 (commencement of the
public offering of the class) through October 31, 1995 were 29.16%
and 16.41%, respectively. The cumulative total return at net asset
value on the Fund's Class C shares for the period September 2, 1993
through October 31, 1995 was 38.98%.
Other Performance Comparisons. From time to time the Fund may
publish the ranking of its Class A, Class B or Class C shares by
Lipper Analytical Services, Inc. ("Lipper"), a widely-recognized
independent mutual fund monitoring service. Lipper monitors the
performance of regulated investment companies, including the Fund,
and ranks their performance for various periods based on categories
relating to investment objectives. The performance of the Fund is
ranked against (i) all other funds and (ii) all other flexible
portfolio funds. The Lipper performance rankings are based on
total returns that include the reinvestment of capital gain
distributions and income dividends but do not take sales charges or
taxes into consideration.
From time to time the Fund may publish the ranking of the
performance of its Class A, Class B or Class C shares by
Morningstar, Inc., an independent mutual fund monitoring service
that ranks mutual funds, including the Fund, monthly in broad
investment categories (equity, taxable bond, municipal bond and
hybrid) based on risk-adjusted investment return. Investment
return measures a fund's three, five and ten-year average annual
total returns (when available) in excess of 90-day U.S. Treasury
bill returns after considering sales charges and expenses. Risk
measures fund performance below 90-day U.S. Treasury bill monthly
returns. Risk and investment return are combined to produce star
rankings reflecting performance relative to the average fund in a
fund's category. Five stars is the "highest" ranking (top 10%),
four stars is "above average" (next 22.5%), three stars is
"average" (next 35%), two stars is "below average" (next 22.5%) and
one star is "lowest" (bottom 10%). Morningstar ranks the Fund in
relation to other rated growth and income funds. Rankings are
subject to change.
The total return on an investment in the Fund's Class A, Class
B or Class C shares may be compared with performance for the same
period of the S&P 500 Index as described in the Prospectus. The
performance of the index includes a factor for the reinvestment of
income dividends, but does not reflect reinvestment of capital
gains, expenses or taxes.
The performance of the Fund's Class A, Class B, or Class C
shares may also be compared in publications to (i) the performance
of various market indices or to other investments for which
reliable performance data is available, and (ii) to averages,
performance rankings or other benchmarks prepared by recognized
mutual fund statistical services.
Investors may also wish to compare the Fund's Class A, Class
B or Class C return to the returns on fixed income investments
available from banks and thrift institutions, such as certificates
of deposit, ordinary interest-paying checking and savings accounts,
and other forms of fixed or variable time deposits, and various
other instruments such as Treasury bills. However, the Fund's
returns and share price are not guaranteed by the FDIC or any other
agency and will fluctuate daily, while bank depository obligations
may be insured by the FDIC and may provide fixed rates of return,
and Treasury bills are guaranteed as to principal and interest by
the U.S. government.
From time to time, the Fund's Manager may publish rankings or
ratings of the Manager (or Transfer Agent) or the investor services
provided by them to shareholders of the Oppenheimer funds, other
than performance rankings of the Oppenheimer funds themselves.
Those ratings or rankings of shareholder/investor services by third
parties may compare the Oppenheimer funds' services to those of
other mutual fund families selected by the rating or ranking
services and may be based upon the opinions of the rating or
ranking service itself, based on its research or judgment, or based
upon surveys of investors, brokers, shareholders or others.
Distribution and Service Plans
The Trust has adopted separate Distribution and Service Plans
for Class A, Class B and Class C shares of the Fund under Rule
12b-1 of the Investment Company Act pursuant to which the Fund will
make payments to the Distributor in connection with the
distribution and/or servicing of the shares of that class, as
described in the Prospectus. Each Plan has been approved by a vote
of (i) the Board of Trustees of the Trust, including a majority of
the Trustees who are not "interested persons" (as defined in the
Investment Company Act) of the Fund and who have no direct or
indirect financial interest in the operation of the Fund's 12b-1
plans or in any related agreement ("Independent Trustees"), cast in
person at a meeting on June 22, 1995 called for the purpose, among
others, of voting on that Plan, and (ii) the holders of a
"majority" (as defined in the Investment Company Act) of the shares
of each class at a meeting on November 3, 1995.
In addition, under the Plans the Manager and the Distributor,
in their sole discretion, from time to time may use their own
resources (which, in the case of the Manager, may include profits
from the advisory fee it receives from the Fund) to make payments
to brokers, dealers or other financial institutions (each is
referred to as a "Recipient" under the Plans) for distribution and
administrative services they perform. The Distributor and the
Manager may, in their sole discretion, increase or decrease the
amount of payments they make from their own resources to
Recipients.
Unless terminated as described below, each plan continues in
effect from year to year but only as long as such continuance is
specifically approved at least annually by the Trust's Board of
Trustees and its "Independent Trustees" by a vote cast in person at
a meeting called for the purpose of voting on such continuance.
Any Plan may be terminated at any time by the vote of a majority of
the Independent Trustees or by the vote of the holders of a
"majority" (as defined in the Investment Company Act) of the
outstanding shares of that class. No Plan may be amended to
increase materially the amount of payments to be made unless such
amendment is approved by shareholders of the class affected by the
amendment. In addition, because Class B shares of the Fund
automatically convert into Class A shares after six years, the Fund
is required to obtain the approval of Class B as well as Class A
shareholders for a proposed material amendment to the Class A Plan
that would materially increase payments under the Plan. Such
approval must be by a "majority" of the Class A and Class B shares
(as defined in the Investment Company Act), voting separately by
class. All material amendments must be approved by the Board of
Trustees and the Independent Trustees.
While the Plans are in effect, the Treasurer of the Trust
shall provide separate written reports to the Trust's Board of
Trustees at least quarterly on the amount of all payments made
pursuant to each Plan, the purpose for which the payments were made
and the identity of each Recipient that received any such payment.
The reports shall also include the distribution costs for that
quarter, and such costs for previous fiscal periods that are
carried forward, as explained in the Prospectus and below. Those
reports, including the allocations on which they are based, will be
subject to the review and approval of the Independent Trustees in
the exercise of their fiduciary duty. Each Plan further provides
that while it is in effect, the selection and nomination of those
Trustees of the Trust who are not "interested persons" of the Trust
is committed to the discretion of the Independent Trustees. This
does not prevent the involvement of others in such selection and
nomination if the final decision on any such selection or
nomination is approved by a majority of the Independent Trustees.
Under the Plans, no payment will be made to any Recipient in
any quarter if the aggregate net asset value of all Fund shares
held by the Recipient for itself and its customers did not exceed
a minimum amount, if any, that may be determined from time to time
by a majority of the Trust's Independent Trustees. Initially, the
Board of Trustees has set the fee at the maximum rate and set no
requirement for a minimum amount.
The Plans allow the service fee payments to be paid by the
Distributor to Recipients in advance for the first year shares are
outstanding, and thereafter on a quarterly basis, as described in
the Prospectus. The advance payment is based on the net assets of
shares of that class sold. An exchange of shares does not entitle
the Recipient to an advance service fee payment. In the event
shares are redeemed during the first year such shares are
outstanding, the Recipient will be obligated to repay a pro rata
portion of such advance payment to the Distributor.
Although the Plans permit the Distributor to retain both the
asset-based sales charge and the service fee, or to pay Recipients
the service fee on a quarterly basis, without payment in advance,
the Distributor presently intends to pay the service fee to
Recipients in the manner described above. A minimum holding period
may be established from time to time under the Plans by the Board.
Initially, the Board has set no minimum holding period. All
payments under the Plans are subject to the limitations imposed by
the Rules of Fair Practice of the National Association of
Securities Dealers, Inc. on payments of asset-based sales charges
and service fees.
The Plans provide for the Distributor to be compensated at a
flat rate, whether the Distributor's expenses are more or less than
the amounts paid by the Fund during that period. The asset-based
sales charges paid to the Distributor by the Fund under the Plans
are intended to allow the Distributor to recoup the cost of sales
commissions paid to authorized brokers and dealers at the time of
sale, plus financing costs, as described in the Prospectus. Such
payments may also be used to pay for the following expenses in
connection with the distribution of shares: (i) financing the
advance of the service fee payment to Recipients under the Plans,
(ii) compensation and expenses of personnel employed by the
Distributor to support distribution of shares, and (iii) costs of
sales literature, advertising and prospectuses (other than those
furnished to current shareholders).
- The Prior Plans. From the inception date of the Fund
through November 22, 1995, OCC Distributors (formerly known as
Quest for Value Distributors) served as Distributor to the Fund.
OCC Distributors provided distribution services for the Fund's
Class A, Class B and Class C shares pursuant to separate plans
adopted for each class under the Investment Company Act (the "Prior
Plans"). The total distribution fees accrued or paid by Class A,
Class B and Class C shares of the Fund under the Prior Plans for
the fiscal year ended October 31, 1995 were $1,258,129, $1,165,226
and $241,676, respectively.
ABOUT YOUR ACCOUNT
How To Buy Shares
Alternative Sales Arrangements - Class A, Class B and Class C
Shares. The availability of three classes of shares permits the
individual investor to choose the method of purchasing shares that
is more beneficial to the investor depending on the amount of the
purchase, the length of time the investor expects to hold shares
and other relevant circumstances. Investors should understand that
the purpose and function of the deferred sales charge and asset-
based sales charge with respect to Class B and Class C shares are
the same as those of the initial sales charge with respect to Class
A shares. Any salesperson or other person entitled to receive
compensation for selling Fund shares may receive different
compensation with respect to one class of shares than another. The
Distributor will not accept any order for $500,000 or $1 million or
more of Class B or Class C shares, respectively, on behalf of a
single investor (not including dealer "street name" or omnibus
accounts) because generally it will be more advantageous for that
investor to purchase Class A shares of the Fund instead.
The three classes of shares each represent an interest in the
same portfolio investments of the Fund. However, each class has
different shareholder privileges and features. The net income
attributable to Class B and Class C shares and the dividends
payable on Class B and Class C shares will be reduced by
incremental expenses borne solely by that class, respectively,
including the asset-based sales charges to which Class B and Class
C shares are subject.
The conversion of Class B shares to Class A shares is subject
to the continuing availability of a private letter ruling from the
Internal Revenue Service, or an opinion of counsel or tax adviser,
to the effect that the conversion of Class B shares does not
constitute a taxable event for the holder under Federal income tax
law. If such a revenue ruling or opinion is no longer available,
the automatic conversion feature may be suspended, in which event
no further conversions of Class B shares would occur while such
suspension remained in effect. Although Class B shares could then
be exchanged for Class A shares on the basis of relative net asset
value of the two classes, without the imposition of a sales charge
or fee, such exchange could constitute a taxable event for the
holder, and absent such exchange, Class B shares might continue to
be subject to the asset-based sales charge for longer than six
years.
The methodology for calculating the net asset value, dividends
and distributions of the Fund's Class A, Class B and Class C shares
recognizes two types of expenses. General expenses that do not
pertain specifically to either class are allocated pro rata to the
shares of each class, based on the percentage of the net assets of
such class to the Fund's total assets, and then equally to each
outstanding share within a given class. Such general expenses
include (i) management fees, (ii) legal, bookkeeping and audit
fees, (iii) printing and mailing costs of shareholder reports,
Prospectuses, Statements of Additional Information and other
materials for current shareholders, (iv) fees to Independent
Trustees, (v) custodian expenses, (vi) share issuance costs, (vii)
organization and start-up costs, (viii) interest, taxes and
brokerage commissions, and (ix) non-recurring expenses, such as
litigation costs. Other expenses that are directly attributable to
a class are allocated equally to each outstanding share within that
class. Such expenses include (i) Distribution and Service Plan
fees, (ii) incremental transfer and shareholder servicing agent
fees and expenses, (iii) registration fees and (iv) shareholder
meeting expenses, to the extent that such expenses pertain to a
specific class rather than to the Fund as a whole.
Determination of Net Asset Values Per Share. The net asset values
per share of Class A, Class B and Class C shares of the Fund are
determined as of the close of business of The New York Stock
Exchange (the "Exchange") on each day that the Exchange is open, by
dividing the value of the Fund's net assets attributable to that
class by the total number of Fund shares of that class outstanding.
The Exchange normally closes at 4:00 P.M. New York time, but may
close earlier on some days (for example, in case of weather
emergencies or days falling before a holiday). The Exchange's most
recent annual holiday schedule (which is subject to change) states
that it will close on New Year's Day, President's Day, Good Friday,
Memorial Day, Independence Day, Labor Day, Thanksgiving Day and
Christmas Day. It may also close on other days. The Fund may
invest a substantial portion of its assets in foreign securities
primarily listed on foreign exchanges which may trade on Saturdays
or customary U.S. business holidays on which the Exchange is
closed. Because the Fund's net asset values will not be calculated
on those days, the Fund's net asset value per share may be
significantly affected on such days when shareholders may not
purchase or redeem shares.
The Trust's Board of Trustees has established procedures for
the valuation of the Fund's securities generally as follows: (i)
equity securities traded on a U.S. securities exchange or on NASDAQ
for which last sale information is regularly reported are valued at
the last reported sale price on their primary exchange or NASDAQ
that day (or, in the absence of sales that day, at values based on
the last sale prices of the preceding trading day or closing bid
and asked prices); (ii) securities actively traded on a foreign
securities exchange are valued at the last sales price available to
the pricing service approved by the Trust's Board of Trustees or to
the Manager as reported by the principal exchange on which the
security is traded; (iii) unlisted foreign securities or listed
foreign securities not actively traded are valued as in (i) above,
if available, or at the mean between "bid" and "asked" prices
obtained from active market makers in the security on the basis of
reasonable inquiry; (iv) long-term debt securities having a
remaining maturity in excess of 60 days are valued at the mean
between the "bid" and "asked" prices determined by a portfolio
pricing service approved by the Trust's Board of Trustees or
obtained from active market makers in the security on the basis of
reasonable inquiry; (v) debt instruments having a maturity of more
than one year when issued, and non-money market type instruments
having a maturity of one year or less when issued, which have a
remaining maturity of 60 days or less are valued at the mean
between the "bid" and "asked" prices determined by a pricing
service approved by the Trust's Board of Trustees or obtained from
active market makers in the security on the basis of reasonable
inquiry; (vi) money market-type debt securities having a maturity
of less than one year when issued that having a remaining maturity
of 60 days or less are valued at cost, adjusted for amortization of
premiums and accretion of discounts; (vii) securities (including
restricted securities) not having readily-available market
quotations are valued at fair value under the Board's procedures;
and (viii) securities traded on foreign exchanges are valued at the
closing or last sales prices reported on the principal exchange,
or, if none, at the mean between closing bid and asked prices and
reflect prevailing rates of exchange taken from the closing price
on the London foreign exchange market that day as provided by a
reliable bank, dealer or pricing service.
Trading in securities on European and Asian exchanges and
over-the-counter markets is normally completed before the close of
the Exchange. Events affecting the values of foreign securities
traded in such markets that occur between the time their prices are
determined and the close of the Exchange will not be reflected in
the Fund's calculation of its net asset value unless the Board of
Trustees or the Manager, under procedures established by the Board,
determines that the particular event would materially affect the
Fund's net asset values, in which case an adjustment would be made.
Foreign currency, including forward contracts, will be valued at
the closing price in the London foreign exchange market that day as
provided by a reliable bank, dealer or pricing service. The values
of securities denominated in foreign currency will be converted to
U.S. dollars at the closing price in the London foreign exchange
market that day as provided by a reliable bank, dealer or pricing
service. In the case of U.S. government securities and corporate
bonds, where last sale information is not generally available, such
pricing procedures may include "matrix" comparisons to the prices
for comparable instruments on the basis of quality, yield, maturity
and other special factors involved. The Trustees will monitor the
accuracy of pricing services by comparing prices used for portfolio
evaluation to actual sales prices of selected securities.
Puts, calls and Futures are valued at the last sales price on
the principal exchanges on which they are traded or on NASDAQ, as
applicable, as determined by a pricing service approved by the
Board of Trustees or by the Manager, or, if there are no sales that
day, in accordance with (i) above. When the Fund writes an option,
an amount equal to the premium received by the Fund is included in
the Fund's Statement of Assets and Liabilities as an asset, and an
equivalent deferred credit is included in the liability section.
The deferred credit is adjusted ("marked-to-market") to reflect the
current market value of the option. If a call written by the Fund
is exercised, the proceeds are increased by the premium received.
AccountLink. When shares are purchased through AccountLink, each
purchase must be at least $25.00. Shares will be purchased on the
regular business day the Distributor is instructed to initiate the
Automated Clearing House ("ACH") transfer to buy the shares.
Dividends will begin to accrue on shares purchased by the proceeds
of ACH transfers on the business day the Fund receives Federal
Funds for the purchase through the ACH system before the close of
The New York Stock Exchange. The Exchange normally closes at 4:00
P.M., but may close earlier on certain days. If Federal Funds are
received on a business day after the close of the Exchange, the
shares will be purchased and dividends will begin to accrue on the
next regular business day. The proceeds of ACH transfers are
normally received by the Fund 3 days after the transfers are
initiated. The Distributor and the Fund are not responsible for
any delays in purchasing shares resulting from delays in ACH
transmissions.
Reduced Sales Charges. As discussed in the Prospectus, a reduced
sales charge rate may be obtained for Class A shares under Rights
of Accumulation and Letters of Intent because of the economies of
sales efforts and reduction in expenses realized by the
Distributor, dealers and brokers making such sales. No sales
charge is imposed in certain other circumstances described in the
Prospectus because the Distributor or dealer or broker incurs
little or no selling expenses. The term "immediate family" refers
to one's spouse, children, grandchildren, parents, grandparents,
parents-in-law, sons- and daughters-in-law, siblings, a sibling's
spouse and a spouse's siblings.
-- The Oppenheimer Funds. The Oppenheimer funds are those
mutual funds for which the Distributor acts as the distributor or
the sub-distributor and include the following:
Oppenheimer Tax-Free Bond Fund
Oppenheimer New York Tax-Exempt Fund
Oppenheimer California Tax-Exempt Fund
Oppenheimer Intermediate Tax-Exempt Fund
Oppenheimer Insured Tax-Exempt Fund
Oppenheimer Main Street California Tax-Exempt Fund
Oppenheimer Florida Tax-Exempt Fund
Oppenheimer Pennsylvania Tax-Exempt Fund
Oppenheimer New Jersey Tax-Exempt Fund
Oppenheimer Fund
Oppenheimer Discovery Fund
Oppenheimer Target Fund
Oppenheimer Growth Fund
Oppenheimer Equity Income Fund
Oppenheimer Value Stock Fund
Oppenheimer Asset Allocation Fund
Oppenheimer Total Return Fund, Inc.
Oppenheimer Main Street Income & Growth Fund
Oppenheimer High Yield Fund
Oppenheimer Champion Income Fund
Oppenheimer Bond Fund
Oppenheimer U.S. Government Trust
Oppenheimer Limited-Term Government Fund
Oppenheimer Global Fund
Oppenheimer Global Emerging Growth Fund
Oppenheimer Global Growth & Income Fund
Oppenheimer Gold & Special Minerals Fund
Oppenheimer Strategic Income Fund
Oppenheimer Strategic Income & Growth Fund
Oppenheimer International Bond Fund
Oppenheimer Enterprise Fund
Oppenheimer Quest Opportunity Value Fund
Oppenheimer Quest Growth & Income Value Fund
Oppenheimer Quest Small Cap Value Fund
Oppenheimer Quest Officers Value Fund
Oppenheimer Quest Global Value Fund, Inc.
Oppenheimer Quest Value Fund, Inc.
Rochester Portfolio Series - Limited-Term New York Municipal
Fund*
Rochester Fund Series - The Bond Fund For Growth*
Rochester Fund Municipals*
- ---------------
* Shares of the Fund are not presently exchangeable for shares of
this fund.
and the following "Money Market Funds":
Oppenheimer Money Market Fund, Inc.
Oppenheimer Cash Reserves
Centennial Money Market Trust
Centennial Tax Exempt Trust
Centennial Government Trust
Centennial New York Tax Exempt Trust
Centennial California Tax Exempt Trust
Centennial America Fund, L.P.
Daily Cash Accumulation Fund, Inc.
There is an initial sales charge on the purchase of Class A
shares of each of the Oppenheimer funds except Money Market Funds
(under certain circumstances described herein, redemption proceeds
of Money Market Fund shares may be subject to a contingent
deferred sales charge).
-- Letters of Intent. A Letter of Intent ("Letter") is the
investor's statement of intention to purchase Class A and Class B
shares (or shares of either class) of the Fund (and other eligible
Oppenheimer funds) during the 13-month period from the investor's
first purchase pursuant to the Letter (the "Letter of Intent
period"), which may, at the investor's request, include purchases
made up to 90 days prior to the date of the Letter. The Letter
states the investor's intention to make the aggregate amount of
purchases (excluding any purchases made by reinvestment of
dividends or distributions or purchases made at net asset value
without sales charge), which together with the investor's holdings
of such funds (calculated at their respective public offering
prices calculated on the date of the Letter) will equal or exceed
the amount specified in the Letter. This enables the investor to
count the shares to be purchased under the Letter of Intent to
obtain the reduced sales charge rate (as set forth in the
Prospectus) that applies under the Right of Accumulation to current
purchases of Class A shares. Each purchase of Class A shares under
the Letter will be made at the public offering price (including the
sales charge) that applies to a single lump-sum purchase of shares
in the amount intended to be purchased under the Letter.
In submitting a Letter, the investor makes no commitment to
purchase shares, but if the investor's purchases of shares within
the Letter of Intent period, when added to the value (at offering
price) of the investor's holdings of shares on the last day of that
period, do not equal or exceed the intended purchase amount, the
investor agrees to pay the additional amount of sales charge
applicable to such purchases, as set forth in "Terms of Escrow,"
below (as those terms may be amended from time to time). The
investor agrees that shares equal in value to 5% of the intended
purchase amount will be held in escrow by the Transfer Agent
subject to the Terms of Escrow. Also, the investor agrees to be
bound by the terms of the Prospectus, this Statement of Additional
Information and the Application used for such Letter of Intent, and
if such terms are amended, as they may be from time to time by the
Fund, that those amendments will apply automatically to existing
Letters of Intent.
For purchases of shares of the Fund and other Oppenheimer
funds by OppenheimerFunds prototype 401(k) plans under a Letter of
Intent, the Transfer Agent will not hold shares in escrow. If the
intended purchase amount under the Letter entered into by an
OppenheimerFunds prototype 401(k) plan is not purchased by the plan
by the end of the Letter of Intent period, there will be no
adjustment of commissions paid to the broker-dealer or financial
institution of record for accounts held in the name of that plan.
If the total eligible purchases made during the Letter of
Intent period do not equal or exceed the intended purchase amount,
the commissions previously paid to the dealer of record for the
account and the amount of sales charge retained by the Distributor
will be adjusted to the rates applicable to actual purchases. If
total eligible purchases during the Letter of Intent period exceed
the intended purchase amount and exceed the amount needed to
qualify for the next sales charge rate reduction set forth in the
applicable prospectus, the sales charges paid will be adjusted to
the lower rate, but only if and when the dealer returns to the
Distributor the excess of the amount of commissions allowed or paid
to the dealer over the amount of commissions that apply to the
actual amount of purchases. The excess commissions returned to the
Distributor will be used to purchase additional shares for the
investor's account at the net asset value per share in effect on
the date of such purchase, promptly after the Distributor's receipt
thereof.
In determining the total amount of purchases made under a
Letter, shares redeemed by the investor prior to the termination of
the Letter of Intent period will be deducted. It is the
responsibility of the dealer of record and/or the investor to
advise the Distributor about the Letter in placing any purchase
orders for the investor during the Letter of Intent period. All
of such purchases must be made through the Distributor.
- Terms of Escrow That Apply to Letters of Intent.
1. Out of the initial purchase (or subsequent purchases if
necessary) made pursuant to a Letter, shares of the Fund equal in
value up to 5% of the intended purchase amount specified in the
Letter shall be held in escrow by the Transfer Agent. For example,
if the intended purchase amount is $50,000, the escrow shall be
shares valued in the amount of $2,500 (computed at the public
offering price adjusted for a $50,000 purchase). Any dividends and
capital gains distributions on the escrowed shares will be credited
to the investor's account.
2. If the intended purchase amount specified under the
Letter is completed within the thirteen-month Letter of Intent
period, the escrowed shares will be promptly released to the
investor.
3. If, at the end of the thirteen-month Letter of Intent
period the total purchases pursuant to the Letter are less than the
intended purchase amount specified in the Letter, the investor must
remit to the Distributor an amount equal to the difference between
the dollar amount of sales charges actually paid and the amount of
sales charges which would have been paid if the total amount
purchased had been made at a single time. Such sales charge
adjustment will apply to any shares redeemed prior to the
completion of the Letter. If such difference in sales charges is
not paid within twenty days after a request from the Distributor or
the dealer, the Distributor will, within sixty days of the
expiration of the Letter, redeem the number of escrowed shares
necessary to realize such difference in sales charges. Full and
fractional shares remaining after such redemption will be released
from escrow. If a request is received to redeem escrowed shares
prior to the payment of such additional sales charge, the sales
charge will be withheld from the redemption proceeds.
4. By signing the Letter, the investor irrevocably
constitutes and appoints the Transfer Agent as attorney-in-fact to
surrender for redemption any or all escrowed shares.
5. The shares eligible for purchase under the Letter (or the
holding of which may be counted toward completion of a Letter)
include (a) Class A shares sold with a front-end sales charge or
subject to a Class A contingent deferred sales charge, (b) Class B
shares acquired subject to a contingent deferred sales charge, and
(c) Class A shares or Class B shares acquired in exchange for
either (i) Class A shares of one of the other Oppenheimer funds
that were acquired subject to a Class A initial or contingent
deferred sales charge or (ii) Class B shares of one of the other
Oppenheimer funds that were acquired subject to a contingent
deferred sales charge.
6. Shares held in escrow hereunder will automatically be
exchanged for shares of another fund to which an exchange is
requested, as described in the section of the Prospectus entitled
"How to Exchange Shares," and the escrow will be transferred to
that other fund.
Asset Builder Plans. To establish an Asset Builder Plan from a
bank account, a check (minimum $25) for the initial purchase must
accompany the application. Shares purchased by Asset Builder Plan
payments from bank accounts are subject to the redemption
restrictions for recent purchases described in "How To Sell
Shares," in the Prospectus. Asset Builder Plans also enable
shareholders of Oppenheimer Cash Reserves to use those accounts for
monthly automatic purchases of shares of up to four other
Oppenheimer funds.
There is a front-end sales charge on the purchase of certain
Oppenheimer funds, or a contingent deferred sales charge may apply
to shares purchased by Asset Builder payments. An application
should be obtained from the Distributor, completed and returned,
and a prospectus of the selected fund(s) should be obtained from
the Distributor or your financial advisor before initiating Asset
Builder payments. The amount of the Asset Builder investment may
be changed or the automatic investments may be terminated at any
time by writing to the Transfer Agent. A reasonable period
(approximately 15 days) is required after the Transfer Agent's
receipt of such instructions to implement them. The Fund reserves
the right to amend, suspend, or discontinue offering such plans at
any time without prior notice.
Cancellation of Purchase Orders. Cancellation of purchase orders
for the Fund's shares (for example, when a purchase check is
returned to the Fund unpaid) causes a loss to be incurred when the
net asset value of the Fund's shares on the cancellation date is
less than on the purchase date. That loss is equal to the amount
of the decline in the net asset value per share multiplied by the
number of shares in the purchase order. The investor is
responsible for that loss. If the investor fails to compensate the
Fund for the loss, the Distributor will do so. The Fund may
reimburse the Distributor for that amount by redeeming shares from
any account registered in that investor's name, or the Fund or the
Distributor may seek other redress.
How to Sell Shares
Information on how to sell shares of the Fund is stated in the
Prospectus. The information below supplements the terms and
conditions for redemptions set forth in the Prospectus.
-- Involuntary Redemptions. The Board of Directors has the
right to cause the involuntary redemption of the shares held in any
Fund account if the aggregate net asset value of those shares is
less than $200 or such lesser amount as the Board may fix. The
Board of Directors will not cause the involuntary redemption of
shares in an account if the aggregate net asset value of the shares
has fallen below the stated minimum solely as a result of market
fluctuations. Should the Board elect to exercise this right, it
may also fix, in accordance with the Investment Company Act, the
requirements for any notice to be given to the shareholders in
question (not less than 30 days), or the Board may set requirements
for granting permission to the Shareholder to increase the
investment, and set other terms and conditions so that the shares
would not be involuntarily redeemed.
Reinvestment Privilege. Within six months of a redemption, a
shareholder may reinvest all or part of the redemption proceeds of
(i) Class A shares, or (ii) Class B shares that were subject to the
Class B contingent deferred sales charge when redeemed. This
privilege does not apply to Class C shares. The reinvestment may
be made without sales charge only in Class A shares of the Fund or
any of the other Oppenheimer funds into which shares of the Fund
are exchangeable as described below, at the net asset value next
computed after the Transfer Agent receives the reinvestment order.
The shareholder must ask the Distributor for that privilege at the
time of reinvestment. Any capital gain that was realized when the
shares were redeemed is taxable, and reinvestment will not alter
any capital gains tax payable on that gain. If there has been a
capital loss on the redemption, some or all of the loss may not be
tax deductible, depending on the timing and amount of the
reinvestment. Under the Internal Revenue Code, if the redemption
proceeds of Fund shares on which a sales charge was paid are
reinvested in shares of the Fund or another of the Oppenheimer
funds within 90 days of payment of the sales charge, the
shareholder's basis in the shares of the Fund that were redeemed
may not include the amount of the sales charge paid. That would
reduce the loss or increase the gain recognized from the
redemption. However, in that case the sales charge would be added
to the basis of the shares acquired by the reinvestment of the
redemption proceeds. The Fund may amend, suspend or cease offering
this reinvestment privilege at any time as to shares redeemed after
the date of such amendment, suspension or cessation.
Transfers of Shares. Shares are not subject to the payment of a
contingent deferred sales charge of any class at the time of
transfer to the name of another person or entity (whether the
transfer occurs by absolute assignment, gift or bequest, not
involving, directly or indirectly, a public sale). The transferred
shares will remain subject to the contingent deferred sales charge,
calculated as if the transferee shareholder had acquired the
transferred shares in the same manner and at the same time as the
transferring shareholder. If less than all shares held in an
account are transferred, and some but not all shares in the account
would be subject to a contingent deferred sales charge if redeemed
at the time of transfer, the priorities described in the Prospectus
under "How to Buy Shares" for the imposition of the Class B and
Class C contingent deferred sales charge will be followed in
determining the order in which shares are transferred.
Distributions From Retirement Plans. Requests for distributions
from OppenheimerFunds-sponsored IRAs, 403(b)(7) custodial plans,
401(k) plans, or pension or profit-sharing plans should be
addressed to "Trustee, OppenheimerFunds Retirement Plans," c/o the
Transfer Agent at its address listed in "How To Sell Shares" in the
Prospectus or on the back cover of this Statement of Additional
Information. The request must: (i) state the reason for the
distribution; (ii) state the owner's awareness of tax penalties if
the distribution is premature; and (iii) conform to the
requirements of the plan and the Fund's other redemption
requirements. Participants, other than self-employed persons
maintaining a plan account in their own name, in OppenheimerFunds-
sponsored prototype pension or profit-sharing or 401(k) plans may
not directly redeem or exchange shares held for their account under
those plans. The employer or plan administrator must sign the
request. Distributions from pension, profit sharing plans are
subject to special requirements under the Internal Revenue Code and
certain documents (available from the Transfer Agent) must be
completed before the distribution may be made. Distributions from
retirement plans are subject to withholding requirements under the
Internal Revenue Code, and IRS Form W-4P (available from the
Transfer Agent) must be submitted to the Transfer Agent with the
distribution request, or the distribution may be delayed. Unless
the shareholder has provided the Transfer Agent with a certified
tax identification number, the Internal Revenue Code requires that
tax be withheld from any distribution even if the shareholder
elects not to have tax withheld. The Fund, the Manager, the
Distributor, the Trustee and the Transfer Agent assume no
responsibility to determine whether a distribution satisfies the
conditions of applicable tax laws and will not be responsible for
any tax penalties assessed in connection with a distribution.
Special Arrangements for Repurchase of Shares from Dealers and
Brokers. The Distributor is the Fund's agent to repurchase its
shares from authorized dealers or brokers. The repurchase price
per share will be the net asset value next computed after the
Distributor receives the order placed by the dealer or broker,
except that if the Distributor receives a repurchase order from the
dealer or broker after the close of The New York Stock Exchange on
a regular business day, it will be processed at that day's net
asset value, if the order was received by the dealer or broker from
its customer prior to the time the Exchange closes (normally, that
is 4:00 P.M., but may be earlier on some days) and the order was
transmitted to and received by the Distributor prior to its close
of business that day (normally 5:00 P.M.). Ordinarily, for
accounts redeemed by a broker-dealer under this procedure, payment
will be made within three business days after the shares have been
redeemed upon the Distributor's receipt of the required redemption
documents in proper form, with the signature(s) of the registered
owners guaranteed on the redemption document as described in the
Prospectus.
Automatic Withdrawal and Exchange Plans. Investors owning shares
of the Fund valued at $5,000 or more can authorize the Transfer
Agent to redeem shares (minimum $50) automatically on a monthly,
quarterly, semi-annual or annual basis under an Automatic
Withdrawal Plan. Shares will be redeemed three business days prior
to the date requested by the shareholder for receipt of the
payment. Automatic withdrawals of up to $1,500 per month may be
requested by telephone if payments are to be made by check payable
to all shareholders of record and sent to the address of record for
the account (and if the address has not been changed within the
prior 30 days). Required minimum distributions from
OppenheimerFunds-sponsored retirement plans may not be arranged on
this basis. Payments are normally made by check, but shareholders
having AccountLink privileges (see "How To Buy Shares") may arrange
to have Automatic Withdrawal Plan payments transferred to the bank
account designated on the OppenheimerFunds New Account Application
or signature-guaranteed instructions. The Fund cannot guarantee
receipt of a payment on the date requested and reserves the right
to amend, suspend or discontinue offering such plans at any time
without prior notice. Because of the sales charge assessed on
Class A share purchases, shareholders should not make regular
additional Class A share purchases while participating in an
Automatic Withdrawal Plan. Class B and Class C shareholders should
not establish withdrawal plans because of the imposition of the
contingent deferred sales charges on such withdrawals (except where
the Class B and Class C contingent deferred sales charges are
waived as described in the Prospectus under "Waivers of Class B and
Class C Contingent Deferred Sales Charges").
By requesting an Automatic Withdrawal or Exchange Plan, the
shareholder agrees to the terms and conditions applicable to such
plans, as stated below and in the provisions of the Oppenheimer
funds Application relating to such Plans, as well as the
Prospectus. These provisions may be amended from time to time by
the Fund and/or the Distributor. When adopted, such amendments
will automatically apply to existing Plans.
-- Automatic Exchange Plans. Shareholders can authorize the
Transfer Agent (on the OppenheimerFunds Application or signature-
guaranteed instructions) to exchange a pre-determined amount of
shares of the Fund for shares (of the same class) of other
Oppenheimer funds automatically on a monthly, quarterly, semi-
annual or annual basis under an Automatic Exchange Plan. The
minimum amount that may be exchanged to each other fund account is
$25. Exchanges made under these plans are subject to the
restrictions that apply to exchanges as set forth in "How to
Exchange Shares" in the Prospectus and below in this Statement of
Additional Information.
-- Automatic Withdrawal Plans. Fund shares will be redeemed
as necessary to meet withdrawal payments. Shares acquired without
a sales charge will be redeemed first and shares acquired with
reinvested dividends and capital gains distributions will be
redeemed next, followed by shares acquired with a sales charge, to
the extent necessary to make withdrawal payments. Depending upon
the amount withdrawn, the investor's principal may be depleted.
Payments made under withdrawal plans should not be considered as a
yield or income on your investment. It may not be desirable to
purchase additional Class A shares while making automatic
withdrawals because of the sales charges that apply to purchases
when made. Accordingly, a shareholder normally may not maintain an
Automatic Withdrawal Plan while simultaneously making regular
purchases of Class A shares.
The Transfer Agent will administer the investor's Automatic
Withdrawal Plan (the "Plan") as agent for the investor (the
"Planholder") who executed the Plan authorization and application
submitted to the Transfer Agent. The Transfer Agent and the Fund
shall incur no liability to the Planholder for any action taken or
omitted by the Transfer Agent in good faith to administer the Plan.
Certificates will not be issued for shares of the Fund purchased
for and held under the Plan, but the Transfer Agent will credit all
such shares to the account of the Planholder on the records of the
Fund. Any share certificates held by a Planholder may be
surrendered unendorsed to the Transfer Agent with the Plan
application so that the shares represented by the certificate may
be held under the Plan.
For accounts subject to Automatic Withdrawal Plans,
distributions of capital gains must be reinvested in shares of the
Fund, which will be done at net asset value without a sales charge.
Dividends on shares held in the account may be paid in cash or
reinvested.
Redemptions of shares needed to make withdrawal payments will
be made at the net asset value per share determined on the
redemption date. Checks or ACH transfer payments of the proceeds
of Plan withdrawals will normally be transmitted three business
days prior to the date selected for receipt of the payment (receipt
of payment on the date selected cannot be guaranteed), according to
the choice specified in writing by the Planholder.
The amount and the interval of disbursement payments and the
address to which checks are to be mailed or AccountLink payments
are to be sent may be changed at any time by the Planholder by
writing to the Transfer Agent. The Planholder should allow at
least two weeks' time in mailing such notification for the
requested change to be put in effect. The Planholder may, at any
time, instruct the Transfer Agent by written notice (in proper form
in accordance with the requirements of the then-current Prospectus
of the Fund) to redeem all, or any part of, the shares held under
the Plan. In that case, the Transfer Agent will redeem the number
of shares requested at the net asset value per share in effect in
accordance with the Fund's usual redemption procedures and will
mail a check for the proceeds to the Planholder.
The Plan may be terminated at any time by the Planholder by
writing to the Transfer Agent. A Plan may also be terminated at
any time by the Transfer Agent upon receiving directions to that
effect from the Fund. The Transfer Agent will also terminate a
Plan upon receipt of evidence satisfactory to it of the death or
legal incapacity of the Planholder. Upon termination of a Plan by
the Transfer Agent or the Fund, shares that have not been redeemed
from the account will be held in uncertificated form in the name of
the Planholder, and the account will continue as a dividend-
reinvestment, uncertificated account unless and until proper
instructions are received from the Planholder or his or her
executor or guardian, or other authorized person.
To use shares held under the Plan as collateral for a debt,
the Planholder may request issuance of a portion of the shares in
certificated form. Upon written request from the Planholder, the
Transfer Agent will determine the number of shares for which a
certificate may be issued without causing the withdrawal checks to
stop because of exhaustion of uncertificated shares needed to
continue payments. However, should such uncertificated shares
become exhausted, Plan withdrawals will terminate.
If the Transfer Agent ceases to act as transfer agent for the
Fund, the Planholder will be deemed to have appointed any successor
transfer agent to act as agent in administering the Plan.
How To Exchange Shares
The Rochester Funds are not Eligible Funds for purposes of the
exchange privilege set forth in the Prospectus. As stated in the
Prospectus, shares of a particular class of Oppenheimer funds
having more than one class of shares may be exchanged only for
shares of the same class of other Oppenheimer funds. Shares of the
Oppenheimer funds that have a single class without a class
designation are deemed "Class A" shares for this purpose. All of
the Oppenheimer funds offer Class A, B and C shares except
Oppenheimer Money Market Fund, Inc., Centennial Money Market Trust,
Centennial Tax Exempt Trust, Centennial Government Trust,
Centennial New York Tax Exempt Trust, Centennial California Tax
Exempt Trust, Centennial America Fund, L.P., and Daily Cash
Accumulation Fund, Inc., which only offer Class A shares, and
Oppenheimer Main Street California Tax-Exempt Fund which only
offers Class A and Class B shares (Class B and Class C shares of
Oppenheimer Cash Reserves are generally available only by exchange
from the same class of shares of other Oppenheimer funds or through
OppenheimerFunds sponsored 401(k) plans). A list showing which
funds offer which classes can be obtained by calling the
distributor at 1-800-525-7048.
Class A shares of Oppenheimer funds may be exchanged at net
asset value for shares of any Money Market Fund. Shares of any
Money Market Fund purchased without a sales charge may be exchanged
for shares of Oppenheimer funds offered with a sales charge upon
payment of the sales charge (or, if applicable, may be used to
purchase shares of Oppenheimer funds subject to a contingent
deferred sales charge). However, shares of Oppenheimer Money
Market Fund, Inc. purchased with the redemption proceeds of shares
of other mutual funds (other than funds managed by the Manager or
its subsidiaries) redeemed within the 12 months prior to that
purchase may subsequently be exchanged for shares of other
Oppenheimer funds without being subject to an initial or contingent
deferred sales charge, whichever is applicable. To qualify for
that privilege, the investor or the investor's dealer must notify
the Distributor of eligibility for this privilege at the time the
shares of Oppenheimer Money Market Fund, Inc. are purchased, and,
if requested, must supply proof of entitlement to this privilege.
Shares of this Fund acquired by reinvestment of dividends or
distributions from any other of the Oppenheimer funds or from any
unit investment trust for which reinvestment arrangements have been
made with the Distributor may be exchanged at net asset value for
shares of any of the Oppenheimer funds. No contingent deferred
sales charge is imposed on exchanges of shares of either class
purchased subject to a contingent deferred sales charge. However,
when Class A shares acquired by exchange of Class A shares of other
Oppenheimer funds purchased subject to a Class A contingent
deferred sales charge are redeemed within 18 months of the end of
the calendar month of the initial purchase of the exchanged Class
A shares, the Class A contingent deferred sales charge is imposed
on the redeemed shares (see "Class A Contingent Deferred Sales
Charge" in the Prospectus). The Class B contingent deferred sales
charge is imposed on Class B shares acquired by exchange if they
are redeemed within six years of the initial purchase of the
exchanged Class B shares. The Class C contingent deferred sales
charge is imposed on Class C shares acquired by exchange if they
are redeemed within 12 months of the initial purchase of the
exchanged Class C shares.
When Class B or Class C shares are redeemed to effect an
exchange, the priorities described in "How To Buy Shares" in the
Prospectus for the imposition of the Class B and Class C contingent
deferred sales charges will be followed in determining the order in
which the shares are exchanged. Shareholders should take into
account the effect of any exchange on the applicability and rate of
any contingent deferred sales charge that might be imposed in the
subsequent redemption of remaining shares. Shareholders owning
shares of more than one class must specify whether they intend to
exchange Class A, Class B or Class C shares.
The Fund reserves the right to reject telephone or written
exchange requests submitted in bulk by anyone on behalf of 10 or
more accounts. The Fund may accept requests for exchanges of up to
50 accounts per day from representatives of authorized dealers that
qualify for this privilege. In connection with any exchange
request, the number of shares exchanged may be less than the number
requested if the exchange or the number requested would include
shares subject to a restriction cited in the Prospectus or this
Statement of Additional Information or would include shares covered
by a share certificate that is not tendered with the request. In
those cases, only the shares available for exchange without
restriction will be exchanged.
When exchanging shares by telephone, a shareholder must either
have an existing account in, or obtain and acknowledge receipt of
a prospectus of, the fund to which the exchange is to be made. For
full or partial exchanges of an account made by telephone, any
special account features such as Asset Builder Plans, Automatic
Withdrawal Plans and retirement plan contributions will be switched
to the new account unless the Transfer Agent is instructed
otherwise. If all telephone lines are busy (which might occur, for
example, during periods of substantial market fluctuations),
shareholders might not be able to request exchanges by telephone
and would have to submit written exchange requests.
Shares to be exchanged are redeemed on the regular business
day the Transfer Agent receives an exchange request in proper form
(the "Redemption Date"). Normally, shares of the fund to be
acquired are purchased on the Redemption Date, but such purchases
may be delayed by either fund up to five business days if it
determines that it would be disadvantaged by an immediate transfer
of the redemption proceeds. The Fund reserves the right, in its
discretion, to refuse any exchange request that may disadvantage it
(for example, if the receipt of multiple exchange requests from a
dealer might require the disposition of portfolio securities at a
time or at a price that might be disadvantageous to the Fund).
The different Oppenheimer funds available for exchange have
different investment objectives, policies and risks, and a
shareholder should assure that the Fund selected is appropriate for
his or her investment and should be aware of the tax consequences
of an exchange. For federal income tax purposes, an exchange
transaction is treated as a redemption of shares of one fund and a
purchase of shares of another. "Reinvestment Privilege," above,
discusses some of the tax consequences of reinvestment of
redemption proceeds in such cases. The Fund, the Distributor, and
the Transfer Agent are unable to provide investment, tax or legal
advice to a shareholder in connection with an exchange request or
any other investment transaction.
Dividends, Capital Gains and Taxes
Tax Status of the Fund's Dividends and Distributions. The Federal
tax treatment of the Fund's dividends and capital gains
distributions is explained in the Prospectus under the caption
"Dividends, Capital Gains and Taxes." Special provisions of the
Internal Revenue Code govern the eligibility of the Fund's
dividends for the dividends-received deduction for corporate
shareholders. Long-term capital gains distributions are not
eligible for the deduction. In addition, the amount of dividends
paid by the Fund which may qualify for the deduction is limited to
the aggregate amount of qualifying dividends that the Fund derives
from its portfolio investments that the Fund has held for a minimum
period, usually 46 days. A corporate shareholder will not be
eligible for the deduction on dividends paid on Fund shares held
for 45 days or less. To the extent the Fund's dividends are
derived from gross income from option premiums, interest income or
short-term gains from the sale of securities or dividends from
foreign corporations, those dividends will not qualify for the
deduction.
Under the Internal Revenue Code, by December 31 each year, the
Fund must distribute 98% of its taxable investment income earned
from January 1 through December 31 of that year and 98% of its
capital gains realized in the period from November 1 of the prior
year through October 31 of the current year, or else the Fund must
pay an excise tax on the amounts not distributed. While it is
presently anticipated that the Fund will meet those requirements,
the Board of Directors and the Manager might determine in a
particular year that it would be in the best interest of
shareholders for the Fund not to make such distributions at the
required levels and to pay the excise tax on the undistributed
amounts. That would reduce the amount of income or capital gains
available for distribution to shareholders.
If the Fund qualifies as a "regulated investment company"
under the Internal Revenue Code, it will not be liable for Federal
income taxes on amounts paid by it as dividends and distribution.
The Fund qualified during its last fiscal year, and intends to
qualify in current and future years, but reserves the right not to
do so. The Internal Revenue Code contains a number of complex
tests to determine whether the Fund will qualify, and the Fund
might not meet those tests in a particular year. For example, if
the Fund derives 30% or more of its gross income from the sale of
securities held less than three months, it may fail to qualify (see
"Tax Aspects of Covered Calls and Hedging Instruments," above). If
it did not so qualify, the Fund would be treated for tax purposes
as an ordinary corporation and receive no tax deduction for
payments made to shareholders.
The amount of a class's distributions may vary from time to
time depending on market conditions, the composition of the Fund's
portfolio, and expenses borne by the Fund or borne separately by a
class, as described in "Alternative Sales Arrangements -- Class A,
Class B and Class C Shares," above. Dividends are calculated in
the same manner, at the same time and on the same day for shares of
each class. However, dividends on Class B and Class C shares are
expected to be lower as a result of the asset-based sales charge on
Class B and Class C shares, and Class B and Class C dividends will
also differ in amount as a consequence of any difference in net
asset value between the classes.
Dividends, distributions and the proceeds of the redemption of
Fund shares represented by checks returned to the Transfer Agent by
the Postal Service as undeliverable will be invested in shares of
Oppenheimer Money Market Fund, Inc., as promptly as possible after
the return of such checks to the Transfer Agent, to enable the
investor to earn a return on otherwise idle funds.
Dividend Reinvestment in Another Fund. Shareholders of the Fund
may elect to reinvest all dividends and/or capital gains
distributions in shares of the same class of any of the other
Oppenheimer funds listed in "Reduced Sales Charges," above, at net
asset value without sales charge. To elect this option, a
shareholder must notify the Transfer Agent in writing and either
have an existing account in the fund selected for reinvestment or
must obtain a prospectus for that fund and an application from the
Distributor to establish an account. The investment will be made
at the net asset value per share in effect at the close of business
on the payable date of the dividend or distribution. Dividends
and/or distributions from certain of the Oppenheimer funds may be
invested in shares of this Fund on the same basis.
Additional Information About the Fund
The Custodian. State Street Bank and Trust Company acts as
custodian of the assets of the Trust. The Fund's cash balances in
excess of $100,000 are not protected by Federal deposit insurance.
Such uninsured balances may be substantial.
Independent Accountants. Price Waterhouse LLP are the
independent accountants of the Fund. Their services include
examining the annual financial statements of the Fund as well as
other related services.
Retirement Plans. The Distributor 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 the Distributor. 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 examples illustrate the
general approaches that will be followed. These hypotheticals will
be modified with different investment amounts, reflecting the
amounts that can be invested in 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 perfor-
mance of any OppenheimerFunds products.
<TABLE>
<CAPTION>
Benefits of Long Term Tax-Free Benefits of Long Term Tax-Free
Compounding - Single Sum Compounding - Periodic Investment
Amount of Contribution: $100,000 Amount Invested Annually: $2,000
Rates of Return Rates of Return
Years 8.00% 10.00% 12.00% Years 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 8.00% 10.00% 12.00% Years 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 $199,492
</TABLE>
<TABLE>
<CAPTION>
Comparison of Tax Deferred Investing -- Deducting Taxes at End
(Amount of Tax Rate as 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>
<PAGE>
- --------------------------------------------------------------------------------
INDEPENDENT AUDITORS' REPORT
To the Shareholders and Board of Directors of
Quest for Value Fund, Inc.:
We have audited the accompanying statement of assets and liabilities of Quest
for Value Fund, Inc., including the schedule of investments, as of October 31,
1995, and the related statement of operations for the year then ended, the
statements of changes in net assets for each of the years in the two year period
then ended and the financial highlights for each of the years in the five year
period then ended. These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
October 31, 1995 by correspondence with the custodian and brokers. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of Quest
for Value Fund, Inc. as of October 31, 1995, the results of its operations for
the year then ended, the changes in its net assets for each of the years in the
two year period then ended, and the financial highlights for each of the years
in the five year period then ended in conformity with generally accepted
accounting principles.
KPMG Peat Marwick LLP
New York, New York
December 20, 1995
41
<PAGE>
- --------------------------------------------------------------------------------
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and Trustees of
Quest for Value Family of Funds:
In our opinion, the accompanying statements of assets and liabilities, including
the schedules of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of the Opportunity Fund, the Small
Capitalization Fund, the Growth and Income Fund, the U.S. Government Income
Fund, and the Investment Quality Income Fund (constituting part of Quest for
Value Family of Funds, hereafter referred to as the "Fund") at October 31, 1995,
the results of each of their operations for the year then ended, the changes in
each of their net assets for each of the two years in the period then ended and
the financial highlights for each of the periods indicated, in conformity with
generally accepted accounting principles. These financial statements and
financial highlights (hereafter referred to as "financial statements") are the
responsibility of the Fund's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these financial statements in accordance with generally accepted
auditing standards which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits, which included confirmation of securities at October 31, 1995 by
correspondence with the custodian and brokers, provide a reasonable basis for
the opinion expressed above.
PRICE WATERHOUSE LLP
1177 Avenue of the Americas
New York, New York 10036
December 20, 1995
<PAGE>
OCTOBER 31, 1995
- --------------------------------------------------------------------------------
SCHEDULES OF INVESTMENTS
QUEST FOR VALUE FUND, INC.
<TABLE>
<CAPTION>
- ------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
- ------------------------------------------------------
SHORT-TERM CORPORATE NOTES -- 19.9%
AUTOMOTIVE -- 6.0%
Ford Motor Credit Co.
$ 2,400,000 5.72%, 11/20/95 $ 2,392,755
6,600,000 5.73%, 11/27/95 6,572,687
General Motors Acceptance Corp.
335,000 5.74%, 11/20/95 333,985
10,700,000 5.77%, 11/20/95 10,667,415
------------
19,966,842
------------
BANKING -- 1.4%
4,700,000 Norwest Financial, Inc.
5.73%, 11/13/95 4,691,023
------------
COMPUTERS -- 0.1%
430,000 IBM Credit Corp.
5.70%, 11/06/95 429,660
------------
MACHINERY & ENGINEERING -- 2.1%
Deere (John) Capital Corp.
3,300,000 5.71%, 11/13/95 3,293,719
3,600,000 5.75%, 11/13/95 3,593,100
------------
6,886,819
------------
MISCELLANEOUS FINANCIAL SERVICES -- 10.1%
Beneficial Corp.
1,300,000 5.72%, 11/27/95 1,294,629
225,000 5.74%, 11/27/95 224,067
800,000 CIT Group Holdings, Inc.
5.73%, 11/13/95 798,472
Household Finance Corp.
14,200,000 5.72%, 12/04/95 14,125,545
1,000,000 5.73%, 11/27/95 995,862
Merrill Lynch & Co., Inc.
500,000 5.72%, 11/06/95 499,603
15,345,000 5.75%, 11/06/95 15,332,745
------------
33,270,923
------------
OIL/GAS -- 0.2%
500,000 Chevron Oil Finance Co.
5.71%, 11/08/95 499,445
------------
Total Short-Term Corporate Notes
(cost -- $65,744,712) $ 65,744,712
------------
<CAPTION>
- ------------------------------------------------------
<C> <S> <C>
PRINCIPAL
AMOUNT VALUE
- ------------------------------------------------------
CONVERTIBLE CORPORATE BONDS -- 0.7%
REAL ESTATE
$ 2,330,921 Security Capital Realty, Inc. (A)
12.00%, 6/30/14
(cost -- $2,198,259) $ 2,330,921
------------
<CAPTION>
- ------------------------------------------------------
<C> <S> <C>
SHARES VALUE
- ------------------------------------------------------
COMMON STOCKS -- 79.3%
AEROSPACE -- 6.0%
127,000 AlliedSignal, Inc. $ 5,397,500
177,000 McDonnell Douglas Corp. 14,469,750
------------
19,867,250
------------
APPAREL -- 1.4%
202,600 Warnaco Group, Inc. (Class A)* 4,710,450
------------
BANKING -- 3.4%
110,000 Citicorp 7,136,250
81,215 Mellon Bank Corp. 4,070,902
------------
11,207,152
------------
CHEMICALS -- 4.5%
60,000 du Pont (E.I.) de Nemours & Co. 3,742,500
81,000 Hercules, Inc. 4,323,375
64,000 Monsanto Co. 6,704,000
------------
14,769,875
------------
CONGLOMERATES -- 1.7%
90,200 General Electric Co. 5,705,150
------------
CONSUMER PRODUCTS -- 1.5%
149,000 Reebok International Ltd. 5,066,000
------------
CONTAINERS -- 2.2%
160,000 Temple - Inland, Inc. 7,280,000
------------
COSMETICS/TOILETRIES -- 1.5%
67,800 Avon Products, Inc. 4,822,275
------------
DRUGS & MEDICAL PRODUCTS -- 4.8%
179,000 Becton, Dickinson & Co. 11,635,000
48,000 Warner-Lambert Co. 4,086,000
------------
15,721,000
------------
</TABLE>
* Non-income producing security.
15
<PAGE>
OCTOBER 31, 1995
- --------------------------------------------------------------------------------
SCHEDULES OF INVESTMENTS
<TABLE>
<CAPTION>
- ------------------------------------------------------
SHARES VALUE
<C> <S> <C>
- ------------------------------------------------------
ELECTRONICS -- 5.3%
177,000 Arrow Electronics, Inc.* $ 8,982,750
122,000 Intel Corp. 8,524,750
------------
17,507,500
------------
HEALTHCARE SERVICES -- 2.4%
440,000 Tenet Healthcare Corp. 7,865,000
------------
INSURANCE -- 17.2%
216,200 Ace Ltd. 7,350,800
35,300 AFLAC, Inc. 1,438,475
99,000 American International Group, Inc. 8,353,125
464,200 EXEL Ltd. 24,834,700
197,000 Progressive Corp., Ohio 8,175,500
101,000 Transamerica Corp. 6,842,750
------------
56,995,350
------------
METALS/MINING -- 2.7%
66,333 Freeport McMoRan, Inc. 2,479,208
8,518 Freeport McMoRan, Copper & Gold
(Class A) 194,849
279,290 Freeport McMoRan, Copper & Gold
(Class B) 6,353,848
------------
9,027,905
------------
MISCELLANEOUS FINANCIAL SERVICES -- 8.8%
200,000 American Express Co. 8,125,000
290,000 Countrywide Credit Industries, Inc. 6,416,250
214,000 Federal Home Loan Mortgage Corp. 14,819,500
------------
29,360,750
------------
PAPER PRODUCTS -- 1.9%
120,000 Champion International Corp. $ 6,420,000
------------
<CAPTION>
- ------------------------------------------------------
<C> <S> <C>
SHARES VALUE
- ------------------------------------------------------
REAL ESTATE -- 0.8%
3,050 Security Capital Realty, Inc. (A) 2,689,844
------------
RETAIL -- 6.3%
373,000 May Department Stores Co. 14,640,250
140,000 Mercantile Stores Co., Inc. 6,282,500
------------
20,922,750
------------
TELECOMMUNICATIONS -- 2.6%
344 Bell Atlantic Corp. 21,887
225,200 Sprint Corp. 8,670,200
------------
8,692,087
------------
TEXTILES -- 1.3%
340,000 Shaw Industries, Inc. 4,335,000
------------
TOYS/GAMES/HOBBY -- 0.9%
92,000 Hasbro, Inc. 2,806,000
------------
TRANSPORTATION -- 2.1%
84,000 CSX Corp. 7,035,000
------------
Total Common Stocks
(cost -- $190,764,443) $262,806,338
------------
</TABLE>
<TABLE>
<S> <C> <C>
Total Investments
(cost -- $258,707,414)) 99.9% $330,881,971
Other Assets in Excess of
Other Liabilities 0.1 429,932
------ ------------
TOTAL NET ASSETS 100.0 % $331,311,903
------ ------------
------ ------------
</TABLE>
* Non-income producing security.
(A) Restricted Securities (the Fund will not bear any costs, including those
involved in registration under the Securities Act of 1933, in connection
with the disposition of these securities):
<TABLE>
<CAPTION>
UNIT
VALUATION
AS
DATE OF UNIT OF OCTOBER
DESCRIPTION ACQUISITION PAR AMOUNT SHARES COST 31, 1995
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Security Capital
Realty, Inc.
12.00%, 6/30/14 9/15/94 $2,330,921 -- $ 94 $ 100
Security Capital
Realty, Inc.
Common Stock 9/15/94 -- 3,050 926 882
</TABLE>
16
<PAGE>
- --------------------------------------------------------------------------------
OPPORTUNITY FUND
<TABLE>
<CAPTION>
- ------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
- ------------------------------------------------------
SHORT-TERM CORPORATE NOTES -- 15.6%
AUTOMOTIVE -- 2.4%
$15,000,000 General Motors Acceptance Corp.
5.77%, 11/20/95 $ 14,954,321
------------
BANKING -- 2.8%
Norwest Financial, Inc.
1,800,000 5.73%, 11/13/95 1,796,562
16,000,000 5.73%, 11/27/95 15,933,787
------------
17,730,349
------------
COMPUTERS -- 0.2%
1,490,000 IBM Credit Corp.
5.70%, 11/06/95 1,488,820
------------
MACHINERY & ENGINEERING -- 3.0%
Deere (John) Capital Corp.
13,600,000 5.71%, 11/13/95 13,574,115
5,235,000 5.74%, 11/13/95 5,224,984
------------
18,799,099
------------
MISCELLANEOUS FINANCIAL SERVICES -- 7.1%
Beneficial Corp.
1,200,000 5.72%, 11/20/95 1,196,377
10,455,000 5.73%, 11/20/95 10,423,382
1,800,000 CIT Group Holdings, Inc.
5.73%, 11/13/95 1,796,562
15,980,000 Household Finance Corp.
5.73%, 11/08/95 15,962,196
Merrill Lynch & Co., Inc.
4,500,000 5.75%, 11/02/95 4,499,281
11,475,000 5.75%, 11/06/95 11,465,836
------------
45,343,634
------------
OIL/GAS -- 0.1%
491,000 Chevron Oil Finance Co.
5.71%, 11/08/95 490,455
------------
Total Short-Term Corporate Notes
(cost -- $98,806,678) $ 98,806,678
------------
<CAPTION>
- ------------------------------------------------------
<C> <S> <C>
PRINCIPAL
AMOUNT VALUE
- ------------------------------------------------------
U.S. TREASURY NOTES -- 0.5%
$ 1,000,000 7.50%, 11/15/01 $ 1,081,410
1,000,000 7.50%, 5/15/02 1,086,410
550,000 7.875%, 4/15/98 577,241
550,000 7.875%, 8/15/01 603,537
------------
Total U.S. Treasury Notes
(cost -- $3,143,397) $ 3,348,598
------------
<CAPTION>
- ------------------------------------------------------
<C> <S> <C>
SHARES VALUE
- ------------------------------------------------------
COMMON STOCKS -- 85.0%
AEROSPACE -- 9.0%
100,000 Loral Corp. $ 2,962,500
525,000 McDonnell Douglas Corp. 42,918,750
200,000 Northrop Grumman Corp. 11,450,000
------------
57,331,250
------------
AIRLINES -- 1.0%
100,000 AMR Corp.* 6,600,000
------------
BANKING -- 13.6%
525,000 Citicorp 34,059,375
34,100 First Empire State Corp. 6,709,175
450,000 Mellon Bank Corp. 22,556,250
110,000 Wells Fargo & Co. 23,113,750
------------
86,438,550
------------
CASINOS/GAMING -- 2.9%
750,000 Harrahs Entertainment, Inc. 18,562,500
------------
CHEMICALS -- 4.4%
260,000 du Pont (E.I.) de Nemours & Co. 16,217,500
220,000 Hercules, Inc. 11,742,500
------------
27,960,000
------------
CONSUMER PRODUCTS -- 3.2%
600,000 Reebok International Ltd. 20,400,000
------------
COSMETICS/TOILETRIES -- 0.7%
60,600 Avon Products, Inc. 4,310,175
------------
DRUGS & MEDICAL PRODUCTS -- 2.8%
275,000 Becton, Dickinson & Co. 17,875,000
------------
</TABLE>
* Non-income producing security.
17
<PAGE>
OCTOBER 31, 1995
- --------------------------------------------------------------------------------
SCHEDULES OF INVESTMENTS
<TABLE>
<CAPTION>
- ------------------------------------------------------
SHARES VALUE
<C> <S> <C>
- ------------------------------------------------------
ELECTRONICS -- 8.1%
460,000 Intel Corp. $ 32,142,500
200,000 National Semiconductor Corp.* 4,875,000
50,000 Raychem Corp. 2,318,750
440,000 Unitrode Corp.* 11,825,000
------------
51,161,250
------------
INSURANCE -- 3.2%
300,000 EXEL Ltd. 16,050,000
60,000 Transamerica Corp. 4,065,000
------------
20,115,000
------------
METALS/MINING -- 5.2%
83,333 Freeport McMoRan, Inc. 3,114,583
1,302,100 Freeport McMoRan Copper & Gold
(Class B) 29,622,775
------------
32,737,358
------------
MISCELLANEOUS FINANCIAL SERVICES -- 10.5%
250,000 American Express Co. 10,156,250
500,000 Countrywide Credit Industries, Inc. 11,062,500
500,000 Federal Home Loan Mortgage Corp. 34,625,000
100,000 Federal National Mortgage Assoc. 10,487,500
------------
66,331,250
------------
OIL/GAS -- 6.0%
80,000 Mapco, Inc. 4,120,000
610,000 Tenneco, Inc. 26,763,750
149,300 Triton Energy Corp.* 6,961,113
------------
37,844,863
------------
PAPER PRODUCTS -- 7.2%
535,000 Champion International Corp. 28,622,500
325,000 Scott Paper Co. 17,306,250
------------
45,928,750
------------
TELECOMMUNICATIONS -- 1.8%
300,000 Sprint Corp. 11,550,000
------------
TEXTILES -- 2.4%
155,000 Collins & Aikman Corp.* $ 1,240,000
1,100,000 Shaw Industries, Inc. 14,025,000
------------
15,265,000
------------
<CAPTION>
- ------------------------------------------------------
<C> <S> <C>
SHARES VALUE
- ------------------------------------------------------
TOYS/GAMES/HOBBY -- 2.7%
600,000 Mattel, Inc. 17,250,000
------------
OTHER -- 0.3%
40,000 Alliant Techsystems, Inc.* 1,860,000
------------
Total Common Stocks
(cost -- $440,332,557) $539,520,946
------------
<CAPTION>
- ------------------------------------------------------
WARRANTS VALUE
- ------------------------------------------------------
<C> <S> <C>
WARRANTS -- 0.0%
HEALTHCARE SERVICES
34 Laboratory Corp. of America
Holdings
(cost -- $81) $ 21
------------
</TABLE>
<TABLE>
<S> <C> <C>
Total Investments
(cost -- $542,282,713) 101.1% $641,676,243
Other Liabilities in Excess of
Other Assets (1.1) (7,165,129)
------ ------------
TOTAL NET ASSETS 100.0% $634,511,114
------ ------------
------ ------------
</TABLE>
SMALL CAPITALIZATION FUND
<TABLE>
<CAPTION>
- ------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
- ------------------------------------------------------
SHORT-TERM CORPORATE NOTES -- 15.1%
AUTOMOTIVE -- 1.8%
$ 2,758,000 General Motors Acceptance Corp.
5.81%, 11/06/95 $ 2,755,774
------------
BANKING -- 4.0%
6,000,000 Norwest Financial, Inc.
5.73%, 11/14/95 5,987,585
------------
INSURANCE -- 4.7%
7,000,000 Prudential Funding Corp.
5.73%, 11/27/95 6,971,031
------------
</TABLE>
* Non-income producing security.
18
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- ------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
- ------------------------------------------------------
MACHINERY & ENGINEERING -- 1.8%
Deere (John) Capital Corp.
$ 1,560,000 5.71%, 11/13/95 $ 1,557,031
1,074,000 5.75%, 11/13/95 1,071,942
------------
2,628,973
------------
MISCELLANEOUS FINANCIAL SERVICES -- 2.8%
3,635,000 Beneficial Corp.
5.73%, 11/22/95 3,622,850
575,000 Household Finance Corp.
5.72%, 11/13/95 573,904
------------
4,196,754
------------
Total Short-Term Corporate Notes
(cost -- $22,540,117) $ 22,540,117
------------
CORPORATE NOTES & BONDS -- 0.4%
AUTOMOTIVE -- 0.0%
$ 62,950 Collins Industries, Inc.
8.75%, 1/11/00 $ 57,577
------------
OIL/GAS -- 0.4%
500,000 Global Marine, Inc.
12.75%, 12/15/99 552,500
------------
Total Corporate Notes & Bonds
(cost -- $585,111) $ 610,077
------------
CONVERTIBLE CORPORATE BONDS -- 0.9%
REAL ESTATE
$ 1,404,189 Security Capital Realty, Inc. (A)
12.00%, 6/30/14
(cost -- $1,325,889) $ 1,404,189
------------
<CAPTION>
- ------------------------------------------------------
<C> <S> <C>
SHARES VALUE
- ------------------------------------------------------
CONVERTIBLE PREFERRED STOCKS -- 0.2%
RETAIL
36,000 Family Bargain Corp.
$0.95 Conv. Pfd.
(cost -- $360,000) $ 220,500
------------
COMMON STOCKS -- 84.4%
ADVERTISING -- 6.2%
77,600 Katz Media Group, Inc.* $ 1,396,800
30,000 Omnicom Group, Inc. 1,916,250
292,400 True North Communications 5,921,100
------------
9,234,150
------------
<CAPTION>
- ------------------------------------------------------
<C> <S> <C>
SHARES VALUE
- ------------------------------------------------------
AEROSPACE -- 0.5%
97,500 BE Aerospace, Inc.* $ 767,813
------------
AUTOMOTIVE -- 1.7%
126,000 Collins Industries, Inc.* 259,875
120,100 Masland Corp. 1,681,400
70,000 Sudbury, Inc.* 586,250
------------
2,527,525
------------
BUILDING & CONSTRUCTION -- 5.8%
57,300 Carlisle Cos., Inc. 2,356,462
190,547 D.R. Horton, Inc. 2,119,835
26,500 Insituform Technologies (Class A)* 331,250
204,000 Martin Marietta Materials, Inc. 3,876,000
------------
8,683,547
------------
CHEMICALS -- 1.7%
86,400 OM Group, Inc. 2,505,600
------------
COMPUTER SERVICES -- 3.6%
149,900 BancTec, Inc.* 2,810,625
52,000 DST Systems, Inc. 1,092,000
114,000 Exabyte Corp.* 1,474,875
------------
5,377,500
------------
CONTAINERS -- 1.9%
169,000 Shorewood Packaging Corp.* 2,830,750
------------
DRUGS & MEDICAL PRODUCTS -- 1.9%
49,900 Amerisource Health Corp. (Class A) 1,359,775
33,900 Sybron International Corp. -
Wisconsin* 1,440,750
------------
2,800,525
------------
ELECTRONICS -- 8.9%
35,700 Arrow Electronics, Inc* 1,811,775
174,900 EG&G, Inc. 3,257,512
146,500 Marshall Industries* 5,164,125
111,000 Oak Industries, Inc.* 2,317,125
26,200 Unitrode Corp.* 704,125
------------
13,254,662
------------
</TABLE>
* Non-income producing security.
19
<PAGE>
OCTOBER 31, 1995
- --------------------------------------------------------------------------------
SCHEDULES OF INVESTMENTS
<TABLE>
<CAPTION>
- ------------------------------------------------------
SHARES VALUE
<C> <S> <C>
- ------------------------------------------------------
ENTERTAINMENT -- 0.2%
25,000 Hollywood Park, Inc.* $ 243,750
------------
FOOD SERVICES -- 1.0%
70,000 IHOP Corp.* 1,505,000
------------
HEALTHCARE SERVICES -- 2.8%
16,000 Charter Medical Corp.* 288,000
20,000 Community Health Systems, Inc.* 635,000
51,900 Dentsply International, Inc. 1,790,550
54,000 SpaceLabs Medical, Inc.* 1,390,500
------------
4,104,050
------------
HOUSEHOLD PRODUCTS -- 2.4%
120,000 Singer Co. 2,820,000
35,000 The Rival Co. 682,500
------------
3,502,500
------------
INSURANCE -- 5.3%
47,000 Ace Ltd. 1,598,000
62,800 Capsure Holdings Corp.* 855,650
119,400 E.W. Blanch Holdings, Inc. 2,298,450
112,500 Guaranty National Corp. 1,603,125
7,000 Horace Mann Educators Corp. 186,375
64,200 Prudential Reinsurance Holdings,
Inc. 1,308,075
------------
7,849,675
------------
LEASING -- 1.1%
101,700 Interpool, Inc.* 1,627,200
------------
<CAPTION>
- ------------------------------------------------------
<C> <S> <C>
SHARES VALUE
- ------------------------------------------------------
MACHINERY & ENGINEERING -- 6.0%
50,000 Baldwin Technologies Co., Inc
(Class A)* $ 268,750
40,000 Briggs & Stratton Corp. 1,615,000
52,100 BW/IP Holdings, Inc. (Class A) 872,675
145,000 Crane Co. 5,129,375
67,400 Harmon Industries, Inc. 994,150
------------
8,879,950
------------
MANUFACTURING -- 1.9%
94,000 North American Watch Corp. 1,703,750
50,000 Pall Corp. 1,218,750
------------
2,922,500
------------
METALS/MINING -- 0.4%
70,000 Olympic Steel, Inc.* 568,750
------------
OFFICE EQUIPMENT -- 0.8%
60,600 Nu-Kote Holdings, Inc. (Class A)* 1,257,450
------------
OIL/GAS -- 6.4%
92,800 Aquila Gas Pipeline Corp. 1,020,800
84,000 Belden & Blake Corp.* 1,219,313
200,000 Global Natural Resources, Inc.* 2,000,000
137,500 Noble Drilling Corp.* 962,500
165,000 Petroleum Heat & Power Co., Inc.
(Class A) 1,278,750
105,400 St. Mary Land & Exploration Co. 1,409,725
34,000 Triton Energy Corp.* 1,585,250
------------
9,476,338
------------
PAPER PRODUCTS -- 1.8%
422,000 Repap Enterprises, Inc.* 2,663,875
------------
PRINTING/PUBLISHING -- 1.4%
69,000 International Imaging Materials,
Inc. 1,742,250
20,000 Merrill Corp. 320,000
------------
2,062,250
------------
</TABLE>
* Non-income producing security.
20
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- ------------------------------------------------------
SHARES VALUE
<C> <S> <C>
- ------------------------------------------------------
REAL ESTATE -- 8.7%
151,800 Cousins Properties, Inc. $ 2,637,525
44,000 Post Properties, Inc. 1,320,000
231,600 Security Capital Industrial Trust,
Inc. 3,792,450
199,363 Security Capital Pacific Trust,
Inc. 3,563,614
1,800 Security Capital Realty, Inc. (A) 1,587,600
------------
12,901,189
------------
RETAIL -- 0.7%
10,900 Blair Corp. 321,550
60,000 The Maxim Group, Inc.* 780,000
------------
1,101,550
------------
TELECOMMUNICATIONS -- 1.2%
94,500 ECI Telecommunications Ltd. 1,795,500
------------
TEXTILES -- 4.8%
89,000 Collins & Aikman Corp.* 712,000
64,000 Culp, Inc. 624,000
42,700 Fab Industries, Inc. 1,248,975
149,600 Mohawk Industries, Inc.* 2,244,000
110,500 WestPoint Stevens, Inc.* 2,334,313
------------
7,163,288
------------
TOBACCO/BEVERAGES/FOOD PRODUCTS -- 2.6%
55,900 Morningstar Group, Inc.* 433,225
111,800 Ralcorp Holdings, Inc. 2,571,400
84,700 Sylvan, Inc.* 899,937
------------
3,904,562
------------
TRANSPORTATION -- 0.1%
8,000 MTL, Inc.* 117,000
------------
UTILITIES -- 1.5%
34,600 Sithe Energies, Inc.* 246,525
96,000 UGI Corp. 2,016,000
------------
2,262,525
------------
<CAPTION>
- ------------------------------------------------------
<C> <S> <C>
SHARES VALUE
- ------------------------------------------------------
OTHER -- 1.1%
93,300 McGrath RentCorp. $ 1,632,750
------------
Total Common Stocks
(cost -- $116,900,149) $125,523,724
------------
</TABLE>
<TABLE>
<S> <C> <C>
Total Investments
(cost -- $141,711,266) 101.0% $150,298,607
Other Liabilities in Excess of
Other Assets (1.0) (1,483,609)
------ ------------
TOTAL NET ASSETS 100.0% $148,814,998
------ ------------
------ ------------
</TABLE>
GROWTH AND INCOME FUND
<TABLE>
<CAPTION>
- ------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
- ------------------------------------------------------
SHORT-TERM CORPORATE NOTES -- 1.9%
AUTOMOTIVE -- 0.4%
$ 200,000 Ford Motor Credit Co.
5.73%, 11/06/95 $ 199,841
------------
MISCELLANEOUS FINANCIAL SERVICES -- 1.5%
Beneficial Corp.
447,000 5.72%, 11/02/95 446,929
230,000 5.74%, 11/15/95 229,486
------------
676,415
------------
Total Short-Term Corporate Notes
(cost -- $876,256) $ 876,256
------------
CORPORATE NOTES & BONDS -- 18.2%
CASINOS/GAMING -- 1.9%
$ 1,000,000 Harrah's Jazz Co.
14.25%, 11/15/01 $ 875,000
------------
COSMETICS/TOILETRIES -- 3.8%
2,000,000 Playtex Family Products Corp.
9.00%, 12/15/03 1,790,000
------------
</TABLE>
* Non-income producing security.
(A) Restricted Securities (the Fund will not bear any costs, including those
involved in registration under the Securities Act of 1933, in connection
with the disposition of these securities):
<TABLE>
<CAPTION>
UNIT
VALUATION
AS
DATE OF UNIT OF OCTOBER
DESCRIPTION ACQUISITION PAR AMOUNT SHARES COST 31, 1995
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Security Capital
Realty, Inc.
12.00%, 6/30/14 6/16/94 $1,404,189 -- $ 94 $ 100
Security Capital
Realty, Inc.
Common Stock 8/02/93 -- 1,800 684 882
</TABLE>
21
<PAGE>
OCTOBER 31, 1995
- --------------------------------------------------------------------------------
SCHEDULES OF INVESTMENTS
<TABLE>
<CAPTION>
- ------------------------------------------------------
PRINCIPAL VALUE
AMOUNT
- ------------------------------------------------------
<C> <S> <C>
ENTERTAINMENT -- 3.7%
$ 5,000,000 Time Warner, Inc.
Zero Coupon, 12/17/12 $ 1,725,000
------------
FOOD SERVICES -- 0.9%
1,000,000 Shoney's, Inc.
Zero Coupon, 4/11/04 402,500
------------
OIL/GAS -- 3.7%
2,000,000 Triton Energy Corp.
Zero Coupon, 11/01/97 1,700,000
------------
TELECOMMUNICATIONS -- 4.2%
1,000,000 Comcast Corp.
10.625%, 7/15/12 1,097,500
1,500,000 Nextel Communications, Inc.
0.00/11.50%, 9/01/03** 870,000
------------
1,967,500
------------
Total Corporate Notes & Bonds
(cost -- $8,705,038) $ 8,460,000
------------
CONVERTIBLE CORPORATE BONDS -- 6.5%
MANUFACTURING
$ 4,000,000 Mascotech, Inc.
4.50%, 12/15/03
(cost -- $3,042,591) $ 3,040,000
------------
<CAPTION>
- ------------------------------------------------------
<C> <S> <C>
SHARES VALUE
- ------------------------------------------------------
COMMON STOCKS -- 72.6%
AEROSPACE -- 4.4%
25,000 McDonnell Douglas Corp. $ 2,043,750
------------
AUTOMOTIVE -- 3.8%
40,000 General Motors Corp. 1,750,000
------------
BANKING -- 7.6%
32,000 Citicorp 2,076,000
50,000 U.S. Bancorp 1,481,250
------------
3,557,250
------------
CHEMICALS -- 2.7%
20,000 du Pont (E.I.) de Nemours & Co. 1,247,500
------------
COMPUTER SOFTWARE -- 1.1%
5,000 Microsoft Corp.* $ 500,000
------------
<CAPTION>
- ------------------------------------------------------
<C> <S> <C>
SHARES VALUE
- ------------------------------------------------------
CONGLOMERATES -- 3.4%
100,000 Canadian Pacific Ltd. 1,600,000
------------
CONTAINERS -- 3.9%
40,000 Temple-Inland, Inc. 1,820,000
------------
ELECTRONICS -- 0.2%
1,000 Intel Corp. 69,875
------------
HEALTHCARE SERVICES -- 1.0%
10,000 Columbia/HCA Healthcare Corp. 491,250
------------
HOUSEHOLD PRODUCTS -- 4.0%
40,000 Premark International, Inc. 1,850,000
------------
INSURANCE -- 6.8%
15,000 Ace, Ltd. 510,000
10,000 AFLAC, Inc. 407,500
30,000 Progressive Corp., Ohio 1,245,000
20,000 Travelers, Inc. 1,010,000
------------
3,172,500
------------
MACHINERY & ENGINEERING -- 3.9%
45,000 Briggs & Stratton Corp. 1,816,875
------------
MEDIA/BROADCASTING -- 4.0%
20,000 Tele-Communications Liberty Media
Group (Series A)* 492,500
80,000 Tele-Communications TCI Group
(Series A)* 1,360,000
------------
1,852,500
------------
METALS/MINING -- 6.6%
133,687 Freeport McMoRan, Copper & Gold
(Class A) 3,058,090
------------
MISCELLANEOUS FINANCIAL SERVICES -- 0.5%
1,000 Countrywide Credit Industries, Inc. 22,125
3,000 Federal Home Loan Mortgage Corp. 207,750
------------
229,875
------------
OIL/GAS -- 1.6%
10,000 Triton Energy Corp.* $ 466,250
15,000 Union Texas Petroleum Holdings,
Inc. 270,000
------------
736,250
------------
</TABLE>
* Non-income producing security.
** Represents a step-up floater which will receive 0.00% interest until 9/01/98,
then will "step-up" to 11.50% until maturity.
22
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- ------------------------------------------------------
SHARES VALUE
<C> <S> <C>
- ------------------------------------------------------
PAPER PRODUCTS -- 4.0%
35,000 Champion International Corp. 1,872,500
------------
TELECOMMUNICATIONS -- 4.5%
55,000 Sprint Corp. 2,117,500
------------
TEXTILES -- 8.6%
20,000 Shaw Industries, Inc. 255,000
50,000 Unifi, Inc. 1,125,000
55,000 VF Corp. 2,633,125
------------
4,013,125
------------
Total Common Stocks
(cost -- $30,820,524) $ 33,798,840
------------
</TABLE>
<TABLE>
<S> <C> <C>
Total Investments
(cost -- $43,444,409) 99.2% $ 46,175,096
Other Assets in Excess of
Other Liabilities 0.8 358,263
------ ------------
TOTAL NET ASSETS 100.0 % $ 46,533,359
------ ------------
------ ------------
</TABLE>
U.S. GOVERNMENT INCOME FUND
<TABLE>
<CAPTION>
- ------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
- ------------------------------------------------------
REPURCHASE AGREEMENT -- 24.6%
$28,300,000 J.P. Morgan, 5.85%, 11/01/95
(proceeds at maturity:
$28,304,599, collateralized by
$27,265,000 par, $28,866,819
value, U.S. Treasury Notes,
7.50%, 10/31/99)
(cost -- $28,300,000) $ 28,300,000
------------
FEDERAL HOME LOAN MORTGAGE
CORPORATION -- 0.6%
$ 652,460 9.50%, 12/01/02 - 11/01/03
(cost -- $657,455) $ 679,981
------------
<CAPTION>
- ------------------------------------------------------
<C> <S> <C>
PRINCIPAL
AMOUNT VALUE
- ------------------------------------------------------
GOVERNMENT NATIONAL MORTGAGE
ASSOCIATION I -- 43.6%
$19,729,923 7.00%, 2/15/22 - 11/15/23 $ 19,594,181
10,813,268 7.50%, 2/15/22 - 5/15/24 10,955,138
7,998,232 8.00%, 4/15/02 - 5/15/25 8,250,767
10,522,241 8.50%, 6/15/01 - 9/15/24 10,956,944
449,937 10.50%, 1/15/98 - 12/15/00 472,573
------------
Total Government National Mortgage
Association I (cost -- $50,865,933) $ 50,229,603
------------
U.S. TREASURY NOTES -- 30.4%
$15,000,000 5.875%, 8/15/98 $ 15,070,350
5,000,000 6.125%, 5/31/97 5,035,950
14,000,000 7.75%, 11/30/99 14,975,660
------------
Total U.S. Treasury Notes
(cost -- $34,397,838) $ 35,081,960
------------
</TABLE>
<TABLE>
<C> <S> <C> <C>
Total Investments
(cost -- $114,221,226) 99.2% $114,291,544
------ ------------
- ------------------------------------------------
PRINCIPAL
AMOUNT
SUBJECT
TO PUT VALUE
- ------------------------------------------------------
WRITTEN PUT OPTIONS OUTSTANDING -- (0.1%)
$25,000,000 U.S. Treasury Notes, 6.125%,
9/30/00, expiring Nov. '95, strike
@ $101.3125
(premium received: $132,812) $ (117,188)
------------
Other Assets in Excess of
Other Liabilities 0.9 1,067,411
------ ------------
TOTAL NET ASSETS 100.0 % $115,241,767
------ ------------
------ ------------
</TABLE>
* Non-income producing security.
23
<PAGE>
OCTOBER 31, 1995
- --------------------------------------------------------------------------------
SCHEDULES OF INVESTMENTS
INVESTMENT QUALITY INCOME FUND
<TABLE>
<CAPTION>
<C> <S> <C>
- ------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
- ------------------------------------------------------
SHORT-TERM CORPORATE NOTES -- 4.5%
MISCELLANEOUS FINANCIAL SERVICES
$ 1,800,000 Beneficial Corp.
5.75%, 11/06/95 $ 1,798,563
570,000 Household Finance Corp.
5.73%, 11/06/95 569,546
425,000 Merrill Lynch & Co., Inc.
5.75%, 11/02/95 424,932
------------
Total Short-Term Corporate Notes
(cost -- $2,793,041) $ 2,793,041
------------
CORPORATE NOTES & BONDS -- 93.6%
AEROSPACE -- 3.4%
$ 2,000,000 Boeing Co.
7.50%, 8/15/42 $ 2,092,300
------------
AIRLINES -- 2.9%
1,000,000 American Airlines
9.73%, 9/29/14 1,133,870
550,000 Delta Air Lines, Inc.
10.375%, 2/01/11 650,551
------------
1,784,421
------------
AUTOMOTIVE -- 3.6%
2,000,000 Ford Motor Credit Co. (A)
8.875%, 11/15/22 2,234,600
------------
BANKING -- 6.5%
70,000 NatWest Bancorp, Inc.
9.375%, 11/15/03 81,979
1,300,000 NCNB Corp.
10.20%, 7/15/15 1,680,731
500,000 RBSG Capital Corp.
10.125%, 3/01/04 606,020
1,500,000 Westpac Banking Corp.
9.125%, 8/15/01 1,680,810
------------
4,049,540
------------
CHEMICALS -- 1.0%
500,000 Rohm & Haas Co.
9.50%, 4/01/21 607,720
------------
CONGLOMERATES -- 4.0%
2,000,000 Canadian Pacific Ltd.
9.45%, 8/01/21 2,517,380
------------
ENTERTAINMENT -- 5.2%
3,000,000 Time Warner, Inc.
9.15%, 2/01/23 3,253,800
------------
<CAPTION>
- ------------------------------------------------------
<C> <S> <C>
PRINCIPAL
AMOUNT VALUE
- ------------------------------------------------------
INSURANCE -- 11.6%
$ 1,000,000 Aetna Life & Casualty Co.
8.00%, 1/15/17 $ 1,015,020
1,200,000 Capital Holding Corp.
8.75%, 1/15/17 1,263,636
2,000,000 CNA Financial Corp.
7.25%, 11/15/23 1,900,200
3,000,000 Torchmark, Inc.
7.875%, 5/15/23 3,064,440
------------
7,243,296
------------
LEASING -- 2.7%
1,600,000 Ryder Systems, Inc.
8.75%, 3/15/17 1,712,464
------------
MACHINERY & ENGINEERING -- 3.3%
1,750,000 Caterpillar, Inc.
9.75%, 6/01/19 2,056,373
------------
MISCELLANEOUS FINANCIAL SERVICES -- 11.4%
20,000 Beneficial Corp.
12.875%, 8/01/13 24,110
1,500,000 BHP Finance USA Ltd.
8.50%, 12/01/12 1,700,430
Lehman Brothers, Inc.
865,000 9.875%, 10/15/00 955,280
115,000 10.00%, 5/15/99 127,045
205,000 Midland American Capital Corp.
12.75%, 11/15/03 240,533
3,000,000 Prudential Funding Corp.
6.75%, 9/15/23 (B) 2,672,760
1,250,000 Source One Mortgage Services Corp.
9.00%, 6/01/12 1,363,087
------------
7,083,245
------------
OIL/GAS -- 5.9%
3,000,000 Occidental Petroleum Corp.
11.125%, 6/01/19 3,677,430
------------
PAPER PRODUCTS -- 0.2%
100,000 Union Camp Corp.
10.00%, 5/01/19 113,709
------------
PIPELINES -- 3.1%
1,500,000 TransCanada Pipelines Ltd.
9.875%, 1/01/21 1,930,965
------------
RETAIL -- 1.3%
May Department Stores Co.
250,000 9.875%, 6/01/17 276,337
405,000 10.625%, 11/01/10 541,542
------------
817,879
------------
</TABLE>
24
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- ------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
- ------------------------------------------------------
TELECOMMUNICATIONS -- 11.8%
$ 2,500,000 New York Telephone Co.
9.375%, 7/15/31 $ 2,965,900
2,000,000 Pacific Bell
8.50%, 8/15/31 2,191,900
2,000,000 Southern New England Telephone Co.
8.70%, 8/15/31 2,168,720
------------
7,326,520
------------
TOBACCO/BEVERAGES/FOOD PRODUCTS -- 3.5%
2,000,000 American Brands, Inc.
7.875%, 1/15/23 2,153,300
------------
UTILITIES -- 7.0%
2,000,000 Hydro-Quebec
8.50%, 12/01/29 2,203,280
2,000,000 Southern California Edison Co.
8.875%, 6/01/24 2,140,540
------------
4,343,820
------------
<CAPTION>
- ------------------------------------------------------
<C> <S> <C>
PRINCIPAL
AMOUNT VALUE
- ------------------------------------------------------
OTHER -- 5.2%
$ 1,447,305 DLJ Mortgage Acceptance Corp.
8.75%, 11/25/24 $ 1,471,276
1,500,000 Nova Scotia (Province of)
8.875%, 7/01/19 1,733,370
------------
3,204,646
------------
Total Corporate Notes & Bonds
(cost -- $54,144,780) $ 58,203,408
------------
</TABLE>
<TABLE>
<S> <C> <C>
Total Investments
(cost -- $56,937,821) 98.1 % $ 60,996,449
Other Assets in Excess of
Other Liabilities 1.9 1,192,720
------ ------------
TOTAL NET ASSETS 100.0 % $ 62,189,169
------ ------------
------ ------------
</TABLE>
(A) Security segregated (partial) as collateral for open futures contracts. The
aggregate market value of such security is $558,650.
(B) Resale of the security is restricted to qualified institutional investors.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
25
<PAGE>
OCTOBER 31, 1995
- --------------------------------------------------------------------------------
STATEMENTS OF ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
QUEST FOR SMALL GROWTH U.S. INVESTMENT
VALUE FUND, OPPORTUNITY CAPITALIZATION AND GOVERNMENT QUALITY
INC. FUND FUND INCOME FUND INCOME FUND INCOME FUND
------------ ------------ ------------ ----------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Investments, at value (cost --
$258,707,414, $542,282,713,
$141,711,266, $43,444,409,
$85,921,226 and $56,937,821,
respectively)...................... $330,881,971 $641,676,243 $150,298,607 $46,175,096 $ 85,991,544 $60,996,449
Repurchase agreement
(cost -- $28,300,000).............. -- -- -- -- 28,300,000 --
Cash................................ 45,640 547,052 554,656 43,048 147,175 59,556
Receivable for fund shares sold..... 530,951 3,886,531 429,526 135,588 112,467 66,286
Dividends receivable 243,046 997,122 50,222 40,770 -- --
Interest receivable................. 70,681 80,486 85,156 232,993 1,100,769 1,428,564
Receivable for investments sold..... -- 3,775,999 1,519,249 -- -- --
Receivable for mortgage
prepayments........................ -- -- -- -- 9,512 --
Deferred organization expenses...... -- -- -- 19,361 -- 1,598
Other assets........................ 39,549 22,478 12,365 17,891 30,144 12,304
------------ ------------ ------------ ----------- ------------ -----------
Total Assets...................... 331,811,838 650,985,911 152,949,781 46,664,747 115,691,611 62,564,757
------------ ------------ ------------ ----------- ------------ -----------
LIABILITIES
Written put options outstanding, at
value (premiums received:
$132,812).......................... -- -- -- -- 117,188 --
Payable for fund shares redeemed.... 246,415 541,931 381,171 39,485 94,741 182,432
Distribution fee payable............ 57,478 218,953 31,207 9,227 13,696 14,560
Investment advisory fee payable..... 54,437 103,767 24,467 6,603 11,374 6,111
Payable for investments purchased... -- 15,310,750 3,596,750 -- -- --
Dividends payable................... -- -- -- -- 100,543 79,161
Payable for futures variation
margin............................. -- -- -- -- -- 33,750
Other payables and accrued
expenses........................... 141,605 299,396 101,188 76,073 112,302 59,574
------------ ------------ ------------ ----------- ------------ -----------
Total Liabilities................. 499,935 16,474,797 4,134,783 131,388 449,844 375,588
------------ ------------ ------------ ----------- ------------ -----------
NET ASSETS
Par value........................... 22,865,787 259,205 86,170 42,633 102,228 57,180
Paid-in-surplus..................... 211,941,042 523,701,982 131,509,611 41,486,396 124,603,694 59,929,025
Accumulated undistributed net
investment income (loss)........... 2,115,981 3,043,582 817,130 62,229 (100,543) (1,302)
Accumulated undistributed net
realized gain (loss) on
investments........................ 22,214,536 8,112,815 7,814,746 2,211,414 (9,449,554) (1,441,862)
Net unrealized appreciation on
investments........................ 72,174,557 99,393,530 8,587,341 2,730,687 85,942 3,646,128
------------ ------------ ------------ ----------- ------------ -----------
Total Net Assets.................. $331,311,903 $634,511,114 $148,814,998 $46,533,359 $115,241,767 $62,189,169
------------ ------------ ------------ ----------- ------------ -----------
------------ ------------ ------------ ----------- ------------ -----------
CLASS A:
Fund shares outstanding............. 19,476,461 14,934,153 6,717,417 3,395,059 9,111,820 4,144,692
------------ ------------ ------------ ----------- ------------ -----------
Net asset value per share........... $ 14.51 $ 24.59 $ 17.31 $ 10.92 $ 11.27 $ 10.88
------------ ------------ ------------ ----------- ------------ -----------
------------ ------------ ------------ ----------- ------------ -----------
Maximum offering price per share*... $ 15.35 $ 26.02 $ 18.32 $ 11.46 $ 11.83 $ 11.42
------------ ------------ ------------ ----------- ------------ -----------
------------ ------------ ------------ ----------- ------------ -----------
CLASS B:
Fund shares outstanding............. 2,682,851 8,945,500 1,369,612 700,417 855,263 1,207,703
------------ ------------ ------------ ----------- ------------ -----------
Net asset value and offering price
per share.......................... $ 14.37 $ 24.33 $ 17.11 $ 10.88 $ 11.27 $ 10.88
------------ ------------ ------------ ----------- ------------ -----------
------------ ------------ ------------ ----------- ------------ -----------
CLASS C:
Fund shares outstanding............. 706,475 2,040,801 529,946 167,833 255,735 365,603
------------ ------------ ------------ ----------- ------------ -----------
Net asset value and offering price
per share.......................... $ 14.35 $ 24.31 $ 17.11 $ 10.89 $ 11.27 $ 10.88
------------ ------------ ------------ ----------- ------------ -----------
------------ ------------ ------------ ----------- ------------ -----------
</TABLE>
*Sales charges decrease on purchases of $50,000 or higher.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
26
<PAGE>
YEAR ENDED OCTOBER 31, 1995
- --------------------------------------------------------------------------------
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
GROWTH
QUEST FOR SMALL AND U.S. INVESTMENT
VALUE OPPORTUNITY CAPITALIZATION INCOME GOVERNMENT QUALITY
FUND, INC. FUND FUND FUND INCOME FUND INCOME FUND
----------- ----------- ------------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
INVESTMENT INCOME
Dividends*................... $4,933,153 $5,805,392 $ 1,902,266 $ 693,240 $ -- $
- --
Interest..................... 2,545,437 4,798,092 1,684,966 1,089,203 8,894,940 4,872,959
----------- ----------- ------------- ---------- ----------- -----------
Total investment income.... 7,478,590 10,603,484 3,587,232 1,782,443 8,894,940 4,872,959
----------- ----------- ------------- ---------- ----------- -----------
OPERATING EXPENSES
Investment advisory fees
(note 2a)................... 2,893,435 3,923,159 1,456,594 333,289 755,883 351,860
Distribution fees (note
2c)......................... 1,607,236 2,665,031 859,394 191,723 455,179 311,219
Transfer and dividend
disbursing agent fees (note
1i)......................... 330,355 410,006 206,267 73,852 130,367 71,201
Accounting service fees (note
2b)......................... -- 103,747 108,951 112,800 121,310 105,362
Registration fees............ 54,800 141,636 34,952 34,042 32,098 33,871
Custodian fees............... 40,216 47,751 22,819 18,724 70,657 21,556
Reports and notices to
shareholders................ 40,057 44,869 27,492 8,814 17,517 10,688
Auditing, consulting and tax
return preparation fees..... 24,597 18,515 18,514 14,435 40,367 17,355
Directors'(Trustees') fees
and expenses................ 17,270 17,270 17,270 8,870 17,270 17,270
Legal fees................... 11,749 10,120 7,222 4,721 6,836 5,236
Amortization of deferred
organization expenses (note
1c)......................... -- -- -- 19,148 -- 12,374
Miscellaneous................ 19,575 13,337 9,189 4,500 14,726 5,566
----------- ----------- ------------- ---------- ----------- -----------
Total operating expenses... 5,039,290 7,395,441 2,768,664 824,918 1,662,210 963,558
Less: Investment advisory
fees waived (note 2a)..... -- -- -- (8,286) -- (42,245)
----------- ----------- ------------- ---------- ----------- -----------
Net operating expenses... 5,039,290 7,395,441 2,768,664 816,632 1,662,210 921,313
----------- ----------- ------------- ---------- ----------- -----------
Net investment income.... 2,439,300 3,208,043 818,568 965,811 7,232,730 3,951,646
----------- ----------- ------------- ---------- ----------- -----------
REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS -- NET
Net realized gain (loss) on
security transactions....... 22,321,532 8,125,065 8,630,413 2,227,731 (3,475,568) (24,232)
Net realized loss on option
transactions (note 1f).... -- -- -- -- (267,734) --
Net realized loss on futures
transactions (note 1g)...... -- -- (86,670) -- -- (464,750)
----------- ----------- ------------- ---------- ----------- -----------
Net realized gain (loss) on
investments............... 22,321,532 8,125,065 8,543,743 2,227,731 (3,743,302) (488,982)
Net change in unrealized
appreciation (depreciation)
on investments.............. 39,322,642 85,013,107 3,040,965 2,324,387 9,332,957 7,336,722
----------- ----------- ------------- ---------- ----------- -----------
Net realized gain (loss)
and change in unrealized
appreciation
(depreciation) on
investments............... 61,644,174 93,138,172 11,584,708 4,552,118 5,589,655 6,847,740
----------- ----------- ------------- ---------- ----------- -----------
Net increase in net assets
resulting from operations... $64,083,474 $96,346,215 $ 12,403,276 $5,517,929 $12,822,385 $10,799,386
----------- ----------- ------------- ---------- ----------- -----------
----------- ----------- ------------- ---------- ----------- -----------
<FN>
* Net of withholding taxes of $6,473, $732 and $1,752 for Quest for Value, Small
Capitalization and Growth and Income, respectively.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
</TABLE>
27
<PAGE>
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
QUEST FOR VALUE FUND,
INC. OPPORTUNITY FUND
YEAR ENDED OCTOBER 31, YEAR ENDED OCTOBER 31,
------------------------ ------------------------
1995 1994 1995 1994
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
OPERATIONS
Net investment income (loss).............................. $ 2,439,300 $ 1,726,225 $ 3,208,043 $ 1,397,364
Net realized gain (loss) on investments................... 22,321,532 16,664,331 8,125,065 7,139,720
Net change in unrealized appreciation (depreciation) on
investments.............................................. 39,322,642 (6,250,090) 85,013,107 4,721,481
----------- ----------- ----------- -----------
Net increase (decrease) in net assets resulting from
operations............................................. 64,083,474 12,140,466 96,346,215 13,258,565
----------- ----------- ----------- -----------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS*
Net investment income -- Class A.......................... (1,649,576) (819,873) (1,066,642) (2,269,483)
Net investment income -- Class B.......................... (108,497) (11,801) (335,822) (98,258)
Net investment income -- Class C.......................... (29,366) (2,040) (56,920) (21,098)
Net realized gains -- Class A............................. (15,501,438) (9,227,704) (5,314,298) (1,498,248)
Net realized gains -- Class B............................. (1,014,005) (115,604) (1,562,718) (30,484)
Net realized gains -- Class C............................. (255,884) (11,081) (267,734) (11,476)
Tax return of capital -- Class A.......................... -- -- -- --
Tax return of capital -- Class B.......................... -- -- -- --
Tax return of capital -- Class C.......................... -- -- -- --
----------- ----------- ----------- -----------
Total dividends and distributions to shareholders....... (18,558,766) (10,188,103) (8,604,134) (3,929,047)
----------- ----------- ----------- -----------
FUND SHARE TRANSACTIONS
CLASS A
Net proceeds from sales................................... 53,027,793 61,908,256 201,988,591 90,332,759
Reinvestment of dividends and distributions............... 16,047,556 9,385,655 6,034,648 3,405,284
Cost of shares redeemed................................... (64,462,161) (80,014,950) (60,771,127) (65,200,453)
----------- ----------- ----------- -----------
Net increase (decrease) -- Class A...................... 4,613,188 (8,721,039) 147,252,112 28,537,590
----------- ----------- ----------- -----------
CLASS B
Net proceeds from sales................................... 22,392,431 12,409,864 160,670,137 40,604,196
Reinvestment of dividends and distributions............... 1,045,812 123,599 1,804,130 124,021
Cost of shares redeemed................................... (3,681,109) (544,061) (14,031,965) (1,026,439)
----------- ----------- ----------- -----------
Net increase -- Class B................................. 19,757,134 11,989,402 148,442,302 39,701,778
----------- ----------- ----------- -----------
CLASS C
Net proceeds from sales................................... 6,835,837 3,521,667 40,882,367 6,945,412
Reinvestment of dividends and distributions............... 280,898 13,020 314,274 32,567
Cost of shares redeemed................................... (1,738,997) (271,901) (4,067,767) (254,081)
----------- ----------- ----------- -----------
Net increase -- Class C................................. 5,377,738 3,262,786 37,128,874 6,723,898
----------- ----------- ----------- -----------
Total net increase (decrease) in net assets from fund
share transactions....................................... 29,748,060 6,531,149 332,823,288 74,963,266
----------- ----------- ----------- -----------
Total increase (decrease) in net assets................. 75,272,768 8,483,512 420,565,369 84,292,784
NET ASSETS
Beginning of year......................................... 256,039,135 247,555,623 213,945,745 129,652,961
----------- ----------- ----------- -----------
End of year (including undistributed net investment income
(loss) of $2,115,981, $1,464,120; $3,043,582, $1,291,867;
$817,130, ($238,336); $62,229, $127,460; ($100,543), $0
and ($1,302), $0, respectively).......................... $331,311,903 $256,039,135 $634,511,114 $213,945,745
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
<FN>
*Certain figures have been restated to conform to current year presentation for
Opportunity, Growth and Income and U.S. Government.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
</TABLE>
28
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SMALL CAPITALIZATION U.S. GOVERNMENT INCOME
FUND GROWTH AND INCOME FUND FUND INVESTMENT QUALITY
INCOME FUND
YEAR ENDED OCTOBER 31, YEAR ENDED OCTOBER 31, YEAR ENDED OCTOBER 31, YEAR ENDED OCTOBER 31,
- -------------------------- ------------------------ -------------------------- ------------------------
1995 1994 1995 1994 1995 1994 1995 1994
- ------------ ------------ ----------- ----------- ------------ ------------ ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
$ 818,568 $ (238,336) $ 965,811 $ 966,108 $ 7,232,730 $ 8,291,969 $ 3,951,646 $ 3,846,353
8,543,743 3,366,835 2,227,731 1,768,686 (3,743,302) (4,366,839) (488,982) (952,880)
3,040,965 (3,118,979) 2,324,387 (189,442) 9,332,957 (11,007,688) 7,336,722 (9,068,979)
- ------------ ------------ ----------- ----------- ------------ ------------ ----------- -----------
12,403,276 9,520 5,517,929 2,545,352 12,822,385 (7,082,558) 10,799,386 (6,175,506)
- ------------ ------------ ----------- ----------- ------------ ------------ ----------- -----------
-- -- (917,781) (936,128) (6,680,576) (8,071,564) (3,164,967) (3,482,793)
-- -- (105,700) (41,545) (464,033) (196,735) (586,935) (244,424)
-- -- (17,697) (7,305) (89,583) (39,362) (199,744) (119,136)
(3,010,761) (8,036,736) (1,275,011) (4,278,474) -- (3,218,859) -- (367,910)
(434,007) (160,831) (129,812) (152,311) -- (42,833) -- (10,112)
(91,772) (19,543) (20,124) (19,378) -- (7,144) -- (637)
-- -- -- -- (140,061) -- -- --
-- -- -- -- (8,675) -- -- --
-- -- -- -- (1,431) -- -- --
- ------------ ------------ ----------- ----------- ------------ ------------ ----------- -----------
(3,536,540) (8,217,110) (2,466,125) (5,435,141) (7,384,359) (11,576,497) (3,951,646) (4,225,012)
- ------------ ------------ ----------- ----------- ------------ ------------ ----------- -----------
38,194,245 127,081,752 8,471,883 5,937,491 18,642,107 17,007,814 8,023,597 12,621,718
2,840,961 7,215,556 2,097,137 5,008,623 5,896,557 9,588,703 2,288,961 2,758,350
(52,052,199) (111,134,238) (6,705,888) (6,040,040) (50,011,121) (74,313,512) (17,520,761) (20,364,228)
- ------------ ------------ ----------- ----------- ------------ ------------ ----------- -----------
(11,016,993) 23,163,070 3,863,132 4,906,074 (25,472,457) (47,716,995) (7,208,203) (4,984,160)
- ------------ ------------ ----------- ----------- ------------ ------------ ----------- -----------
10,160,304 15,275,222 4,674,731 2,763,975 5,110,647 6,748,251 7,327,816 6,440,954
408,265 148,570 217,205 188,513 319,245 187,137 462,628 185,172
(4,495,109) (811,203) (533,417) (260,750) (3,026,400) (964,994) (2,363,759) (800,932)
- ------------ ------------ ----------- ----------- ------------ ------------ ----------- -----------
6,073,460 14,612,589 4,358,519 2,691,738 2,403,492 5,970,394 5,426,685 5,825,194
- ------------ ------------ ----------- ----------- ------------ ------------ ----------- -----------
6,393,572 3,345,761 1,497,250 341,819 2,026,463 1,424,484 1,204,849 3,141,700
88,907 18,810 36,149 26,593 85,658 46,127 93,152 93,436
(1,180,484) (229,505) (232,677) (4,696) (533,211) (289,465) (285,205) (422,838)
- ------------ ------------ ----------- ----------- ------------ ------------ ----------- -----------
5,301,995 3,135,066 1,300,722 363,716 1,578,910 1,181,146 1,012,796 2,812,298
- ------------ ------------ ----------- ----------- ------------ ------------ ----------- -----------
358,462 40,910,725 9,522,373 7,961,528 (21,490,055) (40,565,455) (768,722) 3,653,332
- ------------ ------------ ----------- ----------- ------------ ------------ ----------- -----------
9,225,198 32,703,135 12,574,177 5,071,739 (16,052,029) (59,224,510) 6,079,018 (6,747,186)
139,589,800 106,886,665 33,959,182 28,887,443 131,293,796 190,518,306 56,110,151 62,857,337
- ------------ ------------ ----------- ----------- ------------ ------------ ----------- -----------
$148,814,998 $139,589,800 $46,533,359 $33,959,182 $115,241,767 $131,293,796 $62,189,169 $56,110,151
- ------------ ------------ ----------- ----------- ------------ ------------ ----------- -----------
- ------------ ------------ ----------- ----------- ------------ ------------ ----------- -----------
</TABLE>
29
<PAGE>
OCTOBER 31, 1995
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
Quest for Value Funds are registered under the Investment Company Act of
1940, as diversified, open-end management investment companies. Quest for Value
Fund, Inc. ("Quest for Value") is a Maryland corporation. Opportunity Fund
("Opportunity"), Small Capitalization Fund ("Small Capitalization"), Growth and
Income Fund ("Growth and Income"), U.S. Government Income Fund ("U.S.
Government") and Investment Quality Income Fund ("Investment Quality") are five
of nine funds offered in the Quest for Value Family of Funds, a Massachusetts
business trust. Quest for Value Advisors (the "Adviser") serves as investment
adviser and provides accounting and administrative services to each fund. Quest
for Value Distributors (the "Distributor") serves as each fund's distributor.
Both the Adviser and Distributor are majority-owned (99%) subsidiaries of
Oppenheimer Capital.
Prior to September 1, 1993, the funds issued only one class of shares which
were redesignated Class A shares. Subsequent to that date all funds were
authorized to issue Class A, Class B and Class C shares. Shares of each Class
represent an identical interest in the investment portfolio of their respective
fund and generally have the same rights, but are offered under different sales
charges 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 each 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 securites are valued at the 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. Investment debt securities (other than
short-term obligations) are valued each day by an independent pricing service
approved by the Board of Directors (Trustees) using methods which include
current market quotations from major market makers in the securities and
trader-reviewed "matrix" prices. Futures contracts are valued based upon their
daily settlement value as of the close of the exchange upon which they trade.
OTC options are valued based upon formulas which utilize the market value of the
underlying securities, strike prices and expiration dates of the options.
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 values as determined in good faith under
procedures established by each fund's Board of Directors (Trustees). The ability
of issuers of debt securities held by the funds to meet their obligations may be
affected by economic or political development in a specific state, industry or
region.
(B) FEDERAL INCOME TAXES
It is each 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
The following approximate costs were incurred in connection with their
organization: Growth and Income -- $96,000 and Investment Quality -- $62,000.
These costs have been deferred and are being amortized to expense on a
straight-line basis over sixty months from commencement of each fund's
operations.
(D) SECURITY 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 is
determined on the basis of identified cost. Dividend income is recorded on the
ex-dividend
30
<PAGE>
- --------------------------------------------------------------------------------
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. Net investment income, other than class specific
expenses and unrealized gains and losses are allocated daily to each class of
shares based upon the relative proportion of net assets, as defined, of each
class.
(E) DIVIDENDS AND DISTRIBUTIONS
The following table summarizes each fund's dividend and capital gain
declaration policy:
<TABLE>
<CAPTION>
SHORT-TERM LONG-TERM
INCOME CAPITAL CAPITAL
DIVIDENDS GAINS GAINS
---------- ---------- ----------
<S> <C> <C> <C>
Quest for Value annually annually annually
Opportunity annually annually annually
Small Capitalization annually annually annually
Growth and Income quarterly annually annually
U.S. Government daily * quarterly annually
Investment Quality daily * annually annually
* paid monthly.
</TABLE>
Each fund records dividends and distributions to its shareholders on the
ex-dividend date. The amount of dividends and distributions from net investment
income and net realized capital gains are determined in accordance with federal
income tax regulations, which may differ from generally accepted accounting
principles. These "book-tax" differences are either considered temporary or
permanent in nature. To the extent these differences are permanent in nature,
such amounts are reclassified within the capital accounts based on their federal
tax-basis treatment; temporary differences do not require reclassification.
Dividends and distributions which exceed net investment income and net realized
capital gains for financial reporting purposes but not for tax purposes are
reported as dividends in excess of net investment income or distributions in
excess of net realized capital gains, respectively. To the extent distributions
exceed current and accumulated earnings and profits for federal income tax
purposes, they are reported as distributions of paid-in-surplus or tax return of
capital. Accordingly, permanent book-tax differences relating to shareholder
distributions have been reclassified to paid-in-surplus. Net investment
income(loss), net realized gain(loss) and net assets were not affected.
As required by Statement of Position 93 - 2, Determination, Disclosure and
Financial Statement Presentation of Income, Capital Gain and Return of Capital
Distributions by Investment Companies, the following table discloses the
reclassifications from accumulated undistributed net investment income(loss) and
accumulated undistributed capital gain(loss) on investments to paid-in-surplus
during the fiscal year ended October 31, 1995:
<TABLE>
<CAPTION>
ACCUMULATED
UNDISTRIBUTED
NET ACCUMULATED
INVESTMENT UNDISTRIBUTED PAID
INCOME NET REALIZED IN
(LOSS) GAIN (LOSS) SURPLUS
---------- --------------- --------
<S> <C> <C> <C>
Quest for Value -- -- --
Opportunity 3,056 (5,991) 2,935
Small Capitalization 236,898 (559,292) 322,394
Growth and Income 10,136 (152,783) 142,647
U.S. Government (99,081) (407,920) 507,001
Investment Quality (1,302) -- 1,302
</TABLE>
31
<PAGE>
OCTOBER 31, 1995
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(F) WRITTEN OPTIONS ACCOUNTING POLICIES
When a fund writes a call option or a put option, an amount equal to the
premium received by the fund is included in the fund's Statement of Assets and
Liabilities as an asset and an equivalent liability. The amount of the liability
is subsequently marked-to-market to reflect the current market value of the
option written. If the option expires on its stipulated expiration date or if a
fund enters into a closing purchase transaction, the fund will realize a gain
(or loss if the cost of a closing purchase tranaction exceeds the premium
received when the option was written) without regard to any unrealized gain or
loss on the underlying security, and the liability related to such option will
be extinguished. If a call option which a fund has written is exercised, the
fund realizes a gain or loss from the sale of the underlying security and the
proceeds from such sale are increased by the premium originally received. If a
put option which a fund has written is exercised, the amount of the premium
originally received will reduce the cost of the security which the fund
purchases upon exercise of the option.
(G) FUTURES ACCOUNTING POLICIES
Futures contracts are agreements between two parties to buy and sell a
financial instrument at a set price on a future date. Upon entering into such a
contract, a fund is required to pledge to the broker an amount of cash, cash
equivalents or U.S. Government securities equal to the minimum "initial margin"
requirements of the exchange. Pursuant to the contract, a fund agrees to receive
from or pay to the broker an amount of cash equal to the daily fluctuation in
the value of the contract. Such receipts or payments are known as "variation
margin" and are recorded by the fund as unrealized appreciation or depreciation.
When a contract is closed, the fund records a realized gain or loss equal to the
difference between the value of the contract at the time it was opened and the
value at the time it was closed and reverses any unrealized appreciation or
depreciation previously recorded. At October 31, 1995, Investment Quality had
the following futures contracts open:
<TABLE>
<CAPTION>
NET
NUMBER OF UNREALIZED
TYPE CONTRACTS SHORT VALUE EXPIRATION LOSS
<S> <C> <C> <C> <C>
- ---------------------------------------------------------------------------
CBT U.S. Treasury Bond 120 $13,635,000 Dec. '95 $412,500
</TABLE>
(H) REPURCHASE AGREEMENTS
U.S. Government enters into repurchase agreements as part of its investment
program. The fund's custodian takes possession of collateral pledged by the
counterparty. The collateral is marked-to-market daily to ensure that the value,
plus accrued interest, is at least equal to the repurchase price. In the event
of default by the obligor to repurchase, the fund has the right to liquidate the
collateral and apply the proceeds in satisfaction of the obligation. Under
certain circumstances, in the event of default or bankruptcy by the other party
to the agreement, realization and/or retention of the collateral or proceeds may
be subject to legal proceedings.
(I) ALLOCATION OF EXPENSES
Expenses specifically identifiable to a particular fund or class are borne
by that fund or class. Other expenses are allocated to each fund or class based
on its net assets in relation to the total net assets of all applicable funds or
classes or on another reasonable basis. For the year ended October 31, 1995,
transfer and dividend disbursing agent fees accrued to classes A, B and C were
$279,089, $36,906 and $14,360, respectively, for Quest for Value; $236,086,
$141,736 and $32,184, respectively, for Opportunity; $146,564, $44,501 and
$15,202, respectively, for Small Capitalization; $61,191, $8,864 and $3,797,
respectively, for Growth and Income; $117,106, $8,732 and $4,529, respectively,
for U.S. Government and $58,422, $8,814 and $3,965, respectively, for Investment
Quality Income. These expenses are consolidated, by fund, in the accompanying
Statements of Operations.
32
<PAGE>
- --------------------------------------------------------------------------------
2. INVESTMENT ADVISORY FEE, ACCOUNTING SERVICES FEE, DISTRIBUTION FEE AND OTHER
TRANSACTIONS WITH AFFILIATES
(A) The investment advisory fee is payable monthly to the Adviser, and is
computed as a percentage of each fund's net assets as of the close of business
each day at the following annual rates: 1.00% for Quest for Value, Opportunity
and Small Capitalization, respectively; .85% for Growth and Income and .60% for
U.S. Government and Investment Quality, respectively. For the year ended October
31, 1995, the Adviser voluntarily waived $8,286 and $42,245 in investment
advisory fees for Growth and Income and Investment Quality, respectively.
(B) A portion of the accounting services fee for Opportunity, Small
Capitalization, Growth and Income, U.S. Government and Investment Quality is
payable monthly to the Adviser. These funds reimburse the Adviser for a portion
of the salaries of officers and employees of Oppenheimer Capital based upon the
amount of time such persons spend in providing services to each fund in
accordance with the provisions of the Investment Advisory Agreement. For the
year ended October 31, 1995, the Adviser received $48,747, $53,951, $57,800,
$56,310 and $50,362, respectively.
(C) The funds have adopted a Plan and Agreement of Distribution (the
"Plan") pursuant to which each fund is permitted to compensate the Distributor
in connection with the distribution of fund shares. Under the Plan, the
Distributor has entered 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 funds pay the Distributor compensation, accrued
daily and payable monthly on each fund's average daily net assets for Class A
shares at the following annual rates: .25% for Quest for Value, Opportunity and
Small Capitalization, .05% for U.S. Government and .15% for Investment Quality
and Growth and Income. Each fund's Class A shares also pay a service fee at the
annual rate of .25%. Compensation for Class B and Class C shares of each fund is
at an annual rate of .75% of average daily net assets. Each fund's Class B and
Class C shares also pay a service fee at the 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 fund
shares. 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 year ended October 31, 1995, distribution and service fees charged
to classes A, B and C were $1,286,200, $253,926 and $67,110, respectively, for
Quest for Value; $1,258,129, $1,165,226 and $241,676, respectively, for
Opportunity; $597,200, $201,055 and $61,139, respectively, for Small
Capitalization; $133,588, $48,455 and $9,680, respectively, for Growth and
Income; $344,839, $92,104 and $18,236, respectively, for U.S. Government and
$183,475, $95,449 and $32,295, respectively, for Investment Quality Income.
These expenses are consolidated, by fund, in the accompanying Statements of
Operations.
(D) Total brokerage commissions paid by Quest for Value, Opportunity, Small
Capitalization and Growth and Income were $309,310, $647,240, $400,477 and
$112,411, respectively, of which Oppenheimer & Co., Inc., an affiliate of the
Adviser, received $156,970, $266,868, $161,399 and $54,131, respectively, for
the year ended October 31, 1995.
(E) Oppenheimer & Co., Inc. has informed the funds that it received
approximately $390,000, $959,000, $241,000, $35,000, $162,000 and $88,000 in
connection with the sale of Class A shares for Quest for Value, Opportunity,
Small Capitalization, Growth and Income, U.S. Government and Investment Quality,
respectively, for the year ended October 31, 1995.
33
<PAGE>
OCTOBER 31, 1995
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
The Distributor has also informed the funds that it received contingent
deferred sales charges on the redemption of Class A and Class C shares of
approximately $10,000, $20,000, $10,000, $100, $6,000 and $2,000 for Quest for
Value, Opportunity, Small Capitalization, Growth and Income, U.S. Government and
Investment Quality, respectively, for the year ended October 31, 1995.
For the year ended October 31, 1995, the Distributor had assigned the right
to receive the compensation and contingent deferred sales charge on Class B
shares to a bank in return for the bank's reimbursement to the Distributor of
commissions paid by the Distributor to brokers/dealers on the sale of Class B
shares.
3. PURCHASES AND SALES OF SECURITIES
For the year ended October 31, 1995, purchases and sales of investment
securities, other than short-term securities, were as follows:
<TABLE>
<CAPTION>
QUEST FOR SMALL GROWTH AND U.S. INVESTMENT
VALUE OPPORTUNITY CAPITALIZATION INCOME GOVERNMENT QUALITY
------------ ------------- ---------------- ----------- ------------ ----------
<S> <C> <C> <C> <C> <C> <C>
Purchases $ 89,609,378 $ 350,805,248 $ 92,530,292 $54,163,330 $259,064,073 $5,329,244
Sales 116,160,440 67,743,053 99,613,323 41,657,071 304,565,951 4,275,980
</TABLE>
The following table summarizes activity in written option transactions for U.S.
Government for the year ended October 31, 1995:
<TABLE>
<CAPTION>
CONTRACTS PREMIUMS
----------- -----------
<S> <C> <C>
Option contracts written: Outstanding
beginning of year 2 $ 142,188
Options written 47 3,306,327
Options terminated in closing purchase
transactions (25) (1,788,359)
Options exercised (15) (920,313)
Options expired (8) (607,031)
--- -----------
Option contracts written: Outstanding end of
year 1 $ 132,812
--- -----------
--- -----------
</TABLE>
34
<PAGE>
- --------------------------------------------------------------------------------
4. FUND SHARE TRANSACTIONS
The following tables summarize the fund share activity for the two years
ended October 31, 1995:
<TABLE>
<CAPTION>
QUEST FOR VALUE OPPORTUNITY SMALL CAPITALIZATION
------------------------- ------------------------- -------------------------
YEAR ENDED OCTOBER 31, YEAR ENDED OCTOBER 31, YEAR ENDED OCTOBER 31,
------------------------- ------------------------- -------------------------
1995 1994 1995 1994 1995 1994
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
CLASS A
Issued................................ 4,045,256 5,077,999 9,028,138 4,781,210 2,307,655 7,804,081
Dividends and distributions
reinvested........................... 1,440,961 797,941 328,864 186,714 181,647 450,409
Redeemed.............................. (4,924,606) (6,566,112) (2,718,312) (3,470,990) (3,125,095) (6,835,042)
----------- ----------- ----------- ----------- ----------- -----------
Net increase (decrease)............. 561,611 (690,172) 6,638,690 1,496,934 (635,793) 1,419,448
----------- ----------- ----------- ----------- ----------- -----------
CLASS B
Issued................................ 1,718,575 1,020,362 7,259,921 2,145,988 620,242 936,328
Dividends and distributions
reinvested........................... 94,418 10,514 98,923 6,821 26,272 9,286
Redeemed.............................. (277,524) (44,566) (624,721) (54,500) (271,244) (50,575)
----------- ----------- ----------- ----------- ----------- -----------
Net increase........................ 1,535,469 986,310 6,734,123 2,098,309 375,270 895,039
----------- ----------- ----------- ----------- ----------- -----------
CLASS C
Issued................................ 523,083 289,679 1,828,198 367,367 389,503 205,454
Dividends and distributions
reinvested........................... 25,381 1,106 17,240 1,789 5,721 1,176
Redeemed.............................. (127,913) (22,509) (176,839) (13,680) (71,284) (13,923)
----------- ----------- ----------- ----------- ----------- -----------
Net increase........................ 420,551 268,276 1,668,599 355,476 323,940 192,707
----------- ----------- ----------- ----------- ----------- -----------
Total net increase................ 2,517,631 564,414 15,041,412 3,950,719 63,417 2,507,194
----------- ----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- ----------- -----------
</TABLE>
<TABLE>
<CAPTION>
GROWTH AND INCOME U.S. GOVERNMENT INVESTMENT QUALITY
------------------------- ------------------------- -------------------------
YEAR ENDED OCTOBER 31, YEAR ENDED OCTOBER 31, YEAR ENDED OCTOBER 31,
------------------------- ------------------------- -------------------------
1995 1994 1995 1994 1995 1994
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
CLASS A
Issued................................ 790,817 591,037 1,685,034 1,484,549 777,291 1,194,443
Dividends and distributions
reinvested........................... 216,701 506,743 534,322 839,276 222,241 263,168
Redeemed.............................. (641,530) (600,435) (4,526,190) (6,552,668) (1,706,041) (1,940,417)
----------- ----------- ----------- ----------- ----------- -----------
Net increase (decrease)............. 365,988 497,345 (2,306,834) (4,228,843) (706,509) (482,806)
----------- ----------- ----------- ----------- ----------- -----------
CLASS B
Issued................................ 438,682 269,571 467,177 594,901 708,238 614,495
Dividends and distributions
reinvested........................... 22,368 19,104 28,912 16,698 44,636 18,150
Redeemed.............................. (51,318) (26,407) (272,297) (86,599) (228,114) (77,488)
----------- ----------- ----------- ----------- ----------- -----------
Net increase........................ 409,732 262,268 223,792 525,000 524,760 555,157
----------- ----------- ----------- ----------- ----------- -----------
CLASS C
Issued................................ 140,694 33,894 182,514 123,553 116,706 290,357
Dividends and distributions
reinvested........................... 3,711 2,697 7,733 4,123 8,984 9,047
Redeemed.............................. (21,778) (469) (47,976) (25,877) (27,176) (41,081)
----------- ----------- ----------- ----------- ----------- -----------
Net increase........................ 122,627 36,122 142,271 101,799 98,514 258,323
----------- ----------- ----------- ----------- ----------- -----------
Total net increase (decrease)..... 898,347 795,735 (1,940,771) (3,602,044) (83,235) 330,674
----------- ----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- ----------- -----------
</TABLE>
35
<PAGE>
OCTOBER 31, 1995
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
5. UNREALIZED APPRECIATION (DEPRECIATION) AND COST OF INVESTMENTS FOR FEDERAL
INCOME TAX PURPOSES
At October 31, 1995, the composition of unrealized appreciation
(depreciation) of investment securities and the cost of investments for Federal
income tax purposes were as follows:
<TABLE>
<CAPTION>
APPRECIATION (DEPRECIATION) NET TAX COST
------------ -------------- ----------- ------------
<S> <C> <C> <C> <C>
Quest for Value $72,832,935 $ (782,009) $72,050,926 $258,831,045
Opportunity 107,623,664 (8,230,134) 99,393,530 542,282,713
Small Capitalization 13,114,205 (4,646,081) 8,468,124 141,830,483
Growth and Income 3,674,355 (1,106,543) 2,567,812 43,607,284
U.S. Government 852,086 (2,085,345) (1,233,259) 115,524,803
Investment Quality 4,461,416 (402,788) 4,058,628 56,937,821
</TABLE>
6. AUTHORIZED FUND SHARES AND PAR VALUE PER SHARE
<TABLE>
<CAPTION>
QUEST SMALL GROWTH U.S. INVESTMENT
FOR VALUE OPPORTUNITY CAPITALIZATION AND INCOME GOVERNMENT QUALITY
---------- ----------- -------------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Authorized fund shares 35,000,000 unlimited unlimited unlimited unlimited unlimited
Par value per share $1.00 $.01 $.01 $.01 $.01 $.01
</TABLE>
7. DIVIDENDS AND DISTRIBUTIONS
The following tables summarize the per share dividends and distributions
made for the two years ended October 31, 1995:
<TABLE>
<CAPTION>
QUEST FOR SMALL
VALUE OPPORTUNITY CAPITALIZATION
-------------- -------------- --------------
YEAR ENDED YEAR ENDED YEAR ENDED
OCTOBER 31, OCTOBER 31, OCTOBER 31,
-------------- -------------- --------------
1995 1994 1995 1994 1995 1994
------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
NET INVESTMENT INCOME:
Class A.......................... $ 0.083 $ 0.040 $ 0.117 $ 0.326 -- --
Class B.......................... 0.074 0.031 0.117 0.313 -- --
Class C.......................... 0.081 0.033 0.117 0.312 -- --
NET REALIZED GAINS:
Class A.......................... $ 0.828 $ 0.469 $ 0.614 $ 0.219 $ 0.415 $ 1.331
Class B.......................... 0.828 0.469 0.614 0.219 0.415 1.331
Class C.......................... 0.828 0.469 0.614 0.219 0.415 1.331
</TABLE>
<TABLE>
<CAPTION>
GROWTH AND U.S. INVESTMENT
INCOME GOVERNMENT QUALITY
-------------- -------------- --------------
YEAR ENDED YEAR ENDED YEAR ENDED
OCTOBER 31, OCTOBER 31, OCTOBER 31,
-------------- -------------- --------------
1995 1994 1995 1994 1995 1994
------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
NET INVESTMENT INCOME:
Class A.......................... $ 0.289 $ 0.319 $ 0.639 $ 0.593 $ 0.707 $ 0.680
Class B.......................... 0.242 0.265 0.562 0.510 0.646 0.609
Class C.......................... 0.209 0.261 0.549 0.509 0.643 0.608
NET REALIZED GAINS:
Class A.......................... $ 0.422 $ 1.669 -- $ 0.213 -- $ 0.069
Class B.......................... 0.422 1.669 -- 0.213 -- 0.069
Class C.......................... 0.422 1.669 -- 0.213 -- 0.069
TAX RETURN OF CAPITAL:
Class A.......................... -- -- $ 0.013 -- -- --
Class B.......................... -- -- 0.013 -- -- --
Class C.......................... -- -- 0.013 -- -- --
</TABLE>
36
<PAGE>
- --------------------------------------------------------------------------------
8. FINANCIAL INSTRUMENTS AND ASSOCIATED RISKS
During the year ended October 31, 1995, U.S. Government wrote covered
options and Small Capitalization and Investment Quality entered into futures
contracts in order to hedge their existing portfolio securities against
fluctuations in value. Written options and futures contracts involve elements of
market risk in excess of the amounts reflected in the fund's Statements of
Assets and Liabilities. A fund, as a writer of an option, has no control over
whether the option is exercised. The underlying security may be sold and, as a
result, a fund bears the market risk of an unfavorable change in the price of
the security underlying the written option. For futures contracts, the contract
amount reflects the extent of a fund's exposure to off balance sheet risk.
Written options and futures contracts also have elements of credit risk; i.e.
the risk that the counterparty may not perform. If the option or futures
contracts are traded through a regulated exchange, the counterparty risk is
generally eliminated since the exchange interposes itself into the transaction.
If, however, the option or futures contracts are traded in the over-the-counter
market, counterparty risk can exist.
9. NET CAPITAL LOSS CARRYOVERS
For the fiscal year ended October 31, 1995, Growth and Income will utilize
$188,067 of net capital loss carryovers. Growth and Income has net capital loss
carryovers of $233,749 of which $177,811 and $55,938 will be available, to the
extent provided by regulations, to offset future net capital gains realized
through the fiscal years ending 1996 and 2000, respectively. However, due to the
acquisition of the Unified Income Fund and the Unified Mutual Shares Fund in
1992, the loss carryovers are further limited by IRC Section 382 to $188,067
annually. As a result, Growth and Income had $370,083 of net capital loss
carryover expire on October 31, 1995 which is no longer available for future
periods. In addition, U.S. Government, at October 31, 1995, had a net capital
loss carryover of $8,145,977 available, to the extent provided by regulations,
to offset future net capital gains realized before the end of fiscal year 2003.
Also at October 31, 1995, Investment Quality had a net capital loss carryover of
$1,854,362 of which $952,880 and $901,482 will be available to offset future net
capital gains realized through the fiscal years ending 2002 and 2003,
respectively. To the extent that the capital loss carryovers are used to offset
future net capital gains, it is probable that the gains so offset will not be
distributed to shareholders.
10. SUBSEQUENT EVENTS
(a) On November 22, 1995, OCC Distributors (previously Quest for Value
Distributors), OpCap Advisors (previously Quest for Value Advisors) and their
parent Oppenheimer Capital consummated a transaction with Oppenheimer Management
Corporation ("OMC") which resulted in the sale to OMC of certain mutual fund
assets of OCC Distributors and OpCap Advisors including the transfer of the
management agreements and other contracts relating to certain Quest for Value
Funds and the use of the name "Quest for Value". As part of the transaction,
certain former Quest for Value Funds, including the Quest for Value Fund and the
Opportunity Fund, the Small Capitalization Fund, the Growth and Income Fund and
the Officers Fund, portfolios of the Quest for Value Family of Funds, have
entered into an investment advisory agreement with OMC and OMC has entered into
a sub-advisory agreement with OpCap Advisors with respect to each of such funds.
Pursuant to the transaction, the U.S. Government Income Fund, the Investment
Quality Income Fund, the National Tax-Exempt Fund, the California Tax-Exempt
Fund and the New York Tax-Exempt Fund were merged, as part of a tax-free
reorganization, into the Oppenheimer U.S. Government Trust, the Oppenheimer Bond
Fund, the Oppenheimer Tax-Free Bond Fund, the Oppenheimer California Tax-Exempt
Fund and the Oppenheimer New York Tax-Exempt Fund, respectively.
(b) On November 22, 1995, U.S. Government and Investment Quality paid the
following per share net investment income dividends to shareholders of record on
the close of business November 22, 1995:
<TABLE>
<CAPTION>
CLASS CLASS CLASS
A B C
------ ------ ------
<S> <C> <C> <C>
U.S. Government $0.0352 $0.0302 $0.0298
Investment Quality 0.0384 0.0345 0.0343
</TABLE>
37
<PAGE>
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS (FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
INCOME FROM
INVESTMENT OPERATIONS DIVIDENDS AND DISTRIBUTIONS
---------------------------------- ----------------------------------
Net
Realized Distributions
and Dividends to
Unrealized to Shareholders
Net Asset Net Gain Total Shareholders from Net Total
Value, Investment (Loss) from from Net Realized Dividends
Beginning Income on Investment Investment Gain on and
of Period (Loss)* Investments Operations Income Investments Distributions
<S> <C> <C> <C> <C> <C> <C> <C>
Quest for Value Fund, Inc.
Class A,
YEAR ENDED OCTOBER 31,
1995 $ 12.59 $ 0.12 $ 2.71 $ 2.83 ($ 0.08) ($ 0.83) ($ 0.91)
1994 12.51 0.09 0.50 0.59 (0.04) (0.47) (0.51)
1993 11.71 0.05 1.34 1.39 (0.05) (0.54) (0.59)
1992 10.61 0.04 1.77 1.81 (0.07) (0.64) (0.71)
1991 7.84 0.09 2.84 2.93 (0.16) -- (0.16)
Class B,
YEAR ENDED OCTOBER 31,
1995 12.53 0.05 2.69 2.74 (0.07) (0.83) (0.90)
1994 12.51 0.02 0.50 0.52 (0.03) (0.47) (0.50)
SEPTEMBER 2, 1993 (4)
TO OCTOBER 31, 1993 12.66(3) (0.01) (0.14) (0.15) -- -- --
Class C,
YEAR ENDED OCTOBER 31,
1995 12.52 0.04 2.70 2.74 (0.08) (0.83) (0.91)
1994 12.50 0.01 0.51 0.52 (0.03) (0.47) (0.50)
SEPTEMBER 2, 1993 (4)
TO OCTOBER 31, 1993 12.66(3) (0.01) (0.15) (0.16) -- -- --
<CAPTION>
RATIOS
-----------------------------------
Ratio of
Net Ratio of
Operating Net
Net Net Expenses Investment
Asset Assets to Income
Value, End of Average (Loss) Portfolio
End of Total Period Net to Average Turnover
Period Return** (000's) Assets Net Assets Rate
<S> <C> <C> <C> <C> <C> <C>
Quest for Value Fund, Inc.
Class A,
YEAR ENDED OCTOBER 31,
1995 $14.51 24.74% $282,615 1.68%(1) 0.90%(1) 36%
1994 12.59 5.01% 238,085 1.71% 0.72% 49%
1993 12.51 12.27% 245,320 1.75% 0.40% 27%
1992 11.71 18.45% 142,939 1.75% 0.53% 41%
1991 10.61 37.94% 79,914 1.83% 1.06% 48%
Class B,
YEAR ENDED OCTOBER 31,
1995 14.37 24.08% 38,557 2.21%(1) 0.36%(1) 36%
1994 12.53 4.43% 14,373 2.24% 0.14% 49%
SEPTEMBER 2, 1993 (4)
TO OCTOBER 31, 1993 12.51 (1.19%) 2,015 2.27%(5) (1.19%)(5) 27%
Class C,
YEAR ENDED OCTOBER 31,
1995 14.35 24.10% 10,140 2.26%(1) 0.31%(1) 36%
1994 12.52 4.45% 3,581 2.28% 0.09% 49%
SEPTEMBER 2, 1993 (4)
TO OCTOBER 31, 1993 12.50 (1.26%) 221 2.27%(5) (0.90%)(5) 27%
</TABLE>
(1) AVERAGE NET ASSETS FOR THE YEAR ENDED OCTOBER 31, 1995, FOR CLASSES A, B,
AND C WERE $257,239,913, $25,392,617 AND $6,711,023, RESPECTIVELY.
Opportunity Fund
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C>
Class A,
YEAR ENDED OCTOBER 31,
1995 $ 19.69 $ 0.23 $ 5.40 $ 5.63 ($ 0.12) ($ 0.61) ($ 0.73)
1994 18.71 0.18 1.35 1.53 (0.33) (0.22) (0.55)
1993 16.73 0.35 2.02 2.37 (0.07) (0.32) (0.39)
1992 14.29 0.09 2.93 3.02 (0.03) (0.55) (0.58)
1991 9.74 0.03 4.78 4.81 (0.23) (0.03) (0.26)
Class B,
YEAR ENDED OCTOBER 31,
1995 19.59 0.11 5.36 5.47 (0.12) (0.61) (0.73)
1994 18.70 0.08 1.34 1.42 (0.31) (0.22) (0.53)
SEPTEMBER 2, 1993 (4)
TO OCTOBER 31, 1993 18.73(3) 0.02 (0.05) (0.03) -- -- --
Class C,
YEAR ENDED OCTOBER 31,
1995 19.58 0.08 5.38 5.46 (0.12) (0.61) (0.73)
1994 18.70 0.08 1.33 1.41 (0.31) (0.22) (0.53)
SEPTEMBER 2, 1993 (4)
TO OCTOBER 31, 1993 18.73(3) 0.02 (0.05) (0.03) -- -- --
<CAPTION>
Class A,
<S> <C> <C> <C> <C> <C> <C>
YEAR ENDED OCTOBER 31,
1995 $24.59 29.88% $367,240 1.69%(1) 1.02%(1) 21%
1994 19.69 8.41% 163,340 1.78% 0.96% 42%
1993 18.71 14.34% 127,225 1.83% 2.69% 24%
1992 16.73 21.93% 40,563 2.27% 0.72% 32%
1991 14.29 50.44% 8,446 2.35%(2) 0.30%(2) 88%
Class B,
YEAR ENDED OCTOBER 31,
1995 24.33 29.19% 217,663 2.21%(1) 0.48%(1) 21%
1994 19.59 7.84% 43,317 2.34% 0.43% 42%
SEPTEMBER 2, 1993 (4)
TO OCTOBER 31, 1993 18.70 (0.16%) 2,115 2.52%(5) 1.32%(5) 24%
Class C,
YEAR ENDED OCTOBER 31,
1995 24.31 29.16% 49,608 2.31%(1) 0.37%(1) 21%
1994 19.58 8.06% 7,289 2.35% 0.43% 42%
SEPTEMBER 2, 1993 (4)
TO OCTOBER 31, 1993 18.70 (0.16%) 313 2.52%(5) 1.13%(5) 24%
</TABLE>
(1) AVERAGE NET ASSETS FOR THE YEAR ENDED OCTOBER 31, 1995, FOR CLASSES A, B,
AND C WERE $251,625,672, $116,522,609 AND $24,167,608, RESPECTIVELY.
(2) DURING THE PERIOD NOTED ABOVE, THE ADVISER VOLUNTARILY WAIVED ITS FEE AND
ASSUMED A PORTION OF THE OPERATING EXPENSES. IF SUCH WAIVER AND ASSUMPTION
HAD NOT BEEN IN EFFECT, THE RATIO OF NET OPERATING EXPENSES TO AVERAGE NET
ASSETS AND THE RATIO OF NET INVESTMENT INCOME (LOSS) TO AVERAGE NET ASSETS
WOULD HAVE BEEN 3.33% AND (0.68%), RESPECTIVELY, FOR THE YEAR ENDED OCTOBER
31, 1991.
- ----------------------------------
(3) OFFERING PRICE.
(4) INITIAL OFFERING OF CLASS B AND CLASS C SHARES.
(5) ANNUALIZED.
* BASED ON AVERAGE SHARES OUTSTANDING FOR THE PERIOD.
** ASSUMES REINVESTMENT OF ALL DIVIDENDS AND DISTRIBUTIONS, BUT DOES NOT
REFLECT DEDUCTIONS FOR SALES CHARGES. AGGREGATE (NOT ANNUALIZED) TOTAL
RETURN IS SHOWN FOR ANY PERIOD SHORTER THAN ONE YEAR.
38
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INCOME FROM
INVESTMENT OPERATIONS DIVIDENDS AND DISTRIBUTIONS
---------------------------------- ----------------------------------
Net
Realized Distributions
and Dividends to
Unrealized to Shareholders
Net Asset Net Gain Total Shareholders from Net Total
Value, Investment (Loss) from from Net Realized Dividends
Beginning Income on Investment Investment Gain on and
of Period (Loss)* Investments Operations Income Investments Distributions
<S> <C> <C> <C> <C> <C> <C> <C>
Small Capitalization Fund
Class A,
YEAR ENDED OCTOBER 31,
1995 $ 16.33 $ 0.11 $ 1.29 $ 1.40 $ -- ($ 0.42) ($ 0.42)
1994 17.68 (0.03) 0.01 (0.02) -- (1.33) (1.33)
1993 14.60 (0.04) 4.26 4.22 -- (1.14) (1.14)
1992 13.52 -- 1.50 1.50 -- (0.42) (0.42)
1991 8.80 (0.05) 4.85 4.80 (0.08) -- (0.08)
Class B,
YEAR ENDED OCTOBER 31,
1995 16.24 0.02 1.27 1.29 -- (0.42) (0.42)
1994 17.66 (0.11) 0.02 (0.09) -- (1.33) (1.33)
SEPTEMBER 2, 1993 (4)
TO OCTOBER 31, 1993 17.19(3) (0.02) 0.49 0.47 -- -- --
Class C,
YEAR ENDED OCTOBER 31,
1995 16.23 0.01 1.29 1.30 -- (0.42) (0.42)
1994 17.67 (0.13) 0.02 (0.11) -- (1.33) (1.33)
SEPTEMBER 2, 1993 (4)
TO OCTOBER 31, 1993 17.19(3) (0.02) 0.50 0.48 -- -- --
<CAPTION>
RATIOS
-----------------------------------
Ratio of
Net Ratio of
Operating Net
Net Net Expenses Investment
Asset Assets to Income
Value, End of Average (Loss) Portfolio
End of Total Period Net to Average Turnover
Period Return** (000's) Assets Net Assets Rate
<S> <C> <C> <C> <C> <C> <C>
Small Capitalization Fund
Class A,
YEAR ENDED OCTOBER 31,
1995 $17.31 8.82% $116,307 1.80%(1) 0.67%(1) 76%
1994 16.33 0.04% 120,102 1.88% (0.14%) 67%
1993 17.68 30.21% 104,898 1.89% (0.36%) 74%
1992 14.60 11.60% 39,693 2.11% (0.04%) 95%
1991 13.52 55.01% 20,686 2.25%(2) (0.41%)(2) 103%
Class B,
YEAR ENDED OCTOBER 31,
1995 17.11 8.17% 23,440 2.37%(1) 0.09%(1) 76%
1994 16.24 (0.39%) 16,144 2.48% (0.70%) 67%
SEPTEMBER 2, 1993 (4)
TO OCTOBER 31, 1993 17.66 2.73% 1,754 2.57%(5) (1.15%)(5) 74%
Class C,
YEAR ENDED OCTOBER 31,
1995 17.11 8.24% 9,068 2.38%(1) 0.08%(1) 76%
1994 16.23 (0.51%) 3,344 2.59% (0.81%) 67%
SEPTEMBER 2, 1993 (4)
TO OCTOBER 31, 1993 17.67 2.79% 235 2.57%(5) (1.20%)(5) 74%
</TABLE>
(1) AVERAGE NET ASSETS FOR THE YEAR ENDED OCTOBER 31, 1995, FOR CLASSES A, B,
AND C WERE $119,440,010, $20,105,476 AND $6,113,900, RESPECTIVELY.
(2) DURING THE PERIOD NOTED ABOVE, THE ADVISER VOLUNTARILY WAIVED ITS FEE AND
ASSUMED A PORTION OF THE OPERATING EXPENSES. IF SUCH WAIVER AND ASSUMPTION
HAD NOT BEEN IN EFFECT, THE RATIO OF NET OPERATING EXPENSES TO AVERAGE NET
ASSETS AND THE RATIO OF NET INVESTMENT INCOME (LOSS) TO AVERAGE NET ASSETS
WOULD HAVE BEEN 3.27% AND (1.43%), RESPECTIVELY, FOR THE YEAR ENDED OCTOBER
31, 1991.
Growth and Income Fund
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C>
Class A,
YEAR ENDED OCTOBER 31,
1995 $ 10.09 $ 0.27 $ 1.27 $ 1.54 ($ 0.29) ($ 0.42) ($ 0.71)
1994 11.24 0.32 0.55 0.87 (0.32) (1.70) (2.02)
1993 10.80 0.30 0.73 1.03 (0.26) (0.33) (0.59)
NOVEMBER 4, 1991 (6)
TO OCTOBER 31, 1992 10.00(3) 0.28 0.80 1.08 (0.28) -- (0.28)
Class B,
YEAR ENDED OCTOBER 31,
1995 10.07 0.19 1.28 1.47 (0.24) (0.42) (0.66)
1994 11.23 0.25 0.56 0.81 (0.27) (1.70) (1.97)
SEPTEMBER 2, 1993 (4)
TO OCTOBER 31, 1993 11.21(3) 0.04 0.05 0.09 (0.07) -- (0.07)
Class C,
YEAR ENDED OCTOBER 31,
1995 10.07 0.15 1.30 1.45 (0.21) (0.42) (0.63)
1994 11.23 0.24 0.56 0.80 (0.26) (1.70) (1.96)
SEPTEMBER 2, 1993 (4)
TO OCTOBER 31, 1993 11.21(3) 0.04 0.05 0.09 (0.07) -- (0.07)
<CAPTION>
Class A,
<S> <C> <C> <C> <C> <C> <C>
YEAR ENDED OCTOBER 31,
1995 $10.92 16.35% $37,082 1.99%(1,2) 2.60%(1,2) 130%
1994 10.09 8.64% 30,576 1.86%(2) 3.16%(2) 113%
1993 11.24 9.93% 28,466 1.90%(2) 2.66%(2) 192%
NOVEMBER 4, 1991 (6)
TO OCTOBER 31, 1992 10.80 10.84% 8,057 2.23%(2,5) 2.73%(2,5) 77%
Class B,
YEAR ENDED OCTOBER 31,
1995 10.88 15.65% 7,623 2.59%(1,2) 1.71%(1,2) 130%
1994 10.07 7.96% 2,928 2.47%(2) 2.53%(2) 113%
SEPTEMBER 2, 1993 (4)
TO OCTOBER 31, 1993 11.23 0.81% 319 2.49%(2,5) 1.83%(2,5) 192%
Class C,
YEAR ENDED OCTOBER 31,
1995 10.89 15.38% 1,828 2.88%(1,2) 1.39%(1,2) 130%
1994 10.07 7.91% 455 2.62%(2) 2.39%(2) 113%
SEPTEMBER 2, 1993 (4)
TO OCTOBER 31, 1993 11.23 0.81% 102 2.49%(2,5) 2.18%(2,5) 192%
</TABLE>
(1) AVERAGE NET ASSETS FOR THE YEAR ENDED OCTOBER 31, 1995 FOR CLASSES A, B, AND
C WERE $33,396,923, $4,845,598 AND $967,910, RESPECTIVELY.
(2) DURING THE PERIODS PRESENTED ABOVE, THE ADVISER VOLUNTARILY WAIVED A PORTION
OF ITS FEES. IF SUCH WAIVERS HAD NOT BEEN IN EFFECT, THE RATIOS OF NET
OPERATING EXPENSES TO AVERAGE NET ASSETS AND THE RATIOS OF NET INVESTMENT
INCOME TO AVERAGE NET ASSETS FOR CLASS A WOULD HAVE BEEN 2.02% AND 2.57%,
RESPECTIVELY, FOR THE YEAR ENDED OCOTBER 31, 1995, 2.32% AND 2.70%,
RESPECTIVELY, FOR THE YEAR ENDED OCTOBER 31, 1994, 2.18% AND 2.38%,
RESPECTIVELY, FOR THE YEAR ENDED OCTOBER 31, 1993 AND 2.98% AND 1.98%,
ANNUALIZED, RESPECTIVELY, FOR THE PERIOD NOVEMBER 4, 1991 (COMMENCEMENT OF
OPERATIONS) TO OCTOBER 31, 1992. THE RATIOS OF NET OPERATING EXPENSES TO
AVERAGE NET ASSETS AND THE RATIOS OF NET INVESTMENT INCOME TO AVERAGE NET
ASSETS WOULD HAVE BEEN 2.57% AND 1.73%, RESPECTIVELY, FOR CLASS B AND 2.84%
AND 1.43%, RESPECTIVELY, FOR CLASS C, FOR THE YEAR ENDED OCTOBER 31, 1995,
2.93% AND 2.07%, RESPECTIVELY, FOR CLASS B AND 3.10% AND 1.91%,
RESPECTIVELY, FOR CLASS C, FOR THE YEAR ENDED OCTOBER 31, 1994 AND 2.88% AND
1.44%, ANNUALIZED, RESPECTIVELY, FOR CLASS B AND 2.87% AND 1.80%,
ANNUALIZED, RESPECTIVELY, FOR CLASS C, FOR THE PERIOD SEPTEMBER 2, 1993
(INITIAL OFFERING) TO OCTOBER 31, 1993.
- ----------------------------------
(3) OFFERING PRICE.
(4) INITIAL OFFERING OF CLASS B AND CLASS C SHARES.
(5) ANNUALIZED.
(6) COMMENCEMENT OF OPERATIONS.
* BASED ON AVERAGE SHARES OUTSTANDING FOR THE PERIOD.
** ASSUMES REINVESTMENT OF ALL DIVIDENDS AND DISTRIBUTIONS, BUT DOES NOT
REFLECT DEDUCTIONS FOR SALES CHARGES. AGGREGATE (NOT ANNUALIZED) TOTAL
RETURN IS SHOWN FOR ANY PERIOD SHORTER THAN ONE YEAR.
39
<PAGE>
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS (FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
(CONTINUED)
<TABLE>
<CAPTION>
INCOME FROM
INVESTMENT OPERATIONS DIVIDENDS AND DISTRIBUTIONS
---------------------------------- ----------------------------------
Net
Realized Distributions
and Dividends to
Unrealized to Shareholders
Net Asset Net Gain Total Shareholders from Net Tax
Value, Investment (Loss) from from Net Realized return
Beginning Income on Investment Investment Gain on of
of Period (Loss) Investments Operations Income Investments Capital
<S> <C> <C> <C> <C> <C> <C> <C>
U.S. Government Income Fund
Class A,
YEAR ENDED OCTOBER 31,
1995 $ 10.79 $ 0.64 $ 0.49 $ 1.13 ($ 0.64) $ -- ($ 0.01)
1994 12.08 0.59 (1.08) (0.49) (0.59) (0.21) --
1993 11.92 0.65 0.35 1.00 (0.68) (0.16) --
1992 11.80 0.74 0.18 0.92 (0.74) (0.06) --
1991 11.35 0.85 0.61 1.46 (0.86) (0.15) --
Class B,
YEAR ENDED OCTOBER 31,
1995 10.79 0.56 0.49 1.05 (0.56) -- (0.01)
1994 12.08 0.51 (1.08) (0.57) (0.51) (0.21) --
SEPTEMBER 2, 1993 (4)
TO OCTOBER 31, 1993 12.13(3) 0.08 (0.04) 0.04 (0.08) (0.01) --
Class C,
YEAR ENDED OCTOBER 31,
1995 10.79 0.55 0.49 1.04 (0.55) -- (0.01)
1994 12.08 0.51 (1.08) (0.57) (0.51) (0.21) --
SEPTEMBER 2, 1993 (4)
TO OCTOBER 31, 1993 12.13(3) 0.08 (0.04) 0.04 (0.08) (0.01) --
<CAPTION>
RATIOS
-----------------------------------
Ratio of
Net Ratio of
Operating Net
Net Net Expenses Investment
Asset Assets to Income
Total Value, End of Average (Loss) Portfolio
Dividends and End of Total Period Net to Average Turnover
Distributions Period Return* (000's) Assets Net Assets Rate
<S> <C> <C> <C> <C> <C> <C> <C>
U.S. Government Income Fund
Class A,
YEAR ENDED OCTOBER 31,
1995 ($0.65) $11.27 10.78% $102,718 1.26%(1) 5.81%(1) 245%
1994 (0.80) 10.79 (4.15%) 123,257 1.20%(2) 5.19%(2) 126%
1993 (0.84) 12.08 8.55% 189,091 1.15%(2) 5.33%(2) 315%
1992 (0.80) 11.92 7.98% 151,197 1.15%(2) 6.26%(2) 207%
1991 (1.01) 11.80 13.40% 82,400 1.15%(2) 7.24%(2) 309%
Class B,
YEAR ENDED OCTOBER 31,
1995 (0.57) 11.27 10.01% 9,641 1.94%(1) 5.04%(1) 245%
1994 (0.72) 10.79 (4.84%) 6,813 1.92%(2) 4.53%(2) 126%
SEPTEMBER 2, 1993 (4)
TO OCTOBER 31, 1993 (0.09) 12.08 0.29% 1,286 1.85%(2,5) 3.07%(2,5) 315%
Class C,
YEAR ENDED OCTOBER 31,
1995 (0.56) 11.27 9.89% 2,883 2.06%(1) 4.91%(1) 245%
1994 (0.72) 10.79 (4.84%) 1,224 1.94%(2) 4.57%(2) 126%
SEPTEMBER 2, 1993 (4)
TO OCTOBER 31, 1993 (0.09) 12.08 0.34% 141 1.85%(2,5) 3.89%(2,5) 315%
</TABLE>
(1) AVERAGE NET ASSETS FOR THE YEAR ENDED OCTOBER 31, 1995, FOR CLASSES A, B,
AND C WERE $114,946,501, $9,210,406 AND $1,823,599, RESPECTIVELY.
(2) DURING THE PERIODS NOTED ABOVE, THE ADVISER VOLUNTARILY WAIVED A PORTION OF
ITS FEES. IF SUCH WAIVERS HAD NOT BEEN IN EFFECT, THE RATIOS OF NET
OPERATING EXPENSES TO AVERAGE NET ASSETS AND THE RATIOS OF NET INVESTMENT
INCOME TO AVERAGE NET ASSETS FOR CLASS A WOULD HAVE BEEN 1.23% AND 5.16%,
RESPECTIVELY, FOR THE YEAR ENDED OCTOBER 31, 1994, 1.20% AND 5.28%,
RESPECTIVELY, FOR THE YEAR ENDED OCTOBER 31, 1993, 1.17% AND 6.24%,
RESPECTIVELY, FOR THE YEAR ENDED OCTOBER 31, 1992, AND 1.46% AND 6.93%,
RESPECTIVELY, FOR THE YEAR ENDED OCTOBER 31, 1991. THE RATIOS OF NET
OPERATING EXPENSES TO AVERAGE NET ASSETS AND THE RATIOS OF NET INVESTMENT
INCOME TO AVERAGE NET ASSETS WOULD HAVE BEEN 1.93% AND 4.52%, RESPECTIVELY,
FOR CLASS B AND 1.95% AND 4.56%, RESPECTIVELY, FOR CLASS C, FOR THE YEAR
ENDED OCTOBER 31, 1994 AND 1.96% AND 2.96%, ANNUALIZED, RESEPCTIVELY, FOR
CLASS B AND 1.96% AND 3.78%, ANNUALIZED, RESPECTIVELY, FOR CLASS C, FOR THE
PERIOD SEPTEMBER 2, 1993 (INITIAL OFFERING) TO OCTOBER 31, 1993.
Investment Quality Income Fund
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C>
Class A,
YEAR ENDED OCTOBER 31,
1995 $ 9.67 $ 0.71 $ 1.21 $ 1.92 ($ 0.71) $ -- $ --
1994 11.49 0.68 (1.75) (1.07) (0.68) (0.07) --
1993 10.36 0.68 1.19 1.87 (0.68) (0.06) --
1992 10.06 0.80 0.30 1.10 (0.80) -- --
DECEMBER 18, 1990 (6)
TO OCTOBER 31, 1991 10.00(3) 0.71 0.06 0.77 (0.71) -- --
Class B,
YEAR ENDED OCTOBER 31,
1995 9.67 0.65 1.21 1.86 (0.65) -- --
1994 11.49 0.61 (1.75) (1.14) (0.61) (0.07) --
SEPTEMBER 2, 1993 (4)
TO OCTOBER 31, 1993 11.52(3) 0.08 (0.03) 0.05 (0.08) -- --
Class C,
YEAR ENDED OCTOBER 31,
1995 9.67 0.64 1.21 1.85 (0.64) -- --
1994 11.49 0.61 (1.75) (1.14) (0.61) (0.07) --
SEPTEMBER 2, 1993 (4)
TO OCTOBER 31, 1993 11.52(3) 0.09 (0.03) 0.06 (0.09) -- --
<CAPTION>
Class A,
<S> <C> <C> <C> <C> <C> <C> <C>
YEAR ENDED OCTOBER 31,
1995 ($0.71) $10.88 20.49% $ 45,078 1.44%(1,2) 6.90%(1,2) 8%
1994 (0.75) 9.67 (9.61%) 46,922 1.29%(2) 6.47%(2) 33%
1993 (0.74) 11.49 18.64% 61,288 1.20%(2) 6.07%(2) 12%
1992 (0.80) 10.36 11.21% 29,701 0.95%(2) 7.62%(2) 18%
DECEMBER 18, 1990 (6)
TO OCTOBER 31, 1991 (0.71) 10.06 8.11% 17,235 0.82%(2,5) 8.25%(2,5) 19%
Class B,
YEAR ENDED OCTOBER 31,
1995 (0.65) 10.88 19.78% 13,134 2.03%(1,2) 6.15%(1,2) 8%
1994 (0.68) 9.67 (10.22%) 6,605 1.92%(2) 5.85%(2) 33%
SEPTEMBER 2, 1993 (4)
TO OCTOBER 31, 1993 (0.08) 11.49 0.45% 1,468 1.84%(2,5) 3.68%(2,5) 12%
Class C,
YEAR ENDED OCTOBER 31,
1995 (0.64) 10.88 19.72% 3,977 2.08%(1,2) 6.18%(1,2) 8%
1994 (0.68) 9.67 (10.23%) 2,583 1.90%(2) 6.01%(2) 33%
SEPTEMBER 2, 1993 (4)
TO OCTOBER 31, 1993 (0.09) 11.49 0.55% 101 1.84%(2,5) 4.83%(2,5) 12%
</TABLE>
(1) AVERAGE NET ASSETS FOR THE YEAR ENDED OCTOBER 31, 1995, FOR CLASSES A, B,
AND C WERE $45,868,837, $9,544,915 AND $3,229,501, RESPECTIVELY.
(2) DURING THE PERIODS PRESENTED ABOVE, THE ADVISER VOLUNTARILY WAIVED ALL OR A
PORTION OF ITS FEES AND ASSUMED A PORTION OF ITS OPERATING EXPENSES. IF SUCH
WAIVERS AND ASSUMPTIONS HAD NOT BEEN IN EFFECT, THE RATIOS OF NET OPERATING
EXPENSES TO AVERAGE NET ASSETS AND THE RATIOS OF NET INVESTMENT INCOME TO
AVERAGE NET ASSETS FOR CLASS A WOULD HAVE BEEN 1.52% AND 6.82%,
RESPECTIVELY, FOR THE YEAR ENDED OCTOBER 31, 1995, 1.59% AND 6.71%,
RESPECTIVELY, FOR THE YEAR ENDED OCTOBER 31, 1994, 1.50% AND 5.77%,
RESPECTIVELY, FOR THE YEAR ENDED OCTOBER 31, 1993, 1.72% AND 6.85%,
RESPECTIVELY, FOR THE YEAR ENDED OCTOBER 31, 1992, AND 2.11% AND 6.96%,
ANNUALIZED, RESPECTIVELY, FOR THE PERIOD DECEMBER 18, 1990 (COMMENCEMENT OF
OPERATIONS) TO OCTOBER 31, 1991. THE RATIOS OF NET OPERATING EXPENSES TO
AVERAGE NET ASSETS AND THE RATIOS OF NET INVESTMENT INCOME TO AVERAGE NET
AASETS WOULD HAVE BEEN 2.09% AND 6.09%, RESPECTIVELY, FOR CLASS B AND 2.15%
AND 6.11%, RESPECTIVELY FOR CLASS C, FOR THE YEAR ENDED OCTOBER 31, 1995,
2.23% AND 5.54%, RESPECTIVELY, FOR CLASS B AND 2.21% AND 5.70%,
RESPECTIVELY, FOR CLASS C, FOR THE YEAR ENDED OCTOBER 31, 1994 AND 2.07% AND
3.45%, ANNUALIZED, RESPECTIVELY, FOR CLASS B AND 2.06% AND 4.61%,
ANNUALIZED, RESPECTIVELY, FOR CLASS C FOR THE PERIOD SEPTEMBER 2, 1993
(INITIAL OFFERING) TO OCTOBER 31, 1993.
- ----------------------------------
(3) OFFERING PRICE.
(4) INITIAL OFFERING OF CLASS B AND CLASS C SHARES.
(5) ANNUALIZED.
(6) COMMENCEMENT OF OPERATIONS.
* ASSUMES REINVESTMENT OF ALL DIVIDENDS AND DISTRIBUTIONS, BUT DOES NOT
REFLECT DEDUCTIONS FOR SALES CHARGES. AGGREGATE (NOT ANNUALIZED) TOTAL
RETURN IS SHOWN FOR ANY PERIOD SHORTER THAN ONE YEAR.
<PAGE>
<PAGE>
Appendix A
DESCRIPTION OF RATINGS
Bond Ratings
- -- Moody's Investors Service, Inc.
Aaa: Bonds which are rated "Aaa" are judged to be the best quality
and to carry the smallest degree of investment risk. Interest
payments are protected by a large or by an exceptionally stable
margin and principal is secure. While the various protective
elements are likely to change, the changes that can be expected are
most unlikely to impair the fundamentally strong position of such
issues.
Aa: Bonds which are rated "Aa" are judged to be of high quality by
all standards. Together with the "Aaa" group, they comprise what
are generally known as "high-grade" bonds. They are rated lower
than the best bonds because margins of protection may not be as
large as with "Aaa" securities or fluctuation of protective
elements may be of greater amplitude or there may be other elements
present which make the long-term risks appear somewhat larger than
those of "Aaa" securities.
A: Bonds which are rated "A" possess many favorable investment
attributes and are to be considered as upper-medium grade
obligations. Factors giving security to principal and interest are
considered adequate but elements may be present which suggest a
susceptibility to impairment sometime in the future.
Baa: Bonds which are rated "Baa" are considered medium grade
obligations, i.e., they are neither highly protected nor poorly
secured. Interest payments and principal security appear adequate
for the present but certain protective elements may be lacking or
may be characteristically unreliable over any great length of time.
Such bonds lack outstanding investment characteristics and have
speculative characteristics as well.
Ba: Bonds which are rated "Ba" are judged to have speculative
elements; their future cannot be considered well-assured. Often
the protection of interest and principal payments may be very
moderate and not well safeguarded during both good and bad times
over the future. Uncertainty of position characterizes bonds in
this class.
B: Bonds which are rated "B" generally lack characteristics of
desirable investment. Assurance of interest and principal payments
or of maintenance of other terms of the contract over any long
period of time may be small.
Caa: Bonds which are rated "Caa" are of poor standing and may be in
default or there may be present elements of danger with respect to
principal or interest.
Ca: Bonds which are rated "Ca" represent obligations which are
speculative in a high degree and are often in default or have other
marked shortcomings.
C: Bonds which are rated "C" can be regarded as having extremely
poor prospects of ever retaining any real investment standing.
- -- Standard & Poor's Corporation
AAA: "AAA" is the highest rating assigned to a debt obligation and
indicates an extremely strong capacity to pay principal and
interest.
AA: Bonds rated "AA" also qualify as high quality debt obligations.
Capacity to pay principal and interest is very strong, and in the
majority of instances they differ from "AAA" issues only in small
degree.
A: Bonds rated "A" have a strong capacity to pay principal and
interest, although they are somewhat more susceptible to adverse
effects of change in circumstances and economic conditions.
BBB: Bonds rated "BBB" are regarded as having an adequate capacity
to pay principal and interest. Whereas they normally exhibit
protection parameters, adverse economic conditions or changing
circumstances are more likely to lead to a weakened capacity to pay
principal and interest for bonds in this category than for bonds in
the "A" category.
- -- Fitch Investors Service, Inc.
AAA Bonds considered to be investment grade and of the highest
credit quality. The obligor has an exceptionally strong ability to
pay interest and repay principal, which is unlikely to be affected
by reasonably foreseeable events.
AA Bonds considered to be investment grade and of very high credit
quality. The obligor's ability to pay interest and repay principal
is very strong, although not quite as strong as bonds rated "AAA."
Because bonds rated in the "AAA" and "AA" categories are not
significantly vulnerable to foreseeable future developments, short-
term debt of these issuers is generally rated "F-1+."
A Bonds considered to be investment grade and of high credit
quality. The obligor's ability to pay interest and repay principal
is considered to be strong, but may be more vulnerable to adverse
changes in economic conditions and circumstances than bonds with
higher ratings.
BBB Bonds considered to be investment grade and of satisfactory
credit quality. The obligor's ability to pay interest and repay
principal is considered to be adequate. Adverse changes in
economic conditions and circumstances, however, are more likely to
have adverse impact on these bonds, and therefore impair timely
payment. The likelihood that the ratings of these bonds will fall
below investment grade is higher than for bonds with higher
ratings.
Plus (+) Minus (-) Plus and minus signs are used with a rating
symbol to indicate the relative position of a credit within the
rating category. Plus and minus signs, however, are not used in
the "DDD," "DD," or "D" categories.
Short-Term Debt Ratings.
- -- Moody's Investors Service, Inc. The following rating
designations for commercial paper (defined by Moody's as promissory
obligations not having original maturity in excess of nine months),
are judged by Moody's to be investment grade, and indicate the
relative repayment capacity of rated issuers:
Prime-1: Superior capacity for repayment. Capacity will normally
be evidenced by the following characteristics: (a) leveling market
positions in well-established industries; (b) high rates of return
on funds employed; (c) conservative capitalization structures with
moderate reliance on debt and ample asset protection; (d) broad
margins in earning coverage of fixed financial charges and high
internal cash generation; and (e) well established access to a
range of financial markets and assured sources of alternate
liquidity.
Prime-2: Strong capacity for repayment. This will normally be
evidenced by many of the characteristics cited above but to a
lesser degree. Earnings trends and coverage ratios, while sound,
will be more subject to variation. Capitalization characteristics,
while still appropriate, may be more affected by external
conditions. Ample alternate liquidity is maintained.
Moody's ratings for state and municipal short-term obligations are
designated "Moody's Investment Grade" ("MIG"). Short-term notes
which have demand features may also be designated as "VMIG". These
rating categories are as follows:
MIG1/VMIG1: Best quality. There is present strong protection by
established cash flows, superior liquidity support or demonstrated
broadbased access to the market for refinancing.
MIG2/VMIG2: High quality. Margins of protection are ample
although not so large as in the preceding group.
- -- Standard & Poor's Corporation ("S&P"): The following ratings by
S&P for commercial paper (defined by S&P as debt having an original
maturity of no more than 365 days) assess the likelihood of
payment:
A-1: Strong capacity for timely payment. Those issues determined
to possess extremely strong safety characteristics are denoted with
a plus sign (+) designation.
A-2: Satisfactory capacity for timely payment. However, the
relative degree of safety is not as high as for issues designated
"A-1".
S&P's ratings for Municipal Notes due in three years or less are:
SP-1: Very strong or strong capacity to pay principal and
interest. Those issues determined to possess overwhelming safety
characteristics will be given a plus (+) designation.
SP-2: Satisfactory capacity to pay principal and interest.
S&P assigns "dual ratings" to all municipal debt issues that have
a demand or double feature as part of their provisions. The first
rating addresses the likelihood of repayment of principal and
interest as due, and the second rating addresses only the demand
feature. With short-term demand debt, S&P's note rating symbols
are used with the commercial paper symbols (for example, "SP-1+/A-
1+").
- -- Fitch Investors Service, Inc. Fitch assigns the following
short-term ratings to debt obligations that are payable on demand
or have original maturities of generally up to three years,
including commercial paper, certificates of deposit, medium-term
notes, and municipal and investment notes:
F-1+: Exceptionally strong credit quality; the strongest degree of
assurance for timely payment.
F-1: Very strong credit quality; assurance of timely payment is
only slightly less in degree than issues rated "F-1+".
F-2: Good credit quality; satisfactory degree of assurance for
timely payment, but the margin of safety is not as great as for
issues assigned "F-1+" or "F-1" ratings.
- -- Duff & Phelps, Inc. The following ratings are for commercial
paper (defined by Duff & Phelps as obligations with maturities,
when issued, of under one year), asset-backed commercial paper, and
certificates of deposit (the ratings cover all obligations of the
institution with maturities, when issued, of under one year,
including bankers' acceptance and letters of credit):
Duff 1+: Highest certainty of timely payment. Short-term
liquidity, including internal operating factors and/or access to
alternative sources of funds, is outstanding, and safety is just
below risk-free U.S. Treasury short-term obligations.
Duff 1: Very high certainty of timely payment. Liquidity factors
are excellent and supported by good fundamental protection factors.
Risk factors are minor.
Duff 1-: High certainty of timely payment. Liquidity factors are
strong and supported by good fundamental protection factors. Risk
factors are very small.
Duff 2: Good certainty of timely payment. Liquidity factors and
company fundamentals are sound. Although ongoing funding needs may
enlarge total financing requirements, access to capital markets is
good. Risk factors are small.
- -- IBCA Limited or its affiliate IBCA Inc. Short-term ratings,
including commercial paper (with maturities up to 12 months), are
as follows:
A1+: Obligations supported by the highest capacity for timely
repayment.
A1: Obligations supported by a very strong capacity for timely
repayment.
A2: Obligations supported by a strong capacity for timely
repayment, although such capacity may be susceptible to adverse
changes in business, economic, or financial conditions.
- -- Thomson BankWatch, Inc. The following short-term ratings apply
to commercial paper, certificates of deposit, unsecured notes, and
other securities having a maturity of one year or less.
TBW-1: The highest category; indicates the degree of safety
regarding timely repayment of principal and interest is very
strong.
TBW-2: The second highest rating category; while the degree of
safety regarding timely repayment of principal and interest is
strong, the relative degree of safety is not as high as for issues
rated "TBW-1".
<PAGE>
<PAGE>
Appendix B
Corporate Industry Classifications
Aerospace/Defense
Air Transportation
Auto Parts Distribution
Automotive
Bank Holding Companies
Banks
Beverages
Broadcasting
Broker-Dealers
Building Materials
Cable Television
Chemicals
Commercial Finance
Computer Hardware
Computer Software
Conglomerates
Consumer Finance
Containers
Convenience Stores
Department Stores
Diversified Financial
Diversified Media
Drug Stores
Drug Wholesalers
Durable Household Goods
Education
Electric Utilities
Electrical Equipment
Electronics
Energy Services & Producers
Entertainment/Film
Environmental
Food
Gas Utilities
Gold
Health Care/Drugs
Health Care/Supplies & Services
Homebuilders/Real Estate
Hotel/Gaming
Industrial Services
Insurance
Leasing & Factoring
Leisure
Manufacturing
Metals/Mining
Nondurable Household Goods
Oil - Integrated
Paper
Publishing/Printing
Railroads
Restaurants
Savings & Loans
Shipping
Special Purpose Financial
Specialty Retailing
Steel
Supermarkets
Telecommunications - Technology
Telephone - Utility
Textile/Apparel
Tobacco
Toys
Trucking<PAGE>
B-1
<PAGE>
Oppenheimer Quest Opportunity Value Fund
Two World Trade Center
New York, New York 10048-0203
1-800-525-7048
Investment Adviser
OppenheimerFunds, Inc.
Two World Trade Center
New York, New York 10048-0203
Sub-Advisor
OpCap Advisors
One World Financial Center
New York, New York 10281
Distributor
OppenheimerFunds Distributor, Inc.
Two World Trade Center
New York, New York 10048-0203
Transfer Agent
OppenheimerFunds Services
P.O. Box 5270
Denver, Colorado 80217
1-800-525-7048
Custodian of Portfolio Securities
State Street Bank and Trust Company
P.O. Box 8505
Boston, Massachusetts 02266-8505
Independent Accountants
Price Waterhouse LLP
950 Seventeenth Street
Denver, Colorado 80202
Legal Counsel
Gordon Altman Butowsky Weitzen
Shalov & Wein
114 West 47th Street
New York, New York 10036
prosp\q236sai
<PAGE>
OPPENHEIMER QUEST SMALL CAP VALUE FUND
Supplement dated February 15, 1996 to the
Prospectus dated February 15, 1996
The Prospectus is changed as follows:
In addition to paying dealers the regular commission for (1)
sales of Class A shares stated in the sales charge table in "Buying
Class A Shares," (2) sales of Class B shares described in
"Distribution and Service Plan for Class B Shares," or (3) sales of
Class C shares described in "Distribution and Service Plan for
Class C Shares," the Distributor will pay additional commission to
each participating broker, dealer and financial institution that
has a sales agreement with the Distributor (these are referred to
as "participating firms") for Class A, B and C shares of the Fund
sold in "qualifying transactions" (the "promotion"). The
additional commission will be .75% of the offering price of shares
of the Fund sold by a registered representative or sales
representative of a participating firm during the promotion. If
the additional commission is paid on the sale of Class A shares of
$1 million or more and those shares are redeemed within 13 months
from the end of the month in which they were purchased, the
participating firm will be required to return the additional
commission.
"Qualifying transactions" are sales of Class A, Class B and/or
Class C shares of any one or more of the Oppenheimer funds (except
money market funds and tax-exempt funds) for (1) new Individual
Retirement Accounts ("IRAs"), using the OppenheimerFunds prototype
IRA agreement, including rollover IRAs, SEP IRAs and SAR-SEP IRAs,
where the IRA is established and the purchase payment is received
during the period from January 1, 1996 through April 15, 1996 (the
"promotion period") or, (2) IRAs using the A.G. Edwards & Sons,
Inc. prototype IRA agreement, including rollover IRAs, SEP IRAs and
SAR-SEP IRAs, where the purchase payment is received during the
promotion period. "Qualifying transactions" also include
purchases of shares of Oppenheimer funds for existing
OppenheimerFunds or A.G. Edwards & Sons, Inc. prototype IRAs,
rollover IRAs, SEP IRAs and SAR-SEP IRAs effected through a
rollover from an investor, or through a direct rollover or trustee-
to-trustee transfer from another retirement plan trustee, of IRA
assets or other employee benefit plan assets from an account or
investment other than an account or investment in the Oppenheimer
funds. To qualify, the payment for the shares purchased for a
rollover to an OppenheimerFunds prototype IRA or for a rollover,
direct rollover or trustee-to-trustee transfer to an A.G. Edwards
& Sons, Inc. prototype IRA must be received during the promotion
period, or the acceptance of a direct rollover or trustee-to-
trustee transfer to an OppenheimerFunds prototype IRA must be
acknowledged by the trustee of the OppenheimerFunds prototype IRA
during the promotion period. "Qualifying transactions" do not
include (1) purchases of Class A shares intended but not yet made
under a Letter of Intent, and (2) purchases of Class A, Class B
and/or Class C shares with the redemption proceeds from an existing
OppenheimerFunds account.
February 15, 1996 PS0251.003
<PAGE>
OPPENHEIMER
QUEST SMALL CAP
VALUE FUND
Prospectus dated February 15, 1996
Oppenheimer Quest Small Cap Value Fund (the "Fund"), a series of
Oppenheimer Quest for Value Funds, is a mutual fund that seeks
capital appreciation through investments in a diversified portfolio
which under normal conditions will have at least 65% of its assets
invested in equity securities of companies with market
capitalizations under $1 billion. In an uncertain investment
environment, the Fund may stress defensive investment methods.
Please refer to "Investment Policies and Strategies" for more
information about the types of securities in which the Fund
invests, its investment methods and the risks of investing in the
Fund.
This Prospectus explains concisely what you should know before
investing in the Fund. Please read this Prospectus carefully and
keep it for future reference. You can find more detailed
information about the Fund in the February 15, 1996, Statement of
Additional Information. For a free copy, call OppenheimerFunds
Services, the Fund's Transfer Agent, at 1-800-525-7048, or write to
the Transfer Agent at the address on the back cover. The Statement
of Additional Information has been filed with the Securities and
Exchange Commission and is incorporated into this Prospectus by
reference (which means that it is legally part of this Prospectus).
(OppenheimerFunds logo)
Shares of the Fund are not deposits or obligations of any bank, are
not guaranteed by any bank, and are not insured by the F.D.I.C. or
any other agency, and involve investment risks, including the
possible loss of the principal amount invested.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION 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.
<PAGE>
Contents
A B O U T T H E F U N D
3 Expenses
5 A Brief Overview of the Fund
7 Financial Highlights
10 Investment Objective and Policies
16 How the Fund is Managed
18 Performance of the Fund
A B O U T Y O U R A C C O U N T
22 How to Buy Shares
Class A Shares
Class B Shares
Class C Shares
34 Special Investor Services
AccountLink
Automatic Withdrawal and Exchange Plans
Reinvestment Privilege
Retirement Plans
36 How to Sell Shares
By Mail
By Telephone
38 How to Exchange Shares
39 Shareholder Account Rules and Policies
41 Dividends, Capital Gains and Taxes
A-1 Appendix A: Special Sales Charge Arrangements for
Shareholders of the Fund who were Shareholders of the Former
Quest for Value Funds
<PAGE>
<PAGE>
A B O U T T H E F U N D
Expenses
The Fund pays a variety of expenses directly for management of its
assets, administration, distribution of its shares and other
services, and those expenses are subtracted from the Fund's assets
to calculate the Fund's net asset value per share. All shareholders
therefore pay those expenses indirectly. Shareholders pay other
expenses directly, such as sales charges and account transaction
charges. The following tables are provided to help you understand
your direct expenses of investing in the Fund and your share of the
Fund's business operating expenses that you might expect to bear
indirectly. The numbers below are based on the Fund's expenses
during its last fiscal year ended October 31, 1995.
-- Shareholder Transaction Expenses are charges you pay when
you buy or sell shares of the Fund. Please refer to "About Your
Account" from pages 22 through 43 for an explanation of how and
when these charges apply.
<TABLE>
<CAPTION>
Class A Class B Class C
Shares Shares Shares
- ----------------------------------------------------------------------
<S> <C> <C> <C>
Maximum Sales 5.75% None None
Charge on Purchases
(as a % of offering price)
- ----------------------------------------------------------------------
Sales Charge on None None None
Reinvested Dividends
- ----------------------------------------------------------------------
Deferred Sales Charge None(1) 5% in the first 1.0% if
(as a % of the lower of the year, declining shares are
original purchase price or to 1% in the redeemed
redemption proceeds) sixth year and within 12
eliminated months of
thereafter(2) purchase(2)
- ----------------------------------------------------------------------
Exchange Fee None None None
</TABLE>
(1)If you invest $1 million or more ($500,000 or more for purchases
by OppenheimerFunds prototype 401(k) plans), in Class A shares, you
may have to pay a sales charge of up to 1% if you sell your shares
within 18 calendar months from the end of the calendar month during
which you purchased those shares, depending upon when you purchased
such shares. See "How to Buy Shares - Buying Class A Shares,"
below. Class A shares of the Fund purchased without an initial
sales charge on or before November 24, 1995 will continue to be
subject to the applicable contingent deferred sales charge in
effect as of that date as set forth in the then-current prospectus
for such fund.
(2)See "How to Buy Shares - Buying Class B Shares" and "How to Buy
Shares - Buying Class C Shares," below, for more information on the
contingent deferred sales charges.
-- Annual Fund Operating Expenses are paid out of the Fund's
assets and represent the Fund's expenses of operating its business.
For example, the Fund pays management fees to its investment
adviser, OppenheimerFunds, Inc.(which is referred to in this
Prospectus as the "Manager"). The rates of the Manager's fees are
set forth in "How the Fund is Managed," below. The Fund has other
regular expenses for services, such as transfer agent fees,
custodial fees paid to the bank that holds its portfolio
securities, audit fees and legal expenses. Those expenses are
detailed in the Fund's Financial Statements included in the
Statement of Additional Information.
The numbers in the chart below are projections of the Fund's
business expenses based on the Fund's expenses in its fiscal year
ended October 31, 1995. These amounts are shown as a percentage of
the average net assets of each class of the Fund's shares for that
year. The "12b-1 Distribution Plan Fees" for Class A shares are
the service plan fees (the maximum fee is 0.25% of average annual
net assets of that class), and a distribution fee of 0.25% of the
average annual net assets of that class. For Class B and Class C
shares, the "12b-1 Distribution Plan Fees" are the service plan
fees of 0.25% of average annual net assets of the class, and the
asset-based sales charge of 0.75% of the average annual net assets
of the class. These plans are described in greater detail in "How
to Buy Shares."
The actual expenses for each class of shares in future years
may be more or less than the numbers in the chart, depending on a
number of factors, including the actual value of the Fund's assets
represented by each class of shares.
Class A Class B Class C
Shares Shares Shares
- ------------------------------------------------------------
Management Fees 1.00% 1.00% 1.00%
- ------------------------------------------------------------
12b-1 Distribution
Plans Fees 0.50% 1.00% 1.00%
- ------------------------------------------------------------
Other Expenses 0.30% 0.37% 0.38%
- ------------------------------------------------------------
Total Fund
Operating Expenses 1.80% 2.37% 2.38%
-- Examples. To try to show the effect of these expenses on
an investment over time, we have created the hypothetical examples
shown below. Assume that you make a $1,000 investment in each class
of shares of the Fund, that the Fund's annual return is 5%, that
its operating expenses for each class are the ones shown in the
Annual Fund Operating Expenses chart above and that Class B shares
automatically convert into Class A shares six years after purchase.
If you were to redeem your shares at the end of each period shown
below, your investment would incur the following expenses by the
end of 1, 3, 5 and 10 years:
1 year 3 years 5 years 10 years(1)
- -------------------------------------------------------------
Class A Shares $75 $111 $149 $257
Class B Shares $74 $104 $147 $244
Class C Shares $34 $74 $127 $272
If you did not redeem your investment, it would incur the
following expenses:
1 year 3 years 5 years 10 years(1)
- ------------------------------------------------------------
Class A Shares $75 $111 $149 $257
Class B Shares $24 $74 $127 $244
Class C Shares $24 $74 $127 $272
(1)The Class B expenses in years 7 through 10 are based on the Class
A expenses shown above, because the Fund automatically converts
Class B shares into Class A shares after 6 years. Because of the
effect of the asset-based sales charge and the contingent deferred
sales charge on Class B and Class C shares, long-term Class B and
Class C shareholders could pay the economic equivalent of more
than the maximum front-end sales charge allowed under applicable
regulations. For Class B shareholders, the automatic conversion of
Class B shares to Class A shares is designed to minimize the
likelihood that this will occur. Please refer to "How to Buy
Shares - Buying Class B Shares" for more information.
These examples show the effect of expenses on an investment,
but are not meant to state or predict actual or expected costs or
investment returns of the Fund, all of which will vary.
A Brief Overview of the Fund
Some of the important facts about the Fund are summarized
below, with references to the section of this Prospectus where more
complete information can be found. You should carefully read the
entire Prospectus before making a decision about investing in the
Fund. Keep the Prospectus for reference after you invest,
particularly for information about your account, such as how to
sell or exchange shares.
-- What is the Fund's Investment Objective? The Fund's
investment objective is to seek capital appreciation through
investments in a diversified portfolio which under normal
conditions will have at least 65% of its assets invested in equity
securities of companies with market capitalizations under $1
billion.
-- What does the Fund Invest In? The Fund emphasizes
investments in equity securities of companies the Fund believes
have favorable stock prices in relation to their book values and/or
sales, and in equity securities of companies the Fund believes have
limited operating leverage and/or financial leverage. The Fund may
assume a temporary defensive position when appropriate to do so by
investing in money market instruments, as defined on page 10 under
"Investment Policies and Strategies." These investments and
investment methods are more fully explained in "Investment
Objective and Policies," starting on page 10.
-- Who Manages the Fund? The Fund's investment adviser (the
"Manager") is OppenheimerFunds, Inc. The Manager (including a
subsidiary) manages investment company portfolios having over $40
billion in assets. The Manager handles the day-to-day business of
the Fund. The Fund also has a sub-adviser, OpCap Advisors (the
"Sub-Adviser") which is responsible for choosing the Fund's
investments. The Manager is paid an advisory fee by the Fund. The
Manager, not the Fund, pays the Sub-Adviser. The Fund has two
portfolio managers, Ms. Jenny Beth Jones and Mr. Louis Goldstein,
who are employed by the Sub-Adviser and are primarily responsible
for the selection of the Fund's securities. The Fund's Board of
Trustees, elected by shareholders, oversees the investment adviser
and the portfolio managers. Please refer to "How the Fund is
Managed" starting on page 16 for more information about the
Manager, the Sub-Adviser and their fees.
-- How Risky is the Fund? All investments carry risks to some
degree. The Fund's investments in stocks and bonds are subject to
changes in their value from a number of factors such as changes in
general bond and stock market movements, or the change in value of
particular stocks or bonds because of an event affecting the
issuer. Changes in interest rates can affect stock and bond
prices. These changes affect the value of the Fund's investments
and its price per share. Investments in small cap issuers involve
certain risks. See "Stock Investment Risks" on page 10. The
Fund's investments in foreign securities involve additional risks
not associated with investments in domestic securities, including
risks associated with changes in currency rates.
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 may disproportionately affect their
market price. This will tend to make the price of smaller
capitalization companies rise more in response to buying demand and
fall more in response to selling pressure than is the case with
larger capitalization companies. While the Manager tries to reduce
risks by diversifying investments, by carefully researching
securities before they are purchased for the Fund's portfolio, and
in some cases by using hedging techniques, there is no guarantee of
success in achieving the Fund's investment objective and your
shares may be worth more or less than their original cost when you
redeem them. Please refer to "Investment Objective and Policies"
starting on page 10 for a more complete discussion of the Fund's
investment risks.
-- How Can I Buy Shares? You can buy shares through your
dealer or financial institution, or you can purchase shares
directly through OppenheimerFunds Distributor, Inc. (the
"Distributor") by completing an Application or by using an
Automatic Investment Plan under AccountLink. Please refer to "How
to Buy Shares" on page 22 for more details.
-- Will I Pay a Sales Charge to Buy Shares? The Fund offers
the individual investor three classes of shares. Each class has
the same investment portfolio but different expenses. Class A
shares are offered with a front-end sales charge, starting at
5.75%, and reduced for larger purchases. Class B and Class C
shares are offered without a front-end sales charge, but may be
subject to a contingent deferred sales charge if redeemed within
6 years or 12 months of purchase, respectively. There is also an
annual asset-based sales charge on Class B and Class C shares.
Please review "How to Buy Shares" starting on page 22 for more
details, including a discussion about which class may be
appropriate for you.
-- How Can I Sell My Shares? Shares can be redeemed by mail
or by telephone call to the Transfer Agent on any business day, or
through your dealer. Please refer to "How to Sell Shares" on page
36. The Fund also offers exchange privileges to other Oppenheimer
funds, described in "How to Exchange Shares" on page 38.
-- How Has the Fund Performed? The Fund measures its
performance by quoting its average annual total returns and
cumulative total returns, which measure historical performance.
Those returns can be compared to the returns (over similar periods)
of other funds. Of course, other funds may have different
objectives, investments, and levels of risk. The Fund's
performance can also be compared to broad-based market indices,
which we have done on pages 20 and 21. Please remember that past
performance does not guarantee future results.
Financial Highlights
The table on the following pages presents selected financial
information about the Fund, including per share data, expense
ratios and other data based on the Fund's average net assets. This
information has been audited by Price Waterhouse LLP, the Fund's
independent accountants, whose report on the Fund's financial
statements for the fiscal year ended October 31, 1995, is included
in the Statement of Additional Information.
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS CLASS A
---------------------------------------------------------------------------------------
PERIOD
ENDED
YEAR ENDED OCTOBER 31, OCT. 31,
1995 1994 1993 1992 1991 1990 1989(2)
==========================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING DATA:
Net asset value,
beginning of period $16.33 $17.68 $14.60 $13.52 $8.80 $10.91 $10.00(3)
- --------------------------------------------------------------------------------------------------------------------------
Income (loss) from
investment operations:
Net investment income
(loss)(4) .11 (.03) (.04) -- (.05) .07 .08
Net realized and unrealized
gain (loss) on investments 1.29 .01 4.26 1.50 4.85 (2.04) .83
-------- ------ ------ ------ ------ ------- ------
Total income (loss) from
investment operations 1.40 (.02) 4.22 1.50 4.80 (1.97) .91
- --------------------------------------------------------------------------------------------------------------------------
Dividends and distributions
to shareholders:
Dividends from net
investment income -- -- -- -- (.08) (.08) --
Distributions from
net realized
gain on investments (.42) (1.33) (1.14) (.42) -- (.06) --
-------- ------ ------ ------ ------ ------- ------
Total dividends
and distributions
to shareholders (.42) (1.33) (1.14) (.42) (.08) (.14) --
- --------------------------------------------------------------------------------------------------------------------------
Net asset value,
end of period $17.31 $16.33 $17.68 $14.60 $13.52 $8.80 $10.91
======== ======== ======== ======== ======== ======== ========
==========================================================================================================================
TOTAL RETURN, AT
NET ASSET VALUE(5) 8.82% .04% 30.21% 11.60% 55.01% (18.33)% 9.10%
==========================================================================================================================
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of
period (in thousands) $116,307 $120,102 $104,898 $39,693 $20,686 $1,880 $2,085
- --------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets:
Net investment income (loss) .67%(6) (.14)% (.36)% (.04)% (.41)%(7) .71%(7) 1.34%(7,8)
Expenses 1.80%(6) 1.88% 1.89% 2.11% 2.25%(7) 2.00%(7) 1.74%(7,8)
- --------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate(9) 76.0% 67.0% 74.0% 95.0% 103.0% 18.0% 32.0%
</TABLE>
<TABLE>
FINANCIAL HIGHLIGHTS CLASS B CLASS C
--------------------------------- ---------------------------------
PERIOD PERIOD
ENDED ENDED
YEAR ENDED OCTOBER 31, OCT. 31, YEAR ENDED OCTOBER 31, OCT. 31,
1995 1994 1993(1) 1995 1994 1993(1)
==============================================================================================================
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING DATA:
Net asset value,
beginning of period $16.24 $17.66 $17.19(3) $16.23 $17.67 $17.19(3)
- --------------------------------------------------------------------------------------------------------------
Income (loss) from
investment operations:
Net investment income
(loss)(4) .02 (.11) (.02) .01 (.13) (.02)
Net realized and unrealized
gain (loss) on investments 1.27 .02 .49 1.29 .02 .50
------ ------ ------ ------ ------ ------
Total income (loss) from
investment operations 1.29 (.09) .47 1.30 (.11) (.48)
- --------------------------------------------------------------------------------------------------------------
Dividends and distributions
to shareholders:
Dividends from net
investment income -- -- -- -- -- --
Distributions from
net realized
gain on investments (.42) (1.33) -- (.42) (1.33) --
------ ------ ------ ------ ------ ------
Total dividends
and distributions
to shareholders (.42) (1.33) -- (.42) (1.33) --
- --------------------------------------------------------------------------------------------------------------
Net asset value,
end of period $17.11 $16.24 $17.66 $17.11 $16.23 $17.67
====== ====== ====== ====== ====== ======
==============================================================================================================
TOTAL RETURN, AT
NET ASSET VALUE(5) 8.17% (.39)% 2.73% 8.24% (.51)% 2.79%
==============================================================================================================
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of
period (in thousands) $23,440 $16,144 $1,754 $9,068 $3,344 $235
- -------------------------------------------------------------------------------------------------------------
Ratios to average net assets:
Net investment income (loss) .09%(6) (.70)% (1.15)%(8) .08%(6) (.81)% (1.20)%(8)
Expenses 2.37%(6) 2.48% 2.57%(8) 2.38%(6) 2.59% 2.57%(8)
- -------------------------------------------------------------------------------------------------------------
Portfolio turnover rate(9) 76.0% 67.0% 74.0% 76.0% 67.0% 74.0%
</TABLE>
1. Initial offering of Class B and Class C shares. For the period from
September 2, 1993 (inception of offering) to October 31, 1993.
2. For the period from January 1, 1989 (commencement of operations) to October
31, 1989.
3. Offering price.
4. Based on average shares outstanding for the period.
5. Assumes reinvestment of all dividends and distributions, but does not
reflect deductions for sales charges. Aggregate (not annualized) total
return is shown for any period shorter than one year.
6. Average net assets for the year ended October 31, 1995, for Classes A, B,
and C were $119,440,010, $20,105,476 and $6,113,900, respectively.
7. During the periods noted above, the former Adviser voluntarily waived all or
a portion of its fees and assumed some operating expenses of the Fund. Without
such waivers and assumptions, the ratios of net investment income (loss) to
average net assets and the ratios of expenses to average net assets would have
been, respectively: Class A shares--(1.43)% and 3.27% for the year ended
10/31/91, (3.11)% and 5.82% for the year ended 10/31/90 and (3.19)% and 6.27%
(annualized) for the period 1/1/89 (commencement of operations) to 10/31/89.
8. Annualized.
9. The lesser of purchases or sales of portfolio securities for a period,
divided by the monthly average of the market value of portfolio securities
owned during the period. Securities with a maturity or expiration date at the
time of acquisition of one year or less are excluded from the calculation.
Purchases and sales of investment securities (excluding short-term securities)
for the period ended October 31, 1995 were $92,530,292 and $99,613,323,
respectively.
<PAGE>
Investment Objective and Policies
Objective. The Fund seeks capital appreciation through investments
in a diversified portfolio which under normal conditions will have
at least 65% of its assets invested in equity securities of
companies with market capitalizations under $1 billion.
Investment Policies and Strategies. The Fund's investment approach
will attempt to identify securities of companies the Fund believes
have favorable stock prices in relation to their book values and/or
sales, and securities of companies which have limited operating
leverage and/or limited financial leverage. Operating leverage
generally refers to a company's sensitivity to changes in the
general economy. Financial leverage generally refers to a
company's ratio of debt to assets, or cost of debt service to
income.
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"). As a non-fundamental policy, the Fund may also
invest up to 5% of its total assets in "lower-grade" debt
securities. "Lower grade" debt securities (commonly known as "junk
bonds") are rated below investment grade, which means that have a
rating lower than "Baa" by Moody's Investors Service, Inc. or lower
than "BBB" by Standard & Poor's Corporation, or similar rating by
other rating organizations, or, if unrated, determined by the Sub-
Adviser to be of comparable quality to securities rated below
investment grade. The Fund does not intend to invest in debt
securities that are in default.
For temporary defensive purposes, the Fund may invest up to
100% of its assets in money market instruments. At any time that
the Fund invests in money market instruments for temporary
defensive purposes, to the extent of such investments, it is not
pursuing its investment objective.
-- Can the Fund's Investment Objective and Policies Change?
The Fund has an investment objective, which is described above, as
well as investment policies it follows to try to achieve its
objective. Additionally, the Fund uses certain investment
techniques and strategies in carrying out those policies. Except
as indicated, the investment objective and policies described above
are fundamental policies.
Fundamental policies are those that cannot be changed without
the approval of a "majority" of the Fund's outstanding voting
shares. The term "majority" is defined in the Investment Company
Act to be a particular percentage of outstanding voting shares (and
this term is explained in the Statement of Additional Information).
The Fund's Board of Trustees may change non-fundamental policies
without shareholder approval, although significant changes will be
described in amendments to this Prospectus.
-- Stock Investment Risks. Because the Fund may invest a
substantial portion of its assets in stocks, the value of the
Fund's portfolio will be affected by changes in the stock markets.
At times, the stock markets can be volatile, and stock prices can
change substantially. 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 generally less than that of
larger capitalization companies and thus may disproportionately
affect their market price, causing their price to rise more in
response to buying demand and fall more in response to selling
pressure than is the case with larger capitalization companies.
These market risks will affect the Fund's net asset values per
share, which will fluctuate as the values of the Fund's portfolio
securities change. Not all stock prices change uniformly or at the
same time, not all stock markets move in the same direction at the
same time, and other factors can affect a particular stock's prices
(for example, poor earnings reports by an issuer, loss of major
customers, major litigation against an issuer, and changes in
government regulations affecting an industry). Not all of these
factors can be predicted.
The Fund attempts to limit market risks by diversifying its
investments, that is, by not holding a substantial amount of the
stock of any one company and by not investing too great a
percentage of the Fund's assets in any one company. Because
changes in market prices can occur at any time, there is no
assurance that the Fund will achieve its investment objective, and
when you redeem your shares, they may be worth more or less than
what you paid for them.
-- Foreign Securities. The Fund may purchase foreign
securities that are listed on a domestic or foreign securities
exchange, traded in domestic or foreign over-the counter markets or
represented by American Depository Receipts. There is no limit to
the amount of such foreign securities the Fund may acquire. The
Fund may buy securities in any country, including emerging market
countries. The Fund presently intends that its purchases of
securities issued by emerging market countries or by companies
located in those countries, if any, will be limited to 5% of its
total assets. Foreign currency will be held by the Fund only in
connection with the purchase or sale of foreign securities.
Foreign securities have special risks. For example, foreign
issuers are not subject to the same accounting and disclosure
requirements that U.S. companies are subject to. The value of
foreign investments may be affected by changes in foreign currency
rates, exchange control regulations, expropriation or
nationalization of a company's assets, foreign taxes, delays in
settlement of transactions, changes in governmental economic or
monetary policy in the U.S. or abroad, or other political and
economic factors. Certain developing countries may have relatively
unstable governments, economies based on only a few industries that
are dependent upon international trade and reduced secondary market
liquidity. Foreign investment in certain emerging market countries
is restricted or controlled to varying degrees. In the past,
securities in emerging countries have experienced greater price
movement, both positive and negative, than securities of companies
located in developed countries. More information about the risks
and potential rewards of investing in foreign securities is
contained in the Statement of Additional Information.
-- Warrants and Rights. 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.
-- Portfolio Turnover. A change in the securities held by the
Fund is known as "portfolio turnover." The Fund may engage in
short-term trading to try to achieve its objective. It is
anticipated that the Fund's annual portfolio turnover rate will not
exceed 100%. The "Financial Highlights," above, show the Fund's
portfolio turnover rate during past fiscal years. High turnover
and short-term trading may cause the Fund to have relatively larger
commission expenses and transaction costs than funds that do not
engage in short-term trading. Additionally, high portfolio
turnover may affect the ability of the Fund to qualify, as a
"regulated investment company" under the Internal Revenue Code, for
tax deductions for dividends and capital gain distributions the
Fund pays to shareholders. The Fund qualified in its last fiscal
year and intends to do so in the coming year, although there is no
guarantee that it will qualify.
Other Investment Techniques and Strategies. The Fund may also use
the investment techniques and Strategies described below. These
techniques involve certain risks. The Statement of Additional
Information contains more information about these practices,
including limitations on their use that may help reduce some of the
risks.
-- Temporary Defensive Investments. In times of unstable
market or economic conditions, when the Sub-Adviser determines it
appropriate to do so to attempt to reduce fluctuations in the value
of the Fund's net assets, the Fund may assume a temporary defensive
position and invest an unlimited amount of assets in money market
instruments of the type identified on page __ under "Investment
Policies and Strategies."
-- When-Issued and Delayed Delivery Transactions. The Fund
may purchase securities on a "when-issued" basis, and may purchase
or sell such securities on a "delayed delivery" basis. These terms
refer to securities whose terms and indenture are available and for
which a market exists, but which are not available for immediate
delivery. The Fund does not intend to make such purchases for
speculative purposes. During the period between the purchase and
settlement, the underlying securities are subject to market
fluctuations and no interest accrues prior to delivery of the
securities.
-- Repurchase Agreements. The Fund may enter into repurchase
agreements. They are primarily used for cash liquidity purposes.
In a repurchase transaction, the Fund buys a security and
simultaneously sells it to the vendor for delivery at a future
date. Repurchase agreements must be fully collateralized. However,
if the vendor fails to pay the resale price on the delivery date,
the Fund may incur costs in disposing of the collateral and may
experience losses if there is any delay in its ability to do so.
There is no limit on the amount of the Fund's net assets that may
be subject to repurchase agreements of seven days or less.
Repurchase agreements with a maturity beyond seven days are subject
to the Fund's limitations on investments in illiquid and restricted
securities, discussed below.
-- Illiquid Securities. Under the policies established by the
Board of Trustees, the Manager determines the liquidity of the
Fund's investments. Investments may be illiquid because of the
absence of an active trading market, making it difficult to value
them or dispose of them promptly at an acceptable price. As a
fundamental policy, the Fund will not invest more than 10% of its
total assets in illiquid securities. Restricted securities are
considered illiquid securities for purposes of this restriction.
A restricted security is one that has a contractual restriction on
its resale or which cannot be sold publicly until it is registered
under the Securities Act of 1933. Certain restricted securities,
eligible for resale to qualified institutional purchasers, are not
subject to that limit.
-- Loans of Portfolio Securities. To attempt to increase its
total return, the Fund may lend its portfolio securities to certain
types of eligible borrowers approved by the Board of Trustees.
Each loan must be collateralized in accordance with applicable
regulatory requirements. After any loan, the value of the
securities loaned is not expected to exceed 10% of the Fund's total
assets. There are some risks in connection with securities
lending. The Fund might experience a delay in receiving additional
collateral to secure a loan or a delay in recovery of the loaned
securities.
-- Hedging. As described below, the Fund may purchase and
sell certain kinds of futures contracts, put and call options,
forward contracts, and options on securities, futures and broadly-
based stock indices. These are all referred to as "hedging
instruments." The Fund does not use hedging instruments for
speculative purposes, and has limits on the use of them, described
below. The hedging instruments the Fund may use are described
below and in greater detail in "Other Investment Techniques and
Strategies" in the Statement of Additional Information.
The Fund may buy and sell options, futures and forward
contracts for a number of purposes. It may do so to try to manage
its exposure to the possibility that the prices of its portfolio
securities may decline, or to establish a position in the
securities market as a temporary substitute for purchasing
individual securities. Some of these strategies, such as selling
futures, buying puts and writing covered calls, hedge the Fund's
portfolio against price fluctuations. Other hedging strategies,
such as buying futures and call options, tend to increase the
Fund's exposure to the securities market.
Forward contracts are used to try to manage foreign currency
risks on the Fund's foreign investments. Foreign currency options
are used to try to protect against declines in the dollar value of
foreign securities the Fund owns, or to protect against an increase
in the dollar cost of buying foreign securities. Writing covered
call options may also provide income to the Fund for liquidity
purposes or to raise cash to distribute to shareholders.
- Futures. The Fund may buy and sell futures contracts that
relate to broadly-based stock indices (these are referred to as
Stock Index Futures) or foreign currencies (these are called
Forward Contracts). 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 related option premiums would not exceed 5% of
the Fund's total assets.
- Put and Call Options. The Fund may buy and sell certain
kinds of put options (puts) and call options (calls). Calls the
Fund buys or sells must be listed on a securities or commodities
exchange, or quoted on the automated quotation system of NASDAQ, or
traded in the over-the-counter market. In the case of puts and
calls on a foreign currency, they must be traded on a securities or
commodities exchange or in the over-the-counter market, or must be
quoted by recognized dealers in those options.
The Fund may buy calls on securities, broadly-based stock
indices, or Stock Index Futures. The Fund may buy calls to
terminate its obligation on a call the Fund previously wrote.
The Fund may write (that is, sell) covered call options. Each
call the Fund writes must be "covered" while it is outstanding.
That means the Fund must own the investment on which the call was
written. The Fund may write calls on Futures contracts it owns,
but these calls must be covered by securities or other liquid
assets the Fund owns and segregated to enable it to satisfy its
obligations if the call is exercised. When the Fund writes a call,
it receives cash (called a premium). The call gives the buyer the
ability to buy the investment on which the call was written from
the Fund at the call price during the period in which the call may
be exercised. If the value of the investment does not rise above
the call price, it is likely that the call will lapse without being
exercised, while the Fund keeps the cash premium (and the
investment).
The Fund may purchase and sell put options. Buying a put on
an investment gives the Fund the right to sell the investment at a
set price to a seller of a put on that investment. The Fund can
buy only those puts that relate to securities the Fund owns,
broadly-based stock indices or Stock Index Futures. The Fund may
write puts on broadly-based stock indices or Stock Index Futures,
but only if those puts are covered by segregated liquid assets.
- Hedging instruments can be volatile investments and may
involve special risks. The use of hedging instruments requires
special skills and knowledge of investment techniques that are
different than what is required for normal portfolio management.
If the Manager uses a hedging instrument at the wrong time or
judges market conditions incorrectly, hedging strategies may reduce
the Fund's return. The Fund could also experience losses if the
prices of its futures and options positions were not correlated
with its other investments or if it could not close out a position
because of an illiquid market for the future or option.
Options trading involves the payment of premiums and has
special tax effects on the Fund. There are also special risks in
particular hedging strategies. If a covered call written by the
Fund is exercised on an investment that has increased in value, the
Fund will be required to sell the investment at the call price and
will not be able to realize any profit if the investment has
increased in value above the call price. In writing a put, there
is a risk that the Fund may be required to buy the underlying
security at a disadvantageous price. The use of forward contracts
may reduce the gain that would otherwise result from a change in
the relationship between the U.S. dollar and a foreign currency.
These risks are described in greater detail in the Statement of
Additional Information.
Other Investment Restrictions.
The Fund has certain investment restrictions that are
fundamental policies. Under these fundamental policies the Fund
cannot do any of the following:
- With respect to 75% of its total assets, invest more than 5%
of the value of its total assets in the securities of any one
issuer;
- Purchase more than 10% of any class of security of any
issuer (other than the U.S. Government or any of its agencies of
instrumentalities), with all outstanding debt securities and all
preferred stock of an issuer each being considered as one class;
- 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);
- Borrow money in excess of 10% of the value of the Fund's
total assets; the Fund may borrow only from banks and only as
temporary measure for extraordinary or emergency purposes and will
make no additional investments while such borrowings exceed 5% of
the Fund's total assets;
- Invest more than 10% 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 of
longer than seven days, securities subject to legal or contractual
restrictions and certain over-the-counter options; and
- Invest more than 5% of the Fund's total assets in securities
of issuers having a record, together with predecessors, of less
than three years continuous operation.
Notwithstanding the above restriction on illiquid securities,
the Fund may purchase securities which are not registered under the
Securities Act of 1933 (the "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,
provided that the Sub-Advisor, under guidelines established by the
Fund's Board of Trustees, determines that an adequate trading
market exists for that security.
The Fund has undertaken, in connection with the qualification
of its shares for sale in certain states, to limit investments in
restricted securities to 5% of its total assets excluding
restricted securities that may be resold to "qualified
institutional buyers". This undertaking will terminate if the Fund
ceases to qualify its shares for sale in those states, or if the
applicable state rules or regulations are amended.
All of the percentage restrictions described above and
elsewhere in this Prospectus and in the Statement of Additional
Information apply only at the time the Fund purchases a security,
and the Fund need not dispose of a security merely because the size
of the Fund's assets has changed or the security has increased in
value relative to the size of the Fund. There are other fundamental
policies discussed in the Statement of Additional Information.
How the Fund is Managed
Organization and History. The Fund is one of four portfolios of
Oppenheimer Quest For Value Funds, an open-end management
investment company organized as a Massachusetts business trust in
April, 1987. The Fund is an open-end, diversified management
investment company, with an unlimited number of authorized shares
of beneficial interest.
The Fund is governed by a Board of Trustees, which is
responsible under Massachusetts law for protecting the interests of
shareholders. The Trustees meet periodically throughout the year
to oversee the Fund's activities, review its performance, and
review the actions of the Manager. "Trustees and Officers of the
Fund" in the Statement of Additional Information names the Trustees
and provides more information about them and the officers of the
Fund. Although the Fund is not required by law to hold annual
meetings, it may hold shareholder meetings from time to time on
important matters, and shareholders have the right under certain
circumstances to call a meeting to remove a Trustee or to take
other action described in the Fund's Declaration of Trust.
The Board of Trustees has the power, without shareholder
approval, to divide unissued shares of the Fund into two or more
classes. The Board has done so, and the Fund currently has three
classes of shares, Class A, Class B and Class C. All classes
invest in the same investment portfolio. Each class has its own
dividends and distributions and pays certain expenses which may be
different for the different classes. Each class may have a
different net asset value. Each share has one vote at shareholder
meetings, with fractional shares voting proportionally on matters
submitted to the vote of shareholders. Only shares of a particular
class vote as a class on matters that affect that class alone.
Shares are freely transferrable.
The Manager. The Fund is managed by the Manager, OppenheimerFunds,
Inc., which supervises the Fund's investment program and handles
its day-to-day business. The Manager carries out its duties,
subject to the policies established by the Board of Trustees, under
an Investment Advisory Agreement with the Fund which states the
Manager's responsibilities. The Agreement sets forth the fees paid
by the Fund to the Manager and describes the expenses that the Fund
pays to conduct its business.
The Manager has operated as an investment adviser since 1959.
The Manager (including a subsidiary) currently manages investment
companies, including other Oppenheimer funds, with assets of more
than $40 billion as of December 31, 1995, and with more than 2.8
million shareholder accounts. The Manager is owned by Oppenheimer
Acquisition Corp., a holding company that is owned in part by
senior officers of the Manager and controlled by Massachusetts
Mutual Life Insurance Company.
The Sub-Adviser. The Manager has retained OpCap Advisors (the
"Sub-Adviser") to provide day-to-day portfolio management of the
Fund. OpCap 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 OpCap
Advisors. Oppenheimer Financial Corp., a holding company, holds a
33% interest in Oppenheimer Capital, a registered investment
advisor. 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.
Prior to November 22, 1995, OpCap Advisors was named Quest for
Value Advisors and was the investment adviser to the Fund.
Effective November 22, 1995, the Manager acquired the investment
advisory and other contracts and business relationships and certain
assets and liabilities of Quest for Value Advisors, Quest for Value
Distributors and Oppenheimer Capital relating to twelve Quest for
Value mutual funds, including the Fund. Pursuant to this
acquisition and Fund shareholder approval received on November 3,
1995, the Fund entered into the following agreements, effective
November 22, 1995: the Investment Advisory Agreement between the
Fund and the Manager, and the distribution and service plans and
agreements between the Fund and the Distributor. Further, the
Manager entered into a subadvisory agreement with the Sub-Adviser
for the benefit of the Fund. These agreements are described below.
-- Portfolio Managers. The portfolio managers of the Fund are
Ms. Jenny Beth Jones, Senior Vice President of Oppenheimer Capital,
and Mr. Louis Goldstein, Vice President of Oppenheimer Capital.
Ms. Jones has been a portfolio manager of the Fund since 1990, and
Mr. Goldstein has been a portfolio manager of the Fund since
January, 1995.
-- Fees and Expenses. Under the Investment Advisory
Agreement, the Fund pays the Manager an annual fee based on the
Fund's daily net assets, as follows: 1% of the first $400 million
of net assets, .90% of the next $400 million, and .85% of net
assets over $800 million. This management fee is higher than that
paid by most other investment companies. The Fund also reimburses
the Manager for bookkeeping and accounting services performed on
behalf of the Fund.
The Manager pays OpCap Advisors an annual fee based on the
average daily net assets of the Fund equal to 40% of the advisory
fee collected by the Manager based on the total net assets of the
Fund as of November 22, 1995 (the "Base Amount") plus 30% of the
investment advisory fee collected by the Manager based on the total
net assets of the Fund that exceed the Base Amount.
OpCap 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, OpCap
Advisors may consider their record of sales of shares of the Fund.
Further information about the Fund's brokerage policies and
practices is set forth in "Brokerage Policies of the Fund" in the
Statement of Additional Information.
Distributor. The Fund's shares are sold through dealers and
brokers that have a sales agreement with OppenheimerFunds
Distributor, Inc., a subsidiary of the Manager that acts as the
Distributor. The Distributor also distributes the shares of other
mutual funds managed by the Manager (the "Oppenheimer funds") and
is sub-distributor for funds managed by a subsidiary of the
Manager.
Transfer Agent and Shareholder Servicing Agent. The transfer agent
and shareholder servicing agent for the Fund is OppenheimerFunds
Services. 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 the 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 and
other accounts for which Unified Management Corporation is the
dealer of record.
Performance of the Fund
Explanation of Performance Terminology. The Fund uses the terms
"total return" and "average annual total return" to illustrate its
performance. The performance of each class of shares is shown
separately, because the performance of each class will usually be
different as a result of the different kinds of expenses each class
bears. These returns measure the performance of a hypothetical
investment in the Fund over various periods, and do not show the
performance of each shareholder's investment (which will vary if
dividends are received in cash or shares are sold or additional
shares are purchased). The Fund's performance information may help
you see how well your Fund has done over time and to compare it to
other funds or market indices, as we have done below.
It is important to understand that the Fund's total returns
represent past performance and should not be considered to be
predictions of future returns or performance. This performance
data is described below, but more detailed information about how
total returns are calculated is contained in the Statement of
Additional Information, which also contains information about other
ways to measure and compare the Fund's performance. The Fund's
investment performance will vary over time, depending on market
conditions, the composition of the portfolio, expenses and which
class of shares you purchase.
-- Total Returns. There are different types of total returns
used to measure the Fund's performance. Total return is the change
in value of a hypothetical investment in the Fund over a given
period, assuming that all dividends and capital gains distributions
are reinvested in additional shares. The cumulative total return
measures the change in value over the entire period (for example,
ten years). An average annual total return shows the average rate
of return for each year in a period that would produce the
cumulative total return over the entire period. However, average
annual total returns do not show the Fund's actual year-by-year
performance.
When total returns are quoted for Class A shares, they reflect
the payment of the current maximum initial sales charge. When
total returns are shown for Class B shares, they reflect the effect
of the contingent deferred sales charge that applies to the period
for which total return is shown. When total returns are shown for
a one-year period (or less) for Class C shares, they reflect the
effect of the contingent deferred sales charge. Total returns may
also be quoted "at net asset value," without considering the effect
of the sales charge, and those returns would be reduced if sales
charges were deducted.
How Has the Fund Performed? Below is a discussion of the Fund's
performance during its last fiscal year ended October 31, 1995,
followed by a graphical comparison of the Fund's performance to
appropriate broad-based market indices. Prior to November 22,
1995, the Fund was known as Quest for Value Small Capitalization
Fund, and the Sub-Adviser was the Fund's investment manager.
-- Management's Discussion of Performance. During the Fund's
fiscal year ended October 31, 1995, common stocks of smaller
companies generally increased in value, but at a less rapid rate
than larger capitalization issues. The Fund underperformed the
small-cap market for two main reasons: it was underweighted in
high-technology and financial service company stocks, the small-cap
market's strongest sectors during the period, and it held above-
average cash reserves through most of the year in a rising market.
The Sub-Adviser invests relatively conservatively in the small-cap
sector, seeking to preserve capital and achieve growth by
purchasing the shares of companies believed by the Sub-Adviser to
be undervalued with established operating histories, excellent
balance sheets and cash flow, and skilled, experienced management.
Therefore, in a rising market, the Fund may not perform as
dramatically as funds that invest in more speculative issues.
-- Comparing the Fund's Performance to the Market. The graphs
below show the performance of a hypothetical $10,000 investment in
each class of shares of the Fund held until October 31, 1995. In
the case of Class A shares, performance is measured from the
commencement of operations on January 3, 1989, and in the case of
Class B and Class C shares, from inception of those classes on
September 1, 1993.
The Fund's performance is compared to the performance of the
Russell 2000 Index. The Russell 2000 Index is an index of the 2000
smallest securities in the Russell 3000 Index with market values
ranging from $25 million to $275 million. These securities
represent approximately 7% of the Russell 3000 total market
capitalization.
Index performance reflects the reinvestment of dividends but
does not consider the effect of capital gains or transaction costs,
and none of the data in the graphs below shows the effect of taxes.
Moreover, index performance data does not reflect any assessment of
the risk of the investments included in the index. The Fund's
performance reflects the effect of Fund business and operating
expenses. While index comparisons may be useful to provide a
benchmark for the Fund's performance, it must be noted that the
Fund's investments are not limited to the securities in the index
shown.
Oppenheimer Quest Small Cap Value Fund
Comparison of Change in Value
of $10,000 Hypothetical Investments
in Oppenheimer Quest Small Cap Value Fund
and the Russell 2000 Index
[Graph]
Past Performance is not predictive of future performance.
Oppenheimer Quest Small Cap Value Fund
Average Annual Total Returns of the Fund at 10/31/95
- ----------------------------------------------------
Class A Shares(1)
- -----------------
1-Year 5-Year Life
------ ------ ----
2.56% 18.23% 11.15%
Class B Shares(2)
- -----------------
1-Year Life
------ ----
3.17% 3.49%
Class C Shares(3)
- -----------------
1-Year Life
------ ----
7.24% 4.81%
- ---------------------
Total returns and the ending account values in the graphs reflect
reinvestment of all dividends and capital gains distributions.
(1) The commencement of operations of the Fund (Class A shares) was
1/1/89. Class A returns are shown net of the current applicable
5.75% maximum initial sales charge.
(2) Class B shares of the Fund were first publicly offered on
9/01/93. Returns are shown net of the applicable 5% and 3%
contingent deferred sales charge, respectively, for the 1-year
period and life of the class. The ending account value in the
graph is net of the applicable 3% contingent deferred sales charge.
(3) Class C shares of the Fund were first publicly offered on
9/01/93. The 1-year return is shown net of the applicable 1%
contingent deferred sales charge.
About Your Account
How to Buy Shares
Classes of Shares. The Fund offers investors three different
classes of shares. The different classes of shares represent
investments in the same portfolio of securities but are subject to
different expenses and will likely have different share prices.
-- Class A Shares. If you buy Class A shares, you may pay an
initial sales charge on investments up to $1 million (up to
$500,000 for purchases by OppenheimerFunds prototype 401(k) plans).
If you purchase Class A shares as part of an investment of at least
$1 million ($500,000 for OppenheimerFunds prototype 401(k) plans)
in shares of one or more Oppenheimer funds or former Quest Funds,
you will not pay an initial sales charge, but if you sell any of
those shares within 18 months of buying them, you may pay a
contingent deferred sales charge in an amount that depends upon
when you bought such shares. The amount of that sales charge will
vary depending on the amount you invested. Class A shares of the
Fund purchased subject to a contingent deferred sales charge on or
prior to November 24, 1995 will be subject to a contingent deferred
sales charge at the applicable rate set forth in Appendix A to this
Prospectus. Sales charges are described in "Buying Class A Shares"
below.
-- Class B Shares. If you buy Class B shares, you pay no
sales charge at the time of purchase, but if you sell your shares
within six years you will normally pay a contingent deferred sales
charge that varies, depending on how long you have owned your
shares. It is described in "Buying Class B Shares" below.
-- Class C Shares. When you buy Class C shares, you pay no
sales charge at the time of purchase, but if you sell your shares
within 12 months of buying them, you will normally pay a contingent
deferred sales charge of 1%. It is described in "Buying Class C
Shares" below.
Which Class of Shares Should You Choose? Once you decide that the
Fund is an appropriate investment for you, the decision as to which
class of shares is better suited to your needs depends on a number
of factors which you should discuss with your financial advisor.
The Fund's operating costs that apply to a class of shares and the
effect of the different types of sales charges on your investment
will vary your investment results over time. The most important
factors are how much you plan to invest and how long you plan to
hold your investment. If your goals and objectives change over
time and you plan to purchase additional shares, you should re-
evaluate those factors to see if you should consider another class
of shares.
In the following discussion, to help provide you and your
financial advisor with a framework in which to choose a class, we
have made some assumptions using a hypothetical investment in the
Fund. We used the sales charge rates that apply to each class, and
considered the effect of the asset-based sales charges on Class B
and Class C expenses (which will affect your investment return).
For the sake of comparison, we have assumed that there is a 10%
rate of appreciation in the investment each year. Of course, the
actual performance of your investment cannot be predicted and will
vary, based on the Fund's actual investment returns and the
operating expenses borne by each class of shares, and which class
of shares you invest in.
The factors discussed below are not intended to be investment
advice or recommendations, because each investor's financial
considerations are different. The discussion below of the factors
to consider in purchasing a particular class of shares assumes that
you will purchase only one class of shares and not a combination of
shares of different classes.
-- How Long Do You Expect to Hold Your Investment? While
future financial needs cannot be predicted with certainty, knowing
how long you expect to hold your investment will assist you in
selecting the appropriate class of shares. Because of the effect
of class-based expenses, your choice will also depend on how much
you plan to invest. For example, the reduced sales charges
available for larger purchases of Class A shares may, over time,
offset the effect of paying an initial sales charge on your
investment (which reduces the amount of your investment dollars
used to buy shares for your account), compared to the effect over
time of higher class-based expenses on Class B or Class C shares
for which no initial sales charge is paid.
Investing for the Short Term. If you have a short-term
investment horizon (that is, you plan to hold your shares for not
more than six years), you should probably consider purchasing Class
A or Class C shares rather than Class B shares, because of the
effect of the Class B contingent deferred sales charge if you
redeem within 6 years, as well as the effect of the Class B asset-
based sales charge on the investment return for that class in the
short-term. Class C shares might be the appropriate choice
(especially for investments of less than $100,000), because there
is no initial sales charge on Class C Shares, and the contingent
deferred sales charge does not apply to amounts you sell after
holding them one year.
However, if you plan to invest more than $100,000 for the
shorter term, then the more you invest and the more your investment
horizon increases toward six years, Class C shares might not be as
advantageous as Class A shares. That is because the annual asset-
based sales charge on Class C shares will have a greater impact on
your account over the longer term than the reduced front-end sales
charge available for larger purchases of Class A shares. For
example, Class A might be more advantageous than Class C (as well
as Class B) for investments of more than $100,000 expected to be
held for 5 or 6 years (or more). For investments over $250,000
expected to be held 4 to 6 years (or more), Class A shares may
become more advantageous than Class C (and Class B). If investing
$500,000 or more, Class A may be more advantageous as your
investment horizon approaches 3 years or more.
And for most investors who invest $1 million or more, in most
cases Class A shares will be the most advantageous choice, no
matter how long you intend to hold your shares. For that reason,
the Distributor normally will not accept purchase orders of
$500,000 or $1 million or more of Class B or Class C shares,
respectively, from a single investor.
Investing for the Longer Term. If you are investing for the
longer term, for example, for retirement, and do not expect to need
access to your money for seven years or more, Class B shares may be
an appropriate consideration, if you plan to invest less than
$100,000. If you plan to invest more than $100,000 over the long
term, Class A shares will likely be more advantageous than Class B
shares or Class C shares, as discussed above, because of the effect
of the expected lower expenses for Class A shares and the reduced
initial sales charges available for larger investments in Class A
shares under the Fund's Right of Accumulation.
Of course, these examples are based on approximations of the
effect of current sales charges and expenses on a hypothetical
investment over time, using the assumed annual performance return
stated above, and therefore should not be relied on as rigid
guidelines.
-- Are There Differences in Account Features That Matter to
You? Because some account features may not be available for Class
B or Class C shareholders, you should carefully review how you plan
to use your investment account before deciding which class of
shares is better for you. For example, share certificates are not
available for Class B or Class C shares, and if you are considering
using your shares as collateral for a loan, that may be a factor to
consider. Additionally, dividends payable to Class B and Class C
shareholders will be reduced by the additional expenses borne
solely by those classes, such as the asset-based sales charges
described below and in the Statement of Additional Information.
-- How Does It Affect Payments to My Broker? A salesperson,
such as a broker or any other person who is entitled to receive
compensation for selling Fund shares, may receive different
compensation for selling one class rather than another class. It
is important that investors understand that the purpose of the
contingent deferred sales charges and asset-based sales charges for
Class B and Class C shares are the same as the purpose of the
front-end sales charge on sales of Class A shares: to compensate
the Distributor for commissions it pays to dealers and financial
institutions for selling shares.
How Much Must You Invest? You can open a Fund account with a
minimum initial investment of $1,000 and make additional
investments at any time with as little as $25. There are reduced
minimum investments under special investment plans:
With Asset Builder Plans, Automatic Exchange Plans, 403(b)(7)
custodial plans and military allotment plans, you can make initial
and subsequent investments of as little as $25; and subsequent
purchases of at least $25 can be made by telephone through
AccountLink.
Under pension and profit-sharing plans and Individual
Retirement Accounts (IRAs), you can make an initial investment of
as little as $250 (if your IRA is established under an Asset
Builder Plan, the $25 minimum applies), and subsequent investments
may be as little as $25.
There is no minimum investment requirement if you are buying
shares by reinvesting dividends from the Fund or other Oppenheimer
funds (a list of them appears in the Statement of Additional
Information, or you can ask your dealer or call the Transfer
Agent), or by reinvesting distributions from unit investment trusts
that have made arrangements with the Distributor.
-- How Are Shares Purchased? You can buy shares several ways:
through any dealer, broker or financial institution that has a
sales agreement with the Distributor, directly through the
Distributor, or automatically from your bank account through an
Asset Builder Plan under the OppenheimerFunds AccountLink service.
When you buy shares, be sure to specify Class A, Class B or Class
C shares. If you do not choose, your investment will be made in
Class A shares.
-- Buying Shares Through Your Dealer. Your dealer will place
your order with the Distributor on your behalf.
-- Buying Shares Through the Distributor. Complete an
OppenheimerFunds New Account Application and return it with a check
payable to "OppenheimerFunds Distributor, Inc." Mail it to P.O. Box
5270, Denver, Colorado 80217. If you don't list a dealer on the
application, the Distributor will act as your agent in buying the
shares. However, we recommend that you discuss your investment
first with a financial advisor, to be sure it is appropriate for
you.
-- Buying Shares Through OppenheimerFunds AccountLink. You
can use AccountLink to link your Fund account with an account at a
U.S. bank or other financial institution that is an Automated
Clearing House (ACH) member, to transmit funds electronically to
purchase shares, to have the Transfer Agent send redemption
proceeds, or to transmit dividends and distributions.
Shares are purchased for your account on AccountLink on the
regular business day the Distributor is instructed by you to
initiate the ACH transfer to buy shares. You can provide those
instructions automatically, under an Asset Builder Plan, described
below, or by telephone instructions using OppenheimerFunds
PhoneLink, also described below. You should request AccountLink
privileges on the application or dealer settlement instructions
used to establish your account. Please refer to "AccountLink" below
for more details.
-- Asset Builder Plans. You may purchase shares of the Fund
(and up to four other Oppenheimer funds) automatically each month
from your account at a bank or other financial institution under an
Asset Builder Plan with AccountLink. Details are on the Application
and in the Statement of Additional Information.
-- At What Price Are Shares Sold? Shares are sold at the
public offering price based on the net asset value (and any initial
sales charge that applies) that is next determined after the
Distributor receives the purchase order in Denver, Colorado. In
most cases, to enable you to receive that day's offering price, the
Distributor must receive your order by the time of day The New York
Stock Exchange closes, which is normally 4:00 P.M., New York time,
but may be earlier on some days (all references to time in this
Prospectus mean "New York time"). The net asset value of each
class of shares is determined as of that time on each day The New
York Stock Exchange is open (which is a "regular business day").
If you buy shares through a dealer, the dealer must receive
your order by the close of business of The New York Stock Exchange
on a regular business day and transmit it to the Distributor so
that it is received before the Distributor's close of business that
day, which is normally 5:00 P.M. The Distributor may reject any
purchase order for the Fund's shares, in its sole discretion.
Special Sales Charge Arrangements for Certain Persons. Appendix A
to this Prospectus sets forth conditions for the waiver of, or
exemption from, sales charges or the special sales charge rates
that apply to purchases of shares of the Fund (including purchases
by exchange) by a person who was a shareholder of one of the Former
Quest for Value Funds (as defined in that Appendix).
Buying Class A Shares. Class A shares are sold at their offering
price, which is normally net asset value plus an initial sales
charge. However, in some cases, described below, where purchases
are not subject to an initial sales charge, the offering price may
be net asset value. In some cases, reduced sales charges may be
available, as described below. Out of the amount you invest, the
Fund receives the net asset value to invest for your account. The
sales charge varies depending on the amount of your purchase. A
portion of the sales charge may be retained by the Distributor and
allocated to your dealer as commission. The current sales charge
rates and commissions paid to dealers and brokers are as follows:
Front-End Sales Charge Commission
As a Percentage of as Percentage
Offering Amount of Offering
Amount of Purchase Price Invested Price
- ----------------------------------------------------------------
Less than $25,000 5.75% 6.10% 4.75%
- ----------------------------------------------------------------
$25,000 or more but
less than $50,000 5.50% 5.82% 4.75%
- ----------------------------------------------------------------
$50,000 or more but
less than $100,000 4.75% 4.99% 4.00%
- ----------------------------------------------------------------
$100,000 or more but
less than $250,000 3.75% 3.90% 3.00%
- ----------------------------------------------------------------
$250,000 or more but
less than $500,000 2.50% 2.56% 2.00%
- ----------------------------------------------------------------
$500,000 or more but
less than $1 million 2.00% 2.04% 1.60%
The Distributor reserves the right to reallow the entire commission
to dealers. If that occurs, the dealer may be considered an
"underwriter" under Federal securities laws.
-- Class A Contingent Deferred Sales Charge. There is no
initial sales charge on purchases of Class A shares of any one or
more of the Oppenheimer funds in the following cases:
- Purchases aggregating $1 million or more, or
- Purchases by an OppenheimerFunds prototype 401(k) plan that:
(1) buys shares costing $500,000 or more, or (2) has, at the time
of purchase, 100 or more eligible participants, or (3) certifies
that it projects to have annual plan purchases of $200,000 or more.
Shares of any class of the Oppenheimer funds that offer only
one class of shares that has no designation are considered "Class
A shares" for this purpose. The Distributor pays dealers of record
commissions on those purchases in an amount equal to the sum of
1.0% of the first $2.5 million, plus 0.50% of the next $2.5
million, plus 0.25% of purchases over $5 million. That commission
will be paid only on the amount of those purchases in excess of $1
million ($500,000 for purchases by OppenheimerFunds 401(k)
prototype plans) that were not previously subject to a front-end
sales charge and dealer commission.
If you redeem any of those shares within 18 months of the end
of the calendar month of their purchase, a contingent deferred
sales charge (called the "Class A contingent deferred sales
charge") will be deducted from the redemption proceeds. That sales
charge will be equal to 1.0% of either (1) the aggregate net asset
value of the redeemed shares (not including shares purchased by
reinvestment of dividends or capital gain distributions) or (2) the
original cost of the shares, whichever is less. However, the Class
A contingent deferred sales charge will not exceed the aggregate
commissions the Distributor paid to your dealer on all Class A
shares of all Oppenheimer funds you purchased subject to the Class
A contingent deferred sales charge. Class A shares of the Fund
purchased subject to a contingent deferred sales charge on or prior
to November 24, 1995 will be subject to a contingent deferred sales
charge at the applicable rate set forth in Appendix A to this
Prospectus.
In determining whether a contingent deferred sales charge is
payable, the Fund will first redeem shares that are not subject to
the sales charge, including shares purchased by reinvestment of
dividends and capital gains, and then will redeem other shares in
the order that you purchased them. The Class A contingent deferred
sales charge is waived in certain cases described in "Waivers of
Class A Sales Charges" below.
No Class A contingent deferred sales charge is charged on
exchanges of shares under the Fund's exchange privilege (described
below). However, if the shares acquired by exchange are redeemed
within 18 months of the end of the calendar month of the purchase
of the exchanged shares.
-- Special Arrangements With Dealers. The Distributor may
advance up to 13 months' commissions to dealers that have
established special arrangements with the Distributor for Asset
Builder Plans for their clients. Dealers whose sales of Class A
shares of Oppenheimer funds (other than money market funds) under
OppenheimerFunds-sponsored 403(b)(7) custodial plans exceed $5
million per year (calculated per quarter), will receive monthly
one-half of the Distributor's retained commissions on those sales,
and if those sales exceed $10 million per year, those dealers will
receive the Distributor's entire retained commission on those
sales.
Reduced Sales Charges for Class A Share Purchases. You may be
eligible to buy Class A shares at reduced sales charge rates in one
or more of the following ways:
-- Right of Accumulation. To qualify for the lower sales
charge rates that apply to larger purchases of Class A shares, you
and your spouse can add together Class A and Class B shares you
purchase for your individual accounts, or jointly, or for trust or
custodial accounts on behalf of your children who are minors. A
fiduciary can cumulate shares purchased for a trust, estate or
other fiduciary account (including one or more employee benefit
plans of the same employer) that has multiple accounts.
Additionally, you can add together current purchases of Class
A and Class B shares of the Fund and other Oppenheimer funds to
reduce the sales charge rate that applies to current purchases of
Class A shares. You can also count Class A and Class B shares of
Oppenheimer funds you previously purchased subject to an initial or
contingent deferred sales charge to reduce the sales charge rate
for current purchases of Class A shares, provided that you still
hold that investment in one of the Oppenheimer funds. The value of
those shares will be based on the greater of the amount you paid
for the shares or their current value (at offering price). The
Oppenheimer funds are listed in "Reduced Sales Charges" in the
Statement of Additional Information, or a list can be obtained from
the Transfer Agent. The reduced sales charge will apply only to
current purchases and must be requested when you buy your shares.
-- Letter of Intent. Under a Letter of Intent, if you
purchase Class A shares or Class A and Class B shares of the Fund
and other Oppenheimer funds during a 13-month period, you can
reduce the sales charge rate that applies to your purchases of
Class A shares. The total amount of your intended purchases of
both Class A and Class B shares will determine the reduced sales
charge rate for the Class A shares purchased during that period.
This can include purchases made up to 90 days before the date of
the Letter. More information is contained in the Application and
in "Reduced Sales Charges" in the Statement of Additional
Information.
-- Waivers of Class A Sales Charges. The Class A sales
charges are not imposed in the circumstances described below.
There is an explanation of this policy in "Reduced Sales Charges"
in the Statement of Additional Information.
Waivers of Initial and Contingent Deferred Sales Charges for
Certain Purchasers. Class A shares purchased by the following
investors are not subject to any Class A sales charges:
- the Manager or its affiliates;
- present or former officers, directors, trustees and
employees (and their "immediate families" as defined in "Reduced
Sales Charges" in the Statement of Additional Information) of the
Fund, the Manager and its affiliates, and retirement plans
established by them for their employees;
- registered management investment companies, or separate
accounts of insurance companies having an agreement with the
Manager or the Distributor for that purpose;
- dealers or brokers that have a sales agreement with the
Distributor, if they purchase shares for their own accounts or for
retirement plans for their employees;
- employees and registered representatives (and their spouses)
of dealers or brokers described above or financial institutions
that have entered into sales arrangements with such dealers or
brokers (and are identified to the Distributor) or with the
Distributor; the purchaser must certify to the Distributor at the
time of purchase that the purchase is for the purchaser's own
account (or for the benefit of such employee's spouse or minor
children);
- dealers, brokers or registered investment advisers that have
entered into an agreement with the Distributor (1) providing
specifically for the use of shares of the Fund in particular
investment products made available to their clients (those clients
may be charged a transaction fee by their dealer, broker or advisor
for the purchase or sale of Fund shares) and (2) to sell shares of
defined contribution employee retirement plans for which the
dealer, broker or investment adviser provides administrative
services;
- dealers, brokers or registered investment advisers that have
entered into an agreement with the Distributor to sell shares of
defined contribution employee retirement plans for which the
dealer, broker or investment adviser provides administrative
services;
- directors, trustees, officers or full-time employees of
OpCap Advisors or its affiliates, their relatives or any trust,
pension, profit sharing or other benefit plan which beneficially
owns shares for those persons;
- accounts for which Oppenheimer Capital is the investment
adviser (the Distributor must be advised of this arrangement) and
persons who are directors or trustees of the company or trust which
is the beneficial owner of such accounts;
- any unit investment trust that has entered into an
appropriate agreement with the Distributor;
- a TRAC-2000 401(k) plan (sponsored by the former Quest for
Value Advisors) whose Class B or Class C shares of a Former Quest
for Value Fund were exchanged for Class A shares of that Fund due
to the termination of the Class B and C TRAC-2000 program on
November 24, 1995; or
- qualified retirement plans that had agreed with the former
Quest for Value Advisors to purchase shares of any of the Former
Quest for Value Funds at net asset value, with such shares to be
held through DCXchange, a sub-transfer agency mutual fund
clearinghouse, provided that such arrangements are consummated and
share purchases commence by March 31, 1996.
Waivers of Initial and Contingent Deferred Sales Charges in
Certain Transactions. Class A shares issued or purchased in the
following transactions are not subject to Class A sales charges:
- shares issued in plans of reorganization, such as mergers,
asset acquisitions and exchange offers, to which the Fund is a
party;
- shares purchased by the reinvestment of loan repayments by
a participant in a retirement plan for which the Manager or its
affiliates acts as sponsor;
- shares purchased by the reinvestment of dividends or other
distributions reinvested from the Fund or other Oppenheimer funds
(other than Oppenheimer Cash Reserves) or unit investment trusts
for which reinvestment arrangements have been made with the
Distributor; or
- shares purchased and paid for with the proceeds of shares
redeemed in the prior 12 months from a mutual fund (other than a
fund managed by the Manager or any of its subsidiaries) on which an
initial sales charge or contingent deferred sales charge was paid
(this waiver also applies to shares purchased by exchange of shares
of Oppenheimer Money Market Fund, Inc. that were purchased and paid
for in this manner); this waiver must be requested when the
purchase order is placed for your shares of the Fund, and the
Distributor may require evidence of your qualification for this
waiver; or
- purchased with the proceeds of maturing principal of units
of any Qualified Unit Investment Liquid Trust Series.
Waivers of the Class A Contingent Deferred Sales Charge for
Certain Redemptions. The Class A contingent deferred sales charge
does not apply to purchases of Class A shares at net asset value
without sales charge as described in the two sections above. It is
also waived if shares that would otherwise be subject to the
contingent deferred sales charge are redeemed in the following
cases:
- for retirement distributions or loans to participants or
beneficiaries from qualified retirement plans, deferred
compensation plans or other employee benefit plans, including
OppenheimerFunds prototype 401(k) plans (these are all referred to
as "Retirement Plans");
- to return excess contributions made to Retirement Plans;
- to make Automatic Withdrawal Plan payments that are limited
annually to no more than 12% of the original account value;
- involuntary redemptions of shares by operation of law or
involuntary redemptions of small accounts (see "Shareholder Account
Rules and Policies," below);
- if, at the time a purchase order is placed for Class A
shares that would otherwise be subject to the Class A contingent
deferred sales charge, the dealer agrees to accept the dealer's
portion of the commission payable on the sale in installments of
1/18th of the commission per month (and no further commission will
be payable if the shares are redeemed within 18 months of
purchase); or
- for distributions from OppenheimerFunds prototype 401(k)
plans for any of the following cases or purposes: (1) following
the death or disability (as defined in the Internal Revenue Code)
of the participant or beneficiary (the death or disability must
occur after the participant's account was established); (2)
hardship withdrawals, as defined in the plan; (3) under a
Qualified Domestic Relations Order, as defined in the Internal
Revenue Code; (4) to meet the minimum distribution requirements of
the Internal Revenue Code; (5) to establish "substantially equal
periodic payments" as described in Section 72(t) of the Internal
Revenue Code, or (6) separation from service.
-- Distribution and Service Plan for Class A Shares. The Fund
has adopted a Distribution and Service Plan for Class A shares to
reimburse the Distributor for a portion of its costs incurred in
connection with the personal service and maintenance of shareholder
accounts that hold Class A shares. Under the Plan, the Fund pays
an annual asset-based sales charge to the Distributor of 0.25% of
the average annual net assets of the class. The Fund also pays a
service fee to the Distributor of 0.25% of the average annual net
assets of the class. The Distributor uses all of the service fee
and a portion of the asset-based sales charge (equal to 0.15%
annually for Class A shares purchased prior to September 1, 1993
and 0.10% annually for Class A shares purchased on or after
September 1, 1993) to compensate dealers, brokers, banks and other
financial institutions quarterly for providing personal service and
maintenance of accounts of their customers that hold Class A
shares. The Distributor retains the balance of the asset-based
sales charge to reimburse itself for its other expenditures under
the Plan.
Services to be provided include, among others, answering
customer inquiries about the Fund, assisting in establishing and
maintaining accounts in the Fund, making the Fund's investment
plans available and providing other services at the request of the
Fund or the Distributor. The payments under the Plan increase the
annual expenses of Class A shares. For more details, please refer
to "Distribution and Service Plans" in the Statement of Additional
Information.
Buying Class B Shares. Class B shares are sold at net asset value
per share without an initial sales charge. However, if Class B
shares are redeemed within 6 years of their purchase, a contingent
deferred sales charge will be deducted from the redemption
proceeds. That sales charge will not apply to shares purchased by
the reinvestment of dividends or capital gains distributions. The
charge will be assessed on the lesser of the net asset value of the
shares at the time of redemption or the original purchase price.
The contingent deferred sales charge is not imposed on the amount
of your account value represented by the increase in net asset
value over the initial purchase price (including increases due to
the reinvestment of dividends and capital gains distributions). The
Class B contingent deferred sales charge is paid to the Distributor
to reimburse its expenses of providing distribution-related
services to the Fund in connection with the sale of Class B shares.
To determine whether the contingent deferred sales charge
applies to a redemption, the Fund redeems shares in the following
order: (1) shares acquired by reinvestment of dividends and capital
gains distributions, (2) shares held for over 6 years, and (3)
shares held the longest during the 6-year period.
The amount of the contingent deferred sales charge will depend
on the number of years since you invested and the dollar amount
being redeemed, according to the following schedule:
Years Since Contingent Deferred Sales Charge
Beginning of Month In Which on Redemptions in that Year
Purchase Order was Accepted (As % of Amount Subject to Charge)
- ----------------------------------------------------------------
0 - 1 5.0%
- ----------------------------------------------------------------
1 - 2 4.0%
- ----------------------------------------------------------------
2 - 3 3.0%
- ----------------------------------------------------------------
3 - 4 3.0%
- ----------------------------------------------------------------
4 - 5 2.0%
- ----------------------------------------------------------------
5 - 6 1.0%
- ----------------------------------------------------------------
6 and following None
In the table, a "year" is a 12-month period. All purchases are
considered to have been made on the first regular business day of
the month in which the purchase was made.
-- Automatic Conversion of Class B Shares. Six years after
you purchase Class B shares, those shares will automatically
convert to Class A shares. This conversion feature relieves Class
B shareholders of the asset-based sales charge that applies to
Class B shares under the Class B Distribution and Service Plan,
described below. The conversion is based on the relative net asset
value of the two classes, and no sales load or other charge is
imposed. When Class B shares convert, any other Class B shares that
were acquired by the reinvestment of dividends and distributions on
the converted shares will also convert to Class A shares. The
conversion feature is subject to the continued availability of a
tax ruling described in "Alternative Sales Arrangements - Class A,
Class B and Class C Shares" in the Statement of Additional
Information.
-- Distribution and Service Plan for Class B Shares. The Fund
has adopted a Distribution and Service Plan for Class B shares to
compensate the Distributor for distributing Class B shares and
servicing accounts. This Plan is described below under "Buying
Class C Shares - Distribution and Service Plans for Class B and
Class C Shares."
-- Waivers of Class B Sales Charges. The Class B contingent
deferred sales charge will not apply to shares purchased in certain
types of transactions, nor will it apply to shares redeemed in
certain circumstances, as described below under "Buying Class C
Shares - Waivers of Class B and Class C Sales Charges."
Buying Class C Shares. Class C shares are sold at net asset value
per share without an initial sales charge. However, if Class C
shares are redeemed within 12 months of their purchase, a
contingent deferred sales charge of 1.0% will be deducted from the
redemption proceeds. That sales charge will not apply to shares
purchased by the reinvestment of dividends or capital gains
distributions. The charge will be assessed on the lesser of the net
asset value of the shares at the time of redemption or the original
purchase price. The contingent deferred sales charge is not imposed
on the amount of your account value represented by the increase in
net asset value over the initial purchase price (including
increases due to the reinvestment of dividends and capital gains
distributions). The Class C contingent deferred sales charge is
paid to the Distributor to reimburse its expenses of providing
distribution-related services to the Fund in connection with the
sale of Class C shares.
To determine whether the contingent deferred sales charge
applies to a redemption, the Fund redeems shares in the following
order: (1) shares acquired by reinvestment of dividends and capital
gains distributions, (2) shares held for over 12 months, and (3)
shares held the longest during the 12-month period.
-- Distribution and Service Plans for Class B and Class C
Shares. The Fund has adopted Distribution and Service Plans for
Class B and Class C shares to compensate the Distributor for
distributing Class B and Class C shares and servicing accounts.
Under the Plans, the Fund pays the Distributor an annual "asset-
based sales charge" of 0.75% per year on Class B shares that are
outstanding for 6 years or less and on Class C shares. The
Distributor also receives a service fee of 0.25% per year.
Under each Plan, both fees are computed on the average of the
net asset value of shares in the respective class, determined as of
the close of each regular business day during the period. The
asset-based sales charge allows investors to buy Class B or Class
C shares without a front-end sales charge while allowing the
Distributor to compensate dealers that sell those shares.
The Distributor uses the service fees to compensate dealers
for providing personal services for accounts that hold Class B or
Class C shares. Those services are similar to those provided under
the Class A Service Plan, described above. The Distributor pays
the 0.25% service fees to dealers in advance for the first year
after Class B or Class C shares have been sold by the dealer and
retains the service fee paid by the Fund in that year. After the
shares have been held for a year, the Distributor pays the service
fees to dealers on a quarterly basis.
The Distributor currently pays sales commissions of 3.75% of
the purchase price of Class B shares to dealers from its own
resources at the time of sale. The total commission paid by the
Distributor to the dealer at the time of sale of Class B shares is
4.00% of the purchase price. The Fund pays the asset-based sales
charge to the Distributor for its services rendered in connection
with the distribution of Class B C shares. Those payments,
retained by the Distributor, are at a fixed rate which is not
related to the Distributor's expenses. The services rendered by
the Distributor include paying and financing the payment of sales
commissions, service fees, and other costs of distributing and
selling Class B shares.
The Distributor currently pays sales commissions of 0.75% of
the purchase price of Class C shares to dealers from its own
resources at the time of sale. The total commission paid by the
Distributor to the dealer at the time of sale of Class C shares is
1.00% of the purchase price. The Distributor retains the asset-
based sales charge during the first year Class C shares are
outstanding to recoup sales commissions it has paid, the advances
of service fee payments it has made, and its financing costs and
other expenses. The Distributor plans to pay the asset-based sales
charge as an ongoing commission to the dealer on Class C shares
that have been outstanding for a year or more.
If either Plan is terminated by the Fund, the Board of
Trustees may allow the Fund to continue payments of the service fee
and/or asset-based sales charge to the Distributor for distributing
Class B or Class C shares, as appropriate, before the Plan was
terminated.
-- Waivers of Class B and Class C Sales Charges. The Class B
and Class C contingent deferred sales charges will not be applied
to shares purchased in certain types of transactions nor will it
apply to Class B and Class C shares redeemed in certain
circumstances as described below. The reasons for this policy are
in "Reduced Sales Charges" in the Statement of Additional
Information.
Waivers for Redemptions in Certain Cases. The Class B and
Class C contingent deferred sales charges will be waived for
redemptions of shares in the following cases if the Transfer Agent
is notified that these conditions apply to the redemption:
- distributions to participants or beneficiaries from
Retirement Plans, if the distributions are made (a) under an
Automatic Withdrawal Plan after the participant reaches age 59-1/2,
as long as the payments are no more than 10% of the account value
annually (measured from the date the Transfer Agent received the
request), or (b) following the death or disability (as defined in
the Internal Revenue Code ("IRC")) of the participant or
beneficiary (the death or disability must have occurred after the
account was established);
- redemptions from accounts other than Retirement Plans
following the death or disability of the last surviving shareholder
(the death or disability must have occurred after the account was
established, and for disability you must provide evidence of a
determination of disability by the Social Security Administration);
- returns of excess contributions to Retirement Plans;
- distributions from IRAs (including SEP-IRAs and SAR/SEP
accounts) before the participant is age 59-1/2, and distributions
from 403(b)(7) custodial plans or pension or profit sharing plans
before the participant is age 59-1/2 but only after the participant
has separated from service, if the distributions are made in
substantially equal periodic payments over the life (or life
expectancy) of the participant or the joint lives (or joint life
and last survivor expectancy) of the participant and the
participant's designated beneficiary (and the distributions must
comply with other requirements for such distributions under the IRC
and may not exceed 10% of the account value annually, measured from
the date the Transfer Agent received the request);
- shares redeemed involuntarily, as described in "Shareholder
Account Rules and Policies," below; or
- distributions from OppenheimerFunds prototype 401(k) plans:
(1) for hardship withdrawals; (2) under a Qualified Domestic
Relations Order, as defined in the IRC; (3) to meet minimum
distribution requirements as defined in the IRC; (4) to make
"substantially equal periodic payments" as described in Section
72(t) of the IRC; (5) for separation from service.
Waivers for Shares Sold or Issued in Certain Transactions.
The contingent deferred sales charge is also waived on Class B and
Class C shares sold or issued in the following cases:
- shares sold to the Manager or its affiliates;
- shares sold to registered management investment companies or
separate accounts of insurance companies having an agreement with
the Manager or the Distributor for that purpose; or
- shares issued in plans or reorganization to which the Fund
is a party.
Special Investor Services
AccountLink. OppenheimerFunds AccountLink links your Fund account
to your account at your bank or other financial institution to
enable you to send money electronically between those accounts to
perform a number of types of account transactions. These include
purchases of shares by telephone (either through a service
representative or by PhoneLink, described below), automatic
investments under Asset Builder Plans, and sending dividends and
distributions or Automatic Withdrawal Plan payments directly to
your bank account. Please refer to the Application for details or
call the Transfer Agent for more information.
AccountLink privileges should be requested on the Application
you use to buy shares, or on your dealer's settlement instructions
if you buy your shares through your dealer. After your account is
established, you can request AccountLink privileges on signature-
guaranteed instructions to the Transfer Agent. AccountLink
privileges will apply to each shareholder listed in the
registration on your account as well as to your dealer
representative of record unless and until the Transfer Agent
receives written instructions terminating or changing those
privileges. After you establish AccountLink for your account, any
change of bank account information must be made by signature-
guaranteed instructions to the Transfer Agent signed by all
shareholders who own the account.
-- Using AccountLink to Buy Shares. Purchases may be made by
telephone only after your account has been established. To purchase
shares in amounts up to $250,000 through a telephone
representative, call the Distributor at 1-800-852-8457. The
purchase payment will be debited from your bank account.
-- PhoneLink. PhoneLink is the OppenheimerFunds automated
telephone system that enables shareholders to perform a number of
account transactions automatically using a touch-tone phone.
PhoneLink may be used on already-established Fund accounts after
you obtain a Personal Identification Number (PIN), by calling the
special PhoneLink number: 1-800-533-3310.
- Purchasing Shares. You may purchase shares in amounts up to
$100,000 by phone, by calling 1-800-533-3310. You must have
established AccountLink privileges to link your bank account with
the Fund, to pay for these purchases.
- Exchanging Shares. With the OppenheimerFunds exchange
privilege, described below, you can exchange shares automatically
by phone from your Fund account to another Oppenheimer funds
account you have already established by calling the special
PhoneLink number. Please refer to "How to Exchange Shares," below,
for details.
- Selling Shares. You can redeem shares by telephone
automatically by calling the PhoneLink number and the Fund will
send the proceeds directly to your AccountLink bank account.
Please refer to "How to Sell Shares," below, for details.
Automatic Withdrawal and Exchange Plans. The Fund has several plans
that enable you to sell shares automatically or exchange them to
another Oppenheimer funds account on a regular basis:
-- Automatic Withdrawal Plans. If your Fund account is $5,000
or more, you can establish an Automatic Withdrawal Plan to receive
payments of at least $50 on a monthly, quarterly, semi-annual or
annual basis. The checks may be sent to you or sent automatically
to your bank account on AccountLink. You may even set up certain
types of withdrawals of up to $1,500 per month by telephone. You
should consult the Application and Statement of Additional
Information for more details.
-- Automatic Exchange Plans. You can authorize the Transfer
Agent to exchange an amount you establish in advance automatically
for shares of up to five other Oppenheimer funds on a monthly,
quarterly, semi-annual or annual basis under an Automatic Exchange
Plan. The minimum purchase for each other Oppenheimer funds
account is $25. These exchanges are subject to the terms of the
exchange privilege, described below.
Reinvestment Privilege. If you redeem some or all of your Class A
shares, you have up to 6 months to reinvest all or part of the
redemption proceeds in Class A shares of the Fund or other
Oppenheimer funds without paying a sales charge. This privilege
applies to Class A shares that you purchased subject to an initial
sales charge and to Class A shares on which you paid a contingent
deferred sales charge when you redeemed them. It does not apply to
Class C shares. Please consult the Statement of Additional
Information for more details.
Retirement Plans. Fund shares are available as an investment for
your retirement plans. If you participate in a plan sponsored by
your employer, the plan trustee or administrator must make the
purchase of shares for your retirement plan account. The
Distributor offers a number of different retirement plans that can
be used by individuals and employers:
- Individual Retirement Accounts including rollover IRAs, for
individuals and their spouses
- 403(b)(7) Custodial Plans for employees of eligible tax-
exempt organizations, such as schools, hospitals and charitable
organizations
- SEP-IRAs Simplified Employee Pension Plans) for small
business owners or people with income from self-employment,
including SAR/SEP IRAs
- Pension and Profit-Sharing Plans for self-employed persons
and small business owners
- 401(k) prototype retirement plans for businesses
Please call the Distributor for the OppenheimerFunds plan
documents, which contain important information and applications.
How to Sell Shares
You can arrange to take money out of your account by selling
(redeeming) some or all of your shares on any regular business day.
Your shares will be sold at the next net asset value calculated
after your order is received and accepted by the Transfer Agent.
The Fund offers you a number of ways to sell your shares: in
writing or by telephone. You can also set up Automatic Withdrawal
Plans to redeem shares on a regular basis, as described above. If
you have questions about any of these procedures, and especially if
you are redeeming shares in a special situation, such as due to the
death of the owner, or from a retirement plan, please call the
Transfer Agent first, at 1-800-525-7048, for assistance.
-- Retirement Accounts. To sell shares in an OppenheimerFunds
retirement account in your name, call the Transfer Agent for a
distribution request form. There are special income tax withholding
requirements for distributions from retirement plans and you must
submit a withholding form with your request to avoid delay. If your
retirement plan account is held for you by your employer, you must
arrange for the distribution request to be sent by the plan
administrator or trustee. There are additional details in the
Statement of Additional Information.
-- Certain Requests Require A Signature Guarantee. To protect
you and the Fund from fraud, certain redemption requests must be in
writing and must include a signature guarantee in the following
situations (there may be other situations also requiring a
signature guarantee):
- You wish to redeem more than $50,000 worth of shares and
receive a check
- The redemption check is not payable to all shareholders
listed on the account statement
- The redemption check is not sent to the address of record on
your account statement
- Shares are being transferred to a Fund account with a
different owner or name
- Shares are redeemed by someone other than the owners (such
as an Executor)
-- Where Can I Have My Signature Guaranteed? The Transfer
Agent will accept a guarantee of your signature by a number of
financial institutions, including: a U.S. bank, trust company,
credit union or savings association, or by a foreign bank that has
a U.S. correspondent bank, or by a U.S. registered dealer or broker
in securities, municipal securities or government securities, or by
a U.S. national securities exchange, a registered securities
association or a clearing agency. If you are signing as a fiduciary
or on behalf of a corporation, partnership or other business, you
must also include your title in the signature.
Selling Shares by Mail. Write a "letter of instructions" that
includes:
- Your name
- The Fund's name
- Your Fund account number (from your account statement)
- The dollar amount or number of shares to be redeemed
- Any special payment instructions
- Any share certificates for the shares you are selling
- The signatures of all registered owners exactly as the
account is registered, and
- Any special requirements or documents requested by the
Transfer Agent to assure proper authorization of the person asking
to sell shares.
Use the following address for Send courier or Express Mail
request by mail: requests to:
OppenheimerFunds Services OppenheimerFunds Services
P.O. Box 5270 10200 E. Girard Ave., Building D
Denver, Colorado 80217 Denver, Colorado 80231
Selling Shares by Telephone. You and your dealer representative of
record may also sell your shares by telephone. To receive the
redemption price on a regular business day, your call must be
received by the Transfer Agent by the close of The New York Stock
Exchange that day, which is normally 4:00 P.M. but may be earlier
on some days. Shares held in an OppenheimerFunds retirement plan
or under a share certificate may not be redeemed by telephone.
- To redeem shares through a service representative, call 1-
800-852-8457
- To redeem shares automatically on PhoneLink, call 1-800-533-
3310
Whichever method you use, you may have a check sent to the
address on the account statement, or, if you have linked your Fund
account to your bank account on AccountLink, you may have the
proceeds wired to that bank account.
-- Telephone Redemptions Paid by Check. Up to $50,000 may be
redeemed by telephone in any 7-day period. The check must be
payable to all owners of record of the shares and must be sent to
the address on the account. This service is not available within
30 days of changing the address on an account.
-- Telephone Redemptions Through AccountLink. There are no
dollar limits on telephone redemption proceeds sent to a bank
account designated when you establish AccountLink. Normally the ACH
wire to your bank is initiated on the business day after the
redemption. You do not receive dividends on the proceeds of the
shares you redeemed while they are waiting to be wired.
Selling Shares Through Your Dealer. The Distributor has made
arrangements to repurchase Fund shares from dealers and brokers on
behalf of their customers. Brokers or dealers may charge for that
service. Please refer to "Special Arrangements for Repurchase of
Shares from Dealers and Brokers" in the Statement of Additional
Information for more details.
How to Exchange Shares
Shares of the Fund may be exchanged for shares of certain
Oppenheimer funds at net asset value per share at the time of
exchange, without sales charge. To exchange shares, you must meet
several conditions:
- Shares of the fund selected for exchange must be available
for sale in your state of residence
- The prospectuses of this Fund and the fund whose shares you
want to buy must offer the exchange privilege
- You must hold the shares you buy when you establish your
account for at least 7 days before you can exchange them; after the
account is open 7 days, you can exchange shares every regular
business day
- You must meet the minimum purchase requirements for the fund
you purchase by exchange
- Before exchanging into a fund, you should obtain and read
its prospectus
Shares of a particular class may be exchanged only for shares
of the same class in the other Oppenheimer funds. For example, you
can exchange Class A shares of this Fund only for Class A shares of
another fund. At present, Oppenheimer Money Market Fund, Inc.
offers only one class of shares, which are considered Class A
shares for this purpose. In some cases, sales charges may be
imposed on exchange transactions. Please refer to "How to Exchange
Shares" in the Statement of Additional Information for more
details.
Exchanges may be requested in writing or by telephone:
-- Written Exchange Requests. Submit an OppenheimerFunds
Exchange Request form, signed by all owners of the account. Send
it to the Transfer Agent at the addresses listed in "How to Sell
Shares."
-- Telephone Exchange Requests. Telephone exchange requests
may be made either by calling a service representative at 1-800-
852-8457 or by using PhoneLink for automated exchanges, by calling
1-800-533-3310. Telephone exchanges may be made only between
accounts that are registered with the same name(s) and address.
Shares held under certificates may not be exchanged by telephone.
You can find a list of Oppenheimer funds currently available
for exchanges in the Statement of Additional Information or by
calling a service representative at 1-800-525-7048. Exchanges of
shares involve a redemption of the shares of the fund you own and
a purchase of shares of the other fund.
There are certain exchange policies you should be aware of:
- Shares are normally redeemed from one fund and purchased
from the other fund in the exchange transaction on the same regular
business day on which the Transfer Agent receives an exchange
request that is in proper form by the close of The New York Stock
Exchange that day, which is normally 4:00 P.M. but may be earlier
on some days. However, either fund may delay the purchase of
shares of the fund you are exchanging into up to 7 days if it
determines it would be disadvantaged by a same-day transfer of the
proceeds to buy shares. For example, the receipt of multiple
exchange requests from a dealer in a "market-timing" strategy might
require the disposition of securities at a time or price
disadvantageous to the Fund.
- Because excessive trading can hurt fund performance and harm
shareholders, the Fund reserves the right to refuse any exchange
request that will disadvantage it, or to refuse multiple exchange
requests submitted by a shareholder or dealer.
- The Fund may amend, suspend or terminate the exchange
privilege at any time. Although the Fund will attempt to provide
you notice whenever it is reasonably able to do so, it may impose
these changes at any time.
- If the Transfer Agent cannot exchange all the shares you
request because of a restriction cited above, only the shares
eligible for exchange will be exchanged.
Shareholder Account Rules and Policies
-- Net Asset Value Per Share is determined for each class of
shares as of the close of The New York Stock Exchange, which is
normally 4:00 P.M. but may be earlier on some days, on each day the
Exchange is open by dividing the value of each Fund's net assets
attributable to a class by the number of shares of that class that
are outstanding. The Fund's Board of Trustees has established
procedures to value each Fund's securities to determine net asset
value. In general, securities values are based on market value.
There are special procedures for valuing illiquid and restricted
securities and obligations for which market values cannot be
readily obtained. These procedures are described more completely
in the Statement of Additional Information.
-- The offering of shares may be suspended during any period
in which the determination of net asset value is suspended, and the
offering may be suspended by the Board of Trustees at any time the
Board believes it is in the Fund's best interest to do so.
-- Telephone Transaction Privileges for purchases, redemptions
or exchanges may be modified, suspended or terminated by the Fund
at any time. If an account has more than one owner, the Fund and
the Transfer Agent may rely on the instructions of any one owner.
Telephone privileges apply to each owner of the account and the
dealer representative of record for the account unless and until
the Transfer Agent receives cancellation instructions from an owner
of the account.
-- The Transfer Agent will record any telephone calls to
verify data concerning transactions and has adopted other
procedures to confirm that telephone instructions are genuine, by
requiring callers to provide tax identification numbers and other
account data or by using PINs, and by confirming such transactions
in writing. If the Transfer Agent does not use reasonable
procedures it may be liable for losses due to unauthorized
transactions, but otherwise neither the Transfer Agent nor the Fund
will be liable for losses or expenses arising out of telephone
instructions reasonably believed to be genuine. If you are unable
to reach the Transfer Agent during periods of unusual market
activity, you may not be able to complete a telephone transaction
and should consider placing your order by mail.
-- Redemption or transfer requests will not be honored until
the Transfer Agent receives all required documents in proper form.
From time to time, the Transfer Agent in its discretion may waive
certain of the requirements for redemptions stated in this
Prospectus.
-- Dealers that can perform account transactions for their
clients by participating in NETWORKING through the National
Securities Clearing Corporation are responsible for obtaining their
clients' permission to perform those transactions and are
responsible to their clients who are shareholders of the Fund if
the dealer performs any transaction erroneously.
-- The redemption price for shares will vary from day to day
because the value of the securities in each Fund's portfolio
fluctuates, and the redemption price, which is the net asset value
per share, will normally be different for Class A, Class B and
Class C shares. Therefore, the redemption value of your shares may
be more or less than their original cost.
-- Payment for redeemed shares is made ordinarily in cash and
forwarded by check or through AccountLink (as elected by the
shareholder under the redemption procedures described above) within
7 days after the Transfer Agent receives redemption instructions in
proper form, except under unusual circumstances determined by the
Securities and Exchange Commission delaying or suspending such
payments. For accounts registered in the name of a broker-dealer,
payment will be forwarded within 3 business days. The Transfer
Agent may delay forwarding a check or processing a payment via
AccountLink for recently purchased shares, but only until the
purchase payment has cleared. That delay may be as much as 10 days
from the date the shares were purchased. That delay may be avoided
if you purchase shares by certified check or arrange with your bank
to provide telephone or written assurance to the Transfer Agent
that your purchase payment has cleared.
-- Involuntary redemptions of small accounts may be made by
the Fund if the account value has fallen below $500 for reasons
other than the fact that the market value of shares has dropped,
and in some cases involuntary redemptions may be made to repay the
Distributor for losses from the cancellation of share purchase
orders.
-- Under unusual circumstances, shares of a Fund may be
redeemed "in kind", which means that the redemption proceeds will
be paid with securities from the Fund's portfolio. Please refer to
the Statement of Additional Information for more details.
-- "Backup Withholding" of Federal income tax may be applied
at the rate of 31% from dividends, distributions and redemption
proceeds (including exchanges) if you fail to furnish the Fund a
certified Social Security or taxpayer identification number when
you sign your application, or if you violate Internal Revenue
Service regulations on tax reporting of dividends.
-- The Fund does not charge a redemption fee, but if your
dealer or broker handles your redemption, they may charge a fee.
That fee can be avoided by redeeming your Fund shares directly
through the Transfer Agent. Under the circumstances described in
"How to Buy Shares," you may be subject to a contingent deferred
sales charges when redeeming certain Class A, Class B and Class C
shares.
-- To avoid sending duplicate copies of materials to
households, the Fund will mail only one copy of each annual and
semi-annual report to shareholders having the same last name and
address on the Fund's records. However, each shareholder may call
the Transfer Agent at 1-800-525-7048 to ask that copies of those
materials be sent personally to that shareholder.
Dividends, Capital Gains and Taxes
Dividends. The Fund declares dividends separately for Class
A, Class B and Class C shares from net investment income on an
annual basis and normally pays those dividends to shareholders
following the end of its fiscal year, which is October 31.
Dividends paid on Class A shares generally are expected to be
higher than for Class B and Class C shares because expenses
allocable to Class B and Class C shares will generally be higher
than for Class A shares. There is no fixed dividend rate and there
can be no assurance as to the payment of any dividends.
Capital Gains. The Fund may make distributions annually in December
out of any net short-term or long-term capital gains, and the Fund
may make supplemental distributions of dividends and capital gains
following the end of its fiscal year. Short-term capital gains are
treated as dividends for tax purposes. Long-term capital gains will
be separately identified in the tax information the Fund sends you
after the end of the calendar year. There can be no assurances
that the Fund will pay any capital gains distributions in a
particular year.
Distribution Options. When you open your account, specify on your
application how you want to receive your distributions. For
OppenheimerFunds retirement accounts, all distributions are
reinvested. For other accounts, you have four options:
-- Reinvest All Distributions in the Fund. You can elect to
reinvest all dividends and long-term capital gains distributions in
additional shares of the Fund.
-- Reinvest Capital Gains Only. You can elect to reinvest
long-term capital gains in the Fund while receiving dividends by
check or sent to your bank account on AccountLink.
-- Receive All Distributions in Cash. You can elect to receive
a check for all dividends and long-term capital gains distributions
or have them sent to your bank on AccountLink.
-- Reinvest Your Distributions in Another Oppenheimer Fund
Account. You can reinvest all distributions in another Oppenheimer
fund account you have established.
Taxes. If your account is not a tax-deferred retirement account,
you should be aware of the following tax implications of investing
in the Fund. Long-term capital gains are taxable as long-term
capital gains when distributed to shareholders. It does not matter
how long you held your shares. Dividends paid from short-term
capital gains and net investment income are taxable as ordinary
income. Distributions are subject to federal income tax and may be
subject to state or local taxes. Your distributions are taxable
when paid, whether you reinvest them in additional shares or take
them in cash. Every year the Fund will send you and the IRS a
statement showing the amount of each taxable distribution you
received in the previous year.
-- "Buying a Dividend": When the Fund goes ex-dividend, its
share price is reduced by the amount of the distribution. If you
buy shares on or just before the ex-dividend date, or just before
the Fund declares a capital gains distribution, you will pay the
full price for the shares and then receive a portion of the price
back as a taxable dividend or capital gain.
-- Taxes on Transactions. Share redemptions, including
redemptions for exchanges, are subject to capital gains tax. A
capital gain or loss is the difference between the price you paid
for the shares and the price you received when you sold them.
-- Returns of Capital. In certain cases distributions made by
a Fund may be considered a non-taxable return of capital to
shareholders. If that occurs, it will be identified in notices to
shareholders. A non-taxable return of capital may reduce your tax
basis in your Fund shares.
This information is only a summary of certain federal tax
information about your investment. More information is contained
in the Statement of Additional Information, and in addition you
should consult with your tax adviser about the effect of an
investment in the Fund on your particular tax situation.
<PAGE>
APPENDIX A
Special Sales Charge Arrangements for Shareholders of the Fund
Who Were Shareholders of the Former Quest for Value Funds
The initial and contingent deferred sales charge rates and
waivers for Class A, Class B and Class C shares of the Fund
described elsewhere in this Prospectus are modified as described
below for those shareholders of (i) Quest for Value Fund, Inc.,
Quest for Value Growth and Income Fund, Quest for Value Opportunity
Fund, Quest for Value Small Capitalization Fund and Quest for Value
Global Equity Fund, Inc. on November 24, 1995, when
OppenheimerFunds, Inc. became the investment adviser to those
funds, and (ii) Quest for Value U.S. Government Income Fund, Quest
for Value Investment Quality Income Fund, Quest for Value Global
Income Fund, Quest for Value New York Tax-Exempt Fund, Quest for
Value National Tax-Exempt Fund and Quest for Value California Tax-
Exempt Fund when those funds merged into various Oppenheimer funds
on November 24, 1995. The funds listed above are referred to in
this Prospectus as the "Former Quest for Value Funds." The waivers
of initial and contingent deferred sales charges described in this
Appendix apply to shares of the Fund (i) acquired by such
shareholder pursuant to an exchange of shares of one of the
Oppenheimer funds that was one of the Former Quest for Value Funds
or (ii) received by such shareholder pursuant to the merger of any
of the Former Quest for Value Funds into an Oppenheimer fund on
November 24, 1995.
Class A Sales Charges
- -- Reduced Class A Initial Sales Charge Rates for Certain Former
Quest Shareholders
- - Purchases by Groups, Associations and Certain Qualified
Retirement Plans. The following table sets forth the initial sales
charge rates for Class A shares purchased by a "Qualified
Retirement Plan" through a single broker, dealer or financial
institution, or by members of "Associations" formed for any purpose
other than the purchase of securities if that Qualified Retirement
Plan or that Association purchased shares of any of the Former
Quest for Value Funds or received a proposal to purchase such
shares from OCC Distributors prior to November 24, 1995. For this
purpose only, a "Qualified Retirement Plan" includes any 401(k)
plan, 403(b) plan, and SEP/IRA or IRA plan for employees of a
single employer.
Front-End Front-End
Sales Sales Commission
Charge Charge as
Number of as a as a Percentage
Eligible Percentage Percentage of
Employees of Offering of Amount Offering
or Members Price Invested Price
- --------------------------------------------------------------
9 or fewer 2.50% 2.56% 2.00%
- --------------------------------------------------------------
At least 10 but not
more than 49 2.00% 2.04% 1.60%
For purchases by Qualified Retirement plans and Associations
having 50 or more eligible employees or members, there is no
initial sales charge on purchases of Class A shares, but those
shares are subject to the Class A contingent deferred sales charge
described on pages 26 and 27 of this Prospectus.
Purchases made under this arrangement qualify for the lower of
the sales charge rate in the table based on the number of eligible
employees in a Qualified Retirement Plan or members of an
Association or the sales charge rate that applies under the Rights
of Accumulation described above in the Prospectus. In addition,
purchases by 401(k) plans that are Qualified Retirement Plans
qualify for the waiver of the Class A initial sales charge if they
qualified to purchase shares of any of the Former Quest For Value
Funds by virtue of projected contributions or investments of $1
million or more each year. Individuals who qualify under this
arrangement for reduced sales charge rates as members of
Associations, or as eligible employees in Qualified Retirement
Plans also may purchase shares for their individual or custodial
accounts at these reduced sales charge rates, upon request to the
Fund's Distributor.
- -- Special Class A Contingent Deferred Sales Charge Rates
Class A shares of the Fund purchased by exchange of shares of other
Oppenheimer funds that were acquired as a result of the merger of
Former Quest for Value Funds into those Oppenheimer funds, and
which shares were subject to a Class A contingent deferred sales
charge prior to November 24, 1995 will be subject to a contingent
deferred sales charge at the following rates: if they are redeemed
within 18 months of the end of the calendar month in which they
were purchased, at a rate equal to 1.0% if the redemption occurs
within 12 months of their initial purchase and at a rate of 0.50 of
1.0% if the redemption occurs in the subsequent six months. Class
A shares of any of the Former Quest for Value Funds purchased
without an initial sales charge on or before November 22, 1995 will
continue to be subject to the applicable contingent deferred sales
charge in effect as of that date as set forth in the then-current
prospectus for such fund.
- -- Waiver of Class A Sales Charges for Certain Shareholders
Class A shares of the Fund purchased by the following investors are
not subject to any Class A initial or contingent deferred sales
charges:
- Shareholders of the Fund who were shareholders of the AMA
Family of Funds on February 28, 1991 and who acquired shares of any
of the Former Quest for Value Funds by merger of a portfolio of the
AMA Family of Funds.
- Shareholders of the Fund who acquired shares of any Former
Quest for Value Fund by merger of any of the portfolios of the
Unified Funds.
- -- Waiver of Class A Contingent Deferred Sales Charge in Certain
Transactions
The Class A contingent deferred sales charge will not apply to
redemptions of Class A shares of the Fund purchased by the
following investors who were shareholders of any Former Quest for
Value Fund:
- Investors who purchased Class A shares from a dealer that is
or was not permitted to receive a sales load or redemption fee
imposed on a shareholder with whom that dealer has a fiduciary
relationship under the Employee Retirement Income Security Act of
1974 and regulations adopted under that law.
- Participants in Qualified Retirement Plans that purchased
shares of any of the Former Quest For Value Funds pursuant to a
special "strategic alliance" with the distributor of those funds.
The Fund's Distributor will pay a commission to the dealer for
purchases of Fund shares as described above in "Class A Contingent
Deferred Sales Charge."
Class A, Class B and Class C Contingent Deferred Sales Charge
Waivers
- -- Waivers for Redemptions of Shares Purchased Prior to March 6,
1995
In the following cases, the contingent deferred sales charge will
be waived for redemptions of Class A, Class B or Class C shares of
the Fund acquired by merger of a Former Quest for Value Fund into
the Fund or by exchange from an Oppenheimer fund that was a Former
Quest for Value Fund or into which such fund merged, if those
shares were purchased prior to March 6, 1995: in connection with
(i) distributions to participants or beneficiaries of plans
qualified under Section 401(a) of the Internal Revenue Code or from
custodial accounts under Section 403(b)(7) of the Code, Individual
Retirement Accounts, deferred compensation plans under Section 457
of the Code, and other employee benefit plans, and returns of
excess contributions made to each type of plan, (ii) withdrawals
under an automatic withdrawal plan holding only either Class B or
Class C shares if the annual withdrawal does not exceed 10% of the
initial value of the account, and (iii) liquidation of a
shareholder's account if the aggregate net asset value of shares
held in the account is less than the required minimum value of such
accounts.
- -- Waivers for Redemptions of Shares Purchased on or After March 6,
1995 but Prior to November 24, 1995.
In the following cases, the contingent deferred sales charge will
be waived for redemptions of Class A, Class B or Class C shares of
the Fund acquired by merger of a Former Quest for Value Fund into
the Fund or by exchange from an Oppenheimer fund that was a Former
Quest For Value Fund or into which such fund merged, if those
shares were purchased on or after March 6, 1995, but prior to
November 24, 1995: (1) distributions to participants or
beneficiaries from Individual Retirement Accounts under
Section 408(a) of the Internal Revenue Code or retirement plans
under Section 401(a), 401(k), 403(b) and 457 of the Code, if those
distributions are made either (a) to an individual participant as
a result of separation from service or (b) following the death or
disability (as defined in the Code) of the participant or
beneficiary; (2) returns of excess contributions to such retirement
plans; (3) redemptions other than from retirement plans following
the death or disability of the shareholder(s) (as evidenced by a
determination of total disability by the U.S. Social Security
Administration); (4) withdrawals under an automatic withdrawal plan
(but only for Class B or C shares) where the annual withdrawals do
not exceed 10% of the initial value of the account; and
(5) liquidation of a shareholder's account if the aggregate net
asset value of shares held in the account is less than the required
minimum account value. A shareholder's account will be credited
with the amount of any contingent deferred sales charge paid on the
redemption of any Class A, Class B or Class C shares of the Fund
described in this section if within 90 days after that redemption,
the proceeds are invested in the same Class of shares in this Fund
or another Oppenheimer fund.
Special Dealer Arrangements
Dealers who sold Class B shares of a Former Quest for Value Fund to
Quest for Value prototype 401(k) plans that were maintained on the
TRAC-2000 recordkeeping system and that were transferred to an
OppenheimerFunds prototype 401(k) plan shall be eligible for an
additional one-time payment by the Distributor of 1% of the value
of the plan assets transferred, but that payment may not exceed
$5,000 as to any one plan.
Dealers who sold Class C shares of a Former Quest for Value Fund to
Quest for Value prototype 401(k) plans that were maintained on the
TRAC-2000 recordkeeping system and (i) the shares held by those
plans were exchanged for Class A shares, or (ii) the plan assets
were transferred to an OppenheimerFunds prototype 401(k) plan,
shall be eligible for an additional one-time payment by the
Distributor of 1% of the value of the plan assets transferred, but
that payment may not exceed $5,000.
<PAGE>
SCHEDULE TO PROSPECTUS OF
OPPENHEIMER QUEST SMALL CAP VALUE FUND
Graphic material included in Prospectus of Oppenheimer Quest
Small Cap Value Fund: "Comparison of Total Return of Oppenheimer
Quest Small Cap Value Fund with the Russell 2000 Index - Change in
Value of $10,000 Hypothetical Investments in Class A, Class B and
Class C Shares of Oppenheimer Quest Small Cap Value Fund and the
Russell 2000 Index."
Linear graphs will be included in the Prospectus of
Oppenheimer Quest Small Cap Value Fund (the "Fund") depicting the
initial account value and subsequent account value of a
hypothetical $10,000 investment in the Fund. In the case of the
Fund's Class A shares, that graph will cover the period from
inception (1/1/89) through 10/31/95, and in the case of the Fund's
Class B and Class C shares, will cover the period from the
inception of the class (September 2, 1993) through 10/31/95. The
graph will compare such values with hypothetical $10,000
investments over the same time periods in the Russell 2000 Index.
Set forth below are the relevant data points that will appear on
the linear graph. Additional information with respect to the
foregoing, including a description of the and Russell 2000 Index,
is set forth in the Prospectus under "Performance of the Fund -
Comparing the Fund's Performance to the Market."
Oppenheimer
Fiscal Quest Small Cap Russell
Period Ended Fund A 2000 Index
- ------------ --------------- ----------
01/03/89 $ 9,425 $10,000
10/31/89 $10,283 $11,504
10/31/90 $ 8,398 $ 8,363
10/31/91 $13,018 $13,265
10/31/92 $14,528 $14,523
10/31/93 $18,917 $19,227
10/31/94 $18,924 $19,180
10/31/95 $20,593 $22,699
Oppenheimer
Fiscal Quest Small Cap Russell
Period Ended Fund B 2000 Index
- ------------ --------------- ----------
9/01/93(2) $10,000 $10,000
10/31/93 $10,273 $10,503
10/31/94 $10,233 $10,477
10/31/95 $10,771 $12,400
Oppenheimer
Fiscal Quest Small Cap Russell
Period Ended Fund C 2000 Index
9/01/93(2) $10,000 $10,000
10/31/93 $10,279 $10,503
10/31/94 $10,277 $10,477
10/31/95 $11,070 $12,400
- ---------------------
(2) Class B shares of the Fund were first publicly offered on
9/01/93.
(3) Class C shares of the Fund were first publicly offered on
9/01/93.
<PAGE>
Oppenheimer Quest Small Cap Value Fund
Two World Trade Center
New York, New York 10048-0203
1-800-525-7048
Investment Adviser
OppenheimerFunds, Inc.
Two World Trade Center
New York, New York 10048-0203
Sub-Adviser
OpCap Advisors
One World Financial Center
New York, New York 10281
Distributor
OppenheimerFunds Distributor, Inc.
Two World Trade Center
New York, New York 10048-0203
Transfer Agent
OppenheimerFunds Services
P.O. Box 5270
Denver, Colorado 80217
1-800-525-7048
Custodian of Portfolio Securities
State Street Bank and Trust Company
P.O. Box 8505
Boston, Massachusetts 02266-8505
Independent Accountants
Price Waterhouse LLP
950 Seventeenth Street
Denver, Colorado 80202
Legal Counsel
Gordon Altman Butowsky Weitzen Shalov & Wein
114 West 47th Street
New York, New York 10036
No dealer, broker, salesperson or any other person has been
authorized to give any information or to make any representations
other than those contained in this Prospectus or the Statement of
Additional Information, and if given or made, such information and
representations must not be relied upon as having been authorized
by the Fund, OppenheimerFunds, Inc., OppenheimerFunds Distributor,
Inc. or any affiliate thereof. This Prospectus does not constitute
an offer to sell or a solicitation of an offer to buy any of the
securities offered hereby in any state to any person to whom it is
unlawful to make such an offer in such state.
prosp\q251psp
<PAGE>
OPPENHEIMER QUEST SMALL CAP VALUE FUND
Two World Trade Center, New York, New York 10048
1-800-525-7048
Statement of Additional Information dated February 15, 1996
This document contains additional information about Oppenheimer
Quest Small Cap Value Fund (the "Fund") and supplements information
in the Prospectus dated February 15, 1996. It should be read
together with the Prospectus, which may be obtained upon written
request to the Fund's Transfer Agent, OppenheimerFunds Services at
P.O. Box 5270, Denver, Colorado 80217, or by calling the Transfer
Agent at the toll-free number shown above.
<TABLE>
Caption>
Contents
Page
<S> <C>
About the Fund
Investment Objective and Policies. . . . . . . . . . . . . . . 2
Investment Policies and Strategies. . . . . . . . . . . 2
Other Investment Techniques and Strategies. . . . . . . 5
Other Investment Restrictions . . . . . . . . . . . . . 14
How the Fund is Managed . . . . . . . . . . . . . . . . . . . 15
Organization and History. . . . . . . . . . . . . . . . 15
Trustees and Officers of the Trust. . . . . . . . . . . 16
The Manager and Its Affiliates. . . . . . . . . . . . . 20
Brokerage Policies of the Fund . . . . . . . . . . . . . . . . 23
Performance of the Fund. . . . . . . . . . . . . . . . . . . . 25
Distribution and Service Plans . . . . . . . . . . . . . . . . 28
About Your Account
How To Buy Shares. . . . . . . . . . . . . . . . . . . . . . . 30
How To Sell Shares . . . . . . . . . . . . . . . . . . . . . . 37
How To Exchange Shares . . . . . . . . . . . . . . . . . . . . 42
Dividends, Capital Gains and Taxes . . . . . . . . . . . . . . 43
Additional Information About the Fund. . . . . . . . . . . . . 45
Financial Information About the Fund
Independent Auditors' Report . . . . . . . . . . . . . . . . . 47
Financial Statements . . . . . . . . . . . . . . . . . . . . . 49
Appendix A: Description of Ratings . . . . . . . . . . . . . . A-1
Appendix B: Corporate Industry Classifications . . . . . . . . B-1
</TABLE>
<PAGE>
ABOUT THE FUND
Investment Objective and Policies
Investment Policies and Strategies. The investment objective and
policies of the Fund are described in the Prospectus. The Fund is
one of four portfolios of Oppenheimer Quest for Value Funds (the
"Trust"). Set forth below is supplemental information about those
policies and the types of securities in which the Fund invests, as
well as the strategies the Fund may use to try to achieve its
objective. Capitalized terms used in this Statement of Additional
Information have the same meaning as those terms have in the
Prospectus.
-- Foreign Securities. The Fund may invest in securities
(which may be denominated in U.S. dollars or non-U.S. currencies)
issued or guaranteed by foreign corporations, certain supranational
entities (described below) and foreign governments or their
agencies or instrumentalities, and in securities issued by U.S.
corporations denominated in non-U.S. currencies. All such
securities are referred to as "foreign securities."
Investing in foreign securities offers potential benefits not
available from investing solely in securities of domestic issuers,
including the opportunity to invest in foreign issuers that appear
to offer growth potential, or in foreign countries with economic
policies or business cycles different from those of the U.S., or to
reduce fluctuations in portfolio value by taking advantage of
foreign stock markets that do not move in a manner parallel to U.S.
markets. If the Fund's portfolio securities are held abroad, the
countries in which they may be held and the sub-custodians or
depositories holding them must be approved by the Trust's Board of
Trustees to the extent that approval is required under applicable
rules of the Securities and Exchange Commission.
- Risks of Foreign Investing. Investments in foreign
securities present special additional risks and considerations not
typically associated with investments in domestic securities:
reduction of income by foreign taxes; fluctuation in value of
foreign portfolio investments due to changes in currency rates and
control regulations (e.g., currency blockage); transaction charges
for currency exchange; lack of public information about foreign
issuers; lack of uniform accounting, auditing and financial
reporting standards comparable to those applicable to domestic
issuers; less volume on foreign exchanges than on U.S. exchanges;
greater volatility and less liquidity on foreign markets than in
the U.S.; less regulation of foreign issuers, stock exchanges and
brokers than in the U.S.; greater difficulties in commencing
lawsuits and obtaining judgments in foreign courts; higher
brokerage commission rates than in the U.S.; increased risks of
delays in settlement of portfolio transactions or loss of
certificates for portfolio securities; possibilities in some
countries of expropriation, confiscatory taxation, political,
financial or social instability or adverse diplomatic developments;
and unfavorable differences between the U.S. economy and foreign
economies. In the past, U.S. Government policies have discouraged
certain investments abroad by U.S. investors, through taxation or
other restrictions, and it is possible that such restrictions could
be re-imposed.
- Emerging Market Countries: Certain developing countries may
have relatively unstable governments, economies based on only a few
industries that are dependent upon international trade, and reduced
secondary market liquidity. Foreign investment in certain emerging
market countries is restricted or controlled in varying degrees.
In the past, securities in these countries have experienced greater
price movement, both positive and negative, than securities of
companies located in developed countries. Lower-rated high-
yielding emerging market securities may be considered to have
speculative elements.
-- U.S. Government Securities. Obligations of U.S. Government
agencies or instrumentalities (including mortgage-backed
securities) may or may not be guaranteed or supported by the "full
faith and credit" of the United States. Some are backed by the
right of the issuer to borrow from the U.S. Treasury; others, by
discretionary authority of the U.S. Government to purchase the
agencies' obligations; while others are supported only by the
credit of the instrumentality. All U.S. Treasury obligations are
backed by the full faith and credit of the United States. If the
securities are not backed by the full faith and credit of the
United States, the owner of the securities must look principally to
the agency issuing the obligation for repayment and may not be able
to assert a claim against the United States in the event that the
agency or instrumentality does not meet its commitment. The Fund
will invest in U.S. Government Securities of such agencies and
instrumentalities only when the Manager is satisfied that the
credit risk with respect to such instrumentality is minimal.
Money Market Securities. As stated in the Prospectus, the
Fund typically invests a part of its assets in money market
securities, and may invest up to 100% of its total assets in money
market securities for temporary defensive purposes. Money market
securities in which the Fund may invest include the following:
- Time Deposits and Variable Rate Notes. The Fund may invest
in fixed time deposits, whether or not subject to withdrawal
penalties. However, investment in such deposits which are subject
to withdrawal penalties, other than overnight deposits, are subject
to the 10% limit on illiquid investments set forth in the
Prospectus for the Fund.
The commercial paper obligations which the Fund may buy are
unsecured and may include variable rate notes. The nature and
terms of a variable rate note (i.e., a "Master Note") permit the
Fund to invest fluctuating amounts at varying rates of interest
pursuant to a direct arrangement between the Fund as lender, and
the issuer, as borrower. It permits daily changes in the amounts
borrowed. The Fund has the right at any time to increase, up to
the full amount stated in the note agreement, or to decrease the
amount outstanding under the note. The issuer may prepay at any
time and without penalty any part or the full amount of the note.
The note may or may not be backed by one or more bank letters of
credit. Because these notes are direct lending arrangements
between the Fund and the issuer, it is not generally contemplated
that they will be traded; moreover, there is currently no secondary
market for them. Except as specifically provided in the Prospectus
for each Fund, there is no limitation on the type of issuer from
whom these notes will be purchased. However, in connection with
such purchase and on an ongoing basis, OpCap Advisors (the
"Sub-Adviser") will consider the earning power, cash flow and other
liquidity ratios of the issuer, and its ability to pay principal
and interest on demand, including a situation in which all holders
of such notes made demand simultaneously. The Fund will not invest
more than 5% of its total assets in variable rate notes. Variable
rate notes are subject to the Fund's investment restriction on
illiquid securities unless such notes can be put back to the issuer
on demand within seven days.
- Insured Bank Obligations. The Federal Deposit Insurance
Corporation ("FDIC") insures the deposits of federally insured
banks and savings and loan associations (collectively referred to
as "banks") up to $100,000. The Fund may, within the limits set
forth in the Prospectus, purchase bank obligations which are fully
insured as to principal by the FDIC. Currently, to remain fully
insured as to principal, these investments must be limited to
$100,000 per bank. If the principal amount and accrued interest
together exceed $100,000, the excess principal and accrued interest
will not be insured. Insured bank obligations may have limited
marketability. Unless the Board of Trustees determines that a
readily available market exists for such obligations, the Fund will
treat such obligations as subject to the 10% limit for illiquid
investments set forth in the Prospectus for the Fund unless such
obligations are payable at principal amount plus accrued interest
on demand or within seven days after demand.
-- Convertible Securities. The Fund may invest in fixed-
income securities which are convertible into common stock.
Convertible securities rank senior to common stocks in a
corporation's capital structure and, therefore, entail less risk
than the corporation's common stock. The value of a convertible
security is a function of its "investment value" (its value as if
it did not have a conversion privilege), and its "conversion value"
(the security's worth if it were to be exchanged for the underlying
security, at market value, pursuant to its conversion privilege).
To the extent that a convertible security's "investment value"
is greater than its "conversion value," its price will be primarily
a reflection of such "investment value" and its price will be
likely to increase when interest rates fall and decrease when
interest rates rise, as with a fixed-income security. The credit
standing of the issuer and other factors may also have an effect on
the convertible security's value. If the "conversion value"
exceeds the investment value, the price of the convertible security
will rise above its "investment value" and, in addition, will sell
at some premium over its "conversion value." This premium
represents the price investors are willing to pay for the privilege
of purchasing a fixed-income security with a possibility of capital
appreciation due to the conversion privilege. At such times the
price of the convertible security will tend to fluctuate directly
with the price of the underlying equity security. Convertible
securities may be purchased by the Fund at varying price levels
above their "investment values" and/or their "conversion values" in
keeping with the Fund's objectives.
-- Lower-Grade Securities. The Fund may invest up to 5% of
its total assets in lower-grade securities. Lower-grade securities
(commonly known as "junk bonds") are rated less than "BBB" by
Standard & Poor's Corporation, or less than "Baa" by Moody's
Investors Service, Inc., or have a comparable rating from another
rating organization. If unrated, the security is determined by the
Sub-Adviser to be of comparable quality to securities rated less
than investment grade.
- Special Risks of Lower-Grade Securities. High yield, lower-
grade securities, whether rated or unrated, often have speculative
characteristics. Lower-grade securities have special risks that
make them riskier investments than investment grade securities.
They may be subject to greater market fluctuations and risk of loss
of income and principal than lower yielding, investment-grade
securities. There may be less of a market for them and therefore
they may be harder to sell at an acceptable price. There is a
relatively greater possibility that the issuer's earnings may be
insufficient to make the payments of interest due on the bonds.
The issuer's low creditworthiness may increase the potential for
its insolvency.
These risks mean that the Fund may not achieve the expected
income from lower-grade securities, and that the Fund's net asset
value per share may be affected by declines in value of these
securities. However, the Fund's limitations on investments in
these types of securities may reduce some of the risk, as will the
Fund's policy of diversifying its investments.
-- Rights and Warrants. Warrants basically are options to
purchase equity securities at specific prices valid for a specific
period of time. Their prices do not necessarily move parallel to
the prices of the underlying securities. Rights are similar to
warrants, but normally have a short duration and are distributed
directly by the issuer to its shareholders. Rights and warrants
have no voting rights, receive no dividends and have no rights with
respect to the assets of the issuer.
Other Investment Techniques and Strategies.
-- When-Issued Securities. The Fund may take advantage of
offerings of eligible portfolio securities on a "when-issued" basis
where delivery of and payment for such securities takes place
sometime after the transaction date on terms established on such
date. Normally, settlement on U.S. Government securities takes
place within ten days. The Fund only will make when-issued
commitments on eligible securities with the intention of actually
acquiring the securities. If the Fund chooses to dispose of the
right to acquire a when-issued security prior to its acquisition,
it could, as with the disposition of any other portfolio
obligation, incur a gain or loss due to market fluctuation. When-
issued commitments will not be made if, as a result, more than 15%
of the net assets of the Fund would be so committed.
-- Repurchase Agreements. The Fund may acquire securities
subject to repurchase agreements for liquidity purposes to meet
anticipated redemptions, or pending the investment of the proceeds
from sales of Fund shares, or pending the settlement of purchases
of portfolio securities.
In a repurchase transaction, the Fund acquires a security
from, and simultaneously agrees to resell it to, an approved
vendor. An "approved vendor" is a U.S. commercial bank or the U.S.
branch of a foreign bank or a broker-dealer that has been
designated a primary dealer in government securities, that must
meet credit requirements set by the Trust's Board of Trustees from
time to time. The resale price exceeds the purchase price by an
amount that reflects an agreed-upon interest rate effective for the
period during which the repurchase agreement is in effect. The
majority of these transactions run from day to day, and delivery
pursuant to the resale typically will occur within one to five days
of the purchase. Repurchase agreements are considered "loans"
under the Investment Company Act, collateralized by the underlying
security. The Fund's repurchase agreements require that at all
times while the repurchase agreement is in effect, the value of the
collateral must equal or exceed the repurchase price to fully
collateralize the repayment obligation. Additionally, the Manager
will impose creditworthiness requirements to confirm that the
vendor is financially sound and will continuously monitor the
collateral's value.
-- Illiquid and Restricted Securities. To enable the Fund to
sell restricted securities not registered under the Securities Act
of 1933, the Fund may have to cause those securities to be
registered. The expenses of registration of restricted securities
may be negotiated by the Fund with the issuer at the time such
securities are purchased by the Fund, if such registration is
required before such securities may be sold publicly. When
registration must be arranged because the Fund wishes to sell the
security, a considerable period may elapse between the time the
decision is made to sell the securities and the time the Fund would
be permitted to sell them. The Fund would bear the risks of any
downward price fluctuation during that period. The Fund may also
acquire, through private placements, securities having contractual
restrictions on their resale, which might limit the Fund's ability
to dispose of such securities and might lower the amount realizable
upon the sale of such securities.
The Fund has percentage limitations that apply to purchases of
restricted securities, as stated in the Prospectus. Those
percentage restrictions do not limit purchases of restricted
securities that are eligible for sale to qualified institutional
purchasers pursuant to Rule 144A under the Securities Act of 1933,
provided that those securities have been determined to be liquid by
the Board of Trustees of the Trust or by the Sub-Advisor under
Board-approved guidelines. Those guidelines take into account the
trading activity for such securities and the availability of
reliable pricing information, among other factors. If there is a
lack of trading interest in a particular Rule 144A security, the
Fund's holding of that security may be deemed to be illiquid.
-- Loans of Portfolio Securities. The Fund may lend its
portfolio securities subject to the restrictions stated in the
Prospectus. Under applicable regulatory requirements (which are
subject to change), the loan collateral on each business day must
at least equal the value of the loaned securities and must consist
of cash, bank letters of credit or securities of the U.S.
Government (or its agencies or instrumentalities). To be
acceptable as collateral, letters of credit must obligate a bank to
pay amounts demanded by the Fund if the demand meets the terms of
the letter. Such terms and the issuing bank must be satisfactory
to the Fund. When it lends securities, the Fund receives amounts
equal to the dividends or interest on loaned securities and also
receives one or more of (a) negotiated loan fees, (b) interest on
securities used as collateral, and (c) interest on short-term debt
securities purchased with such loan collateral. Either type of
interest may be shared with the borrower. The Fund may also pay
reasonable finder's, custodian and administrative fees. The terms
of the Fund's loans must meet applicable tests under the Internal
Revenue Code and must permit the Fund to reacquire loaned
securities on five days' notice or in time to vote on any important
matter.
-- Hedging With Options and Futures Contracts. The Fund may
employ one or more types of Hedging Instruments for the purposes
described in the Prospectus. When hedging to attempt to protect
against declines in the market value of the Fund's portfolio, or to
permit the Fund to retain unrealized gains in the value of
portfolio securities which have appreciated, or to facilitate
selling securities for investment reasons, the Fund may: (i) sell
Stock Index Futures, (ii) buy puts on securities or securities
indices, or (iii) write covered calls on securities, securities
indices or Stock Index Futures (as described in the Prospectus).
When hedging to establish a position in the equity securities
markets as a temporary substitute for the purchase of individual
equity securities the Fund may: (i) buy Stock Index Futures, or
(ii) buy calls on securities, securities indices or Stock Index
Futures. Normally, the Fund would then purchase the equity
securities and terminate the hedging portion.
The Fund's strategy of hedging with Futures and options on
Futures will be incidental to the Fund's investment activities in
the underlying cash market. In the future, the Fund may employ
hedging instruments and strategies that are not presently
contemplated but which may be subsequently developed, to the extent
such investment methods are consistent with the Fund's investment
objective, and are legally permissible and disclosed in the
Prospectus. Additional information about the hedging instruments
the Fund may use is provided below.
- Writing Call Options. As described in the Prospectus, the
Fund may write covered calls. When the Fund writes a call on an
investment, it receives a premium and agrees to sell the callable
investment to a purchaser of a corresponding call during the call
period (usually not more than 9 months) at a fixed exercise price
(which may differ from the market price of the underlying
investment) regardless of market price changes during the call
period. To terminate its obligation on a call it has written, the
Fund may purchase a corresponding call in a "closing purchase
transaction." A profit or loss will be realized, depending upon
whether the net of the amount of option transaction costs and the
premium received on the call the Fund has written is more or less
than the price of the call the Fund subsequently purchased. A
profit may also be realized if the call lapses unexercised because
the Fund retains the underlying investment and the premium
received. Those profits are considered short-term capital gains
for Federal income tax purposes, as are premiums on lapsed calls,
and when distributed by the Fund are taxable as ordinary income.
If the Fund could not effect a closing purchase transaction due to
the lack of a market, it would have to hold the callable investment
until the call lapsed or was exercised.
The Fund may also write calls on Futures without owning a
futures contract or deliverable securities, provided that at the
time the call is written, the Fund covers the call by segregating
in escrow an equivalent dollar value of deliverable securities or
liquid assets. The Fund will segregate additional liquid assets if
the value of the escrowed assets drops below 100% of the current
value of the Future. In no circumstances would an exercise notice
as to a Future put the Fund in a short futures position.
- Writing Put Options. A put option on securities gives the
purchaser the right to sell, and the writer the obligation to buy,
the underlying investment at the exercise price during the option
period. Writing a put covered by segregated liquid assets equal to
the exercise price of the put has the same economic effect to the
Fund as writing a covered call. The premium the Fund receives from
writing a put option represents a profit, as long as the price of
the underlying investment remains above the exercise price.
However, the Fund has also assumed the obligation during the option
period to buy the underlying investment from the buyer of the put
at the exercise price, even though the value of the investment may
fall below the exercise price. If the put expires unexercised, the
Fund (as the writer of the put) realizes a gain in the amount of
the premium less transaction costs. If the put is exercised, the
Fund must fulfill its obligation to purchase the underlying
investment at the exercise price, which will usually exceed the
market value of the investment at that time. In that case, the
Fund may incur a loss, equal to the sum of the sale price of the
underlying investment and the premium received minus the sum of the
exercise price and any transaction costs incurred.
When writing put options on securities or on foreign
currencies, to secure its obligation to pay for the underlying
security, the Fund will deposit in escrow liquid assets with a
value equal to or greater than the exercise price of the underlying
securities. The Fund therefore forgoes the opportunity of
investing the segregated assets or writing calls against those
assets. As long as the obligation of the Fund as the put writer
continues, it may be assigned an exercise notice by the exchange or
broker-dealer through whom such option was sold, requiring the Fund
to exchange currency at the specified rate of exchange or to take
delivery of the underlying security against payment of the exercise
price. The Fund may have no control over when it may be required
to purchase the underlying security, since it may be assigned an
exercise notice at any time prior to the termination of its
obligation as the writer of the put. This obligation terminates
upon expiration of the put, or such earlier time at which the Fund
effects a closing purchase transaction by purchasing a put of the
same series as that previously sold. Once the Fund has been
assigned an exercise notice, it is thereafter not allowed to effect
a closing purchase transaction.
The Fund may effect a closing purchase transaction to realize
a profit on an outstanding put option it has written or to prevent
an underlying security from being put. Furthermore, effecting such
a closing purchase transaction will permit the Fund to write
another put option to the extent that the exercise price thereof is
secured by the deposited assets, or to utilize the proceeds from
the sale of such assets for other investments by the Fund. The
Fund will realize a profit or loss from a closing purchase
transaction if the cost of the transaction is less or more than the
premium received from writing the option. As above for writing
covered calls, any and all such profits described herein from
writing puts are considered short-term capital gains for Federal
tax purposes, and when distributed by the Fund, are taxable as
ordinary income.
The Trustees have adopted a non-fundamental policy that the
Fund may write covered call options or write covered put options
with respect to not more than 5% of the value of its net assets.
Similarly, the Fund may only purchase call options and put options
with a value of up to 5% of its net assets.
- Purchasing Puts and Calls. The Fund may purchase calls to
protect against the possibility that the Fund's portfolio will not
participate in an anticipated rise in the securities market. When
the Fund purchases a call (other than in a closing purchase
transaction), it pays a premium and, except as to calls on stock
indices, has the right to buy the underlying investment from a
seller of a corresponding call on the same investment during the
call period at a fixed exercise price. In purchasing a call, the
Fund benefits only if the call is sold at a profit or if, during
the call period, the market price of the underlying investment is
above the sum of the exercise price, transaction costs, and the
premium paid, and the call is exercised. If the call is not
exercised or sold (whether or not at a profit), it will become
worthless at its expiration date and the Fund will lose its premium
payment and the right to purchase the underlying investment. When
the Fund purchases a call on a stock index, it pays a premium, but
settlement is in cash rather than by delivery of the underlying
investment to the Fund.
When the Fund purchases a put, it pays a premium and, except
as to puts on stock indices, has the right to sell the underlying
investment to a seller of a corresponding put on the same
investment during the put period at a fixed exercise price. Buying
a put on an investment the Fund owns (a "protective put") enables
the Fund to attempt to protect itself during the put period against
a decline in the value of the underlying investment below the
exercise price by selling the underlying investment at the exercise
price to a seller of a corresponding put. If the market price of
the underlying investment is equal to or above the exercise price
and as a result the put is not exercised or resold, the put will
become worthless at its expiration and the Fund will lose the
premium payment and the right to sell the underlying investment.
However, the put may be sold prior to expiration (whether or not at
a profit).
Puts and calls on broadly-based stock indices or Stock Index
Futures are similar to puts and calls on securities or futures
contracts except that all settlements are in cash and gain or loss
depends on changes in the index in question (and thus on price
movements in the stock market generally) rather than on price
movements of individual securities or futures contracts. When the
Fund buys a call on a stock index or Stock Index Future, it pays a
premium. If the Fund exercises the call during the call period, a
seller of a corresponding call on the same investment will pay the
Fund an amount of cash to settle the call if the closing level of
the stock index or Future upon which the call is based is greater
than the exercise price of the call. That cash payment is equal to
the difference between the closing price of the call and the
exercise price of the call times a specified multiple (the
"multiplier") which determines the total dollar value for each
point of difference. When the Fund buys a put on a stock index or
Stock Index Future, it pays a premium and has the right during the
put period to require a seller of a corresponding put, upon the
Fund's exercise of its put, to deliver cash to the Fund to settle
the put if the closing level of the stock index or Stock Index
Future upon which the put is based is less than the exercise price
of the put. That cash payment is determined by the multiplier, in
the same manner as described above as to calls.
When the Fund purchases a put on a stock index, or on a Stock
Index Future not owned by it, the put protects the Fund to the
extent that the index moves in a similar pattern to the securities
the Fund holds. The Fund can either resell the put or, in the case
of a put on a Stock Index Future, buy the underlying investment and
sell it at the exercise price. The resale price of the put will
vary inversely with the price of the underlying investment. If the
market price of the underlying investment is above the exercise
price, and as a result the put is not exercised, the put will
become worthless on the expiration date. In the event of a decline
in price of the underlying investment, the Fund could exercise or
sell the put at a profit to attempt to offset some or all of its
loss on its portfolio securities.
The Fund's option activities may affect its portfolio turnover
rate and brokerage commissions. The exercise of calls written by
the Fund may cause the Fund to sell related portfolio securities,
thus increasing its turnover rate. The exercise by the Fund of
puts on securities will cause the sale of underlying investments,
increasing portfolio turnover. Although the decision whether to
exercise a put it holds is within the Fund's control, holding a put
might cause the Fund to sell the related investments for reasons
that would not exist in the absence of the put. The Fund will pay
a brokerage commission each time it buys or sells a call, put or an
underlying investment in connection with the exercise of a put or
call. Those commissions may be higher than the commissions for
direct purchases or sales of the underlying investments.
Premiums paid for options are small in relation to the market
value of the underlying investments and, consequently, put and call
options offer large amounts of leverage. The leverage offered by
trading in options could result in the Fund's net asset value being
more sensitive to changes in the value of the underlying
investments.
- Stock Index Futures. As described in the Prospectus, the
Fund may invest in Stock Index Futures only if they relate to
broadly-based stock indices. A stock index is considered to be
broadly-based if it includes stocks that are not limited to issuers
in any particular industry or group of industries. A stock index
assigns relative values to the common stocks included in the index
and fluctuates with the changes in the market value of those
stocks. Stock indices cannot be purchased or sold directly.
Stock index futures are contracts based on the future value of
the basket of securities that comprise the underlying stock index.
The contracts obligate the seller to deliver, and the purchaser to
take, cash to settle the futures transaction or to enter into an
offsetting contract. No physical delivery of the securities
underlying the index is made on settling the futures obligation. No
monetary amount is paid or received by the Fund on the purchase or
sale of a Stock Index Future. Upon entering into a Futures
transaction, the Fund will be required to deposit an initial margin
payment, in cash or U.S. Treasury bills, with the futures
commission merchant (the "futures broker"). Initial margin
payments will be deposited with the Fund's Custodian in an account
registered in the futures broker's name; however, the futures
broker can gain access to that account only under certain specified
conditions. As the Future is marked to market (that is, its value
on the Fund's books is changed) to reflect changes in its market
value, subsequent margin payments, called variation margin, will be
paid to or by the futures broker on a daily basis.
At any time prior to the expiration of the Future, the Fund
may elect to close out its position by taking an opposite position,
at which time a final determination of variation margin is made and
additional cash is required to be paid by or released to the Fund.
Any gain or loss is then realized by the Fund on the Future for tax
purposes. Although Stock Index Futures by their terms call for
settlement by the delivery of cash, in most cases the settlement
obligation is fulfilled without such delivery by entering into an
offsetting transaction. All futures transactions are effected
through a clearing house associated with the exchange on which the
contracts are traded.
- Regulatory Aspects of Hedging Instruments. The Fund is
required to operate within certain guidelines and restrictions with
respect to its use of futures and options thereon as established by
the Commodities Futures Trading Commission ("CFTC"). In
particular, the Fund is excluded from registration as a "commodity
pool operator" if it complies with the requirements of Rule 4.5
adopted by the CFTC. Under this Rule, the Fund is not limited
regarding the percentage of its assets committed to futures margins
and related options premiums subject to a hedge position. However,
aggregate initial futures margins and related options premiums are
limited to 5% or less of the Fund's net asset value for other than
bona fide hedging strategies employed by the Fund within the
meaning and intent of applicable provisions of the Commodity
Exchange Act and CFTC regulations thereunder.
Transactions in options by the Fund are subject to limitations
established by option exchanges governing the maximum number of
options that may be written or held by a single investor or group
of investors acting in concert, regardless of whether the options
were written or purchased on the same or different exchanges or are
held in one or more accounts or through one or more different
exchanges or through one or more brokers. Thus the number of
options which the Fund may write or hold may be affected by options
written or held by other entities, including other investment
companies having the same adviser as the Fund (or an adviser that
is an affiliate of the Fund's adviser). The exchanges also impose
position limits on Futures transactions. An exchange may order the
liquidation of positions found to be in violation of those limits
and may impose certain other sanctions.
Due to requirements under the Investment Company Act, when the
Fund purchases a Stock Index Future, the Fund will maintain, in a
segregated account or accounts with its custodian, cash or readily-
marketable, short-term (maturing in one year or less) debt
instruments in an amount equal to the market value of the
securities underlying such Future, less the margin deposit
applicable to it.
- Additional Information About Hedging Instruments and Their
Use. The Fund's Custodian, or a securities depository acting for
the Custodian, will act as the Fund's escrow agent, through the
facilities of the Options Clearing Corporation ("OCC"), as to the
investments on which the Fund has written options traded on
exchanges or as to other acceptable escrow securities, so that no
margin will be required for such transactions. OCC will release
the securities on the expiration of the option or upon the Fund's
entering into a closing transaction. An option position may be
closed out only on a market which provides secondary trading for
options of the same series, and there is no assurance that a liquid
secondary market will exist for any particular option.
When the Fund writes an over-the-counter("OTC") option, it
will enter into an arrangement with a primary U.S. Government
securities dealer, which would establish a formula price at which
the Fund would have the absolute right to repurchase that OTC
option. That formula price would generally be based on a multiple
of the premium received for the option, plus the amount by which
the option is exercisable below the market price of the underlying
security (that is, the extent to which the option is "in-the-
money"). When the Fund writes an OTC option, it will treat as
illiquid (for purposes of the limit on its assets that may be
invested in the illiquid securities, stated in the Prospectus) the
mark-to-market value of any OTC option held by it. The Securities
and Exchange Commission ("SEC") is evaluating whether OTC options
should be considered liquid securities, and the procedure described
above could be affected by the outcome of that evaluation.
The Fund's option activities may affect its turnover rate and
brokerage commissions. The exercise by the Fund of puts on
securities will cause the sale of related investments, increasing
portfolio turnover. Although such exercise is within the Fund's
control, holding a put might cause the Fund to sell the related
investments for reasons which would not exist in the absence of the
put. The Fund will pay a brokerage commission each time it buys a
put or call, sells a call, or buys or sells an underlying
investment in connection with the exercise of a put or call. Such
commissions may be higher than those which would apply to direct
purchases or sales of such underlying investments. Premiums paid
for options are small in relation to the market value of the
related investments, and consequently, put and call options offer
large amounts of leverage. The leverage offered by trading options
could result in the Fund's net asset value being more sensitive to
changes in the value of the underlying investments.
- Tax Aspects of Covered Calls and Hedging Instruments. The
Fund intends to qualify as a "regulated investment company" under
the Internal Revenue Code (although there is no guarantee that it
will qualify). That qualification enables the Fund to "pass
through" its income and realized capital gains to shareholders
without having to pay tax on them. This avoids a "double tax" on
that income and capital gains, since shareholders normally will be
taxed on the dividends and capital gains they receive from the Fund
(unless the Fund's shares are held in a retirement account or the
shareholder is otherwise exempt from tax). One of the tests for
the Fund's qualification as a regulated investment company is that
less than 30% of its gross income must be derived from gains
realized on the sale of securities held for less than three months.
To comply with this 30% cap, the Fund will limit the extent to
which it engages in the following activities, but will not be
precluded from them: (i) selling investments, including Stock Index
Futures, held for less than three months, whether or not they were
purchased on the exercise of a call held by the Fund; (ii)
purchasing options which expire in less than three months; (iii)
effecting closing transactions with respect to calls or puts
written or purchased less than three months previously; (iv)
exercising puts or calls held by the Fund for less than three
months; or (v) writing calls on investments held less than three
months.
Certain foreign currency exchange contracts ("Forward
Contracts") in which the Fund may invest are treated as "section
1256 contracts." Gains or losses relating to section 1256
contracts generally are characterized under the Internal Revenue
Code as 60% long-term and 40% short-term capital gains or losses.
However, foreign currency gains or losses arising from certain
section 1256 contracts (including Forward Contracts) generally are
treated as ordinary income or loss. In addition, section 1256
contracts held by the Fund at the end of each taxable year are
"marked-to-market" with the result that unrealized gains or losses
are treated as though they were realized. These contracts also may
be marked-to-market for purposes of the excise tax applicable to
investment company distributions and for other purposes under rules
prescribed pursuant to the Internal Revenue Code. An election can
be made by the Fund to exempt these transactions from this marked-
to-market treatment.
Certain Forward Contracts entered into by the Fund may result
in "straddles" for Federal income tax purposes. The straddle rules
may affect the character of gains (or losses) realized by the Fund
on straddle positions. Generally, a loss sustained on the
disposition of a position making up a straddle is allowed only to
the extent such loss exceeds any unrecognized gain in the
offsetting positions making up the straddle. Disallowed loss is
generally allowed at the point where there is no unrecognized gain
in the offsetting positions making up the straddle, or the
offsetting position is disposed of.
Under the Internal Revenue Code, gains or losses attributable
to fluctuations in exchange rates that occur between the time the
Fund accrues interest or other receivables or accrues expenses or
other liabilities denominated in a foreign currency and the time
the Fund actually collects such receivables or pays such
liabilities generally are treated as ordinary income or ordinary
loss. Similarly, on disposition of debt securities denominated in
a foreign currency and on disposition foreign currency forward
contracts, gains or losses attributable to fluctuations in the
value of a foreign currency between the date of acquisition of the
security or contract and the date of the disposition also are
treated as an ordinary gain or loss. Currency gains and losses are
offset against market gains and losses on each trade before
determining a net "section 988" gain or loss under the Internal
Revenue Code, which may ultimately increase or decrease the amount
of the Fund's investment company income available for distribution
to its shareholders.
- Additional Risk Factors in Hedging. In addition to the
risks with respect to options discussed in the Prospectus and
above, there is a risk in using short hedging by (i) selling Stock
Index Futures or (ii) purchasing puts on stock indices or Stock
Index Futures to attempt to protect against declines in the value
of the Fund's equity securities. The risk is that the prices of
Stock Index Futures will correlate imperfectly with the behavior of
the cash (i.e., market value) prices of the Fund's equity
securities. The ordinary spreads between prices in the cash and
futures markets are subject to distortions, due to differences in
the natures of those markets. First, all participants in the
futures markets are subject to margin deposit and maintenance
requirements. Rather than meeting additional margin deposit
requirements, investors may close out futures contracts through
offsetting transactions which could distort the normal relationship
between the cash and futures markets. Second, the liquidity of the
futures markets depends on participants entering into offsetting
transactions rather than making or taking delivery. To the extent
participants decide to make or take delivery, liquidity in the
futures markets could be reduced, thus producing distortion.
Third, from the point of view of speculators, the deposit
requirements in the futures markets are less onerous than margin
requirements in the securities markets. Therefore, increased
participation by speculators in the futures markets may cause
temporary price distortions.
The risk of imperfect correlation increases as the composition
of the Fund's portfolio diverges from the securities included in
the applicable index. To compensate for the imperfect correlation
of movements in the price of the equity securities being hedged and
movements in the price of the hedging instruments, the Fund may use
hedging instruments in a greater dollar amount than the dollar
amount of equity securities being hedged if the historical
volatility of the prices of the equity securities being hedged is
more than the historical volatility of the applicable index. It is
also possible that if the Fund has used hedging instruments in a
short hedge, the market may advance and the value of equity
securities held in the Fund's portfolio may decline. If that
occurred, the Fund would lose money on the hedging instruments and
also experience a decline in value in its portfolio securities.
However, while this could occur for a very brief period or to a
very small degree, over time the value of a diversified portfolio
of equity securities will tend to move in the same direction as the
indices upon which the hedging instruments are based.
If the Fund uses hedging instruments to establish a position
in the equities markets as a temporary substitute for the purchase
of individual equity securities (long hedging) by buying Stock
Index Futures and/or calls on such Futures, on securities or on
stock indices, it is possible that the market may decline. If the
Fund then concludes not to invest in equity securities at that time
because of concerns as to a possible further market decline or for
other reasons, the Fund will realize a loss on the hedging
instruments that is not offset by a reduction in the price of the
equity securities purchased.
Other Investment Restrictions
The Fund's most significant investment restrictions are set
forth in the Prospectus. There are additional investment
restrictions that the Fund must follow that are also fundamental
policies. Fundamental policies and the Fund's investment objective
cannot be changed without the vote of a "majority" of the Fund's
outstanding voting securities. Under the Investment Company Act of
1940, such a majority vote is defined as the vote of the holders of
the lesser of: (i) 67% or more of the shares present or represented
by proxy at a shareholder meeting, if the holders of more than 50%
of the outstanding shares are present or represented by proxy, or
(ii) more than 50% of the outstanding shares.
Under these additional restrictions, the Fund cannot:
- invest in physical commodities or physical commodity
contracts or speculate in financial commodity contracts, but the
Fund is authorized to purchase and sell financial futures contracts
and options on such futures contracts exclusively for hedging and
other non-speculative purposes to the extent specified in the
Prospectus;
- invest in real estate or real estate limited partnerships
(direct participation programs); however, the Fund may purchase
securities of issuers which engage in real estate operations and
securities which are secured by real estate or interests therein;
- purchase securities on margin (except for such short-term
loans as are necessary for the clearance of purchases of portfolio
securities) or make short sales of securities except "against the
box" (collateral arrangements in connection with transactions in
futures and options are not deemed to be margin transactions);
- underwrite securities of other companies except in so far as
the Fund may be deemed to be an underwriter under the Securities
Act of 1933 in disposing of a security ;
- invest in securities of other investment companies except in
connection with a merger, consolidation, reorganization or
acquisition of assets;
- invest in interests in oil, gas or other mineral exploration
or development programs or leases;
- purchase warrants if as a result the Fund would then have
either more than 5% of its total assets (determined at the time of
investment) invested in warrants or more than 2% of its total
assets invested in warrants not listed on the New York or American
Stock Exchange;
- invest in securities of any issuer if, to the knowledge of
the Trust, any officer or trustee of the Trust or any officer or
director of the Manager or Sub-Adviser owns more than 1/2 of 1% of
the outstanding securities of such issuer, and such officers,
trustees and directors who own more than 1/2 of l% own in the
aggregate more than 5% of the outstanding securities of such
issuer;
- pledge its assets or assign or otherwise encumber its assets
in excess of 10% of its net assets (taken at market value at the
time of pledging) and then only to secure borrowings effected
within the limitations set forth in the Prospectus;
- invest for the purpose of exercising control or management
of another company;
- issue senior securities as defined in the 1940 Act except
insofar as the Fund may be deemed to have issued a senior security
by reason of: (a) entering into any repurchase agreement; (b)
borrowing money in accordance with restrictions described above; or
(c) lending portfolio securities; or
- make loans to any person or individual except that portfolio
securities may be loaned by the Fund within the limitations set
forth in the Prospectus.
For purposes of the Fund's policy not to concentrate its
assets described in the Prospectus, the Fund has adopted, as a
matter of non-fundamental policy, the corporate industry
classifications set forth in Appendix B to this Statement of
Additional Information.
How the Fund is Managed
Organization and History. Oppenheimer Quest Small Cap Value Fund
(referred to as the "Fund") is one of four portfolios of
Oppenheimer Quest for Value Funds (the "Trust"), a Massachusetts
business trust. This Statement of Additional Information may be
used with the Fund's Prospectus only to offer shares of the Fund.
The Trustees are authorized to create new series and classes
of series. The Trustees may reclassify unissued shares of the
Trust or its series or classes into additional series or classes of
shares. The Trustees may also divide or combine the shares of a
class into a greater or lesser number of shares without thereby
changing the proportionate beneficial interest of a shareholder in
the Fund. Shares do not have cumulative voting rights or
preemptive or subscription rights. Shares may be voted in person
or by proxy.
As a Massachusetts business trust, the Fund is not required to
hold, and does not plan to hold, regular annual meetings of
shareholders. The Fund will hold meetings when required to do so by
the Investment Company Act or other applicable law, or when a
shareholder meeting is called by the Trustees or upon proper
request of the shareholders. Shareholders have the right, upon the
declaration in writing or vote of two-thirds 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 of 10% of its outstanding
shares. In addition, if the Trustees receive a request from at
least 10 shareholders (who have been shareholders for at least six
months) holding shares of the Fund valued at $25,000 or more or
holding at least 1% of the Fund's outstanding shares, whichever is
less, stating that they wish to communicate with other shareholders
to request a meeting to remove a Trustee, the Trustees will then
either make the Fund's shareholder list available to the applicants
or mail their communication to all other shareholders at the
applicants' expense, or the Trustees may take such other action as
set forth under Section 16(c) of the Investment Company Act.
The Fund's Declaration of Trust contains an express disclaimer
of shareholder or Trustee liability for the Fund's obligations, and
provides for indemnification and reimbursement of expenses out of
its property for any shareholder held personally liable for its
obligations. The Declaration of Trust also provides that the Fund
shall, upon request, assume the defense of any claim made against
any shareholder for any act or obligation of the Fund and satisfy
any judgment thereon. Thus, while Massachusetts law permits a
shareholder of a business trust (such as the Fund) to be held
personally liable as a "partner" under certain circumstances, the
risk of a Fund shareholder incurring financial loss on account of
shareholder liability is limited to the relatively remote
circumstances in which the Fund would be unable to meet its
obligations described above. Any person doing business with the
Trust, and any shareholder of the Trust, agrees under the Trust's
Declaration of Trust to look solely to the assets of the Trust for
satisfaction of any claim or demand which may arise out of any
dealings with the Trust, and the Trustees shall have no personal
liability to any such person, to the extent permitted by law.
Trustees and Officers of the Trust. The Trust's Trustees and
officers, and the Fund's portfolio manager (who is not an officer),
are listed below, together with principal occupations and business
affiliations during the past five years. Each Trustee is also a
Trustee of Oppenheimer Quest Growth & Income Value Fund,
Oppenheimer Quest Opportunity Value Fund, Oppenheimer Quest
Officers Fund, Oppenheimer Quest Value Fund, Inc., Oppenheimer
Quest Global Value Fund, Inc. (collectively, the "Oppenheimer Quest
Funds"), Rochester Portfolio Series - Limited-Term New York
Municipal Fund, Rochester Fund Series - The Bond Fund For Growth
and Rochester Fund Municipals (collectively, the "Rochester
Funds"). The address of each is Two World Trade Center, New York,
New York 10048, except as noted. As of January 25, 1996, the
trustees and officers of the Trust as a group owned less than 1% of
the outstanding shares of each class of the Fund.
Bridget A. Macaskill, Chairman of the Board of Trustees and
President; Age: 47.
President, Chief Executive Officer and Chief Operating Officer of
OppenheimerFunds, Inc. (the "Manager"); prior thereto, Executive
Vice President and Chief Operating Officer of the Manager. Vice
President and a Director of Oppenheimer Acquisition Corp., Director
of Oppenheimer Partnership Holdings, Inc., Chairman and a Director
of Shareholder Services, Inc., Director of Main Street Advisers,
Inc., and Director of HarbourView Asset Management Corporation, all
of which are subsidiaries of the Manager; President and a Trustee
of the Oppenheimer funds.
Paul Y. Clinton, Trustee; Age: 64
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 Oppenheimer Quest Value Fund, Inc., Oppenheimer
Quest Global Value Fund, Inc., and Quest Cash Reserves, Inc. and
Trustee of Quest For Value Accumulation Trust, 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, Trustee; Age: 62
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., Oppenheimer Quest Value
Fund, Inc. and Oppenheimer Quest Global Value Fund, Inc. and
Trustee of Quest for Value Accumulation Trust, all of which are
open-end investment companies; former President of Boston Company
Institutional Investors; Trustee of Hawaiian Tax-Free Trust and Tax
Free Trust of Arizona, tax-exempt bond funds; Director of several
privately owned corporations; former Director of Financial Analysts
Federation.
Lacy B. Herrmann, Trustee; Age: 66
380 Madison Avenue, Suite 2300, New York, New York 10017
President and Chairman of the Board of Aquila Management
Corporation, the sponsoring organization and Administrator and/or
Sub-Adviser to the following open-end investment companies, and
Chairman of the Board of Trustees and President of each: Churchill
Cash Reserves Trust, Short Term Asset Reserves, Pacific Capital
Cash Assets Trust, Pacific Capital U.S. Treasuries Cash Assets
Trust, Pacific Capital Tax-Free Cash Assets Trust, Prime Cash Fund,
Narragansett Insured Tax-Free Income Fund, Tax-Free Fund For Utah,
Churchill Tax-Free Fund of Kentucky, Tax-Free Fund of Colorado,
Tax-Free Trust of Oregon, Tax-Free Trust of Arizona, Hawaiian Tax-
Free Trust, and Aquila Rocky Mountain Equity Fund; Vice President,
Director, Secretary, and formerly Treasurer of Aquila Distributors,
Inc., distributor of the above funds; President and Chairman of the
Board of Trustees of Capital Cash Management Trust ("CCMT"), and an
Officer and Trustee/Director of its predecessors; President and
Director of STCM Management Company, Inc., sponsor and adviser to
CCMT; Chairman, President and a Director of InCap Management
Corporation, formerly sub-adviser and administrator of Prime Cash
Fund and Short Term Asset Reserves; Director or Trustee of Quest
Cash Reserves, Inc., Oppenheimer Quest Global Value Fund, Inc. and
Oppenheimer Quest Value Fund, Inc. and Trustee of Quest for Value
Accumulation Trust and The Saratoga Advantage Trust, each of which
is an open-end investment company; Trustee of Brown University.
George Loft, Trustee; Age: 80
51 Herrick Road, Sharon, Connecticut 06069
Private Investor; Director of Quest Cash Reserves, Inc.,
Oppenheimer Quest Value Fund, Inc. and Oppenheimer Quest Global
Value Fund, Inc. and Trustee of Quest for Value Accumulation Trust
and The Saratoga Advantage Trust, all of which are open-end
investment companies, and Director of the Quest for Value Dual
Purpose Fund, Inc., a closed-end investment company.
Robert C. Doll, Jr., Vice President; Age: 41
Executive Vice President and Director of Equity Investments of the
Manager; an officer and Portfolio Manager of other Oppenheimer
funds.
Andrew J. Donohue, Secretary; Age: 45
Executive Vice President and General Counsel of the Manager and the
Distributor; an officer of other Oppenheimer funds; President and
a director of Centennial Asset Management Corporation, investment
advisory subsidiary of the Manager; formerly Senior Vice President
and Associate General Counsel of the Manager and the Distributor,
partner in Kraft & McManimon (a law firm), an officer of First
Investors Corporation (a broker-dealer) and First Investors
Management Company, Inc. (broker-dealer and investment adviser),
and a director and an officer of First Investors Family of Funds
and First Investors Life Insurance Company.
George C. Bowen, Treasurer; Age: 59
3410 South Galena Street Denver, Colorado 80231
Senior Vice President and Treasurer of the Manager; Vice President
and Treasurer of the Distributor and HarbourView Asset Management
Corporation; Senior Vice President, Treasurer, Assistant Secretary
and a director of Centennial Asset Management Corporation, an
investment advisory subsidiary of the Manager; Vice President,
Treasurer and Secretary of the Transfer Agent and Shareholder
Financial Services, Inc., a transfer agent subsidiary of the
Manager; an officer of other Oppenheimer funds.
Jenny Beth Jones, Portfolio Manager; Age: 37
Two World Financial Center, 225 Liberty Street, New York, New York
10080
Senior Vice President of Oppenheimer Capital.
Louis Goldstein, Portfolio Manager; Age: 35
Vice President of Oppenheimer Capital, formerly a security analyst
with Oppenheimer Capital; previously a security analyst with David
J. Greene & Co.
Robert Bishop, Assistant Treasurer; Age: 37
3410 South Galena Street, Denver, Colorado 80231
Assistant Vice President of the Manager/Mutual Fund Accounting; an
officer of other Oppenheimer funds; formerly a Fund Controller for
the Manager, prior to which he was an Accountant for Yale &
Seffinger, P.C., an accounting firm, and previously an Accountant
and Commissions Supervisor for Stuart James Company Inc., a broker-
dealer.
Scott Farrar, Assistant Treasurer; Age: 30
3410 South Galena Street, Denver, Colorado 80231
Assistant Vice President of the Manager/Mutual Fund Accounting; an
officer of other Oppenheimer funds; formerly a Fund Controller for
the Manager, prior to which he was an International Mutual Fund
Supervisor for Brown Brothers, Harriman Co., a bank, and previously
a Senior Fund Accountant for State Street Bank & Trust Company.
Robert G. Zack, Assistant Secretary; Age: 47
Senior Vice President and Associate General Counsel of the Manager;
Assistant Secretary of SSI, SFSI; an officer of other Oppenheimer
funds.
-- Remuneration of Trustees. All officers of the Trust and
Ms. Macaskill, a Trustee, are officers or directors of the Manager
and receive no salary or fee from the Fund. The Trustees of the
Fund (excluding Ms. Macaskill, who was not a Trustee prior to
November 22, 1995) received the total amounts shown below from (i)
the Fund during its fiscal period ended to October 31, 1995 and
(ii) other investment companies (or series thereof) managed by
OpCap Advisors (previously named Quest for Value Advisors), or an
affiliate thereof, during the fiscal year ended October 31, 1995
(the "Fund Complex"). OpCap Advisors, or an affiliate thereof,
served as the investment adviser to the Fund Complex prior to
November 22, 1995. Effective as of such date, the Manager acquired
the investment advisory and other contracts and business
relationships and certain assets and liabilities of OpCap Advisors,
Quest for Value Distributors and Oppenheimer Capital relating to
twelve Quest for Value mutual funds (or series thereof) included in
the Fund Complex.
<TABLE>
<CAPTION>
Pension or
Retirement Estimated
Aggregate Benefits Annual Total
Compensation Accrued as Benefits Compensation
from the Part of Fund Upon From Fund
Name of Person Fund Expenses Retirement Complex
<S> <C> <C> <C> <C>
Paul Y. Clinton $4,200 None None $61,650
Thomas W. Courtney $4,200 None None $60,900
Lacy B. Herrmann $4,200 None None $61,650
George Loft $4,200 None None $61,650
</TABLE>
Messrs. Clinton, Courtney and Herrmann earned directors fees
with respect to 18 investment companies in the Fund Complex and the
fees earned by Mr. Loft were with respect to 19 investment
companies in the Fund Complex. During such period the non-
interested Trustees received fees from three investment companies
for which they no longer serve as directors and which are no longer
part of the Fund Complex but for which OpCap Advisors currently
serves as subadviser. In addition, during such periods, Mr.
Clinton and Mr. Courtney each served as director with respect to
three investment companies in the 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 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.
-- Major Shareholders. As of January 26, 1996, the only
persons who owned of record or were known by the Fund to own
beneficially 5% or more of the Fund's outstanding Class A, Class B
or Class C shares were the following:
<TABLE>
<CAPTION>
Number and Class
of Shares Owned Percentage
Beneficially of Record Name & Address of Class
<S> <C> <C>
Class A 463,183.946 Oppenheimer Capital Accumulation 6.64%
Plan Omnibus
Attn.: York Unit
Oppenheimer Tower
World Financial Center
New York, NY 10281
Class A 456,188.099 Wells Fargo Bank 6.48%
FBO Exclusive of our Customers
Attn.: Trish McCrae
MAC-0103-208
P.O. Box 7066
San Francisco, CA 94120-7066
Class A 418,908.425 COMTRADES 6.01%
Attn.: Clara Bruner - TR Dept.
c/o Commerce Bank & Trust
3035 SW Topeka Blvd.
Topeka, KS 66611-2155
</TABLE>
The Manager and its Affiliates. The Manager is wholly-owned by
Oppenheimer Acquisition Corp. ("OAC"), a holding company controlled
by Massachusetts Mutual Life Insurance Company. OAC is also owned
in part by certain of the Manager's directors and officers, some of
whom also serve as officers of the Fund and one of whom (Ms.
Macaskill) also serves as an officer and a Trustee of the Fund.
The Manager and the Trust has a Code of Ethics. In addition
to having its own Code of Ethics, the Sub-Adviser is subject to a
reporting obligation to the Manager under this Code of Ethics. The
Code of Ethics is designed to detect and prevent improper personal
trading by certain employees, including the Fund's portfolio
manager, who is an employee of the Sub-Adviser, that would compete
with or take advantage of the Funds' portfolio transactions.
Compliance with the Code of Ethics is carefully monitored and
strictly enforced by the Manager.
-- The Investment Advisory Agreement. The Manager acts as
investment adviser to the Funds pursuant to the terms of an
Investment Advisory Agreement dated as of November 22, 1995. OpCap
Advisors, the Fund's Sub-Adviser, served as the Fund's investment
adviser from its inception to November 22, 1995.
Under the Investment Advisory Agreement, the Manager acts as
the investment adviser for the Fund and supervises the investment
program of the Fund. The Investment Advisory Agreement provides
that the Manager will provide administrative services for the Fund,
including completion and maintenance of records, preparation and
filing of reports required by the Securities and Exchange
Commission, reports to shareholders, and composition of proxy
statements and registration statements required by Federal and
state securities laws. The Manager will furnish the Fund with
office space, facilities and equipment and arrange for its
employees to serve as officers of the Trust. The administrative
services to be provided by the Manager under the Investment
Advisory Agreement will be at its own expense, except that each
class of shares of the Fund will pay the Manager an annual fee for
calculating the Fund's daily net asset value as follows: Class A -
$25,000; Class B - $18,000; and Class C - $12,000.
Expenses not assumed by the Manager under the Investment
Advisory Agreement or paid by the Distributor under the General
Distributor's Agreement will be paid by the Fund. Expenses with
respect to the Trust's four portfolios, including the Fund, are
allocated in proportion to the net assets of the respective
portfolio, except where allocations of direct expenses could be
made. Certain expenses are further allocated to certain classes of
shares of a series as explained in the Prospectus and under "How to
Buy Shares," below. The Investment Advisory Agreement lists
examples of expenses paid by the Fund, including interest, taxes,
brokerage commissions, insurance premiums, fees of non-interested
Trustees, legal and audit expenses, transfer agent and custodian
expenses, share issuance costs, certain printing and registration
costs, and non-recurring expenses, including litigation.
The Investment Advisory Agreement contains no expense
limitation. However, independently of the Investment Advisory
Agreement, the Manager has voluntarily undertaken that the Fund's
total expenses in any fiscal year (including the investment
advisory fee but exclusive of taxes, interest, brokerage
commissions, distribution plan payments and any extraordinary non-
recurring expenses, including litigation) shall not exceed the most
stringent state regulatory limitation application to the Fund. At
present, that limitation is imposed by California and limits
expenses (with specified exclusions) to 2.5% of the first $30
million of average annual net assets, 2% of the next $70 million
and 1.5% of average annual net assets in excess of $100 million.
Pursuant to the undertaking, the Manager's fee at the end of
any month will be reduced or eliminated such that there will not be
any accrued but unpaid liability under this expense limitation.
The Manager reserves the right to terminate or amend the
undertaking at any time. Any assumption of the Fund's expenses
under this undertaking would lower the Fund's overall expense ratio
and increase its total return during any period in which expenses
are limited.
The Investment Advisory Agreement provides that in the absence
of willful misfeasance, bad faith, or gross negligence in the
performance of its duty, or reckless disregard for its obligations
and duties under the advisory agreement, the Manager is not liable
for any loss resulting from good faith errors or omissions on its
part with respect to any of its duties thereunder. The Investment
Advisory Agreement permits the Manager to act as investment adviser
for any other person, firm or corporation and to use the name
"Oppenheimer" in connection with its other investment companies for
which it may act as an investment adviser or general distributor.
If the Manager shall no longer act as investment adviser to a Fund,
the right of the Fund to use "Oppenheimer" as part of its name may
be withdrawn.
-- Fees Paid Under the Prior Investment Advisory Agreement.
OpCap Advisors served as investment adviser to the Fund from its
inception until November 22, 1995. Under the prior Investment
Advisory Agreement, the total advisory fees accrued or paid by the
Fund were $756,765 for the fiscal year ended October 31, 1993,
$1,260,578 for the fiscal year ended October 31, 1994, and
$1,456,594 for the fiscal year ended October 31, 1995.
For the fiscal years ended October 31, 1993, 1994 and 1995,
the Fund paid or accrued accounting services fees to OpCap
Advisors in the amounts of $23,448, $67,578 and $53,951,
respectively. Commencing in 1993, the Trust retained the services
of State Street Bank and Trust Company ("State Street") to
calculate the net asset value of each class of shares and to
prepare the books and records. For such services, the Fund accrued
or paid fees for the fiscal years ended October 31, 1993, 1994 and
1995 in the amounts of $27,917, $55,000 and $55,000, respectively.
The Investment Advisory Agreement provides that the Manager
may enter into sub-advisory agreements with other affiliated or
unaffiliated registered investment advisers in order to obtain
specialized services for the Funds provided that the Fund is not
required to pay any additional fees for such services. The Manager
has retained OpCap Advisors (previously named Quest for Value
Advisors) pursuant to a separate Subadvisory Agreement dated as of
November 22, 1995 with respect to the Fund.
-- The Subadvisory Agreement. The Subadvisory Agreement
provides that OpCap Advisors shall regularly provide investment
advice with respect to the Fund and invest and reinvest cash,
securities and the property comprising the assets of the Fund.
Under the Subadvisory Agreement, OpCap Advisors agrees not to
change the Portfolio Manager of the Fund without the written
approval of the Manager and to provide assistance in the
distribution and marketing of the Fund. The Subadvisory Agreement
was approved by the Board of Trustees, including a majority of the
Trustees who are not "interested persons" of the Trust (as defined
in the Investment Company Act) and who have no direct or indirect
financial interest in such agreements on June 22, 1995 and by the
shareholders of the Fund at a meeting held for that purpose on
November 3, 1995.
Under the Subadvisory Agreement, the Manager will pay OpCap
Advisors an annual fee payable monthly, based on the average daily
net assets of the Fund, equal to 40% of the investment advisory fee
collected by the Manager from the Fund based on the total net
assets of the Fund as of the effective date of the Subadvisory
Agreement (the "Base Amount") plus 30% of the investment advisory
fee collected by the Manager based on the total net assets of the
Fund that exceed the Base Amount.
The Subadvisory Agreement provides that in the absence of
willful misfeasance, bad faith, negligence or reckless disregard of
its duties or obligations, OpCap Advisors shall not be liable to
the Manager for any act or omission in the course of or connected
with rendering services under the Subadvisory Agreement or for any
losses that may be sustained in the purchase, holding or sale of
any security.
-- The Distributor. Under a General Distributor's Agreement
with the Trust dated as of November 22, 1995, the Distributor acts
as the Fund's principal underwriter in the continuous public
offering of its Class A, Class B and Class C shares but is not
obligated to sell a specific number of shares. Expenses normally
attributable to sales, including advertising and the cost of
printing and mailing prospectuses, other than those furnished to
existing shareholders, are borne by the Distributor. During the
Fund's fiscal year ended October 31, 1995, the aggregate amount of
sales charges on sales of the Fund's Class A shares was $241,000,
of which Quest for Value Distributors, the Fund's distributor prior
to November 22, 1995, retained $0 and an affiliated broker-dealer
retained $0, respectively. During the fiscal year ended October
31, 1995, Quest for Value Distributors received contingent deferred
sales charges of $86,795 upon redemption of Class B shares, and
received contingent deferred sales charges of $2,641, upon
redemption of Class C shares. For additional information about
distribution of the Fund's shares and the expenses connected with
such activities, please refer to "Distribution and Service Plans"
below.
-- The Transfer Agent. OppenheimerFunds Services acts as the
Fund's Transfer Agent pursuant to a Transfer Agency and Service
Agency Agreement dated November 22, 1995. Pursuant to the
Agreement, the Transfer Agent is responsible for maintaining the
Fund's shareholder registry and shareholder accounting records and
for shareholder servicing and administrative functions. As
compensation therefor, the Fund is obligated to pay the Transfer
Agent an annual maintenance fee for each Fund shareholder account
and reimburse the Transfer Agent for its out of pocket expenses.
- Shareholder Servicing Agent for Certain Shareholders.
Unified Management Corporation (1-800-346-4601) is the shareholder
servicing agent of the Fund for former shareholders of the AMA
Family of Funds and clients of AMA Investment Advisers, Inc. (which
had been the investment adviser of AMA Family of Funds) who acquire
shares of any Oppenheimer Quest Fund, and for (i) former
shareholders of the Unified Funds and Liquid Green Trusts, (ii)
accounts which participated or participate in a retirement plan for
which Unified Investment Advisers, Inc. or an affiliate acts as
custodian or trustee, (iii) accounts which have a Money Manager
brokerage account, and (iv) other accounts for which Unified
Management Corporation is the dealer of record.
Brokerage Policies of the Fund
Brokerage Provisions of the Investment Advisory and Subadvisory
Agreement. The Investment Advisory Agreement contains provisions
relating to the selection of broker-dealers ("brokers") for the
Fund's portfolio transactions. The Manager and the Sub-Adviser may
use such brokers as may, in their best judgment based on all
relevant factors, implement the policy of the Fund to achieve best
execution of portfolio transactions. While the Manager need not
seek advance competitive bidding or base its selection on posted
rates, it is expected to be aware of the current rates of most
eligible brokers and to minimize the commissions paid to the extent
consistent with the interests and policies of the Fund as
established by its Board and the provisions of the Investment
Advisory Agreement.
The Investment Advisory Agreement also provides that,
consistent with obtaining the best execution of the Fund's
portfolio transactions, the Manager and the Sub-Adviser, in the
interest of the Fund, may select brokers other than affiliated
brokers, because they provide brokerage and/or research services to
the Fund and/or other accounts of the Manager or the Sub-Adviser.
The commissions paid to such brokers may be higher than another
qualified broker would have charged if a good faith determination
is made by the Manager or the Sub-Adviser that the commissions are
reasonable in relation to the services provided, viewed either in
terms of that transaction or the Manager's or the Sub-Adviser's
overall responsibilities to all its accounts. No specific dollar
value need be put on the services, some of which may or may not be
used by the Manager or the Sub-Adviser for the benefit of the Fund
or other of its advisory clients. To show that the determinations
were made in good faith, the Manager or any Sub-Adviser must be
prepared to show that the amount of such commissions paid over a
representative period selected by the Board was reasonable in
relation to the benefits to the Fund. The Investment Advisory
Agreement recognizes that an affiliated broker-dealer may act as
one of the regular brokers for the Fund provided that any
commissions paid to such broker are calculated in accordance with
procedures adopted by the Trust's Board under applicable rules of
the Securities and Exchange Commission ("SEC").
In addition, the Subadvisory Agreement permits the Sub-Adviser
to enter into "soft dollar" arrangements through the agency of
third parties to obtain services for the Fund. Pursuant to these
arrangements, the Sub-Adviser will undertake to place brokerage
business with broker-dealers who pay third parties that provide
services. Any such "soft dollar" arrangements will be made in
accordance with policies adopted by the Board of the Trust and in
compliance with applicable law.
Description of Brokerage Practices. Portfolio decisions are based
upon recommendations of the portfolio manager and the judgment of
the portfolio managers. The Fund will pay brokerage commissions on
transactions in listed options and equity securities. Prices of
portfolio securities purchased from underwriters of new issues
include a commission or concession paid by the issuer to the
underwriter, and prices of debt securities purchased from dealers
include a spread between the bid and asked prices.
Transactions may be directed to dealers during the course of
an underwriting in return for their brokerage and research
services, which are intangible and on which no dollar value can be
placed. There is no formula for such allocation. The research
information may or may not be useful to one or more of the Fund
and/or other accounts of the Manager or the Sub-Adviser;
information received in connection with directed orders of other
accounts managed by the Manager or the Sub-Adviser or its
affiliates may or may not be useful to one or more of the Funds.
Such information may be in written or oral form and includes
information on particular companies and industries as well as
market, economic or institutional activity areas. It serves to
broaden the scope and supplement the research activities of the
Manager or the Sub-Adviser, to make available additional views for
consideration and comparison, and to enable the Manager or the Sub-
Adviser to obtain market information for the valuation of
securities held in the Fund's assets.
Sales of shares of the Fund, subject to applicable rules
covering the Distributor's activities in this area, will also be
considered as a factor in the direction of portfolio transactions
to dealers, but only in conformity with the price, execution and
other considerations and practices discussed above. The Fund will
not purchase any securities from or sell any securities to an
affiliated broker-dealer including Oppenheimer & Co., Inc.
("Opco"), an affiliate of the Sub-Adviser, acting as principal for
its own account.
The Sub-Adviser currently serves as investment manager to a
number of clients, including other investment companies, and may in
the future act as investment manager or advisor to others. It is
the practice of the Sub-Adviser to cause purchase or sale
transactions to be allocated among the Fund and others whose assets
it manages in such manner as it deems equitable. In making such
allocations among the Fund and other client accounts, the main
factors considered are the respective investment objectives, the
relative size of portfolio holdings of the same or comparable
securities, the availability of cash for investment, the size of
investment commitments generally held and the opinions of the
persons responsible for managing the portfolios of each Fund and
other client accounts.
When orders to purchase or sell the same security on identical
terms are placed by more than one of the funds and/or other
advisory accounts managed by the Sub-Adviser or its affiliates, the
transactions are generally executed as received, although a fund or
advisory account that does not direct trades to a specific broker
("free trades") usually will have its order executed first.
Purchases are combined where possible for the purpose of
negotiating brokerage commissions, which in some cases might have
a detrimental effect on the price or volume of the security in a
particular transaction as far as the Fund is concerned. Orders
placed by accounts that direct trades to a specific broker will
generally be executed after the free trades. All orders placed on
behalf of the Fund are considered free trades. However, having an
order placed first in the market does not necessarily guarantee the
most favorable price.
The following table presents information as to the allocation
of brokerage commissions paid by the Fund for the fiscal years
ended October 31, 1993, 1994 and 1995:
<TABLE>
<CAPTION>
Total Amount of Transactions
For the Total Brokerage Commissions Where Brokerage Commissions
Fiscal Year Brokerage Paid to Opco Paid to Opco
Ended Commissions Dollar Dollar
October 31, Paid Amounts % Amounts %
<S> <C> <C> <C> <C> <C>
1993 $314,604 $234,334 74.5% $56,166,571 71.0%
1994 $300,037 $143,991 48.0% $44,408,800 48.5%
1995 $400,477 $161,399 40.3% $52,738,643 36.6%
</TABLE>
During the Fund's fiscal year ended October 31, 1995, $9,860 was
paid by the Fund to brokers as commissions in return for research
services; the aggregate dollar amount of those transactions was
$4,192,803.
Performance of the Fund
Total Return Information. As described in the Prospectus, from
time to time the "average annual total return," "cumulative total
return" and "total return at net asset value" of an investment in
a class of shares of the Fund may be advertised. An explanation of
how these total returns are calculated for each class and the
components of those calculations is set forth below.
The Fund's advertisements of its performance data must, under
applicable SEC rules, include the average annual total returns for
each class of shares of the Fund for the 1, 5, and 10-year periods
(or the life of the class, if less) ending as of the most recently-
ended calendar quarter prior to the publication of the
advertisement. This enables an investor to compare the Fund's
performance to the performance of other funds for the same periods.
However, a number of factors should be considered before using such
information as a basis for comparison with other investments. An
investment in the Fund is not insured; its returns and share prices
are not guaranteed and normally will fluctuate on a daily basis.
When redeemed, an investor's shares may be worth more or less than
their original cost. Returns for any given past period are not a
prediction or representation by the Fund of future returns. The
returns of Class A, Class B and Class C shares of the Fund are
affected by portfolio quality, the type of investments the Fund
holds and its operating expenses allocated to the particular class.
-- Average Annual Total Returns. The "average annual total
return" of each class is an average annual compounded rate of
return for each year in a specified number of years. It is the
rate of return based on the change in value of a hypothetical
initial investment of $1,000 ("P" in the formula below) held for a
number of years ("n") to achieve an Ending Redeemable Value ("ERV")
of that investment, according to the following formula:
1/n
(ERV)
(---) -1 = Average Annual Total Return
( P )
The "average annual total returns" on an investment in Class
A shares of the Fund (using the method described above) for the one
and five year periods ended October 31, 1995 and for the period
from January 3, 1989 (commencement of operations) to October 31,
1995 were 2.56%, 18.24% and 11.16%, respectively.
The average annual total returns on Class B shares for the
one-year period ended October 31, 1995 and for the period September
1, 1993 (commencement of the public offering of the class) through
October 31, 1995 were 3.17% and 3.49%, respectively.
The average annual total returns on Class C shares for the
one-year period ended October 31, 1995 and for the period September
1, 1993 (commencement of the public offering of the class) through
October 31, 1995 were 7.24% and 4.80%, respectively.
-- Cumulative Total Returns. The cumulative "total return"
calculation measures the change in value of a hypothetical
investment of $1,000 over an entire period of years. Its
calculation uses some of the same factors as average annual total
return, but it does not average the rate of return on an annual
basis. Cumulative total return is determined as follows:
ERV - P
------- = Total Return
P
In calculating total returns for Class A shares, the current
maximum sales charge of 5.75% (as a percentage of the offering
price) is deducted from the initial investment ("P") (unless the
return is shown at net asset value, as described below). Prior to
November 24, 1995, the maximum initial sales charge on Class A
shares was 5.50%. For Class B shares, the payment of the
applicable contingent deferred sales charge (5% for the first year,
4% for the second year, 3% for the third and fourth years, 2% for
the fifth year, 1% for the sixth year, and none thereafter) is
applied to the investment result for the period shown (unless the
total return is shown at net asset value, as described below). For
Class C shares, the 1.0% contingent deferred sales charge is
applied to the investment result for the one-year period (or less).
Total returns also assume that all dividends and capital gains
distributions during the period are reinvested to buy additional
shares at net asset value per share, and that the investment is
redeemed at the end of the period.
The "cumulative total return" on Class A shares for the period
from January 3, 1989 (commencement of operations) to October 31,
1995 was 105.93%. The cumulative total return on Class B shares
for the period from September 1, 1993 (commencement of the public
offering of the class) through October 31, 1995 was 7.71%. The
cumulative total return on Class C shares for the period from
September 1, 1993 (commencement of the public offering of the
class) through October 31, 1995 was 10.70%.
-- Total Returns at Net Asset Value. From time to time the
Fund may also quote an "average annual total return at net asset
value" or a "cumulative total return at net asset value" for Class
A, Class B or Class C shares. Each is based on the difference in
net asset value per share at the beginning and the end of the
period for a hypothetical investment in that class of shares
(without considering front-end or contingent deferred sales
charges) and takes into consideration the reinvestment of dividends
and capital gains distributions.
The average annual total returns at net asset value on the
Fund's Class A shares for the one and five year periods ended
October 31, 1995 and for the period from January 1, 1989
(commencement of operations) to October 31, 1995 were 8.82%, 19.65%
and 12.13%, respectively. The cumulative total return at net asset
value on the Fund's Class A shares for the period January 1, 1989
through October 31, 1995 was 118.49%.
The average annual total returns at net asset value on the
Fund's Class B shares for the one year period ended October 31,
1995 and for the period from September 1, 1993 (commencement of the
public offering of the class) through October 31, 1995 were 8.17%
and 4.80%, respectively. The cumulative total return at net asset
value on the Fund's Class B shares for the period September 1, 1993
through October 31, 1995 was 10.70%.
The average annual total returns at net asset value on the
Fund's Class C shares for the one-year period ended October 31,
1995 and for the period September 1, 1993 (commencement of the
public offering of the class) through October 31, 1995 were 8.24%
and 4.80%, respectively. The cumulative total return at net asset
value on the Fund's Class C shares for the period September 1, 1993
through October 31, 1995 was 10.70%.
Other Performance Comparisons. From time to time the Fund may
publish the ranking of its Class A, Class B or Class C shares by
Lipper Analytical Services, Inc. ("Lipper"), a widely-recognized
independent mutual fund monitoring service. Lipper monitors the
performance of regulated investment companies, including the Fund,
and ranks their performance for various periods based on categories
relating to investment objectives. The performance of the Fund is
ranked against (i) all other funds and (ii) all other small company
growth funds. The Lipper performance rankings are based on total
returns that include the reinvestment of capital gain distributions
and income dividends but do not take sales charges or taxes into
consideration.
From time to time the Fund may publish the ranking of the
performance of its Class A, Class B or Class C shares by
Morningstar, Inc., an independent mutual fund monitoring service
that ranks mutual funds, including the Fund, monthly in broad
investment categories (equity, taxable bond, municipal bond and
hybrid) based on risk-adjusted investment return. Investment
return measures a fund's three, five and ten-year average annual
total returns (when available) in excess of 90-day U.S. Treasury
bill returns after considering sales charges and expenses. Risk
measures fund performance below 90-day U.S. Treasury bill monthly
returns. Risk and investment return are combined to produce star
rankings reflecting performance relative to the average fund in a
fund's category. Five stars is the "highest" ranking (top 10%),
four stars is "above average" (next 22.5%), three stars is
"average" (next 35%), two stars is "below average" (next 22.5%) and
one star is "lowest" (bottom 10%). Morningstar ranks the Fund in
relation to other rated growth and income funds. Rankings are
subject to change.
The total return on an investment in the Fund's Class A, Class
B or Class C shares may be compared with performance for the same
period of the Russell 2000 Index as described in the Prospectus.
The performance of each index includes a factor for the
reinvestment of income dividends, but does not reflect reinvestment
of capital gains, expenses or taxes.
The performance of the Fund's Class A, Class B, or Class C
shares may also be compared in publications to (i) the performance
of various market indices or to other investments for which
reliable performance data is available, and (ii) to averages,
performance rankings or other benchmarks prepared by recognized
mutual fund statistical services.
Investors may also wish to compare the Fund's Class A, Class
B or Class C return to the returns on fixed income investments
available from banks and thrift institutions, such as certificates
of deposit, ordinary interest-paying checking and savings accounts,
and other forms of fixed or variable time deposits, and various
other instruments such as Treasury bills. However, the Fund's
returns and share price are not guaranteed by the FDIC or any other
agency and will fluctuate daily, while bank depository obligations
may be insured by the FDIC and may provide fixed rates of return,
and Treasury bills are guaranteed as to principal and interest by
the U.S. government.
From time to time, the Fund's Manager may publish rankings or
ratings of the Manager (or Transfer Agent) or the investor services
provided by them to shareholders of the Oppenheimer funds, other
than performance rankings of the Oppenheimer funds themselves.
Those ratings or rankings of shareholder/investor services by third
parties may compare the Oppenheimer funds' services to those of
other mutual fund families selected by the rating or ranking
services and may be based upon the opinions of the rating or
ranking service itself, based on its research or judgment, or based
upon surveys of investors, brokers, shareholders or others.
Distribution and Service Plans
The Trust has adopted separate Distribution and Service Plans
for Class A, Class B and Class C shares of the Fund under Rule
12b-1 of the Investment Company Act pursuant to which the Fund will
make payments to the Distributor in connection with the
distribution and/or servicing of the shares of that class, as
described in the Prospectus. Each Plan has been approved by a vote
of (i) the Board of Trustees of the Trust, including a majority of
the Trustees who are not "interested persons" (as defined in the
Investment Company Act) of the Fund and who have no direct or
indirect financial interest in the operation of the Fund's 12b-1
plans or in any related agreement ("Independent Trustees"), cast in
person at a meeting on June 22, 1995 called for the purpose, among
others, of voting on that Plan, and (ii) the holders of a
"majority" (as defined in the Investment Company Act) of the shares
of each class at a meeting on November 3, 1995.
In addition, under the Plans the Manager and the Distributor,
in their sole discretion, from time to time may use their own
resources (which, in the case of the Manager, may include profits
from the advisory fee it receives from the Fund) to make payments
to brokers, dealers or other financial institutions (each is
referred to as a "Recipient" under the Plans) for distribution and
administrative services they perform. The Distributor and the
Manager may, in their sole discretion, increase or decrease the
amount of payments they make from their own resources to
Recipients.
Unless terminated as described below, each plan continues in
effect from year to year but only as long as such continuance is
specifically approved at least annually by the Trust's Board of
Trustees and its "Independent Trustees" by a vote cast in person at
a meeting called for the purpose of voting on such continuance.
Any Plan may be terminated at any time by the vote of a majority of
the Independent Trustees or by the vote of the holders of a
"majority" (as defined in the Investment Company Act) of the
outstanding shares of that class. No Plan may be amended to
increase materially the amount of payments to be made unless such
amendment is approved by shareholders of the class affected by the
amendment. In addition, because Class B shares of the Fund
automatically convert into Class A shares after six years, the Fund
is required to obtain the approval of Class B as well as Class A
shareholders for a proposed material amendment to the Class A Plan
that would materially increase payments under the Plan. Such
approval must be by a "majority" of the Class A and Class B shares
(as defined in the Investment Company Act), voting separately by
class. All material amendments must be approved by the Board of
Trustees and the Independent Trustees.
While the Plans are in effect, the Treasurer of the Trust
shall provide separate written reports to the Trust's Board of
Trustees at least quarterly on the amount of all payments made
pursuant to each Plan, the purpose for which the payments were made
and the identity of each Recipient that received any such payment.
The reports shall also include the distribution costs for that
quarter, and such costs for previous fiscal periods that are
carried forward, as explained in the Prospectus and below. Those
reports, including the allocations on which they are based, will be
subject to the review and approval of the Independent Trustees in
the exercise of their fiduciary duty. Each Plan further provides
that while it is in effect, the selection and nomination of those
Trustees of the Trust who are not "interested persons" of the Trust
is committed to the discretion of the Independent Trustees. This
does not prevent the involvement of others in such selection and
nomination if the final decision on any such selection or
nomination is approved by a majority of the Independent Trustees.
Under the Plans, no payment will be made to any Recipient in
any quarter if the aggregate net asset value of all Fund shares
held by the Recipient for itself and its customers did not exceed
a minimum amount, if any, that may be determined from time to time
by a majority of the Trust's Independent Trustees. Initially, the
Board of Trustees has set the fee at the maximum rate and set no
requirement for a minimum amount.
The Plans allow the service fee payments to be paid by the
Distributor to Recipients in advance for the first year shares are
outstanding, and thereafter on a quarterly basis, as described in
the Prospectus. The advance payment is based on the net assets of
shares of that class sold. An exchange of shares does not entitle
the Recipient to an advance service fee payment. In the event
shares are redeemed during the first year such shares are
outstanding, the Recipient will be obligated to repay a pro rata
portion of such advance payment to the Distributor.
Although the Plans permit the Distributor to retain both the
asset-based sales charge and the service fee, or to pay Recipients
the service fee on a quarterly basis, without payment in advance,
the Distributor presently intends to pay the service fee to
Recipients in the manner described above. A minimum holding period
may be established from time to time under the Plans by the Board.
Initially, the Board has set no minimum holding period. All
payments under the Plans are subject to the limitations imposed by
the Rules of Fair Practice of the National Association of
Securities Dealers, Inc. on payments of asset-based sales charges
and service fees.
The Plans provide for the Distributor to be compensated at a
flat rate, whether the Distributor's expenses are more or less than
the amounts paid by the Fund during that period. The asset-based
sales charges paid to the Distributor by the Fund under the Plans
are intended to allow the Distributor to recoup the cost of sales
commissions paid to authorized brokers and dealers at the time of
sale, plus financing costs, as described in the Prospectus. Such
payments may also be used to pay for the following expenses in
connection with the distribution of shares: (i) financing the
advance of the service fee payment to Recipients under the Plans,
(ii) compensation and expenses of personnel employed by the
Distributor to support distribution of shares, and (iii) costs of
sales literature, advertising and prospectuses (other than those
furnished to current shareholders).
- The Prior Plans. From the inception date of the Fund
through November 22, 1995, OCC Distributors (formerly known as
Quest for Value Distributors) served as Distributor to the Fund.
OCC Distributors provided distribution services for the Fund's
Class A, Class B and Class C shares pursuant to separate plans
adopted for each class under the Investment Company Act (the "Prior
Plans"). The total distribution fees accrued or paid by Class A,
Class B and Class C shares of the Fund under the Prior Plans for
the fiscal year ended October 31, 1995 were $597,200, $201,055 and
$61,139, respectively.
ABOUT YOUR ACCOUNT
How To Buy Shares
Alternative Sales Arrangements - Class A, Class B and Class C
Shares. The availability of three classes of shares permits the
individual investor to choose the method of purchasing shares that
is more beneficial to the investor depending on the amount of the
purchase, the length of time the investor expects to hold shares
and other relevant circumstances. Investors should understand that
the purpose and function of the deferred sales charge and asset-
based sales charge with respect to Class B and Class C shares are
the same as those of the initial sales charge with respect to Class
A shares. Any salesperson or other person entitled to receive
compensation for selling Fund shares may receive different
compensation with respect to one class of shares than another. The
Distributor will not accept any order for $500,000 or $1 million or
more of Class B or Class C shares, respectively, on behalf of a
single investor (not including dealer "street name" or omnibus
accounts) because generally it will be more advantageous for that
investor to purchase Class A shares of the Fund instead.
The three classes of shares each represent an interest in the
same portfolio investments of the Fund. However, each class has
different shareholder privileges and features. The net income
attributable to Class B and Class C shares and the dividends
payable on Class B and Class C shares will be reduced by
incremental expenses borne solely by that class, respectively,
including the asset-based sales charges to which Class B and Class
C shares are subject.
The conversion of Class B shares to Class A shares is subject
to the continuing availability of a private letter ruling from the
Internal Revenue Service, or an opinion of counsel or tax adviser,
to the effect that the conversion of Class B shares does not
constitute a taxable event for the holder under Federal income tax
law. If such a revenue ruling or opinion is no longer available,
the automatic conversion feature may be suspended, in which event
no further conversions of Class B shares would occur while such
suspension remained in effect. Although Class B shares could then
be exchanged for Class A shares on the basis of relative net asset
value of the two classes, without the imposition of a sales charge
or fee, such exchange could constitute a taxable event for the
holder, and absent such exchange, Class B shares might continue to
be subject to the asset-based sales charge for longer than six
years.
The methodology for calculating the net asset value, dividends
and distributions of the Fund's Class A, Class B and Class C shares
recognizes two types of expenses. General expenses that do not
pertain specifically to either class are allocated pro rata to the
shares of each class, based on the percentage of the net assets of
such class to the Fund's total assets, and then equally to each
outstanding share within a given class. Such general expenses
include (i) management fees, (ii) legal, bookkeeping and audit
fees, (iii) printing and mailing costs of shareholder reports,
Prospectuses, Statements of Additional Information and other
materials for current shareholders, (iv) fees to Independent
Trustees, (v) custodian expenses, (vi) share issuance costs, (vii)
organization and start-up costs, (viii) interest, taxes and
brokerage commissions, and (ix) non-recurring expenses, such as
litigation costs. Other expenses that are directly attributable to
a class are allocated equally to each outstanding share within that
class. Such expenses include (i) Distribution and Service Plan
fees, (ii) incremental transfer and shareholder servicing agent
fees and expenses, (iii) registration fees and (iv) shareholder
meeting expenses, to the extent that such expenses pertain to a
specific class rather than to the Fund as a whole.
Determination of Net Asset Values Per Share. The net asset values
per share of Class A, Class B and Class C shares of the Fund are
determined as of the close of business of The New York Stock
Exchange (the "Exchange") on each day that the Exchange is open, by
dividing the value of the Fund's net assets attributable to that
class by the total number of Fund shares of that class outstanding.
The Exchange normally closes at 4:00 P.M. New York time, but may
close earlier on some days (for example, in case of weather
emergencies or days falling before a holiday). The Exchange's most
recent annual holiday schedule (which is subject to change) states
that it will close on New Year's Day, President's Day, Good Friday,
Memorial Day, Independence Day, Labor Day, Thanksgiving Day and
Christmas Day. It may also close on other days. The Fund may
invest a substantial portion of its assets in foreign securities
primarily listed on foreign exchanges which may trade on Saturdays
or customary U.S. business holidays on which the Exchange is
closed. Because the Fund's net asset values will not be calculated
on those days, the Fund's net asset value per share may be
significantly affected on such days when shareholders may not
purchase or redeem shares.
The Trust's Board of Trustees has established procedures for
the valuation of the Fund's securities generally as follows: (i)
equity securities traded on a U.S. securities exchange or on NASDAQ
for which last sale information is regularly reported are valued at
the last reported sale price on their primary exchange or NASDAQ
that day (or, in the absence of sales that day, at values based on
the last sale prices of the preceding trading day or closing bid
and asked prices); (ii) securities actively traded on a foreign
securities exchange are valued at the last sales price available to
the pricing service approved by the Trust's Board of Trustees or to
the Manager as reported by the principal exchange on which the
security is traded; (iii) unlisted foreign securities or listed
foreign securities not actively traded are valued as in (i) above,
if available, or at the mean between "bid" and "asked" prices
obtained from active market makers in the security on the basis of
reasonable inquiry; (iv) long-term debt securities having a
remaining maturity in excess of 60 days are valued at the mean
between the "bid" and "asked" prices determined by a portfolio
pricing service approved by the Trust's Board of Trustees or
obtained from active market makers in the security on the basis of
reasonable inquiry; (v) debt instruments having a maturity of more
than one year when issued, and non-money market type instruments
having a maturity of one year or less when issued, which have a
remaining maturity of 60 days or less are valued at the mean
between the "bid" and "asked" prices determined by a pricing
service approved by the Trust's Board of Trustees or obtained from
active market makers in the security on the basis of reasonable
inquiry; (vi) money market-type debt securities having a maturity
of less than one year when issued that having a remaining maturity
of 60 days or less are valued at cost, adjusted for amortization of
premiums and accretion of discounts; (vii) securities (including
restricted securities) not having readily-available market
quotations are valued at fair value under the Board's procedures
and (viii) securities traded on foreign exchanges are valued at the
closing or last prices reported on a principal exchange, or, if
none, at the mean between the closing bid and asked prices and
reflect prevailing rates of exchange taken from the closing price
on the London foreign exchange market that day as provided by a
reliable bank, dealer or pricing service.
Trading in securities on European and Asian exchanges and
over-the-counter markets is normally completed before the close of
the Exchange. Events affecting the values of foreign securities
traded in such markets that occur between the time their prices are
determined and the close of the Exchange will not be reflected in
the Fund's calculation of its net asset value unless the Board of
Trustees or the Manager, under procedures established by the Board,
determines that the particular event would materially affect the
Fund's net asset values, in which case an adjustment would be made.
Foreign currency, including forward contracts, will be valued at
the closing price in the London foreign exchange market that day as
provided by a reliable bank, dealer or pricing service. The values
of securities denominated in foreign currency will be converted to
U.S. dollars at the closing price in the London foreign exchange
market that day as provided by a reliable bank, dealer or pricing
service. In the case of U.S. government securities and corporate
bonds, where last sale information is not generally available, such
pricing procedures may include "matrix" comparisons to the prices
for comparable instruments on the basis of quality, yield, maturity
and other special factors involved. The Trustees will monitor the
accuracy of pricing services by comparing prices used for portfolio
evaluation to actual sales prices of selected securities.
Puts, calls and Futures are valued at the last sales price on
the principal exchanges on which they are traded or on NASDAQ, as
applicable, as determined by a pricing service approved by the
Board of Trustees or by the Manager, or if there are no sales that
day, in accordance with (i) above. When the Fund writes an option,
an amount equal to the premium received by the Fund is included in
the Fund's Statement of Assets and Liabilities as an asset, and an
equivalent deferred credit is included in the liability section.
The deferred credit is adjusted ("marked-to-market") to reflect the
current market value of the option. If a call written by the Fund
is exercised, the proceeds are increased by the premium received.
AccountLink. When shares are purchased through AccountLink, each
purchase must be at least $25.00. Shares will be purchased on the
regular business day the Distributor is instructed to initiate the
Automated Clearing House ("ACH") transfer to buy the shares.
Dividends will begin to accrue on shares purchased by the proceeds
of ACH transfers on the business day the Fund receives Federal
Funds for the purchase through the ACH system before the close of
The New York Stock Exchange. The Exchange normally closes at 4:00
P.M., but may close earlier on certain days. If Federal Funds are
received on a business day after the close of the Exchange, the
shares will be purchased and dividends will begin to accrue on the
next regular business day. The proceeds of ACH transfers are
normally received by the Fund 3 days after the transfers are
initiated. The Distributor and the Fund are not responsible for
any delays in purchasing shares resulting from delays in ACH
transmissions.
Reduced Sales Charges. As discussed in the Prospectus, a reduced
sales charge rate may be obtained for Class A shares under Rights
of Accumulation and Letters of Intent because of the economies of
sales efforts and reduction in expenses realized by the
Distributor, dealers and brokers making such sales. No sales
charge is imposed in certain other circumstances described in the
Prospectus because the Distributor or dealer or broker incurs
little or no selling expenses. The term "immediate family" refers
to one's spouse, children, grandchildren, parents, grandparents,
parents-in-law, sons- and daughters-in-law, siblings, a sibling's
spouse and a spouse's siblings.
-- The Oppenheimer Funds. The Oppenheimer funds are those
mutual funds for which the Distributor acts as the distributor or
the sub-distributor and include the following:
Oppenheimer Tax-Free Bond Fund
Oppenheimer New York Tax-Exempt Fund
Oppenheimer California Tax-Exempt Fund
Oppenheimer Intermediate Tax-Exempt Fund
Oppenheimer Insured Tax-Exempt Fund
Oppenheimer Main Street California Tax-Exempt Fund
Oppenheimer Florida Tax-Exempt Fund
Oppenheimer Pennsylvania Tax-Exempt Fund
Oppenheimer New Jersey Tax-Exempt Fund
Oppenheimer Fund
Oppenheimer Discovery Fund
Oppenheimer Target Fund
Oppenheimer Growth Fund
Oppenheimer Equity Income Fund
Oppenheimer Value Stock Fund
Oppenheimer Asset Allocation Fund
Oppenheimer Total Return Fund, Inc.
Oppenheimer Main Street Income & Growth Fund
Oppenheimer High Yield Fund
Oppenheimer Champion Income Fund
Oppenheimer Bond Fund
Oppenheimer U.S. Government Trust
Oppenheimer Limited-Term Government Fund
Oppenheimer Global Fund
Oppenheimer Global Emerging Growth Fund
Oppenheimer Global Growth & Income Fund
Oppenheimer Gold & Special Minerals Fund
Oppenheimer Strategic Income Fund
Oppenheimer Strategic Income & Growth Fund
Oppenheimer International Bond Fund
Oppenheimer Enterprise Fund
Oppenheimer Quest Opportunity Value Fund
Oppenheimer Quest Growth & Income Value Fund
Oppenheimer Quest Small Cap Value Fund
Oppenheimer Quest Officers Value Fund
Oppenheimer Quest Global Value Fund, Inc.
Oppenheimer Quest Value Fund, Inc.
Rochester Portfolio Series - Limited-Term New York Municipal
Fund*
Rochester Fund Series - The Bond Fund For Growth*
Rochester Fund Municipals*
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* Shares of the Fund are not presently exchangeable for shares of
this fund.
and the following "Money Market Funds":
Oppenheimer Money Market Fund, Inc.
Oppenheimer Cash Reserves
Centennial Money Market Trust
Centennial Tax Exempt Trust
Centennial Government Trust
Centennial New York Tax Exempt Trust
Centennial California Tax Exempt Trust
Centennial America Fund, L.P.
Daily Cash Accumulation Fund, Inc.
There is an initial sales charge on the purchase of Class A
shares of each of the Oppenheimer funds except Money Market Funds
(under certain circumstances described herein, redemption proceeds
of Money Market Fund shares may be subject to a contingent
deferred sales charge).
-- Letters of Intent. A Letter of Intent ("Letter") is the
investor's statement of intention to purchase Class A and Class B
shares (or shares of either class) of the Fund (and other eligible
Oppenheimer funds) during the 13-month period from the investor's
first purchase pursuant to the Letter (the "Letter of Intent
period"), which may, at the investor's request, include purchases
made up to 90 days prior to the date of the Letter. The Letter
states the investor's intention to make the aggregate amount of
purchases (excluding any purchases made by reinvestment of
dividends or distributions or purchases made at net asset value
without sales charge), which together with the investor's holdings
of such funds (calculated at their respective public offering
prices calculated on the date of the Letter) will equal or exceed
the amount specified in the Letter. This enables the investor to
count the shares to be purchased under the Letter of Intent to
obtain the reduced sales charge rate (as set forth in the
Prospectus) that applies under the Right of Accumulation to current
purchases of Class A shares. Each purchase of Class A shares under
the Letter will be made at the public offering price (including the
sales charge) that applies to a single lump-sum purchase of shares
in the amount intended to be purchased under the Letter.
In submitting a Letter, the investor makes no commitment to
purchase shares, but if the investor's purchases of shares within
the Letter of Intent period, when added to the value (at offering
price) of the investor's holdings of shares on the last day of that
period, do not equal or exceed the intended purchase amount, the
investor agrees to pay the additional amount of sales charge
applicable to such purchases, as set forth in "Terms of Escrow,"
below (as those terms may be amended from time to time). The
investor agrees that shares equal in value to 5% of the intended
purchase amount will be held in escrow by the Transfer Agent
subject to the Terms of Escrow. Also, the investor agrees to be
bound by the terms of the Prospectus, this Statement of Additional
Information and the Application used for such Letter of Intent, and
if such terms are amended, as they may be from time to time by the
Fund, that those amendments will apply automatically to existing
Letters of Intent.
For purchases of shares of the Fund and other Oppenheimer
funds by OppenheimerFunds prototype 401(k) plans under a Letter of
Intent, the Transfer Agent will not hold shares in escrow. If the
intended purchase amount under the Letter entered into by an
OppenheimerFunds prototype 401(k) plan is not purchased by the plan
by the end of the Letter of Intent period, there will be no
adjustment of commissions paid to the broker-dealer or financial
institution of record for accounts held in the name of that plan.
If the total eligible purchases made during the Letter of
Intent period do not equal or exceed the intended purchase amount,
the commissions previously paid to the dealer of record for the
account and the amount of sales charge retained by the Distributor
will be adjusted to the rates applicable to actual purchases. If
total eligible purchases during the Letter of Intent period exceed
the intended purchase amount and exceed the amount needed to
qualify for the next sales charge rate reduction set forth in the
applicable prospectus, the sales charges paid will be adjusted to
the lower rate, but only if and when the dealer returns to the
Distributor the excess of the amount of commissions allowed or paid
to the dealer over the amount of commissions that apply to the
actual amount of purchases. The excess commissions returned to the
Distributor will be used to purchase additional shares for the
investor's account at the net asset value per share in effect on
the date of such purchase, promptly after the Distributor's receipt
thereof.
In determining the total amount of purchases made under a
Letter, shares redeemed by the investor prior to the termination of
the Letter of Intent period will be deducted. It is the
responsibility of the dealer of record and/or the investor to
advise the Distributor about the Letter in placing any purchase
orders for the investor during the Letter of Intent period. All
of such purchases must be made through the Distributor.
- Terms of Escrow That Apply to Letters of Intent.
1. Out of the initial purchase (or subsequent purchases if
necessary) made pursuant to a Letter, shares of the Fund equal in
value up to 5% of the intended purchase amount specified in the
Letter shall be held in escrow by the Transfer Agent. For example,
if the intended purchase amount is $50,000, the escrow shall be
shares valued in the amount of $2,500 (computed at the public
offering price adjusted for a $50,000 purchase). Any dividends and
capital gains distributions on the escrowed shares will be credited
to the investor's account.
2. If the intended purchase amount specified under the
Letter is completed within the thirteen-month Letter of Intent
period, the escrowed shares will be promptly released to the
investor.
3. If, at the end of the thirteen-month Letter of Intent
period the total purchases pursuant to the Letter are less than the
intended purchase amount specified in the Letter, the investor must
remit to the Distributor an amount equal to the difference between
the dollar amount of sales charges actually paid and the amount of
sales charges which would have been paid if the total amount
purchased had been made at a single time. Such sales charge
adjustment will apply to any shares redeemed prior to the
completion of the Letter. If such difference in sales charges is
not paid within twenty days after a request from the Distributor or
the dealer, the Distributor will, within sixty days of the
expiration of the Letter, redeem the number of escrowed shares
necessary to realize such difference in sales charges. Full and
fractional shares remaining after such redemption will be released
from escrow. If a request is received to redeem escrowed shares
prior to the payment of such additional sales charge, the sales
charge will be withheld from the redemption proceeds.
4. By signing the Letter, the investor irrevocably
constitutes and appoints the Transfer Agent as attorney-in-fact to
surrender for redemption any or all escrowed shares.
5. The shares eligible for purchase under the Letter (or the
holding of which may be counted toward completion of a Letter)
include (a) Class A shares sold with a front-end sales charge or
subject to a Class A contingent deferred sales charge, (b) Class B
shares acquired subject to a contingent deferred sales charge, and
(c) Class A shares or Class B shares acquired in exchange for
either (i) Class A shares of one of the other Oppenheimer funds
that were acquired subject to a Class A initial or contingent
deferred sales charge or (ii) Class B shares of one of the other
Oppenheimer funds that were acquired subject to a contingent
deferred sales charge.
6. Shares held in escrow hereunder will automatically be
exchanged for shares of another fund to which an exchange is
requested, as described in the section of the Prospectus entitled
"How to Exchange Shares," and the escrow will be transferred to
that other fund.
Asset Builder Plans. To establish an Asset Builder Plan from a
bank account, a check (minimum $25) for the initial purchase must
accompany the application. Shares purchased by Asset Builder Plan
payments from bank accounts are subject to the redemption
restrictions for recent purchases described in "How To Sell
Shares," in the Prospectus. Asset Builder Plans also enable
shareholders of Oppenheimer Cash Reserves to use those accounts for
monthly automatic purchases of shares of up to four other
Oppenheimer funds.
There is a front-end sales charge on the purchase of certain
Oppenheimer funds, or a contingent deferred sales charge may apply
to shares purchased by Asset Builder payments. An application
should be obtained from the Distributor, completed and returned,
and a prospectus of the selected fund(s) should be obtained from
the Distributor or your financial advisor before initiating Asset
Builder payments. The amount of the Asset Builder investment may
be changed or the automatic investments may be terminated at any
time by writing to the Transfer Agent. A reasonable period
(approximately 15 days) is required after the Transfer Agent's
receipt of such instructions to implement them. The Fund reserves
the right to amend, suspend, or discontinue offering such plans at
any time without prior notice.
Cancellation of Purchase Orders. Cancellation of purchase orders
for the Fund's shares (for example, when a purchase check is
returned to the Fund unpaid) causes a loss to be incurred when the
net asset value of the Fund's shares on the cancellation date is
less than on the purchase date. That loss is equal to the amount
of the decline in the net asset value per share multiplied by the
number of shares in the purchase order. The investor is
responsible for that loss. If the investor fails to compensate the
Fund for the loss, the Distributor will do so. The Fund may
reimburse the Distributor for that amount by redeeming shares from
any account registered in that investor's name, or the Fund or the
Distributor may seek other redress.
How to Sell Shares
Information on how to sell shares of the Fund is stated in the
Prospectus. The information below supplements the terms and
conditions for redemptions set forth in the Prospectus.
-- Involuntary Redemptions. The Board of Directors has the
right to cause the involuntary redemption of the shares held in any
Fund account if the aggregate net asset value of those shares is
less than $200 or such lesser amount as the Board may fix. The
Board of Directors will not cause the involuntary redemption of
shares in an account if the aggregate net asset value of the shares
has fallen below the stated minimum solely as a result of market
fluctuations. Should the Board elect to exercise this right, it
may also fix, in accordance with the Investment Company Act, the
requirements for any notice to be given to the shareholders in
question (not less than 30 days), or the Board may set requirements
for granting permission to the Shareholder to increase the
investment, and set other terms and conditions so that the shares
would not be involuntarily redeemed.
Reinvestment Privilege. Within six months of a redemption, a
shareholder may reinvest all or part of the redemption proceeds of
(i) Class A shares, or (ii) Class B shares that were subject to the
Class B contingent deferred sales charge when redeemed. This
privilege does not apply to Class C shares. The reinvestment may
be made without sales charge only in Class A shares of the Fund or
any of the other Oppenheimer funds into which shares of the Fund
are exchangeable as described below, at the net asset value next
computed after the Transfer Agent receives the reinvestment order.
The shareholder must ask the Distributor for that privilege at the
time of reinvestment. Any capital gain that was realized when the
shares were redeemed is taxable, and reinvestment will not alter
any capital gains tax payable on that gain. If there has been a
capital loss on the redemption, some or all of the loss may not be
tax deductible, depending on the timing and amount of the
reinvestment. Under the Internal Revenue Code, if the redemption
proceeds of Fund shares on which a sales charge was paid are
reinvested in shares of the Fund or another of the Oppenheimer
funds within 90 days of payment of the sales charge, the
shareholder's basis in the shares of the Fund that were redeemed
may not include the amount of the sales charge paid. That would
reduce the loss or increase the gain recognized from the
redemption. However, in that case the sales charge would be added
to the basis of the shares acquired by the reinvestment of the
redemption proceeds. The Fund may amend, suspend or cease offering
this reinvestment privilege at any time as to shares redeemed after
the date of such amendment, suspension or cessation.
Transfers of Shares. Shares are not subject to the payment of a
contingent deferred sales charge of any class at the time of
transfer to the name of another person or entity (whether the
transfer occurs by absolute assignment, gift or bequest, not
involving, directly or indirectly, a public sale). The transferred
shares will remain subject to the contingent deferred sales charge,
calculated as if the transferee shareholder had acquired the
transferred shares in the same manner and at the same time as the
transferring shareholder. If less than all shares held in an
account are transferred, and some but not all shares in the account
would be subject to a contingent deferred sales charge if redeemed
at the time of transfer, the priorities described in the Prospectus
under "How to Buy Shares" for the imposition of the Class B and
Class C contingent deferred sales charge will be followed in
determining the order in which shares are transferred.
Distributions From Retirement Plans. Requests for distributions
from OppenheimerFunds-sponsored IRAs, 403(b)(7) custodial plans,
401(k) plans, or pension or profit-sharing plans should be
addressed to "Trustee, OppenheimerFunds Retirement Plans," c/o the
Transfer Agent at its address listed in "How To Sell Shares" in the
Prospectus or on the back cover of this Statement of Additional
Information. The request must: (i) state the reason for the
distribution; (ii) state the owner's awareness of tax penalties if
the distribution is premature; and (iii) conform to the
requirements of the plan and the Fund's other redemption
requirements. Participants, other than self-employed persons
maintaining a plan account in their own name, in OppenheimerFunds-
sponsored prototype pension or profit-sharing or 401(k) plans may
not directly redeem or exchange shares held for their account under
those plans. The employer or plan administrator must sign the
request. Distributions from pension, profit sharing plans are
subject to special requirements under the Internal Revenue Code and
certain documents (available from the Transfer Agent) must be
completed before the distribution may be made. Distributions from
retirement plans are subject to withholding requirements under the
Internal Revenue Code, and IRS Form W-4P (available from the
Transfer Agent) must be submitted to the Transfer Agent with the
distribution request, or the distribution may be delayed. Unless
the shareholder has provided the Transfer Agent with a certified
tax identification number, the Internal Revenue Code requires that
tax be withheld from any distribution even if the shareholder
elects not to have tax withheld. The Fund, the Manager, the
Distributor, the Trustee and the Transfer Agent assume no
responsibility to determine whether a distribution satisfies the
conditions of applicable tax laws and will not be responsible for
any tax penalties assessed in connection with a distribution.
Special Arrangements for Repurchase of Shares from Dealers and
Brokers. The Distributor is the Fund's agent to repurchase its
shares from authorized dealers or brokers. The repurchase price
per share will be the net asset value next computed after the
Distributor receives the order placed by the dealer or broker,
except that if the Distributor receives a repurchase order from the
dealer or broker after the close of The New York Stock Exchange on
a regular business day, it will be processed at that day's net
asset value, if the order was received by the dealer or broker from
its customer prior to the time the Exchange closes (normally, that
is 4:00 P.M., but may be earlier on some days) and the order was
transmitted to and received by the Distributor prior to its close
of business that day (normally 5:00 P.M.). Ordinarily, for
accounts redeemed by a broker-dealer under this procedure, payment
will be made within three business days after the shares have been
redeemed upon the Distributor's receipt of the required redemption
documents in proper form, with the signature(s) of the registered
owners guaranteed on the redemption document as described in the
Prospectus.
Automatic Withdrawal and Exchange Plans. Investors owning shares
of the Fund valued at $5,000 or more can authorize the Transfer
Agent to redeem shares (minimum $50) automatically on a monthly,
quarterly, semi-annual or annual basis under an Automatic
Withdrawal Plan. Shares will be redeemed three business days prior
to the date requested by the shareholder for receipt of the
payment. Automatic withdrawals of up to $1,500 per month may be
requested by telephone if payments are to be made by check payable
to all shareholders of record and sent to the address of record for
the account (and if the address has not been changed within the
prior 30 days). Required minimum distributions from
OppenheimerFunds-sponsored retirement plans may not be arranged on
this basis. Payments are normally made by check, but shareholders
having AccountLink privileges (see "How To Buy Shares") may arrange
to have Automatic Withdrawal Plan payments transferred to the bank
account designated on the OppenheimerFunds New Account Application
or signature-guaranteed instructions. The Fund cannot guarantee
receipt of a payment on the date requested and reserves the right
to amend, suspend or discontinue offering such plans at any time
without prior notice. Because of the sales charge assessed on
Class A share purchases, shareholders should not make regular
additional Class A share purchases while participating in an
Automatic Withdrawal Plan. Class B and Class C shareholders should
not establish withdrawal plans because of the imposition of the
contingent deferred sales charges on such withdrawals (except where
the Class B and Class C contingent deferred sales charges are
waived as described in the Prospectus under "Waivers of Class B and
Class C Contingent Deferred Sales Charges").
By requesting an Automatic Withdrawal or Exchange Plan, the
shareholder agrees to the terms and conditions applicable to such
plans, as stated below and in the provisions of the Oppenheimer
funds Application relating to such Plans, as well as the
Prospectus. These provisions may be amended from time to time by
the Fund and/or the Distributor. When adopted, such amendments
will automatically apply to existing Plans.
-- Automatic Exchange Plans. Shareholders can authorize the
Transfer Agent (on the Oppenheimer funds Application or signature-
guaranteed instructions) to exchange a pre-determined amount of
shares of the Fund for shares (of the same class) of other
Oppenheimer funds automatically on a monthly, quarterly, semi-
annual or annual basis under an Automatic Exchange Plan. The
minimum amount that may be exchanged to each other fund account is
$25. Exchanges made under these plans are subject to the
restrictions that apply to exchanges as set forth in "How to
Exchange Shares" in the Prospectus and below in this Statement of
Additional Information.
-- Automatic Withdrawal Plans. Fund shares will be redeemed
as necessary to meet withdrawal payments. Shares acquired without
a sales charge will be redeemed first and shares acquired with
reinvested dividends and capital gains distributions will be
redeemed next, followed by shares acquired with a sales charge, to
the extent necessary to make withdrawal payments. Depending upon
the amount withdrawn, the investor's principal may be depleted.
Payments made under withdrawal plans should not be considered as a
yield or income on your investment. It may not be desirable to
purchase additional Class A shares while making automatic
withdrawals because of the sales charges that apply to purchases
when made. Accordingly, a shareholder normally may not maintain an
Automatic Withdrawal Plan while simultaneously making regular
purchases of Class A shares.
The Transfer Agent will administer the investor's Automatic
Withdrawal Plan (the "Plan") as agent for the investor (the
"Planholder") who executed the Plan authorization and application
submitted to the Transfer Agent. The Transfer Agent and the Fund
shall incur no liability to the Planholder for any action taken or
omitted by the Transfer Agent in good faith to administer the Plan.
Certificates will not be issued for shares of the Fund purchased
for and held under the Plan, but the Transfer Agent will credit all
such shares to the account of the Planholder on the records of the
Fund. Any share certificates held by a Planholder may be
surrendered unendorsed to the Transfer Agent with the Plan
application so that the shares represented by the certificate may
be held under the Plan.
For accounts subject to Automatic Withdrawal Plans,
distributions of capital gains must be reinvested in shares of the
Fund, which will be done at net asset value without a sales charge.
Dividends on shares held in the account may be paid in cash or
reinvested.
Redemptions of shares needed to make withdrawal payments will
be made at the net asset value per share determined on the
redemption date. Checks or ACH transfer payments of the proceeds
of Plan withdrawals will normally be transmitted three business
days prior to the date selected for receipt of the payment (receipt
of payment on the date selected cannot be guaranteed), according to
the choice specified in writing by the Planholder.
The amount and the interval of disbursement payments and the
address to which checks are to be mailed or AccountLink payments
are to be sent may be changed at any time by the Planholder by
writing to the Transfer Agent. The Planholder should allow at
least two weeks' time in mailing such notification for the
requested change to be put in effect. The Planholder may, at any
time, instruct the Transfer Agent by written notice (in proper form
in accordance with the requirements of the then-current Prospectus
of the Fund) to redeem all, or any part of, the shares held under
the Plan. In that case, the Transfer Agent will redeem the number
of shares requested at the net asset value per share in effect in
accordance with the Fund's usual redemption procedures and will
mail a check for the proceeds to the Planholder.
The Plan may be terminated at any time by the Planholder by
writing to the Transfer Agent. A Plan may also be terminated at
any time by the Transfer Agent upon receiving directions to that
effect from the Fund. The Transfer Agent will also terminate a
Plan upon receipt of evidence satisfactory to it of the death or
legal incapacity of the Planholder. Upon termination of a Plan by
the Transfer Agent or the Fund, shares that have not been redeemed
from the account will be held in uncertificated form in the name of
the Planholder, and the account will continue as a dividend-
reinvestment, uncertificated account unless and until proper
instructions are received from the Planholder or his or her
executor or guardian, or other authorized person.
To use shares held under the Plan as collateral for a debt,
the Planholder may request issuance of a portion of the shares in
certificated form. Upon written request from the Planholder, the
Transfer Agent will determine the number of shares for which a
certificate may be issued without causing the withdrawal checks to
stop because of exhaustion of uncertificated shares needed to
continue payments. However, should such uncertificated shares
become exhausted, Plan withdrawals will terminate.
If the Transfer Agent ceases to act as transfer agent for the
Fund, the Planholder will be deemed to have appointed any successor
transfer agent to act as agent in administering the Plan.
How To Exchange Shares
The Rochester Funds are not Eligible Funds for purposes of the
exchange privilege set forth in the Prospectus. As stated in the
Prospectus, shares of a particular class of Oppenheimer funds
having more than one class of shares may be exchanged only for
shares of the same class of other Oppenheimer funds. Shares of the
Oppenheimer funds that have a single class without a class
designation are deemed "Class A" shares for this purpose. All of
the Oppenheimer funds offer Class A, B and C shares except
Oppenheimer Money Market Fund, Inc., Centennial Money Market Trust,
Centennial Tax Exempt Trust, Centennial Government Trust,
Centennial New York Tax Exempt Trust, Centennial California Tax
Exempt Trust, Centennial America Fund, L.P., and Daily Cash
Accumulation Fund, Inc., which only offer Class A shares, and
Oppenheimer Main Street California Tax-Exempt Fund which only
offers Class A and Class B shares (Class B and Class C shares of
Oppenheimer Cash Reserves are generally available only by exchange
from the same class of shares of other Oppenheimer funds or through
OppenheimerFunds sponsored 401(k) plans). A list showing which
funds offer which classes can be obtained by calling the
distributor at 1-800-525-7048.
Class A shares of Oppenheimer funds may be exchanged at net
asset value for shares of any Money Market Fund. Shares of any
Money Market Fund purchased without a sales charge may be exchanged
for shares of Oppenheimer funds offered with a sales charge upon
payment of the sales charge (or, if applicable, may be used to
purchase shares of Oppenheimer funds subject to a contingent
deferred sales charge). However, shares of Oppenheimer Money
Market Fund, Inc. purchased with the redemption proceeds of shares
of other mutual funds (other than funds managed by the Manager or
its subsidiaries) redeemed within the 12 months prior to that
purchase may subsequently be exchanged for shares of other
Oppenheimer funds without being subject to an initial or contingent
deferred sales charge, whichever is applicable. To qualify for
that privilege, the investor or the investor's dealer must notify
the Distributor of eligibility for this privilege at the time the
shares of Oppenheimer Money Market Fund, Inc. are purchased, and,
if requested, must supply proof of entitlement to this privilege.
Shares of this Fund acquired by reinvestment of dividends or
distributions from any other of the Oppenheimer funds or from any
unit investment trust for which reinvestment arrangements have been
made with the Distributor may be exchanged at net asset value for
shares of any of the Oppenheimer funds. No contingent deferred
sales charge is imposed on exchanges of shares of either class
purchased subject to a contingent deferred sales charge. However,
when Class A shares acquired by exchange of Class A shares of other
Oppenheimer funds purchased subject to a Class A contingent
deferred sales charge are redeemed within 18 months of the end of
the calendar month of the initial purchase of the exchanged Class
A shares, the Class A contingent deferred sales charge is imposed
on the redeemed shares (see "Class A Contingent Deferred Sales
Charge" in the Prospectus). The Class B contingent deferred sales
charge is imposed on Class B shares acquired by exchange if they
are redeemed within six years of the initial purchase of the
exchanged Class B shares. The Class C contingent deferred sales
charge is imposed on Class C shares acquired by exchange if they
are redeemed within 12 months of the initial purchase of the
exchanged Class C shares.
When Class B or Class C shares are redeemed to effect an
exchange, the priorities described in "How To Buy Shares" in the
Prospectus for the imposition of the Class B and Class C contingent
deferred sales charges will be followed in determining the order in
which the shares are exchanged. Shareholders should take into
account the effect of any exchange on the applicability and rate of
any contingent deferred sales charge that might be imposed in the
subsequent redemption of remaining shares. Shareholders owning
shares of more than one class must specify whether they intend to
exchange Class A, Class B or Class C shares.
The Fund reserves the right to reject telephone or written
exchange requests submitted in bulk by anyone on behalf of 10 or
more accounts. The Fund may accept requests for exchanges of up to
50 accounts per day from representatives of authorized dealers that
qualify for this privilege. In connection with any exchange
request, the number of shares exchanged may be less than the number
requested if the exchange or the number requested would include
shares subject to a restriction cited in the Prospectus or this
Statement of Additional Information or would include shares covered
by a share certificate that is not tendered with the request. In
those cases, only the shares available for exchange without
restriction will be exchanged.
When exchanging shares by telephone, a shareholder must either
have an existing account in, or obtain and acknowledge receipt of
a prospectus of, the fund to which the exchange is to be made. For
full or partial exchanges of an account made by telephone, any
special account features such as Asset Builder Plans, Automatic
Withdrawal Plans and retirement plan contributions will be switched
to the new account unless the Transfer Agent is instructed
otherwise. If all telephone lines are busy (which might occur, for
example, during periods of substantial market fluctuations),
shareholders might not be able to request exchanges by telephone
and would have to submit written exchange requests.
Shares to be exchanged are redeemed on the regular business
day the Transfer Agent receives an exchange request in proper form
(the "Redemption Date"). Normally, shares of the fund to be
acquired are purchased on the Redemption Date, but such purchases
may be delayed by either fund up to five business days if it
determines that it would be disadvantaged by an immediate transfer
of the redemption proceeds. The Fund reserves the right, in its
discretion, to refuse any exchange request that may disadvantage it
(for example, if the receipt of multiple exchange requests from a
dealer might require the disposition of portfolio securities at a
time or at a price that might be disadvantageous to the Fund).
The different Oppenheimer funds available for exchange have
different investment objectives, policies and risks, and a
shareholder should assure that the Fund selected is appropriate for
his or her investment and should be aware of the tax consequences
of an exchange. For federal income tax purposes, an exchange
transaction is treated as a redemption of shares of one fund and a
purchase of shares of another. "Reinvestment Privilege," above,
discusses some of the tax consequences of reinvestment of
redemption proceeds in such cases. The Fund, the Distributor, and
the Transfer Agent are unable to provide investment, tax or legal
advice to a shareholder in connection with an exchange request or
any other investment transaction.
Dividends, Capital Gains and Taxes
Tax Status of the Fund's Dividends and Distributions. The Federal
tax treatment of the Fund's dividends and capital gains
distributions is explained in the Prospectus under the caption
"Dividends, Capital Gains and Taxes." Special provisions of the
Internal Revenue Code govern the eligibility of the Fund's
dividends for the dividends-received deduction for corporate
shareholders. Long-term capital gains distributions are not
eligible for the deduction. In addition, the amount of dividends
paid by the Fund which may qualify for the deduction is limited to
the aggregate amount of qualifying dividends that the Fund derives
from its portfolio investments that the Fund has held for a minimum
period, usually 46 days. A corporate shareholder will not be
eligible for the deduction on dividends paid on Fund shares held
for 45 days or less. To the extent the Fund's dividends are
derived from gross income from option premiums, interest income or
short-term gains from the sale of securities or dividends from
foreign corporations, those dividends will not qualify for the
deduction.
Under the Internal Revenue Code, by December 31 each year, the
Fund must distribute 98% of its taxable investment income earned
from January 1 through December 31 of that year and 98% of its
capital gains realized in the period from November 1 of the prior
year through October 31 of the current year, or else the Fund must
pay an excise tax on the amounts not distributed. While it is
presently anticipated that the Fund will meet those requirements,
the Board of Directors and the Manager might determine in a
particular year that it would be in the best interest of
shareholders for the Fund not to make such distributions at the
required levels and to pay the excise tax on the undistributed
amounts. That would reduce the amount of income or capital gains
available for distribution to shareholders.
If the Fund qualifies as a "regulated investment company"
under the Internal Revenue Code, it will not be liable for Federal
income taxes on amounts paid by it as dividends and distribution.
The Fund qualified during its last fiscal year, and intends to
qualify in current and future years, but reserves the right not to
do so. The Internal Revenue Code contains a number of complex
tests to determine whether the Fund will qualify, and the Fund
might not meet those tests in a particular year. For example, if
the Fund derives 30% or more of its gross income from the sale of
securities held less than three months, it may fail to qualify (see
"Tax Aspects of Covered Calls and Hedging Instruments," above). If
it did not so qualify, the Fund would be treated for tax purposes
as an ordinary corporation and receive no tax deduction for
payments made to shareholders.
The amount of a class's distributions may vary from time to
time depending on market conditions, the composition of the Fund's
portfolio, and expenses borne by the Fund or borne separately by a
class, as described in "Alternative Sales Arrangements -- Class A,
Class B and Class C Shares," above. Dividends are calculated in
the same manner, at the same time and on the same day for shares of
each class. However, dividends on Class B and Class C shares are
expected to be lower as a result of the asset-based sales charge on
Class B and Class C shares, and Class B and Class C dividends will
also differ in amount as a consequence of any difference in net
asset value between the classes.
Dividends, distributions and the proceeds of the redemption of
Fund shares represented by checks returned to the Transfer Agent by
the Postal Service as undeliverable will be invested in shares of
Oppenheimer Money Market Fund, Inc., as promptly as possible after
the return of such checks to the Transfer Agent, to enable the
investor to earn a return on otherwise idle funds.
Dividend Reinvestment in Another Fund. Shareholders of the Fund
may elect to reinvest all dividends and/or capital gains
distributions in shares of the same class of any of the other
Oppenheimer funds listed in "Reduced Sales Charges," above, at net
asset value without sales charge. To elect this option, a
shareholder must notify the Transfer Agent in writing and either
have an existing account in the fund selected for reinvestment or
must obtain a prospectus for that fund and an application from the
Distributor to establish an account. The investment will be made
at the net asset value per share in effect at the close of business
on the payable date of the dividend or distribution. Dividends
and/or distributions from certain of the Oppenheimer funds may be
invested in shares of this Fund on the same basis.
Additional Information About the Fund
The Custodian. State Street Bank and Trust Company acts as
custodian of the assets of the Trust. The Fund's cash balances in
excess of $100,000 are not protected by Federal deposit insurance.
Such uninsured balances may be substantial.
Independent Accountants. Price Waterhouse LLP are the
independent accountants of the Fund. Their services include
examining the annual financial statements of the Fund as well as
other related services.
Retirement Plans. The Distributor 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 the Distributor. 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 examples illustrate the
general approaches that will be followed. These hypotheticals will
be modified with different investment amounts, reflecting the
amounts that can be invested in 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 perfor-
mance of any OppenheimerFunds products.
<TABLE>
<CAPTION>
Benefits of Long Term Tax-Free Benefits of Long Term Tax-Free
Compounding - Single Sum Compounding - Periodic Investment
Amount of Contribution: $100,000 Amount Invested Annually: $2,000
Rates of Return Rates of Return
Years 8.00% 10.00% 12.00% Years 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 8.00% 10.00% 12.00% Years 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 $199,492
</TABLE>
<TABLE>
<CAPTION>
Comparison of Tax Deferred Investing -- Deducting Taxes at End
(Amount of Tax Rate as 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>
<PAGE>
<PAGE>
- --------------------------------------------------------------------------------
INDEPENDENT AUDITORS' REPORT
To the Shareholders and Board of Directors of
Quest for Value Fund, Inc.:
We have audited the accompanying statement of assets and liabilities of Quest
for Value Fund, Inc., including the schedule of investments, as of October 31,
1995, and the related statement of operations for the year then ended, the
statements of changes in net assets for each of the years in the two year period
then ended and the financial highlights for each of the years in the five year
period then ended. These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
October 31, 1995 by correspondence with the custodian and brokers. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of Quest
for Value Fund, Inc. as of October 31, 1995, the results of its operations for
the year then ended, the changes in its net assets for each of the years in the
two year period then ended, and the financial highlights for each of the years
in the five year period then ended in conformity with generally accepted
accounting principles.
KPMG Peat Marwick LLP
New York, New York
December 20, 1995
41
<PAGE>
- --------------------------------------------------------------------------------
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and Trustees of
Quest for Value Family of Funds:
In our opinion, the accompanying statements of assets and liabilities, including
the schedules of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of the Opportunity Fund, the Small
Capitalization Fund, the Growth and Income Fund, the U.S. Government Income
Fund, and the Investment Quality Income Fund (constituting part of Quest for
Value Family of Funds, hereafter referred to as the "Fund") at October 31, 1995,
the results of each of their operations for the year then ended, the changes in
each of their net assets for each of the two years in the period then ended and
the financial highlights for each of the periods indicated, in conformity with
generally accepted accounting principles. These financial statements and
financial highlights (hereafter referred to as "financial statements") are the
responsibility of the Fund's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these financial statements in accordance with generally accepted
auditing standards which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits, which included confirmation of securities at October 31, 1995 by
correspondence with the custodian and brokers, provide a reasonable basis for
the opinion expressed above.
PRICE WATERHOUSE LLP
1177 Avenue of the Americas
New York, New York 10036
December 20, 1995
<PAGE>
OCTOBER 31, 1995
- --------------------------------------------------------------------------------
SCHEDULES OF INVESTMENTS
QUEST FOR VALUE FUND, INC.
<TABLE>
<CAPTION>
- ------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
- ------------------------------------------------------
SHORT-TERM CORPORATE NOTES -- 19.9%
AUTOMOTIVE -- 6.0%
Ford Motor Credit Co.
$ 2,400,000 5.72%, 11/20/95 $ 2,392,755
6,600,000 5.73%, 11/27/95 6,572,687
General Motors Acceptance Corp.
335,000 5.74%, 11/20/95 333,985
10,700,000 5.77%, 11/20/95 10,667,415
------------
19,966,842
------------
BANKING -- 1.4%
4,700,000 Norwest Financial, Inc.
5.73%, 11/13/95 4,691,023
------------
COMPUTERS -- 0.1%
430,000 IBM Credit Corp.
5.70%, 11/06/95 429,660
------------
MACHINERY & ENGINEERING -- 2.1%
Deere (John) Capital Corp.
3,300,000 5.71%, 11/13/95 3,293,719
3,600,000 5.75%, 11/13/95 3,593,100
------------
6,886,819
------------
MISCELLANEOUS FINANCIAL SERVICES -- 10.1%
Beneficial Corp.
1,300,000 5.72%, 11/27/95 1,294,629
225,000 5.74%, 11/27/95 224,067
800,000 CIT Group Holdings, Inc.
5.73%, 11/13/95 798,472
Household Finance Corp.
14,200,000 5.72%, 12/04/95 14,125,545
1,000,000 5.73%, 11/27/95 995,862
Merrill Lynch & Co., Inc.
500,000 5.72%, 11/06/95 499,603
15,345,000 5.75%, 11/06/95 15,332,745
------------
33,270,923
------------
OIL/GAS -- 0.2%
500,000 Chevron Oil Finance Co.
5.71%, 11/08/95 499,445
------------
Total Short-Term Corporate Notes
(cost -- $65,744,712) $ 65,744,712
------------
<CAPTION>
- ------------------------------------------------------
<C> <S> <C>
PRINCIPAL
AMOUNT VALUE
- ------------------------------------------------------
CONVERTIBLE CORPORATE BONDS -- 0.7%
REAL ESTATE
$ 2,330,921 Security Capital Realty, Inc. (A)
12.00%, 6/30/14
(cost -- $2,198,259) $ 2,330,921
------------
<CAPTION>
- ------------------------------------------------------
<C> <S> <C>
SHARES VALUE
- ------------------------------------------------------
COMMON STOCKS -- 79.3%
AEROSPACE -- 6.0%
127,000 AlliedSignal, Inc. $ 5,397,500
177,000 McDonnell Douglas Corp. 14,469,750
------------
19,867,250
------------
APPAREL -- 1.4%
202,600 Warnaco Group, Inc. (Class A)* 4,710,450
------------
BANKING -- 3.4%
110,000 Citicorp 7,136,250
81,215 Mellon Bank Corp. 4,070,902
------------
11,207,152
------------
CHEMICALS -- 4.5%
60,000 du Pont (E.I.) de Nemours & Co. 3,742,500
81,000 Hercules, Inc. 4,323,375
64,000 Monsanto Co. 6,704,000
------------
14,769,875
------------
CONGLOMERATES -- 1.7%
90,200 General Electric Co. 5,705,150
------------
CONSUMER PRODUCTS -- 1.5%
149,000 Reebok International Ltd. 5,066,000
------------
CONTAINERS -- 2.2%
160,000 Temple - Inland, Inc. 7,280,000
------------
COSMETICS/TOILETRIES -- 1.5%
67,800 Avon Products, Inc. 4,822,275
------------
DRUGS & MEDICAL PRODUCTS -- 4.8%
179,000 Becton, Dickinson & Co. 11,635,000
48,000 Warner-Lambert Co. 4,086,000
------------
15,721,000
------------
</TABLE>
* Non-income producing security.
15
<PAGE>
OCTOBER 31, 1995
- --------------------------------------------------------------------------------
SCHEDULES OF INVESTMENTS
<TABLE>
<CAPTION>
- ------------------------------------------------------
SHARES VALUE
<C> <S> <C>
- ------------------------------------------------------
ELECTRONICS -- 5.3%
177,000 Arrow Electronics, Inc.* $ 8,982,750
122,000 Intel Corp. 8,524,750
------------
17,507,500
------------
HEALTHCARE SERVICES -- 2.4%
440,000 Tenet Healthcare Corp. 7,865,000
------------
INSURANCE -- 17.2%
216,200 Ace Ltd. 7,350,800
35,300 AFLAC, Inc. 1,438,475
99,000 American International Group, Inc. 8,353,125
464,200 EXEL Ltd. 24,834,700
197,000 Progressive Corp., Ohio 8,175,500
101,000 Transamerica Corp. 6,842,750
------------
56,995,350
------------
METALS/MINING -- 2.7%
66,333 Freeport McMoRan, Inc. 2,479,208
8,518 Freeport McMoRan, Copper & Gold
(Class A) 194,849
279,290 Freeport McMoRan, Copper & Gold
(Class B) 6,353,848
------------
9,027,905
------------
MISCELLANEOUS FINANCIAL SERVICES -- 8.8%
200,000 American Express Co. 8,125,000
290,000 Countrywide Credit Industries, Inc. 6,416,250
214,000 Federal Home Loan Mortgage Corp. 14,819,500
------------
29,360,750
------------
PAPER PRODUCTS -- 1.9%
120,000 Champion International Corp. $ 6,420,000
------------
<CAPTION>
- ------------------------------------------------------
<C> <S> <C>
SHARES VALUE
- ------------------------------------------------------
REAL ESTATE -- 0.8%
3,050 Security Capital Realty, Inc. (A) 2,689,844
------------
RETAIL -- 6.3%
373,000 May Department Stores Co. 14,640,250
140,000 Mercantile Stores Co., Inc. 6,282,500
------------
20,922,750
------------
TELECOMMUNICATIONS -- 2.6%
344 Bell Atlantic Corp. 21,887
225,200 Sprint Corp. 8,670,200
------------
8,692,087
------------
TEXTILES -- 1.3%
340,000 Shaw Industries, Inc. 4,335,000
------------
TOYS/GAMES/HOBBY -- 0.9%
92,000 Hasbro, Inc. 2,806,000
------------
TRANSPORTATION -- 2.1%
84,000 CSX Corp. 7,035,000
------------
Total Common Stocks
(cost -- $190,764,443) $262,806,338
------------
</TABLE>
<TABLE>
<S> <C> <C>
Total Investments
(cost -- $258,707,414)) 99.9% $330,881,971
Other Assets in Excess of
Other Liabilities 0.1 429,932
------ ------------
TOTAL NET ASSETS 100.0 % $331,311,903
------ ------------
------ ------------
</TABLE>
* Non-income producing security.
(A) Restricted Securities (the Fund will not bear any costs, including those
involved in registration under the Securities Act of 1933, in connection
with the disposition of these securities):
<TABLE>
<CAPTION>
UNIT
VALUATION
AS
DATE OF UNIT OF OCTOBER
DESCRIPTION ACQUISITION PAR AMOUNT SHARES COST 31, 1995
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Security Capital
Realty, Inc.
12.00%, 6/30/14 9/15/94 $2,330,921 -- $ 94 $ 100
Security Capital
Realty, Inc.
Common Stock 9/15/94 -- 3,050 926 882
</TABLE>
16
<PAGE>
- --------------------------------------------------------------------------------
OPPORTUNITY FUND
<TABLE>
<CAPTION>
- ------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
- ------------------------------------------------------
SHORT-TERM CORPORATE NOTES -- 15.6%
AUTOMOTIVE -- 2.4%
$15,000,000 General Motors Acceptance Corp.
5.77%, 11/20/95 $ 14,954,321
------------
BANKING -- 2.8%
Norwest Financial, Inc.
1,800,000 5.73%, 11/13/95 1,796,562
16,000,000 5.73%, 11/27/95 15,933,787
------------
17,730,349
------------
COMPUTERS -- 0.2%
1,490,000 IBM Credit Corp.
5.70%, 11/06/95 1,488,820
------------
MACHINERY & ENGINEERING -- 3.0%
Deere (John) Capital Corp.
13,600,000 5.71%, 11/13/95 13,574,115
5,235,000 5.74%, 11/13/95 5,224,984
------------
18,799,099
------------
MISCELLANEOUS FINANCIAL SERVICES -- 7.1%
Beneficial Corp.
1,200,000 5.72%, 11/20/95 1,196,377
10,455,000 5.73%, 11/20/95 10,423,382
1,800,000 CIT Group Holdings, Inc.
5.73%, 11/13/95 1,796,562
15,980,000 Household Finance Corp.
5.73%, 11/08/95 15,962,196
Merrill Lynch & Co., Inc.
4,500,000 5.75%, 11/02/95 4,499,281
11,475,000 5.75%, 11/06/95 11,465,836
------------
45,343,634
------------
OIL/GAS -- 0.1%
491,000 Chevron Oil Finance Co.
5.71%, 11/08/95 490,455
------------
Total Short-Term Corporate Notes
(cost -- $98,806,678) $ 98,806,678
------------
<CAPTION>
- ------------------------------------------------------
<C> <S> <C>
PRINCIPAL
AMOUNT VALUE
- ------------------------------------------------------
U.S. TREASURY NOTES -- 0.5%
$ 1,000,000 7.50%, 11/15/01 $ 1,081,410
1,000,000 7.50%, 5/15/02 1,086,410
550,000 7.875%, 4/15/98 577,241
550,000 7.875%, 8/15/01 603,537
------------
Total U.S. Treasury Notes
(cost -- $3,143,397) $ 3,348,598
------------
<CAPTION>
- ------------------------------------------------------
<C> <S> <C>
SHARES VALUE
- ------------------------------------------------------
COMMON STOCKS -- 85.0%
AEROSPACE -- 9.0%
100,000 Loral Corp. $ 2,962,500
525,000 McDonnell Douglas Corp. 42,918,750
200,000 Northrop Grumman Corp. 11,450,000
------------
57,331,250
------------
AIRLINES -- 1.0%
100,000 AMR Corp.* 6,600,000
------------
BANKING -- 13.6%
525,000 Citicorp 34,059,375
34,100 First Empire State Corp. 6,709,175
450,000 Mellon Bank Corp. 22,556,250
110,000 Wells Fargo & Co. 23,113,750
------------
86,438,550
------------
CASINOS/GAMING -- 2.9%
750,000 Harrahs Entertainment, Inc. 18,562,500
------------
CHEMICALS -- 4.4%
260,000 du Pont (E.I.) de Nemours & Co. 16,217,500
220,000 Hercules, Inc. 11,742,500
------------
27,960,000
------------
CONSUMER PRODUCTS -- 3.2%
600,000 Reebok International Ltd. 20,400,000
------------
COSMETICS/TOILETRIES -- 0.7%
60,600 Avon Products, Inc. 4,310,175
------------
DRUGS & MEDICAL PRODUCTS -- 2.8%
275,000 Becton, Dickinson & Co. 17,875,000
------------
</TABLE>
* Non-income producing security.
17
<PAGE>
OCTOBER 31, 1995
- --------------------------------------------------------------------------------
SCHEDULES OF INVESTMENTS
<TABLE>
<CAPTION>
- ------------------------------------------------------
SHARES VALUE
<C> <S> <C>
- ------------------------------------------------------
ELECTRONICS -- 8.1%
460,000 Intel Corp. $ 32,142,500
200,000 National Semiconductor Corp.* 4,875,000
50,000 Raychem Corp. 2,318,750
440,000 Unitrode Corp.* 11,825,000
------------
51,161,250
------------
INSURANCE -- 3.2%
300,000 EXEL Ltd. 16,050,000
60,000 Transamerica Corp. 4,065,000
------------
20,115,000
------------
METALS/MINING -- 5.2%
83,333 Freeport McMoRan, Inc. 3,114,583
1,302,100 Freeport McMoRan Copper & Gold
(Class B) 29,622,775
------------
32,737,358
------------
MISCELLANEOUS FINANCIAL SERVICES -- 10.5%
250,000 American Express Co. 10,156,250
500,000 Countrywide Credit Industries, Inc. 11,062,500
500,000 Federal Home Loan Mortgage Corp. 34,625,000
100,000 Federal National Mortgage Assoc. 10,487,500
------------
66,331,250
------------
OIL/GAS -- 6.0%
80,000 Mapco, Inc. 4,120,000
610,000 Tenneco, Inc. 26,763,750
149,300 Triton Energy Corp.* 6,961,113
------------
37,844,863
------------
PAPER PRODUCTS -- 7.2%
535,000 Champion International Corp. 28,622,500
325,000 Scott Paper Co. 17,306,250
------------
45,928,750
------------
TELECOMMUNICATIONS -- 1.8%
300,000 Sprint Corp. 11,550,000
------------
TEXTILES -- 2.4%
155,000 Collins & Aikman Corp.* $ 1,240,000
1,100,000 Shaw Industries, Inc. 14,025,000
------------
15,265,000
------------
<CAPTION>
- ------------------------------------------------------
<C> <S> <C>
SHARES VALUE
- ------------------------------------------------------
TOYS/GAMES/HOBBY -- 2.7%
600,000 Mattel, Inc. 17,250,000
------------
OTHER -- 0.3%
40,000 Alliant Techsystems, Inc.* 1,860,000
------------
Total Common Stocks
(cost -- $440,332,557) $539,520,946
------------
<CAPTION>
- ------------------------------------------------------
WARRANTS VALUE
- ------------------------------------------------------
<C> <S> <C>
WARRANTS -- 0.0%
HEALTHCARE SERVICES
34 Laboratory Corp. of America
Holdings
(cost -- $81) $ 21
------------
</TABLE>
<TABLE>
<S> <C> <C>
Total Investments
(cost -- $542,282,713) 101.1% $641,676,243
Other Liabilities in Excess of
Other Assets (1.1) (7,165,129)
------ ------------
TOTAL NET ASSETS 100.0% $634,511,114
------ ------------
------ ------------
</TABLE>
SMALL CAPITALIZATION FUND
<TABLE>
<CAPTION>
- ------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
- ------------------------------------------------------
SHORT-TERM CORPORATE NOTES -- 15.1%
AUTOMOTIVE -- 1.8%
$ 2,758,000 General Motors Acceptance Corp.
5.81%, 11/06/95 $ 2,755,774
------------
BANKING -- 4.0%
6,000,000 Norwest Financial, Inc.
5.73%, 11/14/95 5,987,585
------------
INSURANCE -- 4.7%
7,000,000 Prudential Funding Corp.
5.73%, 11/27/95 6,971,031
------------
</TABLE>
* Non-income producing security.
18
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- ------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
- ------------------------------------------------------
MACHINERY & ENGINEERING -- 1.8%
Deere (John) Capital Corp.
$ 1,560,000 5.71%, 11/13/95 $ 1,557,031
1,074,000 5.75%, 11/13/95 1,071,942
------------
2,628,973
------------
MISCELLANEOUS FINANCIAL SERVICES -- 2.8%
3,635,000 Beneficial Corp.
5.73%, 11/22/95 3,622,850
575,000 Household Finance Corp.
5.72%, 11/13/95 573,904
------------
4,196,754
------------
Total Short-Term Corporate Notes
(cost -- $22,540,117) $ 22,540,117
------------
CORPORATE NOTES & BONDS -- 0.4%
AUTOMOTIVE -- 0.0%
$ 62,950 Collins Industries, Inc.
8.75%, 1/11/00 $ 57,577
------------
OIL/GAS -- 0.4%
500,000 Global Marine, Inc.
12.75%, 12/15/99 552,500
------------
Total Corporate Notes & Bonds
(cost -- $585,111) $ 610,077
------------
CONVERTIBLE CORPORATE BONDS -- 0.9%
REAL ESTATE
$ 1,404,189 Security Capital Realty, Inc. (A)
12.00%, 6/30/14
(cost -- $1,325,889) $ 1,404,189
------------
<CAPTION>
- ------------------------------------------------------
<C> <S> <C>
SHARES VALUE
- ------------------------------------------------------
CONVERTIBLE PREFERRED STOCKS -- 0.2%
RETAIL
36,000 Family Bargain Corp.
$0.95 Conv. Pfd.
(cost -- $360,000) $ 220,500
------------
COMMON STOCKS -- 84.4%
ADVERTISING -- 6.2%
77,600 Katz Media Group, Inc.* $ 1,396,800
30,000 Omnicom Group, Inc. 1,916,250
292,400 True North Communications 5,921,100
------------
9,234,150
------------
<CAPTION>
- ------------------------------------------------------
<C> <S> <C>
SHARES VALUE
- ------------------------------------------------------
AEROSPACE -- 0.5%
97,500 BE Aerospace, Inc.* $ 767,813
------------
AUTOMOTIVE -- 1.7%
126,000 Collins Industries, Inc.* 259,875
120,100 Masland Corp. 1,681,400
70,000 Sudbury, Inc.* 586,250
------------
2,527,525
------------
BUILDING & CONSTRUCTION -- 5.8%
57,300 Carlisle Cos., Inc. 2,356,462
190,547 D.R. Horton, Inc. 2,119,835
26,500 Insituform Technologies (Class A)* 331,250
204,000 Martin Marietta Materials, Inc. 3,876,000
------------
8,683,547
------------
CHEMICALS -- 1.7%
86,400 OM Group, Inc. 2,505,600
------------
COMPUTER SERVICES -- 3.6%
149,900 BancTec, Inc.* 2,810,625
52,000 DST Systems, Inc. 1,092,000
114,000 Exabyte Corp.* 1,474,875
------------
5,377,500
------------
CONTAINERS -- 1.9%
169,000 Shorewood Packaging Corp.* 2,830,750
------------
DRUGS & MEDICAL PRODUCTS -- 1.9%
49,900 Amerisource Health Corp. (Class A) 1,359,775
33,900 Sybron International Corp. -
Wisconsin* 1,440,750
------------
2,800,525
------------
ELECTRONICS -- 8.9%
35,700 Arrow Electronics, Inc* 1,811,775
174,900 EG&G, Inc. 3,257,512
146,500 Marshall Industries* 5,164,125
111,000 Oak Industries, Inc.* 2,317,125
26,200 Unitrode Corp.* 704,125
------------
13,254,662
------------
</TABLE>
* Non-income producing security.
19
<PAGE>
OCTOBER 31, 1995
- --------------------------------------------------------------------------------
SCHEDULES OF INVESTMENTS
<TABLE>
<CAPTION>
- ------------------------------------------------------
SHARES VALUE
<C> <S> <C>
- ------------------------------------------------------
ENTERTAINMENT -- 0.2%
25,000 Hollywood Park, Inc.* $ 243,750
------------
FOOD SERVICES -- 1.0%
70,000 IHOP Corp.* 1,505,000
------------
HEALTHCARE SERVICES -- 2.8%
16,000 Charter Medical Corp.* 288,000
20,000 Community Health Systems, Inc.* 635,000
51,900 Dentsply International, Inc. 1,790,550
54,000 SpaceLabs Medical, Inc.* 1,390,500
------------
4,104,050
------------
HOUSEHOLD PRODUCTS -- 2.4%
120,000 Singer Co. 2,820,000
35,000 The Rival Co. 682,500
------------
3,502,500
------------
INSURANCE -- 5.3%
47,000 Ace Ltd. 1,598,000
62,800 Capsure Holdings Corp.* 855,650
119,400 E.W. Blanch Holdings, Inc. 2,298,450
112,500 Guaranty National Corp. 1,603,125
7,000 Horace Mann Educators Corp. 186,375
64,200 Prudential Reinsurance Holdings,
Inc. 1,308,075
------------
7,849,675
------------
LEASING -- 1.1%
101,700 Interpool, Inc.* 1,627,200
------------
<CAPTION>
- ------------------------------------------------------
<C> <S> <C>
SHARES VALUE
- ------------------------------------------------------
MACHINERY & ENGINEERING -- 6.0%
50,000 Baldwin Technologies Co., Inc
(Class A)* $ 268,750
40,000 Briggs & Stratton Corp. 1,615,000
52,100 BW/IP Holdings, Inc. (Class A) 872,675
145,000 Crane Co. 5,129,375
67,400 Harmon Industries, Inc. 994,150
------------
8,879,950
------------
MANUFACTURING -- 1.9%
94,000 North American Watch Corp. 1,703,750
50,000 Pall Corp. 1,218,750
------------
2,922,500
------------
METALS/MINING -- 0.4%
70,000 Olympic Steel, Inc.* 568,750
------------
OFFICE EQUIPMENT -- 0.8%
60,600 Nu-Kote Holdings, Inc. (Class A)* 1,257,450
------------
OIL/GAS -- 6.4%
92,800 Aquila Gas Pipeline Corp. 1,020,800
84,000 Belden & Blake Corp.* 1,219,313
200,000 Global Natural Resources, Inc.* 2,000,000
137,500 Noble Drilling Corp.* 962,500
165,000 Petroleum Heat & Power Co., Inc.
(Class A) 1,278,750
105,400 St. Mary Land & Exploration Co. 1,409,725
34,000 Triton Energy Corp.* 1,585,250
------------
9,476,338
------------
PAPER PRODUCTS -- 1.8%
422,000 Repap Enterprises, Inc.* 2,663,875
------------
PRINTING/PUBLISHING -- 1.4%
69,000 International Imaging Materials,
Inc. 1,742,250
20,000 Merrill Corp. 320,000
------------
2,062,250
------------
</TABLE>
* Non-income producing security.
20
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- ------------------------------------------------------
SHARES VALUE
<C> <S> <C>
- ------------------------------------------------------
REAL ESTATE -- 8.7%
151,800 Cousins Properties, Inc. $ 2,637,525
44,000 Post Properties, Inc. 1,320,000
231,600 Security Capital Industrial Trust,
Inc. 3,792,450
199,363 Security Capital Pacific Trust,
Inc. 3,563,614
1,800 Security Capital Realty, Inc. (A) 1,587,600
------------
12,901,189
------------
RETAIL -- 0.7%
10,900 Blair Corp. 321,550
60,000 The Maxim Group, Inc.* 780,000
------------
1,101,550
------------
TELECOMMUNICATIONS -- 1.2%
94,500 ECI Telecommunications Ltd. 1,795,500
------------
TEXTILES -- 4.8%
89,000 Collins & Aikman Corp.* 712,000
64,000 Culp, Inc. 624,000
42,700 Fab Industries, Inc. 1,248,975
149,600 Mohawk Industries, Inc.* 2,244,000
110,500 WestPoint Stevens, Inc.* 2,334,313
------------
7,163,288
------------
TOBACCO/BEVERAGES/FOOD PRODUCTS -- 2.6%
55,900 Morningstar Group, Inc.* 433,225
111,800 Ralcorp Holdings, Inc. 2,571,400
84,700 Sylvan, Inc.* 899,937
------------
3,904,562
------------
TRANSPORTATION -- 0.1%
8,000 MTL, Inc.* 117,000
------------
UTILITIES -- 1.5%
34,600 Sithe Energies, Inc.* 246,525
96,000 UGI Corp. 2,016,000
------------
2,262,525
------------
<CAPTION>
- ------------------------------------------------------
<C> <S> <C>
SHARES VALUE
- ------------------------------------------------------
OTHER -- 1.1%
93,300 McGrath RentCorp. $ 1,632,750
------------
Total Common Stocks
(cost -- $116,900,149) $125,523,724
------------
</TABLE>
<TABLE>
<S> <C> <C>
Total Investments
(cost -- $141,711,266) 101.0% $150,298,607
Other Liabilities in Excess of
Other Assets (1.0) (1,483,609)
------ ------------
TOTAL NET ASSETS 100.0% $148,814,998
------ ------------
------ ------------
</TABLE>
GROWTH AND INCOME FUND
<TABLE>
<CAPTION>
- ------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
- ------------------------------------------------------
SHORT-TERM CORPORATE NOTES -- 1.9%
AUTOMOTIVE -- 0.4%
$ 200,000 Ford Motor Credit Co.
5.73%, 11/06/95 $ 199,841
------------
MISCELLANEOUS FINANCIAL SERVICES -- 1.5%
Beneficial Corp.
447,000 5.72%, 11/02/95 446,929
230,000 5.74%, 11/15/95 229,486
------------
676,415
------------
Total Short-Term Corporate Notes
(cost -- $876,256) $ 876,256
------------
CORPORATE NOTES & BONDS -- 18.2%
CASINOS/GAMING -- 1.9%
$ 1,000,000 Harrah's Jazz Co.
14.25%, 11/15/01 $ 875,000
------------
COSMETICS/TOILETRIES -- 3.8%
2,000,000 Playtex Family Products Corp.
9.00%, 12/15/03 1,790,000
------------
</TABLE>
* Non-income producing security.
(A) Restricted Securities (the Fund will not bear any costs, including those
involved in registration under the Securities Act of 1933, in connection
with the disposition of these securities):
<TABLE>
<CAPTION>
UNIT
VALUATION
AS
DATE OF UNIT OF OCTOBER
DESCRIPTION ACQUISITION PAR AMOUNT SHARES COST 31, 1995
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Security Capital
Realty, Inc.
12.00%, 6/30/14 6/16/94 $1,404,189 -- $ 94 $ 100
Security Capital
Realty, Inc.
Common Stock 8/02/93 -- 1,800 684 882
</TABLE>
21
<PAGE>
OCTOBER 31, 1995
- --------------------------------------------------------------------------------
SCHEDULES OF INVESTMENTS
<TABLE>
<CAPTION>
- ------------------------------------------------------
PRINCIPAL VALUE
AMOUNT
- ------------------------------------------------------
<C> <S> <C>
ENTERTAINMENT -- 3.7%
$ 5,000,000 Time Warner, Inc.
Zero Coupon, 12/17/12 $ 1,725,000
------------
FOOD SERVICES -- 0.9%
1,000,000 Shoney's, Inc.
Zero Coupon, 4/11/04 402,500
------------
OIL/GAS -- 3.7%
2,000,000 Triton Energy Corp.
Zero Coupon, 11/01/97 1,700,000
------------
TELECOMMUNICATIONS -- 4.2%
1,000,000 Comcast Corp.
10.625%, 7/15/12 1,097,500
1,500,000 Nextel Communications, Inc.
0.00/11.50%, 9/01/03** 870,000
------------
1,967,500
------------
Total Corporate Notes & Bonds
(cost -- $8,705,038) $ 8,460,000
------------
CONVERTIBLE CORPORATE BONDS -- 6.5%
MANUFACTURING
$ 4,000,000 Mascotech, Inc.
4.50%, 12/15/03
(cost -- $3,042,591) $ 3,040,000
------------
<CAPTION>
- ------------------------------------------------------
<C> <S> <C>
SHARES VALUE
- ------------------------------------------------------
COMMON STOCKS -- 72.6%
AEROSPACE -- 4.4%
25,000 McDonnell Douglas Corp. $ 2,043,750
------------
AUTOMOTIVE -- 3.8%
40,000 General Motors Corp. 1,750,000
------------
BANKING -- 7.6%
32,000 Citicorp 2,076,000
50,000 U.S. Bancorp 1,481,250
------------
3,557,250
------------
CHEMICALS -- 2.7%
20,000 du Pont (E.I.) de Nemours & Co. 1,247,500
------------
COMPUTER SOFTWARE -- 1.1%
5,000 Microsoft Corp.* $ 500,000
------------
<CAPTION>
- ------------------------------------------------------
<C> <S> <C>
SHARES VALUE
- ------------------------------------------------------
CONGLOMERATES -- 3.4%
100,000 Canadian Pacific Ltd. 1,600,000
------------
CONTAINERS -- 3.9%
40,000 Temple-Inland, Inc. 1,820,000
------------
ELECTRONICS -- 0.2%
1,000 Intel Corp. 69,875
------------
HEALTHCARE SERVICES -- 1.0%
10,000 Columbia/HCA Healthcare Corp. 491,250
------------
HOUSEHOLD PRODUCTS -- 4.0%
40,000 Premark International, Inc. 1,850,000
------------
INSURANCE -- 6.8%
15,000 Ace, Ltd. 510,000
10,000 AFLAC, Inc. 407,500
30,000 Progressive Corp., Ohio 1,245,000
20,000 Travelers, Inc. 1,010,000
------------
3,172,500
------------
MACHINERY & ENGINEERING -- 3.9%
45,000 Briggs & Stratton Corp. 1,816,875
------------
MEDIA/BROADCASTING -- 4.0%
20,000 Tele-Communications Liberty Media
Group (Series A)* 492,500
80,000 Tele-Communications TCI Group
(Series A)* 1,360,000
------------
1,852,500
------------
METALS/MINING -- 6.6%
133,687 Freeport McMoRan, Copper & Gold
(Class A) 3,058,090
------------
MISCELLANEOUS FINANCIAL SERVICES -- 0.5%
1,000 Countrywide Credit Industries, Inc. 22,125
3,000 Federal Home Loan Mortgage Corp. 207,750
------------
229,875
------------
OIL/GAS -- 1.6%
10,000 Triton Energy Corp.* $ 466,250
15,000 Union Texas Petroleum Holdings,
Inc. 270,000
------------
736,250
------------
</TABLE>
* Non-income producing security.
** Represents a step-up floater which will receive 0.00% interest until 9/01/98,
then will "step-up" to 11.50% until maturity.
22
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- ------------------------------------------------------
SHARES VALUE
<C> <S> <C>
- ------------------------------------------------------
PAPER PRODUCTS -- 4.0%
35,000 Champion International Corp. 1,872,500
------------
TELECOMMUNICATIONS -- 4.5%
55,000 Sprint Corp. 2,117,500
------------
TEXTILES -- 8.6%
20,000 Shaw Industries, Inc. 255,000
50,000 Unifi, Inc. 1,125,000
55,000 VF Corp. 2,633,125
------------
4,013,125
------------
Total Common Stocks
(cost -- $30,820,524) $ 33,798,840
------------
</TABLE>
<TABLE>
<S> <C> <C>
Total Investments
(cost -- $43,444,409) 99.2% $ 46,175,096
Other Assets in Excess of
Other Liabilities 0.8 358,263
------ ------------
TOTAL NET ASSETS 100.0 % $ 46,533,359
------ ------------
------ ------------
</TABLE>
U.S. GOVERNMENT INCOME FUND
<TABLE>
<CAPTION>
- ------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
- ------------------------------------------------------
REPURCHASE AGREEMENT -- 24.6%
$28,300,000 J.P. Morgan, 5.85%, 11/01/95
(proceeds at maturity:
$28,304,599, collateralized by
$27,265,000 par, $28,866,819
value, U.S. Treasury Notes,
7.50%, 10/31/99)
(cost -- $28,300,000) $ 28,300,000
------------
FEDERAL HOME LOAN MORTGAGE
CORPORATION -- 0.6%
$ 652,460 9.50%, 12/01/02 - 11/01/03
(cost -- $657,455) $ 679,981
------------
<CAPTION>
- ------------------------------------------------------
<C> <S> <C>
PRINCIPAL
AMOUNT VALUE
- ------------------------------------------------------
GOVERNMENT NATIONAL MORTGAGE
ASSOCIATION I -- 43.6%
$19,729,923 7.00%, 2/15/22 - 11/15/23 $ 19,594,181
10,813,268 7.50%, 2/15/22 - 5/15/24 10,955,138
7,998,232 8.00%, 4/15/02 - 5/15/25 8,250,767
10,522,241 8.50%, 6/15/01 - 9/15/24 10,956,944
449,937 10.50%, 1/15/98 - 12/15/00 472,573
------------
Total Government National Mortgage
Association I (cost -- $50,865,933) $ 50,229,603
------------
U.S. TREASURY NOTES -- 30.4%
$15,000,000 5.875%, 8/15/98 $ 15,070,350
5,000,000 6.125%, 5/31/97 5,035,950
14,000,000 7.75%, 11/30/99 14,975,660
------------
Total U.S. Treasury Notes
(cost -- $34,397,838) $ 35,081,960
------------
</TABLE>
<TABLE>
<C> <S> <C> <C>
Total Investments
(cost -- $114,221,226) 99.2% $114,291,544
------ ------------
- ------------------------------------------------
PRINCIPAL
AMOUNT
SUBJECT
TO PUT VALUE
- ------------------------------------------------------
WRITTEN PUT OPTIONS OUTSTANDING -- (0.1%)
$25,000,000 U.S. Treasury Notes, 6.125%,
9/30/00, expiring Nov. '95, strike
@ $101.3125
(premium received: $132,812) $ (117,188)
------------
Other Assets in Excess of
Other Liabilities 0.9 1,067,411
------ ------------
TOTAL NET ASSETS 100.0 % $115,241,767
------ ------------
------ ------------
</TABLE>
* Non-income producing security.
23
<PAGE>
OCTOBER 31, 1995
- --------------------------------------------------------------------------------
SCHEDULES OF INVESTMENTS
INVESTMENT QUALITY INCOME FUND
<TABLE>
<CAPTION>
<C> <S> <C>
- ------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
- ------------------------------------------------------
SHORT-TERM CORPORATE NOTES -- 4.5%
MISCELLANEOUS FINANCIAL SERVICES
$ 1,800,000 Beneficial Corp.
5.75%, 11/06/95 $ 1,798,563
570,000 Household Finance Corp.
5.73%, 11/06/95 569,546
425,000 Merrill Lynch & Co., Inc.
5.75%, 11/02/95 424,932
------------
Total Short-Term Corporate Notes
(cost -- $2,793,041) $ 2,793,041
------------
CORPORATE NOTES & BONDS -- 93.6%
AEROSPACE -- 3.4%
$ 2,000,000 Boeing Co.
7.50%, 8/15/42 $ 2,092,300
------------
AIRLINES -- 2.9%
1,000,000 American Airlines
9.73%, 9/29/14 1,133,870
550,000 Delta Air Lines, Inc.
10.375%, 2/01/11 650,551
------------
1,784,421
------------
AUTOMOTIVE -- 3.6%
2,000,000 Ford Motor Credit Co. (A)
8.875%, 11/15/22 2,234,600
------------
BANKING -- 6.5%
70,000 NatWest Bancorp, Inc.
9.375%, 11/15/03 81,979
1,300,000 NCNB Corp.
10.20%, 7/15/15 1,680,731
500,000 RBSG Capital Corp.
10.125%, 3/01/04 606,020
1,500,000 Westpac Banking Corp.
9.125%, 8/15/01 1,680,810
------------
4,049,540
------------
CHEMICALS -- 1.0%
500,000 Rohm & Haas Co.
9.50%, 4/01/21 607,720
------------
CONGLOMERATES -- 4.0%
2,000,000 Canadian Pacific Ltd.
9.45%, 8/01/21 2,517,380
------------
ENTERTAINMENT -- 5.2%
3,000,000 Time Warner, Inc.
9.15%, 2/01/23 3,253,800
------------
<CAPTION>
- ------------------------------------------------------
<C> <S> <C>
PRINCIPAL
AMOUNT VALUE
- ------------------------------------------------------
INSURANCE -- 11.6%
$ 1,000,000 Aetna Life & Casualty Co.
8.00%, 1/15/17 $ 1,015,020
1,200,000 Capital Holding Corp.
8.75%, 1/15/17 1,263,636
2,000,000 CNA Financial Corp.
7.25%, 11/15/23 1,900,200
3,000,000 Torchmark, Inc.
7.875%, 5/15/23 3,064,440
------------
7,243,296
------------
LEASING -- 2.7%
1,600,000 Ryder Systems, Inc.
8.75%, 3/15/17 1,712,464
------------
MACHINERY & ENGINEERING -- 3.3%
1,750,000 Caterpillar, Inc.
9.75%, 6/01/19 2,056,373
------------
MISCELLANEOUS FINANCIAL SERVICES -- 11.4%
20,000 Beneficial Corp.
12.875%, 8/01/13 24,110
1,500,000 BHP Finance USA Ltd.
8.50%, 12/01/12 1,700,430
Lehman Brothers, Inc.
865,000 9.875%, 10/15/00 955,280
115,000 10.00%, 5/15/99 127,045
205,000 Midland American Capital Corp.
12.75%, 11/15/03 240,533
3,000,000 Prudential Funding Corp.
6.75%, 9/15/23 (B) 2,672,760
1,250,000 Source One Mortgage Services Corp.
9.00%, 6/01/12 1,363,087
------------
7,083,245
------------
OIL/GAS -- 5.9%
3,000,000 Occidental Petroleum Corp.
11.125%, 6/01/19 3,677,430
------------
PAPER PRODUCTS -- 0.2%
100,000 Union Camp Corp.
10.00%, 5/01/19 113,709
------------
PIPELINES -- 3.1%
1,500,000 TransCanada Pipelines Ltd.
9.875%, 1/01/21 1,930,965
------------
RETAIL -- 1.3%
May Department Stores Co.
250,000 9.875%, 6/01/17 276,337
405,000 10.625%, 11/01/10 541,542
------------
817,879
------------
</TABLE>
24
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- ------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
- ------------------------------------------------------
TELECOMMUNICATIONS -- 11.8%
$ 2,500,000 New York Telephone Co.
9.375%, 7/15/31 $ 2,965,900
2,000,000 Pacific Bell
8.50%, 8/15/31 2,191,900
2,000,000 Southern New England Telephone Co.
8.70%, 8/15/31 2,168,720
------------
7,326,520
------------
TOBACCO/BEVERAGES/FOOD PRODUCTS -- 3.5%
2,000,000 American Brands, Inc.
7.875%, 1/15/23 2,153,300
------------
UTILITIES -- 7.0%
2,000,000 Hydro-Quebec
8.50%, 12/01/29 2,203,280
2,000,000 Southern California Edison Co.
8.875%, 6/01/24 2,140,540
------------
4,343,820
------------
<CAPTION>
- ------------------------------------------------------
<C> <S> <C>
PRINCIPAL
AMOUNT VALUE
- ------------------------------------------------------
OTHER -- 5.2%
$ 1,447,305 DLJ Mortgage Acceptance Corp.
8.75%, 11/25/24 $ 1,471,276
1,500,000 Nova Scotia (Province of)
8.875%, 7/01/19 1,733,370
------------
3,204,646
------------
Total Corporate Notes & Bonds
(cost -- $54,144,780) $ 58,203,408
------------
</TABLE>
<TABLE>
<S> <C> <C>
Total Investments
(cost -- $56,937,821) 98.1 % $ 60,996,449
Other Assets in Excess of
Other Liabilities 1.9 1,192,720
------ ------------
TOTAL NET ASSETS 100.0 % $ 62,189,169
------ ------------
------ ------------
</TABLE>
(A) Security segregated (partial) as collateral for open futures contracts. The
aggregate market value of such security is $558,650.
(B) Resale of the security is restricted to qualified institutional investors.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
25
<PAGE>
OCTOBER 31, 1995
- --------------------------------------------------------------------------------
STATEMENTS OF ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
QUEST FOR SMALL GROWTH U.S. INVESTMENT
VALUE FUND, OPPORTUNITY CAPITALIZATION AND GOVERNMENT QUALITY
INC. FUND FUND INCOME FUND INCOME FUND INCOME FUND
------------ ------------ ------------ ----------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Investments, at value (cost --
$258,707,414, $542,282,713,
$141,711,266, $43,444,409,
$85,921,226 and $56,937,821,
respectively)...................... $330,881,971 $641,676,243 $150,298,607 $46,175,096 $ 85,991,544 $60,996,449
Repurchase agreement
(cost -- $28,300,000).............. -- -- -- -- 28,300,000 --
Cash................................ 45,640 547,052 554,656 43,048 147,175 59,556
Receivable for fund shares sold..... 530,951 3,886,531 429,526 135,588 112,467 66,286
Dividends receivable 243,046 997,122 50,222 40,770 -- --
Interest receivable................. 70,681 80,486 85,156 232,993 1,100,769 1,428,564
Receivable for investments sold..... -- 3,775,999 1,519,249 -- -- --
Receivable for mortgage
prepayments........................ -- -- -- -- 9,512 --
Deferred organization expenses...... -- -- -- 19,361 -- 1,598
Other assets........................ 39,549 22,478 12,365 17,891 30,144 12,304
------------ ------------ ------------ ----------- ------------ -----------
Total Assets...................... 331,811,838 650,985,911 152,949,781 46,664,747 115,691,611 62,564,757
------------ ------------ ------------ ----------- ------------ -----------
LIABILITIES
Written put options outstanding, at
value (premiums received:
$132,812).......................... -- -- -- -- 117,188 --
Payable for fund shares redeemed.... 246,415 541,931 381,171 39,485 94,741 182,432
Distribution fee payable............ 57,478 218,953 31,207 9,227 13,696 14,560
Investment advisory fee payable..... 54,437 103,767 24,467 6,603 11,374 6,111
Payable for investments purchased... -- 15,310,750 3,596,750 -- -- --
Dividends payable................... -- -- -- -- 100,543 79,161
Payable for futures variation
margin............................. -- -- -- -- -- 33,750
Other payables and accrued
expenses........................... 141,605 299,396 101,188 76,073 112,302 59,574
------------ ------------ ------------ ----------- ------------ -----------
Total Liabilities................. 499,935 16,474,797 4,134,783 131,388 449,844 375,588
------------ ------------ ------------ ----------- ------------ -----------
NET ASSETS
Par value........................... 22,865,787 259,205 86,170 42,633 102,228 57,180
Paid-in-surplus..................... 211,941,042 523,701,982 131,509,611 41,486,396 124,603,694 59,929,025
Accumulated undistributed net
investment income (loss)........... 2,115,981 3,043,582 817,130 62,229 (100,543) (1,302)
Accumulated undistributed net
realized gain (loss) on
investments........................ 22,214,536 8,112,815 7,814,746 2,211,414 (9,449,554) (1,441,862)
Net unrealized appreciation on
investments........................ 72,174,557 99,393,530 8,587,341 2,730,687 85,942 3,646,128
------------ ------------ ------------ ----------- ------------ -----------
Total Net Assets.................. $331,311,903 $634,511,114 $148,814,998 $46,533,359 $115,241,767 $62,189,169
------------ ------------ ------------ ----------- ------------ -----------
------------ ------------ ------------ ----------- ------------ -----------
CLASS A:
Fund shares outstanding............. 19,476,461 14,934,153 6,717,417 3,395,059 9,111,820 4,144,692
------------ ------------ ------------ ----------- ------------ -----------
Net asset value per share........... $ 14.51 $ 24.59 $ 17.31 $ 10.92 $ 11.27 $ 10.88
------------ ------------ ------------ ----------- ------------ -----------
------------ ------------ ------------ ----------- ------------ -----------
Maximum offering price per share*... $ 15.35 $ 26.02 $ 18.32 $ 11.46 $ 11.83 $ 11.42
------------ ------------ ------------ ----------- ------------ -----------
------------ ------------ ------------ ----------- ------------ -----------
CLASS B:
Fund shares outstanding............. 2,682,851 8,945,500 1,369,612 700,417 855,263 1,207,703
------------ ------------ ------------ ----------- ------------ -----------
Net asset value and offering price
per share.......................... $ 14.37 $ 24.33 $ 17.11 $ 10.88 $ 11.27 $ 10.88
------------ ------------ ------------ ----------- ------------ -----------
------------ ------------ ------------ ----------- ------------ -----------
CLASS C:
Fund shares outstanding............. 706,475 2,040,801 529,946 167,833 255,735 365,603
------------ ------------ ------------ ----------- ------------ -----------
Net asset value and offering price
per share.......................... $ 14.35 $ 24.31 $ 17.11 $ 10.89 $ 11.27 $ 10.88
------------ ------------ ------------ ----------- ------------ -----------
------------ ------------ ------------ ----------- ------------ -----------
</TABLE>
*Sales charges decrease on purchases of $50,000 or higher.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
26
<PAGE>
YEAR ENDED OCTOBER 31, 1995
- --------------------------------------------------------------------------------
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
GROWTH
QUEST FOR SMALL AND U.S. INVESTMENT
VALUE OPPORTUNITY CAPITALIZATION INCOME GOVERNMENT QUALITY
FUND, INC. FUND FUND FUND INCOME FUND INCOME FUND
----------- ----------- ------------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
INVESTMENT INCOME
Dividends*................... $4,933,153 $5,805,392 $ 1,902,266 $ 693,240 $ -- $
- --
Interest..................... 2,545,437 4,798,092 1,684,966 1,089,203 8,894,940 4,872,959
----------- ----------- ------------- ---------- ----------- -----------
Total investment income.... 7,478,590 10,603,484 3,587,232 1,782,443 8,894,940 4,872,959
----------- ----------- ------------- ---------- ----------- -----------
OPERATING EXPENSES
Investment advisory fees
(note 2a)................... 2,893,435 3,923,159 1,456,594 333,289 755,883 351,860
Distribution fees (note
2c)......................... 1,607,236 2,665,031 859,394 191,723 455,179 311,219
Transfer and dividend
disbursing agent fees (note
1i)......................... 330,355 410,006 206,267 73,852 130,367 71,201
Accounting service fees (note
2b)......................... -- 103,747 108,951 112,800 121,310 105,362
Registration fees............ 54,800 141,636 34,952 34,042 32,098 33,871
Custodian fees............... 40,216 47,751 22,819 18,724 70,657 21,556
Reports and notices to
shareholders................ 40,057 44,869 27,492 8,814 17,517 10,688
Auditing, consulting and tax
return preparation fees..... 24,597 18,515 18,514 14,435 40,367 17,355
Directors'(Trustees') fees
and expenses................ 17,270 17,270 17,270 8,870 17,270 17,270
Legal fees................... 11,749 10,120 7,222 4,721 6,836 5,236
Amortization of deferred
organization expenses (note
1c)......................... -- -- -- 19,148 -- 12,374
Miscellaneous................ 19,575 13,337 9,189 4,500 14,726 5,566
----------- ----------- ------------- ---------- ----------- -----------
Total operating expenses... 5,039,290 7,395,441 2,768,664 824,918 1,662,210 963,558
Less: Investment advisory
fees waived (note 2a)..... -- -- -- (8,286) -- (42,245)
----------- ----------- ------------- ---------- ----------- -----------
Net operating expenses... 5,039,290 7,395,441 2,768,664 816,632 1,662,210 921,313
----------- ----------- ------------- ---------- ----------- -----------
Net investment income.... 2,439,300 3,208,043 818,568 965,811 7,232,730 3,951,646
----------- ----------- ------------- ---------- ----------- -----------
REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS -- NET
Net realized gain (loss) on
security transactions....... 22,321,532 8,125,065 8,630,413 2,227,731 (3,475,568) (24,232)
Net realized loss on option
transactions (note 1f).... -- -- -- -- (267,734) --
Net realized loss on futures
transactions (note 1g)...... -- -- (86,670) -- -- (464,750)
----------- ----------- ------------- ---------- ----------- -----------
Net realized gain (loss) on
investments............... 22,321,532 8,125,065 8,543,743 2,227,731 (3,743,302) (488,982)
Net change in unrealized
appreciation (depreciation)
on investments.............. 39,322,642 85,013,107 3,040,965 2,324,387 9,332,957 7,336,722
----------- ----------- ------------- ---------- ----------- -----------
Net realized gain (loss)
and change in unrealized
appreciation
(depreciation) on
investments............... 61,644,174 93,138,172 11,584,708 4,552,118 5,589,655 6,847,740
----------- ----------- ------------- ---------- ----------- -----------
Net increase in net assets
resulting from operations... $64,083,474 $96,346,215 $ 12,403,276 $5,517,929 $12,822,385 $10,799,386
----------- ----------- ------------- ---------- ----------- -----------
----------- ----------- ------------- ---------- ----------- -----------
<FN>
* Net of withholding taxes of $6,473, $732 and $1,752 for Quest for Value, Small
Capitalization and Growth and Income, respectively.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
</TABLE>
27
<PAGE>
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
QUEST FOR VALUE FUND,
INC. OPPORTUNITY FUND
YEAR ENDED OCTOBER 31, YEAR ENDED OCTOBER 31,
------------------------ ------------------------
1995 1994 1995 1994
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
OPERATIONS
Net investment income (loss).............................. $ 2,439,300 $ 1,726,225 $ 3,208,043 $ 1,397,364
Net realized gain (loss) on investments................... 22,321,532 16,664,331 8,125,065 7,139,720
Net change in unrealized appreciation (depreciation) on
investments.............................................. 39,322,642 (6,250,090) 85,013,107 4,721,481
----------- ----------- ----------- -----------
Net increase (decrease) in net assets resulting from
operations............................................. 64,083,474 12,140,466 96,346,215 13,258,565
----------- ----------- ----------- -----------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS*
Net investment income -- Class A.......................... (1,649,576) (819,873) (1,066,642) (2,269,483)
Net investment income -- Class B.......................... (108,497) (11,801) (335,822) (98,258)
Net investment income -- Class C.......................... (29,366) (2,040) (56,920) (21,098)
Net realized gains -- Class A............................. (15,501,438) (9,227,704) (5,314,298) (1,498,248)
Net realized gains -- Class B............................. (1,014,005) (115,604) (1,562,718) (30,484)
Net realized gains -- Class C............................. (255,884) (11,081) (267,734) (11,476)
Tax return of capital -- Class A.......................... -- -- -- --
Tax return of capital -- Class B.......................... -- -- -- --
Tax return of capital -- Class C.......................... -- -- -- --
----------- ----------- ----------- -----------
Total dividends and distributions to shareholders....... (18,558,766) (10,188,103) (8,604,134) (3,929,047)
----------- ----------- ----------- -----------
FUND SHARE TRANSACTIONS
CLASS A
Net proceeds from sales................................... 53,027,793 61,908,256 201,988,591 90,332,759
Reinvestment of dividends and distributions............... 16,047,556 9,385,655 6,034,648 3,405,284
Cost of shares redeemed................................... (64,462,161) (80,014,950) (60,771,127) (65,200,453)
----------- ----------- ----------- -----------
Net increase (decrease) -- Class A...................... 4,613,188 (8,721,039) 147,252,112 28,537,590
----------- ----------- ----------- -----------
CLASS B
Net proceeds from sales................................... 22,392,431 12,409,864 160,670,137 40,604,196
Reinvestment of dividends and distributions............... 1,045,812 123,599 1,804,130 124,021
Cost of shares redeemed................................... (3,681,109) (544,061) (14,031,965) (1,026,439)
----------- ----------- ----------- -----------
Net increase -- Class B................................. 19,757,134 11,989,402 148,442,302 39,701,778
----------- ----------- ----------- -----------
CLASS C
Net proceeds from sales................................... 6,835,837 3,521,667 40,882,367 6,945,412
Reinvestment of dividends and distributions............... 280,898 13,020 314,274 32,567
Cost of shares redeemed................................... (1,738,997) (271,901) (4,067,767) (254,081)
----------- ----------- ----------- -----------
Net increase -- Class C................................. 5,377,738 3,262,786 37,128,874 6,723,898
----------- ----------- ----------- -----------
Total net increase (decrease) in net assets from fund
share transactions....................................... 29,748,060 6,531,149 332,823,288 74,963,266
----------- ----------- ----------- -----------
Total increase (decrease) in net assets................. 75,272,768 8,483,512 420,565,369 84,292,784
NET ASSETS
Beginning of year......................................... 256,039,135 247,555,623 213,945,745 129,652,961
----------- ----------- ----------- -----------
End of year (including undistributed net investment income
(loss) of $2,115,981, $1,464,120; $3,043,582, $1,291,867;
$817,130, ($238,336); $62,229, $127,460; ($100,543), $0
and ($1,302), $0, respectively).......................... $331,311,903 $256,039,135 $634,511,114 $213,945,745
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
<FN>
*Certain figures have been restated to conform to current year presentation for
Opportunity, Growth and Income and U.S. Government.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
</TABLE>
28
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SMALL CAPITALIZATION U.S. GOVERNMENT INCOME
FUND GROWTH AND INCOME FUND FUND INVESTMENT QUALITY
INCOME FUND
YEAR ENDED OCTOBER 31, YEAR ENDED OCTOBER 31, YEAR ENDED OCTOBER 31, YEAR ENDED OCTOBER 31,
- -------------------------- ------------------------ -------------------------- ------------------------
1995 1994 1995 1994 1995 1994 1995 1994
- ------------ ------------ ----------- ----------- ------------ ------------ ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
$ 818,568 $ (238,336) $ 965,811 $ 966,108 $ 7,232,730 $ 8,291,969 $ 3,951,646 $ 3,846,353
8,543,743 3,366,835 2,227,731 1,768,686 (3,743,302) (4,366,839) (488,982) (952,880)
3,040,965 (3,118,979) 2,324,387 (189,442) 9,332,957 (11,007,688) 7,336,722 (9,068,979)
- ------------ ------------ ----------- ----------- ------------ ------------ ----------- -----------
12,403,276 9,520 5,517,929 2,545,352 12,822,385 (7,082,558) 10,799,386 (6,175,506)
- ------------ ------------ ----------- ----------- ------------ ------------ ----------- -----------
-- -- (917,781) (936,128) (6,680,576) (8,071,564) (3,164,967) (3,482,793)
-- -- (105,700) (41,545) (464,033) (196,735) (586,935) (244,424)
-- -- (17,697) (7,305) (89,583) (39,362) (199,744) (119,136)
(3,010,761) (8,036,736) (1,275,011) (4,278,474) -- (3,218,859) -- (367,910)
(434,007) (160,831) (129,812) (152,311) -- (42,833) -- (10,112)
(91,772) (19,543) (20,124) (19,378) -- (7,144) -- (637)
-- -- -- -- (140,061) -- -- --
-- -- -- -- (8,675) -- -- --
-- -- -- -- (1,431) -- -- --
- ------------ ------------ ----------- ----------- ------------ ------------ ----------- -----------
(3,536,540) (8,217,110) (2,466,125) (5,435,141) (7,384,359) (11,576,497) (3,951,646) (4,225,012)
- ------------ ------------ ----------- ----------- ------------ ------------ ----------- -----------
38,194,245 127,081,752 8,471,883 5,937,491 18,642,107 17,007,814 8,023,597 12,621,718
2,840,961 7,215,556 2,097,137 5,008,623 5,896,557 9,588,703 2,288,961 2,758,350
(52,052,199) (111,134,238) (6,705,888) (6,040,040) (50,011,121) (74,313,512) (17,520,761) (20,364,228)
- ------------ ------------ ----------- ----------- ------------ ------------ ----------- -----------
(11,016,993) 23,163,070 3,863,132 4,906,074 (25,472,457) (47,716,995) (7,208,203) (4,984,160)
- ------------ ------------ ----------- ----------- ------------ ------------ ----------- -----------
10,160,304 15,275,222 4,674,731 2,763,975 5,110,647 6,748,251 7,327,816 6,440,954
408,265 148,570 217,205 188,513 319,245 187,137 462,628 185,172
(4,495,109) (811,203) (533,417) (260,750) (3,026,400) (964,994) (2,363,759) (800,932)
- ------------ ------------ ----------- ----------- ------------ ------------ ----------- -----------
6,073,460 14,612,589 4,358,519 2,691,738 2,403,492 5,970,394 5,426,685 5,825,194
- ------------ ------------ ----------- ----------- ------------ ------------ ----------- -----------
6,393,572 3,345,761 1,497,250 341,819 2,026,463 1,424,484 1,204,849 3,141,700
88,907 18,810 36,149 26,593 85,658 46,127 93,152 93,436
(1,180,484) (229,505) (232,677) (4,696) (533,211) (289,465) (285,205) (422,838)
- ------------ ------------ ----------- ----------- ------------ ------------ ----------- -----------
5,301,995 3,135,066 1,300,722 363,716 1,578,910 1,181,146 1,012,796 2,812,298
- ------------ ------------ ----------- ----------- ------------ ------------ ----------- -----------
358,462 40,910,725 9,522,373 7,961,528 (21,490,055) (40,565,455) (768,722) 3,653,332
- ------------ ------------ ----------- ----------- ------------ ------------ ----------- -----------
9,225,198 32,703,135 12,574,177 5,071,739 (16,052,029) (59,224,510) 6,079,018 (6,747,186)
139,589,800 106,886,665 33,959,182 28,887,443 131,293,796 190,518,306 56,110,151 62,857,337
- ------------ ------------ ----------- ----------- ------------ ------------ ----------- -----------
$148,814,998 $139,589,800 $46,533,359 $33,959,182 $115,241,767 $131,293,796 $62,189,169 $56,110,151
- ------------ ------------ ----------- ----------- ------------ ------------ ----------- -----------
- ------------ ------------ ----------- ----------- ------------ ------------ ----------- -----------
</TABLE>
29
<PAGE>
OCTOBER 31, 1995
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
Quest for Value Funds are registered under the Investment Company Act of
1940, as diversified, open-end management investment companies. Quest for Value
Fund, Inc. ("Quest for Value") is a Maryland corporation. Opportunity Fund
("Opportunity"), Small Capitalization Fund ("Small Capitalization"), Growth and
Income Fund ("Growth and Income"), U.S. Government Income Fund ("U.S.
Government") and Investment Quality Income Fund ("Investment Quality") are five
of nine funds offered in the Quest for Value Family of Funds, a Massachusetts
business trust. Quest for Value Advisors (the "Adviser") serves as investment
adviser and provides accounting and administrative services to each fund. Quest
for Value Distributors (the "Distributor") serves as each fund's distributor.
Both the Adviser and Distributor are majority-owned (99%) subsidiaries of
Oppenheimer Capital.
Prior to September 1, 1993, the funds issued only one class of shares which
were redesignated Class A shares. Subsequent to that date all funds were
authorized to issue Class A, Class B and Class C shares. Shares of each Class
represent an identical interest in the investment portfolio of their respective
fund and generally have the same rights, but are offered under different sales
charges 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 each 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 securites are valued at the 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. Investment debt securities (other than
short-term obligations) are valued each day by an independent pricing service
approved by the Board of Directors (Trustees) using methods which include
current market quotations from major market makers in the securities and
trader-reviewed "matrix" prices. Futures contracts are valued based upon their
daily settlement value as of the close of the exchange upon which they trade.
OTC options are valued based upon formulas which utilize the market value of the
underlying securities, strike prices and expiration dates of the options.
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 values as determined in good faith under
procedures established by each fund's Board of Directors (Trustees). The ability
of issuers of debt securities held by the funds to meet their obligations may be
affected by economic or political development in a specific state, industry or
region.
(B) FEDERAL INCOME TAXES
It is each 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
The following approximate costs were incurred in connection with their
organization: Growth and Income -- $96,000 and Investment Quality -- $62,000.
These costs have been deferred and are being amortized to expense on a
straight-line basis over sixty months from commencement of each fund's
operations.
(D) SECURITY 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 is
determined on the basis of identified cost. Dividend income is recorded on the
ex-dividend
30
<PAGE>
- --------------------------------------------------------------------------------
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. Net investment income, other than class specific
expenses and unrealized gains and losses are allocated daily to each class of
shares based upon the relative proportion of net assets, as defined, of each
class.
(E) DIVIDENDS AND DISTRIBUTIONS
The following table summarizes each fund's dividend and capital gain
declaration policy:
<TABLE>
<CAPTION>
SHORT-TERM LONG-TERM
INCOME CAPITAL CAPITAL
DIVIDENDS GAINS GAINS
---------- ---------- ----------
<S> <C> <C> <C>
Quest for Value annually annually annually
Opportunity annually annually annually
Small Capitalization annually annually annually
Growth and Income quarterly annually annually
U.S. Government daily * quarterly annually
Investment Quality daily * annually annually
* paid monthly.
</TABLE>
Each fund records dividends and distributions to its shareholders on the
ex-dividend date. The amount of dividends and distributions from net investment
income and net realized capital gains are determined in accordance with federal
income tax regulations, which may differ from generally accepted accounting
principles. These "book-tax" differences are either considered temporary or
permanent in nature. To the extent these differences are permanent in nature,
such amounts are reclassified within the capital accounts based on their federal
tax-basis treatment; temporary differences do not require reclassification.
Dividends and distributions which exceed net investment income and net realized
capital gains for financial reporting purposes but not for tax purposes are
reported as dividends in excess of net investment income or distributions in
excess of net realized capital gains, respectively. To the extent distributions
exceed current and accumulated earnings and profits for federal income tax
purposes, they are reported as distributions of paid-in-surplus or tax return of
capital. Accordingly, permanent book-tax differences relating to shareholder
distributions have been reclassified to paid-in-surplus. Net investment
income(loss), net realized gain(loss) and net assets were not affected.
As required by Statement of Position 93 - 2, Determination, Disclosure and
Financial Statement Presentation of Income, Capital Gain and Return of Capital
Distributions by Investment Companies, the following table discloses the
reclassifications from accumulated undistributed net investment income(loss) and
accumulated undistributed capital gain(loss) on investments to paid-in-surplus
during the fiscal year ended October 31, 1995:
<TABLE>
<CAPTION>
ACCUMULATED
UNDISTRIBUTED
NET ACCUMULATED
INVESTMENT UNDISTRIBUTED PAID
INCOME NET REALIZED IN
(LOSS) GAIN (LOSS) SURPLUS
---------- --------------- --------
<S> <C> <C> <C>
Quest for Value -- -- --
Opportunity 3,056 (5,991) 2,935
Small Capitalization 236,898 (559,292) 322,394
Growth and Income 10,136 (152,783) 142,647
U.S. Government (99,081) (407,920) 507,001
Investment Quality (1,302) -- 1,302
</TABLE>
31
<PAGE>
OCTOBER 31, 1995
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(F) WRITTEN OPTIONS ACCOUNTING POLICIES
When a fund writes a call option or a put option, an amount equal to the
premium received by the fund is included in the fund's Statement of Assets and
Liabilities as an asset and an equivalent liability. The amount of the liability
is subsequently marked-to-market to reflect the current market value of the
option written. If the option expires on its stipulated expiration date or if a
fund enters into a closing purchase transaction, the fund will realize a gain
(or loss if the cost of a closing purchase tranaction exceeds the premium
received when the option was written) without regard to any unrealized gain or
loss on the underlying security, and the liability related to such option will
be extinguished. If a call option which a fund has written is exercised, the
fund realizes a gain or loss from the sale of the underlying security and the
proceeds from such sale are increased by the premium originally received. If a
put option which a fund has written is exercised, the amount of the premium
originally received will reduce the cost of the security which the fund
purchases upon exercise of the option.
(G) FUTURES ACCOUNTING POLICIES
Futures contracts are agreements between two parties to buy and sell a
financial instrument at a set price on a future date. Upon entering into such a
contract, a fund is required to pledge to the broker an amount of cash, cash
equivalents or U.S. Government securities equal to the minimum "initial margin"
requirements of the exchange. Pursuant to the contract, a fund agrees to receive
from or pay to the broker an amount of cash equal to the daily fluctuation in
the value of the contract. Such receipts or payments are known as "variation
margin" and are recorded by the fund as unrealized appreciation or depreciation.
When a contract is closed, the fund records a realized gain or loss equal to the
difference between the value of the contract at the time it was opened and the
value at the time it was closed and reverses any unrealized appreciation or
depreciation previously recorded. At October 31, 1995, Investment Quality had
the following futures contracts open:
<TABLE>
<CAPTION>
NET
NUMBER OF UNREALIZED
TYPE CONTRACTS SHORT VALUE EXPIRATION LOSS
<S> <C> <C> <C> <C>
- ---------------------------------------------------------------------------
CBT U.S. Treasury Bond 120 $13,635,000 Dec. '95 $412,500
</TABLE>
(H) REPURCHASE AGREEMENTS
U.S. Government enters into repurchase agreements as part of its investment
program. The fund's custodian takes possession of collateral pledged by the
counterparty. The collateral is marked-to-market daily to ensure that the value,
plus accrued interest, is at least equal to the repurchase price. In the event
of default by the obligor to repurchase, the fund has the right to liquidate the
collateral and apply the proceeds in satisfaction of the obligation. Under
certain circumstances, in the event of default or bankruptcy by the other party
to the agreement, realization and/or retention of the collateral or proceeds may
be subject to legal proceedings.
(I) ALLOCATION OF EXPENSES
Expenses specifically identifiable to a particular fund or class are borne
by that fund or class. Other expenses are allocated to each fund or class based
on its net assets in relation to the total net assets of all applicable funds or
classes or on another reasonable basis. For the year ended October 31, 1995,
transfer and dividend disbursing agent fees accrued to classes A, B and C were
$279,089, $36,906 and $14,360, respectively, for Quest for Value; $236,086,
$141,736 and $32,184, respectively, for Opportunity; $146,564, $44,501 and
$15,202, respectively, for Small Capitalization; $61,191, $8,864 and $3,797,
respectively, for Growth and Income; $117,106, $8,732 and $4,529, respectively,
for U.S. Government and $58,422, $8,814 and $3,965, respectively, for Investment
Quality Income. These expenses are consolidated, by fund, in the accompanying
Statements of Operations.
32
<PAGE>
- --------------------------------------------------------------------------------
2. INVESTMENT ADVISORY FEE, ACCOUNTING SERVICES FEE, DISTRIBUTION FEE AND OTHER
TRANSACTIONS WITH AFFILIATES
(A) The investment advisory fee is payable monthly to the Adviser, and is
computed as a percentage of each fund's net assets as of the close of business
each day at the following annual rates: 1.00% for Quest for Value, Opportunity
and Small Capitalization, respectively; .85% for Growth and Income and .60% for
U.S. Government and Investment Quality, respectively. For the year ended October
31, 1995, the Adviser voluntarily waived $8,286 and $42,245 in investment
advisory fees for Growth and Income and Investment Quality, respectively.
(B) A portion of the accounting services fee for Opportunity, Small
Capitalization, Growth and Income, U.S. Government and Investment Quality is
payable monthly to the Adviser. These funds reimburse the Adviser for a portion
of the salaries of officers and employees of Oppenheimer Capital based upon the
amount of time such persons spend in providing services to each fund in
accordance with the provisions of the Investment Advisory Agreement. For the
year ended October 31, 1995, the Adviser received $48,747, $53,951, $57,800,
$56,310 and $50,362, respectively.
(C) The funds have adopted a Plan and Agreement of Distribution (the
"Plan") pursuant to which each fund is permitted to compensate the Distributor
in connection with the distribution of fund shares. Under the Plan, the
Distributor has entered 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 funds pay the Distributor compensation, accrued
daily and payable monthly on each fund's average daily net assets for Class A
shares at the following annual rates: .25% for Quest for Value, Opportunity and
Small Capitalization, .05% for U.S. Government and .15% for Investment Quality
and Growth and Income. Each fund's Class A shares also pay a service fee at the
annual rate of .25%. Compensation for Class B and Class C shares of each fund is
at an annual rate of .75% of average daily net assets. Each fund's Class B and
Class C shares also pay a service fee at the 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 fund
shares. 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 year ended October 31, 1995, distribution and service fees charged
to classes A, B and C were $1,286,200, $253,926 and $67,110, respectively, for
Quest for Value; $1,258,129, $1,165,226 and $241,676, respectively, for
Opportunity; $597,200, $201,055 and $61,139, respectively, for Small
Capitalization; $133,588, $48,455 and $9,680, respectively, for Growth and
Income; $344,839, $92,104 and $18,236, respectively, for U.S. Government and
$183,475, $95,449 and $32,295, respectively, for Investment Quality Income.
These expenses are consolidated, by fund, in the accompanying Statements of
Operations.
(D) Total brokerage commissions paid by Quest for Value, Opportunity, Small
Capitalization and Growth and Income were $309,310, $647,240, $400,477 and
$112,411, respectively, of which Oppenheimer & Co., Inc., an affiliate of the
Adviser, received $156,970, $266,868, $161,399 and $54,131, respectively, for
the year ended October 31, 1995.
(E) Oppenheimer & Co., Inc. has informed the funds that it received
approximately $390,000, $959,000, $241,000, $35,000, $162,000 and $88,000 in
connection with the sale of Class A shares for Quest for Value, Opportunity,
Small Capitalization, Growth and Income, U.S. Government and Investment Quality,
respectively, for the year ended October 31, 1995.
33
<PAGE>
OCTOBER 31, 1995
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
The Distributor has also informed the funds that it received contingent
deferred sales charges on the redemption of Class A and Class C shares of
approximately $10,000, $20,000, $10,000, $100, $6,000 and $2,000 for Quest for
Value, Opportunity, Small Capitalization, Growth and Income, U.S. Government and
Investment Quality, respectively, for the year ended October 31, 1995.
For the year ended October 31, 1995, the Distributor had assigned the right
to receive the compensation and contingent deferred sales charge on Class B
shares to a bank in return for the bank's reimbursement to the Distributor of
commissions paid by the Distributor to brokers/dealers on the sale of Class B
shares.
3. PURCHASES AND SALES OF SECURITIES
For the year ended October 31, 1995, purchases and sales of investment
securities, other than short-term securities, were as follows:
<TABLE>
<CAPTION>
QUEST FOR SMALL GROWTH AND U.S. INVESTMENT
VALUE OPPORTUNITY CAPITALIZATION INCOME GOVERNMENT QUALITY
------------ ------------- ---------------- ----------- ------------ ----------
<S> <C> <C> <C> <C> <C> <C>
Purchases $ 89,609,378 $ 350,805,248 $ 92,530,292 $54,163,330 $259,064,073 $5,329,244
Sales 116,160,440 67,743,053 99,613,323 41,657,071 304,565,951 4,275,980
</TABLE>
The following table summarizes activity in written option transactions for U.S.
Government for the year ended October 31, 1995:
<TABLE>
<CAPTION>
CONTRACTS PREMIUMS
----------- -----------
<S> <C> <C>
Option contracts written: Outstanding
beginning of year 2 $ 142,188
Options written 47 3,306,327
Options terminated in closing purchase
transactions (25) (1,788,359)
Options exercised (15) (920,313)
Options expired (8) (607,031)
--- -----------
Option contracts written: Outstanding end of
year 1 $ 132,812
--- -----------
--- -----------
</TABLE>
34
<PAGE>
- --------------------------------------------------------------------------------
4. FUND SHARE TRANSACTIONS
The following tables summarize the fund share activity for the two years
ended October 31, 1995:
<TABLE>
<CAPTION>
QUEST FOR VALUE OPPORTUNITY SMALL CAPITALIZATION
------------------------- ------------------------- -------------------------
YEAR ENDED OCTOBER 31, YEAR ENDED OCTOBER 31, YEAR ENDED OCTOBER 31,
------------------------- ------------------------- -------------------------
1995 1994 1995 1994 1995 1994
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
CLASS A
Issued................................ 4,045,256 5,077,999 9,028,138 4,781,210 2,307,655 7,804,081
Dividends and distributions
reinvested........................... 1,440,961 797,941 328,864 186,714 181,647 450,409
Redeemed.............................. (4,924,606) (6,566,112) (2,718,312) (3,470,990) (3,125,095) (6,835,042)
----------- ----------- ----------- ----------- ----------- -----------
Net increase (decrease)............. 561,611 (690,172) 6,638,690 1,496,934 (635,793) 1,419,448
----------- ----------- ----------- ----------- ----------- -----------
CLASS B
Issued................................ 1,718,575 1,020,362 7,259,921 2,145,988 620,242 936,328
Dividends and distributions
reinvested........................... 94,418 10,514 98,923 6,821 26,272 9,286
Redeemed.............................. (277,524) (44,566) (624,721) (54,500) (271,244) (50,575)
----------- ----------- ----------- ----------- ----------- -----------
Net increase........................ 1,535,469 986,310 6,734,123 2,098,309 375,270 895,039
----------- ----------- ----------- ----------- ----------- -----------
CLASS C
Issued................................ 523,083 289,679 1,828,198 367,367 389,503 205,454
Dividends and distributions
reinvested........................... 25,381 1,106 17,240 1,789 5,721 1,176
Redeemed.............................. (127,913) (22,509) (176,839) (13,680) (71,284) (13,923)
----------- ----------- ----------- ----------- ----------- -----------
Net increase........................ 420,551 268,276 1,668,599 355,476 323,940 192,707
----------- ----------- ----------- ----------- ----------- -----------
Total net increase................ 2,517,631 564,414 15,041,412 3,950,719 63,417 2,507,194
----------- ----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- ----------- -----------
</TABLE>
<TABLE>
<CAPTION>
GROWTH AND INCOME U.S. GOVERNMENT INVESTMENT QUALITY
------------------------- ------------------------- -------------------------
YEAR ENDED OCTOBER 31, YEAR ENDED OCTOBER 31, YEAR ENDED OCTOBER 31,
------------------------- ------------------------- -------------------------
1995 1994 1995 1994 1995 1994
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
CLASS A
Issued................................ 790,817 591,037 1,685,034 1,484,549 777,291 1,194,443
Dividends and distributions
reinvested........................... 216,701 506,743 534,322 839,276 222,241 263,168
Redeemed.............................. (641,530) (600,435) (4,526,190) (6,552,668) (1,706,041) (1,940,417)
----------- ----------- ----------- ----------- ----------- -----------
Net increase (decrease)............. 365,988 497,345 (2,306,834) (4,228,843) (706,509) (482,806)
----------- ----------- ----------- ----------- ----------- -----------
CLASS B
Issued................................ 438,682 269,571 467,177 594,901 708,238 614,495
Dividends and distributions
reinvested........................... 22,368 19,104 28,912 16,698 44,636 18,150
Redeemed.............................. (51,318) (26,407) (272,297) (86,599) (228,114) (77,488)
----------- ----------- ----------- ----------- ----------- -----------
Net increase........................ 409,732 262,268 223,792 525,000 524,760 555,157
----------- ----------- ----------- ----------- ----------- -----------
CLASS C
Issued................................ 140,694 33,894 182,514 123,553 116,706 290,357
Dividends and distributions
reinvested........................... 3,711 2,697 7,733 4,123 8,984 9,047
Redeemed.............................. (21,778) (469) (47,976) (25,877) (27,176) (41,081)
----------- ----------- ----------- ----------- ----------- -----------
Net increase........................ 122,627 36,122 142,271 101,799 98,514 258,323
----------- ----------- ----------- ----------- ----------- -----------
Total net increase (decrease)..... 898,347 795,735 (1,940,771) (3,602,044) (83,235) 330,674
----------- ----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- ----------- -----------
</TABLE>
35
<PAGE>
OCTOBER 31, 1995
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
5. UNREALIZED APPRECIATION (DEPRECIATION) AND COST OF INVESTMENTS FOR FEDERAL
INCOME TAX PURPOSES
At October 31, 1995, the composition of unrealized appreciation
(depreciation) of investment securities and the cost of investments for Federal
income tax purposes were as follows:
<TABLE>
<CAPTION>
APPRECIATION (DEPRECIATION) NET TAX COST
------------ -------------- ----------- ------------
<S> <C> <C> <C> <C>
Quest for Value $72,832,935 $ (782,009) $72,050,926 $258,831,045
Opportunity 107,623,664 (8,230,134) 99,393,530 542,282,713
Small Capitalization 13,114,205 (4,646,081) 8,468,124 141,830,483
Growth and Income 3,674,355 (1,106,543) 2,567,812 43,607,284
U.S. Government 852,086 (2,085,345) (1,233,259) 115,524,803
Investment Quality 4,461,416 (402,788) 4,058,628 56,937,821
</TABLE>
6. AUTHORIZED FUND SHARES AND PAR VALUE PER SHARE
<TABLE>
<CAPTION>
QUEST SMALL GROWTH U.S. INVESTMENT
FOR VALUE OPPORTUNITY CAPITALIZATION AND INCOME GOVERNMENT QUALITY
---------- ----------- -------------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Authorized fund shares 35,000,000 unlimited unlimited unlimited unlimited unlimited
Par value per share $1.00 $.01 $.01 $.01 $.01 $.01
</TABLE>
7. DIVIDENDS AND DISTRIBUTIONS
The following tables summarize the per share dividends and distributions
made for the two years ended October 31, 1995:
<TABLE>
<CAPTION>
QUEST FOR SMALL
VALUE OPPORTUNITY CAPITALIZATION
-------------- -------------- --------------
YEAR ENDED YEAR ENDED YEAR ENDED
OCTOBER 31, OCTOBER 31, OCTOBER 31,
-------------- -------------- --------------
1995 1994 1995 1994 1995 1994
------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
NET INVESTMENT INCOME:
Class A.......................... $ 0.083 $ 0.040 $ 0.117 $ 0.326 -- --
Class B.......................... 0.074 0.031 0.117 0.313 -- --
Class C.......................... 0.081 0.033 0.117 0.312 -- --
NET REALIZED GAINS:
Class A.......................... $ 0.828 $ 0.469 $ 0.614 $ 0.219 $ 0.415 $ 1.331
Class B.......................... 0.828 0.469 0.614 0.219 0.415 1.331
Class C.......................... 0.828 0.469 0.614 0.219 0.415 1.331
</TABLE>
<TABLE>
<CAPTION>
GROWTH AND U.S. INVESTMENT
INCOME GOVERNMENT QUALITY
-------------- -------------- --------------
YEAR ENDED YEAR ENDED YEAR ENDED
OCTOBER 31, OCTOBER 31, OCTOBER 31,
-------------- -------------- --------------
1995 1994 1995 1994 1995 1994
------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
NET INVESTMENT INCOME:
Class A.......................... $ 0.289 $ 0.319 $ 0.639 $ 0.593 $ 0.707 $ 0.680
Class B.......................... 0.242 0.265 0.562 0.510 0.646 0.609
Class C.......................... 0.209 0.261 0.549 0.509 0.643 0.608
NET REALIZED GAINS:
Class A.......................... $ 0.422 $ 1.669 -- $ 0.213 -- $ 0.069
Class B.......................... 0.422 1.669 -- 0.213 -- 0.069
Class C.......................... 0.422 1.669 -- 0.213 -- 0.069
TAX RETURN OF CAPITAL:
Class A.......................... -- -- $ 0.013 -- -- --
Class B.......................... -- -- 0.013 -- -- --
Class C.......................... -- -- 0.013 -- -- --
</TABLE>
36
<PAGE>
- --------------------------------------------------------------------------------
8. FINANCIAL INSTRUMENTS AND ASSOCIATED RISKS
During the year ended October 31, 1995, U.S. Government wrote covered
options and Small Capitalization and Investment Quality entered into futures
contracts in order to hedge their existing portfolio securities against
fluctuations in value. Written options and futures contracts involve elements of
market risk in excess of the amounts reflected in the fund's Statements of
Assets and Liabilities. A fund, as a writer of an option, has no control over
whether the option is exercised. The underlying security may be sold and, as a
result, a fund bears the market risk of an unfavorable change in the price of
the security underlying the written option. For futures contracts, the contract
amount reflects the extent of a fund's exposure to off balance sheet risk.
Written options and futures contracts also have elements of credit risk; i.e.
the risk that the counterparty may not perform. If the option or futures
contracts are traded through a regulated exchange, the counterparty risk is
generally eliminated since the exchange interposes itself into the transaction.
If, however, the option or futures contracts are traded in the over-the-counter
market, counterparty risk can exist.
9. NET CAPITAL LOSS CARRYOVERS
For the fiscal year ended October 31, 1995, Growth and Income will utilize
$188,067 of net capital loss carryovers. Growth and Income has net capital loss
carryovers of $233,749 of which $177,811 and $55,938 will be available, to the
extent provided by regulations, to offset future net capital gains realized
through the fiscal years ending 1996 and 2000, respectively. However, due to the
acquisition of the Unified Income Fund and the Unified Mutual Shares Fund in
1992, the loss carryovers are further limited by IRC Section 382 to $188,067
annually. As a result, Growth and Income had $370,083 of net capital loss
carryover expire on October 31, 1995 which is no longer available for future
periods. In addition, U.S. Government, at October 31, 1995, had a net capital
loss carryover of $8,145,977 available, to the extent provided by regulations,
to offset future net capital gains realized before the end of fiscal year 2003.
Also at October 31, 1995, Investment Quality had a net capital loss carryover of
$1,854,362 of which $952,880 and $901,482 will be available to offset future net
capital gains realized through the fiscal years ending 2002 and 2003,
respectively. To the extent that the capital loss carryovers are used to offset
future net capital gains, it is probable that the gains so offset will not be
distributed to shareholders.
10. SUBSEQUENT EVENTS
(a) On November 22, 1995, OCC Distributors (previously Quest for Value
Distributors), OpCap Advisors (previously Quest for Value Advisors) and their
parent Oppenheimer Capital consummated a transaction with Oppenheimer Management
Corporation ("OMC") which resulted in the sale to OMC of certain mutual fund
assets of OCC Distributors and OpCap Advisors including the transfer of the
management agreements and other contracts relating to certain Quest for Value
Funds and the use of the name "Quest for Value". As part of the transaction,
certain former Quest for Value Funds, including the Quest for Value Fund and the
Opportunity Fund, the Small Capitalization Fund, the Growth and Income Fund and
the Officers Fund, portfolios of the Quest for Value Family of Funds, have
entered into an investment advisory agreement with OMC and OMC has entered into
a sub-advisory agreement with OpCap Advisors with respect to each of such funds.
Pursuant to the transaction, the U.S. Government Income Fund, the Investment
Quality Income Fund, the National Tax-Exempt Fund, the California Tax-Exempt
Fund and the New York Tax-Exempt Fund were merged, as part of a tax-free
reorganization, into the Oppenheimer U.S. Government Trust, the Oppenheimer Bond
Fund, the Oppenheimer Tax-Free Bond Fund, the Oppenheimer California Tax-Exempt
Fund and the Oppenheimer New York Tax-Exempt Fund, respectively.
(b) On November 22, 1995, U.S. Government and Investment Quality paid the
following per share net investment income dividends to shareholders of record on
the close of business November 22, 1995:
<TABLE>
<CAPTION>
CLASS CLASS CLASS
A B C
------ ------ ------
<S> <C> <C> <C>
U.S. Government $0.0352 $0.0302 $0.0298
Investment Quality 0.0384 0.0345 0.0343
</TABLE>
37
<PAGE>
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS (FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
INCOME FROM
INVESTMENT OPERATIONS DIVIDENDS AND DISTRIBUTIONS
---------------------------------- ----------------------------------
Net
Realized Distributions
and Dividends to
Unrealized to Shareholders
Net Asset Net Gain Total Shareholders from Net Total
Value, Investment (Loss) from from Net Realized Dividends
Beginning Income on Investment Investment Gain on and
of Period (Loss)* Investments Operations Income Investments Distributions
<S> <C> <C> <C> <C> <C> <C> <C>
Quest for Value Fund, Inc.
Class A,
YEAR ENDED OCTOBER 31,
1995 $ 12.59 $ 0.12 $ 2.71 $ 2.83 ($ 0.08) ($ 0.83) ($ 0.91)
1994 12.51 0.09 0.50 0.59 (0.04) (0.47) (0.51)
1993 11.71 0.05 1.34 1.39 (0.05) (0.54) (0.59)
1992 10.61 0.04 1.77 1.81 (0.07) (0.64) (0.71)
1991 7.84 0.09 2.84 2.93 (0.16) -- (0.16)
Class B,
YEAR ENDED OCTOBER 31,
1995 12.53 0.05 2.69 2.74 (0.07) (0.83) (0.90)
1994 12.51 0.02 0.50 0.52 (0.03) (0.47) (0.50)
SEPTEMBER 2, 1993 (4)
TO OCTOBER 31, 1993 12.66(3) (0.01) (0.14) (0.15) -- -- --
Class C,
YEAR ENDED OCTOBER 31,
1995 12.52 0.04 2.70 2.74 (0.08) (0.83) (0.91)
1994 12.50 0.01 0.51 0.52 (0.03) (0.47) (0.50)
SEPTEMBER 2, 1993 (4)
TO OCTOBER 31, 1993 12.66(3) (0.01) (0.15) (0.16) -- -- --
<CAPTION>
RATIOS
-----------------------------------
Ratio of
Net Ratio of
Operating Net
Net Net Expenses Investment
Asset Assets to Income
Value, End of Average (Loss) Portfolio
End of Total Period Net to Average Turnover
Period Return** (000's) Assets Net Assets Rate
<S> <C> <C> <C> <C> <C> <C>
Quest for Value Fund, Inc.
Class A,
YEAR ENDED OCTOBER 31,
1995 $14.51 24.74% $282,615 1.68%(1) 0.90%(1) 36%
1994 12.59 5.01% 238,085 1.71% 0.72% 49%
1993 12.51 12.27% 245,320 1.75% 0.40% 27%
1992 11.71 18.45% 142,939 1.75% 0.53% 41%
1991 10.61 37.94% 79,914 1.83% 1.06% 48%
Class B,
YEAR ENDED OCTOBER 31,
1995 14.37 24.08% 38,557 2.21%(1) 0.36%(1) 36%
1994 12.53 4.43% 14,373 2.24% 0.14% 49%
SEPTEMBER 2, 1993 (4)
TO OCTOBER 31, 1993 12.51 (1.19%) 2,015 2.27%(5) (1.19%)(5) 27%
Class C,
YEAR ENDED OCTOBER 31,
1995 14.35 24.10% 10,140 2.26%(1) 0.31%(1) 36%
1994 12.52 4.45% 3,581 2.28% 0.09% 49%
SEPTEMBER 2, 1993 (4)
TO OCTOBER 31, 1993 12.50 (1.26%) 221 2.27%(5) (0.90%)(5) 27%
</TABLE>
(1) AVERAGE NET ASSETS FOR THE YEAR ENDED OCTOBER 31, 1995, FOR CLASSES A, B,
AND C WERE $257,239,913, $25,392,617 AND $6,711,023, RESPECTIVELY.
Opportunity Fund
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C>
Class A,
YEAR ENDED OCTOBER 31,
1995 $ 19.69 $ 0.23 $ 5.40 $ 5.63 ($ 0.12) ($ 0.61) ($ 0.73)
1994 18.71 0.18 1.35 1.53 (0.33) (0.22) (0.55)
1993 16.73 0.35 2.02 2.37 (0.07) (0.32) (0.39)
1992 14.29 0.09 2.93 3.02 (0.03) (0.55) (0.58)
1991 9.74 0.03 4.78 4.81 (0.23) (0.03) (0.26)
Class B,
YEAR ENDED OCTOBER 31,
1995 19.59 0.11 5.36 5.47 (0.12) (0.61) (0.73)
1994 18.70 0.08 1.34 1.42 (0.31) (0.22) (0.53)
SEPTEMBER 2, 1993 (4)
TO OCTOBER 31, 1993 18.73(3) 0.02 (0.05) (0.03) -- -- --
Class C,
YEAR ENDED OCTOBER 31,
1995 19.58 0.08 5.38 5.46 (0.12) (0.61) (0.73)
1994 18.70 0.08 1.33 1.41 (0.31) (0.22) (0.53)
SEPTEMBER 2, 1993 (4)
TO OCTOBER 31, 1993 18.73(3) 0.02 (0.05) (0.03) -- -- --
<CAPTION>
Class A,
<S> <C> <C> <C> <C> <C> <C>
YEAR ENDED OCTOBER 31,
1995 $24.59 29.88% $367,240 1.69%(1) 1.02%(1) 21%
1994 19.69 8.41% 163,340 1.78% 0.96% 42%
1993 18.71 14.34% 127,225 1.83% 2.69% 24%
1992 16.73 21.93% 40,563 2.27% 0.72% 32%
1991 14.29 50.44% 8,446 2.35%(2) 0.30%(2) 88%
Class B,
YEAR ENDED OCTOBER 31,
1995 24.33 29.19% 217,663 2.21%(1) 0.48%(1) 21%
1994 19.59 7.84% 43,317 2.34% 0.43% 42%
SEPTEMBER 2, 1993 (4)
TO OCTOBER 31, 1993 18.70 (0.16%) 2,115 2.52%(5) 1.32%(5) 24%
Class C,
YEAR ENDED OCTOBER 31,
1995 24.31 29.16% 49,608 2.31%(1) 0.37%(1) 21%
1994 19.58 8.06% 7,289 2.35% 0.43% 42%
SEPTEMBER 2, 1993 (4)
TO OCTOBER 31, 1993 18.70 (0.16%) 313 2.52%(5) 1.13%(5) 24%
</TABLE>
(1) AVERAGE NET ASSETS FOR THE YEAR ENDED OCTOBER 31, 1995, FOR CLASSES A, B,
AND C WERE $251,625,672, $116,522,609 AND $24,167,608, RESPECTIVELY.
(2) DURING THE PERIOD NOTED ABOVE, THE ADVISER VOLUNTARILY WAIVED ITS FEE AND
ASSUMED A PORTION OF THE OPERATING EXPENSES. IF SUCH WAIVER AND ASSUMPTION
HAD NOT BEEN IN EFFECT, THE RATIO OF NET OPERATING EXPENSES TO AVERAGE NET
ASSETS AND THE RATIO OF NET INVESTMENT INCOME (LOSS) TO AVERAGE NET ASSETS
WOULD HAVE BEEN 3.33% AND (0.68%), RESPECTIVELY, FOR THE YEAR ENDED OCTOBER
31, 1991.
- ----------------------------------
(3) OFFERING PRICE.
(4) INITIAL OFFERING OF CLASS B AND CLASS C SHARES.
(5) ANNUALIZED.
* BASED ON AVERAGE SHARES OUTSTANDING FOR THE PERIOD.
** ASSUMES REINVESTMENT OF ALL DIVIDENDS AND DISTRIBUTIONS, BUT DOES NOT
REFLECT DEDUCTIONS FOR SALES CHARGES. AGGREGATE (NOT ANNUALIZED) TOTAL
RETURN IS SHOWN FOR ANY PERIOD SHORTER THAN ONE YEAR.
38
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INCOME FROM
INVESTMENT OPERATIONS DIVIDENDS AND DISTRIBUTIONS
---------------------------------- ----------------------------------
Net
Realized Distributions
and Dividends to
Unrealized to Shareholders
Net Asset Net Gain Total Shareholders from Net Total
Value, Investment (Loss) from from Net Realized Dividends
Beginning Income on Investment Investment Gain on and
of Period (Loss)* Investments Operations Income Investments Distributions
<S> <C> <C> <C> <C> <C> <C> <C>
Small Capitalization Fund
Class A,
YEAR ENDED OCTOBER 31,
1995 $ 16.33 $ 0.11 $ 1.29 $ 1.40 $ -- ($ 0.42) ($ 0.42)
1994 17.68 (0.03) 0.01 (0.02) -- (1.33) (1.33)
1993 14.60 (0.04) 4.26 4.22 -- (1.14) (1.14)
1992 13.52 -- 1.50 1.50 -- (0.42) (0.42)
1991 8.80 (0.05) 4.85 4.80 (0.08) -- (0.08)
Class B,
YEAR ENDED OCTOBER 31,
1995 16.24 0.02 1.27 1.29 -- (0.42) (0.42)
1994 17.66 (0.11) 0.02 (0.09) -- (1.33) (1.33)
SEPTEMBER 2, 1993 (4)
TO OCTOBER 31, 1993 17.19(3) (0.02) 0.49 0.47 -- -- --
Class C,
YEAR ENDED OCTOBER 31,
1995 16.23 0.01 1.29 1.30 -- (0.42) (0.42)
1994 17.67 (0.13) 0.02 (0.11) -- (1.33) (1.33)
SEPTEMBER 2, 1993 (4)
TO OCTOBER 31, 1993 17.19(3) (0.02) 0.50 0.48 -- -- --
<CAPTION>
RATIOS
-----------------------------------
Ratio of
Net Ratio of
Operating Net
Net Net Expenses Investment
Asset Assets to Income
Value, End of Average (Loss) Portfolio
End of Total Period Net to Average Turnover
Period Return** (000's) Assets Net Assets Rate
<S> <C> <C> <C> <C> <C> <C>
Small Capitalization Fund
Class A,
YEAR ENDED OCTOBER 31,
1995 $17.31 8.82% $116,307 1.80%(1) 0.67%(1) 76%
1994 16.33 0.04% 120,102 1.88% (0.14%) 67%
1993 17.68 30.21% 104,898 1.89% (0.36%) 74%
1992 14.60 11.60% 39,693 2.11% (0.04%) 95%
1991 13.52 55.01% 20,686 2.25%(2) (0.41%)(2) 103%
Class B,
YEAR ENDED OCTOBER 31,
1995 17.11 8.17% 23,440 2.37%(1) 0.09%(1) 76%
1994 16.24 (0.39%) 16,144 2.48% (0.70%) 67%
SEPTEMBER 2, 1993 (4)
TO OCTOBER 31, 1993 17.66 2.73% 1,754 2.57%(5) (1.15%)(5) 74%
Class C,
YEAR ENDED OCTOBER 31,
1995 17.11 8.24% 9,068 2.38%(1) 0.08%(1) 76%
1994 16.23 (0.51%) 3,344 2.59% (0.81%) 67%
SEPTEMBER 2, 1993 (4)
TO OCTOBER 31, 1993 17.67 2.79% 235 2.57%(5) (1.20%)(5) 74%
</TABLE>
(1) AVERAGE NET ASSETS FOR THE YEAR ENDED OCTOBER 31, 1995, FOR CLASSES A, B,
AND C WERE $119,440,010, $20,105,476 AND $6,113,900, RESPECTIVELY.
(2) DURING THE PERIOD NOTED ABOVE, THE ADVISER VOLUNTARILY WAIVED ITS FEE AND
ASSUMED A PORTION OF THE OPERATING EXPENSES. IF SUCH WAIVER AND ASSUMPTION
HAD NOT BEEN IN EFFECT, THE RATIO OF NET OPERATING EXPENSES TO AVERAGE NET
ASSETS AND THE RATIO OF NET INVESTMENT INCOME (LOSS) TO AVERAGE NET ASSETS
WOULD HAVE BEEN 3.27% AND (1.43%), RESPECTIVELY, FOR THE YEAR ENDED OCTOBER
31, 1991.
Growth and Income Fund
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C>
Class A,
YEAR ENDED OCTOBER 31,
1995 $ 10.09 $ 0.27 $ 1.27 $ 1.54 ($ 0.29) ($ 0.42) ($ 0.71)
1994 11.24 0.32 0.55 0.87 (0.32) (1.70) (2.02)
1993 10.80 0.30 0.73 1.03 (0.26) (0.33) (0.59)
NOVEMBER 4, 1991 (6)
TO OCTOBER 31, 1992 10.00(3) 0.28 0.80 1.08 (0.28) -- (0.28)
Class B,
YEAR ENDED OCTOBER 31,
1995 10.07 0.19 1.28 1.47 (0.24) (0.42) (0.66)
1994 11.23 0.25 0.56 0.81 (0.27) (1.70) (1.97)
SEPTEMBER 2, 1993 (4)
TO OCTOBER 31, 1993 11.21(3) 0.04 0.05 0.09 (0.07) -- (0.07)
Class C,
YEAR ENDED OCTOBER 31,
1995 10.07 0.15 1.30 1.45 (0.21) (0.42) (0.63)
1994 11.23 0.24 0.56 0.80 (0.26) (1.70) (1.96)
SEPTEMBER 2, 1993 (4)
TO OCTOBER 31, 1993 11.21(3) 0.04 0.05 0.09 (0.07) -- (0.07)
<CAPTION>
Class A,
<S> <C> <C> <C> <C> <C> <C>
YEAR ENDED OCTOBER 31,
1995 $10.92 16.35% $37,082 1.99%(1,2) 2.60%(1,2) 130%
1994 10.09 8.64% 30,576 1.86%(2) 3.16%(2) 113%
1993 11.24 9.93% 28,466 1.90%(2) 2.66%(2) 192%
NOVEMBER 4, 1991 (6)
TO OCTOBER 31, 1992 10.80 10.84% 8,057 2.23%(2,5) 2.73%(2,5) 77%
Class B,
YEAR ENDED OCTOBER 31,
1995 10.88 15.65% 7,623 2.59%(1,2) 1.71%(1,2) 130%
1994 10.07 7.96% 2,928 2.47%(2) 2.53%(2) 113%
SEPTEMBER 2, 1993 (4)
TO OCTOBER 31, 1993 11.23 0.81% 319 2.49%(2,5) 1.83%(2,5) 192%
Class C,
YEAR ENDED OCTOBER 31,
1995 10.89 15.38% 1,828 2.88%(1,2) 1.39%(1,2) 130%
1994 10.07 7.91% 455 2.62%(2) 2.39%(2) 113%
SEPTEMBER 2, 1993 (4)
TO OCTOBER 31, 1993 11.23 0.81% 102 2.49%(2,5) 2.18%(2,5) 192%
</TABLE>
(1) AVERAGE NET ASSETS FOR THE YEAR ENDED OCTOBER 31, 1995 FOR CLASSES A, B, AND
C WERE $33,396,923, $4,845,598 AND $967,910, RESPECTIVELY.
(2) DURING THE PERIODS PRESENTED ABOVE, THE ADVISER VOLUNTARILY WAIVED A PORTION
OF ITS FEES. IF SUCH WAIVERS HAD NOT BEEN IN EFFECT, THE RATIOS OF NET
OPERATING EXPENSES TO AVERAGE NET ASSETS AND THE RATIOS OF NET INVESTMENT
INCOME TO AVERAGE NET ASSETS FOR CLASS A WOULD HAVE BEEN 2.02% AND 2.57%,
RESPECTIVELY, FOR THE YEAR ENDED OCOTBER 31, 1995, 2.32% AND 2.70%,
RESPECTIVELY, FOR THE YEAR ENDED OCTOBER 31, 1994, 2.18% AND 2.38%,
RESPECTIVELY, FOR THE YEAR ENDED OCTOBER 31, 1993 AND 2.98% AND 1.98%,
ANNUALIZED, RESPECTIVELY, FOR THE PERIOD NOVEMBER 4, 1991 (COMMENCEMENT OF
OPERATIONS) TO OCTOBER 31, 1992. THE RATIOS OF NET OPERATING EXPENSES TO
AVERAGE NET ASSETS AND THE RATIOS OF NET INVESTMENT INCOME TO AVERAGE NET
ASSETS WOULD HAVE BEEN 2.57% AND 1.73%, RESPECTIVELY, FOR CLASS B AND 2.84%
AND 1.43%, RESPECTIVELY, FOR CLASS C, FOR THE YEAR ENDED OCTOBER 31, 1995,
2.93% AND 2.07%, RESPECTIVELY, FOR CLASS B AND 3.10% AND 1.91%,
RESPECTIVELY, FOR CLASS C, FOR THE YEAR ENDED OCTOBER 31, 1994 AND 2.88% AND
1.44%, ANNUALIZED, RESPECTIVELY, FOR CLASS B AND 2.87% AND 1.80%,
ANNUALIZED, RESPECTIVELY, FOR CLASS C, FOR THE PERIOD SEPTEMBER 2, 1993
(INITIAL OFFERING) TO OCTOBER 31, 1993.
- ----------------------------------
(3) OFFERING PRICE.
(4) INITIAL OFFERING OF CLASS B AND CLASS C SHARES.
(5) ANNUALIZED.
(6) COMMENCEMENT OF OPERATIONS.
* BASED ON AVERAGE SHARES OUTSTANDING FOR THE PERIOD.
** ASSUMES REINVESTMENT OF ALL DIVIDENDS AND DISTRIBUTIONS, BUT DOES NOT
REFLECT DEDUCTIONS FOR SALES CHARGES. AGGREGATE (NOT ANNUALIZED) TOTAL
RETURN IS SHOWN FOR ANY PERIOD SHORTER THAN ONE YEAR.
39
<PAGE>
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS (FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
(CONTINUED)
<TABLE>
<CAPTION>
INCOME FROM
INVESTMENT OPERATIONS DIVIDENDS AND DISTRIBUTIONS
---------------------------------- ----------------------------------
Net
Realized Distributions
and Dividends to
Unrealized to Shareholders
Net Asset Net Gain Total Shareholders from Net Tax
Value, Investment (Loss) from from Net Realized return
Beginning Income on Investment Investment Gain on of
of Period (Loss) Investments Operations Income Investments Capital
<S> <C> <C> <C> <C> <C> <C> <C>
U.S. Government Income Fund
Class A,
YEAR ENDED OCTOBER 31,
1995 $ 10.79 $ 0.64 $ 0.49 $ 1.13 ($ 0.64) $ -- ($ 0.01)
1994 12.08 0.59 (1.08) (0.49) (0.59) (0.21) --
1993 11.92 0.65 0.35 1.00 (0.68) (0.16) --
1992 11.80 0.74 0.18 0.92 (0.74) (0.06) --
1991 11.35 0.85 0.61 1.46 (0.86) (0.15) --
Class B,
YEAR ENDED OCTOBER 31,
1995 10.79 0.56 0.49 1.05 (0.56) -- (0.01)
1994 12.08 0.51 (1.08) (0.57) (0.51) (0.21) --
SEPTEMBER 2, 1993 (4)
TO OCTOBER 31, 1993 12.13(3) 0.08 (0.04) 0.04 (0.08) (0.01) --
Class C,
YEAR ENDED OCTOBER 31,
1995 10.79 0.55 0.49 1.04 (0.55) -- (0.01)
1994 12.08 0.51 (1.08) (0.57) (0.51) (0.21) --
SEPTEMBER 2, 1993 (4)
TO OCTOBER 31, 1993 12.13(3) 0.08 (0.04) 0.04 (0.08) (0.01) --
<CAPTION>
RATIOS
-----------------------------------
Ratio of
Net Ratio of
Operating Net
Net Net Expenses Investment
Asset Assets to Income
Total Value, End of Average (Loss) Portfolio
Dividends and End of Total Period Net to Average Turnover
Distributions Period Return* (000's) Assets Net Assets Rate
<S> <C> <C> <C> <C> <C> <C> <C>
U.S. Government Income Fund
Class A,
YEAR ENDED OCTOBER 31,
1995 ($0.65) $11.27 10.78% $102,718 1.26%(1) 5.81%(1) 245%
1994 (0.80) 10.79 (4.15%) 123,257 1.20%(2) 5.19%(2) 126%
1993 (0.84) 12.08 8.55% 189,091 1.15%(2) 5.33%(2) 315%
1992 (0.80) 11.92 7.98% 151,197 1.15%(2) 6.26%(2) 207%
1991 (1.01) 11.80 13.40% 82,400 1.15%(2) 7.24%(2) 309%
Class B,
YEAR ENDED OCTOBER 31,
1995 (0.57) 11.27 10.01% 9,641 1.94%(1) 5.04%(1) 245%
1994 (0.72) 10.79 (4.84%) 6,813 1.92%(2) 4.53%(2) 126%
SEPTEMBER 2, 1993 (4)
TO OCTOBER 31, 1993 (0.09) 12.08 0.29% 1,286 1.85%(2,5) 3.07%(2,5) 315%
Class C,
YEAR ENDED OCTOBER 31,
1995 (0.56) 11.27 9.89% 2,883 2.06%(1) 4.91%(1) 245%
1994 (0.72) 10.79 (4.84%) 1,224 1.94%(2) 4.57%(2) 126%
SEPTEMBER 2, 1993 (4)
TO OCTOBER 31, 1993 (0.09) 12.08 0.34% 141 1.85%(2,5) 3.89%(2,5) 315%
</TABLE>
(1) AVERAGE NET ASSETS FOR THE YEAR ENDED OCTOBER 31, 1995, FOR CLASSES A, B,
AND C WERE $114,946,501, $9,210,406 AND $1,823,599, RESPECTIVELY.
(2) DURING THE PERIODS NOTED ABOVE, THE ADVISER VOLUNTARILY WAIVED A PORTION OF
ITS FEES. IF SUCH WAIVERS HAD NOT BEEN IN EFFECT, THE RATIOS OF NET
OPERATING EXPENSES TO AVERAGE NET ASSETS AND THE RATIOS OF NET INVESTMENT
INCOME TO AVERAGE NET ASSETS FOR CLASS A WOULD HAVE BEEN 1.23% AND 5.16%,
RESPECTIVELY, FOR THE YEAR ENDED OCTOBER 31, 1994, 1.20% AND 5.28%,
RESPECTIVELY, FOR THE YEAR ENDED OCTOBER 31, 1993, 1.17% AND 6.24%,
RESPECTIVELY, FOR THE YEAR ENDED OCTOBER 31, 1992, AND 1.46% AND 6.93%,
RESPECTIVELY, FOR THE YEAR ENDED OCTOBER 31, 1991. THE RATIOS OF NET
OPERATING EXPENSES TO AVERAGE NET ASSETS AND THE RATIOS OF NET INVESTMENT
INCOME TO AVERAGE NET ASSETS WOULD HAVE BEEN 1.93% AND 4.52%, RESPECTIVELY,
FOR CLASS B AND 1.95% AND 4.56%, RESPECTIVELY, FOR CLASS C, FOR THE YEAR
ENDED OCTOBER 31, 1994 AND 1.96% AND 2.96%, ANNUALIZED, RESEPCTIVELY, FOR
CLASS B AND 1.96% AND 3.78%, ANNUALIZED, RESPECTIVELY, FOR CLASS C, FOR THE
PERIOD SEPTEMBER 2, 1993 (INITIAL OFFERING) TO OCTOBER 31, 1993.
Investment Quality Income Fund
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C>
Class A,
YEAR ENDED OCTOBER 31,
1995 $ 9.67 $ 0.71 $ 1.21 $ 1.92 ($ 0.71) $ -- $ --
1994 11.49 0.68 (1.75) (1.07) (0.68) (0.07) --
1993 10.36 0.68 1.19 1.87 (0.68) (0.06) --
1992 10.06 0.80 0.30 1.10 (0.80) -- --
DECEMBER 18, 1990 (6)
TO OCTOBER 31, 1991 10.00(3) 0.71 0.06 0.77 (0.71) -- --
Class B,
YEAR ENDED OCTOBER 31,
1995 9.67 0.65 1.21 1.86 (0.65) -- --
1994 11.49 0.61 (1.75) (1.14) (0.61) (0.07) --
SEPTEMBER 2, 1993 (4)
TO OCTOBER 31, 1993 11.52(3) 0.08 (0.03) 0.05 (0.08) -- --
Class C,
YEAR ENDED OCTOBER 31,
1995 9.67 0.64 1.21 1.85 (0.64) -- --
1994 11.49 0.61 (1.75) (1.14) (0.61) (0.07) --
SEPTEMBER 2, 1993 (4)
TO OCTOBER 31, 1993 11.52(3) 0.09 (0.03) 0.06 (0.09) -- --
<CAPTION>
Class A,
<S> <C> <C> <C> <C> <C> <C> <C>
YEAR ENDED OCTOBER 31,
1995 ($0.71) $10.88 20.49% $ 45,078 1.44%(1,2) 6.90%(1,2) 8%
1994 (0.75) 9.67 (9.61%) 46,922 1.29%(2) 6.47%(2) 33%
1993 (0.74) 11.49 18.64% 61,288 1.20%(2) 6.07%(2) 12%
1992 (0.80) 10.36 11.21% 29,701 0.95%(2) 7.62%(2) 18%
DECEMBER 18, 1990 (6)
TO OCTOBER 31, 1991 (0.71) 10.06 8.11% 17,235 0.82%(2,5) 8.25%(2,5) 19%
Class B,
YEAR ENDED OCTOBER 31,
1995 (0.65) 10.88 19.78% 13,134 2.03%(1,2) 6.15%(1,2) 8%
1994 (0.68) 9.67 (10.22%) 6,605 1.92%(2) 5.85%(2) 33%
SEPTEMBER 2, 1993 (4)
TO OCTOBER 31, 1993 (0.08) 11.49 0.45% 1,468 1.84%(2,5) 3.68%(2,5) 12%
Class C,
YEAR ENDED OCTOBER 31,
1995 (0.64) 10.88 19.72% 3,977 2.08%(1,2) 6.18%(1,2) 8%
1994 (0.68) 9.67 (10.23%) 2,583 1.90%(2) 6.01%(2) 33%
SEPTEMBER 2, 1993 (4)
TO OCTOBER 31, 1993 (0.09) 11.49 0.55% 101 1.84%(2,5) 4.83%(2,5) 12%
</TABLE>
(1) AVERAGE NET ASSETS FOR THE YEAR ENDED OCTOBER 31, 1995, FOR CLASSES A, B,
AND C WERE $45,868,837, $9,544,915 AND $3,229,501, RESPECTIVELY.
(2) DURING THE PERIODS PRESENTED ABOVE, THE ADVISER VOLUNTARILY WAIVED ALL OR A
PORTION OF ITS FEES AND ASSUMED A PORTION OF ITS OPERATING EXPENSES. IF SUCH
WAIVERS AND ASSUMPTIONS HAD NOT BEEN IN EFFECT, THE RATIOS OF NET OPERATING
EXPENSES TO AVERAGE NET ASSETS AND THE RATIOS OF NET INVESTMENT INCOME TO
AVERAGE NET ASSETS FOR CLASS A WOULD HAVE BEEN 1.52% AND 6.82%,
RESPECTIVELY, FOR THE YEAR ENDED OCTOBER 31, 1995, 1.59% AND 6.71%,
RESPECTIVELY, FOR THE YEAR ENDED OCTOBER 31, 1994, 1.50% AND 5.77%,
RESPECTIVELY, FOR THE YEAR ENDED OCTOBER 31, 1993, 1.72% AND 6.85%,
RESPECTIVELY, FOR THE YEAR ENDED OCTOBER 31, 1992, AND 2.11% AND 6.96%,
ANNUALIZED, RESPECTIVELY, FOR THE PERIOD DECEMBER 18, 1990 (COMMENCEMENT OF
OPERATIONS) TO OCTOBER 31, 1991. THE RATIOS OF NET OPERATING EXPENSES TO
AVERAGE NET ASSETS AND THE RATIOS OF NET INVESTMENT INCOME TO AVERAGE NET
AASETS WOULD HAVE BEEN 2.09% AND 6.09%, RESPECTIVELY, FOR CLASS B AND 2.15%
AND 6.11%, RESPECTIVELY FOR CLASS C, FOR THE YEAR ENDED OCTOBER 31, 1995,
2.23% AND 5.54%, RESPECTIVELY, FOR CLASS B AND 2.21% AND 5.70%,
RESPECTIVELY, FOR CLASS C, FOR THE YEAR ENDED OCTOBER 31, 1994 AND 2.07% AND
3.45%, ANNUALIZED, RESPECTIVELY, FOR CLASS B AND 2.06% AND 4.61%,
ANNUALIZED, RESPECTIVELY, FOR CLASS C FOR THE PERIOD SEPTEMBER 2, 1993
(INITIAL OFFERING) TO OCTOBER 31, 1993.
- ----------------------------------
(3) OFFERING PRICE.
(4) INITIAL OFFERING OF CLASS B AND CLASS C SHARES.
(5) ANNUALIZED.
(6) COMMENCEMENT OF OPERATIONS.
* ASSUMES REINVESTMENT OF ALL DIVIDENDS AND DISTRIBUTIONS, BUT DOES NOT
REFLECT DEDUCTIONS FOR SALES CHARGES. AGGREGATE (NOT ANNUALIZED) TOTAL
RETURN IS SHOWN FOR ANY PERIOD SHORTER THAN ONE YEAR.
<PAGE>
<PAGE>
Appendix A
DESCRIPTION OF RATINGS
Bond Ratings
- -- Moody's Investors Service, Inc.
Aaa: Bonds which are rated "Aaa" are judged to be the best quality and to
carry the smallest degree of investment risk. Interest payments are
protected by a large or by an exceptionally stable margin and principal is
secure. While the various protective elements are likely to change, the
changes that can be expected are most unlikely to impair the fundamentally
strong position of such issues.
Aa: Bonds which are rated "Aa" are judged to be of high quality by all
standards. Together with the "Aaa" group, they comprise what are generally
known as "high-grade" bonds. They are rated lower than the best bonds
because margins of protection may not be as large as with "Aaa" securities or
fluctuation of protective elements may be of greater amplitude or there may
be other elements present which make the long-term risks appear somewhat
larger than those of "Aaa" securities.
A: Bonds which are rated "A" possess many favorable investment attributes and
are to be considered as upper-medium grade obligations. Factors giving
security to principal and interest are considered adequate but elements may
be present which suggest a susceptibility to impairment sometime in the
future.
Baa: Bonds which are rated "Baa" are considered medium grade obligations,
i.e., they are neither highly protected nor poorly secured. Interest
payments and principal security appear adequate for the present but certain
protective elements may be lacking or may be characteristically unreliable
over any great length of time. Such bonds lack outstanding investment
characteristics and have speculative characteristics as well.
Ba: Bonds which are rated "Ba" are judged to have speculative elements; their
future cannot be considered well-assured. Often the protection of interest
and principal payments may be very moderate and not well safeguarded during
both good and bad times over the future. Uncertainty of position
characterizes bonds in this class.
B: Bonds which are rated "B" generally lack characteristics of desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small.
Caa: Bonds which are rated "Caa" are of poor standing and may be in default
or there may be present elements of danger with respect to principal or
interest.
Ca: Bonds which are rated "Ca" represent obligations which are speculative in
a high degree and are often in default or have other marked shortcomings.
C: Bonds which are rated "C" can be regarded as having extremely poor
prospects of ever retaining any real investment standing.
- -- Standard & Poor's Corporation
AAA: "AAA" is the highest rating assigned to a debt obligation and indicates
an extremely strong capacity to pay principal and interest.
AA: Bonds rated "AA" also qualify as high quality debt obligations. Capacity
to pay principal and interest is very strong, and in the majority of
instances they differ from "AAA" issues only in small degree.
A: Bonds rated "A" have a strong capacity to pay principal and interest,
although they are somewhat more susceptible to adverse effects of change in
circumstances and economic conditions.
BBB: Bonds rated "BBB" are regarded as having an adequate capacity to pay
principal and interest. Whereas they normally exhibit protection parameters,
adverse economic conditions or changing circumstances are more likely to lead
to a weakened capacity to pay principal and interest for bonds in this
category than for bonds in the "A" category.
BB, B, CCC, CC: Bonds rated "BB," "B," "CCC" and "CC" are regarded, on
balance, as predominantly speculative with respect to the issuer's capacity
to pay interest and repay principal in accordance with the terms of the
obligation. "BB" indicates the lowest degree of speculation and "CC" the
highest degree. While such bonds will likely have some quality and
protective characteristics, these are outweighed by large uncertainties or
major risk exposures to adverse conditions.
C, D: Bonds on which no interest is being paid are rated "C." Bonds rated
"D" are in default and payment of interest and/or repayment of principal is
in arrears.
- -- Fitch Investors Service, Inc.
AAA Bonds considered to be investment grade and of the highest credit
quality. The obligor has an exceptionally strong ability to pay interest and
repay principal, which is unlikely to be affected by reasonably foreseeable
events.
AA Bonds considered to be investment grade and of very high credit quality.
The obligor's ability to pay interest and repay principal is very strong,
although not quite as strong as bonds rated "AAA." Because bonds rated in
the "AAA" and "AA" categories are not significantly vulnerable to foreseeable
future developments, short-term debt of these issuers is generally rated "F-
1+."
A Bonds considered to be investment grade and of high credit quality. The
obligor's ability to pay interest and repay principal is considered to be
strong, but may be more vulnerable to adverse changes in economic conditions
and circumstances than bonds with higher ratings.
BBB Bonds considered to be investment grade and of satisfactory credit
quality. The obligor's ability to pay interest and repay principal is
considered to be adequate. Adverse changes in economic conditions and
circumstances, however, are more likely to have adverse impact on these
bonds, and therefore impair timely payment. The likelihood that the ratings
of these bonds will fall below investment grade is higher than for bonds with
higher ratings.
BB Bonds are considered speculative. The obligor's ability to pay interest
and repay principal may be affected over time by adverse economic changes.
However, business and financial alternatives can be identified which could
assist the obligor in satisfying its debt service requirements.
B Bonds are considered highly speculative. While bonds in this class are
currently meeting debt service requirements, the probability of continued
timely payment of principal and interest reflects the obligor's limited
margin of safety and the need for reasonable business and economic activity
through the life of the issue.
CCC Bonds have certain identifiable characteristics which, if not remedied,
may lead to default. The ability to meet obligations requires an
advantageous business and economic environment.
CC Bonds are minimally protected. Default in payment of interest and/or
principal seems probable over time.
C Bonds are in imminent default in payment of interest or principal.
DDD, DD, and D Bonds are in default on interest and/or principal payments.
Such bonds are extremely speculative and should be valued on the basis of
their ultimate recovery value in liquidation or reorganization of the
obligor. "DDD" represents the highest potential for recovery of these bonds,
and "D" represents the lowest potential for recovery.
Plus (+) Minus (-) Plus and minus signs are used with a rating symbol to
indicate the relative position of a credit within the rating category. Plus
and minus signs, however, are not used in the "DDD," "DD," or "D" categories.
Short-Term Debt Ratings.
- -- Moody's Investors Service, Inc. The following rating designations for
commercial paper (defined by Moody's as promissory obligations not having
original maturity in excess of nine months), are judged by Moody's to be
investment grade, and indicate the relative repayment capacity of rated
issuers:
Prime-1: Superior capacity for repayment. Capacity will normally be
evidenced by the following characteristics: (a) leveling market positions in
well-established industries; (b) high rates of return on funds employed; (c)
conservative capitalization structures with moderate reliance on debt and
ample asset protection; (d) broad margins in earning coverage of fixed
financial charges and high internal cash generation; and (e) well established
access to a range of financial markets and assured sources of alternate
liquidity.
Prime-2: Strong capacity for repayment. This will normally be evidenced by
many of the characteristics cited above but to a lesser degree. Earnings
trends and coverage ratios, while sound, will be more subject to variation.
Capitalization characteristics, while still appropriate, may be more affected
by external conditions. Ample alternate liquidity is maintained.
Moody's ratings for state and municipal short-term obligations are designated
"Moody's Investment Grade" ("MIG"). Short-term notes which have demand
features may also be designated as "VMIG". These rating categories are as
follows:
MIG1/VMIG1: Best quality. There is present strong protection by established
cash flows, superior liquidity support or demonstrated broadbased access to
the market for refinancing.
MIG2/VMIG2: High quality. Margins of protection are ample although not so
large as in the preceding group.
- -- Standard & Poor's Corporation ("S&P"): The following ratings by S&P for
commercial paper (defined by S&P as debt having an original maturity of no
more than 365 days) assess the likelihood of payment:
A-1: Strong capacity for timely payment. Those issues determined to possess
extremely strong safety characteristics are denoted with a plus sign (+)
designation.
A-2: Satisfactory capacity for timely payment. However, the relative degree
of safety is not as high as for issues designated "A-1".
S&P's ratings for Municipal Notes due in three years or less are:
SP-1: Very strong or strong capacity to pay principal and interest. Those
issues determined to possess overwhelming safety characteristics will be
given a plus (+) designation.
SP-2: Satisfactory capacity to pay principal and interest.
S&P assigns "dual ratings" to all municipal debt issues that have a demand or
double feature as part of their provisions. The first rating addresses the
likelihood of repayment of principal and interest as due, and the second
rating addresses only the demand feature. With short-term demand debt, S&P's
note rating symbols are used with the commercial paper symbols (for example,
"SP-1+/A-1+").
- -- Fitch Investors Service, Inc. Fitch assigns the following short-term
ratings to debt obligations that are payable on demand or have original
maturities of generally up to three years, including commercial paper,
certificates of deposit, medium-term notes, and municipal and investment
notes:
F-1+: Exceptionally strong credit quality; the strongest degree of assurance
for timely payment.
F-1: Very strong credit quality; assurance of timely payment is only
slightly less in degree than issues rated "F-1+".
F-2: Good credit quality; satisfactory degree of assurance for timely
payment, but the margin of safety is not as great as for issues assigned "F-
1+" or "F-1" ratings.
- -- Duff & Phelps, Inc. The following ratings are for commercial paper
(defined by Duff & Phelps as obligations with maturities, when issued, of
under one year), asset-backed commercial paper, and certificates of deposit
(the ratings cover all obligations of the institution with maturities, when
issued, of under one year, including bankers' acceptance and letters of
credit):
Duff 1+: Highest certainty of timely payment. Short-term liquidity,
including internal operating factors and/or access to alternative sources of
funds, is outstanding, and safety is just below risk-free U.S. Treasury
short-term obligations.
Duff 1: Very high certainty of timely payment. Liquidity factors are
excellent and supported by good fundamental protection factors. Risk factors
are minor.
Duff 1-: High certainty of timely payment. Liquidity factors are strong and
supported by good fundamental protection factors. Risk factors are very
small.
Duff 2: Good certainty of timely payment. Liquidity factors and company
fundamentals are sound. Although ongoing funding needs may enlarge total
financing requirements, access to capital markets is good. Risk factors are
small.
- -- IBCA Limited or its affiliate IBCA Inc. Short-term ratings, including
commercial paper (with maturities up to 12 months), are as follows:
A1+: Obligations supported by the highest capacity for timely repayment.
A1: Obligations supported by a very strong capacity for timely repayment.
A2: Obligations supported by a strong capacity for timely repayment,
although such capacity may be susceptible to adverse changes in business,
economic, or financial conditions.
- -- Thomson BankWatch, Inc. The following short-term ratings apply to
commercial paper, certificates of deposit, unsecured notes, and other
securities having a maturity of one year or less.
TBW-1: The highest category; indicates the degree of safety regarding timely
repayment of principal and interest is very strong.
TBW-2: The second highest rating category; while the degree of safety
regarding timely repayment of principal and interest is strong, the relative
degree of safety is not as high as for issues rated "TBW-1".
<PAGE>
Appendix B
Corporate Industry Classifications
Aerospace/Defense
Air Transportation
Auto Parts Distribution
Automotive
Bank Holding Companies
Banks
Beverages
Broadcasting
Broker-Dealers
Building Materials
Cable Television
Chemicals
Commercial Finance
Computer Hardware
Computer Software
Conglomerates
Consumer Finance
Containers
Convenience Stores
Department Stores
Diversified Financial
Diversified Media
Drug Stores
Drug Wholesalers
Durable Household Goods
Education
Electric Utilities
Electrical Equipment
Electronics
Energy Services & Producers
Entertainment/Film
Environmental
Food
Gas Utilities
Gold
Health Care/Drugs
Health Care/Supplies & Services
Homebuilders/Real Estate
Hotel/Gaming
Industrial Services
Insurance
Leasing & Factoring
Leisure
Manufacturing
Metals/Mining
Nondurable Household Goods
Oil - Integrated
Paper
Publishing/Printing
Railroads
Restaurants
Savings & Loans
Shipping
Special Purpose Financial
Specialty Retailing
Steel
Supermarkets
Telecommunications - Technology
Telephone - Utility
Textile/Apparel
Tobacco
Toys
Trucking
B-1
<PAGE>
Oppenheimer Quest Small Cap Value Fund
Two World Trade Center
New York, New York 10048-0203
1-800-525-7048
Investment Adviser
OppenheimerFunds, Inc.
Two World Trade Center
New York, New York 10048-0203
Sub-Adviser
OpCap Advisors
One World Financial Center
New York, New York 10281
Distributor
OppenheimerFunds Distributor, Inc.
Two World Trade Center
New York, New York 10048-0203
Transfer Agent
OppenheimerFunds Services
P.O. Box 5270
Denver, Colorado 80217
1-800-525-7048
Custodian of Portfolio Securities
State Street Bank and Trust Company
P.O. Box 8505
Boston, Massachusetts 02266-8505
Independent Accountants
Price Waterhouse LLP
950 Seventeenth Street
Denver, Colorado 80202
Legal Counsel
Gordon Altman Butowsky Weitzen
Shalov & Wein
114 West 47th Street
New York, New York 10036
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