OPPENHEIMER QUEST SMALL CAP VALUE FUND
Supplement dated February 26, 1997 to the
Prospectus dated February 26, 1997
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 the
fifth paragraph in "Distribution and Service Plans for Class B and
Class C Shares," and (3) sales of Class C shares described in the
sixth paragraph in "Distribution and Service Plans for Class B and
Class C Shares," the Distributor will pay additional commission to
each broker, dealer and financial institution that has a sales
agreement with the Distributor and agrees to accept that additional
commission (these are referred to as "participating firms") for
Class A, Class B and Class C shares of the Fund sold in "qualifying
transactions" (the "promotion"). The additional commission will be
1.00% 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 $500,000 or
more or the sale of Class A shares to a SEP IRA with 100 or more
eligible participants 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 aggregate sales of $150,000 or
more of Class A, Class B and/or Class C shares of any one or more
of the Oppenheimer funds (except money market funds and municipal
bond funds) for rollovers or trustee-to-trustee transfers 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 (1) IRAs,
rollover IRAs, SEP IRAs and SAR-SEP IRAs, using the
OppenheimerFunds, Inc. prototype IRA agreement, if the rollover
contribution is received during the period from January 1, 1997
through April 15, 1997 (the "promotion period"), or the acceptance
of a direct rollover or trustee-to-trustee transfer is acknowledged
by the trustee of the OppenheimerFunds prototype IRA during the
promotion period, and (2) IRAs, rollover IRAs, SEP IRAs and SAR-
SEP IRAs using the A.G. Edwards & Sons, Inc. prototype IRA
agreement, if the rollover contribution or trustee-to-trustee
payment is received 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 Oppenheimer funds account.
February 26, 1997 PS0251.008
<PAGE>
Quest Small Cap Value Fund
Prospectus dated February 26, 1997
Oppenheimer Quest Small Cap Value Fund 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 Objective and Policies" for more
information about the types of securities in which the Fund invests
and refer to "Investment Risks" for a discussion of the risks of
investing in the Fund.
This Prospectus explains concisely what you should know before
investing in the Fund. Please read this Prospectus carefully and
keep it for future reference. You can find more detailed
information about the Fund in the February 26, 1997 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>
Contents
ABOUT THE FUND
Expenses
A Brief Overview of the Fund
Financial Highlights
Investment Objective and Policies
Investment Risks
Investment Techniques and Strategies
How the Fund is Managed
Performance of the Fund
ABOUT YOUR ACCOUNT
How to Buy Shares
Class A Shares
Class B Shares
Class C Shares
Special Investor Services
AccountLink
Automatic Withdrawal and Exchange Plans
Reinvestment Privilege
Retirement Plans
How to Sell Shares
By Mail
By Telephone
How to Exchange Shares
Shareholder Account Rules and Policies
Dividends, Capital Gains and Taxes
Appendix A: Special Sales Charge Arrangements for
Shareholders of the Former Quest for Value Funds
<PAGE>
ABOUT THE FUND
Expenses
The Fund pays a variety of expenses directly for management of its
assets, administration, distribution of its shares and other
services, and those expenses are subtracted from the Fund's assets
to calculate the Fund's net asset value per share. All shareholders
therefore pay those expenses indirectly. Shareholders pay other
expenses directly, such as sales charges and account transaction
charges. The following tables are provided to help you understand
your direct expenses of investing in the Fund and your share of the
Fund's business operating expenses that you will bear indirectly.
The numbers below are based on the Fund's expenses during its last
fiscal year ended October 31, 1996.
Shareholder Transaction Expenses are charges you pay when
you buy or sell shares of the Fund. Please refer to "About Your
Account," starting on page __ for an explanation of how and when
these charges apply.
<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)
- ----------------------------------------------------------------------
Maximum Deferred Sales Charge None(1) 5% in the first 1% if
(as a % of the lower of the year, declining shares are
original offering price or to 1% in the redeemed
redemption proceeds) sixth year and within 12
eliminated months of
thereafter(2) purchase(2)
- ----------------------------------------------------------------------
Maximum Sales Charge on None None None
Reinvested Dividends
- -----------------------------------------------------------------------
Exchange Fee None None None
- ------------------------------------------------------------------------
Redemption Fee None(3) None(3) None(3)
(1)If you invest $1 million or more ($500,000 or more for purchases
by "Retirement Plans," as defined in "Class A Contingent Deferred
Sales Charge" on page _____) in Class A shares, you may have to pay
a sales charge of up to 1% if you sell your shares within 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.
(2)See "How to Buy Shares - Buying Class B Shares" and "How to Buy
Shares - Buying Class C Shares" below, for more information on the
contingent deferred sales charges.
(3) There is a $10 transaction fee for redemptions paid by Federal
Funds wire, but not for redemptions paid by ACH transfer through
AccountLink.
</TABLE>
Annual Fund Operating Expenses are paid out of the Fund's
assets and represent the Fund's expenses of operating its business.
For example, the Fund pays management fees to its investment
adviser, OppenheimerFunds, Inc.(referred to in this Prospectus as
the "Manager"). The rates of the Manager's fees are set forth in
"How the Fund is Managed," below. The Fund has other regular
expenses for services, such as transfer agent fees, custodial fees
paid to the bank that holds the Fund's portfolio securities, audit
fees and legal expenses. Those expenses are detailed in the Fund's
Financial Statements in the Statement of Additional Information.
Annual Fund Operating Expenses (as a Percentage of Average Net
Assets)
Class 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 0.40% 0.38% 0.40%
- ------------------------------------------------------------
Total Fund
Operating Expenses 1.90% 2.38% 2.40%
The numbers in the chart above are based upon the Fund's
expenses in its last fiscal year ended October 31, 1996. 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 service fees (the maximum fee is
0.25% of the average annual net assets of that class) and the
asset-based sales charge of 0.25% of the average annual net assets
of that class. For Class B and Class C shares, the 12b-1
Distribution Plan Fees are the service fees (the maximum fee is
0.25% of average annual net assets of those classes), 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 changes in the actual value of the
Fund's assets represented by each class of shares.
Examples. To try to show the effect of these expenses on an
investment over time, we have created the hypothetical examples
shown below. Assume that you make a $1,000 investment in each class
of shares of the Fund, and the Fund's annual return is 5%, and its
operating expenses for each class are the ones shown in the Annual
Fund Operating Expenses chart above and that Class B shares
automatically convert into Class A shares six years after purchase.
If you were to redeem your shares at the end of each period shown
below, your investment would incur the following expenses by the
end of 1, 3, 5 and 10 years:
1 year 3 years 5 years 10 years*
- -------------------------------------------------------------
Class A Shares $76 $114 $154 $267
Class B Shares $74 $104 $147 $249
Class C Shares $34 $ 75 $128 $274
If you did not redeem your investment, it would incur the
following expenses:
1 year 3 years 5 years 10 years*
- ------------------------------------------------------------
Class A Shares $76 $114 $154 $267
Class B Shares $24 $ 74 $127 $249
Class C Shares $24 $ 75 $128 $274
*In the first example, expenses include the Class A initial sales
charge and the applicable Class B or Class C contingent deferred
sales charge. In the second example, Class A expenses include the
initial sales charge, but Class B and Class C expenses do not
include contingent deferred sales charges. The Class B expenses in
years 7 through 10 are based on the Class A expenses shown above,
because the Fund automatically converts Class B shares into Class
A shares after 6 years. Because of the effect of the higher asset-
based sales charge and the contingent deferred sales charge on
Class B and Class C shares, long-term holders of Class B and Class
C shares could pay the economic equivalent of more than the
maximum front-end sales charge allowed under applicable
regulations. For Class B shareholders, the automatic conversion of
Class B shares to Class A shares is designed to minimize the
likelihood that this will occur. Please refer to "How to Buy
Shares - Buying Class B Shares" for more information.
These examples show the effect of expenses on an investment,
but are not meant to state or predict actual or expected costs or
investment returns of the Fund, all of which may be more or less
than those shown.
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 believed to have
favorable stock prices in relation to their book values and/or
sales, and in equity securities of companies believed to have
limited operating leverage and/or financial leverage. To provide
liquidity, the Fund typically invests a part of its assets in
various types of U.S. Government securities and money market
instruments. For temporary defensive purposes, the Fund may invest
up to 100% of its assets in such money market instruments. These
investments are more fully explained in "Investment Policies and
Strategies," starting on page __.
Who Manages the Fund? The Manager supervises the Fund's
investment program and handles its day-to-day business. The
Manager (including a subsidiary) manages investment company
portfolios having over $62 billion in assets as of December 31,
1996. The Manager is paid an advisory fee by the Fund, based on
its net assets. The Fund's sub-adviser is OpCap Advisors (the
"Sub-Adviser"), which is paid a fee by the Manager, not the Fund.
The Sub-Adviser provides day-to-day portfolio management of the
Fund. The Fund's portfolio managers are employed by the Sub-
Adviser and are primarily responsible for the selection of the
Fund's securities. The Board of Trustees, elected by shareholders,
oversees the Manager, the Sub-Adviser and the portfolio managers.
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. It is important to remember that the Fund is designed for
long-term investors. The Fund's investments in stocks are subject
to changes in their value from a number of factors such as changes
in general stock market movements, or the change in value of
particular stocks because of an event affecting the issuer. These
changes affect the value of the Fund's investments and its price
per share. The Fund's investments in smaller capitalization
issuers may involve greater risks than more traditional equity
investments. Smaller capitalization companies may experience higher
growth rates and higher failure rates than larger capitalization
companies. Further, the trading volume of securities of smaller
capitalization companies is normally lower than that of larger
capitalization companies, and may disproportionately affect their
market price. Investments in foreign securities involve additional
risks not associated with investment in domestic securities,
including risks associated with changes in currency rates.
While the Sub-Adviser tries to reduce risks by diversifying
investments, by carefully researching securities before they are
purchased for the Fund's portfolio, and in some cases by using
hedging techniques, there is no guarantee of success in achieving
the Fund's investment objective and your shares may be worth more
or less than their original cost when you redeem them. Please
refer to "Investment Risks" starting on page ___ for a more
complete discussion of the Fund's investment risks.
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
Class A, Class B and Class C shares to the individual investor.
All classes have the same investment portfolio but have different
expenses. Class A shares are offered with a front-end sales
charge, starting at 5.75%, and 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, respectively, of buying
them. There is also an annual asset-based sales charge which is
higher on Class B and Class C shares. Please review "How to Buy
Shares" starting on page __ for more details, including a
discussion about factors you and your financial advisor should
consider in determining which class may be appropriate for you.
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 __ and __. 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, 1996, is included
in the Statement of Additional Information.
Oppenheimer Quest Small Cap Value Fund
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
CLASS A
---------------------------------------------------------
YEAR ENDED OCTOBER 31,
1996(2) 1995 1994 1993
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
PER SHARE OPERATING DATA:
Net asset value, beginning of period $ 17.31 $ 16.33 $ 17.68 $ 14.60
- ----------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income (loss) .03 .11(4) (.03)(4) (.04)(4)
Net realized and unrealized gain (loss) 2.79 1.29 .01 4.26
- ----------------------------------------------------------------------------------------------------------
Total income (loss) from investment
operations 2.82 1.40 (.02) 4.22
- ----------------------------------------------------------------------------------------------------------
Dividends and distributions to shareholders:
Dividends from net investment income (.11) -- -- --
Distributions from net realized gain (.99) (.42) (1.33) (1.14)
- ----------------------------------------------------------------------------------------------------------
Total dividends and distributions
to shareholders (1.10) (.42) (1.33) (1.14)
- ----------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 19.03 $ 17.31 $ 16.33 $ 17.68
==========================================================
- ----------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE(5) 17.17% 8.82% 0.04% 30.21%
- ----------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in thousands) $ 102,746 $ 116,307 $ 120,102 $ 104,898
- ----------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $ 117,765 $ 119,440 $ 115,276 $ 75,500
- ----------------------------------------------------------------------------------------------------------
Ratios to average net assets:
Net investment income (loss) 0.11% 0.67% (0.14)% (0.36)%
Expenses 1.90% 1.80% 1.88% 1.89%
- ----------------------------------------------------------------------------------------------------------
Portfolio turnover rate(8) 70.4% 76.0% 67.0% 74.0%
Average brokerage commission rate(9) $ 0.0515 -- -- --
</TABLE>
<TABLE>
<CAPTION>
CLASS A
-----------------------------------------------------------
YEAR ENDED OCTOBER 31,
1992 1991 1990 1989(3)
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
PER SHARE OPERATING DATA:
Net asset value, beginning of period $ 13.52 $ 8.80 $ 10.91 $ 10.00
- ------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income (loss) --(4) (.05)(4) .07(4) .08(4)
Net realized and unrealized gain (loss) 1.50 4.85 (2.04) .83
- ------------------------------------------------------------------------------------------------------------
Total income (loss) from investment
operations 1.50 4.80 (1.97) .91
- ------------------------------------------------------------------------------------------------------------
Dividends and distributions to shareholders:
Dividends from net investment income -- (.08) (.08) --
Distributions from net realized gain (.42) -- (.06) --
- ------------------------------------------------------------------------------------------------------------
Total dividends and distributions
to shareholders (.42) (.08) (.14) --
- ------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 14.60 $ 13.52 $ 8.80 $ 10.91
============================================================
- ------------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE(5) 11.60% 55.01% (18.33)% 9.10%
- ------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in thousands) $ 39,693 $ 20,686 $ 1,880 $ 2,085
- ------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $ 32,551 -- -- --
- ------------------------------------------------------------------------------------------------------------
Ratios to average net assets:
Net investment income (loss) (0.04)% (0.41)%(7) 0.71%(7) 1.34%(6)(7)
Expenses 2.11% 2.25%(7) 2.00%(7) 1.74%(6)(7)
- ------------------------------------------------------------------------------------------------------------
Portfolio turnover rate(8) 95.0% 103.0% 18.0% 32.0%
Average brokerage commission rate(9) -- -- -- --
</TABLE>
<TABLE>
<CAPTION>
CLASS B
--------------------------------------------------------
YEAR ENDED OCTOBER 31,
1996(2) 1995 1994 1993(1)
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
PER SHARE OPERATING DATA:
Net asset value, beginning of period $ 17.11 $ 16.24 $ 17.66 $ 17.19
- --------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income (loss) (.06) .02(4) (.11)(4) (.02)(4)
Net realized and unrealized gain (loss) 2.76 1.27 .02 .49
- --------------------------------------------------------------------------------------------------------
Total income (loss) from investment
operations 2.70 1.29 (.09) .47
- --------------------------------------------------------------------------------------------------------
Dividends and distributions to shareholders:
Dividends from net investment income (.03) -- -- --
Distributions from net realized gain (.99) (.42) (1.33) --
- --------------------------------------------------------------------------------------------------------
Total dividends and distributions
to shareholders (1.02) (.42) (1.33) --
- --------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 18.79 $ 17.11 $ 16.24 $ 17.66
========================================================
- --------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE(5) 16.57% 8.17% (0.39)% 2.73%
- --------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in thousands) $ 30,766 $ 23,440 $ 16,144 $ 1,754
- --------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $ 26,478 $ 20,105 $ 9,401 $ 934
- --------------------------------------------------------------------------------------------------------
Ratios to average net assets:
Net investment income (loss) (0.37)% 0.09% (0.70)% (1.15)%(6)
Expenses 2.38% 2.37% 2.48% 2.57%(6)
- --------------------------------------------------------------------------------------------------------
Portfolio turnover rate(8) 70.4% 76.0% 67.0% 74.0%
Average brokerage commission rate(9) $ 0.0515 -- -- --
</TABLE>
1. For the period from September 1, 1993 (inception of offering) to October 31,
1993.
2. On November 22, 1995, OppenheimerFunds, Inc. became the investment adviser to
the Fund.
3. For the period from January 1, 1989 (commencement of operations) to October
31, 1989.
4. Based on average shares outstanding for the period.
5. Assumes a hypothetical initial investment on the business day before the
first day of the fiscal period (or inception of offering), with all dividends
and distributions reinvested in additional shares on the reinvestment date, and
redemption at the net asset value calculated on the last business day of the
fiscal period. Sales charges are not reflected in the total returns. Total
returns are not annualized for periods of less than one full year.
6. Annualized.
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. 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, 1996 were $96,608,078 and $113,296,341, respectively.
9. Total brokerage commissions paid on applicable purchases and sales of
portfolio securities for the period, divided by the total number of related
shares purchased and sold.
<PG$PCN>
Oppenheimer Quest Small Cap Value Fund
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
CLASS C
--------------------------------------------------------
YEAR ENDED OCTOBER 31,
1996(2) 1995 1994 1993(1)
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
PER SHARE OPERATING DATA:
Net asset value, beginning of period $ 17.11 $ 16.23 $ 17.67 $ 17.19
- --------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income (loss) (.05) .01(4) (.13)(4) (.02)(4)
Net realized and unrealized gain (loss) 2.75 1.29 .02 .50
- --------------------------------------------------------------------------------------------------------
Total income (loss) from investment
operations 2.70 1.30 (.11) .48
- --------------------------------------------------------------------------------------------------------
Dividends and distributions to shareholders:
Dividends from net investment income (.06) -- -- --
Distributions from net realized gain (.99) (.42) (1.33) --
- --------------------------------------------------------------------------------------------------------
Total dividends and distributions
to shareholders (1.05) (.42) (1.33) --
- --------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 18.76 $ 17.11 $ 16.23 $ 17.67
========================================================
- --------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE(5) 16.55% 8.24% (0.51)% 2.79%
- --------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in thousands) $ 13,181 $ 9,068 $ 3,344 $ 235
- --------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $ 11,501 $ 6,114 $ 1,381 $ 138
- --------------------------------------------------------------------------------------------------------
Ratios to average net assets:
Net investment income (loss) (0.40)% 0.08% (0.81)% (1.20)%(6)
Expenses 2.40% 2.38% 2.59% 2.57%(6)
- --------------------------------------------------------------------------------------------------------
Portfolio turnover rate(8) 70.4% 76.0% 67.0% 74.0%
Average brokerage commission rate(9) $ 0.0515 -- -- --
</TABLE>
1. For the period from September 1, 1993 (inception of offering) to October 31,
1993.
2. On November 22, 1995, OppenheimerFunds, Inc. became the investment adviser to
the Fund.
3. For the period from January 1, 1989 (commencement of operations) to October
31, 1989.
4. Based on average shares outstanding for the period.
5. Assumes a hypothetical initial investment on the business day before the
first day of the fiscal period (or inception of offering), with all dividends
and distributions reinvested in additional shares on the reinvestment date, and
redemption at the net asset value calculated on the last business day of the
fiscal period. Sales charges are not reflected in the total returns. Total
returns are not annualized for periods of less than one full year.
6. Annualized.
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. 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, 1996 were $96,608,078 and $113,296,341, respectively.
9. Total brokerage commissions paid on applicable purchases and sales of
portfolio securities for the period, divided by the total number of related
shares purchased and sold.
<PG$PCN>
<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 Sub-Adviser
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 they
have a rating lower than "Baa" by Moody's Investors Service, Inc.
("Moody's") or lower than "BBB" by Standard & Poor's Corporation
("S&P"), or another nationally recognized statistical rating
organization, 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; the Fund's investment policies and
practices described elsewhere in this Prospectus or in the
Statement of Additional Information are not "fundamental" unless
stated to be "fundamental".
Fundamental policies are those that cannot be changed without
the approval of a "majority" of the Fund's outstanding voting
shares. The term "majority" is defined in the Investment Company
Act of 1940 to be a particular percentage of outstanding voting
shares (and this term is explained in the Statement of Additional
Information). The Board of Trustees of the Trust (as defined
below) (the "Board of Trustees") may change non-fundamental
policies without shareholder approval, although significant changes
will be described in amendments to this Prospectus.
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.
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" table above shows 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 gains 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.
Investment Risks
All investments carry risks to some degree, whether they are
risks that market prices of the investment will fluctuate (this is
known as "market risk") or that the underlying issuer will
experience financial difficulties and may default on its obligation
under a fixed-income investment to pay interest and repay principal
(this is referred to as "credit risk"). The special risks of
certain types of investments that the Fund may hold are described
below. They affect the value of the Fund's investments, its
investment performance and the prices of its shares. These risks
collectively form the risk profile of the Fund.
Because of the types of securities the Fund invests in and the
investment techniques the Fund uses, the Fund is designed for
investors who are investing for the long term. It is not intended
for investors seeking assured income or preservation of capital.
While the Manager tries to reduce risks by diversifying
investments, by carefully researching securities before they are
purchased, and in some cases by using hedging techniques, changes
in overall market prices can occur at any time and there is no
assurance that the Fund will achieve its investment objective. When
you redeem your shares, they may be worth more or less than what
you paid for them.
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.
<PAGE>
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.
Hedging Instruments Can Be Volatile Investments and May
Involve Special Risks. The Fund may invest in certain hedging
instruments, as described below. The use of hedging instruments
requires special skills and knowledge of investment techniques that
are different than what is required for normal portfolio
management. If the Sub-Adviser uses a hedging instrument at the
wrong time or judges market conditions incorrectly, hedging
strategies may reduce the Fund's return. The Fund could also
experience losses if the prices of its futures 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.
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 that have been created and for which a market
exists, but which are not available for immediate delivery. The
Fund does not intend to make such purchases for speculative
purposes. During the period between the purchase and settlement,
the underlying securities are subject to market fluctuations and no
interest accrues prior to delivery of the securities.
Repurchase Agreements. The Fund may enter into repurchase
agreements to generate income for liquidity purposes to meet
anticipated redemptions, or pending the investment of proceeds from
sales of Fund shares or settlement of purchases of portfolio
investments. In a repurchase transaction, the Fund buys a security
and simultaneously sells it to the vendor for delivery at a future
date. Repurchase agreements must be fully collateralized. However,
if the vendor fails to pay the resale price on the delivery date,
the Fund may incur costs in disposing of the collateral and may
experience losses if there is any delay in its ability to do so.
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 and procedures
established by the Board of Trustees, the Manager determines the
liquidity of certain of the Fund's investments. Investments may be
illiquid because of the absence of an active trading market, making
it difficult to value them or dispose of them promptly at an
acceptable price. 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. The
Manager monitors holdings of illiquid securities on an ongoing
basis and at times the Fund may be required to sell some holdings
to maintain adequate liquidity.
Loans of Portfolio Securities. To raise cash for liquidity
purposes, the Fund may lend its portfolio securities to brokers,
dealers, and other financial institutions. The Fund must receive
collateral for a loan. After any loan, the value of the securities
loaned is not expected to exceed 10% of the Fund's total assets.
Other conditions to which loans are subject are described in the
Statement of Additional Information. There are some risks in
connection with securities lending. The Fund might experience a
delay in receiving additional collateral to secure a loan or a
delay in recovery of the loaned securities.
Hedging. 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 ("NASDAQ")of
The Nasdaq Stock Market, Inc. 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 owns the investment on which the call was
written or the Fund owns and segregates liquid assets to satisfy
its obligation if the call is exercised. 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.
Other Investment Restrictions. The Fund has other 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 a
temporary measure for extraordinary or emergency purposes and will
make no additional investments while such borrowings exceed 5% of
the Fund's total assets. With respect to this fundamental policy,
the Fund can borrow only if it maintains a 300% ratio of assets to
borrowings at all times in the manner set forth in the Investment
Company Act.
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 (the Fund has
undertaken as a non-fundamental policy to limit investments in
restricted securities to 5% of its total assets excluding
restricted securities that may be resold to "qualified
institutional buyers"). Notwithstanding this restriction on
illiquid securities, the Fund may purchase securities which are not
registered under the Securities Act of 1933 but which can be sold
to "qualified institutional buyers" in accordance with Rule 144A
under that Act. Any such security will not be considered illiquid,
provided that the Manager, under guidelines established by the
Board of Trustees, determines that an adequate trading market
exists for that security.
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.
Unless this Prospectus states that a percentage restriction
applies on an ongoing basis, it applies only at the time the Fund
makes an investment, and the Fund need not sell securities to meet
the percentage limits if the value of the investment increases in
proportion to the size of the Fund. Other investment restrictions
are listed in "Investment Restrictions" in the Statement of
Additional Information.
How the Fund is Managed
Organization and History. The Fund is one of four portfolios of
Oppenheimer Quest For Value Funds (the "Trust"), 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 and the Sub-Adviser. "Trustees
and Officers of the Trust" in the Statement of Additional
Information names the Trustees and provides more information about
them and the officers of the Trust. Although the Trust will not
normally hold annual meetings of its shareholders, it may hold
shareholder meetings from time to time on important matters, and
shareholders have the right to call a meeting to remove a Trustee
or to take other action described in the Trust'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 entitles a shareholder to
vote on matters submitted to the shareholders to vote on, 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. Please refer to "How the Fund is Managed" in the
Statement of Additional Information for more information on the
voting of shares.
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
is responsible to pay 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 $62 billion as of December 31, 1996, and with more than 3
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 the Sub-Adviser to
provide day-to-day portfolio management of the Fund. Prior to
November 22, 1995, the Sub-Adviser was named Quest for Value
Advisors and the Sub-Adviser was the investment adviser to the
Fund. The Sub-Adviser is a majority-owned subsidiary of Oppenheimer
Capital, a registered investment advisor, whose employees perform
all investment advisory services provided to the Fund by the Sub-
Adviser. Oppenheimer Financial Corp., a holding company, holds a
one-third interest in Oppenheimer Capital and Oppenheimer Capital,
L.P., a Delaware limited partnership whose units are traded on The
New York Stock Exchange and of which Oppenheimer Financial Corp. is
the sole general partner, owns the remaining two-thirds interest.
On February 13, 1997, PIMCO Advisors L.P., a registered
investment adviser with $110 billion in assets under management
through various subsidiaries, signed a definitive agreement with
Oppenheimer Group, Inc. and its subsidiary Oppenheimer Financial
Corp. for PIMCO Advisors L.P. and its affiliate, Thomson Advisory
Group, Inc., to acquire the one-third managing general partner
interest in Oppenheimer Capital and the 1.0% general partner
interest in Oppenheimer Capital, L.P. The completion of the
transaction is subject to certain client, lender, Internal Revenue
Service and other approvals.
Portfolio Managers. The portfolio managers of the Fund are
Timothy McCormack, Timothy Curro and Gavin Albert. Mr. McCormack
has been a portfolio manager of the Fund since May 1996, and
Messrs. Curro and Albert became the portfolio managers of the Fund
effective January 1, 1997. Mr. McCormack, a Vice President of
Oppenheimer Capital, joined that firm in 1994; from 1993 to 1994,
he was a securities analyst at U.S. Trust Company and prior thereto
he was a securities analyst at Gabelli & Company. Mr. Curro has
been a Vice President of Oppenheimer Capital since November 1996.
Prior thereto, he was a general partner of Value Holdings, L.P., an
investment partnership, from May 1995 to November 1996, a Vice
President in the equity research department at UBS Securities Inc.,
from June 1994 through May 1995 and from January 1991 through
February 1993 and was a partner with Omega Advisors, Inc. from
March 1993 to March 1994. Mr. Albert, a Vice President of
Oppenheimer Capital since December 1996, joined that firm in
September 1994 as a research analyst. Prior thereto he was a
management consultant for EDS Energy Management in 1994, a graduate
student at the Vanderbilt University Business School from September
1992 to May 1994 and a financial analyst in the Corporate Finance
department of Texaco, Inc. from 1990 to 1992.
The Sub-Adviser's equity investment policy is overseen by
George Long, President and Chief Investment Officer for Oppenheimer
Capital. Mr. Long has been with Oppenheimer Capital since 1981.
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: 1.00% of the first $400 million of average
annual net assets, 0.90% of the next $400 million, and 0.85% of
average annual net assets over $800 million. This management fee
is higher than that paid by most other investment companies. The
Fund pays expenses related to its daily operations, such as
custodian fees, trustees' fees, transfer agency fees and legal and
auditing costs; the Fund also reimburses the Manager for
bookkeeping and accounting services performed on behalf of the
Fund. These expenses are paid out of the Fund's assets and are not
paid directly by shareholders. However, they reduce the net asset
value of shares, and therefore are indirectly borne by shareholders
through their investment. More information about the Investment
Advisory Agreement and the other expenses paid by the Fund is
contained in the Statement of Additional Information.
The Manager pays the Sub-Adviser an annual fee based on the
average daily net assets of the Fund equal to 40% of the advisory
fee collected by the Manager based on the 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 net assets of
the Fund that exceed the Base Amount.
The Sub-Adviser 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, the
Sub-Adviser 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.
The Distributor. The Fund's shares are sold through dealers,
brokers and other financial institutions that have a sales
agreement with OppenheimerFunds Distributor, Inc., a subsidiary of
the Manager that acts as the Fund's Distributor. The Distributor
also distributes the shares of the other Oppenheimer funds managed
by the Manager and is sub-distributor for funds managed by a
subsidiary of the Manager.
The Transfer Agent and Shareholder Servicing Agent. The Fund's
transfer agent and shareholder servicing agent is OppenheimerFunds
Services, a division of the Manager. It also acts as the
shareholder servicing agent for certain other Oppenheimer funds.
Shareholders should direct inquiries about their accounts to the
Transfer Agent at the address and toll-free number shown below in
this Prospectus and on the back cover. 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 of shares will
usually be different as a result of the different kinds of expenses
each class bears. These returns measure the performance of a
hypothetical account in the Fund over various periods, and do not
show the performance of each shareholder's account (which will vary
if dividends are received in cash or shares are sold or additional
shares are purchased). The Fund's performance information may help
you see how well your investment in the Fund has done over time and
to compare it to other funds or market indices, as we have done
below on pages __ and __.
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, normally the
current maximum initial sales charge has been deducted. When total
returns are shown for Class B or Class C shares, normally the
contingent deferred sales charge that applies to the period for
which total return is shown has been deducted. However, total
returns may also be quoted "at net asset value," without including
the effect of the sales charge, and those returns would be lower if
sales charges were deducted.
How Has the Fund Performed? Below is a discussion by the Manager of
the Fund's performance during its last fiscal year ended October
31, 1996, followed by a graphical comparison of the Fund's
performance to an appropriate broad-based market index.
Management's Discussion of Performance. During the Fund's
fiscal year ended October 31, 1996 the small-cap market did not
experience the overall strong performance of the domestic stock
market for larger capitalization issuers. Investments by the Fund
in a telecommunications company and a producer of consumer durables
increased in value over the past fiscal year and helped the Fund
perform at net asset value ahead of its benchmark, the Russell 2000
Index. During the fiscal year, the Sub-Adviser continued its
conservative investment policy of seeking to preserve capital and
achieve growth by purchasing shares of companies believed to be
undervalued with established operating histories, strong balance
sheets and cash flow, and skilled, experienced management. The
Fund's portfolio and its portfolio managers' strategies are subject
to change.
Comparing the Fund's Performance to the Market. The graphs
below show the performance of a hypothetical $10,000 investment in
Class A, Class B and Class C shares of the Fund held until October
31, 1996. 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. 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 10/31/96
- ----------------------------------------------------
Class A Shares(1)
- -----------------
1-Year 5-Year Life
------ ------ ----
10.43 11.80 11.91
Class B Shares(2)
- -----------------
1-Year Life of Class
------ -------------
11.57 7.85
Class C Shares(3)
- -----------------
1-Year Life of Class
------ -------------
15.55 8.38
- ---------------------
Total returns and the ending account values in the graphs show
change in share value and include reinvestment of all dividends and
capital gains distributions.
(1)Class A returns are shown net of the current applicable 5.75%
maximum initial sales charge. The inception date of the Fund
(Class A shares) was 1/3/89.
(2) Class B shares of the Fund were first publicly offered on
9/1/93. 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
9/1/93. 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: Class A, Class B and Class C 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 "Retirement Plans," as defined in "Class
A Contingent Deferred Sales Charge" on page ____. If you purchase
Class A shares as part of an investment of at least $1 million
($500,000 for Retirement Plans) in shares of one or more
Oppenheimer funds, you will not pay an initial sales charge, but if
you sell any of those shares within 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. Sales
charge rates 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 of buying them you will normally pay a contingent
deferred sales charge that varies, depending on how long you have
owned your shares as described in "Buying Class B Shares" below.
Class C Shares. If you buy Class C shares, you pay no
sales charge at the time of purchase, but if you sell your shares
within 12 months of buying them, you will normally pay a contingent
deferred sales charge of 1% as described in "Buying Class C Shares"
below.
Which Class of Shares Should You Choose? Once you decide that the
Fund is an appropriate investment for you, the decision as to which
class of shares is better suited to your needs depends on a number
of factors which you should discuss with your financial advisor.
The Fund's operating costs that apply to a class of shares and the
effect of the different types of sales charges on your investment
will vary your investment results over time. The most important
factors to consider are how much you plan to invest and how long
you plan to hold your investment. If your goals and objectives
change over time and you plan to purchase additional shares, you
should re-evaluate those factors to see if you should consider
another class of shares.
In the following discussion, to help provide you and your
financial advisor with a framework in which to choose a class, we
have made some assumptions using a hypothetical investment in the
Fund. We used the sales charge rates that apply to each class, and
considered the effect of the asset-based sales charge on Class B
and Class C expenses (which, like all expenses, will affect your
investment return). For the sake of comparison, we have assumed
that there is a 10% rate of appreciation 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. The effect of the sales
charge, over time, using our assumptions will generally depend on
the amount invested. Because of the effect of class-based expenses,
your choice will also depend on how much you plan to invest. For
example, the reduced sales charges available for larger purchases
of Class A shares may, over time, offset the effect of paying an
initial sales charge on your investment (which reduces the amount
of your investment dollars used to buy shares for your account),
compared to the effect over time of higher class-based expenses on
Class B or Class C shares for which no initial sales charge is
paid.
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 economic
impact on your account over the longer term than the reduced front-
end sales charge available for larger purchases of Class A shares.
For example, Class A might be more advantageous than Class C (as
well as Class B) for investments of more than $100,000 expected to
be held for 5 or 6 years (or more). For investments over $250,000
expected to be held 4 to 6 years (or more), Class A shares may
become more advantageous than Class C (and Class B). If investing
$500,000 or more, Class A may be more advantageous as your
investment horizon approaches 3 years or more.
And for most investors who invest $1 million or more, in most
cases Class A shares will be the most advantageous choice, no
matter how long you intend to hold your shares. For that reason,
the Distributor normally will not accept purchase orders of
$500,000 or more of Class B shares or $1 million or more of Class
C shares from a single investor.
Investing for the Longer Term. If you are investing for
the longer term, for example, for retirement, and do not expect to
need access to your money for seven years or more, Class B shares
may be an appropriate consideration, if you plan to invest less
than $100,000. If you plan to invest more than $100,000 over the
long term, Class A shares will likely be more advantageous than
Class B shares or Class C shares, as discussed above, because of
the effect of the expected lower expenses for Class A shares and
the reduced initial sales charges available for larger investments
in Class A shares under the Fund's Right of Accumulation.
Of course, these examples are based on approximations of the
effect of current sales charges and expenses on a hypothetical
investment over time, using the assumed annual performance return
stated above, and therefore you should analyze your opinions
carefully.
Are There Differences in Account Features That Matter to
You? Because some account features may not be available for Class
B or Class C shareholders, or other features (such as Automatic
Withdrawal Plans) may not be advisable (because of the effect of
the contingent deferred sales charge in non-retirement accounts)
for Class B or Class C shareholders, you should carefully review
how you plan to use your investment account before deciding which
class of shares is better for you. For example, share certificates
are not available for Class B or Class C shares, and if you are
considering using your shares as collateral for a loan, that may be
a factor to consider. Additionally, dividends payable to Class B
and Class C shareholders will be reduced by the additional expenses
borne solely by those classes, or higher expenses, such as the
asset-based sales charges to which Class B and Class C shares are
subject, as described below and in the Statement of Additional
Information.
How Does It Affect Payments to My Broker? A salesperson,
such as a broker or any other person who is entitled to receive
compensation for selling Fund shares, may receive different
compensation for selling one class of shares than for selling
another class. It is important that investors understand that the
purpose of the contingent deferred sales charges and asset-based
sales charges for Class B and Class C shares are the same as the
purpose of the front-end sales charge on sales of Class A shares:
that is, to compensate the Distributor for commissions it pays to
dealers and financial institutions for selling shares.
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, profit-sharing plans and 401(k) 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.
The Distributor may appoint certain servicing agents as the
Distributor's agent to accept purchase (and redemption) orders.
When you buy shares, be sure to specify Class A, Class B or Class
C shares. If you do not choose, your investment will be made in
Class A shares.
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 to your bank
account.
Shares are purchased for your account on AccountLink on the
regular business day the Distributor is instructed by you to
initiate the ACH transfer to buy shares. You can provide those
instructions automatically, under an Asset Builder Plan, described
below, or by telephone instructions using OppenheimerFunds
PhoneLink, also described below. You should request AccountLink
privileges on the application or dealer settlement instructions
used to establish your account. Please refer to "AccountLink" below
for more details.
Asset Builder Plans. You may purchase shares of the Fund
(and up to four other Oppenheimer funds) automatically each month
from your account at a bank or other financial institution under an
Asset Builder Plan with AccountLink. Details are in the Statement
of Additional Information.
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 or its designated agent 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 regular 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,
in its sole discretion, may reject any purchase order for the
Fund's shares.
Special Sales Charge Arrangements for Certain Persons. Appendix A
to this Prospectus sets forth conditions for the waiver of, or
exemption from, sales charges or the special sales charge rates
that apply to shareholders of one of the Former Quest for Value
Funds (as defined in that Appendix), including the Fund.
Buying Class A Shares. Class A shares are sold at their offering
price, which is normally net asset value plus an initial sales
charge. However, in some cases, described below, purchases are not
subject to an initial sales charge, and the offering price will be
the net asset value. In some cases, reduced sales charges may be
available, as described below. Out of the amount you invest, the
Fund receives the net asset value to invest for your account. The
sales charge varies depending on the amount of your purchase. A
portion of the sales charge may be retained by the Distributor and
allocated to your dealer as commission. The current 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 by a retirement plan qualified under section
401(a) if the retirement plan has total plan assets of $500,000 or
more.
Purchases aggregating $1 million or more.
Purchases by a retirement plan qualified under sections
401(a) or 401(k) of the Internal Revenue Code, by a non-qualified
deferred compensation plan (not including Section 457 plans),
employee benefit plan, group retirement plan (see "How to Buy
Shares - Retirement Plans" in the Statement of Additional
Information for further details), an employee's 403(b)(7) custodial
plan account, SEP IRA, SARSEP, or SIMPLE plan (all of these plans
are collectively referred to as "Retirement Plans"); that: (1) buys
shares costing $500,000 or more or (2) has, at the time of
purchase, 100 or more eligible participants, or (3) certifies that
it projects to have annual plan purchases of $200,000 or more.
Purchases by an OppenheimerFunds Rollover IRA if the
purchases are made (1) through a broker, dealer, bank or registered
investment adviser that has made special arrangements with the
Distributor for these purchases, or (2) by a direct rollover of a
distribution from a qualified retirement plan if the administrator
of that plan has made special arrangements with the Distributor for
those purchases.
The Distributor pays dealers of record commissions on those
purchases in an amount equal to (i) 1.0% for non-Retirement Plan
accounts, and (ii) for Retirement Plan accounts, 1.0% of the first
$2.5 million, plus 0.50% of the next $2.5 million, plus 0.25% of
purchases over $5 million. That commission will be paid only on
those purchases that were not previously subject to a front-end
sales charge and dealer commission. No sales commission will be
paid to the dealer, broker or financial institution on sales of
Class A shares purchased with the redemption proceeds of shares of
a mutual fund offered as an investment option in a Retirement Plan
in which Oppenheimer funds are also offered as investment options
under a special arrangement with the Distributor if the purchase
occurs more than 30 days after the addition of the Oppenheimer
funds as an investment option to the Retirement Plan.
If you redeem any of those shares 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 may be equal to 1.0% of the lesser of (1) the aggregate net
asset value of the redeemed shares (not including shares purchased
by reinvestment of dividends or capital gain distributions) or (2)
the original offering price (which is the original net asset value)
of the redeemed shares. However, the Class A contingent deferred
sales charge will not exceed the aggregate amount of the
commissions the Distributor paid to your dealer on all Class A
shares of all Oppenheimer funds you purchased subject to the Class
A contingent deferred sales charge. 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 contingent deferred 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.
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 your 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, banks or registered investment advisers
that have entered into an agreement with the Distributor providing
specifically for the use of shares of the Fund in particular
investment products made available to their clients (those clients
may be charged a transaction fee by their dealer, broker or adviser
for the purchase or sale of Fund shares);
(1) investment advisors and financial planners who charge an
advisory, consulting or other fee for their services and buy shares
for their own accounts or the accounts of their clients, and (2)
retirement plans and deferred compensation plans and trusts used to
fund those plans (including, for example, plans qualified or
created under sections 401(a), 403(b) or 457 of the Internal
Revenue Code), and "rabbi trusts" that buy shares for their own
accounts, in each case if those purchases are made through a broker
or agent or other financial intermediary that has made special
arrangements with the Distributor for those purchases; (3) clients
of such investment advisors or financial planners who buy shares
for their own accounts may also purchase shares without sales
charge but only if their accounts are linked to a master account of
their investment advisor or financial planner on the books and
records of the broker, agent or financial intermediary with which
the Distributor has made such special arrangements (each of these
investors may be charged a fee by the broker, agent or financial
intermediary for purchasing shares);
directors, trustees, officers or full-time employees of
OpCap Advisors or its affiliates, their relatives or any trust,
pension, profit sharing or other benefit plan which beneficially
owns shares for those persons;
employee benefit plans purchasing shares through a
shareholder servicing agent which the Distributor has appointed as
agent to accept those purchase orders;
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 December 31, 1996.
Waivers of Initial and Contingent Deferred Sales Charges in
Certain Transactions. Class A shares issued or purchased in the
following transactions are not subject to Class A sales charges:
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 past 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
shares purchased with the proceeds of maturing principal of
units of any Qualified Unit Investment Liquid Trust Series.
Waivers of the Class A Contingent Deferred Sales Charge for
Certain Redemptions. The Class A contingent deferred sales charge
is also waived if shares that would otherwise be subject to the
contingent deferred sales charge are redeemed in the following
cases:
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 in writing 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);
for distributions from a TRAC-2000 401(k) plan sponsored
by the Distributor due to the termination of the TRAC-2000 program;
or
for distributions from Retirement Plans, deferred
compensation plans or other employee benefit plans for any of the
following purposes: (1) following the death or disability (as
defined in the Internal Revenue Code) of the participant or
beneficiary (the death or disability must occur after the
participant's account was established); (2) to return excess
contributions; (3) to return contributions made due to a mistake of
fact; (4) hardship withdrawals, as defined in the plan; (5) under
a Qualified Domestic Relations Order, as defined in the Internal
Revenue Code; (6) to meet the minimum distribution requirements of
the Internal Revenue Code; (7) to establish "substantially equal
periodic payments" as described in Section 72(t) of the Internal
Revenue Code; (8) for retirement distributions or loans to
participants or beneficiaries; (9) separation from service; (10)
participant-directed redemptions to purchase shares of a mutual
fund (other than a fund managed by the Manager or its subsidiary)
offered as an investment option in a Retirement Plan in which
Oppenheimer funds are also offered as investment options under a
special arrangement with the Distributor; or (11) plan termination
or "in-service distributions", if the redemption proceeds are
rolled over directly to an OppenheimerFunds IRA.
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 at an annual
rate of 0.25% of the average annual net assets of the class. The
Fund also pays a service fee to the Distributor 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
contingent deferred sales charge will be based on the lesser of the
net asset value of the redeemed shares at the time of redemption or
the original offering price (which is the original net asset
value). The contingent deferred sales charge is not imposed on the
amount of your account value represented by the increase in net
asset value over the initial purchase price. The Class B
contingent deferred sales charge is paid to the Distributor to
reimburse its expenses of providing distribution-related services
to the Fund in connection with the sale of Class B shares.
To determine whether the contingent deferred sales charge
applies to a redemption, the Fund redeems shares in the following
order: (1) shares acquired by reinvestment of dividends and capital
gains distributions, (2) shares held for over 6 years, and (3)
shares held the longest during the 6-year period. The contingent
deferred sales charge is not imposed in the circumstances described
in "Waivers of Class B and Class C Sales Charges" below.
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. 72 months after you
purchase Class B shares, those shares will automatically convert to
Class A shares. This conversion feature relieves Class B
shareholders of the asset-based sales charge that applies to Class
B shares under the Class B Distribution and Service Plan, described
below. The conversion is based on the relative net asset value of
the two classes, and no sales load or other charge is imposed. When
Class B shares convert, any other Class B shares that were acquired
by the reinvestment of dividends and distributions on the converted
shares will also convert to Class A shares. The conversion feature
is subject to the continued availability of a tax ruling described
in "Alternative Sales Arrangements - Class A, Class B and Class C
Shares" in the Statement of Additional Information.
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 contingent deferred sales charge will be based
on the lesser of the net asset value of the redeemed shares at the
time of redemption or the original offering price (which is the
original net asset value). The contingent deferred sales charge is
not imposed on the amount of your account value represented by the
increase in net asset value over the initial purchase price. The
Class C contingent deferred sales charge is paid to compensate the
Distributor for its expenses of providing distribution-related
services to the Fund in connection with the sale of Class C shares.
To determine whether the contingent deferred sales charge
applies to a redemption, the Fund redeems shares in the following
order: (1) shares acquired by reinvestment of dividends and capital
gains distributions, (2) shares held for over 12 months, and (3)
shares held the longest during the 12-month period.
Distribution and Service Plans for Class B and Class C
Shares. The Fund has adopted Distribution and Service Plans for
Class B and Class C shares to compensate the Distributor for its
services and costs in distributing Class B and Class C shares and
servicing accounts. Under the Plans, the Fund pays the Distributor
an annual "asset-based sales charge" of 0.75% per year on Class B
shares that are outstanding for 6 years or less and on Class C
shares. The Distributor also receives a service fee of 0.25% per
year under each plan.
Under each Plan, both fees are computed on the average of the
net asset value of shares in the respective class, determined as of
the close of each regular business day during the period. The
asset-based sales charge and service fees increase Class B and
Class C expenses by up to 1.00% of the net assets per year of the
respective Class.
The Distributor uses the service fees to compensate dealers
for providing personal services for accounts that hold Class B or
Class C shares. Those services are similar to those provided under
the Class A Service Plan, described above. The Distributor pays
the 0.25% service fees to dealers in advance for the first year
after Class B or Class C shares have been sold by the dealer and
retains the service fee paid by the Fund in that year. After the
shares have been held for a year, the Distributor pays the service
fees to dealers on a quarterly basis.
The asset-based sales charge allows investors to buy Class B
or Class C shares without a front-end sales charge while allowing
the Distributor to compensate dealers that sell those shares. The
Fund pays the asset-based sales charges to the Distributor for its
services rendered in distributing Class B and Class C shares.
Those payments are at a fixed rate that is not related to the
Distributor's expenses. The services rendered by the Distributor
include paying and financing the payment of sales commissions,
service fees and other costs of distributing and selling Class B
and Class C shares.
The Distributor currently pays sales commissions of 3.75% of
the purchase price of Class B shares to dealers from its own
resources at the time of sale. Including the advance of the
service fee, the total amount paid by the Distributor to the dealer
at the time of sale of Class B shares is 4.00% of the purchase
price. The Distributor retains the Class B asset-based sales
charge.
The Distributor currently pays sales commissions of 0.75% of
the purchase price of Class C shares to dealers from its own
resources at the time of sale. Including the advance of the
service fee, the total amount paid by the Distributor to the dealer
at the time of sale of Class C shares is 1.00% of the purchase
price. The Distributor retains the asset-based sales charge during
the first year Class C shares are outstanding to recoup sales
commissions it has paid, the advances of service fee payments it
has made, and its financing costs and other expenses. The
Distributor plans to pay the asset-based sales charge as an ongoing
commission to the dealer on Class C shares that have been
outstanding for a year or more.
The Distributor's actual expenses in selling Class B and Class
C shares may be more than the payments it receives from contingent
deferred sales charges collected on redeemed shares and from the
Fund under the Distribution and Service Plans for Class B and Class
C shares. 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 receives 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
including a trustee of a "grantor" trust or revocable living trust
for which the trustee is also the sole beneficiary (the death or
disability must have occurred after the account was established,
and for disability you must provide evidence of a determination of
disability by the Social Security Administration);
returns of excess contributions to Retirement Plans;
distributions from retirement plans to make "substantially
equal periodic payments" under Section 72(t) of the Internal
Revenue Code, provided the distributions do not exceed 10% of the
account value annually, measured from the date the Transfer Agent
receives the request);
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 Internal Revenue Code; (3) to
meet minimum distribution requirements as defined in the Internal
Revenue Code; (4) to make "substantially equal periodic payments"
as described in Section 72(t) of the Internal Revenue Code; or (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 of 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 call the Transfer Agent for more
information.
AccountLink privileges should be requested on your dealer's
settlement instructions if you buy your shares through your dealer.
After your account is established, you can request AccountLink
privileges by sending signature-guaranteed instructions to the
Transfer Agent. AccountLink privileges will apply to each
shareholder listed in the registration on your account as well as
to your dealer representative of record unless and until the
Transfer Agent receives written instructions terminating or
changing those privileges. After you establish AccountLink for your
account, any change of bank account information must be made by
signature-guaranteed instructions to the Transfer Agent signed by
all shareholders who own the account.
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 worth
$5,000 or more, you can establish an Automatic Withdrawal Plan to
receive payments of at least $50 on a monthly, quarterly, semi-
annual or annual basis. The checks may be sent to you or sent
automatically to your bank account on AccountLink. You may even set
up certain types of withdrawals of up to $1,500 per month by
telephone. You should consult the Statement of Additional
Information for more details.
Automatic Exchange Plans. You can authorize the Transfer
Agent to exchange an amount you establish in advance automatically
for shares of up to five other Oppenheimer funds on a monthly,
quarterly, semi-annual or annual basis under an Automatic Exchange
Plan. The minimum purchase for each other Oppenheimer funds
account is $25. These exchanges are subject to the terms of the
exchange privilege, described below.
Reinvestment Privilege. If you redeem some or all of your Class A
or Class B shares of the Fund, you have up to 6 months to reinvest
all or part of the redemption proceeds in Class A shares of the
Fund or other Oppenheimer funds without paying a sales charge.
This privilege applies to Class A shares that you purchased subject
to an initial sales charge and to Class A or Class B shares on
which you paid a contingent deferred sales charge when you redeemed
them. This privilege does not apply to Class C shares. You must
be sure to ask the Distributor for this privilege when you send
your payment. Please consult the Statement of Additional
Information for more details.
Retirement Plans. Fund shares are available as an investment for
your retirement plans. If you participate in a plan sponsored by
your employer, the plan trustee or administrator must make the
purchase of shares for your retirement plan account. The
Distributor offers a number of different retirement plans that can
be used by individuals and employers:
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 statement. This service is not
available within 30 days of changing the address on an account.
Telephone Redemptions Through AccountLink or by Wire. There
are no dollar limits on telephone redemption proceeds sent to a
bank account designated when you establish AccountLink. Normally
the ACH transfer to your bank is initiated on the business day
after the redemption. You do not receive dividends on the proceeds
of the shares you redeemed while they are waiting to be
transferred.
Shareholders may also have the Transfer Agent send redemption
proceeds of $2,500 or more by Federal Funds wire to a designated
commercial bank account. The bank must be a member of the Federal
Reserve wire system. There is a $10 fee for each Federal Funds
wire. To place a wire redemption request, call the Transfer Agent
at 1-800-852-8457. The wire will normally be transmitted on the
next bank business day after the shares are redeemed. There is a
possibility that the wire may be delayed up to seven days to enable
the Fund to sell securities to pay the redemption proceeds. No
dividends are accrued or paid on the proceeds of shares that have
been redeemed and are awaiting transmittal by wire. To establish
wire redemption privileges on an accout that is already
established, please contact the Transfer Agent for instructions.
Selling Shares Through Your Dealer. The Distributor has made
arrangements to repurchase Fund shares from dealers and brokers on
behalf of their customers. Brokers or dealers may charge for that
service. Please call your dealer for more information about this
procedure. Please refer to "Special Arrangements for Repurchase of
Shares from Dealers and Brokers" in the Statement of Additional
Information for more details.
How to Exchange Shares
Shares of the Fund may be exchanged for shares of certain
Oppenheimer funds at net asset value per share at the time of
exchange, without sales charge. To exchange shares, you must meet
several conditions:
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 of the Fund may be exchanged only
for shares of the same class in the other Oppenheimer funds. For
example, you can exchange Class A shares of this Fund only for
Class A shares of another fund. At present, Oppenheimer Money
Market Fund, Inc. offers only one class of shares, which are
considered to be Class A shares for this purpose. In some cases,
sales charges may be imposed on exchange transactions. Please
refer to "How to Exchange Shares" in the Statement of Additional
Information for more details.
Exchanges may be requested in writing or by telephone:
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 obtain
one by calling a service representative at 1-800-525-7048. That
list can change from time to time.
There are certain exchange policies you should be aware of:
Shares are normally redeemed from one fund and purchased
from the other fund in the exchange transaction on the same regular
business day on which the Transfer Agent receives an exchange
request that is in proper form by the close of The New York Stock
Exchange that day, which is normally 4:00 P.M. but may be earlier
on some days. However, either fund may delay the purchase of
shares of the fund you are exchanging into up to 7 days if it
determines it would be disadvantaged by a same-day transfer of the
proceeds to buy shares. For example, the receipt of multiple
exchange requests from a dealer in a "market-timing" strategy might
require the sale of portfolio securities at a time or price
disadvantageous to the Fund.
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.
For tax purposes, exchanges of shares involve a redemption
of the shares of the Fund you own and a purchase of the shares of
the other fund, which may result in a capital gain or loss. For
more information about the taxes affecting exchanges, please refer
to "How to Exchange Shares" in the Statement of Additional
Information.
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 that day,
which is normally 4:00 P.M., but may be earlier on some days, on
each day the Exchange is open by dividing the value of the Fund's
net assets attributable to a class by the number of shares of that
class that are outstanding. The Board of Trustees has established
procedures to value the Fund's securities to determine net asset
value. In general, securities values are based on market value.
There are special procedures for valuing illiquid and restricted
securities and obligations for which market values cannot be
readily obtained. These procedures are described more completely
in the Statement of Additional Information.
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 the Fund's portfolio
fluctuates, and the redemption price, which is the net asset value
per share, will normally be different for Class A, Class B and
Class C shares. Therefore, the redemption value of your shares may
be more or less than their original cost.
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 to have your
bank 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 the Fund may be
redeemed "in kind", which means that the redemption proceeds will
be paid with securities from the Fund's portfolio. Please refer to
"How to Sell Shares" in the Statement of Additional Information for
more details.
"Backup Withholding" of Federal income tax may be applied at
the rate of 31% from taxable dividends, distributions and
redemption proceeds (including exchanges) if you fail to furnish
the Fund a certified Social Security or Employer 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 or the realization of any gains.
Capital Gains. The Fund may make distributions annually in December
out of any net short-term or long-term capital gains, and the Fund
may make supplemental distributions of dividends and capital gains
following 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 Long-Term Capital Gains Only. You can elect to
reinvest long-term capital gains in the Fund while receiving
dividends by check or sent to your bank account on AccountLink.
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 have held your shares. Dividends paid from short-term
capital gains and net investment income are taxable as ordinary
income. Distributions are subject to federal income tax and may be
subject to state or local taxes. Your distributions are taxable
when paid, whether you reinvest them in additional shares or take
them in cash. Every year the Fund will send you and the IRS a
statement showing the amount of each taxable distribution you
received in the previous year.
"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.
Generally speaking a capital gain or loss is the difference between
the price you paid for the shares and the price you receive when
you sell them.
Returns of Capital. In certain cases distributions made by
the Fund may be considered a non-taxable return of capital to
shareholders. If that occurs, it will be identified in notices to
shareholders. A non-taxable return of capital may reduce your tax
basis in your Fund shares.
This information is only a summary of certain federal tax
information about your investment. More information is contained
in the Statement of Additional Information, and in addition you
should consult with your tax adviser about the effect of an
investment in the Fund on your particular tax situation.
<PAGE>
APPENDIX A
Special Sales Charge Arrangements for Shareholders of
the Former Quest for Value Funds
The initial and contingent deferred sales charge rates and
waivers for Class A, Class B and Class C shares of the Fund
described elsewhere in this Prospectus are modified as described
below for those shareholders of (i) Oppenheimer Quest Value Fund,
Inc., Oppenheimer Quest Growth & Income Value Fund, Oppenheimer
Quest Opportunity Value Fund, Oppenheimer Quest Small Cap Value
Fund and Oppenheimer Quest Global Value Fund, Inc. on November 24,
1995, when OppenheimerFunds, Inc. became the investment adviser to
those funds, and (ii) Quest for Value U.S. Government Income Fund,
Quest for Value Investment Quality Income Fund, Quest for 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."
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.
<TABLE>
<CAPTION>
Front-End Front-End
Sales Sales Commission
Charge Charge as
as a as a Percentage
Number of Percentage Percentage of
Eligible Employees of Offering of Amount Offering
or Members Price Invested Price
<S> <C> <C> <C>
9 or fewer 2.50% 2.56% 2.00%
At least 10 but not
more than 49 2.00% 2.04% 1.60%
</TABLE>
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 __ to __ 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.
Shareholders of the Fund that have continually owned shares
of the Fund prior to November 1, 1988.
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 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 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 if those shares were purchased on or after March 6, 1995,
but prior to November 24, 1995: (1) distributions to participants
or beneficiaries from Individual Retirement Accounts under
Section 408(a) of the Internal Revenue Code or retirement plans
under Section 401(a), 401(k), 403(b) and 457 of the Code, if those
distributions are made either (a) to an individual participant as
a result of separation from service or (b) following the death or
disability (as defined in the Code) of the participant or
beneficiary; (2) returns of excess contributions to such retirement
plans; (3) redemptions other than from retirement plans following
the death or disability of the shareholder(s) (as evidenced by a
determination of total disability by the U.S. Social Security
Administration); (4) withdrawals under an automatic withdrawal plan
(but only for Class B or Class C shares) where the annual
withdrawals do not exceed 10% of the initial value of the account;
and (5) liquidation of a shareholder's account if the aggregate net
asset value of shares held in the account is less than the required
minimum account value. A shareholder's account will be credited
with the amount of any contingent deferred sales charge paid on the
redemption of any Class A, Class B or Class C shares of the Fund
described in this section if within 90 days after that redemption,
the proceeds are invested in the same Class of shares in this Fund
or another Oppenheimer fund.
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 10/31/96, 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 10/31/96. 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 $9425 $10000
10/31/89 $10283 $11505
10/31/90 $8398 $8365
10/31/91 $13018 $13267
10/31/92 $14528 $14525
10/31/93 $18917 $19232
10/31/94 $18925 $19173
10/31/95 $20593 $22686
10/31/96 $24128 $26466
Oppenheimer
Fiscal Quest Small Cap Russell
Period Ended Fund B 2000 Index
- ------------ --------------- ----------
9/01/93(2) $10000 $10000
10/31/93 $10273 $10547
10/31/94 $10233 $10515
10/31/95 $11069 $12441
10/31/96 $12604 $14514
Oppenheimer
Fiscal Quest Small Cap Russell
Period Ended Fund C 2000 Index
9/01/93(2) $10000 $10000
10/31/93 $10279 $10547
10/31/94 $10227 $10515
10/31/95 $11069 $12441
10/31/96 $12901 $14514
- ---------------------
(2) Class B and 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.
PR0251.001 0297 Printed on recycled paper
prosp\251psp.#1
<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 26, 1997
This Statement of Additional Information of Oppenheimer Quest Small
Cap Value Fund is not a Prospectus. This document contains
additional information about the Fund and supplements information
in the Prospectus dated February 26, 1997. It should be read
together with the Prospectus, which may be obtained upon written
request to the Fund's Transfer Agent, OppenheimerFunds Services at
P.O. Box 5270, Denver, Colorado 80217, or by calling the Transfer
Agent at the toll-free number shown above.
Contents
Page
About the Fund
Investment Objective and Policies. . . . . . . . . . . 2
Investment Policies and Strategies . . . . . . . . . 2
Other Investment Techniques and Strategies . . . . . . 5
Other Investment Restrictions. . . . . . . . . . . . .13
How the Fund is Managed . . . . . . . . . . . . . . . .15
Organization and History . . . . . . . . . . . . . . .15
Trustees and Officers of the Trust . . . . . . . . . .16
The Manager and Its Affiliates . . . . . . . . . . . .19
Brokerage Policies of the Fund . . . . . . . . . . . . .22
Performance of the Fund. . . . . . . . . . . . . . . . .24
Distribution and Service Plans . . . . . . . . . . . . .28
About Your Account
How To Buy Shares. . . . . . . . . . . . . . . . . . . 30
How To Sell Shares . . . . . . . . . . . . . . . . . . .38
How To Exchange Shares . . . . . . . . . . . . . . . . .42
Dividends, Capital Gains and Taxes . . . . . . . . . . .44
Additional Information About the Fund. . . . . . . . . .45
Financial Information About the Fund
Report of Independent Accountants. . . . . . . . . . . 46
Financial Statements . . . . . . . . . . . . . . . . . 47
Appendix A: Description of Ratings . . . . . . . . . . A-1
Appendix B: Corporate Industry Classifications . . . . B-1
<PAGE>
ABOUT THE FUND
Investment Objective and Policies
Investment Policies and Strategies. The investment objective and
policies of the Fund are described in the Prospectus. 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 may invest,
as well as the strategies the Fund may use to try to achieve its
objective. Capitalized terms used in this Statement of Additional
Information have the same meaning as those terms have in the
Prospectus.
Foreign Securities. As noted in the Prospectus 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 considered "foreign
securities."
Investing in foreign securities offers the Fund potential
benefits not available from investing solely in securities of
domestic issuers, including the opportunity to invest in foreign
issuers that appear to offer growth potential, or in foreign
countries with economic policies or business cycles different from
those of the U.S., or to reduce fluctuations in portfolio value by
taking advantage of foreign stock markets that do not move in a
manner parallel to U.S. markets. If the Fund's portfolio securities
are held abroad, the countries in which such securities may be held
and the sub-custodians or depositories holding them must be
approved by the Trust's Board of Trustees to the extent that
approval is required under applicable rules of the Securities and
Exchange Commission. In buying foreign securities, the Fund may
convert U.S. dollars into foreign currency but only to effect
securities transactions on foreign securities exchanges and not to
hold such foreign currency as an investment.
Risks of Foreign Investing. Investing in foreign securities
involves special additional risks and considerations not typically
associated with investing in securities of issuers traded in the
U.S. These include: reduction of income by foreign taxes;
fluctuation in value of foreign portfolio investments due to
changes in currency rates and control regulations (e.g., currency
blockage); transaction charges for currency exchange; lack of
public information about foreign issuers; lack of uniform
accounting, auditing and financial reporting standards comparable
to those applicable to domestic issuers; less volume on foreign
exchanges than on U.S. exchanges; greater volatility and less
liquidity on foreign markets than in the U.S.; less regulation of
foreign issuers, stock exchanges and brokers than in the U.S.;
greater difficulties in commencing lawsuits and obtaining judgments
in foreign courts; higher brokerage commission rates than in the
U.S.; increased risks of delays in settlement of portfolio
transactions or loss of certificates for portfolio securities;
possibilities in some countries of expropriation or nationalization
of assets, confiscatory taxation, political, financial or social
instability or adverse diplomatic developments; and unfavorable
differences between the U.S. economy and foreign economies. In the
past, U.S. Government policies have discouraged certain
investments abroad by U.S. investors, through taxation or other
restrictions, and it is possible that such restrictions could be
re-imposed.
Emerging Market Countries. The Fund may invest in 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 purchases a security
from, and simultaneously resells it to, an approved vendor ( a U.S.
commercial bank or the U.S. branch of a foreign bank having total
domestic assets of at least $1 billion or a broker-dealer with a
net worth of at least $50 million and which 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) for delivery at an agreed upon future date. The resale price
exceeds the purchase price by an amount that reflects an agreed-
upon interest rate effective for the period during which the
repurchase agreement is in effect. 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 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
illiquid 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-Adviser under Board-
approved guidelines. Those guidelines take into account the trading
activity for such securities and the availability of reliable
pricing information, among other factors. If there is a lack of
trading interest in a particular Rule 144A security, the Fund's
holding of that security may be deemed to be illiquid.
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, securities
indices or Stock Index Futures or (iii) write covered calls on
securities held by it, securities indices or on 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 Stock Index Futures, securities indices 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,
under the Rule the Fund must limit its aggregate initial futures
margins and related options premiums to 5% or less of the Fund's
total assets for hedging strategies that are considered bona fide
hedging strategies under the Rule. Under the Rule, the Fund also
must use short future and options on futures positions solely for
bona fide hedging purposes within the meaning and intent of
applicable provisions of the Commodity Exchange Act.
Transactions in options by the Fund are subject to limitations
established by option exchanges governing the maximum number of
options that may be written or held by a single investor or group
of investors acting in concert, regardless of whether the options
were written or purchased on the same or different exchanges or are
held in one or more accounts or through one or more different
exchanges or through one or more brokers. Thus the number of
options which the Fund may write or hold may be affected by options
written or held by other entities, including other investment
companies having the same adviser as the Fund (or an adviser that
is an affiliate of the Fund's adviser). The exchanges also impose
position limits on Futures transactions. An exchange may order the
liquidation of positions found to be in violation of those limits
and may impose certain other sanctions.
Due to requirements under the Investment Company Act, when the
Fund purchases a Stock Index Future, the Fund will maintain, in a
segregated account or accounts with its custodian, cash or readily-
marketable, short-term (maturing in one year or less) debt
instruments in an amount equal to the market value of the
securities underlying such Future, less the margin deposit
applicable to it.
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 and timing of gains (or losses) recognized
by the Fund on straddle positions. Generally, a loss sustained on
the disposition of a position making up a straddle is allowed only
to the extent such loss exceeds any unrecognized gain in the
offsetting positions making up the straddle. Disallowed loss is
generally allowed at the point where there is no unrecognized gain
in the offsetting positions making up the straddle, or the
offsetting position is disposed of.
Under the Internal Revenue Code, gains or losses attributable
to fluctuations in exchange rates that occur between the time the
Fund accrues interest or other receivables or accrues expenses or
other liabilities denominated in a foreign currency and the time
the Fund actually collects such receivables or pays such
liabilities generally are treated as ordinary income or ordinary
loss. Similarly, on disposition of debt securities denominated in
a foreign currency and on disposition foreign currency forward
contracts, gains or losses attributable to fluctuations in the
value of a foreign currency between the date of acquisition of the
security or contract and the date of the disposition also are
treated as an ordinary gain or loss. Currency gains and losses are
offset against market gains and losses on each trade before
determining a net "section 988" gain or loss under the Internal
Revenue Code, which may ultimately increase or decrease the amount
of the Fund's investment company income available for distribution
to its shareholders.
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 as 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. 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 managers (who are not officers),
are listed below, together with principal occupations and business
affiliations during the past five years. The address of each is
Two World Trade Center, New York, New York 10048, except as noted.
In addition to the Trust (including its other portfolios
Oppenheimer Quest Growth & Income Value Fund, Oppenheimer Quest
Opportunity Value Fund and Oppenheimer Quest Officers Value Fund),
all of the Trustees are also trustees or directors of Oppenheimer
Quest Value Fund, Inc., Oppenheimer Quest Global Value Fund, Inc.
(collectively, with the Fund and the Trust's other portfolios,
"Oppenheimer Quest Funds") and Rochester Portfolio Series -
Limited-Term New York Municipal Fund, Bond Fund Series -
Oppenheimer Bond Fund For Growth and Rochester Fund Municipals
(collectively, the "Oppenheimer Rochester Funds"). As of January
31, 1997, the trustees and officers of the Trust as a group owned
less than 1% of the outstanding shares of each class of the Fund.
The foregoing does not include shares held of record by an employee
benefit plan for employees of the Manager for which one of the
officers listed below, Mr. Donohue, is a trustee, other than the
shares beneficially owned under that plan by the officers of the
Fund listed below.
Bridget A. Macaskill, Chairman of the Board of Trustees and
President; Age: 48.
President, Chief Executive Officer and a Director of the Manager
and HarbourView Asset Management Corporation ("HarbourView"), a
subsidiary of the Manager; President and a Director of Oppenheimer
Acquisition Corp. ("OAC") the Manager's parent holding company, and
Oppenheimer Partnership Holdings, Inc.; Chairman and a Director of
Shareholder Services, Inc. ("SSI"), a transfer agent subsidiary of
the Manager and Shareholder Financial Services, Inc. ("SFSI"); and
a director of Oppenheimer Real Asset Management, Inc.
Paul Y. Clinton, Trustee; Age: 66
39 Blossom Avenue, Osterville, Massachusetts 02655
Principal of Clinton Management Associates, a financial and venture
capital consulting firm; Trustee of Capital Cash Management Trust,
a money-market fund and Narraganssett Tax-Free Fund, a tax-exempt
bond fund; Director of OCC Cash Reserves, Inc. and Trustee of OCC
Accumulation Trust, all of which are open-end investment companies.
Formerly: Director, External Affairs, Kravco Corporation, a
national real estate owner and property management corporation;
President of Essex Management Corporation, a management consulting
company; a general partner of Capital Growth Fund, a venture
capital partnership; a general partner of Essex Limited
Partnership, an investment partnership; President of Geneve Corp.,
a venture capital fund; Chairman of Woodland Capital Corp., a small
business investment company; and Vice President of W.R. Grace & Co.
Thomas W. Courtney, Trustee; Age: 63
833 Wyndemere Way, Naples, Florida 34105
Principal of Courtney Associates, Inc., (venture capital firm);
former General Partner of Trivest Venture Fund (private venture
capital fund); former President of Investment Counseling Federated
Investors, Inc.; Trustee of Cash Assets Trust, a money market fund;
Director of OCC Cash Reserves, Inc. and Trustee of OCC Accumulation
Trust, 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: 67
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 of OCC Cash Reserves,
Inc.and Trustee of OCC Accumulation Trust and The Saratoga
Advantage Trust, all of which are open-end investment companies;
Trustee of Brown University.
George Loft, Trustee; Age: 82
51 Herrick Road, Sharon, Connecticut 06069
Private Investor; Director of OCC Cash Reserves, Inc., and Trustee
of OCC Accumulation Trust 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: 42
Executive Vice President and Director of the Manager; a Vice
President and a director of OAC; an officer of other Oppenheimer
funds.
Andrew J. Donohue, Secretary; Age: 46
Executive Vice President, General Counsel and a director of the
Manager, OppenheimerFunds Distributor, Inc. (the "Distributor"),
HarbourView, SSI, SFSI, Oppenheimer Partnership Holdings, Inc. and
MultiSource Services, Inc. (a broker-dealer); President and a
director of Centennial; President and a director of Oppenheimer
Real Asset Management, Inc., General Counsel of OAC; an officer of
other Oppenheimer funds.
George C. Bowen, Treasurer; Age: 60
6803 South Tucson Way, Englewood, Colorado 80012
Senior Vice President and Treasurer of the Manager; Vice President
and Treasurer of the Distributor and HarbourView; Senior Vice
President, Treasurer, Assistant Secretary and a director of
Centennial; President, Treasurer and a director of Centennial
Capital Corporation; Senior Vice President, Treasurer and Secretary
of SSI; Vice President, Treasurer and Secretary of SFSI; Treasurer
of OAC; Treasurer of Oppenheimer Partnership Holdings, Inc.; Vice
President and Treasurer of Oppenheimer Real Asset Management, Inc.;
Chief Executive Officer, Treasurer and a director of MultiSource
Services, Inc. (a broker-dealer); an officer of other Oppenheimer
funds.
Gavin Albert, Portfolio Manager; Age: 28
Two World Financial Center, 225 Liberty Street, New York, New York
10080
Vice President of Oppenheimer Capital; formerly, a research analyst
with Oppenheimer Capital, prior to which (in reverse chronological
order) he was a management consultant for EDS Energy Management
(management consulting firm), a graduate student at the Vanderbilt
University Business School and a financial analyst in the Corporate
Finance department of Texaco, Inc. (integrated oil and gas
company).
Timothy Curro, Portfolio Manager; Age: 37
Two World Financial Center, 225 Liberty Street, New York, New York
10080
Vice President of Oppenheimer Capital; formerly a general partner
of Value Holdings, L.P., an investment partnership, prior to which
he was a Vice President in the equity research department at UBS
Securities Inc. (investment management ) and a partner with Omega
Advisors, Inc. (investment management).
Timothy McCormack, Portfolio Manager; Age: 32
Two World Financial Center, 225 Liberty Street, New York, New York
10080
Vice President of Oppenheimer Capital; formerly a securities
analyst at U.S. Trust Company (investment management) and prior
thereto a securities analyst at Gabelli & Company (investment
management).
Robert Bishop, Assistant Treasurer; Age: 38
6803 South Tucson Way, Englewood, Colorado 80012
Vice President of the Manager/Mutual Fund Accounting; an officer of
other Oppenheimer funds; formerly a Fund Controller for the
Manager.
Scott Farrar, Assistant Treasurer; Age: 31
6803 South Tucson Way, Englewood, Colorado 80012
Vice President of the Manager/Mutual Fund Accounting; an officer of
other Oppenheimer funds; formerly a Fund Controller for the
Manager.
Robert G. Zack, Assistant Secretary; Age: 48
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 remaining Trustees of
the Fund received the total amounts shown below from (i) the Fund
during its fiscal year ended October 31, 1996 and (ii) other
investment companies (or series thereof) managed by the Manager and
the Sub-Adviser paid during the calendar year ended December 31,
1996.
<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(1)
<S> <C> <C> <C> <C>
Paul Y. Clinton $5,627 None None $90,225
Thomas W. Courtney $5,627 None None $87,525
Lacy B. Herrmann $5,627 None None $90,225
George Loft $5,627 None None $95,700
(1) For the purpose of the chart above, "Fund Complex" includes the Fund, the other
Oppenheimer Quest Funds, the Oppenheimer Rochester Funds and three other funds advised by the
Sub-Adviser (the Sub-Adviser Funds ). For these purposes, each series constitutes a
separate fund. Messrs. Clinton, Courtney and Herrmann served as directors or trustees of two
Sub-Adviser Funds, for which they are to receive $38,550, $35,850 and $38,550, respectively,
and Mr. Loft served as a director or trustee of three Sub-Adviser Funds, for which he is to
receive $44,025.
</TABLE>
Major Shareholders. As of February 3, 1997, no person
owned of record or was known by the Fund to own beneficially 5% or
more of the Fund's outstanding Class A, Class B or Class C shares
except Oppenheimer Capital Accumulation Omnibus Plan, Oppenheimer
Tower, One World Financial Center, New York, New York 10281-1003,
which owned of record 419,428.737 Class A shares (approximately
6.82% of the Class A shares then outstanding).
The Manager and its Affiliates. The Manager is wholly-owned by
Oppenheimer Acquisition Corp. ("OAC"), a holding company controlled
by Massachusetts Mutual Life Insurance Company. OAC is also owned
in part by certain of the Manager's directors and officers, some of
whom also serve as officers of the Fund and one of whom (Ms.
Macaskill) also serves as an officer and a Trustee of the Fund.
The Manager and the Trust have a Code of Ethics. In addition
to having its own Code of Ethics, the Sub-Adviser is obligated to
report to the Manager any violations of the Sub-Adviser's Code of
Ethics relating to the Fund. The Code of Ethics is designed to
detect and prevent improper personal trading by certain employees,
including the Fund's portfolio manager, who is an employee of the
Sub-Adviser, that would compete with or take advantage of the
Funds' portfolio transactions. Compliance with the Code of Ethics
is carefully monitored and strictly enforced by the Manager.
The Investment Advisory Agreement. The Manager acts as
investment adviser to the Fund pursuant to the terms of an
Investment Advisory Agreement dated as of November 22, 1995. The
Sub-Adviser previously served as the Fund's investment adviser from
the Fund's inception (January 3, 1989) 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 at an annual rate
$55,000, plus reimbursement for out-of-pocket expenses.
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. For the
fiscal period from November 24, 1995 (when the Manager became the
investment adviser to the Fund) to October 31, 1996 (the "Fiscal
Period"), the Fund paid to the Manager $1,467,707 in management
fees and paid or accrued accounting services fees to the Manager in
the amount of $51,634.
The Investment Advisory Agreement contains no expense
limitation. However, because of state regulations limiting fund
expenses that previously applied, the Manager had 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) would
not exceed the most stringent state regulatory limitation
applicable to the Fund. Due to changes in federal securities laws,
such state regulations no longer apply and the Manager s
undertaking is therefore inapplicable and has been withdrawn.
During the Fund s last fiscal year, the Fund s expenses did not
exceed the most stringent state regulatory limit and the voluntary
undertaking was not invoked.
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.
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.
Fees Paid Under the Prior Investment Advisory Agreement.
The Sub-Adviser 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 $1,260,578 for the fiscal year ended October 31, 1994,
$1,456,594 for the fiscal year ended October 31, 1995 and $90,775
for the fiscal period November 1, 1995 to November 22, 1995 (the
"Interim Period").
For the fiscal years ended October 31, 1994 and 1995, and the
Interim Period, the Fund paid or accrued accounting services fees
to the Sub-Adviser in the amounts of $67,578 and $53,951, and
$2,292, 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, 1994 and 1995
in the amounts of $55,000 and $55,000 respectively; no fees were
accrued or paid with respect to the Interim Period.
The Subadvisory Agreement. The Subadvisory Agreement
provides that Sub-Adviser shall regularly provide investment advice
with respect to the Fund and invest and reinvest cash, securities
and the property comprising the assets of the Fund. Under the
Subadvisory Agreement, Sub-Adviser 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 the
Sub-Adviser an annual fee payable monthly, based on the average
daily net assets of the Fund, equal to 40% of the investment
advisory fee collected by the Manager from the Fund based on the
total net assets of the Fund as of 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, the Sub-Adviser shall not be liable to
the Manager for any act or omission in the course of or connected
with rendering services under the Subadvisory Agreement or for any
losses that may be sustained in the purchase, holding or sale of
any security.
The Distributor. Under a General Distributor's Agreement
with the Trust dated as of November 22, 1995, the Distributor acts
as the principal underwriter in the continuous public offering of
Class A, Class B and Class C shares of the Fund but is not
obligated to sell a specific number of shares. Expenses normally
attributable to sales, including advertising and the cost of
printing and mailing prospectuses, other than those furnished to
existing shareholders, are borne by the Distributor. During the
Fund's fiscal year ended October 31, 1996, the aggregate amount of
sales charges on sales of the Fund's Class A shares was $297,166 of
which the Distributor and affiliated brokers retained $115,180; no
amounts were retained by OCC Distributors, the Fund's distributor
prior to November 22, 1995. During the fiscal year ended October
31, 1996, the Distributor received contingent deferred sales
charges of $99,115 upon redemption of Class B shares, and received
contingent deferred sales charges of $3,583, 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 on behalf of the Manager. Soft dollar arrangements
for services may be entered into in order to facilitate an
improvement in performance in respect of the Sub-Adviser's service
to the Manager with respect to the Fund. Pursuant to these
arrangements, the Sub-Adviser will undertake to place brokerage
business with broker-dealers who pay third parties that provide
these services. Any such soft dollar arrangements will be made in
accordance with policies adopted by the Manager and the Board of
the Fund and in compliance with Section 28(e) of the Securities
Exchange Act of 1934, as amended.
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, 1994, 1995 and 1996:
<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>
1994 $300,037 $143,991 48.0% $44,408,800 48.5%
1995 $400,477 $161,399 40.3% $52,738,643 36.6%
1996 $362,454 $147,765 40.8% $61,029,692 29.1%
</TABLE>
During the Fund's fiscal year ended October 31, 1996, $17,963
was paid by the Fund to brokers as commissions in return for
research services; the aggregate dollar amount of those
transactions was $7,497,014.
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 advertised class 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, 1996 and for the period
from January 3, 1989 (commencement of operations) to October 31,
1996 were 10.43%, 11.80% and 11.91%, respectively.
The average annual total returns on Class B shares for the
one-year period ended October 31, 1996 and for the period September
1, 1993 (commencement of the public offering of the class) through
October 31, 1996 were 11.57% and 7.85%, respectively.
The average annual total returns on Class C shares for the
one-year period ended October 31, 1996 and for the period September
1, 1993 (commencement of the public offering of the class) through
October 31, 1996 were 15.55% and 8.38%, 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,
1996 was 141.28%. 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, 1996 was 27.04%. 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, 1996 was 29.02%.
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, 1996 and for the period from January 1, 1989
(commencement of operations) to October 31, 1996 were 17.17%,
13.13% and 12.76%, 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, 1996 was 156%.
The average annual total returns at net asset value on the
Fund's Class B shares for the one year period ended October 31,
1996 and for the period from September 1, 1993 (commencement of the
public offering of the class) through October 31, 1996 were 16.57%
and 8.38%, 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, 1996 was 29.04%.
The average annual total returns at net asset value on the
Fund's Class C shares for the one-year period ended October 31,
1996 and for the period September 1, 1993 (commencement of the
public offering of the class) through October 31, 1996 were 16.55%
and 8.38%, 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, 1996 was 29.02%.
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 star ranking of the
performance of its Class A, Class B or Class C shares by
Morningstar Inc., an independent mutual fund monitoring service.
Morningstar ranks mutual funds in broad investment categories:
domestic stock funds, international stock funds, taxable bond funds
and municipal bond funds, based on risk-adjusted total investment
returns. The Fund is ranked among small company growth funds.
Investment return measure a fund's or class's one, three, five and
ten-year average annual total returns (depending on the inception
of the fund or class) in excess of 90-day U.S. Treasury bill
returns after considering the fund's sales charges and expenses.
Risk measure a fund's class performance below 90-day U.S. Treasury
bill returns. Risk and investment return are combined to produce
star rankings reflecting performance relative to the average fund
in the fund's category. Five stars is the "highest" ranking (top
10%), four stars is "above average" (next 22.5%), three stars is
"average" (next 35%), two stars is "below average" (next 22.5%) and
one star is "lowest" (bottom 10%). The current star rankings is
the fund's or class's 3-year ranking or its combined 3 and 5-year
ranking (weighted 60%/40% respectively, or its combined 3-,5-and
10-year ranking (weighted 40%, 30% and 30%, respectively) depending
on the inception of the fund or class. Rankings are subject to
change monthly.
The Fund may also compare its performance to that of other
funds in its Morningstar Category. In addition to its star
rankings, Morningstar also categorizes and compares a fund's 3-year
performance on Morningstar's classification of the fund's
investments and investment style, rather than how a fund defines
its investment objective. Morningstar's four broad categories
(domestic equity, international equity, municipal bond and taxable
bond) are each further subdivided into categories based on types of
investments and investment styles. Those comparison by Morningstar
are based on the same risk and return measurements as its star
rankings but do not consider the effect of sales charges.
The total return on an investment in the Fund's Class A, Class
B 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 the index includes a factor for the reinvestment
of income dividends, but does not reflect reinvestment of capital
gains, expenses or taxes.
The performance of the Fund's Class A, Class B, or Class C
shares may also be compared in publications to (i) the performance
of various market indices or to other investments for which
reliable performance data is available, and (ii) to averages,
performance rankings or other benchmarks prepared by recognized
mutual fund statistical services.
Total return information may be useful to investors in
reviewing the performance of the Fund's Class A, Class B or Class
C shares. However, when comparing total return of an investment in
Class A, Class B and Class C shares of the Fund, a number of
factors should be considered before using such information as a
basis for comparison with other investments. For example, an
investor may also wish to compare the Fund's Class A, Class B 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 Amended and Restated
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 compensate 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 at no cost to the Fund. The
Distributor and the Manager may, in their sole discretion, increase
or decrease the amount of payments they make from their own
resources to Recipients.
Unless terminated as described below, each plan continues in
effect from year to year but only as long as such continuance is
specifically approved at least annually by the 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 by a Securities and Exchange Commission rule to obtain
the approval of Class B as well as Class A shareholders for a
proposed material amendment to the Class A Plan that would
materially increase payments under the Plan. Such approval must be
by a "majority" of the Class A and Class B shares (as defined in
the Investment Company Act), voting separately by class. All
material amendments must be approved by the Board of 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 Class B and Class C Plans are subject to the
limitations imposed by the Conduct Rules of the National
Association of Securities Dealers, Inc. on payments of asset-based
sales charges and service fees.
For the Fiscal Period, (i) payments under the Plan for Class
A shares totaled $588,072, of which $139,245 was retained by the
Distributor and $1,102 that was paid to an affiliate of the
Distributor, (ii) payments made under the Class B Plan totaled
$264,640, of which $206,892 was retained by the Distributor and
$31 was paid to a dealer affiliated with the Distributor and (iii)
payments made under the Class C plan amounted to $115,068, of which
$65,837 was retained by the Distributor and $28 was paid to a
dealer affiliated with the Distributor. The Plans provide for the
Distributor to be compensated at a flat rate, whether the
Distributor's expenses are more or less than the amounts paid by
the Fund during that period. The asset-based sales charges paid to
the Distributor by the Fund under the Plans are intended to allow
the Distributor to recoup the cost of sales commissions paid to
authorized brokers and dealers at the time of sale, plus financing
costs, as described in the Prospectus. Such payments may also be
used to pay for the following expenses in connection with the
distribution of shares: (i) financing the advance of the service
fee payment to Recipients under the Plans, (ii) compensation and
expenses of personnel employed by the Distributor to support
distribution of shares, and (iii) costs of sales literature,
advertising and prospectuses (other than those furnished to current
shareholders).
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 Interim Period were $35,489, $114,295 and $5,503, 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 an
individual investor to choose the method of purchasing shares that
is more beneficial to the investor depending on the amount of the
purchase, the length of time the investor expects to hold shares
and other relevant circumstances. Investors should understand that
the purpose and function of the deferred sales charge and asset-
based sales charge with respect to Class B and Class C shares are
the same as those of the initial sales charge with respect to Class
A shares. Any salesperson or other person entitled to receive
compensation for selling Fund shares may receive different
compensation with respect to one class of shares than another. The
Distributor will generally not accept any order for $500,000 or
more of Class B shares or $1 million or more of Class C shares, on
behalf of a single investor (not including dealer "street name" or
omnibus accounts) because generally it will be more advantageous
for that investor to purchase Class A shares of the Fund instead.
The three classes of shares each represent an interest in the
same portfolio investments of the Fund. However, each class has
different shareholder privileges and features. The net income
attributable to Class B and Class C shares and the dividends
payable on Class B and Class C shares will be reduced by
incremental expenses borne solely by that class, respectively,
including the asset-based sales charges to which Class B and Class
C shares are subject.
The conversion of Class B shares to Class A shares after six
years is subject to the continuing availability of a private letter
ruling from the Internal Revenue Service, or an opinion of counsel
or tax adviser, to the effect that the conversion of Class B shares
does not constitute a taxable event for the holder under Federal
income tax law. If such a revenue ruling or opinion is no longer
available, the automatic conversion feature may be suspended, in
which event no further conversions of Class B shares would occur
while such suspension remained in effect. Although Class B shares
could then be exchanged for Class A shares on the basis of relative
net asset value of the two classes, without the imposition of a
sales charge or fee, such exchange could constitute a taxable event
for the holder, and absent such exchange, Class B shares might
continue to be subject to the asset-based sales charge for longer
than six years.
The methodology for calculating the net asset value, dividends
and distributions of the Fund's Class A, Class B and Class C shares
recognizes two types of expenses. General expenses that do not
pertain specifically to any class are allocated pro rata to the
shares of each class, based on the percentage of the net assets of
such class to the Fund's total net assets, and then equally to each
outstanding share within a given class. Such general expenses
include (i) management fees, (ii) legal, bookkeeping and audit
fees, (iii) printing and mailing costs of shareholder reports,
Prospectuses, Statements of Additional Information and other
materials for current shareholders, (iv) fees to Independent
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 (a) Distribution and Service Plan
fees, (b) incremental transfer and shareholder servicing agent fees
and expenses, (c) registration fees and (d) shareholder meeting
expenses, to the extent that such expenses pertain to a specific
class rather than to the Fund as a whole.
Determination of Net Asset Values Per 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 other days (for example, in case of weather
emergencies or days falling before a holiday). The Exchange's most
recent annual announcement (which is subject to change) states that
it will close on New Year's Day, 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 the
Automated Quotation System ("NASDAQ") of the Nasdaq Stock Market,
Inc. for which last sale information is regularly reported are
valued at the last reported sale price on 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" prices that day); (ii) securities traded on a foreign
securities exchange are valued generally at the last sale 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; or at the mean between "bid" and
"asked" prices obtained from the principal exchange or two active
market makers in the security on the basis of reasonable inquiry;
(iii) long-term debt securities having a remaining maturity in
excess of 60 days are valued based on the mean between the "bid"
and "asked" prices determined by a portfolio pricing service
approved by the Trust's Board of Trustees or obtained by the
Manager from two active market makers in the security on the basis
of reasonable inquiry; (iv) debt instruments having a maturity of
more than 397 days when issued, and non-money market type
instruments having a maturity of 397 days 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; (v) money market debt securities that had a
maturity of less than 397 days when issued that have a remaining
maturity of 60 days or less are valued at cost, adjusted for
amortization of premiums and accretion of discounts; and (vi)
securities (including restricted securities) not having readily-
available market quotations are valued at fair value determined
under the Board's procedures. If the Manager is unable to locate
two market makers willing to give quotes (see (ii), (iii) and (iv)
above), the security may be priced at the mean between the "bid"
and "asked" prices provided by a single active market maker (which
in certain cases may be the "bid" price if no "ask" price is
available).
In the case of U.S. Government securities and mortgage-backed
securities, where last sale information is not generally available,
such pricing procedures may include "matrix" comparisons to the
prices for comparable instruments on the basis of quality, yield,
maturity and other special factors involved. The Manager may use
any of the pricing services approved by the Board of Trustees to
price any of the types of securities described above and to price
U.S. Government securities, mortgage-backed securities, foreign
government securities and corporate bonds. The Manager will
monitor the accuracy of such pricing services, which may include
comparing prices used for portfolio evaluation to actual sales
prices of selected securities.
Trading in securities on European and Asian exchanges and
over-the-counter markets is normally completed before the close of
the Exchange. Events affecting the values of foreign securities
traded in such 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 sale price on
the principal exchanges on which they are traded or on NASDAQ, as
applicable, as determined by a pricing service approved by the
Board of Trustees or by the Manager. If there were no sales that
day, value shall be the last sale price on the preceding trading
day if it is within the spread of the closing "bid" and "ask"
prices on the principal exchange or on NASDAQ on the valuation
date, or, if not, value shall be the closing "bid" price on the
principal exchange or on NASDAQ on the valuation date. If the put,
call or future is not traded on an exchange or on NASDAQ, it shall
be valued at the mean between "bid" and "ask" prices obtained by
the Manager from two active market makers (which in certain cases
may be the "bid" price if no "ask" price is available).
When the Fund writes an option, an amount equal to the premium
received by the Fund is included in the Fund's Statement of Assets
and Liabilities as an asset, and an equivalent deferred credit is
included in the liability section. Credit is adjusted ("marked-to-
market") to reflect the current market value of the option. In
determining the Fund's gain on investments, if a call or put
written by the Fund is exercised, the proceeds are increased by the
premium received. If a call or put written by the Fund expires,
the Fund has a gain in the amount of the premium; if the Fund
enters into a closing purchase transaction, it will have a gain or
loss depending on whether the premium received was more or less
than the cost of the closing transaction. If the Fund exercises a
put it holds, the amount the Fund receives on its sale of the
underlying investment is reduced by the amount of premium paid by
the Fund.
AccountLink. When shares are purchased through AccountLink, each
purchase must be at least $25.00. Shares will be purchased on the
regular business day the Distributor is instructed to initiate the
Automated Clearing House ("ACH") transfer to buy the shares.
Dividends will begin to accrue on shares purchased by the proceeds
of ACH transfers on the business day the Fund receives Federal
Funds for the purchase through the ACH system before the close of
The New York Stock Exchange. The Exchange normally closes at 4:00
P.M., but may close earlier on certain days. If Federal Funds are
received on a business day after the close of the Exchange, the
shares will be purchased and dividends will begin to accrue on the
next regular business day. The proceeds of ACH transfers are
normally received by the Fund 3 days after the transfers are
initiated. The Distributor and the Fund are not responsible for
any delays in purchasing shares resulting from delays in ACH
transmissions.
Reduced Sales Charges. As discussed in the Prospectus, a reduced
sales charge rate may be obtained for Class A shares under Rights
of Accumulation and Letters of Intent because of the economies of
sales efforts and reduction in expenses realized by the
Distributor, dealers and brokers making such sales. No sales
charge is imposed in certain other circumstances described in the
Prospectus because the Distributor or dealer or broker incurs
little or no selling expenses. The term "immediate family" refers
to one's spouse, children, grandchildren, parents, grandparents,
parents-in-law, sons- and daughters-in-law, aunts, uncles, nieces
and nephews, 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 Municipal Bond Fund
Oppenheimer New York Municipal Fund
Oppenheimer California Municipal Fund
Oppenheimer Intermediate Municipal Fund
Oppenheimer Insured Municipal Fund
Oppenheimer Main Street California Municipal Fund
Oppenheimer Florida Municipal Fund
Oppenheimer Pennsylvania Municipal Fund
Oppenheimer New Jersey Municipal Fund
Oppenheimer Fund
Oppenheimer Discovery Fund
Oppenheimer Capital Appreciation Fund
Oppenheimer Growth Fund
Oppenheimer Equity Income Fund
Oppenheimer Value Stock Fund
Oppenheimer Multiple Strategies Fund
Oppenheimer Total Return Fund, Inc.
Oppenheimer Main Street Income & Growth Fund
Oppenheimer High Yield Fund
Oppenheimer Champion Income Fund
Oppenheimer Bond Fund
Oppenheimer U.S. Government Trust
Oppenheimer Limited-Term Government Fund
Oppenheimer Global Fund
Oppenheimer Global 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 International Growth 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.
Limited-Term New York Municipal Fund*
Oppenheimer Bond Fund For Growth
Rochester Fund Municipals*
Oppenheimer Disciplined Value Fund
Oppenheimer Disciplined Allocation Fund
Oppenheimer LifeSpan Balanced Fund
Oppenheimer LifeSpan Income Fund
Oppenheimer LifeSpan Growth Fund
Oppenheimer Developing Markets Fund
____________________
* 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 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 in writing to the Distributor of the 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 on
purchases of Class A shares of the Fund (and other Oppenheimer
funds) that applies under the Right of Accumulation to current
purchases of Class A shares. Each purchase of Class A shares under
the Letter will be made at the public offering price (including the
sales charge) that applies to a single lump-sum purchase of shares
in the amount intended to be purchased under the Letter.
In submitting a Letter, the investor makes no commitment to
purchase shares, but if the investor's purchases of shares within
the Letter of Intent period, when added to the value (at offering
price) of the investor's holdings of shares on the last day of that
period, do not equal or exceed the intended purchase amount, the
investor agrees to pay the additional amount of sales charge
applicable to such purchases, as set forth in "Terms of Escrow,"
below (as those terms may be amended from time to time). The
investor agrees that shares equal in value to 5% of the intended
purchase amount will be held in escrow by the Transfer Agent
subject to the Terms of Escrow. Also, the investor agrees to be
bound by the terms of the Prospectus, this Statement of Additional
Information and the Application used for such Letter of Intent, and
if such terms are amended, as they may be from time to time by the
Fund, that those amendments will apply automatically to existing
Letters of Intent.
For purchases of shares of the Fund and other Oppenheimer
funds by OppenheimerFunds prototype 401(k) plans under a Letter of
Intent, the Transfer Agent will not hold shares in escrow. If the
intended purchase amount under the Letter entered into by an
OppenheimerFunds prototype 401(k) plan is not purchased by the plan
by the end of the Letter of Intent period, there will be no
adjustment of commissions paid to the broker-dealer or financial
institution of record for accounts held in the name of that plan.
If the total eligible purchases made during the Letter of
Intent period do not equal or exceed the intended purchase amount,
the commissions previously paid to the dealer of record for the
account and the amount of sales charge retained by the Distributor
will be adjusted to the rates applicable to actual total purchases.
If total eligible purchases during the Letter of Intent period
exceed the intended purchase amount and exceed the amount needed to
qualify for the next sales charge rate reduction set forth in the
applicable prospectus, the sales charges paid will be adjusted to
the lower rate, but only if and when the dealer returns to the
Distributor the excess of the amount of commissions allowed or paid
to the dealer over the amount of commissions that apply to the
actual amount of purchases. The excess commissions returned to the
Distributor will be used to purchase additional shares for the
investor's account at the net asset value per share in effect on
the date of such purchase, promptly after the Distributor's receipt
thereof.
In determining the total amount of purchases made under a
Letter, shares redeemed by the investor prior to the termination of
the Letter of Intent period will be deducted. It is the
responsibility of the dealer of record and/or the investor to
advise the Distributor about the Letter in placing any purchase
orders for the investor during the Letter of Intent period. All
of such purchases must be made through the Distributor.
Terms of Escrow That Apply to Letters of Intent.
1. Out of the initial purchase (or subsequent purchases if
necessary) made pursuant to a Letter, shares of the Fund equal in
value up to 5% of the intended purchase amount specified in the
Letter shall be held in escrow by the Transfer Agent. For example,
if the intended purchase amount is $50,000, the escrow shall be
shares valued in the amount of $2,500 (computed at the public
offering price adjusted for a $50,000 purchase). Any dividends and
capital gains distributions on the escrowed shares will be credited
to the investor's account.
2. If the total minimum investment purchase amount specified
under the Letter is completed within the thirteen-month Letter of
Intent period, the escrowed shares will be promptly released to the
investor.
3. If, at the end of the thirteen-month Letter of Intent
period the total purchases pursuant to the Letter are less than the
intended purchase amount specified in the Letter, the investor must
remit to the Distributor an amount equal to the difference between
the dollar amount of sales charges actually paid and the amount of
sales charges which would have been paid if the total amount
purchased had been made at a single time. Such sales charge
adjustment will apply to any shares redeemed prior to the
completion of the Letter. If such difference in sales charges is
not paid within twenty days after a request from the Distributor or
the dealer, the Distributor will, within sixty days of the
expiration of the Letter, redeem the number of escrowed shares
necessary to realize such difference in sales charges. Full and
fractional shares remaining after such redemption will be released
from escrow. If a request is received to redeem escrowed shares
prior to the payment of such additional sales charge, the sales
charge will be withheld from the redemption proceeds.
4. By signing the Letter, the investor irrevocably
constitutes and appoints the Transfer Agent as attorney-in-fact to
surrender for redemption any or all escrowed shares.
5. The shares eligible for purchase under the Letter (or the
holding of which may be counted toward completion of a Letter)
include (a) Class A shares sold with a front-end sales charge or
subject to a Class A contingent deferred sales charge, (b) Class B
shares of other Oppenheimer funds acquired subject to a contingent
deferred sales charge, and (c) Class A shares or Class B shares
acquired in exchange for either (i) Class A shares 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
"Shareholder Account Rules and Policies," and the escrow will be
transferred to that other fund.
Asset Builder Plans. To establish an Asset Builder Plan from a
bank account, a check (minimum $25) for the initial purchase must
accompany the application. Shares purchased by Asset Builder Plan
payments from bank accounts are subject to the redemption
restrictions for recent purchases described in "How To Sell
Shares," in the Prospectus. Asset Builder Plans also enable
shareholders of Oppenheimer Cash Reserves to use those accounts for
monthly automatic purchases of shares of up to four other
Oppenheimer funds. If you make payments from your bank account to
purchase shares of the Fund, your bank account will be
automatically debited normally four to five days prior to the
investment dates selected in the Account Application. Neither the
Distributor, the Transfer Agent nor the Fund shall be responsible
for any delays in purchasing shares resulting from delays in ACH
transmission.
There is a front-end sales charge on the purchase of certain
Oppenheimer funds, or a contingent deferred sales charge may apply
to shares purchased by Asset Builder payments. An application
should be obtained from the Distributor, completed and returned,
and a prospectus of the selected fund(s) should be obtained from
the Distributor or your financial advisor before initiating Asset
Builder payments. The amount of the Asset Builder investment may
be changed or the automatic investments may be terminated at any
time by writing to the Transfer Agent. A reasonable period
(approximately 15 days) is required after the Transfer Agent's
receipt of such instructions to implement them. The Fund reserves
the right to amend, suspend, or discontinue offering such plans at
any time without prior notice.
Cancellation of Purchase Orders. Cancellation of purchase orders
for the Fund's shares (for example, when a purchase check is
returned to the Fund unpaid) causes a loss to be incurred when the
net asset value of the Fund's shares on the cancellation date is
less than on the purchase date. That loss is equal to the amount
of the decline in the net asset value per share multiplied by the
number of shares in the purchase order. The investor is
responsible for that loss. If the investor fails to compensate the
Fund for the loss, the Distributor will do so. The Fund may
reimburse the Distributor for that amount by redeeming shares from
any account registered in that investor's name, or the Fund or the
Distributor may seek other redress.
Retirement Plans. In describing certain types of employee benefit
plans that may purchase Class A shares without being subject to the
Class A contingent differed sales charge, the term "employee
benefit plan" means any plan or arrangement, whether or not
"qualified" under the Internal Revenue Code, including, medical
savings accounts, payroll deduction plans or similar plans in which
Class A shares are purchased by a fiduciary or other person for the
account of participants who are employees of a single employer or
of affiliated employers, if the Fund account is registered in the
name of the fiduciary or other person for the benefit of
participants in the plan.
The term "group retirement plan" means any qualified or non-
qualified retirement plan (including 457 plans, SEPs, SARSEPs,
403(b) plans, and SIMPLE plans) for employees of a corporation or
a sole proprietorship, members and employees of a partnership or
association or other organized group of persons (the members of
which may include other groups), if the group has made special
arrangements with the Distributor and all members of the group
participating in the plan purchase Class A shares of the Fund
through a single investment dealer, broker or other financial
institution designated by the group.
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 $500 or such lesser amount as the Board may fix. The
Board of Directors will not cause the involuntary redemption of
shares in an account if the aggregate net asset value of the shares
has fallen below the stated minimum solely as a result of market
fluctuations. Should the Board elect to exercise this right, it
may also fix, in accordance with the 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 that you purchased subject to an initial sales
charge or Class A contingent deferred sales charge, or (ii) Class
B shares on which you paid a contingent deferred sales charge when
you redeemed them. This privilege does not apply to Class C
shares. The reinvestment may be made without sales charge only in
Class A shares of the Fund or any of the other Oppenheimer funds
into which shares of the Fund are exchangeable as described in "How
to Exchange Shares" below, at the net asset value next computed
after the Transfer Agent receives the reinvestment order. The
shareholder must ask the Distributor for that privilege at the time
of reinvestment. Any capital gain that was realized when the
shares were redeemed is taxable, and reinvestment will not alter
any capital gains tax payable on that gain. If there has been a
capital loss on the redemption, some or all of the loss may not be
tax deductible, depending on the timing and amount of the
reinvestment. Under the Internal Revenue Code, if the redemption
proceeds of Fund shares on which a sales charge was paid are
reinvested in shares of the Fund or another of the Oppenheimer
funds within 90 days of payment of the sales charge, the
shareholder's basis in the shares of the Fund that were redeemed
may not include the amount of the sales charge paid. That would
reduce the loss or increase the gain recognized from the
redemption. However, in that case the sales charge would be added
to the basis of the shares acquired by the reinvestment of the
redemption proceeds. The Fund may amend, suspend or cease offering
this reinvestment privilege at any time as to shares redeemed after
the date of such amendment, suspension or cessation.
Transfers of Shares. Shares are not subject to the payment of a
contingent deferred sales charge of any class at the time of
transfer to the name of another person or entity (whether the
transfer occurs by absolute assignment, gift or bequest, not
involving, directly or indirectly, a public sale). The transferred
shares will remain subject to the contingent deferred sales charge,
calculated as if the transferee shareholder had acquired the
transferred shares in the same manner and at the same time as the
transferring shareholder. If less than all shares held in an
account are transferred, and some but not all shares in the account
would be subject to a contingent deferred sales charge if redeemed
at the time of transfer, the priorities described in the Prospectus
under "How to Buy Shares" for the imposition of the Class B 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 the Statement of Additional
Information. The request must: (i) state the reason for the
distribution; (ii) state the owner's awareness of tax penalties if
the distribution is premature; and (iii) conform to the
requirements of the plan and the Fund's other redemption
requirements. Participants, other than self-employed persons
maintaining a plan account in their own name, in OppenheimerFunds-
sponsored prototype pension or profit-sharing or 401(k) plans may
not directly redeem or exchange shares held for their account under
those plans. The employer or plan administrator must sign the
request. Distributions from pension plans or 401(k) or profit
sharing plans are subject to special requirements under the
Internal Revenue Code and certain documents (available from the
Transfer Agent) must be completed before the distribution may be
made. Distributions from retirement plans are subject to
withholding requirements under the Internal Revenue Code, and IRS
Form W-4P (available from the Transfer Agent) must be submitted to
the Transfer Agent with the distribution request, or the
distribution may be delayed. Unless the shareholder has provided
the Transfer Agent with a certified tax identification number, the
Internal Revenue Code requires that tax be withheld from any
distribution even if the shareholder elects not to have tax
withheld. The Fund, the Manager, the Distributor, the Trustee and
the Transfer Agent assume no responsibility to determine whether a
distribution satisfies the conditions of applicable tax laws and
will not be responsible for any tax penalties assessed in
connection with a distribution.
Special Arrangements for Repurchase of Shares from Dealers and
Brokers. The Distributor is the Fund's agent to repurchase its
shares from authorized dealers or brokers on behalf of their
customers. The shareholder should contact the broker or dealer to
arrange this type of redemption. The repurchase price per share
will be the net asset value next computed after the Distributor
receives the order placed by the dealer or broker, except that if
the Distributor receives a repurchase order from the dealer or
broker after the close of The New York Stock Exchange on a regular
business day, it will be processed at that day's net asset value,
if the order was received by the dealer or broker from its customer
prior to the time the Exchange closes (normally, that is 4:00 P.M.,
but may be earlier on some days) and the order was transmitted to
and received by the Distributor prior to its close of business that
day (normally 5:00 P.M.). Ordinarily, for accounts redeemed by a
broker-dealer under this procedure, payment will be made within
three business days after the shares have been redeemed upon the
Distributor's receipt of the required redemption documents in
proper form, with the signature(s) of the registered owners
guaranteed on the redemption document as described in the
Prospectus.
Automatic Withdrawal and Exchange Plans. Investors owning shares
of the Fund valued at $5,000 or more can authorize the Transfer
Agent to redeem shares (minimum $50) automatically on a monthly,
quarterly, semi-annual or annual basis under an Automatic
Withdrawal Plan. Shares will be redeemed three business days prior
to the date requested by the shareholder for receipt of the
payment. Automatic withdrawals of up to $1,500 per month may be
requested by telephone if payments are to be made by check payable
to all shareholders of record and sent to the address of record for
the account (and if the address has not been changed within the
prior 30 days). Required minimum distributions from
OppenheimerFunds-sponsored retirement plans may not be arranged on
this basis. Payments are normally made by check, but shareholders
having AccountLink privileges (see "How To Buy Shares") may arrange
to have Automatic Withdrawal Plan payments transferred to the bank
account designated on the OppenheimerFunds New Account Application
or signature-guaranteed instructions. Shares are normally redeemed
pursuant to an Automatic Withdrawal Plan three business days before
the date you select in the Account Application. If a contingent
deferred sales charge applies to the redemption, the amount of the
check or payment will be reduced accordingly. The Fund cannot
guarantee receipt of a payment on the date requested and reserves
the right to amend, suspend or discontinue offering such plans at
any time without prior notice. Because of the sales charge
assessed on Class A share purchases, shareholders should not make
regular additional Class A share purchases while participating in
an Automatic Withdrawal Plan. Class B and Class C shareholders
should not establish withdrawal plans because of the imposition of
the contingent deferred sales charges on such withdrawals (except
where the Class B and Class C contingent deferred sales charges are
waived as described in the Prospectus under "Waivers of Class B and
Class C Contingent Deferred Sales Charges").
By requesting an Automatic Withdrawal or Exchange Plan, the
shareholder agrees to the terms and conditions applicable to such
plans, as stated below as well as the Prospectus. These provisions
may be amended from time to time by the Fund and/or the
Distributor. When adopted, such amendments will automatically
apply to existing Plans.
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. Neither the Transfer Agent nor
the Fund shall incur any liability to the Planholder for any action
taken or omitted by the Transfer Agent in good faith to administer
the Plan. Certificates will not be issued for shares of the Fund
purchased for and held under the Plan, but the Transfer Agent will
credit all such shares to the account of the Planholder on the
records of the Fund. Any share certificates held by a Planholder
may be surrendered unendorsed to the Transfer Agent with the Plan
application so that the shares represented by the certificate may
be held under the Plan.
For accounts subject to Automatic Withdrawal Plans,
distributions of capital gains must be reinvested in shares of the
Fund, which will be done at net asset value without a sales charge.
Dividends on shares held in the account may be paid in cash or
reinvested.
Redemptions of shares needed to make withdrawal payments will
be made at the net asset value per share determined on the
redemption date. Checks or ACH transfer payments of the proceeds
of Plan withdrawals will normally be transmitted three business
days prior to the date selected for receipt of the payment (receipt
of payment on the date selected cannot be guaranteed), according to
the choice specified in writing by the Planholder.
The amount and the interval of disbursement payments and the
address to which checks are to be mailed or AccountLink payments
are to be sent may be changed at any time by the Planholder by
writing to the Transfer Agent. The Planholder should allow at
least two weeks' time in mailing such notification for the
requested change to be put in effect. The Planholder may, at any
time, instruct the Transfer Agent by written notice (in proper form
in accordance with the requirements of the then-current Prospectus
of the Fund) to redeem all, or any part of, the shares held under
the Plan. In that case, the Transfer Agent will redeem the number
of shares requested at the net asset value per share in effect in
accordance with the Fund's usual redemption procedures and will
mail a check for the proceeds to the Planholder.
The Plan may be terminated at any time by the Planholder by
writing to the Transfer Agent. A Plan may also be terminated at
any time by the Transfer Agent upon receiving directions to that
effect from the Fund. The Transfer Agent will also terminate a
Plan upon receipt of evidence satisfactory to it of the death or
legal incapacity of the Planholder. Upon termination of a Plan by
the Transfer Agent or the Fund, shares that have not been redeemed
from the account will be held in uncertificated form in the name of
the Planholder, and the account will continue as a dividend-
reinvestment, uncertificated account unless and until proper
instructions are received from the Planholder or his or her
executor or guardian, or other authorized person.
To use shares held under the Plan as collateral for a debt,
the Planholder may request issuance of a portion of the shares in
certificated form. Upon written request from the Planholder, the
Transfer Agent will determine the number of shares for which a
certificate may be issued without causing the withdrawal checks to
stop because of exhaustion of uncertificated shares needed to
continue payments. However, should such uncertificated shares
become exhausted, Plan withdrawals will terminate.
If the Transfer Agent ceases to act as transfer agent for the
Fund, the Planholder will be deemed to have appointed any successor
transfer agent to act as agent in administering the Plan.
How To Exchange Shares
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 Money Market Trust, Centennial America
Fund, L.P., and Daily Cash Accumulation Fund, Inc., which only
offer Class A shares, and Oppenheimer Main Street California
Municipal Fund which only offers Class A and Class B shares (Class
B and Class C shares of Oppenheimer Cash Reserves are generally
available only by exchange from the same class of shares of other
Oppenheimer funds or through OppenheimerFunds sponsored 401(k)
plans). A current list showing which funds offer which classes can
be obtained by calling the distributor at 1-800-525-7048.
For accounts established on or before March 8, 1996 holding
Class M shares of Oppenheimer Bond Fund for Growth, Class M shares
can be exchanged only for Class A shares of other Oppenheimer
funds, including Rochester Fund Municipals and Limited Term New
York Municipal Fund. Class A shares of Rochester Fund Municipals
or Limited Term New York Municipal Fund acquired on the exchange of
Class M shares of Oppenheimer Bond Fund for Growth may be exchanged
for Class M shares of that fund. For accounts of Oppenheimer Bond
Fund for Growth established after March 8, 1996, Class M shares may
be exchanged for Class A shares of other Oppenheimer funds except
Rochester Fund Municipals and Limited-Term New York Municipals.
Exchanges to Class M shares of Oppenheimer Bond Fund for Growth are
permitted from Class A shares of Oppenheimer Money Market Fund,
Inc. or Oppenheimer Cash Reserves that were acquired by exchange
from Class M shares. Otherwise no exchanges of any class of any
Oppenheimer fund into Class M shares are permitted.
Class A shares of Oppenheimer funds may be exchanged at net
asset value for shares of any Money Market Fund. Shares of any
Money Market Fund purchased without a sales charge may be exchanged
for shares of Oppenheimer funds offered with a sales charge upon
payment of the sales charge (or, if applicable, may be used to
purchase shares of Oppenheimer funds subject to a contingent
deferred sales charge). However, shares of Oppenheimer Money
Market Fund, Inc. purchased with the redemption proceeds of shares
of other mutual funds (other than funds managed by the Manager or
its subsidiaries) redeemed within the 12 months prior to that
purchase may subsequently be exchanged for shares of other
Oppenheimer funds without being subject to an initial or contingent
deferred sales charge, whichever is applicable. To qualify for
that privilege, the investor or the investor's dealer must notify
the Distributor of eligibility for this privilege at the time the
shares of Oppenheimer Money Market Fund, Inc. are purchased, and,
if requested, must supply proof of entitlement to this privilege.
Shares of the Fund acquired by reinvestment of dividends or
distributions from any other of the Oppenheimer funds (except
Oppenheimer Cash Reserves) or from any unit investment trust for
which reinvestment arrangements have been made with the Distributor
may be exchanged at net asset value for shares of any of the
Oppenheimer funds. No contingent deferred sales charge is imposed
on exchanges of shares of any class purchased subject to a
contingent deferred sales charge. However, when Class A shares
acquired by exchange of Class A shares of other Oppenheimer funds
purchased subject to a Class A contingent deferred sales charge are
redeemed within 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 more
than one account. The Fund may accept requests for exchanges of up
to 50 accounts per day from representatives of authorized dealers
that qualify for this privilege. In connection with any exchange
request, the number of shares exchanged may be less than the number
requested if the exchange or the number requested would include
shares subject to a restriction cited in the Prospectus or this
Statement of Additional Information or would include shares covered
by a share certificate that is not tendered with the request. In
those cases, only the shares available for exchange without
restriction will be exchanged.
When exchanging shares by telephone, a shareholder must either
have an existing account in, or obtain and acknowledge receipt of
a prospectus of, the fund to which the exchange is to be made. For
full or partial exchanges of an account made by telephone, any
special account features such as Asset Builder Plans, Automatic
Withdrawal Plans and retirement plan contributions will be switched
to the new account unless the Transfer Agent is instructed
otherwise. If all telephone lines are busy (which might occur, for
example, during periods of substantial market fluctuations),
shareholders might not be able to request exchanges by telephone
and would have to submit written exchange requests.
Shares to be exchanged are redeemed on the regular business
day the Transfer Agent receives an exchange request in proper form
(the "Redemption Date"). Normally, shares of the fund to be
acquired are purchased on the Redemption Date, but such purchases
may be delayed by either fund up to five business days if it
determines that it would be disadvantaged by an immediate transfer
of the redemption proceeds. The Fund reserves the right, in its
discretion, to refuse any exchange request that may disadvantage it
(for example, if the receipt of multiple exchange requests from a
dealer might require the disposition of portfolio securities at a
time or at a price that might be disadvantageous to the Fund).
The different Oppenheimer funds available for exchange have
different investment objectives, policies and risks, and a
shareholder should assure that the Fund selected is appropriate for
his or her investment and should be aware of the tax consequences
of an exchange. For federal income tax purposes, an exchange
transaction is treated as a redemption of shares of one fund and a
purchase of shares of another. "Reinvestment Privilege," above,
discusses some of the tax consequences of reinvestment of
redemption proceeds in such cases. The Fund, the Distributor, and
the Transfer Agent are unable to provide investment, tax or legal
advice to a shareholder in connection with an exchange request or
any other investment transaction.
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 Trustees and the Manager might determine in a
particular year that it would be in the best interest of
shareholders for the Fund not to make such distributions at the
required levels and to pay the excise tax on the undistributed
amounts. That would reduce the amount of income or capital gains
available for distribution to shareholders.
If the Fund qualifies as a "regulated investment company"
under the Internal Revenue Code, it will not be liable for Federal
income taxes on amounts paid by it as dividends and distributions.
The Fund qualified during its last fiscal year, and intends to
qualify in current and future years, but reserves the right not to
do so. The Internal Revenue Code contains a number of complex
tests to determine whether the Fund will qualify, and the Fund
might not meet those tests in a particular year. 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
must have an existing account in the fund selected for reinvestment
or must obtain a prospectus for that fund and an application from
the Distributor to establish an account. The investment will be
made at the net asset value per share in effect at the close of
business on the payable date of the dividend or distribution.
Dividends and/or distributions from certain of the Oppenheimer
funds may be invested in shares of this Fund on the same basis.
Additional Information About the Fund
The Custodian. State Street Bank and Trust Company acts as
custodian of the assets of the 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 serves as the
Fund's independent accountants. Their services include examining
the annual financial statements of the Fund as well as other
related services.
16 Oppenheimer Quest Small Cap Value Fund
<PAGE> 17
REPORT OF INDEPENDENT ACCOUNTANTS
================================================================================
To the Board of Trustees and Shareholders of
Oppenheimer Quest Small Cap Value Fund
In our opinion, the accompanying statement of assets
and liabilities, including the statement of
investments, and the related statements of
operations and of changes in net assets and the
financial highlights present fairly, in all material
respects, the financial position of Oppenheimer
Quest Small Cap Value Fund (formerly Quest for Value
Small Capitalization Fund, one of the portfolios
constituting Oppenheimer Quest for Value Funds,
formerly Quest for Value Family of Funds, hereafter
referred to as the Fund) at October 31, 1996, the
results of its operations for the year then ended,
the changes in its net assets for each of the two
years in the period then ended and the financial
highlights for 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, 1996 by correspondence
with the custodian and the application of
alternative auditing procedures for unsettled
security transactions, provide a reasonable basis
for the opinion expressed above.
/s/ Price Waterhouse LLP
Price Waterhouse LLP
Denver, Colorado
November 21, 1996
5 Oppenheimer Quest Small Cap Value Fund
<PAGE> 6
STATEMENT OF INVESTMENTS October 31, 1996
<TABLE>
<CAPTION>
FACE
MARKET VALUE
AMOUNT
SEE NOTE 1
================================================================================================================
====================
<S> <C>
<C>
SHORT-TERM NOTES--10.3%
- ----------------------------------------------------------------------------------------------------------------
- --------------------
Household Finance Corp., 5.25%, 11/26/96(1)
$10,668,000 $10,629,106
- --------------------------------------------------------------------------------------------------
Prudential Funding Corp., 5.25%, 12/4/96(1)
4,509,000 4,487,301
----------
Total Short-Term Notes (Cost $15,116,407)
15,116,407
================================================================================================================
====================
NON-CONVERTIBLE CORPORATE BONDS AND NOTES--0.0%
- ----------------------------------------------------------------------------------------------------------------
- --------------------
Collins Industries, Inc., 8.75% Nts., 1/11/00 (Cost $62,950)
62,950 57,636
================================================================================================================
====================
CONVERTIBLE CORPORATE BONDS AND NOTES--1.0%
- ----------------------------------------------------------------------------------------------------------------
- --------------------
Security Capital Realty, Inc., 12% Cv. Sub. Debs., 6/30/14(2)
1,363,500 1,410,948
- --------------------------------------------------------------------------------------------------
Security Capital Realty, Inc., 12% Cv. Sub. Debs. Interest Shares,
6/30/14(2)
78,585 78,585
---------
Total Convertible Corporate Bonds and Notes (Cost $1,372,940)
1,489,533
<CAPTION>
SHARES
================================================================================================================
====================
<S> <C> <C>
<C>
COMMON STOCKS--91.1%
- ----------------------------------------------------------------------------------------------------------------
- --------------------
BASIC MATERIALS--3.2%
- ----------------------------------------------------------------------------------------------------------------
- --------------------
CHEMICALS--1.1% McWhorter Technologies, Inc.(3)
84,200 1,620,850
- ----------------------------------------------------------------------------------------------------------------
- --------------------
PAPER--2.1% Shorewood Packaging Corp.(3)
162,000 3,057,750
- ----------------------------------------------------------------------------------------------------------------
- --------------------
CONSUMER CYCLICALS--11.9%
- ----------------------------------------------------------------------------------------------------------------
- --------------------
AUTOS & HOUSING--8.1% Borg-Warner Automotive, Inc.
55,100 2,114,462
- --------------------------------------------------------------------------------------------------
Cousins Properties, Inc.
101,800 2,328,675
- --------------------------------------------------------------------------------------------------
Security Capital Industrial Trust
150,600 2,729,625
- --------------------------------------------------------------------------------------------------
Security Capital Pacific Trust
120,363 2,708,167
- --------------------------------------------------------------------------------------------------
Security Capital Realty, Inc.(2)(3)
1,800 1,948,320
------------
11,829,249
- ----------------------------------------------------------------------------------------------------------------
- --------------------
MEDIA--1.2% Katz Media Group, Inc.(3)
210,400 1,762,100
- ----------------------------------------------------------------------------------------------------------------
- --------------------
RETAIL: GENERAL--1.8% WestPoint Stevens, Inc.(3)
100,000 2,662,500
- ----------------------------------------------------------------------------------------------------------------
- --------------------
RETAIL: SPECIALTY--0.8% Nu-Kote Holding, Inc., Cl. A(3)
120,200 1,141,900
- ----------------------------------------------------------------------------------------------------------------
- --------------------
CONSUMER NON-CYCLICALS--11.4%
- ----------------------------------------------------------------------------------------------------------------
- --------------------
HEALTHCARE/DRUGS--6.7% Dentsply International, Inc.
51,900 2,186,287
- --------------------------------------------------------------------------------------------------
SpaceLabs Medical, Inc.(3)
320,000 6,480,000
- --------------------------------------------------------------------------------------------------
Sylvan, Inc.(3)
84,700 1,090,512
-----------
9,756,799
- ----------------------------------------------------------------------------------------------------------------
- --------------------
HEALTHCARE/SUPPLIES & Magellan Health Services, Inc.(3)
355,300 6,528,637
SERVICES--4.7%
- --------------------------------------------------------------------------------------------------
Vital Signs, Inc.
14,200 301,750
-----------
6,830,387
</TABLE>
6 Oppenheimer Quest Small Cap Value Fund
<PAGE> 7
<TABLE>
<CAPTION>
MARKET VALUE
SHARES SEE
NOTE 1
- ----------------------------------------------------------------------------------------------------------------
- ------------
<S> <C> <C>
<C>
ENERGY--6.3%
- ----------------------------------------------------------------------------------------------------------------
- ------------
ENERGY SERVICES & Petroleum Heat & Power Co., Inc., Cl. A 165,000
$ 1,216,875
PRODUCERS--2.3%
- ------------------------------------------------------------------------------------------
St. Mary Land & Exploration Co. 105,500
2,136,375
- -----------
3,353,250
- ----------------------------------------------------------------------------------------------------------------
- ------------
OIL-INTEGRATED--4.0% Belden & Blake Corp.(3) 49,000
1,298,500
- ------------------------------------------------------------------------------------------
Nuevo Energy Co.(3) 31,800
1,586,025
- ------------------------------------------------------------------------------------------
Seagull Energy Corp.(3) 58,000
1,254,250
- ------------------------------------------------------------------------------------------
Triton Energy Corp.(3) 37,400
1,668,975
- -----------
5,807,750
- ----------------------------------------------------------------------------------------------------------------
- ------------
FINANCIAL--14.0%
- ----------------------------------------------------------------------------------------------------------------
- ------------
BANKS--0.6% First Financial Caribbean Corp. 36,000
927,000
- ----------------------------------------------------------------------------------------------------------------
- ------------
INSURANCE--13.4% ACE Ltd. 68,000
3,723,000
- ------------------------------------------------------------------------------------------
Berkley (W.R.) Corp. 39,200
2,038,400
- ------------------------------------------------------------------------------------------
Delphi Financial Group, Inc., Cl. A 113,640
3,181,920
- ------------------------------------------------------------------------------------------
E.W. Blanch Holdings, Inc. 149,400
3,081,375
- ------------------------------------------------------------------------------------------
Everest Reinsurance Holdings, Inc. 44,000
1,122,000
- ------------------------------------------------------------------------------------------
Horace Mann Educators Corp. 95,000
3,253,750
- ------------------------------------------------------------------------------------------
Protective Life Corp. 43,500
1,500,750
- ------------------------------------------------------------------------------------------
United Wisconsin Services, Inc. 69,900
1,808,662
- -----------
19,709,857
- ----------------------------------------------------------------------------------------------------------------
- ------------
INDUSTRIAL--20.6%
- ----------------------------------------------------------------------------------------------------------------
- ------------
ELECTRICAL EQUIPMENT--4.3% AVX Corp. 41,400
765,900
- ------------------------------------------------------------------------------------------
Oak Industries, Inc.(3) 219,300
5,564,738
- ----------
6,330,638
- ----------------------------------------------------------------------------------------------------------------
- ------------
INDUSTRIAL MATERIALS--3.2% Dal-Tile International, Inc.(3) 144,000
2,520,000
- ------------------------------------------------------------------------------------------
Interpool, Inc. 101,700
2,211,975
- ----------
4,731,975
- ----------------------------------------------------------------------------------------------------------------
- ------------
INDUSTRIAL SERVICES--3.2% Briggs & Stratton Corp. 45,000
1,800,000
- ------------------------------------------------------------------------------------------
International Imaging Materials, Inc.(3) 87,600
2,080,500
- ------------------------------------------------------------------------------------------
McGrath Rentcorp 36,300
862,125
- -----------
4,742,625
- ----------------------------------------------------------------------------------------------------------------
- ------------
MANUFACTURING--9.9% Baldwin Technology Co., Inc., Cl. A(3) 510,500
1,531,500
- ------------------------------------------------------------------------------------------
Carlisle Cos., Inc. 43,300
2,462,688
- ------------------------------------------------------------------------------------------
Crane Co. 62,800
2,920,200
- ------------------------------------------------------------------------------------------
EASCO, Inc. 5,000
30,000
- ------------------------------------------------------------------------------------------
Greenfield Industries, Inc. 42,200
1,118,300
- ------------------------------------------------------------------------------------------
Harmon Industries, Inc. 50,400
856,800
- ------------------------------------------------------------------------------------------
United Dominion Industries Ltd. 269,600
5,560,500
- -----------
14,479,988
</TABLE>
7 Oppenheimer Quest Small Cap Value Fund
<PAGE> 8
STATEMENT OF INVESTMENTS (Continued)
<TABLE>
<CAPTION>
MARKET VALUE
SHARES SEE
NOTE 1
- ----------------------------------------------------------------------------------------------------------------
- -----------
<S> <C> <C>
TECHNOLOGY--22.7%
- ----------------------------------------------------------------------------------------------------------------
- -----------
AEROSPACE/DEFENSE--1.3% Tracor, Inc.(3) 87,000 $
1,979,250
- ----------------------------------------------------------------------------------------------------------------
- -----------
COMPUTER HARDWARE--2.5% Exabyte Corp.(3) 164,000
2,173,000
- -----------------------------------------------------------------------------------------
Wang Laboratories, Inc.(3) 65,000
1,519,375
- ------------
3,692,375
- ----------------------------------------------------------------------------------------------------------------
- -----------
COMPUTER SOFTWARE--3.6% BancTec, Inc.(3) 258,900
5,275,088
- ----------------------------------------------------------------------------------------------------------------
- -----------
ELECTRONICS--14.1% Arrow Electronics, Inc.(3) 70,100
3,338,513
- -----------------------------------------------------------------------------------------
Channell Commercial Corp.(3) 32,000
374,000
- -----------------------------------------------------------------------------------------
EG&G, Inc. 381,200
6,718,650
- -----------------------------------------------------------------------------------------
Exar Corp.(3) 261,500
3,595,625
- -----------------------------------------------------------------------------------------
Marshall Industries(3) 177,300
5,341,163
- -----------------------------------------------------------------------------------------
Unitrode Corp.(3) 56,200
1,348,800
- ------------
20,716,751
- ----------------------------------------------------------------------------------------------------------------
- -----------
TELECOMMUNICATIONS- ECI Telecommunications Ltd. 89,000
1,780,000
TECHNOLOGY--1.2%
- ----------------------------------------------------------------------------------------------------------------
- -----------
UTILITIES--1.0%
- ----------------------------------------------------------------------------------------------------------------
- -----------
Aquila Gas Pipeline Corp. 96,600
1,400,700
- ------------
Total Common Stocks (Cost $120,275,475)
133,588,782
- ----------------------------------------------------------------------------------------------------------------
- -----------
TOTAL INVESTMENTS, AT VALUE (COST $136,827,772) 102.4%
150,252,358
- ----------------------------------------------------------------------------------------------------------------
- -----------
LIABILITIES IN EXCESS OF OTHER ASSETS (2.4)
(3,559,147)
--------
- ------------
NET ASSETS 100.0%
$146,693,211
========
============
</TABLE>
1. Short-term notes are generally traded on a discount basis; the
interest rate is the discount rate received by the Fund at the time of
purchase.
2. Identifies issues considered to be illiquid--See Note 5 of Notes to
Financial Statements.
3. Non-income producing security. See accompanying Notes to Financial
Statements.
8 Oppenheimer Quest Small Cap Value Fund
<PAGE> 9
STATEMENT OF ASSETS AND LIABILITIES OCTOBER 31, 1996
<TABLE>
================================================================================================================
=========
<S> <C> <C>
ASSETS Investments, at value (cost $136,827,772)--see accompanying statement
$150,252,358
- -----------------------------------------------------------------------------------------------
Receivables:
Shares of beneficial interest sold
1,029,023
Investments sold
838,142
Interest and dividends
155,909
- -----------------------------------------------------------------------------------------------
Other
9,200
- ------------
Total assets
152,284,632
================================================================================================================
=========
LIABILITIES Bank overdraft
164,639
- -----------------------------------------------------------------------------------------------
Payables and other liabilities:
Investments purchased
4,134,293
Shares of beneficial interest redeemed
1,147,923
Distribution and service plan fees
31,510
Transfer agent and accounting service fees
10,077
Trustees' fees
3,276
Other
99,703
- ------------
Total liabilities
5,591,421
================================================================================================================
=========
NET ASSETS
$146,693,211
============
================================================================================================================
=========
COMPOSITION OF Par value of shares of beneficial interest $
77,390
NET ASSETS
- -----------------------------------------------------------------------------------------------
Additional paid-in capital
114,615,487
- -----------------------------------------------------------------------------------------------
Accumulated net realized gain on investment transactions
18,575,748
- -----------------------------------------------------------------------------------------------
Net unrealized appreciation on investments--Note 3
13,424,586
- ------------
Net assets
$146,693,211
============
================================================================================================================
=========
NET ASSET VALUE Class A Shares:
PER SHARE Net asset value and redemption price per share (based on net
assets of $102,746,109 and 5,398,787 shares of beneficial
interest outstanding)
$19.03
Maximum offering price per share (net asset value plus sales
charge of 5.75% of offering price)
$20.19
- -----------------------------------------------------------------------------------------------
Class B Shares:
Net asset value, redemption price and offering price per share
(based on net assets of $30,765,729 and 1,637,492 shares of
beneficial interest outstanding)
$18.79
- -----------------------------------------------------------------------------------------------
Class C Shares:
Net asset value, redemption price and offering price per share
(based on net assets of $13,181,373 and 702,671 shares of
beneficial interest outstanding)
$18.76
</TABLE>
See accompanying Notes to Financial Statements.
9 Oppenheimer Quest Small Cap Value Fund
<PAGE> 10
STATEMENT OF OPERATIONS For the Year Ended October 31, 1996
<TABLE>
- ----------------------------------------------------------------------------------------------------------------
- ---------
<S> <C> <C>
INVESTMENT INCOME Dividends (net of foreign withholding taxes of $6,932) $
1,867,796
- -----------------------------------------------------------------------------------------------
Interest
1,256,038
- -----------
Total income
3,123,834
================================================================================================================
=========
EXPENSES Management fees--Note 4
1,558,482
- -----------------------------------------------------------------------------------------------
Distribution and service plan fees--Note 4:
Class A
588,072
Class B
264,640
Class C
115,068
- -----------------------------------------------------------------------------------------------
Transfer agent and accounting service fees--Note 4
235,421
- -----------------------------------------------------------------------------------------------
Shareholder reports
163,557
- -----------------------------------------------------------------------------------------------
Registration and filing fees:
Class A
62,575
Class B
9,573
Class C
6,633
- -----------------------------------------------------------------------------------------------
Legal and auditing fees
38,885
- -----------------------------------------------------------------------------------------------
Custodian fees and expenses
32,948
- -----------------------------------------------------------------------------------------------
Trustees' fees and expenses
24,625
- -----------------------------------------------------------------------------------------------
Other
39,366
- -----------
Total expenses
3,139,845
================================================================================================================
=========
NET INVESTMENT LOSS
(16,011)
================================================================================================================
=========
REALIZED AND Net realized gain on investments
19,244,292
UNREALIZED GAIN
- -----------------------------------------------------------------------------------------------
Net change in unrealized appreciation or depreciation on investments
4,837,245
- -----------
Net realized and unrealized gain
24,081,537
================================================================================================================
=========
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS
$24,065,526
===========
</TABLE>
See accompanying Notes to Financial Statements.
10 Oppenheimer Quest Small Cap Value Fund
<PAGE> 11
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER
31,
1996
1995
================================================================================================================
=============
<S> <C> <C>
<C>
OPERATIONS Net investment income (loss) $ (16,011)
$ 818,568
- ------------------------------------------------------------------------------------------------
Net realized gain 19,244,292
8,543,743
- ------------------------------------------------------------------------------------------------
Net change in unrealized appreciation or depreciation 4,837,245
3,040,965
-----------
- -----------
Net increase in net assets resulting from operations 24,065,526
12,403,276
================================================================================================================
=============
DIVIDENDS AND Dividends from net investment income:
DISTRIBUTIONS TO Class A (758,969)
--
SHAREHOLDERS Class B (44,363)
--
Class C (29,083)
--
- ------------------------------------------------------------------------------------------------
Distributions from net realized gain:
Class A (6,609,655)
(3,010,761)
Class B (1,335,461)
(434,007)
Class C (506,878)
(91,772)
================================================================================================================
=============
BENEFICIAL INTEREST Net increase (decrease) in net assets resulting from beneficial interest
TRANSACTIONS transactions--Note 2:
Class A (24,805,861)
(11,016,993)
Class B 4,861,970
6,073,460
Class C 3,040,987
5,301,995
================================================================================================================
=============
NET ASSETS Total increase (decrease) (2,121,787)
9,225,198
- ------------------------------------------------------------------------------------------------
Beginning of period 148,814,998
139,589,800
------------
- ------------
End of period (including undistributed net investment income
of $817,130 in 1995) $146,693,211
$148,814,998
============
============
</TABLE>
See accompanying Notes to Financial Statements.
11 Oppenheimer Quest Small Cap Value Fund
<PAGE> 12
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
CLASS A
- --------------------------------------------------------------------------
YEAR ENDED OCTOBER 31,
1996(2) 1995 1994 1993
1992
================================================================================================================
================
<S> <C> <C> <C> <C>
<C>
PER SHARE OPERATING DATA:
Net asset value, beginning of period $17.31 $16.33 $17.68 $14.60
$13.52
- ----------------------------------------------------------------------------------------------------------------
- ----------------
Income (loss) from investment operations:
Net investment income (loss) .03 .11(3) (.03)(3) (.04)(3)
--(3)
Net realized and unrealized gain 2.79 1.29 .01 4.26
1.50
--------- ------- ------- -------
--------
Total income (loss) from
investment operations 2.82 1.40 (.02) 4.22
1.50
- ----------------------------------------------------------------------------------------------------------------
- ----------------
Dividends and distributions to shareholders:
Dividends from net investment income (.11) -- -- --
--
Distributions from net realized gain (.99) (.42) (1.33) (1.14)
(.42)
--------- ------- ------- -------
--------
Total dividends and distributions to shareholders (1.10) (.42) (1.33) (1.14)
(.42)
- ----------------------------------------------------------------------------------------------------------------
- ----------------
Net asset value, end of period $19.03 $17.31 $16.33 $17.68
$14.60
========= ======= ======= =======
========
================================================================================================================
================
TOTAL RETURN, AT NET ASSET VALUE(4) 17.17% 8.82% 0.04% 30.21%
11.60%
================================================================================================================
================
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in thousands) $102,746 $116,307 $120,102 $104,898
$39,693
- ----------------------------------------------------------------------------------------------------------------
- ----------------
Average net assets (in thousands) $117,765 $119,440 $115,276 $75,500
$32,551
- ----------------------------------------------------------------------------------------------------------------
- ----------------
Ratios to average net assets:
Net investment income (loss) 0.11% 0.67% (0.14)% (0.36)%
(0.04)%
Expenses 1.90% 1.80% 1.88% 1.89%
2.11%
- ----------------------------------------------------------------------------------------------------------------
- ----------------
Portfolio turnover rate(6) 70.4% 76.0% 67.0% 74.0%
95.0%
Average brokerage commission rate(7) $0.0515 -- -- --
--
</TABLE>
1. For the period from September 1, 1993 (inception of
offering) to October 31, 1993.
2. On November 22, 1995, OppenheimerFunds, Inc. became the
investment adviser to the Fund.
3. Based on average shares outstanding for the period.
4. Assumes a hypothetical initial investment on the business
day before the first day of the fiscal period (or inception
of offering), with all dividends and distributions
reinvested in additional shares on the reinvestment date,
and redemption at the net asset value calculated on the last
business day of the fiscal period. Sales charges are not
reflected in the total returns. Total returns are not
annualized for periods of less than one full year.
12 Oppenheimer Quest Small Cap Value Fund
<PAGE> 13
<TABLE>
<CAPTION>
CLASS B CLASS C
- -----------------------------------------------------------
- -----------------------------------------------------
YEAR ENDED OCTOBER 31, YEAR ENDED OCTOBER 31,
1996(2) 1995 1994 1993(1) 1996(2) 1995 1994
1993(1)
================================================================================================================
==============
<S> <C> <C> <C> <C> <C> <C>
<C>
$17.11 $16.24 $17.66 $17.19 $17.11 $16.23 $17.67
$17.19
- ----------------------------------------------------------------------------------------------------------------
- --------------
(.06) .02(3) (.11)(3) (.02)(3) (.05) .01(3) (.13)(3)
(.02)(3)
2.76 1.27 .02 .49 2.75 1.29 .02
.50
- ------- ------- ------- ------- -------- ------- -------
-------
2.70 1.29 (.09) .47 2.70 1.30 (.11)
.48
- ----------------------------------------------------------------------------------------------------------------
- --------------
(.03) -- -- -- (.06) -- --
--
(.99) (.42) (1.33) -- (.99) (.42) (1.33)
--
- ------- ------- ------- ------- -------- ------- -------
-------
(1.02) (.42) (1.33) -- (1.05) (.42) (1.33)
--
- ----------------------------------------------------------------------------------------------------------------
- --------------
$18.79 $17.11 $16.24 $17.66 $18.76 $17.11 $16.23
$17.67
======= ======= ======= ======= ======== ======= =======
=======
================================================================================================================
==============
16.57% 8.17% (0.39)% 2.73% 16.55% 8.24% (0.51)%
2.79%
================================================================================================================
==============
$30,766 $23,440 $16,144 $1,754 $13,181 $9,068 $3,344
$235
- ----------------------------------------------------------------------------------------------------------------
- --------------
$26,478 $20,105 $9,401 $934 $11,501 $6,114 $1,381
$138
- ----------------------------------------------------------------------------------------------------------------
- --------------
(0.37)% 0.09% (0.70)% (1.15)%(5) (0.40)% 0.08% (0.81)%
(1.20)%(5)
2.38% 2.37% 2.48% 2.57%(5) 2.40% 2.38% 2.59%
2.57%(5)
- ----------------------------------------------------------------------------------------------------------------
- --------------
70.4% 76.0% 67.0% 74.0% 70.4% 76.0% 67.0%
74.0%
$0.0515 -- -- -- $0.0515 -- --
--
</TABLE>
5. Annualized.
6. 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, 1996 were $96,608,078 and $113,296,341,
respectively.
7. Total brokerage commissions paid on applicable purchases and sales of
portfolio securities for the period, divided by the total number of related
shares purchased and sold.
See accompanying Notes to Financial Statements.
13 Oppenheimer Quest Small Cap Value Fund
<PAGE> 14
NOTES TO FINANCIAL STATEMENTS
================================================================================
1. SIGNIFICANT
ACCOUNTING POLICIES
Oppenheimer Quest Small Cap Value Fund (the Fund),
formerly named Quest for Value Small Capitalization
Fund, a series of Oppenheimer Quest for Value Funds,
is a diversified open-end management investment
company registered under the Investment Company Act
of 1940, as amended. 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. 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
OppenheimerFunds, Inc. (the Manager), which resulted
in the sale to the Manager of certain mutual fund
assets of OCC Distributors and OpCap Advisors
including the transfer of Quest for Value Funds and
the use of the name "Quest for Value." As part of
the transaction, the Fund entered into an investment
advisory agreement with the Manager and the Manager
entered into a sub-advisory agreement with OpCap
Advisors (the former Manager). The Fund offers Class
A, Class B and Class C shares. Class A shares are
sold with a front-end sales charge. Class B and
Class C shares may be subject to a contingent
deferred sales charge. All three classes of shares
have identical rights to earnings, assets and voting
privileges, except that each class has its own
distribution and/or service plan, expenses directly
attributable to a particular class and exclusive
voting rights with respect to matters affecting a
single class. Class B shares will automatically
convert to Class A shares six years after the date
of purchase. The following is a summary of
significant accounting policies consistently
followed by the Fund.
-----------------------------------------------------
INVESTMENT VALUATION. Portfolio securities are
valued at the close of the New York Stock Exchange
on each trading day. Listed and unlisted securities
for which such information is regularly reported are
valued at the last sale price of the day or, in the
absence of sales, at values based on the closing bid
or the last sale price on the prior trading day.
Long-term and short-term "non-money market" debt
securities are valued by a portfolio pricing service
approved by the Board of Trustees. Such securities
which cannot be valued by the approved portfolio
pricing service are valued using dealer-supplied
valuations provided the Manager is satisfied that
the firm rendering the quotes is reliable and that
the quotes reflect current market value, or are
valued under consistently applied procedures
established by the Board of Trustees to determine
fair value in good faith. Short-term "money market
type" debt securities having a remaining maturity of
60 days or less are valued at cost (or last
determined market value) adjusted for amortization
to maturity of any premium or discount.
-----------------------------------------------------
ALLOCATION OF INCOME, EXPENSES, AND GAINS AND
LOSSES. Income, expenses (other than those
attributable to a specific class) and gains and
losses are allocated daily to each class of shares
based upon the relative proportion of net assets
represented by such class. Operating expenses
directly attributable to a specific class are
charged against the operations of that class.
-----------------------------------------------------
FEDERAL TAXES. The Fund intends to continue to
comply with provisions of the Internal Revenue Code
applicable to regulated investment companies and to
distribute all of its taxable income, including any
net realized gain on investments not offset by loss
carryovers, to shareholders. Therefore, no federal
income or excise tax provision is required.
-----------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS. Dividends and
distributions to shareholders are recorded on the
ex-dividend date.
-----------------------------------------------------
CLASSIFICATION OF DISTRIBUTIONS TO SHAREHOLDERS. Net
investment income (loss) and net realized gain
(loss) may differ for financial statement and tax
purposes. The character of the distributions made
during the year from net investment income or net
realized gains may differ from their ultimate
characterization for federal income tax purposes.
Also, due to timing of dividend distributions, the
fiscal year in which amounts are distributed may
differ from the year that the income or realized
gain (loss) was recorded by the Fund.
During the year ended October 31, 1996,
the Fund adjusted the classification of net
investment income and capital gain (loss) to reflect
the differences between financial statement amounts
and distributions determined in accordance with
income tax regulations. Accordingly, during the year
ended October 31, 1996, amounts have been
reclassified to reflect a decrease in accumulated
net realized gain on investments of $31,296. Net
investment income was decreased by the same amount.
14 Oppenheimer Quest Small Cap Value Fund
<PAGE> 15
================================================================================
1. SIGNIFICANT
ACCOUNTING POLICIES
(CONTINUED)
OTHER. Investment transactions are accounted for on
the date the investments are purchased or sold
(trade date) and dividend income is recorded on the
ex-dividend date. Realized gains and losses on
investments and unrealized appreciation and
depreciation are determined on an identified cost
basis, which is the same basis used for federal
income tax purposes.
The preparation of financial statements
in conformity with generally accepted accounting
principles requires management to make estimates and
assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent
assets and liabilities at the date of the financial
statements and the reported amounts of income and
expenses during the reporting period. Actual results
could differ from those estimates.
================================================================================
2. SHARES OF
BENEFICIAL INTEREST
The Fund has authorized an unlimited number of $.01
par value shares of beneficial interest.
Transactions in shares of beneficial interest were
as follows:
<TABLE>
<CAPTION>
Year Ended October 31, 1996 Year Ended
October 31, 1995
----------------------------
- ----------------------------
Shares Amount Shares
Amount
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
<C>
Class A:
Sold 1,937,231 $35,893,632 2,307,655
$38,194,245
Dividends and distributions reinvested 420,196 7,076,100 181,647
2,840,961
Redeemed (3,676,057) (67,775,591) (3,125,095)
(52,052,199)
---------- ------------ ----------
------------
Net decrease (1,318,630) $(24,805,859) (635,793)
$(11,016,993)
========== ============ ==========
============
- -----------------------------------------------------------------------------------------------------
Class B:
Sold 551,514 $10,124,916 620,242
$10,160,304
Dividends and distributions reinvested 78,798 1,315,750 26,272
408,265
Redeemed (362,432) (6,578,696) (271,244)
(4,495,109)
---------- ------------ ----------
------------
Net increase 267,880 $4,861,970 375,270
$6,073,460
========== ============ ==========
============
- -----------------------------------------------------------------------------------------------------
Class C:
Sold 389,343 $7,061,411 389,503
$6,393,572
Dividends and distributions reinvested 31,101 518,457 5,721
88,907
Redeemed (247,719) (4,538,881) (71,284)
(1,180,484)
---------- ------------ ----------
------------
Net increase 172,725 $3,040,987 323,940
$5,301,995
========== ============ ==========
============
================================================================================================================
===============
</TABLE>
3. UNREALIZED GAINS AND
LOSSES ON INVESTMENTS
At October 31, 1996, net unrealized appreciation on
investments of $13,424,586 was composed of gross
appreciation of $19,225,136, and gross depreciation
of $5,800,550.
================================================================================
4. MANAGEMENT FEES
AND OTHER TRANSACTIONS
WITH AFFILIATES
Management fees paid to the Manager were in
accordance with the investment advisory agreement
with the Fund which provides for a fee of 1.00% on
the first $400 million of average annual net assets,
0.90% on the next $400 million and 0.85% on net
assets in excess of $800 million. Prior to November
22, 1995, management fees were paid to the former
Manager at an annual rate of 1.00% of the Fund's
average net assets. The Manager has agreed to
reimburse the Fund if aggregate expenses (with
specified exceptions) exceed the most stringent
applicable regulatory limit on Fund expenses. The
Manager acts as the accounting agent for the Fund at
an annual fee of $55,000, plus out-of-pocket costs
and expenses reasonably incurred. Prior to November
22, 1995, accounting service fees were paid monthly
to the former Manager.
Effective November 22, 1995, the
Manager pays OpCap Advisors (the Sub-Adviser) based
on the fee schedule set forth in the Prospectus. For
the period ended October 31, 1996, the Manager paid
$581,663 to the Sub-Adviser.
For the year ended October 31, 1996,
commissions (sales charges paid by investors) on
sales of Class A shares totaled $297,166, of which
$115,180 was retained by OppenheimerFunds
Distributor, Inc. (OFDI), a subsidiary of the
Manager, as general distributor, and by affiliated
broker/dealers. Sales charges advanced to
broker/dealers by OFDI on sales of the Fund's Class
B and Class C shares totaled $317,703 and $58,943,
of which $5,034 was paid to an affiliated
broker/dealer for Class B. During the year ended
October 31, 1996, OFDI received contingent deferred
sales charges of $99,115 and $3,583, respectively,
upon redemption of Class B and Class C shares as
reimbursement for sales commissions advanced by OFDI
at the time of sale of such shares.
15 Oppenheimer Quest Small Cap Value Fund
<PAGE> 16
NOTES TO FINANCIAL STATEMENTS (Continued)
================================================================================
4. MANAGEMENT FEES
AND OTHER TRANSACTIONS
WITH AFFILIATES
(CONTINUED)
OppenheimerFunds Services (OFS), a division of the
Manager, is the transfer and shareholder servicing
agent for the Fund, and for other registered
investment companies. The Fund pays OFS an annual
maintenance fee of $14.85 for each Fund shareholder
account and reimburses OFS for its out-of-pocket
expenses. During the period ended October 31, 1996,
the Fund paid OFS $169,511.
The Fund has adopted a Distribution and
Service Plan for Class A shares to compensate OFDI
for a portion of its costs incurred in connection
with the personal service and maintenance of
accounts that hold Class A shares. Under the Plan,
the Fund pays an annual asset-based sales charge to
OFDI of 0.25% per year on Class A shares. The Fund
also pays a service fee to OFDI of 0.25% per year.
Both fees are computed on the average annual net
assets of Class A shares of the Fund, determined as
of the close of each regular business day. OFDI uses
all of the service fee and a portion of the
asset-based sales charge to compensate brokers,
dealers, banks and other financial institutions
quarterly for providing personal service and
maintenance of accounts of their customers that hold
Class A shares. OFDI retains the balance of the
asset-based sales charge to reimburse itself for its
other expenditures under the Plan. During the period
ended October 31, 1996, OFDI paid $1,102 to an
affiliated broker/dealer as compensation for Class A
personal service and maintenance expenses.
The Fund has adopted compensation type
Distribution and Service Plans for Class B and Class
C shares to compensate OFDI for its services and
costs in distributing Class B and Class C shares and
servicing accounts. Under the Plans, the Fund pays
OFDI an annual asset-based sales charge of 0.75% per
year on Class B and Class C shares, as compensation
for sales commissions paid from its own resources at
the time of sale and associated financing costs. If
the Plans are terminated by the Fund, the Board of
Trustees may allow the Fund to continue payments of
the asset-based sales charge to OFDI for certain
expenses it incurred before the Plans were
terminated. OFDI also receives a service fee of
0.25% per year as compensation for costs incurred in
connection with the personal service and maintenance
of accounts that hold shares of the Fund, including
amounts paid to brokers, dealers, banks and other
financial institutions. Both fees are computed on
the average annual net assets of Class B and Class C
shares, determined as of the close of each regular
business day. During the year ended October 31,
1996, OFDI retained $206,892 and $65,837,
respectively, as compensation for Class B and Class
C sales commissions and service fee advances, as
well as financing costs. At October 31, 1996, OFDI
had incurred unreimbursed expenses of $82,925 for
Class B and $36,379 for Class C.
================================================================================
5. ILLIQUID AND RESTRICTED
SECURITIES
At October 31, 1996, investments in securities
included issues that are illiquid or restricted.
Restricted securities are often purchased in private
placement transactions, are not registered under the
Securities Act of 1933, may have contractual
restrictions on resale, and are valued under methods
approved by the Board of Trustees as reflecting fair
value. A security may be considered illiquid if it
lacks a readily available market or if its valuation
has not changed for a certain period of time. The
Fund intends to invest no more than 10% of its net
assets (determined at the time of purchase and
reviewed from time to time) in illiquid or
restricted securities. Certain restricted
securities, eligible for resale to qualified
institutional investors, are not subject to that
limit. The aggregate value of illiquid or restricted
securities subject to this limitation at October 31,
1996 was $3,437,853, which represents 2.34% of the
Fund's net assets. Information concerning restricted
securities is as follows:
<TABLE>
<CAPTION>
VALUATION PER UNIT
SECURITY ACQUISITION DATES COST PER UNIT AS
OF OCT. 31, 1996
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Security Capital Realty, Inc. 7/29/93--1/19/94 $683.92
$1,082.40
- --------------------------------------------------------------------------------------------------------
Security Capital Realty, Inc.,
12% Cv. Sub. Debs., 6/30/14 7/1/94 94.26
103.48
- --------------------------------------------------------------------------------------------------------
Security Capital Realty, Inc.,
12% Cv. Sub. Debs.
Interest Shares, 6/30/14 1/1/95--6/30/96 100.00
100.00
</TABLE>
<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
<PAGE>
Food
Gas Transmission*
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
_________________
* For purposes of the Fund's investment policy not to concentrate
in securities of issuers in the same industry, gas utilities and
gas transmission utilities each will be considered a separate
industry.
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
prosp\251sai.#1
