Bridget A. Macaskill
President and
Chief Executive Officer OppenheimerFunds, Inc.
Two World Trade Center, 34th Floor
New York, NY 10048-0203
800 525-7048
www.oppenheimerfunds.com
September 10, 1999
Dear Oppenheimer Quest Capital Value Fund Shareholder,
One of the things we pride ourselves on at OppenheimerFunds, Inc. is our
commitment to searching for new investment opportunities for shareholders of our
funds. I am writing to you today to let you know about one of those
opportunities--a positive change that has been proposed for Oppenheimer Quest
Capital Value Fund, Inc.
After careful consideration, the Board of Directors agreed that it would
be in the best interest of shareholders of Oppenheimer Quest Capital Value Fund
to reorganize into another Oppenheimer fund, Quest Balanced Value Fund. A
shareholder meeting has been scheduled for October 29, 1999, and all Capital
Value Fund shareholders of record on August 19th are being asked to vote either
in person or by proxy. You will find a notice of the meeting, a proxy card, a
proxy statement detailing the proposal, a Balanced Value Fund prospectus and a
postage-paid return envelope enclosed for your use.
Why does the Board of Directors recommend this change?
The Board recommends the reorganization into Balanced Value Fund so
shareholders of Capital Value Fund may become shareholders of a substantially
larger fund. In addition, Balanced Value Fund is advised by the same investment
adviser and subadviser, with the investment objective of capital growth as well
as current income, and similar "value-oriented" investment policies and
strategies but with the potential for lower overall operating expenses. The
Board also considered that the historical performance of Balanced Value Fund was
superior to that of Capital Value Fund.
Further, due to the balance of stocks and debt securities in Balanced
Value Fund, compared to the concentrated stock holdings of Capital Value Fund,
the Balanced Value Fund portfolio would likely not experience the significant
volatility to which Capital Value Fund is exposed to in the event one particular
holding significantly loses value. The Board also considered that the
reorganization would be a tax free reorganization, there would be no sales
charge imposed in effecting the reorganization and there would be no dilution of
the interests of shareholders of the Fund.
How do you vote?
No matter how large or small your investment, your vote is important, so
please review the proxy statement carefully. To cast your vote, simply mark,
sign and date the enclosed proxy card and return it in the postage-paid envelope
today. Remember, it can be expensive for the Fund--and ultimately for you as a
shareholder--to remail proxies if not enough responses are received to conduct
the meeting.
If you have any questions about the proposal, please feel free to contact
your financial advisor, or call us at 1-800-525-7048.
As always, we appreciate your confidence in OppenheimerFunds and look
forward to serving you for many years to come.
Sincerely,
Bridget A. Macaskill
Enclosures
<PAGE>
Oppenheimer Quest Capital Value Fund, Inc.
Proxy For Special Shareholders Meeting To Be Held October 29, 1999
The undersigned shareholder of Oppenheimer Quest Capital Value Fund, Inc.
("Capital Value Fund"), does hereby appoint Andrew J. Donohue, Robert Bishop,
Scott Farrar and Brian W. Wixted, and each of them, as attorneys-in-fact and
proxies of the undersigned, with full power of substitution, to attend the
Special Meeting of Shareholders of Capital Value Fund to be held on October 29,
1999 at 6803 South Tucson Way, Englewood, Colorado at 10:00 A.M., Denver time,
and at all adjournments thereof, and to vote the shares held in the name of the
undersigned on the record date for said meeting on the Proposal specified on the
reverse side. Said attorneys-in-fact shall vote in accordance with their best
judgment as to any other matter.
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS, WHO RECOMMENDS A VOTE FOR
THE PROPOSAL ON THE REVERSE SIDE. THE SHARES REPRESENTED HEREBY WILL BE VOTED AS
INDICATED ON THE REVERSE SIDE OR FOR NO CHOICE IS INDICATED.
Please mark your proxy, date and sign it on the reverse side and return it
promptly in the accompanying envelope, which requires no postage if mailed in
the United States.
The Proposal:
To approve or disapprove an Agreement and Plan of Reorganization between
Oppenheimer Quest For Value Funds, on behalf of Oppenheimer Quest Balanced
Value Fund ("Balanced Value Fund"), and Oppenheimer Quest Capital Value Fund,
Inc. ("Capital Value Fund") and the transactions contemplated thereby,
including (a) the transfer of substantially all the assets of Capital Value
Fund to Balanced Value Fund in exchange for Class A, Class B and Class C
shares of Balanced Value Fund, the distribution of such shares of Balanced
Value Fund to the corresponding Class A, Class B and Class C shareholders of
Capital Value Fund in complete liquidation of Capital Value Fund, and (c) the
cancellation of the outstanding shares of Capital Value Fund.
FOR______ AGAINST______ ABSTAIN_______
Dated: _________________________________, 1999
(Month) (Day)
---------------------------------
Signature(s)
---------------------------------
Signature(s)
Please read both sides of this ballot.
NOTE: PLEASE SIGN EXACTLY AS YOUR NAME(S) APPEAR HEREON. When signing as
custodian, attorney, executor, administrator, trustee, etc., please give your
full title as such. All joint owners should sign this proxy. If the account is
registered in the name of a corporation, partnership or other entity, a duly
authorized individual must sign on its behalf and give his or her title.
<PAGE>
OPPENHEIMER QUEST CAPITAL VALUE FUND, INC.
Two World Trade Center, New York, New York 10048-0203
1-800-525-7048
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON OCTOBER 29, 1999
To the Shareholders of Oppenheimer Quest Capital Value Fund, Inc.:
Notice is hereby given that a Special Meeting of the Shareholders of
Oppenheimer Quest Capital Value Fund, Inc. ("Capital Value Fund"), a
registered management investment company, will be held at 6803 South Tucson
Way, Englewood, Colorado 80112 at 10:00 A.M., Denver time, on October 29,
1999, or any adjournments thereof (the "Meeting"), for the following
purposes:
1. To approve or disapprove an Agreement and Plan of Reorganization between
Capital Value Fund and Oppenheimer Quest For Value Funds, on behalf of its
series Oppenheimer Quest Balanced Value Fund ("Balanced Value Fund"), and
the transactions contemplated thereby, including (a) the transfer of
substantially all the assets of Capital Value Fund to Balanced Value Fund in
exchange for Class A, Class B and Class C shares of Balanced Value Fund, (b)
the distribution of such shares of Balanced Value Fund to the corresponding
Class A, Class B and Class C shareholders of Capital Value Fund in complete
liquidation of Capital Value Fund and (c) the cancellation of the
outstanding shares of Capital Value Fund (the "Proposal").
2. To act upon such other matters as may properly come before the Meeting.
Shareholders of record at the close of business on August 19, 1999 are
entitled to notice of, and to vote at, the Meeting. The Proposal is more
fully discussed in the Proxy Statement and Prospectus. Please read it
carefully before telling us, through your proxy or in person, how you wish
your shares to be voted. The Board of Directors of Capital Value Fund
recommends a vote in favor of the Proposal. WE URGE YOU TO SIGN, DATE AND
MAIL THE ENCLOSED PROXY PROMPTLY.
By Order of the Board of Directors,
Andrew J. Donohue, Secretary
September 13, 1999
----------------------------------------------------------------------
Shareholders who do not expect to attend the Meeting are requested to
indicate voting instructions on the enclosed proxy and to date, sign and
return it in the accompanying postage-paid envelope. To avoid unnecessary
duplicate mailings, we ask your cooperation in promptly mailing your proxy
no matter how large or small your holdings may be.
835
Oppenheimer Quest Capital Value Fund, Inc.
Two World Trade Center, New York, New York 10048-0203
1-800-525-7048
PROXY STATEMENT
Oppenheimer Quest Balanced Value Fund
a series of Oppenheimer Quest For Value Funds
Two World Trade Center, New York, New York 10048-0203
1-800-525-7048
PROSPECTUS
This Proxy Statement of Oppenheimer Quest Capital Value Fund, Inc. ("Capital
Value Fund") relates to the Agreement and Plan of Reorganization (the
"Reorganization Agreement") and the transactions contemplated thereby (the
"Reorganization") between Oppenheimer Quest For Value Funds (the "Trust"), on
behalf of its series, Oppenheimer Quest Balanced Value Fund ("Balanced Value
Fund"), and Capital Value Fund. This Proxy Statement also constitutes a
Prospectus of Balanced Value Fund included in a Registration Statement on Form
N-14 (the "Registration Statement") filed by Balanced Value Fund with the
Securities and Exchange Commission (the "SEC"). Such Registration Statement
relates to the registration of Class A, Class B and Class C shares of Balanced
Value Fund to be offered to the shareholders of Capital Value Fund pursuant to
the Reorganization Agreement. Capital Value Fund is located at Two World Trade
Center, New York, New York 10048-0203 (telephone 1-800-525-7048).
This Proxy Statement and Prospectus sets forth information about Balanced Value
Fund and the Reorganization that shareholders of Capital Value Fund should know
before voting on the Reorganization. A copy of the Prospectus for Balanced Value
Fund, dated February 19, 1999, is enclosed and incorporated herein by reference.
Balanced Value Fund is a mutual fund that seeks growth of capital as its primary
objective and also seeks investment income.
The following documents have been filed with the SEC and are available without
charge upon written request to OppenheimerFunds Services, the transfer and
shareholder servicing agent for Balanced Value Fund and Capital Value Fund (the
ATransfer Agent@), at P.O. Box 5270, Denver, Colorado 80217, or by calling the
toll-free number shown above: (i) a Prospectus for Capital Value Fund, dated
February 26, 1999, as supplemented on June 15, 1999; (ii) a Statement of
Additional Information about Capital Value Fund, dated February 26, 1999,
revised May 1, 1999 (the ACapital Value Fund Additional Statement@); and (iii) a
Statement of Additional Information about Balanced Value Fund, dated February
19, 1999, revised May 1, 1999 (the "Balanced Value Fund Additional Statement").
The Balanced Value Fund Additional Statement contains additional information
about Balanced Value Fund and its management.
A Statement of Additional Information relating to the Reorganization described
in this Proxy Statement and Prospectus (the "Additional Statement"), dated
September 13, 1999, has been filed with the SEC as part of the Registration
Statement, is incorporated herein by reference, and is available by written
request to the Transfer Agent at the same address listed above or by calling the
toll-free number shown above. The Additional Statement includes the following
documents: (i) Annual Report and Semi-Annual Report, as of 10/31/98 and 4/30/99,
respectively, of Balanced Value Fund; (ii) Annual Report and Semi-Annual Report,
as of 10/31/98 and 4/30/99, respectively, of Capital Value Fund; (iii) Balanced
Value Fund Additional Statement; and (iv) Capital Value Fund Additional
Statement.
This Proxy Statement and Prospectus sets forth concisely the information about
Balanced Value Fund that a prospective investor should know before investing.
Investors are advised to read and retain this Proxy Statement and Prospectus for
future reference.
THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED THESE
SECURITIES OR PASSED UPON THE ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
This Proxy Statement and Prospectus is dated September 13, 1999.
TABLE OF CONTENTS
PROXY STATEMENT AND PROSPECTUS
Page
Introduction.............................................................
General...............................................................
Record Date; Vote Required; Share Information.........................
Proxies...............................................................
Costs of the Solicitation and the Reorganization......................
Comparative Fee Tables...................................................
Synopsis.................................................................
Purpose of the Meeting................................................
Parties to the Reorganization.........................................
The Reorganization ..............................................
Reasons for the Reorganization........................................
Tax Consequences of the Reorganization................................
Investment Objectives and Strategies; Other Fund Information .........
Investment Advisory and Distribution and Service Plan Fees............
Purchases, Exchanges and Redemptions..................................
Principal Risk Factors...................................................
Approval or Disapproval of the Reorganization (The Proposal).............
Reasons for the Reorganization........................................
The Reorganization....................................................
Tax Aspects of the Reorganization.....................................
Capitalization Table (Unaudited)......................................
Comparison Between Capital Value Fund and Balanced Value Fund............
Investment Objectives and Policies....................................
Principal Investment Policies......................................
Other Investment Strategies .......................................
Investment Restrictions...............................................
Description of Brokerage Practices....................................
Expense Ratios and Performance........................................
Shareholder Services..................................................
Rights of Shareholders................................................
Organization and History..............................................
Management and Distribution Arrangements..............................
Purchase of Additional Shares.........................................
Dividends and Distributions...........................................
Method of Carrying Out the Reorganization ...............................
Additional Information...................................................
Financial Information.................................................
Public Information....................................................
Other Business...........................................................
Exhibit A - Agreement and Plan of Reorganization by and between
Oppenheimer Quest For Value Funds, on behalf of Oppenheimer Quest
Balanced Value Fund, and Oppenheimer Quest Capital Value Fund, Inc. ..A-1
Exhibit B - Average Annual Total Returns for the funds................B-1
Enclosures - Prospectus of Oppenheimer Quest Balanced Value Fund, dated
February 19, 1999
Oppenheimer Quest Capital Value Fund, Inc.
Two World Trade Center, New York, New York 10048-0203
1-800-525-7048
PROXY STATEMENT
Oppenheimer Quest Balanced Value Fund
a series of Oppenheimer Quest For Value Funds
Two World Trade Center, New York, New York 10048-0203
1-800-525-7048
PROSPECTUS
Special Meeting of Shareholders to be held October 29, 1999
INTRODUCTION
General
This Proxy Statement and Prospectus is being furnished to the shareholders of
Oppenheimer Quest Capital Value Fund, Inc. ("Capital Value Fund"), a registered
management investment company, in connection with the solicitation by its Board
of Directors (the "Board") of proxies to be used at the Special Meeting of
Shareholders of Capital Value Fund to be held at 6803 South Tucson Way,
Englewood, Colorado 80112, at 10:00 A.M., Denver time, on October 29, 1999, or
any adjournments thereof (the "Meeting"). It is expected that the mailing of
this Proxy Statement and Prospectus will commence on or about September 13,
1999.
At the Meeting, shareholders of Capital Value Fund will be asked to approve an
Agreement and Plan of Reorganization (the "Reorganization Agreement") between
Capital Value Fund and Oppenheimer Quest For Value Funds (the "Trust"), on
behalf of Oppenheimer Quest Balanced Value Fund ("Balanced Value Fund"), and the
transactions contemplated thereby (the "Reorganization"), including (a) the
transfer of substantially all the assets of Capital Value Fund to Balanced Value
Fund in exchange for Class A, Class B and Class C shares of Balanced Value Fund,
(b) the distribution of such shares of Balanced Value Fund to the corresponding
Class A, Class B and Class C shareholders of Capital Value Fund in complete
liquidation of Capital Value Fund and (c) the cancellation of the outstanding
shares of Capital Value Fund. A copy of the Reorganization Agreement is attached
hereto as Exhibit A and is incorporated by reference herein.
Balanced Value Fund currently offers Class A, Class B and Class C
shares. Class A shares are generally sold with a sales charge imposed at the
time of purchase. There is no initial sales charge on purchases of Class B or
Class C shares; however, a contingent deferred sales charge may be imposed,
depending on when the shares are sold. The Class A, Class B and Class C shares
issued pursuant to the Reorganization will be issued at net asset value without
a sales charge and no contingent deferred sales charge will imposed on any
Capital Value Fund shares exchanged in the Reorganization. However, any
contingent deferred sales charge which applies to Capital Value Fund shares will
continue to apply to Balanced Value Fund shares received in the Reorganization.
Additional information with respect to these charges by Balanced Value Fund is
set forth herein, in the Prospectus of Balanced Value Fund accompanying this
Proxy Statement and Prospectus and in the Balanced Value Fund Statement of
Additional Information ("Balanced Value Fund Additional Statement"), both of
which are incorporated herein by reference.
Record Date; Vote Required; Share Information
The Board has fixed the close of business on August 19, 1999 as the record date
(the "Record Date") for the determination of shareholders entitled to notice of,
and to vote at, the Meeting. The affirmative vote of two-thirds of all the votes
entitled to be cast on the Proposal by Class A, Class B and Class C
shareholders, voting together, represented in person or by proxy at the Meeting,
is required to approve the Reorganization. Each shareholder will be entitled to
one vote for each share and a fractional vote for each fractional share held of
record at the close of business on the Record Date. Only shareholders of Capital
Value Fund will vote on the Reorganization. The vote of shareholders of Balanced
Value Fund is not being solicited.
At the close of business on the Record Date, there were 7,759,682.203 shares of
Capital Value Fund issued and outstanding, consisting of 7,141,003.143 Class A
shares, 479,000.723 Class B shares and 139,678.337 Class C shares. At the close
of business on the Record Date, there were 96,621,961.522 shares of Balanced
Value Fund issued and outstanding, consisting of 44,273,555.806 Class A shares,
37,607,056.949 Class B shares and 14,741,348.767 Class C shares. The presence in
person or by proxy of shareholders entitled to cast a majority of the votes at
the Meeting constitutes a quorum for the transaction of business at the Meeting.
To the knowledge of Capital Value Fund, as of the Record Date, no person owned
of record or beneficially 5% or more of its outstanding shares except for: Smith
Barney, Inc., 388 Greenwich Street, New York, New York 10013, which owned
561,360.794 Class A shares (representing 7.83% Class A shares then outstanding)
for the benefit of its customers; Charles Schwab & Co., Inc., 101 Montgomery
Street, Floor 10, San Francisco, California 94104-4122, which owned 362,800.475
Class A shares (representing 5.06% Class A shares then outstanding) for the
benefit of its customers; and Merrill Lynch Pierce Fenner & Smith, 4800 Deer
Lake Drive East, Floor 3, Jacksonville, Florida 32246-6484, which owned
30,039.599 Class B shares (representing 6.25% of the Class B shares then
outstanding) for the benefit of its customers. As of the Record Date, to the
knowledge of Balanced Value Fund, no person owned of record or beneficially 5%
or more of its outstanding shares except for: Charles Schwab & Co., Inc., 101
Montgomery Street, Floor 10, San Francisco, California 94104-4122, which owned
2,512,406.379 Class A shares (representing 5.67% Class A shares then
outstanding) for the benefit of its customers; Merrill Lynch Pierce Fenner &
Smith, 4800 Deer Lake Drive East, Floor 3, Jacksonville, Florida 32246-6484,
which owned 2,496,143.860 Class A shares (representing 5.63% Class A shares then
outstanding), 2,632,851.332 Class B shares (representing 7.0% Class B shares
then outstanding), and 2,275,105.056 Class C shares (representing 15.43% Class C
shares then outstanding), in each case for the benefit of its customers.
In addition, as of the Record Date, the Trustees and officers of the Trust and
the Directors and officers of Capital Value Fund, in each case, owned less than
1% of the outstanding shares of Balanced Value Fund and Capital Value Fund,
respectively.
Proxies
The enclosed form of proxy, if properly executed and returned, will be voted (or
counted as an abstention or withheld from voting) in accordance with the choices
specified thereon, and will be included in determining whether there is a quorum
to conduct the Meeting. The proxy will be voted in favor of the Proposal unless
a choice is indicated to vote against or to abstain from voting on the Proposal.
Shares owned of record by broker-dealers for the benefit of their customers
("street account shares") will be voted by the broker-dealer based on
instructions received from its customers. If no instructions are received, and
the broker-dealer does not have discretionary power to vote such street account
shares under applicable stock exchange rules, the shares represented thereby
will be considered to be present at the Meeting for purposes of determining the
quorum, but will have the same effect as a vote "against" the Proposal. If a
shareholder executes and returns a proxy but fails to indicate how the votes
should be cast, the proxy will be voted in favor of the Proposal. The proxy may
be revoked at any time prior to the voting thereof by: (i) writing to the
Secretary of Capital Value Fund at Two World Trade Center, New York, New York
10048-0203 (if received in time to be acted upon); (ii) attending the Meeting
and voting in person; or (iii) signing and returning a new proxy (if returned
and received in time to be voted).
Costs of the Solicitation and the Reorganization
All expenses of this solicitation, including the cost of printing and mailing
this Proxy Statement and Prospectus, will be borne by Capital Value Fund. Any
documents such as existing Prospectuses or annual reports that are included in
that mailing will be a cost of the fund issuing the document. In addition to the
solicitation of proxies by mail, proxies may be solicited by officers of Capital
Value Fund or officers and employees of OppenheimerFunds Services, personally or
by telephone or telegraph; any expenses so incurred will be borne by
OppenheimerFunds Services. Proxies may also be solicited by a proxy solicitation
firm hired at Capital Value Fund's expense for such purpose; the cost for such
firm is not expected to exceed $15,000. Brokerage houses, banks and other
fiduciaries may be requested to forward soliciting material to the beneficial
owners of shares of Capital Value Fund and to obtain authorization for the
execution of proxies. For those services, if any, they will be reimbursed by
Capital Value Fund for their reasonable out-of-pocket expenses.
With respect to the Reorganization, Capital Value Fund and Balanced Value Fund
will bear the cost of their respective tax opinions. Any other out-of-pocket
expenses of Capital Value Fund and Balanced Value Fund associated with the
Reorganization, including legal, accounting and transfer agent expenses, will be
borne by Capital Value Fund and Balanced Value Fund, respectively, in the
amounts so incurred by each.
COMPARATIVE FEE TABLES
Capital Value Fund and Balanced Value Fund each pay a variety of expenses
directly for management of their assets, administration, distribution of their
shares and other services. Those expenses are subtracted from each 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 and compare the fees and expenses of investing in shares
of Capital Value Fund with the fees and expenses of investing in shares of
Balanced Value Fund. The pro forma expenses of the surviving Balanced Value Fund
show what the fees and expenses will be after giving effect to the
Reorganization.
Shareholder Fees (charges paid directly from a shareholder's investment):
<TABLE>
Capital Value Fund
Balanced Value Fund
Class A Class B Class C Class A Class B Class C
Shares Shares Shares Shares Shares Shares
<S> <C> <C> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------
Maximum Sales 5.75% None None 5.75% None None
Charge (Load)
on Purchases
(as a % of
offering
price)
- ---------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------
Maximum None (1) 5% (2) 1% (3) None (1) 5% (2) 1% (3)
Deferred
Sales Charge
(Load) (as %
of the lower
of the
original
offering
price or
redemption
proceeds)
- ---------------------------------------------------------------------------------------------
</TABLE>
Note: Shareholder fees for the surviving fund after giving effect to the
Reorganization will be the same as the shareholder fees set forth above for
either fund.
1. A contingent deferred sales charge may apply to redemptions of
investments of $1 million or more ($500,000 for retirement plan accounts) of
Class A shares. See "How to Buy Shares" in each fund's Prospectus.
2. Applies to redemptions in first year after purchase. The contingent deferred
sales charge declines to 1% in the sixth year and is eliminated after that.
3. Applies to shares redeemed within 12 months of purchase.
Fund Operating Expenses (deducted from fund assets):
(% of average daily net assets)
The following tables are the operating expenses of Class A, Class B and Class C
shares of the funds based on the fund's expenses during its fiscal year ended
October 31, 1998 and the six-month interim period ended April 30, 1999. Pro
forma information is an estimate of the operating expenses of the surviving
Balanced Value Fund at October 31, 1998 and April 30, 1999 after giving effect
to the Reorganization twelve months and six months, respectively, prior to those
dates.
<TABLE>
CAPITAL VALUE FUND
12 months ended 10/31/98 6 months ended 4/30/99 (1)
- -----------------------------------------------------------------------------------------
Class A Class B Class C Class A Class B Class C
- -----------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Management 1.00% 1.00% 1.00% 1.00% 1.00% 1.00%
Fees
- -----------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------
Distribution 0.50% 1.00% 1.00% 0.50% 1.00% 1.00%
and/or
Service
(12b-1) Fees
- -----------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------
Other 0.17% 0.24% 0.23% 0.18% 0.28% 0.27%
expenses
- -----------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------
Total Fund 1.67% 2.24% 2.23% 1.68% 2.28% 2.27%
Operating
Expenses
- -----------------------------------------------------------------------------------------
(1) Annualized
BALANCED VALUE FUND
12 months ended 10/31/98 6 months ended 4/30/99 (1)
- -----------------------------------------------------------------------------------------
Class A Class B Class C Class A Class B Class C
- -----------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------
Management 0.85% 0.85% 0.85% 0.85% 0.85% 0.85%
Fees
- -----------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------
Distribution 0.40% 1.00% 1.00% 0.40% 1.00% 1.00%
and/or
Service
(12b-1) Fees
- -----------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------
Other 0.30% 0.30% 0.30% 0.25% 0.24% 0.24%
expenses
- -----------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------
Total Fund 1.55% 2.15% 2.15% 1.50% 2.09% 2.09%
Operating
Expenses
- -----------------------------------------------------------------------------------------
(1) Annualized
PRO FORMA SURVIVING BALANCED VALUE FUND
12 months ended 10/31/98 6 months ended 4/30/99 (1)
- -----------------------------------------------------------------------------------------
Class A Class B Class C Class A Class B Class C
- -----------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------
Management 0.85% 0.85% 0.85% 0.85% 0.85% 0.85%
Fees
- -----------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------
Distribution 0.40% 1.00% 1.00% 0.40% 1.00% 1.00%
and/or
Service
(12b-1) Fees
- -----------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------
Other 0.20% 0.20% 0.20% 0.22% 0.22% 0.22%
expenses
- -----------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------
Total Fund 1.45% 2.05% 2.05% 1.47% 2.07% 2.07%
Operating
Expenses
- -----------------------------------------------------------------------------------------
(1) Annualized
</TABLE>
Note: Expenses may vary in future years. Management Fees, Distribution and/or
Service (12b-1) Fees and Total Fund Operating Expenses for Capital Value Fund in
the table above do not reflect fee waivers by the Manager and the Distributor
that terminated February 28, 1999 and are no longer in effect. After giving
effect to these waivers, Management Fees would have been 0.77% for each class of
shares and 12b-1 Fees for Class A shares would have been 0.35% and Total Fund
Operating Expenses would have been as follows: (a) for the 12 months ended
10/31/98, 1.29%, 2.01% and 2.00% for Class A, B and C shares, respectively, and
(b) for the 6 months ended 4/30/99, 1.30%, 2.05% and 2.04% for Class A, B and C
shares, respectively. Accordingly, during the period the fee waivers were in
effect, Total Fund Operating Expenses for Capital Value Fund were lower than the
Total Fund Operating Expenses for Balanced Value Fund. "Other expenses" include
transfer agent fees, custodial expenses, and accounting and legal expenses the
fund pays.
Examples
These examples are intended to help you compare the cost of investing in each
fund. These examples assume that you invest $10,000 in a class of shares of
Capital Value Fund, Balanced Value Fund or the pro forma surviving Balanced
Value Fund for the time periods indicated and reinvest your dividends and
distributions.
The first example assumes that you redeem all shares at the end of those
periods. The second example assumes that you keep your shares. Both examples
also assume that your investment has a 5% return each year and that the class's
operating expenses remain the same as in the table above. Your actual costs may
be higher or lower because expenses will vary over time. Based on these
assumptions, the expenses would be as follows:
12 Months Ended 10/31/98
<TABLE>
Capital Value Fund
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
If shares are redeemed: 1 year 3 years 5 years 10 years (1)
- -----------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------
Class A $735 $1071 $1430 $2438
- -----------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------
Class B $727 $1000 $1400 $2301
- -----------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------
Class C $326 $697 $1195 $2565
- -----------------------------------------------------------------------------------------
Balanced Value Fund
- -----------------------------------------------------------------------------------------
If shares are redeemed: 1 year 3 years 5 years 10 years (1)
- -----------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------
Class A $724 $1036 $1371 $2314
- -----------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------
Class B $718 $973 $1354 $2191
- -----------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------
Class C $318 $673 $1154 $2483
- -----------------------------------------------------------------------------------------
Pro Forma Surviving Balanced Value Fund
- -----------------------------------------------------------------------------------------
If shares are redeemed: 1 year 3 years 5 years 10 years (1)
- -----------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------
Class A $714 $1007 $1322 $2210
- -----------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------
Class B $708 $943 $1303 $2085
- -----------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------
Class C $308 $643 $1103 $2379
- -----------------------------------------------------------------------------------------
Capital Value Fund
- -----------------------------------------------------------------------------------------
If shares are not 1 year 3 years 5 years 10 years (1)
redeemed:
- -----------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------
Class A $735 $1071 $1430 $2438
- -----------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------
Class B $227 $700 $1200 $2301
- -----------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------
Class C $226 $697 $1195 $2565
- -----------------------------------------------------------------------------------------
Balanced Value Fund
- -----------------------------------------------------------------------------------------
If shares are not 1 year 3 years 5 years 10 years (1)
redeemed:
- -----------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------
Class A $724 $1036 $1371 $2314
- -----------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------
Class B $218 $673 $1154 $2191
- -----------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------
Class C $218 $673 $1154 $2483
- -----------------------------------------------------------------------------------------
Pro Forma Surviving Balanced Value Fund
- -----------------------------------------------------------------------------------------
If shares are not 1 year 3 years 5 years 10 years (1)
redeemed:
- -----------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------
Class A $714 $1007 $1322 $2210
- -----------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------
Class B $208 $643 $1103 $2085
- -----------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------
Class C $208 $643 $1103 $2379
- -----------------------------------------------------------------------------------------
Six Months Ended 4/30/99
Capital Value Fund
- -----------------------------------------------------------------------------------------
If shares are redeemed: 1 year 3 years 5 years 10 years (1)
- -----------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------
Class A $736 $1074 $1435 $2448
- -----------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------
Class B $731 $1012 $1420 $2328
- -----------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------
Class C $330 $709 $1215 $2605
- -----------------------------------------------------------------------------------------
Balanced Value Fund
- -----------------------------------------------------------------------------------------
If shares are redeemed: 1 year 3 years 5 years 10 years (1)
- -----------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------
Class A $719 $1022 $1346 $2263
- -----------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------
Class B $712 $955 $1324 $2133
- -----------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------
Class C $312 $655 $1124 $2421
- -----------------------------------------------------------------------------------------
Pro Forma Surviving Balanced Value Fund
- -----------------------------------------------------------------------------------------
If shares are redeemed: 1 year 3 years 5 years 10 years (1)
- -----------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------
Class A $716 $1013 $1332 $2231
- -----------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------
Class B $710 $949 $1314 $2106
- -----------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------
Class C $310 $649 $1114 $2400
- -----------------------------------------------------------------------------------------
Capital Value Fund
- -----------------------------------------------------------------------------------------
If shares are not 1 year 3 years 5 years 10 years (1)
redeemed:
- -----------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------
Class A $736 $1074 $1435 $2448
- -----------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------
Class B $231 $712 $1220 $2328
- -----------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------
Class C $230 $709 $1215 $2605
- -----------------------------------------------------------------------------------------
Balanced Value Fund
- -----------------------------------------------------------------------------------------
If shares are not 1 year 3 years 5 years 10 years (1)
redeemed:
- -----------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------
Class A $719 $1022 $1346 $2263
- -----------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------
Class B $212 $655 $1124 $2133
- -----------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------
Class C $212 $655 $1124 $2421
- -----------------------------------------------------------------------------------------
Pro Forma Surviving Balanced Value Fund
- -----------------------------------------------------------------------------------------
If shares are not 1 year 3 years 5 years 10 years (1)
redeemed:
- -----------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------
Class A $716 $1013 $1332 $2231
- -----------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------
Class B $210 $649 $1114 $2106
- -----------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------
Class C $210 $649 $1114 $2400
- -----------------------------------------------------------------------------------------
</TABLE>
In the first example, expenses include the initial sales charge for Class A and
the applicable Class B or Class C contingent deferred sales charge. In the
second example, the Class A expenses include the sales charge, but Class B and
Class C expenses do not include the contingent deferred sales charges. 1. Class
B expenses for years 7 through 10 are based on Class A expenses, since Class B
shares automatically convert to Class A after 6 years.
SYNOPSIS
The following is a synopsis of certain information contained in or incorporated
by reference in this Proxy Statement and Prospectus and presents key
considerations for shareholders of Capital Value Fund to assist them in
determining whether to approve the Reorganization. This synopsis is only a
summary and is qualified in its entirety by the more detailed information
contained in or incorporated by reference in this Proxy Statement and Prospectus
and by the Reorganization Agreement which is Exhibit A hereto. Shareholders
should carefully review this Proxy Statement and Prospectus and the
Reorganization Agreement in their entirety and, in particular, the current
Prospectus of Balanced Value Fund which accompanies this Proxy Statement and
Prospectus and is incorporated herein by reference.
Purpose of the Meeting
At the Meeting, shareholders of Capital Value Fund will be asked to approve or
disapprove the Reorganization.
Parties to the Reorganization
Oppenheimer Quest For Value Funds (the "Trust") was organized in April 1987 as a
multi-series Massachusetts business trust. Balanced Value Fund, a series of the
Trust, is a diversified, open-end management investment company. Prior to May
17, 1998, Balanced Value Fund was named "Oppenheimer Quest Growth and Income
Value Fund". Capital Value Fund is a diversified, open-end management investment
company that was organized in 1986 as a Maryland corporation, and commenced
operations on February 13, 1987 as a closed-end investment company. Capital
Value Fund converted to an open-end management investment company on March 3,
1997.
Capital Value Fund and Balanced Value Fund (each referred to herein as a "fund"
and collectively referred to herein as the "funds") are located at Two World
Trade Center, New York, New York 10048-0203. OppenheimerFunds, Inc. (the
"Manager"), located at Two World Trade Center, New York, New York 10048-0203,
acts as investment adviser to the funds. OpCap Advisors (the "Sub-Adviser") acts
as sub-adviser to the funds and is located at 1345 Avenue of the Americas, New
York, New York 10105-4800. The portfolio managers for Capital Value Fund
(Jeffrey C. Whittington, Alan Gutmann and Louis P. Goldstein) and the portfolio
manager for Balanced Value Fund (Colin Glinsman) are each employed by the
Sub-Adviser. The Trustees and officers of the Trust and the Directors and
officers of Capital Value Fund are the same, and oversee the Manager, the
Sub-Adviser and the portfolio managers. Additional information about the funds,
the Manager and the Sub-Adviser is set forth below.
Shares to be Issued
Shareholders of Capital Value Fund who own Class A, Class B or Class C shares
will receive Class A, Class B or Class C shares, respectively, of Balanced Value
Fund in exchange for such Capital Value Fund shares. The voting rights of shares
of each fund are discussed below in "Rights of Shareholders".
The Reorganization
The Reorganization Agreement provides for the transfer of substantially all the
assets of Capital Value Fund to Balanced Value Fund in exchange for Class A,
Class B and Class C shares of Balanced Value Fund. The aggregate net asset value
of Balanced Value Fund shares issued in the Reorganization will equal the value
of the assets of Capital Value Fund received by Balanced Value Fund. In
conjunction with the Closing (as defined below) of the Reorganization, presently
scheduled for November 12, 1999, Capital Value Fund will distribute the Class A,
Class B and Class C shares of Balanced Value Fund received by Capital Value Fund
on the Closing Date (as defined below) to holders of Class A, Class B and Class
C shares of Capital Value Fund, respectively. As a result of the Reorganization,
each Class A, Class B and Class C Capital Value Fund shareholder will receive
the number of full and fractional Class A, Class B and Class C Balanced Value
Fund shares that equals in value such shareholder's pro rata interest in the
assets transferred to Balanced Value Fund as of the Valuation Date (as defined
below). The Board has determined that the interests of existing Capital Value
Fund shareholders will not be diluted as a result of the Reorganization. For the
reasons set forth below under "Approval or Disapproval of the Reorganization
Reasons for the Reorganization," the Board, including the directors who are not
"interested persons" of Capital Value Fund (the "Independent Directors"), as
that term is defined in the Investment Company Act of 1940, as amended (the
"Investment Company Act"), has concluded that the Reorganization is in the best
interests of Capital Value Fund and its shareholders and recommends approval of
the Reorganization by Capital Value Fund shareholders. The Board of Trustees of
the Trust has also approved the Reorganization and determined that the interests
of existing Balanced Value Fund shareholders will not be diluted as a result of
the Reorganization. If the Reorganization is not approved, Capital Value Fund
will continue in existence and the Board will determine whether to pursue
alternative actions.
Reasons for the Reorganization
The Manager and the Sub-Adviser proposed to the Board a reorganization into
Balanced Value Fund so that shareholders of Capital Value Fund may become
shareholders of a substantially larger fund, advised by the same investment
adviser and sub-adviser, with the investment objective of capital growth as well
as current income, and "value-oriented" investment policies and strategies but
with the potential for lower overall operating expenses. The Board also
considered that the historical performance of Balanced Value Fund was superior
to that of Capital Value Fund. Further, due to the balance of stocks and debt
securities in Balanced Value Fund, compared to the concentrated stock holdings
of Capital Value Fund, the Balanced Value Fund portfolio would likely not
experience the significant volatility to which Capital Value Fund is exposed to
in the event one particular holding significantly loses value. In this respect,
the Board considered the differences between the funds as to investment
objectives and portfolio holdings. The Board also considered that the
Reorganization would be a tax free reorganization, and there would be no sales
charge imposed in effecting the Reorganization. In addition, due to the
relatively moderate costs of the reorganization, the Board and the Board of
Trustees of the Trust concluded that neither fund would experience dilution as a
result of the Reorganization.
Tax Consequences of the Reorganization
In the opinion of PricewaterhouseCoopers LLP, tax adviser to Capital Value Fund,
the Reorganization will qualify as a tax-free reorganization for Federal income
tax purposes. As a result, it is expected that no gain or loss will be
recognized by either fund, or by the shareholders of either fund, as a result of
the Reorganization for Federal income tax purposes. For further information
about the tax consequences of the Reorganization, see "Approval or Disapproval
of the Reorganization - Tax Aspects of the Reorganization" below.
Investment Objectives and Strategies; Other Fund Information
Investment Objectives and Strategies
Capital Value Fund seeks capital appreciation as its investment objective and
invests primarily in equity securities. Capital Value Fund does not seek current
income. Balanced Value Fund seeks growth of capital as its primary investment
objective; it also seeks investment income as a secondary objective. As a
result, Balanced Value Fund invests in equity securities and, to a lesser
extent, debt securities. Shareholders of Capital Value Fund should consider the
difference in investment objectives and portfolio holdings between the funds in
determining whether to approve the Reorganization, including the long-term
capital appreciation potential of a fund like Balanced Value Fund that also
invests in debt securities and the tax implications of receiving quarterly
dividends from a fund like Balanced Value Fund that seeks investment income.
In seeking their investment objectives, Capital Value Fund and Balanced Value
Fund utilize a similar value investing strategy and invest primarily in equity
securities of companies believed to be undervalued in the marketplace in
relation to factors such as the companies' assets, earnings, growth potential
and cash flows. Balanced Value Fund is also required to invest at least 25% of
its total assets in debt securities, and at August 31, 1999 held approximately
31% of its invested assets in debt securities; although Capital Value Fund is
permitted to invest in debt securities, its portfolio holdings currently consist
of stocks, cash and cash equivalents only. Investment in debt securities may
include bonds rated below investment grade but not in an amount exceeding 25% of
the fund's assets. The funds may also invest in foreign securities. The funds
may use certain hedging instruments to try to manage investment risks. To
provide liquidity, the funds typically invest a portion of their respective
assets in various types of U.S. Government securities and certain money market
instruments; for temporary defensive purposes, the funds may invest all of their
respective assets in such securities. See "Comparison Between Capital Value Fund
and Balanced Value Fund" for additional information on the funds' investment
strategies and policies.
Principal Risks of Investment
"Principal Risk Factors" below sets forth the main risks of investing in each
fund. All investments carry risks to some degree and there is no assurance that
either fund will achieve its investment objectives. Balanced Value Fund is
designed primarily for investors seeking capital growth in their investment over
the long term with the opportunity for some income. Those investors should be
willing to assume the risk of short-term share price fluctuations that are
typical for a fund emphasizing equity investments. Since Balanced Value Fund's
income level will fluctuate, it is not designed for investors needing an assured
level of current income.
Past Performance
Set forth in Balanced Value Fund's Prospectus accompanying this Proxy Statement
and Prospectus is past performance information. This information shows one
measure of the risks of investing in Balanced Value Fund by showing changes in
the fund's performance (for its Class A shares) from year to year for the full
calendar years since its inception and by showing how the average annual total
returns of the fund's shares compare to those of the S&P 500 Index, a
broad-based market index.
Investment Advisory and Distribution and Service Plan Fees
Investment Advisory Fees. The funds obtain investment management services from
the Manager pursuant to the terms of investment advisory agreements that are
substantially the same except for fee amounts. The management fee payable to the
Manager is computed on the net asset value of each fund as of the close of
business each day and is payable monthly. Capital Value Fund pays a management
fee at the following annual rate: 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 in excess of $800 million. Prior to February 28, 1999, the Manager
waived a portion of its fee equal to 0.15% of the first $200 million of average
annual net assets, 0.40% of the next $200 million, 0.30% of the next $400
million and 0.25% of average annual net assets over $800 million. This fee
waiver is no longer in effect. Balanced Value Fund pays a management fee at the
annual rate of 0.85% of average annual net assets. Effective upon the Closing of
the Reorganization, the management fee rate for Balanced Value Fund will be
reduced for assets in excess of $4 billion as follows: 0.85% of the first $4
billion of average annual net assets; 0.80% of the next $4 billion of average
annual net assets; and 0.75% of average annual net assets in excess of $8
billion.
The Manager has retained the Sub-Adviser on behalf of each fund to provide
day-to-day portfolio management of the funds. For such services the Manager (not
the fund) pays the Sub-Adviser an annual fee payable monthly based on the
average daily net assets of the fund equal to 40% of the net advisory fee
collected by the Manager based on the net assets of the fund as of November 22,
1995 (for Balanced Value Fund) or February 28, 1997 and remaining in the Fund
120 days later (for Capital Value Fund) (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, calculated after any applicable
waivers.
Distribution and Service Fees. Capital Value Fund and Balanced Value Fund have
adopted Distribution and Service Plans and Agreements under Rule 12b-1 of the
Investment Company Act for Class A, Class B and Class C shares (the "Plans") to
compensate the Distributor for its services and costs in connection with the
distribution of Class A, Class B and Class C shares and the personal service and
maintenance of shareholder accounts that hold Class A, Class B and Class C
shares. Under each Plan, the funds pay the Distributor an asset-based sales
charge on Class A shares at an annual rate of 0.25% (as to Capital Value Fund)
and 0.15% (as to Balanced Value Fund) of average annual net assets of Class A
shares and on Class B and Class C shares at an annual rate of 0.75% of those
shares. The Distributor also receives a service fee of 0.25% per year under each
Plan with respect to each class of shares. All fee amounts are computed on the
average annual net assets of the class determined as of the close of each
regular business day of each fund. With respect to Capital Value Fund, until
February 28, 1999, the Distributor had agreed to waive its receipt of a portion
of the asset-based sales charge equal to 0.15% of average annual net assets of
Class A shares; this waiver is no longer in effect. The Distributor uses all of
the service fee and under the Class A Plans a portion of the asset-based sales
charge to compensate dealers for providing personal services and maintenance of
accounts of their customers that hold shares of the funds. The portion of the
asset-based sales charge that is not paid to dealers under the Class A Plan is
retained by the Distributor to compensate itself for its other expenditures
under the Plan. The Class B asset-based sales charge is retained by the
Distributor and the Class C asset-based sales charge is paid to the dealer as an
ongoing commission on Class C shares that have been outstanding for a year or
more. The Plans are compensation plans whereby payments by the funds are made at
a fixed rate as specified above and the funds= payments are not limited to
reimbursing the Distributor=s costs.
Purchases, Exchanges and Redemptions
Both Capital Value Fund and Balanced Value Fund are part of the OppenheimerFunds
complex of mutual funds. The procedures for purchases, exchanges and redemptions
of shares of the funds are substantially the same. Shares of either fund may be
exchanged for shares of the same class of other Oppenheimer funds offering such
shares.
Both Capital Value Fund and Balanced Value Fund have a maximum initial sales
charge of 5.75% on Class A shares. Investors who purchase $1 million or more
($500,000 or more for certain retirement plan accounts) of Class A shares pay no
initial sales charge but may have to pay a sales charge of up to 1% if shares
are sold within 12 calendar months from the end of the calendar month during
which shares are purchased. Class B and Class C shares of the funds generally
are sold without a front-end sales charge but may be subject to a contingent
deferred sales charge ("CDSC") upon redemption depending on the length of time
the shares are held. See "Comparative Fee Tables" above for a complete
description of such sales charges. Class A, Class B and Class C shares of
Balanced Value Fund received in the Reorganization will be issued at net asset
value, without a sales charge and no CDSC will be imposed on any Capital Value
Fund shares exchanged for Balanced Value Fund shares as a result of the
Reorganization. However, any CDSC that applies to Capital Value Fund shares will
continue to apply to Balanced Value Fund shares received in the Reorganization.
Services available to shareholders of both funds include purchase and redemption
of shares through OppenheimerFunds AccountLink and PhoneLink (an automated
telephone system), telephone redemptions, and exchanges by telephone to other
Oppenheimer funds that offer Class A, Class B and Class C shares, and
reinvestment privileges. Please see "Shareholder Services," below and each
fund=s Prospectus for further information.
PRINCIPAL RISK FACTORS
In evaluating whether to approve the Reorganization and invest in Balanced Value
Fund, shareholders should carefully consider the following risk factors, the
other information set forth in this Proxy Statement and Prospectus and the more
complete description of risk factors set forth in the documents incorporated by
reference herein, including the Prospectuses of the funds and their respective
Statements of Additional Information.
General
All investments carry risks to some degree. Investment by the funds in stocks
and/or bonds are subject to changes in their value from a number of factors.
They include changes in general stock and bond market movements (known as
"market risk") or the change in value of particular stocks or bonds because of
an event affecting the issuer (as to bonds, known as "credit risk"). At times,
either fund may increase the relative emphasis of its equity investment in a
particular industry, or a particular market capitalization range, which can
subject the fund to the added risk that economic, political, market or other
changes will have a negative effect on the values of those issuers. Changes in
interest rates can also affect stock and bond prices (known as "interest rate
risk"). These general investment risks can affect the value of both funds=
investments, their investment performance, and their share prices. There is no
assurance that either 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.
Stock Investment Risks
The funds usually invest a substantial portion (and as to Capital Value Fund,
substantially all) of their assets in stocks. Stocks fluctuate in price, and
their short-term volatility at times may be great. Since the funds emphasize
investment in equity securities, the value of the fund's portfolio will be
affected by changes in the stock market; however, since Balanced Value Fund
invests at least 25% of its total assets in debt securities, it is not subject
to the same degree of stock market volatility as Capital Value Fund. This market
risk will affect each fund's net asset value 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, and other factors can affect a particular
stock's price (for example, poor earnings reports by an issuer, loss of major
customers, major litigation against an issuer, or changes in government
regulations affecting an industry). Not all of these factors can be predicted
and changes in the overall market conditions and prices can occur at any time.
Risks of Debt Securities
Balanced Value Fund invests at least 25% of its total assets in debt securities.
Although Capital Value Fund is permitted to invest in debt securities without
restriction, as of August 31, 1999 it did not hold any debt securities. Debt
securities are subject to changes in their values due to changes in prevailing
interest rates. When interest rates fall, the value of already-issued debt
securities generally rise. When interest rates rise, the values of
already-issued debt securities generally decline. The magnitude of these
fluctuations will often be greater for longer-term debt securities than
shorter-term debt securities. A fund=s share prices can go up or down when
interest rates change because of the effect of the change on the value of the
fund's portfolio of debt securities. Debt securities are also subject to credit
risk. Credit risk relates to the ability of the issuer to meet interest or
principal payments on a security as they become due. If the issuer fails to pay
interest, the fund's income may be reduced and if the issuer fails to repay
principal, the value of that bond and of the fund's shares may be reduced. Each
fund has the ability to (although currently does not) invest up to 25% of its
assets in high-yield, lower-grade debt securities commonly known as "junk
bonds". If a fund were to invest in high-yield securities, those securities may
be subject to greater market fluctuation and risk of loss of income and
principal than lower yielding, investment grade securities. There are additional
risks of investing in lower grade securities that are described in the
Prospectus of each fund.
Foreign Securities
The funds are permitted to purchase foreign securities although neither fund
currently invests in these securities to a significant extent. There are risks
of foreign investing that increase the risk of investing in a fund and also
increase its operating costs. For example, foreign issuers are not required to
use generally-accepted accounting principles. If foreign securities are not
registered for sale in the U.S. under U.S. securities laws, the issuer does not
have to comply with the disclosure requirements of U.S. laws, which are
generally more stringent than foreign laws. The values of foreign securities
investments will be affected by other factors, including exchange control
regulations or currency blockage and possible expropriation or nationalization
of assets. There are risks of changes in foreign currency values. Because
Capital Value Fund and Balanced Value Fund may purchase securities denominated
in foreign currencies, a change in value of a foreign currency against the U.S.
dollar will result in a change in the U.S. dollar value of securities of that
fund denominated in that currency. There may also be changes in governmental
administration or economic or monetary policy in the U.S. or abroad that can
affect foreign investing. In addition, it is generally more difficult to obtain
court judgments outside the United States if that fund has to sue a foreign
broker or issuer. Additional costs may be incurred because foreign broker
commissions are generally higher than U.S. rates, and there are additional
custodial costs associated with holding securities abroad. More information
about the risks and potential rewards of investing in foreign securities is
contained in the Statement of Additional Information of both funds.
Hedging Instruments
Each fund may use certain hedging instruments. 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. Losses
could also be experienced 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 funds. There
are also special risks in particular hedging strategies. 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. To limit its
exposure in foreign currency exchange contracts, the funds limit their exposure
to the amount of its assets denominated in foreign currency.
APPROVAL OR DISAPPROVAL OF THE REORGANIZATION
(The Proposal)
Reasons for the Reorganization
At a meeting of the Board held on June 1, 1999, the Board considered whether to
approve the proposed Reorganization and reviewed and discussed with the Manager,
the Sub-Adviser and independent legal counsel the materials provided by the
Manager and the Sub-Adviser relevant to the proposed Reorganization. Included in
the materials was information with respect to the funds' investment objectives
and policies, management fees, distribution fees and other operating expenses,
historical performance and asset size.
The Board reviewed information that demonstrated that Capital Value Fund was a
smaller fund with approximately $289 million in net assets as of March 31, 1999.
Capital Value Fund's assets had decreased from $663 million at the time of its
open-end conversion in late February 1997 and had generally experienced net
redemptions since that time. It was not anticipated that Capital Value Fund
would increase substantially in size in the near future. In comparison, Balanced
Value Fund had approximately $700 million in net assets as of March 31, 1999,
and has since grown to over $1.4 billion in net assets. After the
Reorganization, the shareholders of Capital Value Fund would become shareholders
of a larger fund and will likely incur lower overall operating expenses. Thus
economies of scale may benefit shareholders of Capital Value Fund.
The Board considered that the proposed Reorganization would permit shareholders
of Capital Value Fund to become shareholders of a fund advised by the same
investment adviser and sub-adviser. The Board considered the investment
objectives of the two funds. Capital Value Fund seeks capital appreciation.
Current income is not a consideration. Balanced Value Fund seeks growth of
capital as a primary objective; it also seeks investment income as a secondary
objective. Both funds invest primarily in equity securities of companies
believed to be undervalued in the marketplace. By employing this value investing
technique, the funds utilize similar investment strategies. Capital Value Fund
tends to seek investment in mid-size companies and Balanced Value Fund tends to
seek investment in larger established companies. Both funds limit their stock
holdings to a number that permits in-depth analysis and review of the
fundamentals and management of each issuer. The Board considered the primary
difference between the funds, which was that Balanced Value Fund invests at
least 25% of its total assets in debt securities and, although permitted to
invest without restriction in such securities, Capital Value Fund typically
holds little or no debt securities. Nevertheless, the equity holdings of
Balanced Value Fund represent a large component of its portfolio and the
investment techniques and strategies employed by the funds' portfolio managers
for equity selection were substantially similar. The Manager advised the Boards
that the portfolio securities held by Capital Value Fund could be suitable for
investment by Balanced Value Fund and, pursuant to the Reorganization, would be
acquired without the payment of brokerage commissions and other fees. The Board
determined that Balanced Value Fund, in terms of investment objective,
investment techniques and strategies, as well as performance, expense and other
matters would be a suitable investment for shareholders of Capital Value Fund.
The Board, in reviewing financial information, considered the lower management
fees, distribution fees and other operating expenses of Balanced Value Fund as
compared to Capital Value Fund. The management fee rate for Balanced Value Fund
as of October 31, 1998 and April 30, 1999 (as annualized) was 0.85% of average
annual net assets, as compared to Capital Value Fund with a management fee rate
of 1.00% as of such dates. Further, the Board of Trustees of the Trust approved
a change in the management fee rate for Balanced Value Fund that would become
effective at the closing of the Reorganization and would effectively reduce the
management fee rate for Balanced Value Fund to 0.80% on assets in excess $4
billion up to $8 billion, and to 0.75% on assets in excess of $8 billion. The
Board also considered the lower 0.40% distribution fee on Class A shares for
Balanced Value Fund as compared to 0.50% for Capital Value Fund and the overall
lower total operating expenses of Balanced Value Fund both before and after
giving effect to the Reorganization. See "Comparative Fee Tables" for additional
information.
In addition to the above, the Board also considered information with respect to
the historical performance of Capital Value Fund and Balanced Value Fund. For
the 1-, 3- and 5-year periods ended March 31, 1999, the performance of Balanced
Value Fund was substantially superior to that of Capital Value Fund and the
Board was advised by the Manager that the prospects for Balanced Value Fund=s
performance in the future were positive. By contrast, the Board also considered
the future viability of Capital Value Fund due to its small size, and that its
prospects for increasing its asset base to achieve efficiencies of scale was
uncertain due to, among other things, below-average performance.
The Board also considered the terms and conditions of the Reorganization,
including that there would be no sales charge imposed in effecting the
Reorganization and that the Reorganization is expected to be a tax free
reorganization. The Board concluded that the Reorganization would not result in
a dilution of the interests of existing shareholders of Capital Value Fund.
After consideration of the above factors, and such other factors and information
as the Board deemed relevant, the Board, including the Independent Directors,
unanimously approved the Reorganization and the Reorganization Agreement and
voted to recommend its approval to the shareholders of Capital Value Fund.
The Board of Trustees of the Trust, including the Trustees who are not
"interested persons" of the Trust, also unanimously approved the Reorganization
and the Reorganization Agreement and determined that the Reorganization would
not result in dilution of Balanced Value Fund shareholders' interests.
The Reorganization
The Reorganization Agreement (a copy of which is set forth in full as Exhibit A
to this Proxy Statement and Prospectus) contemplates a reorganization under
which (i) all of the assets of Capital Value Fund (other than the cash reserve
described below (the "Cash Reserve") will be transferred to Balanced Value Fund
in exchange for Class A, Class B and Class C shares of Balanced Value Fund, (ii)
these shares will be distributed among the shareholders of Capital Value Fund in
complete liquidation of Capital Value Fund, and (iii) the outstanding shares of
Capital Value Fund will be canceled. Balanced Value Fund will not assume any of
Capital Value Fund's liabilities except for portfolio securities purchased which
have not settled and outstanding shareholder redemption and dividend checks.
The result of effectuating the Reorganization would be that: (i) Balanced Value
Fund will add to its gross assets all of the assets (net of any liability for
portfolio securities purchased but not settled and outstanding shareholder
redemption and dividend checks) of Capital Value Fund other than its Cash
Reserve; and (ii) the shareholders of Capital Value Fund as of the close of
business on the Closing Date will become holders of either Class A, Class B or
Class C shares of Balanced Value Fund.
Shareholders of Capital Value Fund who vote their Class A, Class B and Class C
shares in favor of the Reorganization will be electing in effect to redeem their
shares of Capital Value Fund (at net asset value on the Valuation Date referred
to below under "Method of Carrying Out the Reorganization Plan," calculated
after subtracting the Cash Reserve) and reinvest the proceeds in Class A, Class
B or Class C shares of Balanced Value Fund at net asset value without sales
charge and without recognition of taxable gain or loss for Federal income tax
purposes (see "Tax Aspects of the Reorganization" below). The Cash Reserve is
that amount retained by Capital Value Fund which is deemed sufficient in the
discretion of the Board for the payment of: (a) Capital Value Fund's expenses of
liquidation, and (b) its liabilities, other than those assumed by Balanced Value
Fund. Capital Value Fund and Balanced Value Fund will bear all of their
respective expenses associated with the Reorganization, as set forth under
"Costs of the Solicitation and the Reorganization" above. Management estimates
that such expenses associated with the Reorganization to be borne by Capital
Value Fund will not exceed $35,000. Liabilities as of the date of the transfer
of assets will consist primarily of accrued but unpaid normal operating expenses
of Capital Value Fund, excluding the cost of any portfolio securities purchased
but not yet settled and outstanding shareholder redemption and dividend checks.
See "Method of Carrying Out the Reorganization Plan" below.
The Reorganization Agreement provides for coordination between the funds as to
their respective portfolios so that, after the closing, Balanced Value Fund will
be in compliance with all of its investment policies and restrictions. Capital
Value Fund will recognize capital gain or loss on any sales made prior to the
Reorganization pursuant to this paragraph.
Tax Aspects of the Reorganization
Immediately prior to the Valuation Date referred to in the Reorganization
Agreement, Capital Value Fund will pay a dividend or dividends which, together
with all previous dividends, will have the effect of distributing to Capital
Value Fund's shareholders all of Capital Value Fund's investment company taxable
income for taxable years ending on or prior to the Closing Date (computed
without regard to any deduction for dividends paid) and all of its net capital
gain, if any, realized in taxable years ending on or prior to the Closing Date
(after reduction for any available capital loss carry-forward). Such dividends
will be included in the taxable income of Capital Value Fund's shareholders as
ordinary income and capital gain, respectively.
The exchange of the assets of Capital Value Fund for Class A, Class B and Class
C shares of Balanced Value Fund and the assumption by Balanced Value Fund of
certain liabilities of Capital Value Fund is intended to qualify for Federal
income tax purposes as a tax-free reorganization under Section 368(a)(1) of the
Internal Revenue Code of 1986, as amended (the "Code"). Capital Value Fund has
represented to PricewaterhouseCoopers LLP, tax adviser to the funds, that there
is no plan or intention by any Capital Value Fund shareholder who owns 5% or
more of Capital Value Fund's outstanding shares, and, to Capital Value Fund's
best knowledge, there is no plan or intention on the part of the remaining
Capital Value Fund shareholders, to redeem, sell, exchange or otherwise dispose
of a number of Balanced Value Fund Class A, Class B or Class C shares received
in the transaction that would reduce Capital Value Fund shareholders' ownership
of Balanced Value Fund shares to a number of shares having a value, as of the
Closing Date, of less than 50% of the value of all the formerly outstanding
Capital Value Fund shares as of the same date. Balanced Value Fund and Capital
Value Fund have each represented to PricewaterhouseCoopers LLP, that, as of the
Closing Date, it will qualify as a regulated investment company or will meet the
diversification test of Section 368(a)(2)(F)(ii) of the Code.
As a condition to the closing of the Reorganization, Balanced Value Fund and
Capital Value Fund will receive the opinion of PricewaterhouseCoopers LLP to the
effect that, based on the Reorganization Agreement, the above representations,
existing provisions of the Code, Treasury Regulations issued thereunder, current
Revenue Rulings, Revenue Procedures and court decisions, for Federal income tax
purposes:
1. The transactions contemplated by the Reorganization Agreement will qualify
as a tax-free "reorganization" within the meaning of Section 368(a)(1)(c)
of the Code.
2. Capital Value Fund and Balanced Value Fund will each qualify as "a party
to a reorganization" within the meaning of Section 368(b)(2) of the Code.
3. No gain or loss will be recognized by the shareholders of Capital Value
Fund upon the distribution of Class A, Class B or Class C shares of
Balanced Value Fund to the shareholders of Capital Value Fund pursuant to
Section 354(a)(1) of the Code.
4. Under Section 361(a) of the Code, no gain or loss will be recognized by
Capital Value Fund by reason of the transfer of its assets solely in
exchange for Class A, Class B and Class C shares of Balanced Value Fund.
5. Under Section 1032(a) of the Code, no gain or loss will be recognized by
Balanced Value Fund by reason of the transfer of Capital Value Fund's
assets solely in exchange for Class A, Class B and Class C shares of
Balanced Value Fund.
6. The shareholders of Capital Value Fund will have the same tax basis and
holding period for the shares of Balanced Value Fund that they receive as
they had for Capital Value Fund shares that they previously held, pursuant
to Sections 358(a)(1) and 1223(1) of the Code, respectively.
7. The securities transferred by Capital Value Fund to Balanced Value Fund
will have the same tax basis and holding period in the hands of Balanced
Value Fund as they had for Capital Value Fund, pursuant to Sections 362(b)
and 1223(2) of the Code, respectively.
Shareholders of Capital Value Fund should consult their tax advisors regarding
the effect, if any, of the Reorganization in light of their individual
circumstances. Since the foregoing discussion relates only to the Federal income
tax consequences of the Reorganization, shareholders of Capital Value Fund
should also consult their tax advisers as to state and local tax consequences,
if any, of the Reorganization.
<TABLE>
Capitalization Table (Unaudited)
The table below sets forth the capitalization of Capital Value Fund and Balanced
Value Fund and indicates the pro forma combined capitalization as of April 30,
1999 as if the Reorganization had occurred on that date.
Net Asset
Shares Value
Net Assets Outstanding Per Share
Oppenheimer Quest
Capital Value Fund, Inc.
<S> <C> <C> <C>
Class A $267,289,307 7,595,606 $35.19
Class B $ 15,279,143 440,741 $34.67
Class C $ 4,364,930 125,826 $34.69
Oppenheimer Quest
Balanced Value Fund
Class A $420,269,227 25,716,338 $16.34
Class B $322,232,730 19,864,869 $16.22
Class C $125,442,108 7,736,499 $16.22
Oppenheimer Quest
Balanced Value Fund
(Pro Forma Surviving Fund)
Class A $687,558,534 42,074,313 $16.34
Class B $337,511,873 20,806,863 $16.22
Class C $129,807,038 8,005,773 $16.21
</TABLE>
Reflects the issuance of 16,357,975 Class A shares, 941,994 Class B shares and
269,274 Class C shares of Balanced Value Fund in a tax-free exchange for the net
assets of Capital Value Fund, aggregating $286,933,380. The pro forma ratios of
expenses to average net assets of Class A, Class B and Class C shares of the
surviving Balanced Value Fund are set forth above under "Comparative Fee
Tables".
<PAGE>
COMPARISON BETWEEN
CAPITAL VALUE FUND AND BALANCED VALUE FUND
Information about Capital Value Fund and Balanced Value Fund is presented below.
In considering whether to approve the Reorganization, shareholders of Capital
Value Fund should consider the differences in investment objectives, policies
and risks of the funds. Additional information about Balanced Value Fund is set
forth in its Prospectus, accompanying this Proxy Statement and Prospectus and
incorporated herein by reference, and additional information about both funds is
set forth in documents that may be obtained upon request of the transfer agent
or upon review at the offices of the SEC. See "Additional Information - Public
Information."
Investment Objectives and Policies
Balanced Value Fund
Balanced Value Fund seeks growth of capital by investing mainly in equity
securities of issuers that the portfolio manager believes are undervalued in the
marketplace. Realization of investment income is a secondary objective of the
fund. Under normal market conditions, Balanced Value Fund invests at least 25%
of its total assets in equity securities and at least 25% of its total assets in
debt securities. As of August 31, 1999, approximately 52% of the fund's assets
were invested in equity securities, approximately 31% of the fund's assets were
invested in debt securities and the remainder of the fund's assets were invested
in cash and cash equivalents.
As discussed below, Capital Value Fund does not seek current income and does not
currently invest in debt securities. Shareholders of Capital Value Fund should
consider the difference in investment objectives and portfolio holdings in
determining whether to approve the Reorganization. Since Balanced Value Fund is
required to invest at least 25% of its total assets in debt securities, the fund
could experience less long-term capital appreciation than a fund like Capital
Value Fund that invests almost exclusively in equity securities. However, due to
the balance of stocks and debt securities in the portfolio, Balanced Value Fund
may not be subject to the potential for significant price volatility to which
Capital Value Fund is subject in the event the stock market declines or a
particular holding significantly loses value. With respect to current income,
since Balanced Value Fund seeks current income and intends to declare and pay
dividends on a quarterly basis, shareholders of the fund could experience
certain tax implications that would not be present in a fund that does not pay
dividends on a quarterly basis, such as Capital Value Fund.
Equity securities include common stocks and preferred stocks. The fund's
investments in debt securities include bonds, debentures, notes, participation
interests in loans, convertible securities and U.S. Government securities. The
fund may also buy short-term debt instruments, including money market
instruments, for liquidity and cash management purposes and may invest without
limit in these securities in times of unstable or adverse market or economic
conditions.
The portfolio manager allocates Balanced Value Fund's investments among equity
and debt securities after assessing the relative values of these different types
of investments under prevailing market conditions. Within the parameters for
stock and bond investments described above, the portfolio might hold stocks,
bonds and money market instruments in different proportions at different times
and the portfolio manager may rebalance the investment allocation based on a
consideration of valuation of common stocks, debt securities and liquidity
needs.
In selecting securities for purchase or sale by the fund, the portfolio manager
uses a "value" approach to investing and searches primarily for securities of
established companies believed to be undervalued in the marketplace, in relation
to factors such as a company's assets, earnings, growth potential and cash
flows. The selection process for equity securities includes the following
techniques: (i) a "bottom up" analytical approach using fundamental research to
focus on particular issuers before considering industry trends; (ii) a search
for securities of established companies believed to be undervalued and having a
high return on capital, strong management committed to shareholder value and
positive cash flows; and (iii) ongoing monitoring of issuers for fundamental
changes in the company that might alter the portfolio manager's initial analysis
about the security. Balanced Value Fund does not concentrate 25% or more of its
investments in any one industry.
Capital Value Fund
Similar to Balanced Value Fund, Capital Value Fund seeks capital appreciation by
investing mainly in equity securities of issuers that the portfolio manager
believes are undervalued in the marketplace. However, unlike Balanced Value
Fund, realization of investment income is not a consideration for the fund.
Accordingly, although the fund is permitted to invest without limit in debt
securities, it typically does not invest to any significant extent in these
securities. As of August 31, 1999, approximately 95% of the fund's assets were
invested in equity securities and approximately 5% of the fund's assets were
invested in cash and cash equivalents.
The fund may also buy short-term debt instruments, including money market
instruments, for liquidity and cash management purposes and may invest without
limit in these securities in times of unstable or adverse market or economic
conditions.
In selecting securities for purchase or sale by the fund, the portfolio manager
uses the same "value" approach to investing that is used by the portfolio
manager for Balanced Value Fund, and uses the same selection process for equity
securities. Capital Value Fund does not concentrate 25% or more of its
investments in any one industry.
Additional information with respect to the funds' investment policies is set
forth below. Information about the risks and potential rewards of such
investments and investment policies is described above in the section entitled
"Principal Risk Factors" and is contained in each fund's respective Prospectus
and Statement of Additional Information. Unless stated to apply on an ongoing
basis, percentage restrictions set forth below and in "Investment Restrictions"
apply 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.
Principal Investment Policies
Stock Investments
As discussed above, both Balanced Value Fund and Capital Value Fund normally
invest a substantial portion of their assets in stocks for purposes of capital
appreciation or growth opportunities. These securities can be issued by domestic
or foreign companies. While the funds do not limit their investments to issuers
in a particular capitalization range, the portfolio manager of Balanced Value
Fund currently focuses on securities of larger established companies and the
portfolio manager of Capital Value Fund currently focuses on mid-size companies.
While stocks of mid-size companies may offer greater capital appreciation
potential than investments in larger capitalization companies, they generally
are less liquid and subject to more abrupt and erratic price movements than
larger issues.
At times, the funds may increase the relative emphasis of their investments in
the securities of issuers in a particular industry depending upon the portfolio
manager's assessment of market and economic conditions. Stocks of issuers in a
particular industry may be affected by changes in economic conditions,
government regulations, availability of basic resources or other events that
affect that industry more than others. To the extent that the fund increases the
relative emphasis of its investments in a particular industry, its share prices
will fluctuate in response to events affecting that industry.
Both funds may invest in convertible fixed-income securities. Although these
securities are debt securities, the funds consider some convertible securities
to be "equity equivalents" because of the conversion feature and the security's
rating has less impact on the investment decision than in the case of
non-convertible securities.
Debt Securities
The funds are permitted to invest any percentage of their assets in debt
securities with the requirement that Balanced Value Fund invest at least 25% of
its total assets in such securities. As of August 31, 1999, Capital Value did
not hold any debt securities. Debt securities are subject to certain risks,
including credit risk and interest rate risk as discussed above (see "Principal
Risk Factors - Risks of Debt Securities"). The funds may invest up to 25% of
their respective assets in high-yield, lower-grade bonds (commonly known as
"high yield" or "junk bonds"). Such securities are rated below "investment
grade," which means they have a rating lower than "Baa3" by Moody's or lower
than "BBB-" by S&P or similar ratings by other rating organizations, or if
unrated, are determined by the Sub-Adviser to be of comparable quality to debt
securities rated below investment grade. A reduction in the rating of a security
after its purchase by the fund will not require the fund to dispose of the
security. As of August 31, 1999, Capital Value Fund did not hold debt securities
and Balanced Value Fund did not hold securities rated below investment grade.
Both funds may invest in convertible fixed-income securities. These securities
are bonds, debentures or notes that may be converted into or exchanged for a
prescribed amount of company stock of the same or a different issue within a
particular period of time at a specified price or formula. The funds consider
some convertible securities to be "equity equivalents" because of the conversion
feature and the security's rating has less impact on the investment decision
than in the case of non-convertible securities.
For liquidity and cash management purposes, each fund typically invests a part
of its assets in various short-term debt securities, including U.S.
Government securities and money market instruments.
Foreign Securities
The funds 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, European Depository
Receipts or Global Depository Receipts. Although there is no limit to the amount
of foreign securities the funds may acquire neither fund invests to a
significant extent in foreign securities. Investments in securities of issuers
in underdeveloped countries or countries that have emerging markets generally
may offer greater potential for gain but involve more risk and may be considered
highly speculative. The funds will hold foreign currency only in connection with
the purchase or sale of foreign securities.
Portfolio Turnover
A change in the securities held by either fund is known as "portfolio turnover."
Balanced Value Fund can engage frequently in short-term trading to try to
achieve its objective and has historically experienced portfolio turnover rates
in excess of 100%. On the contrary, Capital Value Fund does not engage
frequently in short-term trading to try to achieve its objective and as a
result, its portfolio turnover has been less than 100% each year. For each
fund's portfolio turnover rate, see "Financial Highlights" in each fund's
respective Prospectus or Annual Report. An increased portfolio turnover rate,
such as that of Balanced Value Fund, creates higher brokerage and transaction
costs for the fund, which could reduce its overall performance. Additionally, to
the extent Balanced Value Fund sells portfolio securities more frequently than
other funds (such as Capital Value Fund), it could be subject to increased
capital gains that when realized would be distributed to its shareholders.
Other Investment Strategies
Hedging
Both funds may purchase and sell certain kinds of hedging instruments, including
futures contracts, forward contracts, and options. Neither fund currently
contemplates using hedging instruments to any significant degree. The funds may
use hedging instruments to attempt to protect against declines in the market
value of the fund's portfolio, to permit the fund to retain unrealized gains in
the value of portfolio securities that have appreciated, or to facilitate
selling securities for investment reasons. Balanced Value Fund may not write
covered call options or put options with respect to more than 5% of the value of
its total assets. Capital Value Fund may write such options on up to 25% of its
total assets and is therefore subject to an increased risk of having to sell or
buy the underlying investment at a disadvantageous price to the fund. Neither
fund may purchase calls or puts in an amount exceeding 5% of its total assets.
Illiquid and Restricted Securities
Both of the funds may invest in illiquid and restricted securities. 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. A
restricted security is one that has a contractual restriction on its resale or
that cannot be sold publicly until it is registered under the Securities Act of
1933. The funds will not invest more than 15% of their respective net assets in
illiquid or restricted securities, including repurchase agreements that have a
maturity of longer than seven days and certain over-the-counter options. The
funds' percentage limitation on these investments does not apply to certain
restricted securities that are eligible for resale to qualified institutional
purchasers.
"When-Issued" and "Delayed Delivery" Transactions
Both funds may purchase securities on a "when-issued" basis, and may purchase or
sell such securities on a "delayed delivery" basis or on a "firm commitment"
basis. These terms refer to securities that have been created and for which a
market exists, but which are not available for immediate delivery. 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.
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 funds' net assets, the funds may assume a temporary defensive
position and invest an unlimited amount of assets in U.S. Government securities
and money market instruments. At any time that either fund invests for temporary
defensive purposes, to the extent of such investments, it is not pursuing its
investment objective.
Investing in Small, Unseasoned Companies
Balanced Value Fund may invest up to 5% of its total assets and Capital Value
Fund may invest without limit in securities of small, unseasoned companies.
These are companies that have been in continuous operation for less than three
years, counting the operations of any predecessors. Although these securities
may afford greater capital appreciation potential than larger capitalization
issues, securities of these companies may have limited liquidity (which means
that the fund may have difficulty selling them at an acceptable price when it
wants to) and the prices of these securities may be volatile.
Loans of Portfolio Securities
To provide income or raise cash for liquidity purposes, the funds may lend their
respective portfolio securities to brokers, dealers and other financial
institutions. The fund must receive collateral for a loan. With respect to
Capital Value Fund, as a fundamental policy these loans are limited to not more
than one-third of the value of the total assets of the fund. The funds presently
do not intend to engage in loans of securities. 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.
Warrants and Rights
Warrants basically are options to purchase stock at set prices that are valid
for a limited period of time. Rights are similar to warrants but normally have a
short duration and are distributed directly by the issuer to its shareholders.
Balanced Value Fund may invest up to 5% of its total assets in warrants and
rights. Capital Value Fund may not invest more than 5% of its total assets in
warrants; this 5% limitation does not apply to warrants Capital Value Fund has
acquired as part of units with other securities or that are attached to other
securities.
Borrowing
As a fundamental policy, neither fund may borrow money in excess of 33-1/3%
(one-third) of the value of its total assets, and further, the funds will not
purchase any securities at a time while such borrowings exceed 5% of its total
assets and will only borrow from banks as a temporary measure for extraordinary
or emergency purposes. This investment technique may subject the funds to
greater risks and costs, including the burden of interest expense, an expense
the funds would not otherwise incur. The funds can borrow only if each maintains
a 300% ratio of assets to borrowings at all times in the manner set forth in the
Investment Company Act.
Repurchase Agreements
Each of the funds 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. Neither of the funds will enter into repurchase agreements that
will cause more than 15% of its net assets to be subject to repurchase
agreements having a maturity beyond seven days. 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. The funds may also enter into reverse repurchase
agreements. Under such agreements, the fund sells securities and agrees to
repurchase them at a mutually agreed upon date and price. Reverse repurchase
agreements create leverage, a speculative factor, and will be considered
borrowings by the fund for purposes of certain percentage limitations on
borrowing.
Investment in Other Investment Companies
Each of Balanced Value Fund and Capital Value Fund may invest up to 10% of its
total assets in shares of other investment companies and up to 5% of its total
assets in any one investment company, as long as each investment does not
represent more than 3% of the outstanding voting securities of the acquired
investment company. These limitations do not apply in the case of investment
company securities which may be purchased as part of a plan of merger,
consolidation, reorganization or acquisition. Since the fund would be subject to
its ratable share of the other investment company's expenses, it does not expect
to make these investments unless in the judgment of the Sub-Adviser the
potential investment benefits justify the added costs and expenses. Balanced
Value Fund does not presently intend to make these investments.
Investment Restrictions
Both Capital Value Fund and Balanced Value Fund have certain additional
investment restrictions that, together with their investment objectives, are
fundamental policies, changeable only by shareholder approval. Generally, these
investment restrictions are similar between the funds and are discussed below.
Similar investment restrictions that are fundamental policies:
Concentration: Capital Value Fund cannot 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); (this restriction does not apply to U.S. Government securities);
Balanced Value Fund has the same restriction.
Borrowing: Neither fund may borrow money in excess of 33-1/3% (one-third) of
the value of the its total assets and subject to the other restrictions
described in "Borrowing" above.
Real Estate: Capital Value Fund cannot invest in real estate or interests in
real estate (including limited partnership interests), but may purchase
securities of companies that deal in real estate or interests therein; Balanced
Value Fund has the same restriction.
Underwriting: Capital Value Fund cannot underwrite securities of other
companies, except insofar as it might be deemed to be an underwriter for
purposes of the Securities Act of 1933 in the resale of any securities held in
its own portfolio; Balanced Value Fund has the same restriction.
Pledging Assets: Capital Value Fund cannot mortgage, hypothecate or pledge any
of its assets except to secure permitted borrowings and in connection with
collateral arrangements with respect to options and futures; Balanced Value Fund
is permitted to pledge assets in an amount not to exceed 10% of its net assets
and accordingly may be subject to increased borrowing ability and consequent
increased costs.
Investment in Certain Issuers: Capital Value Fund cannot invest or hold
securities of any issuer if its officers and Directors or those of its Manager
or Sub-Adviser own more than 2 of 1% of the securities of such issuer and
together own more than 5% of the securities of such issuer; Balanced Value Fund
has the same restriction.
Investment for Control: Capital Value Fund cannot invest in companies for the
primary purpose of exercising control or management thereof; Balanced Value Fund
has the same restriction.
Investment in Commodities: Capital Value Fund cannot invest in physical
commodities or physical commodity contracts; however, the fund may buy and sell
hedging instruments to the extent specified in its Prospectus and Statement of
Additional Information and from time to time and may buy and sell options,
futures, securities or other instruments backed by, or the investment return
from which is linked to changes in the price of, physical commodities; Balanced
Value Fund has the same restriction.
Diversification: Capital Value Fund cannot, 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 or purchase more than 10% of the outstanding voting securities
of any one issuer (other than U.S. Government securities issued or guaranteed by
the U.S. Government or any agency or instrumentality thereof); Balanced Value
Fund has the same restriction.
Issuing Senior Securities: Capital Value Fund cannot issue senior securities,
although it can enter into repurchase agreements, lend its portfolio securities
and borrow money in accordance with its fundamental policy; Balanced Value Fund
has the same restriction.
Loans: Capital Value Fund cannot lend money or property to any person, although
it can (i) purchase fixed-income securities, (ii) make loans of portfolio
securities in an amount not to exceed one-third of its total assets and (iii)
enter into repurchase agreements; Balanced Value Fund cannot make loans to any
person or individual except for permitted loans of portfolio securities (and to
the extent loans of portfolio securities are not restricted as to amount,
Balanced Value Fund could be subject to increased costs and risks).
Set forth below are certain non-fundamental policies and guidelines of the funds
changeable without shareholder vote.
Margin and Short Sales: Capital Value Fund cannot purchase securities on margin,
or make short sales of securities; Balanced Value Fund has the same restriction
but it can make short-term borrowings when necessary for the clearance of
purchases of portfolio securities, which could subject Balanced Value Fund to
increased costs.
Oil, Gas and Mineral Investment: Capital Value Fund cannot invest in interests
in oil, gas or other mineral exploration or development programs or leases
although it can invest in securities of companies that invest in or sponsor such
programs; Balanced Value Fund has the same restriction.
Description of Brokerage Practices
The brokerage practices of the funds are the same. Brokerage for the funds is
allocated subject to the provisions of the funds' investment advisory agreements
and Sub-Advisory agreements and internal procedures and rules. Generally, the
Sub-Adviser's portfolio traders allocate brokerage based upon recommendations
from the fund's portfolio manager. In certain instances, portfolio managers may
directly place trades and allocate brokerage. In either case, the Sub-Adviser's
executive officers supervise the allocation of brokerage.
Transactions in securities other than those for which an exchange is the primary
market are generally done with principals or market makers. In transactions on
foreign exchanges, the Fund may be required to pay fixed brokerage commissions
and therefore would not have the benefit of negotiated commissions available in
U.S. markets. Brokerage commissions are paid primarily for transactions in
listed securities or for certain fixed-income agency transactions in the
secondary market. Otherwise brokerage commissions are paid only if it appears
likely that a better price or execution can be obtained by doing so.
The Sub-Adviser 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 allocate purchase or
sale transactions among the funds and other clients whose assets it manages in a
manner it deems equitable. In making those allocations, the Sub-Adviser
considers several main factors, including the respective investment objectives,
the relative size of portfolio holdings of the same or comparable securities,
the availability of cash for investment, the size of investment commitments
generally held and the opinions of the persons responsible for managing the
portfolios of the fund and each other client's accounts.
When orders to purchase or sell the same security on identical terms are placed
by more than one of the funds and/or other advisory accounts managed by the
Sub-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 (these are called "free trades") usually will have its order
executed first. Orders placed by accounts that direct trades to a specific
broker will generally be executed after the free trades. All orders placed on
behalf of the fund are considered free trades. However, having an order placed
first in the market does not necessarily guarantee the most favorable price.
Purchases are combined where possible for the purpose of negotiating brokerage
commissions. In some cases that practice might have a detrimental effect on the
price or volume of the security in a particular transaction for the fund.
Most purchases of debt obligations are principal transactions at net prices.
Instead of using a broker for those transactions, the Fund normally deals
directly with the selling or purchasing principal or market maker unless the
Sub-Adviser determines that a better price or execution can be obtained by using
the services of a broker. Purchases of portfolio securities from underwriters
include a commission or concession paid by the issuer to the underwriter.
Purchases from dealers include a spread between the bid and asked prices. The
Fund seeks to obtain prompt execution of these orders at the most favorable net
price.
The investment advisory agreement and the Sub-Advisory agreement permit the
Manager and the Sub-Adviser to allocate brokerage for research services. The
research services provided by a particular broker may be useful only to one or
more of the advisory accounts of the Sub-Adviser and its affiliates. The
investment research received for the commissions of those other accounts may be
useful both to the Fund and one or more of the Sub-Adviser's other accounts.
Investment research may be supplied to the Sub-Adviser by a third party at the
instance of a broker through which trades are placed.
Investment research services include information and analysis on particular
companies and industries as well as market or economic trends and portfolio
strategy, market quotations for portfolio evaluations, information systems,
computer hardware and similar products and services. If a research service also
assists the Sub-Adviser in a non-research capacity (such as bookkeeping or other
administrative functions), then only the percentage or component that provides
assistance to the Sub-Adviser in the investment decision-making process may be
paid in commission dollars.
The research services provided by brokers broadens the scope and supplements the
research activities of the Sub-Adviser. That research provides additional views
and comparisons for consideration, and helps the Sub-Adviser to obtain market
information for the valuation of securities that are either held in the Fund's
portfolio or are being considered for purchase. The Sub-Adviser provides
information to the Manager and the Board about the commissions paid to brokers
furnishing such services, together with the Sub-Adviser's representation that
the amount of such commissions was reasonably related to the value or benefit of
such services.
Please refer to the Balanced Value Fund Additional Statement and Capital
Value Fund Additional Statement for further information on such fund's
brokerage practices.
Expense Ratios and Performance
The ratio of expenses to average annual net assets for Class A, Class B and
Class C shares of Capital Value Fund for (i) the fiscal year ended October 31,
1998 was 1.67%, 2.24% and 2.23%, respectively, and (ii) the six-month period
ended April 30, 1999 (as annualized) was 1.68%, 2.28% and 2.27%, respectively.
These expense ratios for Capital Value Fund do not reflect fee waivers that
terminated February 28, 1999 are no longer in effect. The ratio of expenses to
average annual net assets for Class A, Class B and Class C shares of Balanced
Value Fund for (i) the fiscal year ended October 31, 1998 was 1.55%, 2.15% and
2.15%, respectively, and (ii) for the six-month period ended April 30, 1999 (as
annualized) was 1.50%, 2.09% and 2.09%, respectively. Additional information is
set forth in "Comparative Fee Tables" above and in Capital Value Fund's Annual
Report and Balanced Value Fund's Annual Report, each dated as of October 31,
1998, and Semi-Annual Report for each fund, each dated as of April 30, 1999,
that are included in the Statement of Additional Information that is
incorporated herein by reference. The performance of the funds for the 1, 3, 5
and 10 year periods, as applicable, ended June 30, 1999 is set forth in Exhibit
B.
Set forth in Balanced Value Fund's Prospectus under "The Fund's Past
Performance", accompanying this Proxy Statement and Prospectus and incorporated
by reference herein, is the following past performance information: (i) a bar
chart detailing annual total returns of Class A shares of the fund as of
December 31 for each of the full calendar years since the fund's inception on
November 1, 1991; and (ii) a table detailing how the average annual total
returns of the fund's Class, Class B and Class C shares compare to those of the
S&P 500 Index, a broad-based market index. Additional information with respect
to Balanced Value Fund's performance during the past fiscal year, including a
discussion of factors that materially affected its performance and relevant
market conditions, is set forth in Balanced Value Fund's Annual Report dated as
of October 31, 1998 that is included in the Statement of Additional Information
that is incorporated herein by reference.
Shareholder Services
The policies of Capital Value Fund and Balanced Value Fund with respect to
minimum initial investments and subsequent investments by its shareholders are
the same. Both Capital Value Fund and Balanced Value Fund offer the following
privileges: (i) Right of Accumulation, (ii) Letter of Intent, (iii) reinvestment
of dividends and distributions at net asset value, (iv) net asset value
purchases by certain individuals and entities, (v) Asset Builder (automatic
investment) Plans, (vi) Automatic Withdrawal and Exchange Plans for shareholders
who own shares of the fund valued at $5,000 or more, (vii) AccountLink and
PhoneLink arrangements, (viii) exchanges of shares for shares of the same class
of certain other funds at net asset value, and (ix) telephone redemption and
exchange privileges.
Shareholders may purchase shares through OppenheimerFunds AccountLink, which
links a shareholder account to an account at a bank or financial institution and
enables shareholders to send money electronically between those accounts to
perform a number of types of account transactions. This includes the purchase of
shares through the automated telephone system (PhoneLink). Exchanges can also be
made by telephone, or automatically through PhoneLink. After AccountLink
privileges have been established with a bank account, shares may be purchased by
telephone in an amount up to $100,000. Shares of either fund may be exchanged
for shares of certain OppenheimerFunds at net asset value per share; however,
shares of a particular class may be exchanged only for shares of the same class
of other OppenheimerFunds. Shareholders of the funds may redeem their shares by
written request or by telephone request in an amount up to $50,000 in any
seven-day period. Shareholders may arrange to have share redemption proceeds
wired to a pre-designated account at a U.S. bank or other financial institution
that is an ACH member, through AccountLink. There is no dollar limit on
telephone redemption proceeds sent to a bank account when AccountLink has been
established. Shareholders may also redeem shares automatically by telephone by
using PhoneLink. Shareholders of the funds may also have the Transfer Agent send
redemption proceeds of $2,500 or more by Federal Funds wire to a designated
commercial bank which is a member of the Federal Reserve wire system.
Shareholders of the funds have up to six months to reinvest redemption proceeds
of their Class A shares which they purchase subject to a sales charge or their
Class B shares on which they paid a contingent deferred sales charge, in Class A
shares of the funds or other Oppenheimer funds without paying a sales charge.
Each fund may redeem accounts valued at less than $500 if the account has fallen
below such stated amount for reasons other than market value fluctuations. Both
funds offer Automatic Withdrawal and Automatic Exchange Plans under certain
conditions.
Rights of Shareholders
The shares of each fund, including shares of each class, entitle the holder to
one vote per share on the election of Trustees of the Trust (as to Balanced
Value Fund) or Directors (as to Capital Value Fund), and on all other matters
submitted to shareholders of the fund. Each share of the fund represents an
interest in the fund proportionately equal to the interest of each other share
of the same class and entitles the holder to one vote per share (and a
fractional vote for a fractional share) on matters submitted to their vote at
shareholder meetings. Shareholders of Capital Value Fund vote together, and
shareholders of Balanced Value Fund vote together with the shareholders of other
series of the Trust in the aggregate, on certain matters at shareholder
meetings, such as the election of Trustees or Directors and ratification of
appointment of auditors. Shareholders of a particular series or class vote
separately on proposals which affect that series or class, and shareholders of a
series or class which are not affected by that matter are not entitled to vote
on the proposal. For example, only shareholders of a series, such as Balanced
Value Fund, vote exclusively on any material amendment to the investment
advisory agreement with respect to the series. Only shareholders of a class of
shares vote on certain amendments to the Distribution and Service Plans and
Agreements if the amendments affect only that class. The Board of Trustees of
the Trust and the Board of Directors of Capital Value Fund are authorized to
create new series and classes of series. The Boards may reclassify unissued
shares of the funds into additional series or classes of shares. The Boards 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 each fund. Shares do not have cumulative voting rights or
preemptive or subscription rights. Shares may be voted in person or by proxy.
Class A, B and C shares of Capital Value Fund and the Class A, Class B and Class
C shares of Balanced Value Fund that Capital Value Fund shareholders will
receive in the Reorganization participate equally in the funds' dividends and
distributions and in the funds' net assets upon liquidation, after taking into
account the different expenses paid by each class. Distributions and dividends
for each class will be different, and Class B and Class C dividends and
distributions will be lower than Class A.
It is not contemplated that the Trust or Capital Value Fund will hold regular
annual meetings of shareholders. Under the Investment Company Act, shareholders
of Capital Value Fund do not have rights of appraisal as a result of the
transactions contemplated by the Reorganization Agreement. However, they have
the right at any time prior to the consummation of such transaction to redeem
their shares at net asset value, less any applicable contingent deferred sales
charge. Shareholders of both of the funds have the right, under certain
circumstances, to remove a Trustee or Director, as the case may be, and will be
assisted in communicating with other shareholders for such purpose.
Balanced Value Fund is a series of the Trust, which is organized as a
Massachusetts business trust. Under certain circumstances, shareholders of
Balanced Value Fund may be held personally liable as partners for the fund=s
obligations, however, under the Declaration of Trust governing the Trust and
Balanced Value Fund, such a shareholder is entitled to certain indemnification
rights and the risk of a shareholder incurring any such loss is limited to the
remote circumstances in which the fund is unable to meet its obligations.
Capital Value Fund is a corporation organized under the laws of the State of
Maryland. As a general matter, shareholders of a corporation will not be liable
to the corporation or its creditors with respect to their interests in the
corporation as long as their shares have been paid for and the requisite
corporate formalities have been observed, both in the organization of the
corporation and in the conduct of its business.
Organization and History
The Trust, Oppenheimer Quest For Value Funds, was organized in April 1987 as a
multi-series Massachusetts business trust with an unlimited number of shares of
beneficial interest and Balanced Value Fund is a diversified open-end management
investment company that is a series of the Trust.
Capital Value Fund is an open-end, diversified management investment company
organized as a Maryland corporation in 1986. Capital Value Fund commenced its
operations on February 13, 1987 as a closed-end investment company with a
"dual-purpose" structure. The fund originally had two objectives: (1) long-term
capital appreciation and preservation of capital, and (2) current income and
long-term growth of income. The fund originally had common stock, denominated as
"capital shares," and preferred stock, denominated as "income shares." Under
Capital Value Fund's original dual-purpose structure, the capital shares were
entitled to all of the fund's gains and losses on its assets, and no fund
expenses were allocated to those shares. The income shares were entitled to all
of the Fund's income and bore all of the Fund's operating expenses. The income
shares were redeemed on January 31, 1997, and the fund's dual-purpose structure
was terminated. On March 3, 1997, the fund was converted to an open-end
management investment company with a single investment objective of capital
appreciation. The outstanding capital shares of the fund were re-denominated as
Class A shares of common stock, which bear their allocable share of fund
expenses.
The Manager acts as investment adviser to the funds, the Sub-Adviser acts as
sub-adviser to the funds and the portfolio managers for the funds are employed
by the Sub-Adviser. The Trustees and officers of the Trust and the Directors and
officers of Capital Value Fund are the same, and oversee the Manager, the
Sub-Adviser and the portfolio managers.
Management and Distribution Arrangements
The Manager, located at Two World Trade Center, New York, New York 10048-0203,
acts as the investment adviser to both Capital Value Fund and Balanced Value
Fund. The terms and conditions of the investment advisory agreement for each
fund are substantially the same except for the management fee rate. The monthly
management fee payable to the Manager by each fund is set forth under "Synopsis
- - Investment Advisory and Distribution and Service Plan Fees" along with the
fees paid by the Manager to the Sub-Adviser for the funds. The 12b-1
Distribution and Service Plan fees paid by the funds with respect to Class A,
Class B and Class C shares are also set forth above under "Synopsis - Investment
Advisory and Distribution and Service Plan Fees."
Pursuant to each investment advisory agreement, the Manager acts as the
investment adviser for the funds and supervises the investment program of the
funds. The investment advisory agreements state that the Manager will provide
administrative services for the funds, including completion and maintenance of
records, preparation and filing of reports required by the SEC, reports to
shareholders, and composition of proxy statements and registration statements
required by Federal and state securities laws. Further, the Manager has agreed
to furnish the funds with office space, facilities and equipment and arrange for
its employees to serve as officers of the Trust (as to Balanced Fund) and
Capital Value Fund. The administrative services to be provided by the Manager
under the investment advisory agreement will be at its own expense.
The Sub-Adviser acts as the sub-adviser to the funds pursuant to the terms of a
subadvisory agreement between the Manager and the Sub-Adviser for each fund. The
Sub-Adviser or its parent previously acted as the investment adviser to the
funds prior to November 22, 1995 (as to Balanced Value Fund) and prior to
February 28, 1997 (as to Capital Value Fund) . The terms and conditions of the
sub-advisory agreements for each fund are substantially the same. The
subadvisory agreements provide that the Sub-Adviser will regularly provide
investment advice with respect to the funds, invest and reinvest cash,
securities and the property comprising the assets of each fund and perform such
other duties and responsibilities as are set forth in its contract with the
Manager. The Manager, not the funds, pays the Sub-Adviser.
Expenses not expressly assumed by the Manager under each fund's advisory
agreement or by the Distributor under the General Distributor's Agreement are
paid by the funds. The investment advisory agreements list examples of expenses
paid by the funds, the major categories of which relate to interest, taxes,
brokerage commissions, fees to certain Trustees or Directors, legal and audit
expenses, custodian and transfer agent expenses, share issuance costs, certain
printing and registration costs and non-recurring expenses, including litigation
costs. The management fee paid by Capital Value Fund for the fiscal year ended
October 31, 1998 was $2,223,087 (after giving effect to a management fee waiver
that terminated on February 28, 1999). The management fee paid by Balanced Value
Fund for the fiscal year ended October 31, 1998 was $1,306,652. During the
fiscal year ended October 31, 1998, Balanced Value Fund also paid or accrued
accounting service fees to the Manager in the amount of $55,000; the Manager has
agreed to eliminate the accounting service fee for fiscal years commencing on or
after November 1, 1998.
The investment advisory agreement for Capital Value Fund provides that the
Manager will waive a portion of its advisory fee for a two-year period that
ended February 28, 1999. The fee waiver, which is no longer in effect, provided
that the Manager waived the portion of its fee equal to 0.15% of the first $200
million of average annual net assets, 0.40% of the next $200 million, 0.30% of
the next $400 million and 0.25% of average annual net assets over $800 million.
The investment advisory agreement provides that in the absence of willful
misfeasance, bad faith, or gross negligence in the performance of its duties, 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" or
"Quest For Value" 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" or "Quest For Value" as part of its name may be withdrawn.
The Manager is controlled by Oppenheimer Acquisition Corp., a holding company
owned in part by senior management of the Manager and ultimately controlled by
Massachusetts Mutual Life Insurance Company, a mutual life insurance company
that also advises pension plans and investment companies. The Manager has
operated as an investment company adviser since 1959. The Manager and its
affiliates currently advise investment companies with combined net assets
aggregating over $115.6 billion as of June 30, 1999, with more than 5.5 million
shareholder accounts. OppenheimerFunds Services, a division of the Manager, acts
as transfer and shareholder servicing agent for Capital Value Fund and Balanced
Value Fund and for certain other open-end funds managed by the Manager and its
affiliates; for its services, the funds pay the transfer agent an annual
maintenance fee for each fund shareholder account and reimburse the transfer
agent for its out of pocket expenses.
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 funds by the Sub-Adviser. On November 4, 1997, PIMCO
Advisors L.P. ("PIMCO Advisors"), a registered investment adviser with $125
billion in assets under management through various subsidiaries and affiliates,
acquired control of Oppenheimer Capital and the Sub-Adviser. On November 5,
1997, the new Sub-Advisory Agreement between the Sub-Adviser and the Manager
became effective. On November 30, 1997, Oppenheimer Capital merged with a
subsidiary of PIMCO Advisors and, as a result, Oppenheimer Capital and the
Sub-Adviser became indirect wholly-owned subsidiaries of PIMCO Advisors. PIMCO
Advisors has two general partners: PIMCO Partners, G.P., a California general
partnership ("PIMCO GP"), and PIMCO Advisors Holdings L.P. (formerly Oppenheimer
Capital, L.P.), an NYSE-listed Delaware limited partnership of which PIMCO GP is
the sole general partner.
PIMCO GP beneficially owns or controls (through its general partner interest in
Oppenheimer Capital, L.P.) greater than 80% of the units of limited partnership
("Units") of PIMCO Advisors. PIMCO GP has two general partners. The first of
these is Pacific Investment Management Company, a wholly-owned subsidiary of
Pacific Financial Asset Management Company, which is a direct subsidiary of
Pacific Life Insurance Company ("Pacific Life").
The managing general partner of PIMCO GP is PIMCO Partners L.L.C. ("PPLLC"),
a California limited liability company. PPLLC's members are the Managing
Directors (the "PIMCO Managers") of Pacific Investment Management Company, a
subsidiary of PIMCO Advisors (the "PIMCO Subpartnership"). The PIMCO
Managers are: William H. Gross, Dean S. Meiling, James F. Muzzy, William F.
Podlich, III, Brent R. Harris, John L. Hague, William S. Thompson Jr.,
William C. Powers, David H. Edington, Benjamin Trosky, William R. Benz, II
and Lee R. Thomas, III.
PIMCO Advisors is governed by a Management Board, which consists of sixteen
members, pursuant to a delegation by its general partners. PIMCO GP has the
power to designate up to nine members of the Management Board and the PIMCO
Subpartnership, of which the PIMCO Managers are the Managing Directors, has the
power to designate up to two members. In addition, PIMCO GP, as the controlling
general partner of PIMCO Advisors, has the power to revoke the delegation to the
Management Board and exercise control of PIMCO Advisors. As a result, Pacific
Life and/or the PIMCO Managers may be deemed to control PIMCO Advisors. Pacific
Life and the PIMCO Managers disclaim such control.
The Distributor, under a General Distributor's Agreement for each of the funds,
acts as the principal underwriter in the continuous public offering of Class A,
Class B and Class C shares of each 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. For the fiscal year ended
October 31, 1998, sales charges on sales of Class A shares totaled $330,196 for
Capital Value Fund and $573,438 for Balanced Value Fund, of which $99,219 and
$164,302, respectively, was retained by the Distributor or an affiliated broker.
For the fiscal year ended October 31, 1998, sales charges advanced to dealers by
the Distributor on sales of (i) Capital Value Fund's Class A, Class B and Class
C shares totaled $27,620, $291,004 and $22,732, respectively, and (ii) Balanced
Value Fund's Class A, Class B and Class C shares totaled $53,578, $912,720 and
$103,768. For additional information about distribution of the funds' shares and
the payments made by the funds to the Distributor in connection with such
activities, please refer to "Distribution and Service Plans," in the Balanced
Value Fund Additional Statement and Capital Value Fund Additional Statement.
Purchase of Additional Shares
Class A shares of Capital Value Fund and Class A shares of Balanced Value Fund
generally may be purchased with an initial sales charge of 5.75% for purchases
of less than $25,000. The sales charge of 5.75% is reduced for purchases of
either fund's Class A shares of $25,000 or more. For purchases of $1 million or
more ($500,000 or more for purchases by certain retirement plan accounts), if
those shares are redeemed within 12 calendar months of the end of the calendar
month of their purchase, a contingent sales charge may be deducted from the
redemption proceeds. Class B shares of the funds are sold at net asset value
without an initial sales charge, however, if Class B shares are redeemed within
six years of the end of the calendar month of their purchase, a contingent
deferred sales charge may be deducted of up to 5%, depending upon how long such
shares had been held. Class C shares may be purchased without an initial sales
charge, but if sold within 12 months of buying them, a contingent deferred sales
charge of 1% may be deducted.
The initial sales charge and contingent deferred sales charge on Class A, Class
B and Class C shares of Balanced Value Fund will only affect shareholders of
Capital Value Fund to the extent that they desire to make additional purchases
of shares of Balanced Value Fund in addition to the shares which they will
receive as a result of the Reorganization. The Class A, Class B and Class C
shares to be issued under the Reorganization Agreement will be issued by
Balanced Value Fund at net asset value. Future dividends and capital gain
distributions of Balanced Value Fund, if any, may be reinvested without sales
charge. The contingent deferred sales charge for each class of shares for both
funds is the same. If Class A, Class B or Class C shares of Capital Value Fund
are currently subject to a contingent deferred sales charge, the Balanced Value
Fund shares issued in the Reorganization will continue to be subject to the same
contingent deferred sales charge. Any Capital Value Fund shareholder who is
entitled to a reduced sales charge on additional purchases by reason of a Letter
of Intent or Right of Accumulation based upon holdings of shares of Capital
Value Fund will continue to be entitled to a reduced sales charge on any future
purchase of shares of Balanced Value Fund.
Dividends and Distributions
The funds declare dividends from net investment income on an annual basis and
normally pay those dividends to shareholders following the end of their
respective fiscal years (October 31). The funds may also make distributions
annually in December out of any net short-term or long-term capital gains, and
may make supplemental distributions of dividends and capital gains following its
fiscal year. Dividends are paid separately for each class of shares and
normally, the dividends on Class A shares are generally expected to be higher
than for Class B and Class C shares because the expenses allocable to Class B
and Class C shares will generally be higher than for Class A. There is no fixed
dividend rate for either fund and there can be no assurance that either fund
will pay any dividends or distributions.
METHOD OF CARRYING OUT THE REORGANIZATION
The consummation of the transactions contemplated by the Reorganization
Agreement is contingent upon the approval of the Reorganization by the
shareholders of Capital Value Fund and the receipt of the opinions and
certificates set forth in Sections 10 and 11 of the Reorganization Agreement and
the occurrence of the events described in those Sections. Under the
Reorganization Agreement, all the assets of Capital Value Fund, excluding the
Cash Reserve, will be delivered to Balanced Value Fund in exchange for Class A,
Class B and Class C shares of Balanced Value Fund. The Cash Reserve to be
retained by Capital Value Fund will be sufficient in the discretion of the Board
for the payment of Capital Value Fund's liabilities, and Capital Value Fund's
expenses of liquidation.
Assuming the shareholders of Capital Value Fund approve the Reorganization, the
actual exchange of assets is expected to take place on November 12, 1999, or as
soon thereafter as is practicable (the "Closing Date") on the basis of net asset
values as of the close of business on the business day preceding the Closing
Date (the "Valuation Date"). Under the Reorganization Agreement, all redemptions
of shares of Capital Value Fund shall be permanently suspended at the close of
business on the Valuation Date; only redemption requests received in proper form
on or prior to the close of business on that date shall be fulfilled by it;
redemption requests received by Capital Value Fund after that date will be
treated as requests for redemptions of Class A, Class B and Class C shares of
Balanced Value Fund to be distributed to the shareholders requesting redemption.
The exchange of assets for shares will be done on the basis of the per share net
asset value of the Class A, Class B and Class C shares of Balanced Value Fund,
and the value of the assets of Capital Value Fund to be transferred as of the
close of business on the Valuation Date, valued in the manner used by Balanced
Value Fund in the valuation of assets. Balanced Value Fund is not assuming any
of the liabilities of Capital Value Fund, except for portfolio securities
purchased which have not settled and outstanding shareholder redemption and
dividend checks.
The net asset value of the shares transferred by Balanced Value Fund to Capital
Value Fund will be the same as the value of the assets received by Balanced
Value Fund. For example, if, on the Valuation Date, Capital Value Fund were to
have securities with a market value of $95,000 and cash in the amount of $10,000
(of which $5,000 was to be retained by it as the Cash Reserve), the value of the
assets which would be transferred to Balanced Value Fund would be $100,000. If
the net asset value per share of Balanced Value Fund were $10 per share at the
close of business on the Valuation Date, the number of shares to be issued would
be 10,000 ($100,000 ) $10). These 10,000 shares of Balanced Value Fund would be
distributed to the former shareholders of Capital Value Fund. This example is
given for illustration purposes only and does not bear any relationship to the
dollar amounts or shares expected to be involved in the Reorganization.
In conjunction with the Closing Date, Capital Value Fund will distribute on a
pro rata basis to its shareholders of record on the Valuation Date the Class A,
Class B and Class C shares of Balanced Value Fund received by Capital Value Fund
at the closing, in liquidation of the outstanding shares of Capital Value Fund,
and the outstanding shares of Capital Value Fund will be canceled. To assist
Capital Value Fund in this distribution, Balanced Value Fund will, in accordance
with a shareholder list supplied by Capital Value Fund, cause its transfer agent
to credit and confirm an appropriate number of shares of Balanced Value Fund to
each shareholder of Capital Value Fund. Certificates for Class A shares of
Balanced Value Fund will be issued upon written request of a former shareholder
of Capital Value Fund but only for whole shares with fractional shares credited
to the name of the shareholder on the books of Balanced Value Fund and only of
shares represented by certificates are delivered for cancellation. Former Class
A shareholders of Capital Value Fund who wish certificates representing their
shares of Balanced Value Fund must, after receipt of their confirmations, make a
written request to OppenheimerFunds Services, P.O. Box 5270, Denver, Colorado
80217. Shareholders of Capital Value Fund holding certificates representing
their shares will not be required to surrender their certificates to anyone in
connection with the Reorganization. After the Reorganization, however, it will
be necessary for such shareholders to surrender such certificates in order to
redeem, transfer, pledge or exchange any shares of Balanced Value Fund.
Under the Reorganization Agreement, within one year after the Closing Date,
Capital Value Fund shall: (a) either pay or make provision for all of its debts
and taxes; and (b) either (i) transfer any remaining amount of the Cash Reserve
to Balanced Value Fund, if such remaining amount is not material (as defined
below) or (ii) distribute such remaining amount to the shareholders of Capital
Value Fund who were such on the Valuation Date. Such remaining amount shall be
deemed to be material if the amount to be distributed, after deducting the
estimated expenses of the distribution, equals or exceeds one cent per share of
the number of Capital Value Fund shares outstanding on the Valuation Date.
Within one year after the Closing Date, Capital Value Fund will complete its
liquidation.
Under the Reorganization Agreement, either Capital Value Fund or Balanced Value
Fund may abandon and terminate the Reorganization Agreement without liability if
the other party breaches any material provision of the Reorganization Agreement
or, if prior to the closing, any legal, administrative or other proceeding shall
be instituted or threatened (i) seeking to restrain or otherwise prohibit the
transactions contemplated by the Reorganization Agreement and/or (ii) asserting
a material liability of either party, which proceeding or liability has not been
terminated or the threat thereto removed prior to the Closing Date.
In the event that the Reorganization is not consummated for any reason, the
Board will consider and may submit to the shareholders of Capital Value Fund
other alternatives.
ADDITIONAL INFORMATION
Financial Information
The Reorganization will be accounted for by the surviving fund in its financial
statements similar to a pooling without restatement. Further financial
information as to Capital Value Fund is contained in its current Prospectus,
which is available without charge from OppenheimerFunds Services, the Transfer
Agent, P.O. Box 5270, Denver, Colorado 80217, and in its Annual Report as of
October 31, 1998, both of which are included in the Additional Statement.
Financial information for Balanced Value Fund is contained in its current
Prospectus accompanying this Proxy Statement and Prospectus and in its Annual
Report as of October 31, 1998 which is included in the Additional Statement.
Public Information
Additional information about Capital Value Fund and Balanced Value Fund is
available, as applicable, in the following documents: (i) Balanced Value Fund's
Prospectus dated February 19, 1999 accompanying this Proxy Statement and
Prospectus and incorporated herein by reference; (ii) Capital Value Fund's
Prospectus dated February 26, 1999, which may be obtained without charge by
writing to OppenheimerFunds Services, P.O. Box 5270, Denver, Colorado 80217;
(iii) Balanced Value Fund's Annual Report as of October 31, 1998 and Semi-Annual
Report as of April 30, 1999, which may be obtained without charge by writing to
OppenheimerFunds Services at the address indicated above; and (iv) Capital Value
Fund's Annual Report as of October 31, 1998 and Semi-Annual Report as of April
30, 1999, which may be obtained without charge by writing to OppenheimerFunds
Services at the address indicated above. The documents set forth in (ii), (iii)
and (iv) above are included in the Additional Statement and the Additional
Statement is incorporated herein by reference. All of the foregoing documents
may be obtained by calling the toll-free number on the cover of this Proxy
Statement and Prospectus.
Additional information about the following matters is contained in the
Additional Statement which includes the Balanced Value Fund Additional
Statement, Capital Value Fund's Prospectus and the Capital Value Fund Additional
Statement: the organization and operation of Balanced Value Fund and Capital
Value Fund; more information on investment policies, practices and risks;
information about the Trust and Capital Value Fund=s respective Boards, officers
and portfolio managers and their responsibilities; a further description of the
services provided by Balanced Value Fund's and Capital Value Fund's investment
adviser, sub-adviser, distributor, and transfer and shareholder servicing agent;
dividend policies; tax matters; an explanation of the method of determining the
offering price of the shares and/or contingent deferred sales charges, as
applicable of Class A, Class B and Class C shares of Balanced Value Fund and
Capital Value Fund; purchase, redemption and exchange programs; the different
expenses paid by each class of shares; and distribution arrangements.
Capital Value Fund and the Trust, on behalf of Balanced Value Fund, are subject
to the informational requirements of the Securities Exchange Act of 1934, as
amended, and in accordance therewith, file reports and other information with
the SEC. Proxy material, reports and other information about Capital Value Fund
and Balanced Value Fund which are of public record can be inspected and copied
at public reference facilities maintained by the SEC in Washington, D.C. and
certain of its regional offices, and copies of such materials can be obtained at
prescribed rates from the Public Reference Branch, Office of Consumer Affairs
and Information Services, SEC, Washington, D.C. 20549.
OTHER BUSINESS
Management of Capital Value Fund knows of no business other than the matters
specified above which will be presented at the Meeting. Since matters not known
at the time of the solicitation may come before the Meeting, the proxy as
solicited confers discretionary authority with respect to such matters as
properly come before the Meeting, including any adjournment or adjournments
thereof, and it is the intention of the persons named as attorneys-in-fact in
the proxy to vote this proxy in accordance with their judgment on such matters.
By Order of the Board of Directors
Andrew J. Donohue, Secretary
September 13, 1999 835
EXHIBIT A
AGREEMENT AND PLAN OF REORGANIZATION
AGREEMENT AND PLAN OF REORGANIZATION (the "Agreement") dated as of August
3, 1999 by and between Oppenheimer Quest For Value Funds, a Massachusetts
business trust (the "Trust") on behalf of its series, Oppenheimer Quest Balanced
Value Fund ("Balanced Value Fund"), and Oppenheimer Quest Capital Value Fund,
Inc. ("Capital Value Fund"), a Maryland Corporation.
W I T N E S S E T H:
WHEREAS, the parties are each open-end investment companies of the
management type; and
WHEREAS, the parties hereto desire to provide for the reorganization
pursuant to Section 368(a)(1) of the Internal Revenue Code of 1986, as amended
(the "Code"), of Capital Value Fund through the acquisition by Balanced Value
Fund of substantially all of the assets of Capital Value Fund in exchange for
the voting shares of beneficial interest ("shares") of Class A, Class B and
Class C of Balanced Value Fund and the assumption by Balanced Value Fund of
certain liabilities of Capital Value Fund, which Class A, Class B and Class C
shares of Balanced Value Fund are to be distributed by Capital Value Fund pro
rata to its shareholders in complete liquidation of Capital Value Fund and
complete cancellation of its shares;
NOW, THEREFORE, in consideration of the mutual promises herein contained,
the parties hereto agree as follows:
1. The parties hereto hereby adopt this Agreement and Plan of
Reorganization (the "Agreement") pursuant to Section 368(a)(1) of the Code as
follows: The reorganization will be comprised of the acquisition by Balanced
Value Fund of substantially all of the assets of Capital Value Fund in exchange
for Class A, Class B and Class C shares of Balanced Value Fund and the
assumption by Balanced Value Fund of certain liabilities of Capital Value Fund,
followed by the distribution of such Class A, Class B and Class C shares of
Balanced Value Fund to the Class A, Class B and Class C shareholders of Capital
Value Fund in exchange for their Class A, Class B and Class C shares of Capital
Value Fund, all upon and subject to the terms of the Agreement hereinafter set
forth.
The share transfer books of Capital Value Fund will be permanently closed
at the close of business on the Valuation Date (as hereinafter defined) and only
redemption requests received in proper form on or prior to the close of business
on the Valuation Date shall be fulfilled by Capital Value Fund; redemption
requests received by Capital Value Fund after that date shall be treated as
requests for the redemption of the shares of Balanced Value Fund to be
distributed to the shareholder in question as provided in Section 5 hereof.
2. On the Closing Date (as hereinafter defined), all of the assets of
Capital Value Fund on that date, excluding a cash reserve (the "Cash Reserve")
to be retained by Capital Value Fund sufficient in its discretion for the
payment of the expenses of Capital Value Fund's dissolution and its liabilities,
but not in excess of the amount contemplated by Section 10E, shall be delivered
as provided in Section 8 to Balanced Value Fund, in exchange for and against
delivery to Capital Value Fund on the Closing Date of a number of Class A, Class
B and Class C shares of Balanced Value Fund, having an aggregate net asset value
equal to the value of the assets of Capital Value Fund so transferred and
delivered.
3. The net asset value of Class A, Class B and Class C shares of Balanced
Value Fund and the value of the assets of Capital Value Fund to be transferred
shall in each case be determined as of the close of business of The New York
Stock Exchange on the Valuation Date. The computation of the net asset value of
the Class A, Class B and Class C shares of Balanced Value Fund and the Class A,
Class B and Class C shares of Capital Value Fund shall be done in the manner
used by Balanced Value Fund and Capital Value Fund, respectively, in the
computation of such net asset value per share as set forth in their respective
prospectuses. The methods used by Balanced Value Fund in such computation shall
be applied to the valuation of the assets of Capital Value Fund to be
transferred to Balanced Value Fund.
Capital Value Fund shall declare and pay, immediately prior to the
Valuation Date, a dividend or dividends which, together with all previous such
dividends, shall have the effect of distributing to Capital Value Fund's
shareholders all of Capital Value Fund's investment company taxable income for
taxable years ending on or prior to the Closing Date (computed without regard to
any dividends paid) and all of its net capital gain, if any, realized in taxable
years ending on or prior to the Closing Date (after reduction for any capital
loss carry-forward).
4. The closing (the "Closing") shall be at the offices of OppenheimerFunds,
Inc. (the "Agent"), Two World Trade Center, 34th Floor, New York, New York
10048, at 4:00 P.M. New York time on November 12, 1999 or at such other time or
place as the parties may designate or as provided below (the "Closing Date").
The business day preceding the Closing Date is herein referred to as the
"Valuation Date."
In the event that on the Valuation Date either party has, pursuant to the
Investment Company Act of 1940, as amended (the "Act"), or any rule, regulation
or order thereunder, suspended the redemption of its shares or postponed payment
therefore, the Closing Date shall be postponed until the first business day
after the date when both parties have ceased such suspension or postponement;
provided, however, that if such suspension shall continue for a period of 60
days beyond the Valuation Date, then the other party to the Agreement shall be
permitted to terminate the Agreement without liability to either party for such
termination.
5.In conjunction with the Closing, Capital Value Fund shall distribute on a
pro rata basis to the shareholders of Capital Value Fund as of the Valuation
Date the Class A, Class B and Class C shares of Balanced Value Fund received by
Capital Value Fund on the Closing Date in exchange for the assets of Capital
Value Fund in complete liquidation of Capital Value Fund; for the purpose of the
distribution by Capital Value Fund of Class A, Class B and Class C shares of
Balanced Value Fund to Capital Value Fund's shareholders, Balanced Value Fund
will promptly cause its transfer agent to: (a) credit an appropriate number of
Class A, Class B and Class C shares of Balanced Value Fund on the books of
Balanced Value Fund to each Class A, Class B and Class C shareholder of Capital
Value Fund in accordance with a list (the "Shareholder List") of Capital Value
Fund shareholders received from Capital Value Fund; and (b) confirm an
appropriate number of Class A, Class B and Class C shares of Balanced Value Fund
to each Class A, Class B and Class C shareholder of Capital Value Fund;
certificates for Class A, Class B and Class C shares of Balanced Value Fund will
be issued upon written request of a former shareholder of Capital Value Fund but
only for whole shares, with fractional shares credited to the name of the
shareholder on the books of Balanced Value Fund.
The Shareholder List shall indicate, as of the close of business on the
Valuation Date, the name and address of each shareholder of Capital Value Fund,
indicating his or her share balance. Capital Value Fund agrees to supply the
Shareholder List to Balanced Value Fund not later than the Closing Date.
Shareholders of Capital Value Fund holding certificates representing their
shares shall not be required to surrender their certificates to anyone in
connection with the reorganization. After the Closing Date, however, it will be
necessary for such shareholders to surrender their certificates in order to
redeem, transfer or pledge the shares of Balanced Value Fund which they
received.
6. Within one year after the Closing Date, Capital Value Fund shall (a)
either pay or make provision for payment of all of its liabilities and taxes,
and (b) either (i) transfer any remaining amount of the Cash Reserve to Balanced
Value Fund, if such remaining amount (as reduced by the estimated cost of
distributing it to shareholders) is not material (as defined below) or (ii)
distribute such remaining amount to the shareholders of Capital Value Fund on
the Valuation Date. Such remaining amount shall be deemed to be material if the
amount to be distributed, after deduction of the estimated expenses of the
distribution, equals or exceeds one cent per share of Capital Value Fund
outstanding on the Valuation Date.
7. Prior to the Closing Date, there shall be coordination between the
parties as to their respective portfolios so that, after the Closing, Balanced
Value Fund will be in compliance with all of its investment policies and
restrictions. At the Closing, Capital Value Fund shall deliver to Balanced Value
Fund two copies of a list setting forth the securities then owned by Capital
Value Fund. Promptly after the Closing, Capital Value Fund shall provide
Balanced Value Fund a list setting forth the respective federal income tax bases
thereof.
8. Portfolio securities or written evidence acceptable to Balanced Value
Fund of record ownership thereof by The Depository Trust Company or through the
Federal Reserve Book Entry System or any other depository approved by Capital
Value Fund pursuant to Rule 17f-4 and Rule 17f-5 under the Act shall be endorsed
and delivered, or transferred by appropriate transfer or assignment documents,
by Capital Value Fund on the Closing Date to Balanced Value Fund, or at its
direction, to its custodian bank, in proper form for transfer in such condition
as to constitute good delivery thereof in accordance with the custom of brokers
and shall be accompanied by all necessary state transfer stamps, if any. The
cash delivered shall be in the form of certified or bank cashiers' checks or by
bank wire or intra-bank transfer payable to the order of Balanced Value Fund for
the account of Balanced Value Fund. Class A, Class B and Class C shares of
Balanced Value Fund representing the number of Class A, Class B and Class C
shares of Balanced Value Fund being delivered against the assets of Capital
Value Fund, registered in the name of Capital Value Fund, shall be transferred
to Capital Value Fund on the Closing Date. Such shares shall thereupon be
assigned by Capital Value Fund to its shareholders so that the shares of
Balanced Value Fund may be distributed as provided in Section 5.
<PAGE>
If, at the Closing Date, Capital Value Fund is unable to make delivery
under this Section 8 to Balanced Value Fund of any of its portfolio securities
or cash for the reason that any of such securities purchased by Capital Value
Fund, or the cash proceeds of a sale of portfolio securities, prior to the
Closing Date have not yet been delivered to it or Capital Value Fund's
custodian, then the delivery requirements of this Section 8 with respect to said
undelivered securities or cash will be waived and Capital Value Fund will
deliver to Balanced Value Fund by or on the Closing Date with respect to said
undelivered securities or cash executed copies of an agreement or agreements of
assignment in a form reasonably satisfactory to Balanced Value Fund, together
with such other documents, including a due bill or due bills and brokers'
confirmation slips as may reasonably be required by Balanced Value Fund.
9. Balanced Value Fund shall not assume the liabilities (except for
portfolio securities purchased which have not settled and for shareholder
redemption and dividend checks outstanding) of Capital Value Fund, but Capital
Value Fund will, nevertheless, use its best efforts to discharge all known
liabilities, so far as may be possible, prior to the Closing Date. The cost of
printing and mailing the proxies and proxy statements will be borne by Capital
Value Fund. Capital Value Fund and Balanced Value Fund will bear the cost of
their respective tax opinion. Any documents such as existing prospectuses or
annual reports that are included in that mailing will be a cost of the fund
issuing the document. Any other out-of-pocket expenses of Balanced Value Fund
and Capital Value Fund associated with this reorganization, including legal,
accounting and transfer agent expenses, will be borne by Capital Value Fund and
Balanced Value Fund, respectively, in the amounts so incurred by each.
10. The obligations of Balanced Value Fund hereunder shall be subject to
the following conditions:
A. The Board of Directors of Capital Value Fund shall have authorized the
execution of the Agreement, and the shareholders of Capital Value Fund shall
have approved the Agreement and the transactions contemplated hereby, and
Capital Value Fund shall have furnished to Balanced Value Fund copies of
resolutions to that effect certified by the Secretary or the Assistant Secretary
of Capital Value Fund; such shareholder approval shall have been by the
affirmative vote required by the Maryland General Corporation Law at a meeting
for which proxies have been solicited by the Proxy Statement and Prospectus (as
hereinafter defined).
B. Balanced Value Fund shall have received an opinion dated the Closing
Date of counsel to Capital Value Fund, to the effect that (i) Capital Value Fund
is a corporation duly organized, validly existing and in good standing under the
laws of the State of Maryland with full corporate powers to carry on its
business as then being conducted and to enter into and perform the Agreement
(Maryland counsel may be relied upon for this opinion); and (ii) that all action
necessary to make the Agreement, according to its terms, valid, binding and
enforceable on Capital Value Fund and to authorize effectively the transactions
contemplated by the Agreement have been taken by Capital Value Fund.
C. The representations and warranties of Capital Value Fund contained
herein shall be true and correct at and as of the Closing Date, and Balanced
Value Fund shall have been furnished with a certificate of the President, or a
Vice President, or the Secretary or the Assistant Secretary or the Treasurer of
Capital Value Fund, dated the Closing Date, to that effect.
D. On the Closing Date, Capital Value Fund shall have furnished to Balanced
Value Fund a certificate of the Treasurer or Assistant Treasurer of Capital
Value Fund as to the amount of the capital loss carry-over and net unrealized
appreciation or depreciation, if any, with respect to Capital Value Fund as of
the Closing Date.
<PAGE>
E. The Cash Reserve shall not exceed 10% of the value of the net assets,
nor 30% in value of the gross assets, of Capital Value Fund at the close of
business on the Valuation Date.
F. A Registration Statement on Form N-14 filed by Balanced Value Fund under
the Securities Act of 1933, as amended (the "1933 Act"), containing a
preliminary form of the Proxy Statement and Prospectus, shall have become
effective under the 1933 Act not later than September 15, 1999.
G. On the Closing Date, Balanced Value Fund shall have received a letter of
Andrew J. Donohue or other senior executive officer of OppenheimerFunds, Inc.
acceptable to Balanced Value Fund, stating that nothing has come to his or her
attention which in his or her judgment would indicate that as of the Closing
Date there were any material, actual or contingent liabilities of Capital Value
Fund arising out of litigation brought against Capital Value Fund or claims
asserted against it, or pending or to the best of his or her knowledge
threatened claims or litigation not reflected in or apparent from the most
recent audited financial statements and footnotes thereto of Capital Value Fund
delivered to Balanced Value Fund. Such letter may also include such additional
statements relating to the scope of the review conducted by such person and his
or her responsibilities and liabilities as are not unreasonable under the
circumstances.
H. Balanced Value Fund shall have received an opinion, dated the Closing
Date, of PricewaterhouseCoopers LLP, to the same effect as the opinion
contemplated by Section 11.E. of the Agreement.
I. Balanced Value Fund shall have received at the Closing all of the assets
of Capital Value Fund to be conveyed hereunder, which assets shall be free and
clear of all liens, encumbrances, security interests, restrictions and
limitations whatsoever.
11. The obligations of Capital Value Fund hereunder shall be subject to the
following conditions:
A. The Board of Trustees of the Trust shall have authorized the execution
of the Agreement, and the transactions contemplated thereby, and Balanced Value
Fund shall have furnished to Capital Value Fund copies of resolutions to that
effect certified by the Secretary or the Assistant Secretary of the Trust.
B. Capital Value Fund's shareholders shall have approved the Agreement and
the transactions contemplated hereby, by an affirmative vote required by the
Maryland General Corporation Law and Capital Value Fund shall have furnished
Value Fund copies of resolutions to that effect certified by the Secretary or an
Assistant Secretary of Capital Value Fund.
C. Capital Value Fund shall have received an opinion dated the Closing Date
of counsel to Balanced Value Fund, to the effect that (i) Balanced Value Fund is
a series of the Trust which is a business trust duly organized, validly existing
and in good standing under the laws of the Commonwealth of Massachusetts with
full powers to carry on its business as then being conducted and to enter into
and perform the Agreement (Massachusetts counsel may be relied upon for this
opinion); (ii) all action necessary to make the Agreement, according to its
terms, valid, binding and enforceable upon Balanced Value Fund and to authorize
effectively the transactions contemplated by the Agreement have been taken by
Balanced Value Fund, and (iii) the shares of Balanced Value Fund to be issued
hereunder are duly authorized and when issued will be validly issued, fully-paid
and non-assessable.
D. The representations and warranties of Balanced Value Fund contained
herein shall be true and correct at and as of the Closing Date, and Capital
Value Fund shall have been furnished with a certificate of the President, a Vice
President or the Secretary or the Assistant Secretary or the Treasurer of the
Trust to that effect dated the Closing Date.
E. Capital Value Fund shall have received an opinion of
PricewaterhouseCoopers LLP to the effect that the federal tax consequences of
the transaction, if carried out in the manner outlined in the Agreement and in
accordance with (i) Capital Value Fund's representation that there is no plan or
intention by any Capital Value Fund shareholder who owns 5% or more of Capital
Value Fund's outstanding shares, and, to Capital Value Fund's best knowledge,
there is no plan or intention on the part of the remaining Capital Value Fund
shareholders, to redeem, sell, exchange or otherwise dispose of a number of
Balanced Value Fund shares received in the transaction that would reduce Capital
Value Fund shareholders' ownership of Balanced Value Fund shares to a number of
shares having a value, as of the Closing Date, of less than 50% of the value of
all of the formerly outstanding Capital Value Fund shares as of the same date,
and (ii) the representation by each of Capital Value Fund and Balanced Value
Fund that, as of the Closing Date, Capital Value Fund and Balanced Value Fund
will qualify as regulated investment companies or will meet the diversification
test of Section 368(a)(2)(F)(ii) of the Code, will be as follows:
1. The transactions contemplated by the Agreement will qualify as a
tax-free "reorganization" within the meaning of Section 368(a)(1) of the Code,
and under the regulations promulgated thereunder.
2. Capital Value Fund and Balanced Value Fund will each qualify as a "party
to a reorganization" within the meaning of Section 368(b)(2) of the Code.
3. No gain or loss will be recognized by the shareholders of Capital Value
Fund upon the distribution of Class A, Class B and Class C shares of beneficial
interest in Balanced Value Fund to the shareholders of Capital Value Fund
pursuant to Section 354 of the Code.
4. Under Section 361(a) of the Code no gain or loss will be recognized by
Capital Value Fund by reason of the transfer of substantially all its assets in
exchange for Class A, Class B and Class C shares of Balanced Value Fund.
5. Under Section 1032 of the Code no gain or loss will be recognized by
Balanced Value Fund by reason of the transfer of substantially all of Capital
Value Fund's assets in exchange for Class A, Class B and Class C shares of
Balanced Value Fund and Balanced Value Fund's assumption of certain liabilities
of Capital Value Fund.
6. The shareholders of Capital Value Fund will have the same tax basis and
holding period for the Class A, Class B and Class C shares of beneficial
interest in Balanced Value Fund that they receive as they had for Capital Value
Fund shares that they previously held, pursuant to Section 358(a) and 1223(1),
respectively, of the Code.
7. The securities transferred by Capital Value Fund to Balanced Value Fund
will have the same tax basis and holding period in the hands of Balanced Value
Fund as they had for Capital Value Fund, pursuant to Section 362(b) and 1223(1),
respectively, of the Code.
F. The Cash Reserve shall not exceed 10% of the value of the net assets,
nor 30% in value of the gross assets, of Capital Value Fund at the close of
business on the Valuation Date.
G. A Registration Statement on Form N-14 filed by Balanced Value Fund under
the 1933 Act, containing a preliminary form of the Proxy Statement and
Prospectus, shall have become effective under the 1933 Act not later than
September 15, 1999.
H. On the Closing Date, Capital Value Fund shall have received a letter of
Andrew J. Donohue or other senior executive officer of OppenheimerFunds, Inc.
acceptable to Capital Value Fund, stating that nothing has come to his or her
attention which in his or her judgment would indicate that as of the Closing
Date there were any material, actual or contingent liabilities of Balanced Value
Fund arising out of litigation brought against Balanced Value Fund or claims
asserted against it, or pending or, to the best of his or her knowledge,
threatened claims or litigation not reflected in or apparent by the most recent
audited financial statements and footnotes thereto of Balanced Value Fund
delivered to Capital Value Fund. Such letter may also include such additional
statements relating to the scope of the review conducted by such person and his
or her responsibilities and liabilities as are not unreasonable under the
circumstances.
I. Capital Value Fund shall acknowledge receipt of the Class A, Class B and
Class C shares of Balanced Value Fund.
12. Capital Value Fund hereby represents and warrants that:
A. The financial statements of Capital Value Fund as at October 31, 1998
(audited) heretofore furnished to Balanced Value Fund, present fairly the
financial position, results of operations, and changes in net assets of Capital
Value Fund as of that date, in conformity with generally accepted accounting
principles applied on a basis consistent with the preceding year; and that from
October 31, 1998 through the date hereof there have not been, and through the
Closing Date there will not be, any material adverse change in the business or
financial condition of Capital Value Fund, it being agreed that a decrease in
the size of Capital Value Fund due to a diminution in the value of its portfolio
and/or redemption of its shares shall not be considered a material adverse
change;
B. Contingent upon approval of the Agreement and the transactions
contemplated thereby by Capital Value Fund's shareholders, Capital Value Fund
has authority to transfer all of the assets of Capital Value Fund to be conveyed
hereunder free and clear of all liens, encumbrances, security interests,
restrictions and limitations whatsoever;
<PAGE>
C. The Prospectus, as amended and supplemented, contained in Capital Value
Fund's Registration Statement under the 1933 Act, as amended, is true, correct
and complete, conforms to the requirements of the 1933 Act and does not contain
any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading. The Registration Statement, as amended, was, as of the date of the
filing of the last Post-Effective Amendment, true, correct and complete,
conformed to the requirements of the 1933 Act and did not contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein not misleading;
D. There is no material contingent liability of Capital Value Fund and no
material claim and no material legal, administrative or other proceedings
pending or, to the knowledge of Capital Value Fund, threatened against Capital
Value Fund, not reflected in such Prospectus;
E. Except for the Agreement, there are no material contracts outstanding to
which Capital Value Fund is a party other than those ordinary in the conduct of
its business;
F. Capital Value Fund is a Maryland corporation duly organized, validly
existing and in good standing under the laws of the State of Maryland; and has
all necessary and material Federal and state authorizations to own all of its
assets and to carry on its business as now being conducted; and Capital Value
Fund is duly registered under the Act and such registration has not been
rescinded or revoked and is in full force and effect;
G. All Federal and other tax returns and reports of Capital Value Fund
required by law to be filed have been filed, and all federal and other taxes
shown due on said returns and reports have been paid or provision shall have
been made for the payment thereof and to the best of the knowledge of Capital
Value Fund no such return is currently under audit and no assessment has been
asserted with respect to such returns and to the extent such tax returns with
respect to the taxable year of Capital Value Fund ended October 31, 1998 have
not been filed, such returns will be filed when required and the amount of tax
shown as due thereon shall be paid when due; and
H. Capital Value Fund has elected to be treated as a regulated investment
company and, for each fiscal year of its operations, Capital Value Fund has met
the requirements of Subchapter M of the Code for qualification and treatment as
a regulated investment company and Capital Value Fund intends to meet such
requirements with respect to its current taxable year.
13. Balanced Value Fund hereby represents and warrants that:
A. The financial statements of Balanced Value Fund as at October 31, 1998
(audited) heretofore furnished to Capital Value Fund, present fairly the
financial position, results of operations, and changes in net assets of Balanced
Value Fund, as of that date, in conformity with generally accepted accounting
principles applied on a basis consistent with the preceding year; and that from
October 31, 1998 through the date hereof there have not been, and through the
Closing Date there will not be, any material adverse changes in the business or
financial condition of Balanced Value Fund, it being understood that a decrease
in the size of Balanced Value Fund due to a diminution in the value of its
portfolio and/or redemption of its shares shall not be considered a material or
adverse change;
<PAGE>
B. The Prospectus, as amended and supplemented, contained in Balanced Value
Fund's Registration Statement under the 1933 Act, is true, correct and complete,
conforms to the requirements of the 1933 Act and does not contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein not misleading. The
Registration Statement, as amended, was, as of the date of the filing of the
last Post-Effective Amendment, true, correct and complete, conformed to the
requirements of the 1933 Act and did not contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading;
C. Except for this Agreement, there is no material contingent liability of
Balanced Value Fund and no material claim and no material legal, administrative
or other proceedings pending or, to the knowledge of Balanced Value Fund,
threatened against Balanced Value Fund, not reflected in such Prospectus;
D. There are no material contracts outstanding to which Balanced Value Fund
is a party other than those ordinary in the conduct of its business;
E. Balanced Value Fund is a series of the Trust which is a business trust
duly organized, validly existing and in good standing under the laws of the
Commonwealth of Massachusetts; Balanced Value Fund has all necessary and
material Federal and state authorizations to own all its properties and assets
and to carry on its business as now being conducted; the Class A, Class B and
Class C shares of Balanced Value Fund which it issues to Capital Value Fund
pursuant to the Agreement will be duly authorized, validly issued, fully-paid
and non-assessable, will conform to the description thereof contained in
Balanced Value Fund's Registration Statement and will be duly registered under
the 1933 Act and in the states where registration is required; and Balanced
Value Fund is duly registered under the Act and such registration has not been
revoked or rescinded and is in full force and effect;
F. All federal and other tax returns and reports of Balanced Value Fund
required by law to be filed have been filed, and all federal and other taxes
shown due on said returns and reports have been paid or provision shall have
been made for the payment thereof and to the best of the knowledge of Balanced
Value Fund no such return is currently under audit and no assessment has been
asserted with respect to such returns and to the extent such tax returns with
respect to the taxable year of Balanced Value Fund ended October 31, 1998 have
not been filed, such returns will be filed when required and the amount of tax
shown as due thereon shall be paid when due;
G. Balanced Value Fund has elected to be treated as a regulated investment
company and, for each fiscal year of its operations, Balanced Value Fund has met
the requirements of Subchapter M of the Code for qualification and treatment as
a regulated investment company and Balanced Value Fund intends to meet such
requirements with respect to its current taxable year;
H. Balanced Value Fund has no plan or intention (i) to dispose of any of
the assets transferred by Capital Value Fund, other than in the ordinary course
of business, or (ii) to redeem or reacquire any of the Class A, Class B and
Class C shares issued by it in the reorganization other than pursuant to valid
requests of shareholders; and
I. After consummation of the transactions contemplated by the Agreement,
Balanced Value Fund intends to operate its business in a substantially unchanged
manner.
14. Each party hereby represents to the other that no broker or finder has
been employed by it with respect to the Agreement or the transactions
contemplated hereby. Each party also represents and warrants to the other that
the information concerning it in the Proxy Statement and Prospectus will not as
of its date contain any untrue statement of a material fact or omit to state a
fact necessary to make the statements concerning it therein not misleading and
that the financial statements concerning it will present the information shown
fairly in accordance with generally accepted accounting principles applied on a
basis consistent with the preceding year. Each party also represents and
warrants to the other that the Agreement is valid, binding and enforceable in
accordance with its terms and that the execution, delivery and performance of
the Agreement will not result in any violation of, or be in conflict with, any
provision of any charter, by-laws, contract, agreement, judgment, decree or
order to which it is subject or to which it is a party. Balanced Value Fund
hereby represents to and covenants with Capital Value Fund that, if the
reorganization becomes effective, Balanced Value Fund will treat each
shareholder of Capital Value Fund who received any of Balanced Value Fund's
shares as a result of the reorganization as having made the minimum initial
purchase of shares of Balanced Value Fund received by such shareholder for the
purpose of making additional investments in shares of Balanced Value Fund,
regardless of the value of the shares of Balanced Value Fund received.
15. Balanced Value Fund agrees that it will prepare and file a Registration
Statement on Form N-14 under the 1933 Act which shall contain a preliminary form
of proxy statement and prospectus contemplated by Rule 145 under the 1933 Act.
The final form of such proxy statement and prospectus is referred to in the
Agreement as the "Proxy Statement and Prospectus." Each party agrees that it
will use its best efforts to have such Registration Statement declared effective
and to supply such information concerning itself for inclusion in the Proxy
Statement and Prospectus as may be necessary or desirable in this connection.
Capital Value Fund covenants and agrees to deregister as an investment company
under the Act as soon as practicable to the extent required, and, upon Closing,
to cause the cancellation of its outstanding shares.
16. The obligations of the parties under the Agreement shall be subject to
the right of either party to abandon and terminate the Agreement without
liability if the other party breaches any material provision of the Agreement or
if any material legal, administrative or other proceeding shall be instituted or
threatened between the date of the Agreement and the Closing Date (i) seeking to
restrain or otherwise prohibit the transactions contemplated hereby and/or (ii)
asserting a material liability of either party, which proceeding has not been
terminated or the threat thereof removed prior to the Closing Date.
17. The Agreement may be executed in several counterparts, each of which
shall be deemed an original, but all taken together shall constitute one
Agreement. The rights and obligations of each party pursuant to the Agreement
shall not be assignable.
18. All prior or contemporaneous agreements and representations are merged
into the Agreement, which constitutes the entire contract between the parties
hereto. No amendment or modification hereof shall be of any force and effect
unless in writing and signed by the parties and no party shall be deemed to have
waived any provision herein for its benefit unless it executes a written
acknowledgment of such waiver.
19. Balanced Value Fund understands that the obligations of Capital Value
Fund under the Agreement are not binding upon any Director or shareholder of
Capital Valued Fund personally, but bind only Capital Value Fund and Capital
Value Fund's property.
20. Capital Value Fund understands that the obligations of Balanced Value
Fund under the Agreement are not binding upon any trustee or shareholder of
Balanced Value Fund personally, but bind only Balanced Value Fund and Balanced
Value Fund's property. Capital Value Fund represents that it has notice of the
provisions of the Declaration of Trust of the Trust with respect to Balanced
Value Fund disclaiming shareholder and trustee liability for acts or obligations
of Balanced Value Fund.
IN WITNESS WHEREOF, each of the parties has caused the Agreement to be
executed and attested by its officers thereunto duly authorized on the date
first set forth above.
OPPENHEIMER QUEST CAPITAL VALUE FUND, INC.
By: /s/ Andrew J. Donohue
Andrew Donohue
Secretary
OPPENHEIMER QUEST FOR VALUE FUNDS
on behalf of
OPPENHEIMER QUEST BALANCED VALUE FUND
By: /s/ Andrew J. Donohue
Andrew J. Donohue
Secretary
<PAGE>
EXHIBIT B
Average Annual Total Returns
For the Periods Ended 6/30/99
1-Year 3-Year 5-Year
10-Year/Life
Capital Value Fund Class A Shares 2.62% 11.53% 15.77% 15.37%
Balanced Value Fund Class A Shares 27.00 25.79 22.70 17.90
Capital Value Fund Class B Shares 3.22 n/a n/a 15.09%
Balanced Value Fund Class B Shares 29.01 26.93 23.26 20.65
Capital Value Fund Class C Shares 7.19 n/a n/a 16.07%
Balanced Value Fund Class C Shares 32.96 27.53 23.31 20.64
Total returns include change in share price and reinvestment of dividends and
capital gains distributions in a hypothetical investment for the periods shown.
An explanation of the different performance calculations is set forth in each
fund's Prospectus.
Each fund's average annual total return includes the applicable sales charge for
Class A, B and C shares: for Class A, the current maximum initial sales charge
of 5.75%; for Class B, the contingent deferred sales charges of 5% (1 year), 3%
(3 year), 2% (5 year) and 1% (life of the class); and for Class C, the 1%
contingent deferred sales charge for the 1-year period. The inception date for
Class A shares of Capital Value Fund and Balanced Value Fund was February 13,
1987 and November 1, 1991, respectively. The inception date for Class B and
Class C shares for Capital Value Fund was March 3, 1997 and for Balanced Value
Fund was September 1, 1993.
Capital Value Fund commenced operations on 2/13/87 as a closed-end investment
company with two classes of shares, income shares and capital shares. Capital
shares were entitled to all gains and losses but bore no expenses. Income shares
bore all of the fund's operating expenses. Capital Value Fund redeemed its
income shares and converted to an open-end fund on 3/3/97. The capital shares
were designated as Class A shares, which bear their allocable share of fund
expenses. Returns for Class A shares of Capital Value Fund reflect the
historical performance of the fund's previous capital shares as adjusted for the
fees and expenses of Class A in effect on 3/3/97 (without giving effect to any
fee waivers). Returns for periods after 3/3/97 are net of the Manager's and
Distributor's waiver of certain fees, described in "Comparative Fee Tables".
OPPENHEIMER QUEST FOR VALUE FUNDS
Two World Trade Center, New York, New York 10048
1-800-525-7048
PART B
STATEMENT OF ADDITIONAL INFORMATION
September 13, 1999
-----------------------------------
This Statement of Additional Information of Oppenheimer Quest For Value
Funds, on behalf of Oppenheimer Quest Balanced Value Fund, consists of this
cover page and the following documents:
1. Statement of Additional Information of Oppenheimer Quest Balanced Value
Fund dated February 19,1999, revised as of May 1, 1999 *
2. Prospectus of Oppenheimer Quest Capital Value Fund, Inc. dated February
26, 1999 *
3. Statement of Additional Information of Oppenheimer Quest Capital Value
Fund, Inc. dated February 26, 1999, revised as of May 1,1999 *
4. Annual Report of Oppenheimer Quest Balanced Value Fund as of October
31, 1998 *
5. Annual Report of Oppenheimer Quest Capital Value Fund, Inc. as of October
31, 1998 *
6. Semi-Annual Report of Oppenheimer Quest Balanced Value Fund as of April
30, 1999 *
7. Semi-Annual Report of Oppenheimer Quest Capital Value Fund, Inc. as of
April 30, 1999*
8. Pro Forma Financial Statements for the 12-month period ended April 30, 1999.
- -------------------------------
* Incorporated by reference from the initial Registration Statement of the
Registrant (Reg. No.: 333-84697) on Form N-14 filed with the Securities and
Exchange Commission on August 6, 1999
This Statement of Additional Information is not a Prospectus. This
Statement of Additional Information should be read in conjunction with the Proxy
Statement and Prospectus, which may be obtained by written request to
OppenheimerFunds Services ("OFS"), P.O. Box 5270, Denver, Colorado 80217, or by
calling OFS at the toll-free number shown above.
FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
The following are pro forma
financial statements which
give effect to the proposed
transaction whereby
substantially all the assets
of Oppenheimer Quest Capital
Value Fund, Inc. will be
exchanged for shares
of Oppenheimer Quest Balanced
Value Fund. Immediately
thereafter, the shares of
Oppenheimer Quest
Balanced Value Fund Class A, B
and C will be distributed to
the Class A, B and C
shareholders of
Oppenheimer Quest Capital
Value Fund, Inc.,
respectively, in a total
liquidation of Oppenheimer
Quest Capital Value Fund,
Inc. The following pro forma
financial statements include a
pro forma
Statement of Investments at
April 30, 1999, a pro forma
Statement of Assets and
Liabilities at April 30,
1999 and a pro forma Statement
of Operations for the year
ended April 30, 1999.
Pro Forma Combining Statements
of Assets and Liabilities
April 30, 1999 (Unaudited)
Oppenheimer Quest Funds -
Oppenheimer Quest Balanced
Value Fund and Oppenheimer
Quest Capital Value Fund, Inc.
<TABLE>
<S> <C> <C> <C> <C>
Pro Forma
Oppenheimer Oppenheimer Combined
Quest Balanced Quest Capital ProForma Oppenheimer Quest
Value Value
Fund Fund, Inc. (1) Adjustments Balanced Value
Fund
--------------------------------------------------------------------------------
ASSETS:
Investments, at value (cost * ) $849,337,271 $287,575,009 $1,136,912,280
Cash 186,565 106,216 292,781
Receivables:
Shares of beneficial 15,271,504 368,539 15,640,043
interest or capital stock sold
Interest and dividends 5,670,108 160,103 5,830,211
Other 7,069 13,010 20,079
--------------------------------------------------------------------------------
Total assets 870,472,517 288,222,877 - 1,158,695,394
--------------------------------------------------------------------------------
LIABILITIES: .
Payables and other liabilities:
Shares of beneficial 894,494 623,693 1,518,187
interest or capital stock
redeemed
Investments purchased 1,277,931 - 1,277,931
Redemption of Income - 498,320 498,320
Certificates
Distributions and service 159,703 60,164 219,867
plan fees
Shareholder reports 68,258 - 68,258
Transfer and shareholder 35,133 24,944 60,077
servicing agent fees
Trustee and Directors' 11,620 17,018 28,638
compensation
Custodian fees - 1,976 1,976
Other 81,313 63,382 144,695
--------------------------------------------------------------------------------
Total liabilities 2,528,452 1,289,497 - 3,817,949
--------------------------------------------------------------------------------
NET ASSETS $867,944,065 $286,933,380 $0 $1,154,877,445
================================================================================
COMPOSITION OF NET ASSETS:
Par value of shares of $533,177 $816 $533,993
beneficial interest or capital
stock
Additional paid-in capital 778,684,001 160,402,775 939,086,776
Undistributed net investment 1,755,363 47,174 1,802,537
income
Accumulated net realized gain 28,472,555 28,232,893 56,705,448
on investment transactions
Net unrealized appreciation on 58,498,969 98,249,722 156,748,691
investments
--------------------------------------------------------------------------------
NET ASSETS $867,944,065 $286,933,380 $0 $1,154,877,445
================================================================================
Pro Forma Combining Statements
of Assets and Liabilities
April 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------------
Pro Forma
___________ ___________ Combined
ProForma Oppenheimer Quest
-------------------------------------
_____ ______________ Adjustments Balanced Value
Fund
--------------------------------------------------------------------------------
Net Asset Value and Redemption
Price Per Share
Class A Shares:
Net asset value and redemption
price per share (based on net
assets of $420,269,227,
$267,289,307, and
$687,558,534, and 25,716,338,
7,595,606 and 42,074,313
shares of
beneficial interest
outstanding for Oppenheimer
Quest Balanced Value Fund,
Oppenheimer
Quest Capital Value Fund, Inc. $16.34 $35.19 $16.34
and Combined Oppenheimer Quest
Balanced Value Fund,
respectively)
Maximum offering price per
share (net asset value plus
sales charge of 5.75%
of offering price) $17.34 $37.34 $17.34
Class B Shares:
Net asset value, redemption
price (excludes applicable
contingent deferred sales
charge) and
offering price per share
(based on net assets of
$322,232,730, $15,279,143 and
$337,511,873 and
19,864,869, 440,741 and
20,806,863 shares of
beneficial interest
outstanding for Oppenheimer
Quest Balanced Value Fund,
Oppenheimer Quest Capital
Value Fund, Inc. and Combined
Oppenheimer Quest Balanced $16.22 $34.67 $16.22
Value Fund, respectively)
Class C Shares:
Net asset value, redemption
price (excludes applicable
contingent deferred sales
charge) and
offering price per share
(based on net assets of
$125,442,108, $4,364,930 and
$129,807,038 and
7,736,499, 125,826 and
8,005,773 shares of beneficial
interest outstanding for
Oppenheimer
Quest Balanced Value Fund,
Oppenheimer Quest Capital
Value Fund, Inc. and Combined
Oppenheimer Quest Balanced $16.21 $34.69 $16.21
Value Fund, respectively)
*Cost $790,838,302 $189,325,287 $980,163,589
(1) Oppenheimer Quest Capital
Value Fund, Inc. Class A
shares will be exchanged for Oppenheimer Quest Balanced Value Fund Class A
shares.
Oppenheimer Quest
Capital Value Fund, Inc. Class
B shares will be exchanged for
Oppenheimer Quest Balanced
Value Fund Class B shares.
Oppenheimer Quest
Capital Value Fund, Inc. Class
C shares will be exchanged for
Oppenheimer Quest Balanced
Value Fund Class C shares.
Pro Forma Combining Statements
of Operations For The Year
Ended April 30, 1999
(Unaudited)
- --------------------------------------------------------------------------------------------------------------
Pro Forma
___________ ___________ Combined
ProForma Oppenheimer Quest
-------------------------------------
_____ Fund, Inc. Adjustments Balanced Value
Fund
--------------------------------------------------------------------------------
INVESTMENT INCOME:
Interest $8,955,398 $2,204,284 $11,159,682
Dividends (net of foreign 2,616,995 1,926,273 4,543,268
withholding of $16,344,
$108,530 and $124,874)
--------------------------------------------------------------------------------
Total income 11,572,393 4,130,557 - 15,702,950
--------------------------------------------------------------------------------
EXPENSES:
Management fees 2,741,704 2,817,971 (406,630) 5,153,045
(1)
Distributionand service plan fees:
Class A 731,212 1,345,315 (265,941) 1,810,586
(2)
Class B 1,013,988 97,296 1,111,284
Class C 383,506 30,033 413,539
Transfer and shareholder 383,216 272,448 655,664
servicing agent fees
Custodian fees and expenses 17,643 5,393 23,036
Legal, auditing and other 18,475 26,387 (26,387) 18,475
professional fees (3)
Shareholder reports 161,532 95,472 (70,804) 186,200
(3)
Trustee and Directors' 27,107 33,380 (33,380) 27,107
compensation (3)
Registration and filing fees: 224,100 - 224,100
Class A 62,635 62,635
Class B 8,939 8,939
Class C - 2,645 2,645
Other 82,619 31,588 114,207
--------------------------------------------------------------------------------
Total expenses 5,785,102 4,829,502 (803,142) 9,811,462
--------------------------------------------------------------------------------
Less expenses paid indirectly (3,517) (908) - (4,425)
--------------------------------------------------------------------------------
Less reimbursement of expenses - (856,390) 856,390 -
by OppenheimerFunds, Inc. (4)
--------------------------------------------------------------------------------
Net expenses 5,781,585 3,972,204 53,248 9,807,037
--------------------------------------------------------------------------------
NET INVESTMENT INCOME 5,790,808 158,353 (53,248) 5,895,913
--------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN:
Net realized gain on 43,293,294 15,356,518 58,649,812
investments
Net change in unrealized 42,145,190 12,437,949 54,583,139
appreciation or depreciation
on investments
--------------------------------------------------------------------------------
Net realized and unrealized 85,438,484 27,794,467 - 113,232,951
gain
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS $91,229,292 $27,952,820 ($53,248) $119,128,864
================================================================================
(1) Calculated in accordance
with the investment advisory
agreement of Oppenheimer Quest
Balanced Value Fund (0.85% of
average annual net assets).
This assumes that the
management fee structure had
been in place for the entire
period.
(2) Calculated in accordance
with the Distribution and
Service Plan for Class A
shares of Oppenheimer Quest
Balanced Value Fund (0.40% of
average annual
net assets). This
assumes that the Distribution
and Service Plan for Class A
shares had been in place for
the entire period.
(3) Elimination of duplicate expense.
(4) Expense reimbursement is
not in effect for Oppenheimer
Quest Balanced Value Fund
Notes to Pro Forma Financial
Statements (Unaudited)
Oppenheimer Quest Balanced
Value Fund, "the Fund," has an
investment advisory agreement
with OppenheimerFunds, Inc.
(the Manager). The Manager has
entered into a sub-advisory
agreement with OpCap
Advisors. The Manager pays
OpCap Advisors (the
Sub-Advisor) a monthly fee
based on the fee schedule
set forth in the Prospectus.
Management fees paid to the
Manager were in accordance
with the investment advisory
agreement with the Fund, which
provides for a fee of 0.85% of
average
annual net assets. The Fund's
management fee for the year
ended April 30, 1999 was 0.85%
of average annual net assets
for each class of shares.
OppenheimerFunds Services
(OFS), a division of the
Manager, is the transfer and
shareholder servicing agent
for the Fund and other
Oppenheimer funds. The
Fund pays OFS an annual
maintenance fee of $20.00 for
each Fund shareholder account
and reimburses OFS for its
out-of-pocket expenses.
Expenses paid indirectly
represent a reduction of
custodian fees for earnings on
cash balances maintained by
the Fund.
The Fund has adopted a
Distribution and Service Plan
for Class A shares to
compensate OppenheimerFunds
Distributor, Inc. (OFDI) for a
portion of its costs
incurred in connection with
the personal service and
maintenance of shareholder
accounts that hold Class A
shares. Under the Plan, the
Fund pays an annual
asset-based sales charge to
OFDI of 0.15% per year on
Class A shares. The Fund also
pays a service fee to OFDI of
0.25% per year. Each fee is
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.
The Fund has adopted
Distribution and Service Plans
for Class B and Class C shares
to compensate OFDI for its
cost 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 for
its services rendered in
distributing Class B and Class
C shares. OFDI also receives
a service fee of 0.25% per
year to compensate dealers for
providing
personal services for accounts
that hold Class B and Class C
shares. Each fee is computed
on the average annual net
assets of Class B or Class C
shares,
determined as of the close of
each regular business day.
The expense adjustments do not
include the one time cost of
the reorganization that is
being borne by Oppenheimer
Quest Balanced Value Fund and
Oppenheimer Quest Capital
Value Fund, Inc.
</TABLE>
