OPPENHEIMER QUEST GLOBAL VALUE FUND, INC.
Two World Trade Center, New York, New York 10048
1-800-525-7048
Statement of Additional Information dated March 21, 1997
This Statement of Additional Information of Oppenheimer Quest
Global Value Fund, Inc. is not a Prospectus. This document
contains additional information about the Fund and supplements
information in the Prospectus dated March 21, 1997. It should be
read together with the Prospectus, which may be obtained upon
written request to the Fund's Transfer Agent, OppenheimerFunds
Services, at P.O. Box 5270, Denver, Colorado 80217, or by calling
the Transfer Agent at the toll-free number shown above.
Contents
Page
About the Fund
Investment Objective and Policies. . . . . . . . . . . . .
Investment Policies and Strategies . . . . . . . . . . .
Other Investment Techniques and Strategies . . . . . .
Other Investment Restrictions. . . . . . . . . . . . .
How the Fund is Managed . . . . . . . . . . . . . . . .
Organization and History . . . . . . . . . . . . . . .
Directors and Officers of the Fund . . . . . . . . . .
The Manager and Its Affiliates . . . . . . . . . . . .
Brokerage Policies of the Fund . . . . . . . . . . . . .
Performance of the Fund. . . . . . . . . . . . . . . . .
Distribution and Service Plans . . . . . . . . . . . . .
About Your Account
How To Buy Shares. . . . . . . . . . . . . . . . . . . .
How To Sell Shares . . . . . . . . . . . . . . . . . . .
How To Exchange Shares . . . . . . . . . . . . . . . . .
Dividends, Capital Gains and Taxes . . . . . . . . . . .
Additional Information About the Fund. . . . . . . . . .
Financial Information About the Fund
Independent Auditors' Report . . . . . . . . . . . . . .
Financial Statements . . . . . . . . . . . . . . . . . .
Appendix A: Description of Ratings . . . . . . . . . . A-1
Appendix B: Corporate Industry Classifications . . . . B-1
<PAGE>
ABOUT THE FUND
Investment Objective and Policies
Investment Policies and Strategies. The investment objective and
policies of the Fund are described in the Prospectus. Set forth
below is supplemental information about those policies and the
types of securities in which the Fund may invest, as well as the
strategies the Fund may use to try to achieve its objective.
Capitalized terms used in this Statement of Additional Information
have the same meaning as those terms have in the Prospectus.
Foreign Securities. As noted in the Prospectus the Fund may
invest in securities (which may be denominated in U.S. dollars or
non-U.S. currencies) issued or guaranteed by foreign corporations,
certain supranational entities (described below) and foreign
governments or their agencies or instrumentalities, and in
securities issued by U.S. corporations denominated in non-U.S.
currencies. All such securities are considered "foreign
securities."
Investing in foreign securities offers the Fund potential
benefits not available from investing solely in securities of
domestic issuers, including the opportunity to invest in foreign
issuers that appear to offer growth potential, or in foreign
countries with economic policies or business cycles different from
those of the U.S., or to reduce fluctuations in portfolio value by
taking advantage of foreign stock markets that do not move in a
manner parallel to U.S. markets. If the Fund's portfolio securities
are held abroad, the countries in which such securities may be held
and the sub-custodians or depositories holding them must be
approved by the Corporation's Board of Directors to the extent that
approval is required under applicable rules of the Securities and
Exchange Commission. In buying foreign securities, the Fund may
convert U.S. dollars into foreign currency, but only to effect
securities transactions on foreign securities exchanges and not to
hold such foreign currency as an investment.
Risks of Foreign Investing. Investing in foreign securities
involves special additional risks and considerations not typically
associated with investing in securities of issuers traded in the
U.S. These include reduction of income by foreign taxes;
fluctuation in value of foreign portfolio investments due to
changes in currency rates and control regulations (e.g., currency
blockage); transaction charges for currency exchange; lack of
public information about foreign issuers; lack of uniform
accounting, auditing and financial reporting standards comparable
to those applicable to domestic issuers; less volume on foreign
exchanges than on U.S. exchanges; greater volatility and less
liquidity on foreign markets than in the U.S.; less regulation of
foreign issuers, stock exchanges and brokers than in the U.S.;
greater difficulties in commencing lawsuits and obtaining judgments
in foreign courts; higher brokerage commission rates than in the
U.S.; increased risks of delays in settlement of portfolio
transactions or loss of certificates for portfolio securities;
possibilities in some countries of expropriation or nationalization
of assets, confiscatory taxation, political, financial or social
instability or adverse diplomatic developments; and unfavorable
differences between the U.S. economy and foreign economies. In the
past, U.S. Government policies have discouraged certain investments
abroad by U.S. investors, through taxation or other restrictions,
and it is possible that such restrictions could be re-imposed.
Brady Bonds. The Fund may invest in U.S. dollar-denominated,
collateralized "Brady Bonds." These debt obligations of foreign
entities may be fixed-rate par bonds or floating- rate discount
bonds and are generally collateralized in full as to principal due
at maturity by U.S. Treasury zero coupon obligations that have the
same maturity as the Brady Bonds. Brady Bonds are often viewed as
having three or four valuation components: (i) the collateralized
repayment of principal at final maturity; (ii) the collateralized
interest payments; (iii) the uncollateralized interest payments;
and (iv) any uncollateralized repayment of principal at maturity
(these uncollateralized amounts constitute the "residual risk").
In the event of a default with respect to collateralized Brady
Bonds as a result of which the payment obligations of the issuer
are accelerated, the zero coupon Treasury securities held as
collateral for the payment of principal will not be distributed to
investors, nor will such obligations be sold and the proceeds
distributed. The collateral will be held by the collateral agent
to the scheduled maturity of the defaulted Brady Bonds, which will
continue to be outstanding, at which time the face amount of the
collateral will equal the principal payments which would have then
been due on the Brady Bonds in the normal course. In addition, in
light of the residual risk of Brady Bonds and, among other factors,
the history of defaults with respect to commercial bank loans to
public and private entities of countries issuing Brady Bonds,
investments in Brady Bonds are to be viewed as speculative.
Sovereign Debt Obligations. The Fund may purchase sovereign
debt instruments issued or guaranteed by foreign governments or
their agencies, including those located in emerging market
countries. Sovereign debt may be in the form of conventional
securities or other types of debt instruments such as loans or loan
participations. Sovereign debt of emerging market countries may
involve a high degree of risk and may be in default or present the
risk of default. Certain emerging market countries have
historically experienced, and may continue to experience, high
inflation and interest rates, large fluctuations in exchange rates,
large amounts of external debt, trade difficulties and extreme
poverty and unemployment. Governmental entities responsible for
repayment of the debt may be unable or unwilling to repay principal
and interest when due. In the event of a default, the Fund may have
limited legal recourse against the issuer or guarantor. Remedies
must in some cases be pursued in the courts of the defaulting party
itself and the ability of holders of foreign government debt
securities to obtain recourse may depend on the political climate
in the relevant country. No assurance can be given that the holders
of commercial bank debt will not contest payments to holders of
other sovereign debt obligations in the event of a default under
their commercial bank loan agreements.
Emerging Market Countries. The Fund may invest in emerging
market countries. Certain developing countries may have relatively
unstable governments, economies based on only a few industries that
are dependent upon international trade and reduced secondary market
liquidity. Foreign investment in certain emerging market countries
is restricted or controlled in varying degrees. In the past,
securities in these countries have experienced greater price
movement, both positive and negative, than securities of companies
located in developed countries. Lower-rated high-yielding emerging
market securities may be considered to have speculative elements.
Special Risks of Emerging Market Countries. Investments in
emerging market countries may involve further risks in addition to
those identified above for investments in foreign securities.
Securities issued by emerging market countries and companies
located in those countries may be subject to extended settlement
periods, whereby the Fund might not receive principal and/or income
on a timely basis and its net asset value could be affected. There
may be a lack of liquidity for emerging market securities; interest
rates and foreign currency exchange rates may be more volatile;
sovereign limitations on foreign investments may be more likely to
be imposed; there may be significant balance of payment deficits;
and their economies and markets may respond in a more volatile
manner to economic changes than those in developed countries.
U.S. Government Securities. Obligations of U.S. Government
agencies or instrumentalities (including mortgage-backed
securities) may or may not be guaranteed or supported by the "full
faith and credit" of the United States. Some are backed by the
right of the issuer to borrow from the U.S. Treasury; others, by
discretionary authority of the U.S. Government to purchase the
agencies' obligations; while others are supported only by the
credit of the instrumentality. All U.S. Treasury obligations are
backed by the full faith and credit of the United States. If the
securities are not backed by the full faith and credit of the
United States, the owner of the securities must look principally to
the agency issuing the obligation for repayment and may not be able
to assert a claim against the United States in the event that the
agency or instrumentality does not meet its commitment. The Fund
will invest in U.S. Government securities of such agencies and
instrumentalities only when the Manager is satisfied that the
credit risk with respect to such instrumentality is minimal.
Money Market Securities. As stated in the Prospectus, the
Fund typically invests a part of its assets in money market
securities, and may invest up to 100% of its total assets in money
market securities for temporary defensive purposes. Money market
securities in which the Fund may invest include the following:
Time Deposits and Variable Rate Notes. The Fund may invest
in fixed time deposits, whether or not subject to withdrawal
penalties. However, investment in such deposits which are subject
to withdrawal penalties, other than overnight deposits, are subject
to the 15% limit on illiquid investments set forth in the
Prospectus for the Fund.
The commercial paper obligations which the Fund may buy are
unsecured and may include variable rate notes. The nature and
terms of a variable rate note (i.e., a "Master Note") permit the
Fund to invest fluctuating amounts at varying rates of interest
pursuant to a direct arrangement between the Fund as lender, and
the issuer, as borrower. It permits daily changes in the amounts
borrowed. The Fund has the right at any time to increase, up to
the full amount stated in the note agreement, or to decrease the
amount outstanding under the note. The issuer may prepay at any
time and without penalty any part or the full amount of the note.
The note may or may not be backed by one or more bank letters of
credit. Because these notes are direct lending arrangements
between the Fund and the issuer, it is not generally contemplated
that they will be traded; moreover, there is currently no secondary
market for them. Except as specifically provided in the Prospectus
for the Fund, there is no limitation on the type of issuer from
whom these notes will be purchased. However, in connection with
such purchase and on an ongoing basis, OpCap Advisors (the "Sub-
Adviser") will consider the earning power, cash flow and other
liquidity ratios of the issuer, and its ability to pay principal
and interest on demand, including a situation in which all holders
of such notes made demand simultaneously. The Fund will not invest
more than 5% of its total assets in variable rate notes. Variable
rate notes are subject to the Fund's investment restriction on
illiquid securities unless such notes can be put back to the issuer
on demand within seven days.
Insured Bank Obligations. The Federal Deposit Insurance
Corporation ("FDIC") insures the deposits of federally insured
banks and savings and loan associations (collectively referred to
as "banks") up to $100,000. The Fund may, within the limits set
forth in the Prospectus, purchase bank obligations which are fully
insured as to principal by the FDIC. Currently, to remain fully
insured as to principal, these investments must be limited to
$100,000 per bank. If the principal amount and accrued interest
together exceed $100,000, the excess principal and accrued interest
will not be insured. Insured bank obligations may have limited
marketability. Unless the Board of Directors determines that a
readily available market exists for such obligations, the Fund will
treat such obligations as subject to the 15% limit for illiquid
investments set forth in the Prospectus for the Fund unless such
obligations are payable at principal amount plus accrued interest
on demand or within seven days after demand.
Convertible Securities. The Fund may invest in fixed-
income securities which are convertible into common stock.
Convertible securities rank senior to common stocks in a
corporation's capital structure and, therefore, entail less risk
than the corporation's common stock. The value of a convertible
security is a function of its "investment value" (its value as if
it did not have a conversion privilege), and its "conversion value"
(the security's worth if it were to be exchanged for the underlying
security, at market value, pursuant to its conversion privilege).
To the extent that a convertible security's investment value
is greater than its conversion value, its price will be primarily
a reflection of such investment value and its price will be likely
to increase when interest rates fall and decrease when interest
rates rise, as with a fixed-income security (the credit standing of
the issuer and other factors may also have an effect on the
convertible security's value). If the conversion value exceeds the
investment value, the price of the convertible security will rise
above its investment value and, in addition, will sell at some
premium over its conversion value. (This premium represents the
price investors are willing to pay for the privilege of purchasing
a fixed-income security with a possibility of capital appreciation
due to the conversion privilege.) At such times the price of the
convertible security will tend to fluctuate directly with the price
of the underlying equity security. Convertible securities may be
purchased by the Fund at varying price levels above their
investment values and/or their conversion values in keeping with
the Fund's objectives.
Investment Risks of Fixed-Income Securities. All fixed-
income securities are subject to two types of risks: credit risk
and interest rate risk. Credit risk relates to the ability of the
issuer to meet interest or principal payments on a security as they
become due. Generally, higher yielding lower-grade bonds are
subject to credit risk to a greater extent than lower yielding,
investment grade bonds. Interest rate risk refers to the
fluctuations in value of fixed-income securities resulting solely
from the inverse relationship between price and yield of
outstanding fixed-income securities. An increase in prevailing
interest rates will generally reduce the market value of already-
issued fixed-income investments, and a decline in interest rates
will tend to increase their value. In addition, debt securities
with longer maturities, which tend to produce higher yields, are
subject to potentially greater changes in their prices from changes
in interest rates than obligations with shorter maturities.
Fluctuations in the market value of fixed-income securities after
the Fund buys them will not affect the interest payable on those
securities, nor the cash income from such securities. However,
those price fluctuations will be reflected in the valuations of
these securities and therefore the Fund's net asset values.
Lower-Grade Securities. The Fund may invest up to 5% of its
assets in bonds rated below "BBB" by Standard & Poor's Corporation,
or "Baa3" by Moody's Investors Service, Inc. (commonly known as
"high yield" or "junk bonds"), or that have a comparable rating
from another rating organization. If unrated, the security must be
determined by the Sub-Adviser to be of comparable quality to
securities rated less than investment grade.
Special Risks of Lower-Grade Securities. High yield, lower-
grade securities, whether rated or unrated, often have speculative
characteristics. Lower-grade securities have special risks that
make them riskier investments than investment grade securities.
They may be subject to greater market fluctuations and risk of loss
of income and principal than lower yielding, investment-grade
securities. There may be less of a market for them and therefore
they may be harder to sell at an acceptable price. There is a
relatively greater possibility that the issuer's earnings may be
insufficient to make the payments of interest due on the bonds.
The issuer's low creditworthiness may increase the potential for
its insolvency.
These risks mean that the Fund may not achieve the expected
income from lower-grade securities, and that the Fund's net asset
value per share may be affected by declines in value of these
securities. However, the Fund's limitations on investments in
these types of securities may reduce some of the risk, as will the
Fund's policy of diversifying its investments.
Rights and Warrants. As a non-fundamental policy, the Fund
may not invest more than 5% of its assets at the time of purchase
in warrants (other than those that have been acquired in units or
attached to other securities). Warrants basically are options to
purchase equity securities at specific prices valid for a specific
period of time. Their prices do not necessarily move parallel to
the prices of the underlying securities. Rights are similar to
warrants, but normally have a short duration and are distributed
directly by the issuer to its shareholders. Rights and warrants
have no voting rights, receive no dividends and have no rights with
respect to the assets of the issuer.
Other Investment Techniques and Strategies.
When-Issued Securities. The Fund may take advantage of
offerings of eligible portfolio securities on a "when-issued" basis
where delivery of and payment for such securities take place
sometime after the transaction date on terms established on such
date. Normally, settlement on U.S. Government securities takes
place within ten days. The Fund only will make when-issued
commitments on eligible securities with the intention of actually
acquiring the securities. If the Fund chooses to dispose of the
right to acquire a when-issued security prior to its acquisition,
it could, as with the disposition of any other portfolio
obligation, incur a gain or loss due to market fluctuation. When-
issued commitments will not be made if, as a result, more than 15%
of the net assets of the Fund would be so committed.
Repurchase Agreements. The Fund may acquire securities
subject to repurchase agreements for liquidity purposes to meet
anticipated redemptions, or pending the investment of the proceeds
from sales of Fund shares, or pending the settlement of purchases
of portfolio securities.
In a repurchase transaction, the Fund purchases a security
from, and simultaneously resells it to, an approved vendor (U.S.
commercial bank or the U.S. branch of a foreign bank or a broker-
dealer that has been designated a primary dealer in government
securities, that must meet credit requirements set by the Fund's
Board of Directors from time to time) for delivery of an agreed
upon future date. The resale price exceeds the purchase price by
an amount that reflects an agreed-upon interest rate effective for
the period during which the repurchase agreement is in effect. The
majority of these transactions run from day to day, and delivery
pursuant to the resale typically will occur within one to five days
of the purchase. Repurchase agreements are considered "loans"
under the Investment Company Act, collateralized by the underlying
security. The Fund's repurchase agreements require that at all
times while the repurchase agreement is in effect, the value of the
collateral must equal or exceed the repurchase price to fully
collateralize the repayment obligation. Additionally, the Manager
will impose creditworthiness requirements to confirm that the
vendor is financially sound and will continuously monitor the
collateral's value.
Illiquid Securities. To enable the Fund to sell restricted
securities not registered under the Securities Act of 1933, the
Fund may have to cause those securities to be registered. The
expenses of registration of restricted securities may be negotiated
by the Fund with the issuer at the time such securities are
purchased by the Fund, if such registration is required before
such securities may be sold publicly. When registration must be
arranged because the Fund wishes to sell the security, a
considerable period may elapse between the time the decision is
made to sell the securities and the time the Fund would be
permitted to sell them. The Fund would bear the risks of any
downward price fluctuation during that period. The Fund may also
acquire, through private placements, securities having contractual
restrictions on their resale, which might limit the Fund's ability
to dispose of such securities and might lower the amount realizable
upon the sale of such securities.
The Fund has percentage limitations that apply to purchases of
illiquid securities, as stated in the Prospectus. Those percentage
restrictions do not limit purchases of restricted securities that
are eligible for sale to qualified institutional purchasers
pursuant to Rule 144A under the Securities Act of 1933, provided
that those securities have been determined to be liquid by the
Board of Directors of the Fund or by the Sub-Advisor under Board-
approved guidelines. Those guidelines take into account the trading
activity for such securities and the availability of reliable
pricing information, among other factors. If there is a lack of
trading interest in a particular Rule 144A security, the Fund's
holding of that security may be deemed to be illiquid.
Loans of Portfolio Securities. The Fund may lend its
portfolio securities subject to the restrictions stated in the
Prospectus. Under applicable regulatory requirements (which are
subject to change), the loan collateral on each business day must
at least equal the value of the loaned securities and must consist
of cash, bank letters of credit or securities of the U.S.
Government (or its agencies or instrumentalities). To be
acceptable as collateral, letters of credit must obligate a bank to
pay amounts demanded by the Fund if the demand meets the terms of
the letter. Such terms and the issuing bank must be satisfactory
to the Fund. When it lends securities, the Fund receives amounts
equal to the dividends or interest on loaned securities and also
receives one or more of (a) negotiated loan fees, (b) interest on
securities used as collateral, and (c) interest on short-term debt
securities purchased with such loan collateral. Either type of
interest may be shared with the borrower. The Fund may also pay
reasonable finder's, custodian and administrative fees. The terms
of the Fund's loans must meet applicable tests under the Internal
Revenue Code and must permit the Fund to reacquire loaned
securities on five days' notice or in time to vote on any important
matter.
Hedging With Options and Futures Contracts. The Fund may
employ one or more types of Hedging Instruments for the purposes
described in the Prospectus. Hedging Instruments used by the Fund
are interest rate futures, foreign currency futures and financial
futures (collectively, "Futures"), Forward Contracts (defined
below), and call and put options on Futures and foreign currencies.
When hedging to attempt to protect against declines in the market
value of the Fund's portfolio, or to permit the Fund to retain
unrealized gains in the value of portfolio securities which have
appreciated, or to facilitate selling securities for investment
reasons, the Fund may: (i) sell Futures, (ii) buy puts, or (iii)
write covered calls on securities held by it or on Futures (as
described in the Prospectus). When hedging to establish a position
in the equity securities markets as a temporary substitute for the
purchase of individual equity securities the Fund may: (i) buy
Futures, or (ii) buy calls on Futures or securities. Normally, the
Fund would then purchase the equity securities and terminate the
hedging portion. When hedging to protect against declines in the
dollar value of a foreign currency-denominated security, the Fund
may (a) purchase puts on that foreign currency and on foreign
currency Futures, (b) write calls on that currency or on such
Futures, or (c) enter into Forward Contracts at a lower rate than
the spot ("cash") rate.
The Fund's strategy of hedging with Futures and options on
Futures will be incidental to the Fund's investment activities in
the underlying cash market. In the future, the Fund may employ
hedging instruments and strategies that are not presently
contemplated but which may be subsequently developed, to the extent
such investment methods are consistent with the Fund's investment
objective, and are legally permissible and disclosed in the
Prospectus. Additional information about the hedging instruments
the Fund may use is provided below.
Writing Call Options. As described in the Prospectus, the
Fund may write covered calls. When the Fund writes a call on an
investment, it receives a premium and agrees to sell the callable
investment to a purchaser of a corresponding call during the call
period (usually not more than 9 months) at a fixed exercise price
(which may differ from the market price of the underlying
investment) regardless of market price changes during the call
period. To terminate its obligation on a call it has written, the
Fund may purchase a corresponding call in a "closing purchase
transaction." A profit or loss will be realized, depending upon
whether the net of the amount of option transaction costs and the
premium received on the call the Fund has written is more or less
than the price of the call the Fund subsequently purchased. A
profit may also be realized if the call lapses unexercised because
the Fund retains the underlying investment and the premium
received. Those profits are considered short-term capital gains
for Federal income tax purposes, as are premiums on lapsed calls,
and when distributed by the Fund are taxable as ordinary income.
If the Fund could not effect a closing purchase transaction due to
the lack of a market, it would have to hold the callable investment
until the call lapsed or was exercised.
The Fund may also write calls on Futures without owning a
futures contract or deliverable securities, provided that at the
time the call is written, the Fund covers the call by segregating
in escrow an equivalent dollar value of deliverable securities or
liquid assets. The Fund will segregate additional liquid assets if
the value of the escrowed assets drops below 100% of the current
value of the Future. In no circumstances would an exercise notice
as to a Future put the Fund in a short futures position.
Writing Put Options. A put option on securities gives the
purchaser the right to sell, and the writer the obligation to buy,
the underlying investment at the exercise price during the option
period. Writing a put covered by segregated liquid assets equal to
the exercise price of the put has the same economic effect to the
Fund as writing a covered call. The premium the Fund receives from
writing a put option represents a profit, as long as the price of
the underlying investment remains above the exercise price.
However, the Fund has also assumed the obligation during the option
period to buy the underlying investment from the buyer of the put
at the exercise price, even though the value of the investment may
fall below the exercise price. If the put expires unexercised, the
Fund (as the writer of the put) realizes a gain in the amount of
the premium less transaction costs. If the put is exercised, the
Fund must fulfill its obligation to purchase the underlying
investment at the exercise price, which will usually exceed the
market value of the investment at that time. In that case, the
Fund may incur a loss, equal to the sum of the sale price of the
underlying investment and the premium received minus the sum of the
exercise price and any transaction costs incurred.
When writing put options on securities or on foreign
currencies, to secure its obligation to pay for the underlying
security, the Fund will deposit in escrow liquid assets with a
value equal to or greater than the exercise price of the underlying
securities. The Fund therefore forgoes the opportunity of
investing the segregated assets or writing calls against those
assets. As long as the obligation of the Fund as the put writer
continues, it may be assigned an exercise notice by the exchange or
broker-dealer through whom such option was sold, requiring the Fund
to exchange currency at the specified rate of exchange or to take
delivery of the underlying security against payment of the exercise
price. The Fund may have no control over when it may be required
to purchase the underlying security, since it may be assigned an
exercise notice at any time prior to the termination of its
obligation as the writer of the put. This obligation terminates
upon expiration of the put, or such earlier time at which the Fund
effects a closing purchase transaction by purchasing a put of the
same series as that previously sold. Once the Fund has been
assigned an exercise notice, it is thereafter not allowed to effect
a closing purchase transaction.
The Fund may effect a closing purchase transaction to realize
a profit on an outstanding put option it has written or to prevent
an underlying security from being put. Furthermore, effecting such
a closing purchase transaction will permit the Fund to write
another put option to the extent that the exercise price thereof is
secured by the deposited assets, or to utilize the proceeds from
the sale of such assets for other investments by the Fund. The
Fund will realize a profit or loss from a closing purchase
transaction if the cost of the transaction is less or more than the
premium received from writing the option. As above for writing
covered calls, any and all such profits described herein from
writing puts are considered short-term capital gains for Federal
tax purposes, and when distributed by the Fund, are taxable as
ordinary income.
Purchasing Puts and Calls. The Fund may purchase calls to
protect against the possibility that the Fund's portfolio will not
participate in an anticipated rise in the securities market. When
the Fund purchases a call (other than in a closing purchase
transaction), it pays a premium and, except as to calls on Futures,
has the right to buy the underlying investment from a seller of a
corresponding call on the same investment during the call period at
a fixed exercise price. In purchasing a call, the Fund benefits
only if the call is sold at a profit or if, during the call period,
the market price of the underlying investment is above the sum of
the exercise price, transaction costs, and the premium paid, and
the call is exercised. If the call is not exercised or sold
(whether or not at a profit), it will become worthless at its
expiration date and the Fund will lose its premium payment and the
right to purchase the underlying investment. When the Fund
purchases a call on a stock index, it pays a premium, but
settlement is in cash rather than by delivery of the underlying
investment to the Fund.
When the Fund purchases a put, it pays a premium and, except
as to puts on Futures, has the right to sell the underlying
investment to a seller of a corresponding put on the same
investment during the put period at a fixed exercise price. Buying
a put on an investment the Fund owns (a "protective put") enables
the Fund to attempt to protect itself during the put period against
a decline in the value of the underlying investment below the
exercise price by selling the underlying investment at the exercise
price to a seller of a corresponding put. If the market price of
the underlying investment is equal to or above the exercise price
and as a result the put is not exercised or resold, the put will
become worthless at its expiration and the Fund will lose the
premium payment and the right to sell the underlying investment.
However, the put may be sold prior to expiration (whether or not at
a profit).
Puts and calls on Futures are similar to puts and calls on
securities except that all settlements are in cash and gain or loss
depends on changes in the index in question (and thus on price
movements in the stock market generally) rather than on price
movements of individual securities or futures contracts. When the
Fund buys a call on a Future, it pays a premium. If the Fund
exercises the call during the call period, a seller of a
corresponding call on the same investment will pay the Fund an
amount of cash to settle the call if the closing level of the
Future upon which the call is based is greater than the exercise
price of the call. That cash payment is equal to the difference
between the closing price of the call and the exercise price of the
call times a specified multiple (the "multiplier") which determines
the total dollar value for each point of difference. When the Fund
buys a put on a Future, it pays a premium and has the right during
the put period to require a seller of a corresponding put, upon the
Fund's exercise of its put, to deliver cash to the Fund to settle
the put if the closing level of the Future upon which the put is
based is less than the exercise price of the put. That cash
payment is determined by the multiplier, in the same manner as
described above as to calls.
When the Fund purchases a put on a Future not owned by it, the
put protects the Fund to the extent that the index moves in a
similar pattern to the securities the Fund holds. The Fund can
either resell the put or buy the underlying investment and sell it
at the exercise price. The resale price of the put will vary
inversely with the price of the underlying investment. If the
market price of the underlying investment is above the exercise
price, and as a result the put is not exercised, the put will
become worthless on the expiration date. In the event of a decline
in price of the underlying investment, the Fund could exercise or
sell the put at a profit to attempt to offset some or all of its
loss on its portfolio securities.
The Fund's option activities may affect its portfolio turnover
rate and brokerage commissions. The exercise of calls written by
the Fund may cause the Fund to sell related portfolio securities,
thus increasing its turnover rate. The exercise by the Fund of
puts on securities will cause the sale of underlying investments,
increasing portfolio turnover. Although the decision whether to
exercise a put it holds is within the Fund's control, holding a put
might cause the Fund to sell the related investments for reasons
that would not exist in the absence of the put. The Fund will pay
a brokerage commission each time it buys or sells a call, put or an
underlying investment in connection with the exercise of a put or
call. Those commissions may be higher than the commissions for
direct purchases or sales of the underlying investments.
Premiums paid for options are small in relation to the market
value of the underlying investments and, consequently, put and call
options offer large amounts of leverage. The leverage offered by
trading in options could result in the Fund's net asset value being
more sensitive to changes in the value of the underlying
investments.
Futures. The Fund may buy and sell futures contracts
relating to a securities index ("Financial Futures"), including
"Stock Index Futures," a type of Financial Future for which the
index used as the basis for trading is a broadly-based stock index
(including stocks that are not limited to issuers in a particular
industry or group of industries). A stock index assigns relative
values to the common stocks included in the index and fluctuates
with the changes in the market value of those stocks. Stock
indices cannot be purchased or sold directly. Financial Futures
are contracts based on the future value of the basket of securities
that comprise the underlying index. The contracts obligate the
seller to deliver, and the purchaser to take, cash to settle the
futures transaction or to enter into an offsetting contract. No
physical delivery of the securities underlying the index is made on
settling the futures obligation. No monetary amount is paid or
received by the Fund on the purchase or sale of a Financial Future
or Stock Index Future.
The Fund may also buy Futures relating to debt securities
("Interest Rate Futures"). An Interest Rate Future obligates the
seller to deliver and the purchaser to take a specific type of debt
security at a specific future date for a fixed price to settle the
futures transaction, or to enter into an offsetting contract. As
with Financial Futures, no monetary amount is paid or received by
the Fund on the purchase of an Interest Rate Future.
Upon entering into a Futures transaction, the Fund will be
required to deposit an initial margin payment, in cash or U.S.
Treasury bills, with the futures commission merchant (the "futures
broker"). Initial margin payments will be deposited with the
Fund's Custodian in an account registered in the futures broker's
name; however, the futures broker can gain access to that account
only under certain specified conditions. As the Future is marked
to market (that is, its value on the Fund's books is changed) to
reflect changes in its market value, subsequent margin payments,
called variation margin, will be paid to or by the futures broker
on a daily basis.
At any time prior to the expiration of the Future, the Fund
may elect to close out its position by taking an opposite position,
at which time a final determination of variation margin is made and
additional cash is required to be paid by or released to the Fund.
Any gain or loss is then realized by the Fund on the Future for tax
purposes. Although Financial Futures and Stock Index Futures by
their terms call for settlement by the delivery of cash, and
Interest Rate Futures call for the delivery of a specific debt
security, in most cases the settlement obligation is fulfilled
without such delivery by entering into an offsetting transaction.
All Futures transactions are effected through a clearinghouse
associated with the exchange on which the contracts are traded.
Options on Foreign Currency. The Fund intends to write
and purchase calls on foreign currencies. The Fund may purchase
and write puts and calls on foreign currencies that are traded on
a securities or commodities exchange or over-the-counter markets or
are quoted by major recognized dealers in such options. It does so
to protect against declines in the dollar value of foreign
securities and against increases in the dollar cost of foreign
securities to be acquired. If the Manager anticipates a rise in
the dollar value of a foreign currency in which securities to be
acquired are denominated, the increased cost of such securities may
be partially offset by purchasing calls or writing puts on that
foreign currency. If a decline in the dollar value of a foreign
currency is anticipated, the decline in value of portfolio
securities denominated in that currency may be partially offset by
writing calls or purchasing puts on that foreign currency.
However, in the event of currency rate fluctuations adverse to the
Fund's position, it would lose the premium it paid and transactions
costs.
A call written on a foreign currency by the Fund is covered if
the Fund owns the underlying foreign currency covered by the call
or has an absolute and immediate right to acquire that foreign
currency without additional cash consideration (or for additional
cash consideration held in a segregated account by its custodian)
upon conversion or exchange of other foreign currency held in its
portfolio. A call may be written by the Fund on a foreign currency
to provide a hedge against a decline due to an expected adverse
change in the exchange rate in the U.S. dollar value of a security
which the Fund owns or has the right to acquire and which is
denominated in the currency underlying the option. This is a
cross-hedging strategy. In such circumstances, the Fund
collateralizes the option by maintaining in a segregated account
with the Fund's Custodian, cash or U.S. Government Securities in an
amount not less than the value of the underlying foreign currency
in U.S. dollars marked-to-market daily.
Forward Contracts. The Fund may enter into foreign currency
exchange contracts ("Forward Contracts"), which obligate the seller
to deliver and the purchaser to take a specific amount of foreign
currency at a specific future date for a fixed price. A Forward
Contract involves bilateral obligations of one party to purchase,
and another party to sell, a specific currency at a future date
(which may be any fixed number of days from the date of the
contract agreed upon by the parties), at a price set at the time
the contract is entered into. These contracts are generally traded
in the interbank market conducted directly between currency traders
(usually large commercial banks) and their customers. The Fund may
enter into a Forward Contract in order to "lock in" the U.S. dollar
price of a security denominated in a foreign currency which it has
purchased or sold but which has not yet settled, or to protect
against a possible loss resulting from an adverse change in the
relationship between the U.S. dollar and a foreign currency.
There is a risk that 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. Forward contracts
include standardized foreign currency futures contracts which are
traded on exchanges and are subject to procedures and regulations
applicable to other Futures. The Fund may also enter into a
forward contract to sell a foreign currency denominated in a
currency other than that in which the underlying security is
denominated. This is done in the expectation that there is a
greater correlation between the foreign currency of the forward
contract and the foreign currency of the underlying investment than
between the U.S. dollar and the foreign currency of the underlying
investment. This technique is referred to as "cross hedging." The
success of cross hedging is dependent on many factors, including
the ability of the Manager to correctly identify and monitor the
correlation between foreign currencies and the U.S. dollar. To the
extent that the correlation is not identical, the Fund may
experience losses or gains on both the underlying security and the
cross currency hedge.
The Fund may use Forward Contracts to protect against
uncertainty in the level of future exchange rates. The use of
Forward Contracts does not eliminate fluctuations in the prices of
the underlying securities the Fund owns or intends to acquire, but
it does fix a rate of exchange in advance. In addition, although
Forward Contracts limit the risk of loss due to a decline in the
value of the hedged currencies, at the same time they limit any
potential gain that might result should the value of the currencies
increase.
There is no limitation as to the percentage of the Fund's
assets that may be committed to foreign currency exchange
contracts. The Fund does not enter into such forward contracts or
maintain a net exposure in such contracts to the extent that the
Fund would be obligated to deliver an amount of foreign currency in
excess of the value of the Fund's assets denominated in that
currency, or enter into a "cross hedge," unless it is denominated
in a currency or currencies that the Manager believes will have
price movements that tend to correlate closely with the currency in
which the investment being hedged is denominated. See "Tax Aspects
of Covered Calls and Hedging Instruments" below for a discussion of
the tax treatment of foreign currency exchange contracts
The Fund may enter into Forward Contracts with respect to
specific transactions. For example, when the Fund enters into a
contract for the purchase or sale of a security denominated in a
foreign currency, or when the Fund anticipates receipt of dividend
payments in a foreign currency, the Fund may desire to "lock-in"
the U.S. dollar price of the security or the U.S. dollar equivalent
of such payment by entering into a Forward Contract, for a fixed
amount of U.S. dollars per unit of foreign currency, for the
purchase or sale of the amount of foreign currency involved in the
underlying transaction ("transaction hedge"). The Fund will
thereby be able to protect itself against a possible loss resulting
from an adverse change in the relationship between the currency
exchange rates during the period between the date on which the
security is purchased or sold, or on which the payment is declared,
and the date on which such payments are made or received.
The Fund may also use Forward Contracts to lock in the U.S.
dollar value of portfolio positions ("position hedge"). In a
position hedge, for example, when the Fund believes that foreign
currency may suffer a substantial decline against the U.S. dollar,
it may enter into a forward sale contract to sell an amount of that
foreign currency approximating the value of some or all of the
Fund's portfolio securities denominated in such foreign currency,
or when the Fund believes that the U.S. dollar may suffer a
substantial decline against a foreign currency, it may enter into
a forward purchase contract to buy that foreign currency for a
fixed dollar amount. In this situation the Fund may, in the
alternative, enter into a forward contract to sell a different
foreign currency for a fixed U.S. dollar amount where the Fund
believes that the U.S. dollar value of the currency to be sold
pursuant to the forward contract will fall whenever there is a
decline in the U.S. dollar value of the currency in which portfolio
securities of the Fund are denominated ("cross hedge").
The Fund's Custodian will place cash or U.S. Government
securities or other liquid high-quality debt securities in a
separate account of the Fund having a value equal to the aggregate
amount of the Fund's commitments under forward contracts to cover
its short positions. If the value of the securities placed in the
separate account declines, additional cash or securities will be
placed in the account on a daily basis so that the value of the
account will equal the amount of the Fund's net commitments with
respect to such contracts. As an alternative to maintaining all or
part of the separate account, the Fund may purchase a call option
permitting the Fund to purchase the amount of foreign currency
being hedged by a forward sale contract at a price no higher than
the forward contract price, or the Fund may purchase a put option
permitting the Fund to sell the amount of foreign currency subject
to a forward purchase contract at a price as high or higher than
the forward contract price. Unanticipated changes in currency
prices may result in poorer overall performance for the Fund than
if it had not entered into such contracts.
The precise matching of the Forward Contract amounts and the
value of the securities involved will not generally be possible
because the future value of such securities in foreign currencies
will change as a consequence of market movements in the value of
these securities between the date the Forward Contract is entered
into and the date it is sold. Accordingly, it may be necessary for
the Fund to purchase additional foreign currency on the spot (i.e.,
cash) market (and bear the expense of such purchase), if the market
value of the security is less than the amount of foreign currency
the Fund is obligated to deliver and if a decision is made to sell
the security and make delivery of the foreign currency.
Conversely, it may be necessary to sell on the spot market some of
the foreign currency received upon the sale of the portfolio
security if its market value exceeds the amount of foreign currency
the Fund is obligated to deliver. The projection of short-term
currency market movements is extremely difficult, and the
successful execution of a short-term hedging strategy is highly
uncertain. Forward Contracts involve the risk that anticipated
currency movements will not be accurately predicted, causing the
Fund to sustain losses on these contracts and transactions costs.
At or before the maturity of a Forward Contract requiring the
Fund to sell a currency, the Fund may either sell a portfolio
security and use the sale proceeds to make delivery of the currency
or retain the security and offset its contractual obligation to
deliver the currency by purchasing a second contract pursuant to
which the Fund will obtain, on the same maturity date, the same
amount of the currency that it is obligated to deliver. Similarly,
the Fund may close out a Forward Contract requiring it to purchase
a specified currency by entering into a second contract entitling
it to sell the same amount of the same currency on the maturity
date of the first contract. The Fund would realize a gain or loss
as a result of entering into such an offsetting Forward Contract
under either circumstance to the extent the exchange rate or rates
between the currencies involved moved between the execution dates
of the first contract and offsetting contract.
The cost to the Fund of engaging in Forward Contracts varies
with factors such as the currencies involved, the length of the
contract period and the market conditions then prevailing. Because
Forward Contracts are usually entered into on a principal basis, no
fees or commissions are involved. Because such contracts are not
traded on an exchange, the Fund must evaluate the credit and
performance risk of each particular counterparty under a Forward
Contract.
Although the Fund values its assets daily in terms of U.S.
dollars, it does not intend to convert all of its holdings of
foreign currency deposits into U.S. dollars on a daily basis. The
Fund may convert foreign currency from time to time, and investors
should be aware of the costs of currency conversion. Foreign
exchange dealers do not charge a fee for conversion, but they do
seek to realize a profit based on the difference between the prices
at which they buy and sell various currencies. Thus, a dealer may
offer to sell a foreign currency to the Fund at one rate, while
offering a lesser rate of exchange should the Fund desire to resell
that currency to the dealer.
Regulatory Aspects of Hedging Instruments. The Fund is
required to operate within certain guidelines and restrictions with
respect to its use of futures and options thereon as established by
the Commodities Futures Trading Commission ("CFTC"). In
particular, the Fund is excluded from registration as a "commodity
pool operator" if it complies with the requirements of Rule 4.5
adopted by the CFTC. Under this Rule, the Fund is not limited
regarding the percentage of its assets committed to futures margins
and related options premiums subject to a hedge position. However,
under the Rule the Fund must limit its aggregate initial futures
margin and related options premiums to 5% or less of the Fund's
total assets for hedging strategies that are not considered bona
fide hedging strategies under the Rule. Under the Rule, the Fund
must also use short futures and options on futures positions solely
for bona fide hedging purposes within the meaning and intent of
applicable provisions of the Commodity Exchange Act.
Transactions in options by the Fund are subject to limitations
established by option exchanges governing the maximum number of
options that may be written or held by a single investor or group
of investors acting in concert, regardless of whether the options
were written or purchased on the same or different exchanges or are
held in one or more accounts or through one or more different
exchanges or through one or more brokers. Thus the number of
options which the Fund may write or hold may be affected by options
written or held by other entities, including other investment
companies having the same adviser as the Fund (or an adviser that
is an affiliate of the Fund's adviser). The exchanges also impose
position limits on Futures transactions. An exchange may order the
liquidation of positions found to be in violation of those limits
and may impose certain other sanctions.
Due to requirements under the Investment Company Act, when the
Fund purchases a Stock Index Future, the Fund will maintain, in a
segregated account or accounts with its custodian, cash or readily-
marketable, short-term (maturing in one year or less) debt
instruments in an amount equal to the market value of the
securities underlying such Future, less the margin deposit
applicable to it.
Additional Information About Hedging Instruments and Their
Use. The Fund's Custodian, or a securities depository acting for
the Custodian, will act as the Fund's escrow agent, through the
facilities of the Options Clearing Corporation ("OCC"), as to the
investments on which the Fund has written options traded on
exchanges or as to other acceptable escrow securities, so that no
margin will be required for such transactions. OCC will release
the securities on the expiration of the option or upon the Fund's
entering into a closing transaction. An option position may be
closed out only on a market which provides secondary trading for
options of the same series, and there is no assurance that a liquid
secondary market will exist for any particular option.
When the Fund writes an over-the-counter ("OTC") option, it
will enter into an arrangement with a primary U.S. Government
securities dealer, which would establish a formula price at which
the Fund would have the absolute right to repurchase that OTC
option. That formula price would generally be based on a multiple
of the premium received for the option, plus the amount by which
the option is exercisable below the market price of the underlying
security (that is, the extent to which the option is "in-the-
money"). When the Fund writes an OTC option, it will treat as
illiquid (for purposes of the limit on its assets that may be
invested in the illiquid securities, stated in the Prospectus) the
mark-to-market value of any OTC option held by it. The Securities
and Exchange Commission ("SEC") is evaluating whether OTC options
should be considered liquid securities, and the procedure described
above could be affected by the outcome of that evaluation.
The Fund's option activities may affect its turnover rate and
brokerage commissions. The exercise by the Fund of puts on
securities will cause the sale of related investments, increasing
portfolio turnover. Although such exercise is within the Fund's
control, holding a put might cause the Fund to sell the related
investments for reasons which would not exist in the absence of the
put. The Fund will pay a brokerage commission each time it buys a
put or call, sells a call, or buys or sells an underlying
investment in connection with the exercise of a put or call. Such
commissions may be higher than those which would apply to direct
purchases or sales of such underlying investments. Premiums paid
for options are small in relation to the market value of the
related investments, and consequently, put and call options offer
large amounts of leverage. The leverage offered by trading options
could result in the Fund's net asset value being more sensitive to
changes in the value of the underlying investments.
Tax Aspects of Covered Calls and Hedging Instruments. The
Fund intends to qualify as a "regulated investment company" under
the Internal Revenue Code (although there is no guarantee that it
will qualify). That qualification enables the Fund to "pass
through" its income and realized capital gains to shareholders
without having to pay tax on them. This avoids a "double tax" on
that income and capital gains, since shareholders normally will be
taxed on the dividends and capital gains they receive from the Fund
(unless the Fund's shares are held in a retirement account or the
shareholder is otherwise exempt from tax). One of the tests for
the Fund's qualification as a regulated investment company is that
less than 30% of its gross income must be derived from gains
realized on the sale of securities held for less than three months.
To comply with this 30% cap, the Fund will limit the extent to
which it engages in the following activities, but will not be
precluded from them: (i) selling investments, including Stock Index
Futures, held for less than three months, whether or not they were
purchased on the exercise of a call held by the Fund; (ii)
purchasing options which expire in less than three months; (iii)
effecting closing transactions with respect to calls or puts
written or purchased less than three months previously; (iv)
exercising puts or calls held by the Fund for less than three
months; or (v) writing calls on investments held less than three
months.
Certain foreign currency exchange contracts ("Forward
Contracts") in which the Fund may invest are treated as "section
1256 contracts." Gains or losses relating to section 1256
contracts generally are characterized under the Internal Revenue
Code as 60% long-term and 40% short-term capital gains or losses.
However, foreign currency gains or losses arising from certain
section 1256 contracts (including Forward Contracts) generally are
treated as ordinary income or loss. In addition, section 1256
contracts held by the Fund at the end of each taxable year are
"marked-to-market" with the result that unrealized gains or losses
are treated as though they were realized. These contracts also may
be marked-to-market for purposes of the excise tax applicable to
investment company distributions and for other purposes under rules
prescribed pursuant to the Internal Revenue Code. An election can
be made by the Fund to exempt these transactions from this marked-
to-market treatment.
Certain Forward Contracts entered into by the Fund may result
in "straddles" for Federal income tax purposes. The straddle rules
may affect the character and timing of gains (or losses) recognized
by the Fund on straddle positions. Generally, a loss sustained on
the disposition of a position making up a straddle is allowed only
to the extent such loss exceeds any unrecognized gain in the
offsetting positions making up the straddle. Disallowed loss is
generally allowed at the point where there is no unrecognized gain
in the offsetting positions making up the straddle, or the
offsetting position is disposed of.
Under the Internal Revenue Code, gains or losses attributable
to fluctuations in exchange rates that occur between the time the
Fund accrues interest or other receivables or accrues expenses or
other liabilities denominated in a foreign currency and the time
the Fund actually collects such receivables or pays such
liabilities generally are treated as ordinary income or ordinary
loss. Similarly, on disposition of debt securities denominated in
a foreign currency and on disposition of foreign currency forward
contracts, gains or losses attributable to fluctuations in the
value of a foreign currency between the date of acquisition of the
security or contract and the date of the disposition also are
treated as an ordinary gain or loss. Currency gains and losses are
offset against market gains and losses on each trade before
determining a net "section 988" gain or loss under the Internal
Revenue Code, which may ultimately increase or decrease the amount
of the Fund's investment company income available for distribution
to its shareholders.
Additional Risk Factors in Hedging. In addition to the
risks with respect to options discussed in the Prospectus and
above, there is a risk in using short hedging by (i) selling Stock
Index Futures or (ii) purchasing puts on stock indices or Stock
Index Futures to attempt to protect against declines in the value
of the Fund's equity securities. The risk is that the prices of
Stock Index Futures will correlate imperfectly with the behavior of
the cash (i.e., market value) prices of the Fund's equity
securities. The ordinary spreads between prices in the cash and
futures markets are subject to distortions, due to differences in
the natures of those markets. First, all participants in the
futures markets are subject to margin deposit and maintenance
requirements. Rather than meeting additional margin deposit
requirements, investors may close out futures contracts through
offsetting transactions which could distort the normal relationship
between the cash and futures markets. Second, the liquidity of the
futures markets depends on participants entering into offsetting
transactions rather than making or taking delivery. To the extent
participants decide to make or take delivery, liquidity in the
futures markets could be reduced, thus producing distortion.
Third, from the point of view of speculators, the deposit
requirements in the futures markets are less onerous than margin
requirements in the securities markets. Therefore, increased
participation by speculators in the futures markets may cause
temporary price distortions.
The risk of imperfect correlation increases as the composition
of the Fund's portfolio diverges from the securities included in
the applicable index. To compensate for the imperfect correlation
of movements in the price of the equity securities being hedged and
movements in the price of the hedging instruments, the Fund may use
hedging instruments in a greater dollar amount than the dollar
amount of equity securities being hedged if the historical
volatility of the prices of the equity securities being hedged is
more than the historical volatility of the applicable index. It is
also possible that if the Fund has used hedging instruments in a
short hedge, the market may advance and the value of equity
securities held in the Fund's portfolio may decline. If that
occurred, the Fund would lose money on the hedging instruments and
also experience a decline in value in its portfolio securities.
However, while this could occur for a very brief period or to a
very small degree, over time the value of a diversified portfolio
of equity securities will tend to move in the same direction as the
indices upon which the hedging instruments are based.
If the Fund uses hedging instruments to establish a position
in the equities markets as a temporary substitute for the purchase
of individual equity securities (long hedging) by buying Stock
Index Futures and/or calls on such Futures, on securities or on
stock indices, it is possible that the market may decline. If the
Fund then concludes not to invest in equity securities at that time
because of concerns as to a possible further market decline or for
other reasons, the Fund will realize a loss on the hedging
instruments that is not offset by a reduction in the price of the
equity securities purchased.
Other Investment Restrictions
The Fund's most significant investment restrictions are set
forth in the Prospectus. There are additional investment
restrictions that the Fund must follow that are also fundamental
policies. Fundamental policies and the Fund's investment objective
cannot be changed without the vote of a "majority" of the Fund's
outstanding voting securities. Under the Investment Company Act,
such a majority vote is defined as the vote of the holders of the
lesser of: (i) 67% or more of the shares present or represented by
proxy at a shareholder meeting, if the holders of more than 50% of
the outstanding shares are present or represented by proxy, or (ii)
more than 50% of the outstanding shares.
Under these additional restrictions, the Fund cannot:
Invest in physical commodities or physical commodity
contracts or speculate in financial commodity contracts, but may
purchase and sell financial futures contracts and options on such
futures contracts exclusively for hedging and other non-speculative
purposes;
Invest in real estate; however, the Fund may purchase
securities of issuers which engage in real estate operations and
securities which are secured by real estate or interests therein;
Purchase securities on margin (except for such short-term
loans as are necessary for the clearance of purchases of portfolio
securities) or make short sales of securities. (Collateral
arrangements in connection with transactions in futures and options
are not deemed to be margin transactions.)
Underwrite securities of other companies except insofar as
the Fund may be deemed to be an underwriter under the Securities
Act of 1933 in disposing of a security;
Invest more than 10% of its assets in securities of other
investment companies or more than 5% of its assets in the
securities of one investment company or more than 3% of the
outstanding voting securities of such company, provided that the
foregoing restrictions on investment company purchases and holdings
by the Fund are inapplicable to acquisitions in connection with a
merger, consolidation, reorganization or acquisition of assets
Invest in interests in oil, gas or other mineral
exploration or development programs;
Invest in securities of any issuer if, to the knowledge of
the Fund, any officer or director of the Fund or any officer or
director of the Manager or the Sub-Adviser owns more than 1/2 of 1%
of the outstanding securities of such issuer, and such officers and
directors who own more than 1/2 of 1% own in the aggregate more
than 5% of the outstanding securities of such issuer;
Pledge its assets or assign or otherwise encumber its assets
in excess of 33 1/3% of its net assets (taken at market value at
the time of pledging) and then only to secure borrowings effected
within the limitations set forth in the Prospectus;
Invest for the purpose of exercising control or management
of another company
Issue senior securities as defined in the 1940 Act except
insofar as the Fund may be deemed to have issued a senior security
by reason of: (1) entering into any repurchase agreement; (2)
borrowing money in accordance with restrictions described in the
Prospectus; or (3) lending portfolio securities.
In addition, as a non-fundamental investment restriction, the
Fund (i) may not purchase warrants if as a result the Fund would
then have either more than 5% of its total assets (determined at
the time of investment) invested in warrants or more than 2% of its
total assets invested in warrants not listed on the New York or
American Stock Exchange; (ii) may not invest in real estate limited
partnership programs; (iii) may not invest in oil, gas or mineral
leases; (iv) may not invest more than 15% of its assets in
restricted securities, foreign equity securities not listed on an
exchange, illiquid securities, securities for which market
quotations are not readily available and repurchase agreements in
excess of seven days; and (v) invest more than 5% of its assets in
unseasoned issues. In addition, to comply with a state's
securities laws, the Fund may not make loans to any person or
individual (except that portfolio securities may be loaned within
the limitations set forth in the Prospectus).
How the Fund is Managed
Organization and History. Oppenheimer Quest Global Value Fund,
Inc. (referred to as the "Fund") is organized as a Maryland
Corporation.
The Directors are authorized to create new series and classes
of series. The Directors may reclassify unissued shares of the
Fund or classes into additional series or classes of shares. The
Directors may also divide or combine the shares of a class into a
greater or lesser number of shares without thereby changing the
proportionate beneficial interest of a shareholder in the Fund.
Shares do not have cumulative voting rights or preemptive or
subscription rights. Shares may be voted in person or by proxy.
As a Maryland corporation, the Fund is not required to hold,
and does not plan to hold, regular annual meetings of shareholders.
The Fund will hold meetings when required to do so by the
Investment Company Act or other applicable law, or when a
shareholder meeting is called by the Directors or upon proper
request of the shareholders. Each share of the Fund represents an
interest in the Fund proportionately equal to the interest of each
other share of the same class and entitles the holder to one vote
per share (and a fractional vote for a fractional share) on matters
submitted to their vote at shareholders' meetings. Shareholders of
the Fund vote together in the aggregate on certain matters at
shareholders' meetings, such as the election of Directors and
ratification of appointment of auditors for the Fund. Shareholders
of a particular class vote separately on proposals which affect
that class, and shareholders of a class which is not affected by
that matter are not entitled to vote on the proposal. For example,
only shareholders of a class of a series vote on certain amendments
to the Distribution and/or Service Plans if the amendments affect
that class.
Directors and Officers of the Fund. The Fund's Directors and
officers, and the Fund's portfolio manager (who is not an officer),
are listed below, together with principal occupations and business
affiliations during the past five years. The address of each is
Two World Trade Center, New York, New York 10048, except as noted.
In addition to the Fund, all of the Directors are also directors or
trustees of Oppenheimer Quest Value Fund, Inc., Oppenheimer Quest
Capital Value Fund, Inc., Oppenheimer Quest for Value Funds
(collectively, the "Oppenheimer Quest Funds") and Limited-Term New
York Municipal Fund, Rochester Fund Municipals and Oppenheimer Bond
Fund For Growth (collectively, with the Fund, the "Oppenheimer
Rochester Funds"). As of February 28, 1997, the directors and
officers of the Fund as a group owned less than 1% of the
outstanding shares of each class of the Fund. The foregoing does
not include shares held of record by an employee benefit plan for
employees of the Manager for which one of the officers below, Mr.
Donohue, is a trustee, other than the shares beneficially owned
under that plan by the officers of the Fund listed below.
Bridget A. Macaskill, Chairman of the Board of Directors and
President;* Age: 48.
Two World Trade Center, New York, New York 10048-0203
President, Chief Executive Officer and a Director of the Manager
and HarbourView Asset Management Corporation ("HarbourView"), a
subsidiary of the Manager; President and a Director of Oppenheimer
Acquisition Corp. ("OAC") the Manager's parent holding company, and
Oppenheimer Partnership Holdings, Inc.; Chairman and a Director of
Shareholder Services, Inc. ("SSI"), a transfer agent subsidiary of
the Manager and Shareholder Financial Services, Inc. ("SFSI"); and
a director of Oppenheimer Real Asset Management, Inc.
Paul Y. Clinton, Director; Age: 66
833 Wyndmere Way, Naples, Florida 34105
Principal of Clinton Management Associates, a financial and venture
capital consulting firm; Trustee of Capital Cash Management Trust,
a money-market fund and Narraganssett Tax-Free Fund, a tax-exempt
bond fund; Director of OCC Cash Reserves, Inc. and Trustee of OCC
Accumulation Trust, all of which are open-end investment companies.
Formerly: Director, External Affairs, Kravco Corporation, a
national real estate owner and property management corporation;
President of Essex Management Corporation, a management consulting
company; a general partner of Capital Growth Fund, a venture
capital partnership; a general partner of Essex Limited
Partnership, an investment partnership; President of Geneve Corp.,
a venture capital fund; Chairman of Woodland Capital Corp., a small
business investment company; and Vice President of W.R. Grace & Co.
__________________________
* A Trustee who is an "interested person" as defined in the
Investment Company Act.
Thomas W. Courtney, Director; Age: 63
P.O. Box 580, Sewickley, Pennsylvania 15143
Principal of Courtney Associates, Inc., a venture capital firm;
former General Partner of Trivest Venture Fund, a private venture
capital fund; former President of Investment Counseling Federated
Investors, Inc.; Trustee of Cash Assets Trust, a money market fund
and OCC Accumulation Trust; Director of OCC Cash Reserves, Inc.,
all of which are open-end investment companies; former President of
Boston Company Institutional Investors; Trustee of Hawaiian Tax-
Free Trust and Tax Free Trust of Arizona, tax-exempt bond funds;
Director of several privately owned corporations; former Director
of Financial Analysts Federation.
Lacy B. Herrmann, Director; Age: 67
380 Madison Avenue, Suite 2300, New York, New York 10017
President and Chairman of the Board of Aquila Management
Corporation, the sponsoring organization and Administrator and/or
Sub-Adviser to the following open-end investment companies, and
Chairman of the Board of Trustees and President of each: Churchill
Cash Reserves Trust, Short Term Asset Reserves, Pacific Capital
Cash Assets Trust, Pacific Capital U.S. Treasuries Cash Assets
Trust, Pacific Capital Tax-Free Cash Assets Trust, Prime Cash Fund,
Narragansett Insured Tax-Free Income Fund, Tax-Free Fund For Utah,
Churchill Tax-Free Fund of Kentucky, Tax-Free Fund of Colorado,
Tax-Free Trust of Oregon, Tax-Free Trust of Arizona, Hawaiian Tax-
Free Trust, and Aquila Rocky Mountain Equity Fund; Vice President,
Director, Secretary, and formerly Treasurer of Aquila Distributors,
Inc., distributor of the above funds; President and Chairman of the
Board of Trustees of Capital Cash Management Trust ("CCMT"), and an
Officer and Trustee/Director of its predecessors; President and
Director of STCM Management Company, Inc., sponsor and adviser to
CCMT; Chairman, President and a Director of InCap Management
Corporation, formerly sub-adviser and administrator of Prime Cash
Fund and Short Term Asset Reserves; Director of OCC Cash Reserves,
Inc. and Trustee of OCC Accumulation Trust and The Saratoga
Advantage Trust, each of which is an open-end investment company;
Trustee of Brown University.
George Loft, Director; Age: 82
51 Herrick Road, Sharon, Connecticut 06069
Private Investor; Director of OCC Cash Reserves, Inc., and Trustee
of OCC Accumulation Trust and The Saratoga Advantage Trust, all of
which are open-end investment companies.
Robert C. Doll, Jr., Vice President; Age: 42
Two World Trade Center, New York, New York 10048-0203
Executive Vice President and Director of Equity Investments of the
Manager; a Vice President and a director of OAC and an officer and
Portfolio Manager of other Oppenheimer funds.
Andrew J. Donohue, Secretary; Age: 46
Two World Trade Center, New York, New York 10048-0203
Executive Vice President, General Counsel and a director of the
Manager, the Distributor, HarbourView, SFSI, SSI, Oppenheimer
Partnership Holdings Inc. and MultiSource Services, Inc.; President
and a director of Centennial; ; President and a director of
Oppenheimer Real Asset Management, Inc.; General Counsel of OAC; an
officer of other Oppenheimer funds.
George C. Bowen, Treasurer; Age: 60
6803 South Tucson Way, Englewood, Colorado 80112
Senior Vice President and Treasurer of the Manager; Vice President
and Treasurer of the Distributor and HarbourView; Senior Vice
President, Treasurer, Assistant Secretary and a director of
Centennial; President, Treasurer and a director of Centennial
Capital Corporation; Senior Vice President, Treasurer and Secretary
of SSI; Vice President, Treasurer and Secretary of SFSI; Treasurer
of OAC and Oppenheimer Partnership Holdings, Inc.; Vice President
and Treasurer of Oppenheimer Real Asset Management, Inc., Chief
Executive Officer, Treasurer and a director of MultiSource
Services, Inc. (a broker-dealer); an officer of other Oppenheimer
funds.
Robert Bishop, Assistant Treasurer; Age: 38
6803 South Tucson Way, Englewood, Colorado 80112
Vice President of the Manager/Mutual Fund Accounting; an officer of
other Oppenheimer funds; formerly a Fund Controller for the
Manager.
Scott Farrar, Assistant Treasurer; Age: 31
6803 South Tucson Way, Englewood, Colorado 80112
Vice President of the Manager/Mutual Fund Accounting; an officer of
other Oppenheimer funds; formerly a Fund Controller for the
Manager.
Robert G. Zack, Assistant Secretary; Age: 48
Two World Trade Center, New York, New York 10048-0203
Senior Vice President and Associate General Counsel of the Manager;
Assistant Secretary of SSI and SFSI; an officer of other
Oppenheimer funds.
Richard J. Glasebrook, II, Portfolio Manager, Age: 48
One World Financial Center, 200 Liberty Street, New York, New York
10281-1098
Managing Director of Oppenheimer Capital; previously a partner with
Delafield Asset Management, where he was a portfolio manager and
analyst.
Pierre Daviron, Portfolio Manager, Age: 54
One World Financial Center, 200 Liberty Street, New York, New York
10281-1098
President and Chief Investment Officer of Oppenheimer Capital
International, a division of Oppenheimer Capital created in 1993;
previously, Chairman and Chief Executive Officer at Indosuez
Gartmore Asset Management, a division of Banque Indosuez, Paris,
France. Prior thereto, a Managing Director in Mergers and
Acquisition at J.P. Morgan.
Remuneration of Directors. All officers of the Fund and Ms.
Macaskill, a Director, are officers or directors of the Manager and
receive no salary or fee from the Fund. The remaining Directors of
the Fund received the total amounts shown below from (i) the Fund
during its fiscal year ended November 30, 1996 and (ii) other
investment companies (or series thereof) managed by the Manager and
the Sub-Adviser, paid during the calendar year ended December 31,
1996.
<TABLE>
<CAPTION>
Pension or
Retirement
Aggregate Benefits Estimated Total
Compensation Accrued as Annual Compensation
from the Part of Fund Benefits Upon From Fund
Name of Person Fund Expenses Retirement Complex(1)
<S> <C> <C> <C> <C>
Paul Y. Clinton $5,627 None None $90,225
Thomas W. Courtney $5,627 None None $87,525
Lacy B. Herrmann $5,627 None None $90,225
George Loft $5,627 None None $95,700
</TABLE>
______________________
(1) For the purpose of the chart above, "Fund Complex" includes the
Fund, the other Oppenheimer Quest Funds, the Oppenheimer Rochester
Funds and three other funds advised by the Sub-Adviser (the Sub-
Adviser Funds ). For these purposes, each series constitutes a
separate fund. Messrs. Clinton, Courtney and Herrmann served as
directors or trustees of two Sub-Adviser Funds, for which they are
to receive $38,550, $35,850 and $38,550, respectively, and Mr. Loft
served as a director or trustee of three Sub-Adviser Funds, for
which he is to receive $44,025.
Major Shareholders. As of February 28, 1997, no person
owned of record or was known by the Fund to own beneficially 5% or
more of the Fund's outstanding Class A, Class B or Class C shares
except: Unified Advisors, Inc., 429 N. Pennsylvania St.,
Indianapolis, Indiana 46204-1873 which owned of record
5,349,389.102 Class A shares (approximately 43.28% of the Class A
shares then outstanding); Oppenheimer Capital Accumulation Plan
Omnibus 401-k Unit, Oppenheimer Tower, One World Financial Center,
New York, New York 10281-1003 which owned of record 680,074.596
Class A shares (approximately 5.49% of the Class A shares then
outstanding) and Merrill Lynch Pierce Fenner & Smith, Inc., 4800
Deer Lake Drive East,Floor 3, Jacksonville, Florida 32246-6484
which owned of record 93,814.659 Class C shares (approximately
7.80% of the Class C shares then outstanding).
The Manager and its Affiliates. The Manager is wholly-owned by
Oppenheimer Acquisition Corp. ("OAC"), a holding company controlled
by Massachusetts Mutual Life Insurance Company. OAC is also owned
in part by certain of the Manager s directors and officers, some of
whom also serve as officers of the Fund and one of whom (Ms.
Macaskill) also serves as an officer and Director of the Fund.
The Manager and the Fund have a Code of Ethics. In addition
to having its own Code of Ethics, the Sub-Adviser is obligated to
report to the Manager any violations of the Sub-Adviser's Code of
Ethics relating to the Fund. The Code of Ethics is designed to
detect and prevent improper personal trading by certain employees,
including the Fund's portfolio manager, who is an employee of the
Sub-Adviser, that would compete with or take advantage of the Funds
portfolio transactions. Compliance with the Code of Ethics is
carefully monitored and strictly enforced by the Manager.
The Investment Advisory Agreement. The Manager acts as
investment adviser to the Fund pursuant to the terms of an
Investment Advisory Agreement dated as of November 22, 1995. The
Sub-Adviser previously served as the Fund's investment adviser from
the Fund's inception (July 2, 1990) to November 22, 1995.
Under the Investment Advisory Agreement, the Manager acts as
the investment adviser for the Fund and supervises the investment
program of the Fund. The Investment Advisory Agreement also
provides that the Manager, at its own expense, will provide and
supervise the activities of all administrative and clerical
personnel as shall be required to provide effective corporate
administration for the Fund to the extent such services are not
being provided under the Administration Agreement described below.
Expenses not assumed by the Manager under the Investment
Advisory Agreement or paid by the Distributor under the General
Distributor's Agreement will be paid by the Fund. Certain expenses
are further allocated to certain classes of shares of a series as
explained in the Prospectus and under "How to Buy Shares," below.
The Investment Advisory Agreement lists examples of expenses paid
by the Fund, including interest, taxes, brokerage commissions,
insurance premiums, fees of non-interested Directors, legal and
audit expenses, transfer agent and custodian expenses, share
issuance costs, certain printing and registration costs, and non-
recurring expenses, including litigation. For the fiscal year
ended November 30, 1996 the Fund paid the Manager $1,591,600 in
management fees. .
The Investment Advisory Agreement contains no expense
limitation. However, because of state regulations limiting fund
expenses that previously applied, the Manager had voluntarily
undertaken that the Fund s total expenses in any fiscal year
(including the investment advisory fee but exclusive of taxes,
interest, brokerage commissions, distribution plan payments and any
extraordinary non-recurring expenses, including litigation) would
not exceed the most stringent state regulatory limitation
applicable to the Fund. Due to changes in federal securities laws,
such state regulations no longer apply and the Manager s
undertaking is therefore inapplicable and has been withdrawn.
During the Fund s last fiscal year, the Fund s expenses did not
exceed the most stringent state regulatory limit and the voluntary
undertaking was not invoked.
The Investment Advisory Agreement provides that in the absence
of willful misfeasance, bad faith, or gross negligence in the
performance of its duty, or reckless disregard for its obligations
and duties under the advisory agreement, the Manager is not liable
for any loss resulting from good faith errors or omissions on its
part with respect to any of its duties thereunder. The Investment
Advisory Agreement permits the Manager to act as investment adviser
for any other person, firm or corporation and to use the name
"Oppenheimer" in connection with its other investment companies for
which it may act as an investment adviser or general distributor.
If the Manager shall no longer act as investment adviser to a Fund,
the right of the Fund to use "Oppenheimer" as part of its name may
be withdrawn.
The Investment Advisory Agreement provides that the Manager
may enter into sub-advisory agreements with other affiliated or
unaffiliated registered investment advisers in order to obtain
specialized services for the Funds provided that the Fund is not
required to pay any additional fees for such services. The Manager
has retained the Sub-Adviser pursuant to a separate Subadvisory
Agreement, dated as of November 22, 1995, with respect to the Fund
as described below.
Fees Paid Under the Prior Investment Advisory Agreement.
The Sub-Adviser served as investment adviser to the Fund from the
inception of the Fund (July 2, 1990) until November 22, 1995.
Under the prior Investment Advisory Agreement, the total advisory
fees accrued or paid by the Fund were $1,166,949 for the fiscal
year ended November 30, 1994, and $1,290,224 for the fiscal year
ended November 30, 1995.
The Subadvisory Agreement. The Subadvisory Agreement
provides that the Sub-Adviser shall regularly provide investment
advice with respect to the Fund and invest and reinvest cash,
securities and the property comprising the assets of the Fund.
Under the Subadvisory Agreement, the Sub-Adviser agrees not to
change the Portfolio Manager of the Fund without the written
approval of the Manager and to provide assistance in the
distribution and marketing of the Fund. The Subadvisory Agreement
was approved by the Board of Directors, including a majority of the
Directors who are not "interested persons" of the Fund (as defined
in the Investment Company Act) and who have no direct or indirect
financial interest in such agreements, on June 22, 1995 and by the
shareholders of the Fund at a meeting held for that purpose on
November 3, 1995.
Under the Subadvisory Agreement, the Manager will pay the Sub-
Adviser an annual fee payable monthly, based on the average daily
net assets of the Fund, equal to 40% of the investment advisory fee
and administration fee collected by the Manager from the Fund based
on the total net assets of the Fund as of the effective date of the
Subadvisory Agreement (the "Base Amount") plus 30% of the
investment advisory fee collected by the Manager based on the total
net assets of the Fund that exceed the Base Amount.
The Subadvisory Agreement provides that in the absence of
willful misfeasance, bad faith, negligence or reckless disregard of
its duties or obligations, OpCap Advisors shall not be liable to
the Manager for any act or omission in the course of or connected
with rendering services under the Subadvisory Agreement or for any
losses that may be sustained in the purchase, holding or sale of
any security.
The Administration Agreement. The Manager acts as the
Fund's administrator pursuant to an Administration Agreement as of
November 22, 1995. The Administration Agreement provides that the
Manager will provide administrative services for the Fund,
including determination of the Fund's net asset value, compilation
and maintenance of books and records, preparation of proxy
materials and semi-annual reports, preparation of such financial or
other information required for the Fund's reports to the Securities
and Exchange Commission and respond to or refer to the Fund's
officers or transfer agents, shareholders' inquiries relating to
the Fund. Further, as administrator, the Manager will furnish the
Fund with office space, facilities and equipment and arrange for
its employees to serve as officers of the Fund. The Administration
Agreement was approved by the Fund's directors on June 22, 1995 and
by the shareholders at a meeting called for that purpose on
November 3, 1995. The Administration Agreement will remain in
effect for two years from the date of its execution and may be
continued annually thereafter if approved by a majority vote of the
Directors who are neither interested persons of the Fund nor have
any direct or indirect financial interest in the Administration
Agreement, cast in person at a meeting called for the purpose of
voting on such approval. From the inception of the Fund until
November 22, 1995, OpCap Advisors served as administrator for the
Fund. For the fiscal years ended November 30, 1994 and 1995 the
total administrative fees accrued or paid by the Fund to OpCap
Advisors under the Prior Administration Agreement were $388,983 and
$430,074. For the fiscal year ended November 30, 1996 the total
administrative fees accrued or paid by the Fund to Manager under
the current Administration Agreement were $540,533.
The Distributor. Under a General Distributor s Agreement
with the Fund dated as of November 22, 1995, the Distributor acts
as the Fund s principal underwriter in the continuous public
offering of its Class A, Class B and Class C shares of the Fund but
is not obligated to sell a specific number of shares. Expenses
normally attributable to sales, including advertising and the cost
of printing and mailing prospectuses, other than those furnished to
existing shareholders, are borne by the Distributor. During the
Fund's fiscal year ended November 30, 1996, the aggregate amount of
sales charges on sales of the Fund's Class A shares was $408,775,
of which the Distributor and affiliated brokers retained $201,003.
No amounts were retained by OCC Distributors, the Fund's
Distributor prior to November 22, 1995. During the fiscal years
ended November 30, 1996, the Distributor received contingent
deferred sales charges of $57,426, upon redemption of Class B
shares, and received contingent deferred sales charges of $2,235,
upon redemption of Class C shares. For additional information
about distribution of the Fund's shares and the expenses connected
with such activities, please refer to "Distribution and Service
Plans" below.
The Transfer Agent. OppenheimerFunds Services acts as the
Fund's Transfer Agent pursuant to a Transfer Agency and Service
Agreement dated November 22, 1995. Pursuant to the Agreement, the
Transfer Agent is responsible for maintaining the Fund's
shareholder registry and shareholder accounting records, and for
shareholder servicing and administrative functions. As
compensation therefor, the Fund is obligated to pay the Transfer
Agent an annual maintenance fee for each Fund shareholder account
and reimburse the Transfer Agent for its out of pocket expenses.
Shareholder Servicing Agent for Certain Shareholders.
Unified Management Corporation (1-800-346-4601) is the shareholder
servicing agent of the Fund for former shareholders of the AMA
Family of Funds and clients of AMA Investment Advisers, Inc. (which
had been the investment adviser of AMA Family of Funds) who acquire
shares of any Oppenheimer Quest Fund, and for (i) former
shareholders of the Unified Funds and Liquid Green Trusts, (ii)
accounts which participated or participate in a retirement plan for
which Unified Investment Advisers, Inc. or an affiliate acts as
custodian or trustee, (iii) accounts which have a Money Manager
brokerage account, and (iv) other accounts for which Unified
Management Corporation is the dealer of record.
Brokerage Policies of the Fund
Brokerage Provisions of the Investment Advisory and Subadvisory
Agreement. The Investment Advisory Agreement contains provisions
relating to the selection of broker-dealers ("brokers") for the
Fund's portfolio transactions. The Manager and the Sub-Adviser may
use such brokers as may, in their best judgment based on all
relevant factors, implement the policy of the Fund to achieve best
execution of portfolio transactions. While the Manager need not
seek advance competitive bidding or base its selection on posted
rates, it is expected to be aware of the current rates of most
eligible brokers and to minimize the commissions paid to the extent
consistent with the interests and policies of the Fund as
established by its Board and the provisions of the Investment
Advisory Agreement.
The Investment Advisory Agreement also provides that,
consistent with obtaining the best execution of the Fund's
portfolio transactions, the Manager and the Sub-Adviser, in the
interest of the Fund, may select brokers other than affiliated
brokers, because they provide brokerage and/or research services to
the Fund and/or other accounts of the Manager or the Sub-Adviser.
The commissions paid to such brokers may be higher than another
qualified broker would have charged if a good faith determination
is made by the Manager or the Sub-Adviser that the commissions are
reasonable in relation to the services provided, viewed either in
terms of that transaction or the Manager s or the Sub-Adviser s
overall responsibilities to all its accounts. No specific dollar
value need be put on the services, some of which may or may not be
used by the Manager or the Sub-Adviser for the benefit of the Fund
or other of its advisory clients. To show that the determinations
were made in good faith, the Manager or any Sub-Adviser must be
prepared to show that the amount of such commissions paid over a
representative period selected by the Board was reasonable in
relation to the benefits to the Fund. The Investment Advisory
Agreement recognizes that an affiliated broker-dealer may act as
one of the regular brokers for the Fund provided that any
commissions paid to such broker are calculated in accordance with
procedures adopted by the Fund s Board under applicable rules of the
Securities and Exchange Commission ("SEC").
In addition, the Subadvisory Agreement permits the Sub-Adviser
to enter into "soft dollar" arrangements through the agency of
third parties on behalf of the Manager. Soft dollar arrangements
for services may be entered into in order to facilitate an
improvement in performance with respect to the Sub-Adviser's
service to the Manager with respect to the Fund. Pursuant to these
arrangements, the Sub-Adviser will undertake to place brokerage
business with broker-dealers who pay third parties that provide
these services. Any such "soft dollar" arrangements will be made
in accordance with policies adopted by the Manager and the Board of
the Fund and in compliance with Section 28(e) of the Securities
Exchange Act of 1934, as amended.
Description of Brokerage Practices. Portfolio decisions are based
upon recommendations of the portfolio manager and the judgment of
the portfolio managers. The Fund will pay brokerage commissions on
transactions in listed options and equity securities. Prices of
portfolio securities purchased from underwriters of new issues
include a commission or concession paid by the issuer to the
underwriter, and prices of debt securities purchased from dealers
include a spread between the bid and asked prices.
Transactions may be directed to dealers during the course of
an underwriting in return for their brokerage and research
services, which are intangible and on which no dollar value can be
placed. There is no formula for such allocation. The research
information may or may not be useful to one or more of the Fund
and/or other accounts of the Manager or the Sub-Adviser;
information received in connection with directed orders of other
accounts managed by the Manager or the Sub-Adviser or its
affiliates may or may not be useful to one or more of the Funds.
Such information may be in written or oral form and includes
information on particular companies and industries as well as
market, economic or institutional activity areas. It serves to
broaden the scope and supplement the research activities of the
Manager or the Sub-Adviser, to make available additional views for
consideration and comparison, and to enable the Manager or the Sub-
Adviser to obtain market information for the valuation of
securities held in the Fund's assets.
Sales of shares of the Fund, subject to applicable rules
covering the Distributor's activities in this area, will also be
considered as a factor in the direction of portfolio transactions
to dealers, but only in conformity with the price, execution and
other considerations and practices discussed above. The Fund will
not purchase any securities from or sell any securities to an
affiliated broker-dealer including Oppenheimer & Co., Inc.
("Opco"), an affiliate of the Sub-Adviser, acting as principal for
its own account.
The Sub-Adviser currently serves as investment manager to a
number of clients, including other investment companies, and may in
the future act as investment manager or advisor to others. It is
the practice of the Sub-Adviser to cause purchase or sale
transactions to be allocated among the Fund and others whose assets
it manages in such manner as it deems equitable. In making such
allocations among the Fund and other client accounts, the main
factors considered are the respective investment objectives, the
relative size of portfolio holdings of the same or comparable
securities, the availability of cash for investment, the size of
investment commitments generally held and the opinions of the
persons responsible for managing the portfolios of each Fund and
other client accounts.
When orders to purchase or sell the same security on identical
terms are placed by more than one of the funds and/or other
advisory accounts managed by the Sub-Adviser or its affiliates, the
transactions are generally executed as received, although a fund or
advisory account that does not direct trades to a specific broker
("free trades") usually will have its order executed first.
Purchases are combined where possible for the purpose of
negotiating brokerage commissions, which in some cases might have
a detrimental effect on the price or volume of the security in a
particular transaction as far as the Fund is concerned. Orders
placed by accounts that direct trades to a specific broker will
generally be executed after the free trades. All orders placed on
behalf of the Fund are considered free trades. However, having an
order placed first in the market does not necessarily guarantee the
most favorable price.
The following table presents information as to the allocation
of brokerage commissions paid by the Fund for the fiscal years
ended November 30, 1994, 1995 and 1996:
<TABLE>
<CAPTION>
For the Total Brokerage Commissions Total Amount of Transactions
Fiscal Year Brokerage Paid to Opco Where Brokerage
Ended Commissions Dollar Paid to Opco
November 30, Paid Amounts % Dollar Amounts %
<S> <C> <C> <C> <C> <C>
1994 $566,615 $16,402 2.89% $ 13,811,383 8.30%
1995 $644,312 $27,013 4.19% $ 22,043,449 10.90%
1996 $600,532 $25,132 4.18% $ 19,646,075 9.15%
</TABLE>
During the Fund's fiscal year ended November 30, 1996, $2,400
was paid by the Fund to brokers as commissions in return for
research services; the aggregate dollar amount of those
transactions was $1,517,549.
Performance of the Fund
Total Return Information. As described in the Prospectus, from
time to time the "average annual total return," "cumulative total
return" and "total return at net asset value" of an investment in
a class of shares of the Fund may be advertised. An explanation of
how these total returns are calculated for each class and the
components of those calculations is set forth below.
The Fund's advertisements of its performance data must, under
applicable rules of the Securities and Exchange Commission, include
the average annual total returns for each advertised class of
shares of the Fund for the 1, 5, and 10-year periods (or the life
of the class, if less) ending as of the most recently-ended
calendar quarter prior to the publication of the advertisement.
This enables an investor to compare the Fund's performance to the
performance of other funds for the same periods. However, a number
of factors should be considered before using such information as a
basis for comparison with other investments. An investment in the
Fund is not insured; its returns and share prices are not
guaranteed and normally will fluctuate on a daily basis. When
redeemed, an investor's shares may be worth more or less than their
original cost. Returns for any given past period are not a
prediction or representation by the Fund of future returns. The
returns of Class A, Class B and Class C shares of the Fund are
affected by portfolio quality, the type of investments the Fund
holds and its operating expenses allocated to the particular class.
Average Annual Total Returns. The "average annual total
return" of each class is an average annual compounded rate of
return for each year in a specified number of years. It is the
rate of return based on the change in value of a hypothetical
initial investment of $1,000 ("P" in the formula below) held for a
number of years ("n") to achieve an Ending Redeemable Value ("ERV")
of that investment, according to the following formula:
1/n
(ERV)
(---) -1 = Average Annual Total Return
( P )
The "average annual total returns" on an investment in Class
A shares of the Fund (using the method described above) for the one
and five year periods ended November 30, 1996 and for the period
from July 2, 1990 (commencement of operations) to November 30, 1996
were 9.90%, 13.30% and 9.26%, respectively. The average annual
total return on Class B shares for the one-year period ended
November 30, 1996 and for the period September 2, 1993
(commencement of the public offering of the class) through November
30, 1996 were 11.03% and 11.78%, respectively.
The average annual total return on Class C shares for the one-
year period ended November 30, 1996 and for the period September 2,
1993 (commencement of the public offering of the class) through
November 30, 1996 were 15.04% and 12.41%, respectively.
Cumulative Total Returns. The cumulative "total return"
calculation measures the change in value of a hypothetical
investment of $1,000 over an entire period of years. Its
calculation uses some of the same factors as average annual total
return, but it does not average the rate of return on an annual
basis. Cumulative total return is determined as follows:
ERV - P
------- = Total Return
P
In calculating total returns for Class A shares, the current
maximum sales charge of 5.75% (as a percentage of the offering
price) is deducted from the initial investment ("P") (unless the
return is shown at net asset value, as described below). Prior to
November 24, 1995, the maximum initial sales charge on Class A
shares was 5.50%. For Class B shares, the payment of the
applicable contingent deferred sales charge (5% for the first year,
4% for the second year, 3% for the third and fourth years, 2% for
the fifth year, 1% for the sixth year, and none thereafter) is
applied to the investment result for the period shown (unless the
total return is shown at net asset value, as described below). For
Class C shares, the 1.0% contingent deferred sales charge is
applied to the investment result for the one-year period (or less).
Total returns also assume that all dividends and capital gains
distributions during the period are reinvested to buy additional
shares at net asset value per share, and that the investment is
redeemed at the end of the period.
The "cumulative total return" on Class A shares for the period
from July 2, 1990 (commencement of operations) to November 30, 1996
was 76.40%. The cumulative total return on Class B shares for the
period from September 2, 1993 (commencement of the public offering
of the class) through November 30, 1996 was 43.57%. The cumulative
total return on Class C shares for the period from September 2,
1993 (commencement of the public offering of the class) through
November 30, 1996 was 46.20%.
Total Returns at Net Asset Value. From time to time the
Fund may also quote an "average annual total return at net asset
value" or a "cumulative total return at net asset value" for Class
A, Class B or Class C shares. Each is based on the difference in
net asset value per share at the beginning and the end of the
period for a hypothetical investment in that class of shares
(without considering front-end or contingent deferred sales
charges) and takes into consideration the reinvestment of dividends
and capital gains distributions.
The average annual total returns at net asset value on the
Fund's Class A shares for the one and five year periods ended
November 30, 1996 and for the period from July 2, 1990
(commencement of operations) to November 30, 1996 were 16.60%,
14.65% and 10.27%, respectively. The cumulative total return at
net asset value on the Fund's Class A shares for the period July 2,
1990 through November 30, 1996 was 87.16%.
The average annual total returns at net asset value on the
Fund's Class B shares for the one year period ended November 30,
1996 and for the period from September 2, 1993 (commencement of the
public offering of the class) through November 30, 1996 were 16.03%
and 12.49%, respectively. The cumulative total return at net asset
value on the Fund's Class B shares for the period September 2, 1993
through November 30, 1996 was 46.57%.
The average annual total returns at net asset value on the
Fund's Class C shares for the one-year period ended November 30,
1996 and for the period September 2, 1993 (commencement of the
public offering of the class) through November 30, 1996 were 16.04%
and 12.41%, respectively. The cumulative total return at net asset
value on the Fund's Class C shares for the period September 2, 1993
through November 30, 1996 was 46.20%.
Other Performance Comparisons. From time to time the Fund may
publish the ranking of its Class A, Class B or Class C shares by
Lipper Analytical Services, Inc. ("Lipper"), a widely-recognized
independent mutual fund monitoring service. Lipper monitors the
performance of regulated investment companies, including the Fund,
and ranks their performance for various periods based on categories
relating to investment objectives. The performance of the Fund is
ranked against (i) all other funds, (ii) all other "global" funds
and (iii) all other "global" funds in a specific size category.
The Lipper performance rankings are based on total returns that
include the reinvestment of capital gain distributions and income
dividends but do not take sales charges or taxes into
consideration.
From time to time the Fund may publish the star ranking of the
performance of its Class A, Class B or Class C shares by
Morningstar Inc., an independent mutual fund monitoring service.
Morningstar ranks mutual funds in broad investment categories:
domestic stock funds, international stock funds, taxable bond funds
and municipal bond funds, based on risk-adjusted total investment
returns. The Fund is ranked among global funds. Investment return
measure a fund's or class's one, three, five and ten-year average
annual total returns (depending on the inception of the fund or
class) in excess of 90-day U.S. Treasury bill returns after
considering the fund's sales charges and expenses. Risk measure a
fund's class performance below 90-day U.S. Treasury bill returns.
Risk and investment return are combined to produce star rankings
reflecting performance relative to the average fund in the fund's
category. Five stars is the "highest" ranking (top 10%), four
stars is "above average" (next 22.5%), three stars is "average"
(next 35%), two stars is "below average" (next 22.5%) and one star
is "lowest" (bottom 10%). The current star rankings is the fund's
or class's 3-year ranking or its combined 3 and 5-year ranking
(weighted 60%/40% respectively, or its combined 3-,5-and 10-year
ranking (weighted 40%, 30% and 30%, respectively) depending on the
inception of the fund or class. Rankings are subject to change
monthly.
The Fund may also compare its performance to that of other
funds in its Morningstar Category. In addition to its star
rankings, Morningstar also categorizes and compares a fund's 3-year
performance on Morningstar's classification of the fund's
investments and investment style, rather than how a fund defines
its investment objective. Morningstar's four broad categories
(domestic equity, international equity, municipal bond and taxable
bond) are each further subdivided into categories based on types of
investments and investment styles. Those comparison by Morningstar
are based on the same risk and return measurements as its star
rankings but do not consider the effect of sales charges.
The total return on an investment in the Fund's Class A, Class
B or Class C shares may be compared with performance for the same
period of the Morgan Stanley World Index, an unmanaged index of
issuers on the stock exchanges of 20 foreign countries and the
United States and widely recognized as a measure of global stock
market performance. The performance of such Index includes a
factor for the reinvestment of dividends but does not reflect
expenses or taxes. The performance of the Fund's Class A, Class B
or Class C shares may also be compared in publications to (i) the
performance of various market indices or to other investments for
which reliable performance data is available, and (ii) to averages,
performance rankings or other benchmarks prepared by recognized
mutual fund statistical services.
Total return information may be useful to investors in
reviewing the performance of the Fund's Class A, Class B or Class
C shares. However, when comparing total return of an investment in
Class A, Class B and Class C shares of the Fund, a number of
factors should be considered before using such information as a
basis for comparison with other investments. For example, an
investor may also wish to compare the Fund's Class A, Class B or
Class C return to the returns on fixed income investments available
from banks and thrift institutions, such as certificates of
deposit, ordinary interest-paying checking and savings accounts,
and other forms of fixed or variable time deposits, and various
other instruments such as Treasury bills. However, the Fund's
returns and share price are not guaranteed by the FDIC or any other
agency and will fluctuate daily, while bank depository obligations
may be insured by the FDIC and may provide fixed rates of return,
and Treasury bills are guaranteed as to principal and interest by
the U.S. government.
From time to time, the Fund's Manager may publish rankings or
ratings of the Manager (or Transfer Agent) or the investor services
provided by them to shareholders of the Oppenheimer funds, other
than performance rankings of the Oppenheimer funds themselves.
Those ratings or rankings of shareholder/investor services by third
parties may compare the Oppenheimer funds' services to those of
other mutual fund families selected by the rating or ranking
services and may be based upon the opinions of the rating or
ranking service itself, based on its research or judgment, or based
upon surveys of investors, brokers, shareholders or others.
Distribution and Service Plans
The Fund has adopted separate Amended and Restated
Distribution and Service Plans and Agreements for Class A, Class B
and Class C shares of the Fund under Rule 12b-1 of the Investment
Company Act pursuant to which the Fund will compensate the
Distributor for all or a portion of its costs incurred in
connection with the distribution and/or servicing of the shares of
that class, as described in the Prospectus. Each Plan has been
approved by a vote of (i) the Board of Directors of the Fund,
including a majority of the Directors who are not "interested
persons" (as defined in the Investment Company Act) of the Fund and
who have no direct or indirect financial interest in the operation
of the Fund's 12b-1 plans or in any related agreement ("Independent
Directors"), cast in person at a meeting on June 22, 1995 called
for the purpose, among others, of voting on that Plan, and (ii) the
holders of a "majority" (as defined in the Investment Company Act)
of the shares of each class at a meeting on November 3, 1995.
In addition, under the Plans the Manager and the Distributor,
in their sole discretion, from time to time may use their own
resources (which, in the case of the Manager, may include profits
from the advisory fee it receives from the Fund) to make payments
to brokers, dealers or other financial institutions (each is
referred to as a "Recipient" under the Plans) for distribution and
administrative services they perform at no cost to the Fund. The
Distributor and the Manager may, in their sole discretion, increase
or decrease the amount of payments they make from their own
resources to Recipients.
Unless terminated as described below, each plan continues in
effect from year to year but only as long as such continuance is
specifically approved at least annually by the Fund's Board of
Directors and its "Independent Directors" by a vote cast in person
at a meeting called for the purpose of voting on such continuance.
Any Plan may be terminated at any time by the vote of a majority of
the Independent Directors or by the vote of the holders of a
"majority" (as defined in the Investment Company Act) of the
outstanding shares of that class. No Plan may be amended to
increase materially the amount of payments to be made unless such
amendment is approved by shareholders of the class affected by the
amendment. In addition, because Class B shares of the Fund
automatically convert into Class A shares after six years, the Fund
is required by a Securities and Exchange Commission rule to obtain
the approval of Class B as well as Class A shareholders for a
proposed material amendment to the Class A Plan that would
materially increase payments under the Plan. Such approval must be
by a "majority" of the Class A and Class B shares (as defined in
the Investment Company Act), voting separately by class. All
material amendments must be approved by the Board of Directors and
the Independent Directors.
While the Plans are in effect, the Treasurer of the Fund shall
provide separate written reports to the Fund's Board of Directors
at least quarterly on the amount of all payments made pursuant to
each Plan, the purpose for which the payments were made and the
identity of each Recipient that received any such payment. The
reports shall also include the distribution costs for that quarter,
and such costs for previous fiscal periods that are carried
forward, as explained in the Prospectus and below. Those reports,
including the allocations on which they are based, will be subject
to the review and approval of the Independent Directors in the
exercise of their fiduciary duty. Each Plan further provides that
while it is in effect, the selection and nomination of those
Directors of the Fund who are not "interested persons" of the Fund
is committed to the discretion of the Independent Directors. This
does not prevent the involvement of others in such selection and
nomination if the final decision on any such selection or
nomination is approved by a majority of the Independent Directors.
Under the Plans, no payment will be made to any Recipient in
any quarter if the aggregate net asset value of all Fund shares
held by the Recipient for itself and its customers did not exceed
a minimum amount, if any, that may be determined from time to time
by a majority of the Fund's Independent Directors. Initially, the
Board of Directors has set the fee at the maximum rate and set no
requirement for a minimum amount.
The Plans allow the service fee payments to be paid by the
Distributor to Recipients in advance for the first year Class B and
Class C shares are outstanding, and thereafter on a quarterly
basis, as described in the Prospectus. The advance payment is
based on the net assets of shares of that class sold. An exchange
of shares does not entitle the Recipient to an advance service fee
payment. In the event shares are redeemed during the first year
such shares are outstanding, the Recipient will be obligated to
repay a pro rata portion of such advance payment to the
Distributor.
Although the Plans permit the Distributor to retain both the
asset-based sales charge and the service fee, or to pay Recipients
the service fee on a quarterly basis, without payment in advance,
the Distributor presently intends to pay the service fee to
Recipients in the manner described above. A minimum holding period
may be established from time to time under the Plans by the Board.
Initially, the Board has set no minimum holding period. All
payments under the Class B and Class C Plans are subject to the
limitations imposed by the Conduct Rules of the National
Association of Securities Dealers, Inc. on payments of asset-based
sales charges and service fees.
For the year ended November 30, 1996 (i) payments under the
Plan for Class A shares totaled $872,871 of which $2,212 that was
paid to an affiliate of the Distributor, (ii) payments made under
the Class B Plan totaled $272,933, of which $234,056 was retained
by the Distributor and (iii) payments made under the Class C plan
totaled to $101,197, of which $63,112 was retained by the
Distributor. The Plans provide for the Distributor to be
compensated at a flat rate, whether the Distributor's expenses are
more or less than the amounts paid by the Fund during that period.
The asset-based sales charges paid to the Distributor by the Fund
under the Plans are intended to allow the Distributor to recoup the
cost of sales commissions paid to authorized brokers and dealers at
the time of sale, plus financing costs, as described in the
Prospectus. Such payments may also be used to pay for the
following expenses in connection with the distribution of shares:
(i) financing the advance of the service fee payment to Recipients
under the Plan, (ii) compensation and expenses of personnel
employed by the Distributor to support distribution of shares, and
(iii) costs of sales literature, advertising and prospectuses
(other than those furnished to current shareholders).
The Prior Plans. From the inception date of the Fund (on
July 2, 1990) through to and including November 22, 1995, OpCap
Distributors (formerly known as Quest for Value Distributors)
served as Distributor to the Fund. OpCap Distributors provided
distribution services for the Fund's Class A, Class B and Class C
shares pursuant to separate plans adopted for each class under the
Investment Company Act (the "Prior Plans").
ABOUT YOUR ACCOUNT
How To Buy Shares
Alternative Sales Arrangements - Class A, Class B and Class C
Shares. The availability of three classes of shares permits the
individual investor to choose the method of purchasing shares that
is more beneficial to the investor depending on the amount of the
purchase, the length of time the investor expects to hold shares
and other relevant circumstances. Investors should understand that
the purpose and function of the deferred sales charge and asset-
based sales charge with respect to Class B and Class C shares are
the same as those of the initial sales charge with respect to Class
A shares. Any salesperson or other person entitled to receive
compensation for selling Fund shares may receive different
compensation with respect to one class of shares than another. The
Distributor will generally not accept any order for $500,000 or
more of Class B shares or $1 million or more of Class C shares, on
behalf of a single investor (not including dealer "street name" or
omnibus accounts) because generally it will be more advantageous
for that investor to purchase Class A shares of the Fund instead.
The three classes of shares each represent an interest in the
same portfolio investments of the Fund. However, each class has
different shareholder privileges and features. The net income
attributable to Class B and Class C shares and the dividends
payable on Class B and Class C shares will be reduced by
incremental expenses borne solely by that class, respectively,
including the asset-based sales charges to which Class B and Class
C shares are subject.
The conversion of Class B shares to Class A shares after six
years is subject to the continuing availability of a private letter
ruling from the Internal Revenue Service, or an opinion of counsel
or tax adviser, to the effect that the conversion of Class B shares
does not constitute a taxable event for the holder under Federal
income tax law. If such a revenue ruling or opinion is no longer
available, the automatic conversion feature may be suspended, in
which event no further conversions of Class B shares would occur
while such suspension remained in effect. Although Class B shares
could then be exchanged for Class A shares on the basis of relative
net asset value of the two classes, without the imposition of a
sales charge or fee, such exchange could constitute a taxable event
for the holder, and absent such exchange, Class B shares might
continue to be subject to the asset-based sales charge for longer
than six years.
The methodology for calculating the net asset value, dividends
and distributions of the Fund's Class A, Class B and Class C shares
recognizes two types of expenses. General expenses that do not
pertain specifically to either class are allocated pro rata to the
shares of each class, based on the percentage of the net assets of
such class to the Fund's total net assets, and then equally to each
outstanding share within a given class. Such general expenses
include (i) management fees, (ii) legal, bookkeeping and audit
fees, (iii) printing and mailing costs of shareholder reports,
Prospectuses, Statements of Additional Information and other
materials for current shareholders, (iv) fees to Independent
Directors, (v) custodian expenses, (vi) share issuance costs, (vii)
organization and start-up costs, (viii) interest, taxes and
brokerage commissions, and (ix) non-recurring expenses, such as
litigation costs. Other expenses that are directly attributable to
a class are allocated equally to each outstanding share within that
class. Such expenses include (a) Distribution and Service Plan
fees, (b) incremental transfer and shareholder servicing agent fees
and expenses, (c) registration fees and (d) shareholder meeting
expenses, to the extent that such expenses pertain to a specific
class rather than to the Fund as a whole.
Determination of Net Asset Values Per Share. The net asset values
per share of Class A, Class B and Class C shares of the Fund are
determined as of the close of business of The New York Stock
Exchange (the "Exchange") on each day that the Exchange is open, by
dividing the value of the Fund's net assets attributable to that
class by the total number of Fund shares of that class outstanding.
The Exchange normally closes at 4:00 P.M. New York time, but may
close earlier on some other days (for example, in case of weather
emergencies or days falling before a holiday). The Exchange's most
recent annual announcement (which is subject to change) states that
it will close on New Year's Day, President's Day, Good Friday,
Memorial Day, Independence Day, Labor Day, Thanksgiving Day and
Christmas Day. It may also close on other days. The Fund may
invest a substantial portion of its assets in foreign securities
primarily listed on foreign exchanges which may trade on Saturdays
or customary U.S. business holidays on which the Exchange is
closed. Because the Fund's net asset values will not be calculated
on those days, the Fund's net asset value per share may be
significantly affected on such days when shareholders may not
purchase or redeem shares.
The Fund's Board of Directors has established procedures for
the valuation of the Fund's securities, generally as follows: (i)
equity securities traded on a U.S. securities exchange or on the
Automated Quotation System ("NASDAQ") of the Nasdaq Stock Market,
Inc. for which last sale information is regularly reported are
valued at the last reported sale price on their primary exchange or
NASDAQ that day (or, in the absence of sales that day, at values
based on the last sale prices of the preceding trading day, or
closing bid prices that day); (ii) securities traded on a foreign
securities exchange are valued generally at the last sale price
available to the pricing service approved by the Fund's Board of
Directors or to the Manager as reported by the principal exchange
on which the security is traded; or at the mean between "bid" and
"asked" prices obtained from the principal exchange or two active
market makers in the security on the basis of reasonable inquiry;
(iii) long-term debt securities having a remaining maturity in
excess of 60 days are valued based on the mean between the "bid"
and "asked" prices determined by a portfolio pricing service
approved by the Fund's Board of Directors or obtained by the
Manager from two active market makers in the security on the basis
of reasonable inquiry; (iv) debt instruments having a maturity of
more than 397 days when issued, and non-money market type
instruments having a maturity of 397 days or less when issued,
which have a remaining maturity of 60 days or less are valued at
the mean between the "bid" and "asked" prices determined by a
pricing service approved by the Fund's Board of Directors or
obtained from active market makers in the security on the basis of
reasonable inquiry; (v) money market debt securities that had a
maturity of less than 397 days when issued that have a remaining
maturity of 60 days or less are valued at cost, adjusted for
amortization of premiums and accretion of discounts; and (vi)
securities (including restricted securities) not having readily-
available market quotations are valued at fair value determined
under the Board's procedures. If the Manager is unable to locate
two market makers willing to give quotes (see (ii), (iii) and (iv)
above), the security may be priced at the mean between the "bid"
and "asked" prices provided by a single active market maker (which
in certain cases may be the bid price if no ask price is
available).
In the case of U.S. Government securities and mortgage-backed
securities, where last sale information is not generally available,
such pricing procedures may include "matrix" comparisons to the
prices for comparable instruments on the basis of quality, yield,
maturity and other special factors involved. The Manager may use
any of the pricing services approved by the Board of Directors to
price any of the types of securities described above and to price
U.S. Government securities, mortgage-backed securities, foreign
government securities and corporate bonds. The Manager will
monitor the accuracy of such pricing services, which may include
comparing prices used for portfolio evaluation to actual sales
prices of selected securities.
Trading in securities on European and Asian exchanges and
over-the-counter markets is normally completed before the close of
the Exchange. Events affecting the values of foreign securities
traded in such markets that occur between the time their prices are
determined and the close of the Exchange will not be reflected in
the Fund's calculation of its net asset value unless the Board of
Directors or the Manager, under procedures established by the Board
of Directors, determines that the particular event would materially
affect the Fund's net asset values, in which case an adjustment
would be made. Foreign currency, including forward contracts, will
be valued at the closing price in the London foreign exchange
market that day as provided by a reliable bank, dealer or pricing
service. The values of securities denominated in foreign currency
will be converted to U.S. dollars at the closing price in the
London foreign exchange market that day as provided by a reliable
bank, dealer or pricing service.
Puts, calls and futures are valued at the last sale price on
the principal exchanges on which they are traded or on NASDAQ, as
applicable, as determined by a pricing service approved by the
Board of Directors or by the Manager. If there were no sales that
day, value shall be the last sale price on the preceding trading
day if it is within the spread of the closing bid and ask prices
on the principal exchange or on NASDAQ on the valuation date, or,
if not, value shall be the closing bid price on the principal
exchange or on NASDAQ on the valuation date. If the put, call or
future is not traded on an exchange or on NASDAQ, it shall be
valued at the mean between bid and ask prices obtained by the
Manager from two active market makers (which in certain cases may
be the bid price if no ask price is available).
When the Fund writes an option, an amount equal to the premium
received by the Fund is included in the Fund's Statement of Assets
and Liabilities as an asset, and an equivalent deferred credit is
included in the liability section. Credit is adjusted ("marked-to-
market") to reflect the current market value of the option. In
determining the Fund's gain on investments, if a call or put
written by the Fund is exercised, the proceeds are increased by the
premium received. If a call or put written by the Fund expires,
the Fund has a gain in the amount of the premium; if the Fund
enters into a closing purchase transaction, it will have a gain or
loss depending on whether the premium received was more or less
than the cost of the closing transaction. If the Fund exercises a
put it holds, the amount the Fund receives on its sale of the
underlying investment is reduced by the amount of premium paid by
the Fund.
AccountLink. When shares are purchased through AccountLink, each
purchase must be at least $25.00. Shares will be purchased on the
regular business day the Distributor is instructed to initiate the
Automated Clearing House ("ACH") transfer to buy the shares.
Dividends will begin to accrue on shares purchased by the proceeds
of ACH transfers on the business day the Fund receives Federal
Funds for the purchase through the ACH system before the close of
The New York Stock Exchange. The Exchange normally closes at 4:00
P.M., but may close earlier on certain days. If Federal Funds are
received on a business day after the close of the Exchange, the
shares will be purchased and dividends will begin to accrue on the
next regular business day. The proceeds of ACH transfers are
normally received by the Fund 3 days after the transfers are
initiated. The Distributor and the Fund are not responsible for
any delays in purchasing shares resulting from delays in ACH
transmissions.
Reduced Sales Charges. As discussed in the Prospectus, a reduced
sales charge rate may be obtained for Class A shares under Rights
of Accumulation and Letters of Intent because of the economies of
sales efforts and reduction in expenses realized by the
Distributor, dealers and brokers making such sales. No sales
charge is imposed in certain other circumstances described in the
Prospectus because the Distributor or broker or dealer incurs
little or no selling expenses. The term "immediate family" refers
to one's spouse, children, grandchildren, parents, grandparents,
parents-in-law, sons- and daughters-in-law, aunts, uncles, nieces,
nephews, siblings, a sibling's spouse and a spouse's siblings.
The Oppenheimer Funds. The Oppenheimer funds are those
mutual funds for which the Distributor acts as the distributor or
the sub-distributor and include the following:
Oppenheimer Municipal Bond Fund
Oppenheimer New York Municipal Fund
Oppenheimer California Municipal Fund
Oppenheimer Intermediate Municipal Fund
Oppenheimer Insured Municipal Fund
Oppenheimer Main Street California Municipal Fund
Oppenheimer Florida Municipal Fund
Oppenheimer Pennsylvania Municipal Fund
Oppenheimer New Jersey Municipal Fund
Oppenheimer Fund
Oppenheimer Discovery Fund
Oppenheimer Capital Appreciation Fund
Oppenheimer Growth Fund
Oppenheimer Equity Income Fund
Oppenheimer Value Stock Fund
Oppenheimer Multiple Strategies Fund
Oppenheimer Total Return Fund, Inc.
Oppenheimer Main Street Income & Growth Fund
Oppenheimer High Yield Fund
Oppenheimer Champion Income Fund
Oppenheimer Bond Fund
Oppenheimer U.S. Government Trust
Oppenheimer Limited-Term Government Fund
Oppenheimer Global Fund
Oppenheimer Global Emerging Growth Fund
Oppenheimer Global Growth & Income Fund
Oppenheimer Gold & Special Minerals Fund
Oppenheimer Strategic Income Fund
Oppenheimer Strategic Income & Growth Fund
Oppenheimer International Bond Fund
Oppenheimer Enterprise Fund
Oppenheimer Quest Opportunity Value Fund
Oppenheimer Quest Growth & Income Value Fund
Oppenheimer Quest Small Cap Value Fund
Oppenheimer Quest Officers Value Fund
Oppenheimer Quest Global Value Fund, Inc.
Oppenheimer Quest Value Fund, Inc.
Oppenheimer Quest Capital Value Fund, Inc.
Oppenheimer Bond Fund for Growth
Limited-Term New York Municipal Fund*
Rochester Fund Municipals*
Oppenheimer Disciplined Value Fund
Oppenheimer Disciplined Allocation Fund
Oppenheimer LifeSpan Balanced Fund
Oppenheimer LifeSpan Income Fund
Oppenheimer LifeSpan Growth Fund
Oppenheimer Developing Markets Fund
Oppenheimer International Growth Fund
and the following "Money Market Funds":
Oppenheimer Money Market Fund, Inc.
Oppenheimer Cash Reserves
Centennial Money Market Trust
Centennial Tax Exempt Trust
Centennial Government Trust
Centennial New York Tax Exempt Trust
Centennial California Tax Exempt Trust
Centennial America Fund, L.P.
Daily Cash Accumulation Fund, Inc.
____________________
* Shares of the Fund are not presently exchangeable for shares of
this fund.
There is an initial sales charge on the purchase of Class A
shares of each of the Oppenheimer funds except Money Market Funds
(under certain circumstances described herein, redemption proceeds
of Money Market Fund shares may be subject to a contingent
deferred sales charge).
Letters of Intent. A Letter of Intent ("Letter") is an
investor's statement in writing to the Distributor of the intention
to purchase Class A shares or Class A and Class B shares (or shares
of either class) of the Fund (and other eligible Oppenheimer funds)
during the 13-month period from the investor's first purchase
pursuant to the Letter (the "Letter of Intent period"), which may,
at the investor's request, include purchases made up to 90 days
prior to the date of the Letter. The Letter states the investor's
intention to make the aggregate amount of purchases (excluding any
purchases made by reinvestment of dividends or distributions or
purchases made at net asset value without sales charge), which
together with the investor's holdings of such funds (calculated at
their respective public offering prices calculated on the date of
the Letter) will equal or exceed the amount specified in the
Letter. This enables the investor to count the shares to be
purchased under the Letter of Intent to obtain the reduced sales
charge rate on purchases of Class A shares of the Fund (and other
Oppenheimer funds) that applies under the Right of Accumulation to
current purchases of Class A shares. Each purchase of Class A
shares under the Letter will be made at the public offering price
(including the sales charge) that applies to a single lump-sum
purchase of shares in the amount intended to be purchased under the
Letter.
In submitting a Letter, the investor makes no commitment to
purchase shares, but if the investor's purchases of shares within
the Letter of Intent period, when added to the value (at offering
price) of the investor's holdings of shares on the last day of that
period, do not equal or exceed the intended purchase amount, the
investor agrees to pay the additional amount of sales charge
applicable to such purchases, as set forth in "Terms of Escrow,"
below (as those terms may be amended from time to time). The
investor agrees that shares equal in value up to 5% of the intended
purchase amount will be held in escrow by the Transfer Agent
subject to the Terms of Escrow. Also, the investor agrees to be
bound by the terms of the Prospectus, this Statement of Additional
Information and the Application used for such Letter of Intent, and
if such terms are amended, as they may be from time to time by the
Fund, that those amendments will apply automatically to existing
Letters of Intent.
For purchases of shares of the Fund and other Oppenheimer
funds by OppenheimerFunds prototype 401(k) plans under a Letter of
Intent, the Transfer Agent will not hold shares in escrow. If the
intended purchase amount under the Letter entered into by an
OppenheimerFunds prototype 401(k) plan is not purchased by the plan
by the end of the Letter of Intent period, there will be no
adjustment of commissions paid to the broker-dealer or financial
institution of record for accounts held in the name of that plan.
If the total eligible purchases made during the Letter of
Intent period do not equal or exceed the intended purchase amount,
the commissions previously paid to the dealer of record for the
account and the amount of sales charge retained by the Distributor
will be adjusted to the rates applicable to actual total purchases.
If total eligible purchases during the Letter of Intent period
exceed the intended purchase amount and exceed the amount needed to
qualify for the next sales charge rate reduction set forth in the
applicable prospectus, the sales charges paid will be adjusted to
the lower rate, but only if and when the dealer returns to the
Distributor the excess of the amount of commissions allowed or paid
to the dealer over the amount of commissions that apply to the
actual amount of purchases. The excess commissions returned to the
Distributor will be used to purchase additional shares for the
investor's account at the net asset value per share in effect on
the date of such purchase, promptly after the Distributor's receipt
thereof.
In determining the total amount of purchases made under a
Letter, shares redeemed by the investor prior to the termination of
the Letter of Intent period will be deducted. It is the
responsibility of the dealer of record and/or the investor to
advise the Distributor about the Letter in placing any purchase
orders for the investor during the Letter of Intent period. All
of such purchases must be made through the Distributor.
Terms of Escrow That Apply to Letters of Intent.
1. Out of the initial purchase (or subsequent purchases if
necessary) made pursuant to a Letter, shares of the Fund equal in
value up to 5% of the intended purchase amount specified in the
Letter shall be held in escrow by the Transfer Agent. For example,
if the intended purchase amount is $50,000, the escrow shall be
shares valued in the amount of $2,500 (computed at the public
offering price adjusted for a $50,000 purchase). Any dividends and
capital gains distributions on the escrowed shares will be credited
to the investor's account.
2. If the total minimum investment purchase amount specified
under the Letter is completed within the thirteen-month Letter of
Intent period, the escrowed shares will be promptly released to the
investor.
3. If, at the end of the thirteen-month Letter of Intent
period the total purchases pursuant to the Letter are less than the
intended purchase amount specified in the Letter, the investor must
remit to the Distributor an amount equal to the difference between
the dollar amount of sales charges actually paid and the amount of
sales charges which would have been paid if the total amount
purchased had been made at a single time. Such sales charge
adjustment will apply to any shares redeemed prior to the
completion of the Letter. If such difference in sales charges is
not paid within twenty days after a request from the Distributor or
the dealer, the Distributor will, within sixty days of the
expiration of the Letter, redeem the number of escrowed shares
necessary to realize such difference in sales charges. Full and
fractional shares remaining after such redemption will be released
from escrow. If a request is received to redeem escrowed shares
prior to the payment of such additional sales charge, the sales
charge will be withheld from the redemption proceeds.
4. By signing the Letter, the investor irrevocably
constitutes and appoints the Transfer Agent as attorney-in-fact to
surrender for redemption any or all escrowed shares.
5. The shares eligible for purchase under the Letter (or the
holding of which may be counted toward completion of a Letter)
include (a) Class A shares sold with a front-end sales charge or
subject to a Class A contingent deferred sales charge, (b) Class B
shares of other Oppenheimer funds acquired subject to a contingent
deferred sales charge, and (c) Class A shares or Class B shares
acquired in exchange for either (i) Class A shares of one of the
other Oppenheimer funds that were acquired subject to a Class A
initial or contingent deferred sales charge or (ii) Class B shares
of one of the other Oppenheimer funds that were acquired subject to
a contingent deferred sales charge.
6. Shares held in escrow hereunder will automatically be
exchanged for shares of another fund to which an exchange is
requested, as described in the section of the Prospectus entitled
"How to Exchange Shares," and the escrow will be transferred to
that other fund.
Asset Builder Plans. To establish an Asset Builder Plan from a
bank account, a check (minimum $25) for the initial purchase must
accompany the application. Shares purchased by Asset Builder Plan
payments from bank accounts are subject to the redemption
restrictions for recent purchases described in "Shareholder Account
Rules and Policies," in the Prospectus. Asset Builder Plans also
enable shareholders of Oppenheimer Cash Reserves to use those
accounts for monthly automatic purchases of shares of up to four
other Oppenheimer funds. If you make payments from your bank
account to purchase shares of the Fund, your bank account will be
automatically debited normally four to five business days prior to
the investment dates selected in the Account Application. Neither
the Distributor, the Transfer Agent nor the Fund shall be
responsible for any delays in purchasing shares resulting from
delays in ACH transmission.
There is a front-end sales charge on the purchase of certain
Oppenheimer funds, or a contingent deferred sales charge may apply
to shares purchased by Asset Builder payments. An application
should be obtained from the Distributor, completed and returned,
and a prospectus of the selected fund(s) should be obtained from
the Distributor or your financial advisor before initiating Asset
Builder payments. The amount of the Asset Builder investment may
be changed or the automatic investments may be terminated at any
time by writing to the Transfer Agent. A reasonable period
(approximately 15 days) is required after the Transfer Agent's
receipt of such instructions to implement them. The Fund reserves
the right to amend, suspend, or discontinue offering such plans at
any time without prior notice.
Cancellation of Purchase Orders. Cancellation of purchase orders
for the Fund's shares (for example, when a purchase check is
returned to the Fund unpaid) causes a loss to be incurred when the
net asset value of the Fund's shares on the cancellation date is
less than on the purchase date. That loss is equal to the amount
of the decline in the net asset value per share multiplied by the
number of shares in the purchase order. The investor is
responsible for that loss. If the investor fails to compensate the
Fund for the loss, the Distributor will do so. The Fund may
reimburse the Distributor for that amount by redeeming shares from
any account registered in that investor's name, or the Fund or the
Distributor may seek other redress.
Retirement Plans. In describing certain types of employee benefit
plans that may purchase Class A shares without being subject to the
Class A contingent differed sales charge, the term "employee
benefit plan" means any plan or arrangement, whether or not
"qualified" under the Internal Revenue Code, including, medical
savings accounts, payroll deduction plans or similar plans in which
Class A shares are purchased by a fiduciary or other person for the
account of participants who are employees of a single employer or
of affiliated employers, if the Fund account is registered in the
name of the fiduciary or other person for the benefit of
participants in the plan.
The term "group retirement plan" means any qualified or non-
qualified retirement plan (including 457 plans, SEPs, SARSEPs,
403(b) plans, and SIMPLE plans) for employees of a corporation or
a sole proprietorship, members and employees of a partnership or
association or other organized group of persons (the members of
which may include other groups), if the group has made special
arrangements with the Distributor and all members of the group
participating in the plan purchase Class A shares of the Fund
through a single investment dealer, broker or other financial
institution designated by the group.
How to Sell Shares
Information on how to sell shares of the Fund is stated in the
Prospectus. The information below supplements the terms and
conditions for redemptions set forth in the Prospectus.
Involuntary Redemptions. The Board of Directors has the
right to cause the involuntary redemption of the shares held in any
Fund account if the aggregate net asset value of those shares is
less than $200 or such lesser amount as the Board may fix. The
Board of Directors will not cause the involuntary redemption of
shares in an account if the aggregate net asset value of the shares
has fallen below the stated minimum solely as a result of market
fluctuations. Should the Board elect to exercise this right, it
may also fix, in accordance with the Investment Company Act, the
requirements for any notice to be given to the shareholders in
question (not less than 30 days), or the Board may set requirements
for granting permission to the Shareholder to increase the
investment, and set other terms and conditions so that the shares
would not be involuntarily redeemed.
Reinvestment Privilege. Within six months of a redemption, a
shareholder may reinvest all or part of the redemption proceeds of
(i) Class A shares that you purchased subject to an initial sales
charge or Class A contingent deferred sales charge, or (ii) Class
B shares on which you paid a contingent deferred sales charge when
you redeemed them. This privilege does not apply to Class C
shares. The reinvestment may be made without sales charge only in
Class A shares of the Fund or any of the other Oppenheimer funds
into which shares of the Fund are exchangeable as described in "How
to Exchange Shares" below, at the net asset value next computed
after the Transfer Agent receives the reinvestment order. The
shareholder must ask the Distributor for that privilege at the time
of reinvestment. Any capital gain that was realized when the
shares were redeemed is taxable, and reinvestment will not alter
any capital gains tax payable on that gain. If there has been a
capital loss on the redemption, some or all of the loss may not be
tax deductible, depending on the timing and amount of the
reinvestment. Under the Internal Revenue Code, if the redemption
proceeds of Fund shares on which a sales charge was paid are
reinvested in shares of the Fund or another of the Oppenheimer
funds within 90 days of payment of the sales charge, the
shareholder's basis in the shares of the Fund that were redeemed
may not include the amount of the sales charge paid. That would
reduce the loss or increase the gain recognized from the
redemption. However, in that case the sales charge would be added
to the basis of the shares acquired by the reinvestment of the
redemption proceeds. The Fund may amend, suspend or cease offering
this reinvestment privilege at any time as to shares redeemed after
the date of such amendment, suspension or cessation.
Transfers of Shares. Shares are not subject to the payment of a
contingent deferred sales charge of any class at the time of
transfer to the name of another person or entity (whether the
transfer occurs by absolute assignment, gift or bequest, not
involving, directly or indirectly, a public sale). The transferred
shares will remain subject to the contingent deferred sales charge,
calculated as if the transferee shareholder had acquired the
transferred shares in the same manner and at the same time as the
transferring shareholder. If less than all shares held in an
account are transferred, and some but not all shares in the account
would be subject to a contingent deferred sales charge if redeemed
at the time of transfer, the priorities described in the Prospectus
under "How to Buy Shares" for the imposition of the Class B and
Class C contingent deferred sales charge will be followed in
determining the order in which shares are transferred.
Distributions From Retirement Plans. Requests for distributions
from OppenheimerFunds-sponsored IRAs, 403(b)(7) custodial plans,
401(k) plans, or pension or profit-sharing plans should be
addressed to "Trustee, OppenheimerFunds Retirement Plans," c/o the
Transfer Agent at its address listed in "How To Sell Shares" in the
Prospectus or on the back cover of the Statement of Additional
Information. The request must: (i) state the reason for the
distribution; (ii) state the owner's awareness of tax penalties if
the distribution is premature; and (iii) conform to the
requirements of the plan and the Fund's other redemption
requirements. Participants, other than self-employed persons
maintaining a plan account in their own name, in OppenheimerFunds-
sponsored prototype pension or profit-sharing or 401(k) plans may
not directly redeem or exchange shares held for their account under
those plans. The employer or plan administrator must sign the
request. Distributions from pension, profit sharing plans or
401(k) plans are subject to special requirements under the Internal
Revenue Code and certain documents (available from the Transfer
Agent) must be completed before the distribution may be made.
Distributions from retirement plans are subject to withholding
requirements under the Internal Revenue Code, and IRS Form W-4P
(available from the Transfer Agent) must be submitted to the
Transfer Agent with the distribution request, or the distribution
may be delayed. Unless the shareholder has provided the Transfer
Agent with a certified tax identification number, the Internal
Revenue Code requires that tax be withheld from any distribution
even if the shareholder elects not to have tax withheld. The Fund,
the Manager, the Distributor, the Trustee and the Transfer Agent
assume no responsibility to determine whether a distribution
satisfies the conditions of applicable tax laws and will not be
responsible for any tax penalties assessed in connection with a
distribution.
Special Arrangements for Repurchase of Shares from Dealers and
Brokers. The Distributor is the Fund's agent to repurchase its
shares from authorized dealers or brokers on behalf of their
customers. The shareholder should contact the broker or dealer to
arrange this type of redemption. The repurchase price per share
will be the net asset value next computed after the Distributor
receives the order placed by the dealer or broker, except that if
the Distributor receives a repurchase order from the dealer or
broker after the close of The New York Stock Exchange on a regular
business day, it will be processed at that day's net asset value,
if the order was received by the dealer or broker from its customer
prior to the time the Exchange closes (normally, that is 4:00 P.M.,
but may be earlier on some days) and the order was transmitted to
and received by the Distributor prior to its close of business that
day (normally 5:00 P.M.). Ordinarily, for accounts redeemed by a
broker-dealer under this procedure, payment will be made within
three business days after the shares have been redeemed upon the
Distributor's receipt of the required redemption documents in
proper form, with the signature(s) of the registered owners
guaranteed on the redemption document as described in the
Prospectus.
Automatic Withdrawal and Exchange Plans. Investors owning shares
of the Fund valued at $5,000 or more can authorize the Transfer
Agent to redeem shares (minimum $50) automatically on a monthly,
quarterly, semi-annual or annual basis under an Automatic
Withdrawal Plan. Shares will be redeemed three business days prior
to the date requested by the shareholder for receipt of the
payment. Automatic withdrawals of up to $1,500 per month may be
requested by telephone if payments are to be made by check payable
to all shareholders of record and sent to the address of record for
the account (and if the address has not been changed within the
prior 30 days). Required minimum distributions from
OppenheimerFunds-sponsored retirement plans may not be arranged on
this basis. Payments are normally made by check, but shareholders
having AccountLink privileges (see "How To Buy Shares") may arrange
to have Automatic Withdrawal Plan payments transferred to the bank
account designated on the OppenheimerFunds New Account Application
or signature-guaranteed instructions. Shares are normally redeemed
pursuant to an Automatic Withdrawal Plan three business days before
the date you select in the Account Application. If a contingent
deferred sales charge applies to the redemption, the amount of the
check or payment will be reduced accordingly. The Fund cannot
guarantee receipt of a payment on the date requested and reserves
the right to amend, suspend or discontinue offering such plans at
any time without prior notice. Because of the sales charge
assessed on Class A share purchases, shareholders should not make
regular additional Class A share purchases while participating in
an Automatic Withdrawal Plan. Class B and Class C shareholders
should not establish withdrawal plans because of the imposition of
the contingent deferred sales charges on such withdrawals (except
where the Class B and Class C contingent deferred sales charges are
waived as described in the Prospectus under "Waivers of Class B and
Class C Contingent Deferred Sales Charges").
By requesting an Automatic Withdrawal or Exchange Plan, the
shareholder agrees to the terms and conditions applicable to such
plans, as stated below, as well as the Prospectus. These
provisions may be amended from time to time by the Fund and/or the
Distributor. When adopted, such amendments will automatically
apply to existing Plans.
Automatic Exchange Plans. Shareholders can authorize the
Transfer Agent (on the OppenheimerFunds Application or signature-
guaranteed instructions) to exchange a pre-determined amount of
shares of the Fund for shares (of the same class) of other
Oppenheimer funds automatically on a monthly, quarterly, semi-
annual or annual basis under an Automatic Exchange Plan. The
minimum amount that may be exchanged to each other fund account is
$25. Exchanges made under these plans are subject to the
restrictions that apply to exchanges as set forth in "How to
Exchange Shares" in the Prospectus and below in this Statement of
Additional Information.
Automatic Withdrawal Plans. Fund shares will be redeemed as
necessary to meet withdrawal payments. Shares acquired without a
sales charge will be redeemed first and shares acquired with
reinvested dividends and capital gains distributions will be
redeemed next, followed by shares acquired with a sales charge, to
the extent necessary to make withdrawal payments. Depending upon
the amount withdrawn, the investor's principal may be depleted.
Payments made under withdrawal plans should not be considered as a
yield or income on your investment. It may not be desirable to
purchase additional Class A shares while making automatic
withdrawals because of the sales charges that apply to purchases
when made. Accordingly, a shareholder normally may not maintain an
Automatic Withdrawal Plan while simultaneously making regular
purchases of Class A shares.
The Transfer Agent will administer the investor's Automatic
Withdrawal Plan (the "Plan") as agent for the investor (the
"Planholder") who executed the Plan authorization and application
submitted to the Transfer Agent. Neither the Transfer Agent nor
the Fund shall incur any liability to the Planholder for any action
taken or omitted by the Transfer Agent in good faith to administer
the Plan. Certificates will not be issued for shares of the Fund
purchased for and held under the Plan, but the Transfer Agent will
credit all such shares to the account of the Planholder on the
records of the Fund. Any share certificates held by a Planholder
may be surrendered unendorsed to the Transfer Agent with the Plan
application so that the shares represented by the certificate may
be held under the Plan.
For accounts subject to Automatic Withdrawal Plans,
distributions of capital gains must be reinvested in shares of the
Fund, which will be done at net asset value without a sales charge.
Dividends on shares held in the account may be paid in cash or
reinvested.
Redemptions of shares needed to make withdrawal payments will
be made at the net asset value per share determined on the
redemption date. Checks or ACH transfer payments of the proceeds
of Plan withdrawals will normally be transmitted three business
days prior to the date selected for receipt of the payment (receipt
of payment on the date selected cannot be guaranteed), according to
the choice specified in writing by the Planholder.
The amount and the interval of disbursement payments and the
address to which checks are to be mailed or AccountLink payments
are to be sent may be changed at any time by the Planholder by
writing to the Transfer Agent. The Planholder should allow at
least two weeks' time in mailing such notification for the
requested change to be put in effect. The Planholder may, at any
time, instruct the Transfer Agent by written notice (in proper form
in accordance with the requirements of the then-current Prospectus
of the Fund) to redeem all, or any part of, the shares held under
the Plan. In that case, the Transfer Agent will redeem the number
of shares requested at the net asset value per share in effect in
accordance with the Fund's usual redemption procedures and will
mail a check for the proceeds to the Planholder.
The Plan may be terminated at any time by the Planholder by
writing to the Transfer Agent. A Plan may also be terminated at
any time by the Transfer Agent upon receiving directions to that
effect from the Fund. The Transfer Agent will also terminate a
Plan upon receipt of evidence satisfactory to it of the death or
legal incapacity of the Planholder. Upon termination of a Plan by
the Transfer Agent or the Fund, shares that have not been redeemed
from the account will be held in uncertificated form in the name of
the Planholder, and the account will continue as a dividend-
reinvestment, uncertificated account unless and until proper
instructions are received from the Planholder or his or her
executor or guardian, or other authorized person.
To use shares held under the Plan as collateral for a debt,
the Planholder may request issuance of a portion of the shares in
certificated form. Upon written request from the Planholder, the
Transfer Agent will determine the number of shares for which a
certificate may be issued without causing the withdrawal checks to
stop because of exhaustion of uncertificated shares needed to
continue payments. However, should such uncertificated shares
become exhausted, Plan withdrawals will terminate.
If the Transfer Agent ceases to act as transfer agent for the
Fund, the Planholder will be deemed to have appointed any successor
transfer agent to act as agent in administering the Plan.
How To Exchange Shares
As stated in the Prospectus, shares of a particular class of
Oppenheimer funds having more than one class of shares may be
exchanged only for shares of the same class of other Oppenheimer
funds. At present Rochester Fund Municipals and Limited Term New
York Municipal Fund are not "Eligible Funds" for purposes of the
exchange privilege in the Prospectus. Shares of the Oppenheimer
funds that have a single class without a class designation are
deemed "Class A" shares for this purpose. All of the Oppenheimer
funds offer Class A, B and C shares except Oppenheimer Money Market
Fund, Inc., Centennial Tax Exempt Trust, Centennial Government
Trust, Centennial New York Tax Exempt Trust, Centennial California
Tax Exempt Trust, Centennial Money Market Trust, Centennial America
Fund, L.P., and Daily Cash Accumulation Fund, Inc., which only
offer Class A shares and Oppenheimer Main Street California
Municipal Fund which only offers Class A and Class B shares (Class
B and Class C shares of Oppenheimer Cash Reserves are generally
available only by exchange from the same class of shares of other
Oppenheimer funds or through OppenheimerFunds sponsored 401(k)
plans). A current list showing which funds offer which classes can
be obtained by calling the distributor at 1-800-525-7048.
For accounts established on or before March 8, 1996 holding
Class M shares of Oppenheimer Bond Fund for Growth, Class M shares
can be exchanged only for Class A shares of other Oppenheimer
funds, including Rochester Fund Municipals and Limited-Term New
York Municipal Fund. Class A shares of Rochester Fund Municipals
or Limited Term New York Municipal Fund acquired on the exchange of
Class M shares of Oppenheimer Bond Fund for Growth may be exchanged
for Class M shares of that fund. For accounts of Oppenheimer Bond
Fund for Growth established after March 8, 1996, Class M shares may
be exchanged for Class A shares of other Oppenheimer funds except
Rochester Fund Municipals and Limited-Term New York Municipals.
Exchanges to Class M shares of Oppenheimer Bond Fund for Growth are
permitted from Class A shares of Oppenheimer Money Market Fund,
Inc. or Oppenheimer Cash Reserves that were acquired by exchange
from Class M shares. Otherwise no exchanges of any class of any
Oppenheimer fund into Class M shares are permitted.
Class A shares of Oppenheimer funds may be exchanged at net
asset value for shares of any Money Market Fund. Shares of any
Money Market Fund purchased without a sales charge may be exchanged
for shares of Oppenheimer funds offered with a sales charge upon
payment of the sales charge (or, if applicable, may be used to
purchase shares of Oppenheimer funds subject to a contingent
deferred sales charge). However, shares of Oppenheimer Money
Market Fund, Inc. purchased with the redemption proceeds of shares
of other mutual funds (other than funds managed by the Manager or
its subsidiaries) redeemed within the 12 months prior to that
purchase may subsequently be exchanged for shares of other
Oppenheimer funds without being subject to an initial or contingent
deferred sales charge, whichever is applicable. To qualify for
that privilege, the investor or the investor's dealer must notify
the Distributor of eligibility for this privilege at the time the
shares of Oppenheimer Money Market Fund, Inc. are purchased, and,
if requested, must supply proof of entitlement to this privilege.
Shares of the Fund acquired by reinvestment of dividends or
distributions from any other of the Oppenheimer funds (except
Oppenheimer Cash Reserves) or from any unit investment trust for
which reinvestment arrangements have been made with the Distributor
may be exchanged at net asset value for shares of any of the
Oppenheimer funds. No contingent deferred sales charge is imposed
on exchanges of shares of any class purchased subject to a
contingent deferred sales charge. However, when Class A shares
acquired by exchange of Class A shares of other Oppenheimer funds
purchased subject to a Class A contingent deferred sales charge are
redeemed within 18 months of the end of the calendar month of the
initial purchase of the exchanged Class A shares, the Class A
contingent deferred sales charge is imposed on the redeemed shares
(see "Class A Contingent Deferred Sales Charge" in the Prospectus).
The Class B contingent deferred sales charge is imposed on Class B
shares acquired by exchange if they are redeemed within six years
of the initial purchase of the exchanged Class B shares. The Class
C contingent deferred sales charge is imposed on Class C shares
acquired by exchange if they are redeemed within 12 months of the
initial purchase of the exchanged Class C shares.
When Class B or Class C shares are redeemed to effect an
exchange, the priorities described in "How To Buy Shares" in the
Prospectus for the imposition of the Class B and Class C contingent
deferred sales charges will be followed in determining the order in
which the shares are exchanged. Shareholders should take into
account the effect of any exchange on the applicability and rate of
any contingent deferred sales charge that might be imposed in the
subsequent redemption of remaining shares. Shareholders owning
shares of more than one class must specify whether they intend to
exchange Class A, Class B or Class C shares.
The Fund reserves the right to reject telephone or written
exchange requests submitted in bulk by anyone on behalf of more
than one account. The Fund may accept requests for exchanges of up
to 50 accounts per day from representatives of authorized dealers
that qualify for this privilege. In connection with any exchange
request, the number of shares exchanged may be less than the number
requested if the exchange or the number requested would include
shares subject to a restriction cited in the Prospectus or this
Statement of Additional Information or would include shares covered
by a share certificate that is not tendered with the request. In
those cases, only the shares available for exchange without
restriction will be exchanged.
When exchanging shares by telephone, a shareholder must either
have an existing account in, or obtain and acknowledge receipt of
a prospectus of, the fund to which the exchange is to be made. For
full or partial exchanges of an account made by telephone, any
special account features such as Asset Builder Plans, Automatic
Withdrawal Plans and retirement plan contributions will be switched
to the new account unless the Transfer Agent is instructed
otherwise. If all telephone lines are busy (which might occur, for
example, during periods of substantial market fluctuations),
shareholders might not be able to request exchanges by telephone
and would have to submit written exchange requests.
Shares to be exchanged are redeemed on the regular business
day the Transfer Agent receives an exchange request in proper form
(the "Redemption Date"). Normally, shares of the fund to be
acquired are purchased on the Redemption Date, but such purchases
may be delayed by either fund up to five business days if it
determines that it would be disadvantaged by an immediate transfer
of the redemption proceeds. The Fund reserves the right, in its
discretion, to refuse any exchange request that may disadvantage it
(for example, if the receipt of multiple exchange requests from a
dealer might require the disposition of portfolio securities at a
time or at a price that might be disadvantageous to the Fund).
The different Oppenheimer funds available for exchange have
different investment objectives, policies and risks, and a
shareholder should assure that the Fund selected is appropriate for
his or her investment and should be aware of the tax consequences
of an exchange. For federal income tax purposes, an exchange
transaction is treated as a redemption of shares of one fund and a
purchase of shares of another. "Reinvestment Privilege," above,
discusses some of the tax consequences of reinvestment of
redemption proceeds in such cases. The Fund, the Distributor, and
the Transfer Agent are unable to provide investment, tax or legal
advice to a shareholder in connection with an exchange request or
any other investment transaction.
Dividends, Capital Gains and Taxes
Tax Status of the Fund's Dividends and Distributions. The Federal
tax treatment of the Fund's dividends and capital gains
distributions is explained in the Prospectus under the caption
"Dividends, Capital Gains and Taxes." Special provisions of the
Internal Revenue Code govern the eligibility of the Fund's
dividends for the dividends-received deduction for corporate
shareholders. Long-term capital gains distributions are not
eligible for the deduction. In addition, the amount of dividends
paid by the Fund which may qualify for the deduction is limited to
the aggregate amount of qualifying dividends that the Fund derives
from its portfolio investments that the Fund has held for a minimum
period, usually 46 days. A corporate shareholder will not be
eligible for the deduction on dividends paid on Fund shares held
for 45 days or less. To the extent the Fund's dividends are
derived from gross income from option premiums, interest income or
short-term gains from the sale of securities or dividends from
foreign corporations, those dividends will not qualify for the
deduction.
Under the Internal Revenue Code, by December 31 each year, the
Fund must distribute 98% of its taxable investment income earned
from January 1 through December 31 of that year and 98% of its
capital gains realized in the period from November 1 of the prior
year through October 31 of the current year, or else the Fund must
pay an excise tax on the amounts not distributed. While it is
presently anticipated that the Fund will meet those requirements,
the Board of Directors and the Manager might determine in a
particular year that it would be in the best interest of
shareholders for the Fund not to make such distributions at the
required levels and to pay the excise tax on the undistributed
amounts. That would reduce the amount of income or capital gains
available for distribution to shareholders.
If the Fund qualifies as a "regulated investment company"
under the Internal Revenue Code, it will not be liable for Federal
income taxes on amounts paid by it as dividends and distributions.
The Fund qualified during its last fiscal year, and intends to
qualify in current and future years, but reserves the right not to
do so. The Internal Revenue Code contains a number of complex
tests to determine whether the Fund will qualify, and the Fund
might not meet those tests in a particular year. For example, if
the Fund derives 30% or more of its gross income from the sale of
securities held less than three months, it may fail to qualify (see
"Tax Aspects of Covered Calls and Hedging Instruments," above). If
it did not so qualify, the Fund would be treated for tax purposes
as an ordinary corporation and receive no tax deduction for
payments made to shareholders.
The amount of a class's distributions may vary from time to
time depending on market conditions, the composition of the Fund's
portfolio, and expenses borne by the Fund or borne separately by a
class, as described in "Alternative Sales Arrangements -- Class A,
Class B and Class C Shares," above. Dividends are calculated in
the same manner, at the same time and on the same day for shares of
each class. However, dividends on Class B and Class C shares are
expected to be lower as a result of the asset-based sales charge on
Class B and Class C shares, and Class B and Class C dividends will
also differ in amount as a consequence of any difference in net
asset value between the classes.
Dividends, distributions and the proceeds of the redemption of
Fund shares represented by checks returned to the Transfer Agent by
the Postal Service as undeliverable will be invested in shares of
Oppenheimer Money Market Fund, Inc., as promptly as possible after
the return of such checks to the Transfer Agent, to enable the
investor to earn a return on otherwise idle funds.
Dividend Reinvestment in Another Fund. Shareholders of the Fund
may elect to reinvest all dividends and/or capital gains
distributions in shares of the same class of any of the other
Oppenheimer funds listed in "Reduced Sales Charges," above, at net
asset value without sales charge. To elect this option, a
shareholder must notify the Transfer Agent in writing and either
must have an existing account in the fund selected for reinvestment
or must obtain a prospectus for that fund and an application from
the Distributor to establish an account. The investment will be
made at the net asset value per share in effect at the close of
business on the payable date of the dividend or distribution.
Dividends and/or distributions from certain of the Oppenheimer
funds may be invested in shares of this Fund on the same basis.
Additional Information About the Fund
The Custodian. State Street Bank and Trust Company acts as
custodian of the assets of the Fund. The Fund's cash balances in
excess of $100,000 are not protected by Federal deposit insurance.
Such uninsured balances may be substantial.
Independent Accountants. Price Waterhouse LLP serves as the Fund's
independent accountants. Their services include auditing the
annual financial statements of the Fund as well as other related
services.
Retirement Plans. The Distributor may print advertisements and
brochures concerning retirement plans, lump sum distributions and
401-k plans. These materials may include descriptions of tax rules,
strategies for reducing risk and descriptions of the 401-k program
offered by the Distributor. From time to time hypothetical
investment programs illustrating various tax-deferred investment
strategies will be used in brochures, sales literature, and
omitting prospectuses. The following examples illustrate the
general approaches that will be followed. These hypotheticals will
be modified with different investment amounts, reflecting the
amounts that can be invested in different types of retirement
programs, different assumed tax rates, and assumed rates of return.
They should not be viewed as indicative of past or future perfor-
mance of any OppenheimerFunds products.
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
================================================================================
To the Board of Directors and Shareholders of
Oppenheimer Quest Global Value Fund, Inc.
In our opinion, the accompanying statement of assets and liabilities,
including the statement of investments, and the related statements of
operations and of changes in net assets and the financial highlights
present fairly, in all material respects, the financial position of
Oppenheimer Quest Global Value Fund, Inc. (the Fund), at November 30,
1996, the results of its operations for the year then ended, the changes
in its net assets for each of the two years in the period then ended and
the financial highlights for the periods indicated, in conformity with
generally accepted accounting principles. These financial statements and
financial highlights (hereafter referred to as financial statements) are
the responsibility of the Fund's management; our responsibility is to
express an opinion on these financial statements based on our audits. We
conducted our audits of these financial statements in accordance with
generally accepted auditing standards which require that we plan and
perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting
principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that
our audits, which included confirmation of securities at November 30,
1996 by correspondence with the custodian and brokers and the
application of alternative auditing procedures where confirmations from
brokers were not received, provide a reasonable basis for the opinion
expressed above.
Price Waterhouse LLP
Denver, Colorado
December 20, 1996
<PAGE>
STATEMENT OF INVESTMENTS November 30, 1996
<TABLE>
<CAPTION>
FACE
MARKET VALUE
AMOUNT
SEE NOTE 1
================================================================================================================
==============
<S> <C>
<C>
SHORT-TERM NOTES--6.0%
- ----------------------------------------------------------------------------------------------------------------
- --------------
Federal Home Loan Mortgage Corp., 5.33%, 12/2/96 (Cost $14,682,675) $14,685,000
$ 14,682,675
================================================================================================================
==============
CONVERTIBLE CORPORATE BONDS AND NOTES--1.0%
- ----------------------------------------------------------------------------------------------------------------
- --------------
MBL International Finance (Bermuda) Trust,
3% Exchangeable Gtd. Nts., 11/30/02 (Cost $2,483,838) 2,250,000
2,528,438
SHARES
================================================================================================================
==============
COMMON STOCKS--93.3%
- ----------------------------------------------------------------------------------------------------------------
- --------------
BASIC MATERIALS--10.9%
- ----------------------------------------------------------------------------------------------------------------
- --------------
CHEMICALS--6.4%
Du Pont (E.I.) De Nemours & Co. 65,000
6,126,250
- ----------------------------------------------------------------------------------------------------------------
- -----
Hercules, Inc. 80,000
3,880,000
- ----------------------------------------------------------------------------------------------------------------
- -----
Monsanto Co. 90,000
3,577,500
- ----------------------------------------------------------------------------------------------------------------
- -----
PT Tigaraksa Satria 224,000
351,045
- ----------------------------------------------------------------------------------------------------------------
- -----
SGL Carbon AG 14,400
1,779,968
- ------------
15,714,763
- ----------------------------------------------------------------------------------------------------------------
- --------------
METALS--2.4%
Freeport-McMoRan Copper & Gold, Inc., Cl. B 80,000
2,520,000
- ----------------------------------------------------------------------------------------------------------------
- -----
Sumitomo Metal Industries 400,000
1,065,026
- ----------------------------------------------------------------------------------------------------------------
- -----
Toho Titanium Co.(1)(2) 36,000
597,891
- ----------------------------------------------------------------------------------------------------------------
- -----
Western Mining Corp. Holdings Ltd.(2) 268,000
1,702,453
- ------------
5,885,370
- ----------------------------------------------------------------------------------------------------------------
- --------------
PAPER--2.1%
Aracruz Celulose SA, Sponsored ADR, Cl. B 157,700
1,222,175
- ----------------------------------------------------------------------------------------------------------------
- -----
AssiDoman AB 59,000
1,520,584
- ----------------------------------------------------------------------------------------------------------------
- -----
Champion International Corp. 60,000
2,580,000
- ------------
5,322,759
- ----------------------------------------------------------------------------------------------------------------
- --------------
CONSUMER CYCLICALS--15.3%
- ----------------------------------------------------------------------------------------------------------------
- --------------
AUTOS & HOUSING--2.9%
Calsonic Corp. 57,000
386,678
- ----------------------------------------------------------------------------------------------------------------
- -----
Corporacion GEO, SA de CV, Series B(1) 205,000
1,037,394
- ----------------------------------------------------------------------------------------------------------------
- -----
Honda Motor Co. 30,000
885,764
- ----------------------------------------------------------------------------------------------------------------
- -----
LucasVarity plc(1) 384,886
1,649,148
- ----------------------------------------------------------------------------------------------------------------
- -----
Michelin (CGDE), B Shares 21,143
1,084,550
- ----------------------------------------------------------------------------------------------------------------
- -----
Mitsubishi Motors Corp.(2) 140,000
1,096,133
- ----------------------------------------------------------------------------------------------------------------
- -----
Murakami Corp. 72,000
955,360
- ------------
7,095,027
- ----------------------------------------------------------------------------------------------------------------
- --------------
LEISURE & ENTERTAINMENT--3.1%
AMR Corp.(1) 20,000
1,825,000
- ----------------------------------------------------------------------------------------------------------------
- -----
Amstrad plc 510,000
1,311,140
- ----------------------------------------------------------------------------------------------------------------
- -----
China Hong Kong Photo Products Holdings Ltd. 2,139,000
740,018
- ----------------------------------------------------------------------------------------------------------------
- -----
Flughafen Wien AG 12,300
562,448
- ----------------------------------------------------------------------------------------------------------------
- -----
Hagemeyer NV 16,216
1,287,259
- ----------------------------------------------------------------------------------------------------------------
- -----
Verenigd Bezit VNU 90,000
1,836,978
- ------------
7,562,843
</TABLE>
5 Oppenheimer Quest Global Value Fund, Inc.
<PAGE> 6
STATEMENT OF INVESTMENTS (Continued)
<TABLE>
<CAPTION>
MARKET VALUE
SHARES
SEE NOTE 1
- ----------------------------------------------------------------------------------------------------------------
- --------------
<S> <C>
<C>
MEDIA--3.4%
Benpres Holdings Corp., Sponsored GDR(1) 241,600
$ 1,812,000
- ----------------------------------------------------------------------------------------------------------------
- -----
Singapore Press Holdings Ltd. 87,000
1,643,935
- ----------------------------------------------------------------------------------------------------------------
- -----
Tele-Communications, Inc. (New), TCI Group, Series A(1) 300,000
4,050,000
- ----------------------------------------------------------------------------------------------------------------
- -----
Thompson Corp. 35,000
788,209
- ------------
8,294,144
- ----------------------------------------------------------------------------------------------------------------
- --------------
RETAIL: GENERAL--3.0%
Bulgari SpA 100,000
1,851,583
- ----------------------------------------------------------------------------------------------------------------
- -----
Cia Tecidos Norte de Minas, Preference 3,050,000
1,048,131
- ----------------------------------------------------------------------------------------------------------------
- -----
Credit Saison Co. Ltd.(2) 29,000
665,114
- ----------------------------------------------------------------------------------------------------------------
- -----
Siam Makro Public Co. Ltd. 404,000
1,755,800
- ----------------------------------------------------------------------------------------------------------------
- -----
Yue Yuen Industrial Holdings Ltd. 6,017,700
2,023,538
- ------------
7,344,166
- ----------------------------------------------------------------------------------------------------------------
- --------------
RETAIL: SPECIALTY--2.9%
adidas AG(2) 19,000
1,656,359
- ----------------------------------------------------------------------------------------------------------------
- -----
Dixons Group plc 230,098
2,213,481
- ----------------------------------------------------------------------------------------------------------------
- -----
Maruetsu, Inc. 122,000
890,878
- ----------------------------------------------------------------------------------------------------------------
- -----
Safeway plc 377,558
2,467,861
- ------------
7,228,579
- ----------------------------------------------------------------------------------------------------------------
- --------------
CONSUMER NON-CYCLICALS--8.0%
- ----------------------------------------------------------------------------------------------------------------
- --------------
BEVERAGES--0.9%
Cho Sun Brewery Co. Ltd.(1) 3,020
80,150
- ----------------------------------------------------------------------------------------------------------------
- -----
Cia Cervejaria Brahma, Preference 2,355,000
1,392,899
- ----------------------------------------------------------------------------------------------------------------
- -----
Mikuni Coca-Cola Bottling Ltd. 53,000
707,908
- ------------
2,180,957
- ----------------------------------------------------------------------------------------------------------------
- --------------
FOOD--0.3%
Bompreco Supermercados do Nordeste(1) 50,000
868,750
- ----------------------------------------------------------------------------------------------------------------
- --------------
HEALTHCARE/DRUGS--4.7%
Ares-Serono Group, Cl. B 2,000
1,870,499
- ----------------------------------------------------------------------------------------------------------------
- -----
Astra AB Free, Series A 36,000
1,726,914
- ----------------------------------------------------------------------------------------------------------------
- -----
Eisai Co. Ltd.(2) 43,000
846,397
- ----------------------------------------------------------------------------------------------------------------
- -----
Gedeon Richter, GDR 20,500
1,127,500
- ----------------------------------------------------------------------------------------------------------------
- -----
OY Tamro AB 156,000
1,123,555
- ----------------------------------------------------------------------------------------------------------------
- -----
Sandoz AG 2,340
2,723,926
- ----------------------------------------------------------------------------------------------------------------
- -----
Sankyo Co. Ltd. 32,000
857,645
- ----------------------------------------------------------------------------------------------------------------
- -----
Schering AG(2) 7,000
572,439
- ----------------------------------------------------------------------------------------------------------------
- -----
Takeda Chemical Industries Ltd. 45,000
881,810
- ------------
11,730,685
- ----------------------------------------------------------------------------------------------------------------
- --------------
HEALTHCARE/SUPPLIES &
SERVICES--1.7%
Becton, Dickinson & Co. 65,000
2,730,000
- ----------------------------------------------------------------------------------------------------------------
- -----
Gehe AG 23,000
1,421,503
- ------------
4,151,503
</TABLE>
6 Oppenheimer Quest Global Value Fund, Inc.
<PAGE> 7
<TABLE>
<CAPTION>
MARKET VALUE
SHARES
SEE NOTE 1
- ----------------------------------------------------------------------------------------------------------------
- --------------
<S> <C>
<C>
HOUSEHOLD GOODS--0.4%
Antofagasta Holdings plc 175,000
$ 1,083,585
- ----------------------------------------------------------------------------------------------------------------
- --------------
ENERGY--2.3%
- ----------------------------------------------------------------------------------------------------------------
- --------------
Novus Petroleum Ltd. 700,423
1,340,523
- ----------------------------------------------------------------------------------------------------------------
- -----
Repsol SA 49,000
1,814,324
- ----------------------------------------------------------------------------------------------------------------
- -----
Suncor, Inc. 18,000
786,688
- ----------------------------------------------------------------------------------------------------------------
- -----
Total SA, B Shares 22,868
1,828,954
- ------------
5,770,489
- ----------------------------------------------------------------------------------------------------------------
- --------------
FINANCIAL--26.2%
- ----------------------------------------------------------------------------------------------------------------
- --------------
BANKS--11.5%
Citicorp 100,000
10,925,000
- ----------------------------------------------------------------------------------------------------------------
- -----
Corporacion Bancaria de Espana SA 45,000
1,754,826
- ----------------------------------------------------------------------------------------------------------------
- -----
CS Holding AG 17,000
1,811,182
- ----------------------------------------------------------------------------------------------------------------
- -----
Daiwa Bank Ltd.(2) 317,000
1,838,488
- ----------------------------------------------------------------------------------------------------------------
- -----
Fokus Bank AS 240,000
1,496,427
- ----------------------------------------------------------------------------------------------------------------
- -----
Liechtenstein Global Trust AG 2,400
1,208,914
- ----------------------------------------------------------------------------------------------------------------
- -----
Lloyds TSB Group plc 271,000
1,876,091
- ----------------------------------------------------------------------------------------------------------------
- -----
Wells Fargo & Co. 26,000
7,400,250
- ------------
28,311,178
- ----------------------------------------------------------------------------------------------------------------
- --------------
DIVERSIFIED FINANCIAL--9.5%
American Express Co. 50,000
2,612,500
- ----------------------------------------------------------------------------------------------------------------
- -----
Federal Home Loan Mortgage Corp. 97,000
11,082,250
- ----------------------------------------------------------------------------------------------------------------
- -----
ING Groep NV 25,790
903,248
- ----------------------------------------------------------------------------------------------------------------
- -----
Manhattan Card Co. Ltd. 262,000
135,540
- ----------------------------------------------------------------------------------------------------------------
- -----
Nichiei Co. Ltd. 10,000
702,109
- ----------------------------------------------------------------------------------------------------------------
- -----
Nikko Securities Co. Ltd. 57,000
530,931
- ----------------------------------------------------------------------------------------------------------------
- -----
Nordbanken AB 46,000
1,302,039
- ----------------------------------------------------------------------------------------------------------------
- -----
Shohkoh Fund & Co. 6,000
1,318,102
- ----------------------------------------------------------------------------------------------------------------
- -----
Transamerica Corp. 61,000
4,841,875
- ------------
23,428,594
- ----------------------------------------------------------------------------------------------------------------
- --------------
INSURANCE--5.2%
ACE Ltd. 42,500
2,459,688
- ----------------------------------------------------------------------------------------------------------------
- -----
AXA SA 22,500
1,352,334
- ----------------------------------------------------------------------------------------------------------------
- -----
EXEL Ltd. 140,000
5,302,500
- ----------------------------------------------------------------------------------------------------------------
- -----
Fuji Fire & Marine Insurance Co. Ltd.(2) 160,000
708,611
- ----------------------------------------------------------------------------------------------------------------
- -----
Koelnische Rueckversicherungs AG 2,675
2,044,833
- ----------------------------------------------------------------------------------------------------------------
- -----
Scor(2) 30,000
1,059,809
- ------------
12,927,775
- ----------------------------------------------------------------------------------------------------------------
- --------------
INDUSTRIAL--11.8%
- ----------------------------------------------------------------------------------------------------------------
- --------------
ELECTRICAL EQUIPMENT--1.8%
Inaba Denkisangyo Co. 28,000
622,495
- ----------------------------------------------------------------------------------------------------------------
- -----
Mitsubishi Electric Corp. 195,000
1,122,363
- ----------------------------------------------------------------------------------------------------------------
- -----
Schneider SA 18,690
889,295
- ----------------------------------------------------------------------------------------------------------------
- -----
Siebe plc 120,000
1,911,512
- ------------
4,545,665
</TABLE>
7 Oppenheimer Quest Global Value Fund, Inc.
<PAGE> 8
STATEMENT OF INVESTMENTS (Continued)
<TABLE>
<CAPTION>
MARKET VALUE
SHARES
SEE NOTE 1
- ----------------------------------------------------------------------------------------------------------------
- --------------
<S> <C>
<C>
INDUSTRIAL MATERIALS--2.0%
Aoki Marine Co. Ltd. 72,000
$ 392,267
- ----------------------------------------------------------------------------------------------------------------
- -----
Bridon plc 524,856
903,965
- ----------------------------------------------------------------------------------------------------------------
- -----
Holderbank Financiere Glarus AG 2,100
1,517,362
- ----------------------------------------------------------------------------------------------------------------
- -----
Kinden Corp. 35,200
491,810
- ----------------------------------------------------------------------------------------------------------------
- -----
Kondor Wessels Groep NV 14,400
558,608
- ----------------------------------------------------------------------------------------------------------------
- -----
Maeda Corp.(2) 70,000
544,991
- ----------------------------------------------------------------------------------------------------------------
- -----
NBM-Amstelland NV 28,001
579,643
- ------------
4,988,646
- ----------------------------------------------------------------------------------------------------------------
- --------------
INDUSTRIAL SERVICES--1.6%
Donnelley (R.R.) & Sons Co. 80,000
2,680,000
- ----------------------------------------------------------------------------------------------------------------
- -----
Nagahori Corp.(2) 65,000
371,836
- ----------------------------------------------------------------------------------------------------------------
- -----
Toyo Corp. 77,000
791,652
- ------------
3,843,488
- ----------------------------------------------------------------------------------------------------------------
- --------------
MANUFACTURING--6.4%
Aeon Credit Service Co. Ltd. 12,000
682,249
- ----------------------------------------------------------------------------------------------------------------
- -----
Alfa SA, Cl. A 225,000
1,004,650
- ----------------------------------------------------------------------------------------------------------------
- -----
Atlas Copco AB, A Shares 115,000
2,638,341
- ----------------------------------------------------------------------------------------------------------------
- -----
Cofinec SA, Sponsored GDR(1) 14,000
374,500
- ----------------------------------------------------------------------------------------------------------------
- -----
IRO AB 33,500
386,775
- ----------------------------------------------------------------------------------------------------------------
- -----
Japan Synthetic Rubber Co. 109,000
726,028
- ----------------------------------------------------------------------------------------------------------------
- -----
Kalmar Industries 48,000
811,614
- ----------------------------------------------------------------------------------------------------------------
- -----
Schweizerische Industrie Gesellschaft Holding AG 350
843,878
- ----------------------------------------------------------------------------------------------------------------
- -----
Sodick Co.(1) 100,000
922,671
- ----------------------------------------------------------------------------------------------------------------
- -----
Tenneco, Inc. 120,000
6,120,000
- ----------------------------------------------------------------------------------------------------------------
- -----
Vidrala SA 23,000
1,403,089
- ------------
15,913,795
- ----------------------------------------------------------------------------------------------------------------
- --------------
TECHNOLOGY--16.7%
- ----------------------------------------------------------------------------------------------------------------
- --------------
AEROSPACE/DEFENSE--5.8%
Lockheed Martin Corp. 35,000
3,171,875
- ----------------------------------------------------------------------------------------------------------------
- -----
McDonnell Douglas Corp. 210,000
11,103,750
- ------------
14,275,625
- ----------------------------------------------------------------------------------------------------------------
- --------------
COMPUTER HARDWARE--1.0%
Canon, Inc. 116,000
2,446,396
- ----------------------------------------------------------------------------------------------------------------
- --------------
COMPUTER SOFTWARE--1.1%
Konami Co. Ltd.(2) 23,000
786,204
- ----------------------------------------------------------------------------------------------------------------
- -----
SAP AG 13,750
1,896,421
- ------------
2,682,625
- ----------------------------------------------------------------------------------------------------------------
- --------------
ELECTRONICS--8.2%
ABB AB, A Shares 17,400
2,014,108
- ----------------------------------------------------------------------------------------------------------------
- -----
CAE, Inc. 170,000
1,305,581
- ----------------------------------------------------------------------------------------------------------------
- -----
Intel Corp. 60,000
7,612,500
- ----------------------------------------------------------------------------------------------------------------
- -----
Kyocera Corp. 40,000
2,572,934
- ----------------------------------------------------------------------------------------------------------------
- -----
Nokia AB 71,000
3,935,329
- ----------------------------------------------------------------------------------------------------------------
- -----
Omron Corp. 65,000
1,239,455
- ----------------------------------------------------------------------------------------------------------------
- -----
Rohm Co. 11,000
676,625
- ----------------------------------------------------------------------------------------------------------------
- -----
Unican Security Systems Ltd., Cl. B 44,000
914,166
- ------------
20,270,698
</TABLE>
8 Oppenheimer Quest Global Value Fund, Inc.
<PAGE> 9
<TABLE>
<CAPTION>
MARKET VALUE
SHARES
SEE NOTE 1
- ----------------------------------------------------------------------------------------------------------------
- --------------
<S> <C>
<C>
TELECOMMUNICATIONS-
TECHNOLOGY--0.6%
Korea Mobile Telecommunications Corp. 290
$ 290,826
- ----------------------------------------------------------------------------------------------------------------
- -----
SPT Telecom AS(1) 10,000
1,130,068
- ------------
1,420,894
- ----------------------------------------------------------------------------------------------------------------
- --------------
UTILITIES--2.1%
- ----------------------------------------------------------------------------------------------------------------
- --------------
ELECTRIC UTILITIES--1.2%
Cie Generale des Eaux 10,808
1,332,727
- ----------------------------------------------------------------------------------------------------------------
- -----
Kyushu Electric Power Co. 78,000
1,631,282
- ------------
2,964,009
- ----------------------------------------------------------------------------------------------------------------
- --------------
TELEPHONE UTILITIES--0.9%
Telecom Italia Mobile SpA 830,000
1,106,725
- ----------------------------------------------------------------------------------------------------------------
- -----
Telecom Italia SpA 550,000
1,011,109
- ------------
2,117,834
- ------------
Total Common Stocks (Cost $173,745,694)
230,370,842
- ----------------------------------------------------------------------------------------------------------------
- --------------
TOTAL INVESTMENTS, AT VALUE (COST $190,912,207) 100.3%
247,581,955
------------
- ------------
LIABILITIES IN EXCESS OF OTHER ASSETS (0.3)
(798,235)
------------
- ------------
NET ASSETS 100.0%
$246,783,720
============
============
</TABLE>
9 Oppenheimer Quest Global Value Fund, Inc.
<PAGE> 10
STATEMENT OF INVESTMENTS (Continued)
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------
- --------------
Distribution of investments by country of issue, as a percentage of total investments at value, is as follows:
COUNTRY MARKET VALUE
PERCENT
- ----------------------------------------------------------------------------------------------------------------
- --------------
<S> <C>
<C>
United States $117,283,612
47.4%
- ----------------------------------------------------------------------------------------------------------------
- -------------
Japan 30,956,106
12.5
- ----------------------------------------------------------------------------------------------------------------
- -------------
Great Britain 13,416,783
5.4
- ----------------------------------------------------------------------------------------------------------------
- -------------
Sweden 10,400,375
4.2
- ----------------------------------------------------------------------------------------------------------------
- -------------
Switzerland 9,975,759
4.0
- ----------------------------------------------------------------------------------------------------------------
- -------------
Germany 9,371,524
3.8
- ----------------------------------------------------------------------------------------------------------------
- -------------
France 7,922,169
3.2
- ----------------------------------------------------------------------------------------------------------------
- -------------
The Netherlands 5,165,735
2.1
- ----------------------------------------------------------------------------------------------------------------
- -------------
Finland 5,058,884
2.0
- ----------------------------------------------------------------------------------------------------------------
- -------------
Spain 4,972,238
2.0
- ----------------------------------------------------------------------------------------------------------------
- -------------
Brazil 4,531,955
1.8
- ----------------------------------------------------------------------------------------------------------------
- -------------
Italy 3,969,417
1.6
- ----------------------------------------------------------------------------------------------------------------
- -------------
Canada 3,794,643
1.5
- ----------------------------------------------------------------------------------------------------------------
- -------------
Australia 3,042,976
1.2
- ----------------------------------------------------------------------------------------------------------------
- -------------
Hong Kong 2,899,096
1.2
- ----------------------------------------------------------------------------------------------------------------
- -------------
Supranational 2,528,438
1.0
- ----------------------------------------------------------------------------------------------------------------
- -------------
Mexico 2,042,044
0.8
- ----------------------------------------------------------------------------------------------------------------
- -------------
Ecuador 1,812,000
0.7
- ----------------------------------------------------------------------------------------------------------------
- -------------
Thailand 1,755,800
0.7
- ----------------------------------------------------------------------------------------------------------------
- -------------
Singapore 1,643,938
0.7
- ----------------------------------------------------------------------------------------------------------------
- -------------
Norway 1,496,427
0.6
- ----------------------------------------------------------------------------------------------------------------
- -------------
Czech Republic 1,130,068
0.5
- ----------------------------------------------------------------------------------------------------------------
- -------------
Hungary 1,127,500
0.5
- ----------------------------------------------------------------------------------------------------------------
- -------------
Austria 562,448
0.2
- ----------------------------------------------------------------------------------------------------------------
- -------------
Korea, Republic of (South) 370,975
0.2
- ----------------------------------------------------------------------------------------------------------------
- -------------
Indonesia 351,045
0.2
- ----------------------------------------------------------------------------------------------------------------
- -------------
Total $247,581,955
100.0%
============
======
</TABLE>
1. Non-income producing security.
2. Loaned security--See Note 6 of Notes to Financial Statements.
See accompanying Notes to Financial Statements.
10 Oppenheimer Quest Global Value Fund, Inc.
<PAGE> 11
STATEMENT OF ASSETS AND LIABILITIES November 30, 1996
<TABLE>
================================================================================================================
==============
<S>
<C>
ASSETS
Investments, at value (cost $190,912,207)--see accompanying statement
$247,581,955
- ----------------------------------------------------------------------------------------------------------------
- ------
Collateral for securities loaned--Note 6
11,244,569
- ----------------------------------------------------------------------------------------------------------------
- ------
Receivables:
Investments sold
1,036,427
Shares of capital stock sold
388,133
Interest and dividends
331,645
- ----------------------------------------------------------------------------------------------------------------
- ------
Other
44,487
- ------------
Total assets
260,627,216
================================================================================================================
==============
LIABILITIES
Bank overdraft
243,086
- ----------------------------------------------------------------------------------------------------------------
- ------
Return of collateral for securities loaned--Note 6
11,244,569
- ----------------------------------------------------------------------------------------------------------------
- ------
Unrealized depreciation on forward foreign currency exchange contracts--Note 5
445
- ----------------------------------------------------------------------------------------------------------------
- ------
Payables and other liabilities:
Investments purchased
1,833,630
Shares of capital stock redeemed
272,950
Distribution and service plan fees
99,332
Shareholder reports
90,556
Transfer and shareholder servicing agent fees
6,057
Directors' fees
5,098
Other
47,773
- ------------
Total liabilities
13,843,496
================================================================================================================
==============
NET ASSETS
$246,783,720
============
================================================================================================================
==============
COMPOSITION OF
NET ASSETS
Par value of shares of capital stock
$ 150,214
- ----------------------------------------------------------------------------------------------------------------
- ------
Additional paid-in capital
182,178,894
- ----------------------------------------------------------------------------------------------------------------
- ------
Overdistributed net investment income
(147,118)
- ----------------------------------------------------------------------------------------------------------------
- ------
Accumulated net realized gain on investment transactions
7,941,027
- ----------------------------------------------------------------------------------------------------------------
- ------
Net unrealized appreciation on investments and translation of assets and liabilities
denominated in foreign currencies
56,660,703
- ------------
Net assets
$246,783,720
============
================================================================================================================
==============
NET ASSET VALUE
PER SHARE
Class A Shares:
Net asset value and redemption price per share (based on net assets of $191,999,854
and 11,648,467 shares of capital stock outstanding)
$16.48
Maximum offering price per share (net asset value plus sales charge of 5.75% of offering price)
$17.49
- ----------------------------------------------------------------------------------------------------------------
- ------
Class B Shares:
Net asset value, redemption price and offering price per share (based on net assets
of $38,634,382 and 2,377,524 shares of capital stock outstanding)
$16.25
- ----------------------------------------------------------------------------------------------------------------
- ------
Class C Shares:
Net asset value, redemption price and offering price per share (based on net assets
of $16,149,484 and 995,458 shares of capital stock outstanding)
$16.22
</TABLE>
See accompanying Notes to Financial Statements.
11 Oppenheimer Quest Global Value Fund, Inc.
<PAGE> 12
STATEMENT OF OPERATIONS For the Year Ended November 30, 1996
<TABLE>
================================================================================================================
============
<S> <C>
INVESTMENT INCOME
Dividends (net of foreign withholding taxes of $268,593)
$3,730,645
- ----------------------------------------------------------------------------------------------------------------
- -----
Interest (net of foreign withholding taxes of $410)
720,147
- ----------------------------------------------------------------------------------------------------------------
- -----
Lending fees--Note 6
57,587
- -----------
Total income
4,508,379
================================================================================================================
============
EXPENSES
Management fees--Note 4
1,591,600
- ----------------------------------------------------------------------------------------------------------------
- -----
Distribution and service plan fees--Note 4:
Class A
872,871
Class B
272,933
Class C
101,197
- ----------------------------------------------------------------------------------------------------------------
- -----
Administrative fees--Note 4
540,533
- ----------------------------------------------------------------------------------------------------------------
- -----
Custodian fees and expenses
241,266
- ----------------------------------------------------------------------------------------------------------------
- -----
Shareholder reports
192,410
- ----------------------------------------------------------------------------------------------------------------
- -----
Transfer and shareholder servicing agent fees--Note 4
168,484
- ----------------------------------------------------------------------------------------------------------------
- -----
Registration and filing fees:
Class A
79,212
Class B
14,356
Class C
5,728
- ----------------------------------------------------------------------------------------------------------------
- -----
Legal and auditing fees
57,472
- ----------------------------------------------------------------------------------------------------------------
- -----
Directors' fees and expenses
26,272
- ----------------------------------------------------------------------------------------------------------------
- -----
Other
33,540
- -----------
Total expenses
4,197,874
================================================================================================================
============
NET INVESTMENT INCOME
310,505
================================================================================================================
============
REALIZED AND UNREALIZED
GAIN (LOSS)
Net realized gain (loss) on:
Investments
8,221,005
Foreign currency transactions
(249,904)
- -----------
Net realized gain
7,971,101
- ----------------------------------------------------------------------------------------------------------------
- -----
Net change in unrealized appreciation or depreciation on:
Investments
26,311,881
Translation of assets and liabilities denominated in foreign currencies
(1,804,682)
- -----------
Net change
24,507,199
- -----------
Net realized and unrealized gain
32,478,300
================================================================================================================
============
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS
$32,788,805
===========
</TABLE>
See accompanying Notes to Financial Statements.
12 Oppenheimer Quest Global Value Fund, Inc.
<PAGE> 13
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
YEAR ENDED
NOVEMBER 30,
1996
1995
================================================================================================================
===============
<S> <C>
<C>
OPERATIONS
Net investment income $ 310,505
$ 1,205,062
- ----------------------------------------------------------------------------------------------------------------
- --------
Net realized gain 7,971,101
15,002,765
- ----------------------------------------------------------------------------------------------------------------
- --------
Net change in unrealized appreciation or depreciation 24,507,199
14,748,932
------------
------------
Net increase in net assets resulting from operations 32,788,805
30,956,759
================================================================================================================
===============
DIVIDENDS AND
DISTRIBUTIONS TO
SHAREHOLDERS
Dividends from net investment income:
Class A (1,335,495)
--
Class B (79,285)
--
Class C (18,174)
--
- ----------------------------------------------------------------------------------------------------------------
- --------
Distributions from net realized gain:
Class A (12,615,414)
(12,831,716)
Class B (1,413,588)
(896,679)
Class C (405,576)
(212,761)
================================================================================================================
===============
CAPITAL STOCK
TRANSACTIONS
Net increase (decrease) in net assets resulting from capital stock
transactions--Note 2:
Class A 17,211,738
(1,357,869)
Class B 18,976,456
5,163,787
Class C 10,628,255
1,497,862
================================================================================================================
===============
NET ASSETS
Total increase 63,737,722
22,319,383
- ----------------------------------------------------------------------------------------------------------------
- --------
Beginning of period 183,045,998
160,726,615
------------
------------
End of period [including undistributed (overdistributed) net
investment income of $(147,118) and $1,181,343, respectively] $246,783,720
$183,045,998
============
============
</TABLE>
See accompanying Notes to Financial Statements.
13 Oppenheimer Quest Global Value Fund, Inc.
<PAGE> 14
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
CLASS A
- ------------------------------------------------------------------
YEAR ENDED NOVEMBER 30,
1996 1995(2) 1994 1993 1992
<S> <C> <C> <C> <C> <C>
================================================================================================================
========
PER SHARE OPERATING DATA:
Net asset value, beginning of period $ 15.49 $ 14.16 $ 13.54 $ 12.30 $
11.25
- ----------------------------------------------------------------------------------------------------------------
- --------
Income (loss) from investment operations:
Net investment income (loss) .03 .11(3) .01(3) --(3)
.12(3)
Net realized and unrealized gain (loss) 2.33 2.45 1.10 2.26
.93
--------- --------- -------- --------
- ---------
Total income (loss) from investment operations 2.36 2.56 1.11 2.26
1.05
- ----------------------------------------------------------------------------------------------------------------
- --------
Dividends and distributions to shareholders:
Dividends from net investment income (.13) -- -- (.12)
--
Distributions from net realized gain (1.24) (1.23) (.49) (.90)
--
--------- --------- -------- --------
- ---------
Total dividends and distributions to shareholders (1.37) (1.23) (.49) (1.02)
--
- ----------------------------------------------------------------------------------------------------------------
- --------
Net asset value, end of period $ 16.48 $ 15.49 $ 14.16 $ 13.54 $
12.30
========= ========= ======== ========
=========
================================================================================================================
========
TOTAL RETURN, AT NET ASSET VALUE(4) 16.60% 19.75% 8.37% 19.72%
9.33
================================================================================================================
========
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in thousands) $192,000 $161,693 $148,044 $135,616
$111,207
- ----------------------------------------------------------------------------------------------------------------
- --------
Average net assets (in thousands) $174,838 $154,288 $148,461 $125,158
$125,786
- ----------------------------------------------------------------------------------------------------------------
- --------
Ratios to average net assets:
Net investment income (loss) 0.19% 0.77% 0.05%(5) 0.04%(5)
0.72%(5)
Expenses 1.88% 1.88% 1.92%(5) 1.76%(5)
1.76%(5)
- ----------------------------------------------------------------------------------------------------------------
- --------
Portfolio turnover rate(7) 47.8% 76.0% 70.0% 46.0%
62.0%
Average brokerage commission rate(8) $ 0.0045 -- -- --
--
</TABLE>
1. For the period from September 1, 1993 (inception of offering) to
November 30, 1993.
2. On November 22, 1995, OppenheimerFunds, Inc. became the investment
adviser to the Fund.
3. Based on average shares outstanding for the period.
4. Assumes a hypothetical initial investment on the business day before
the first day of the fiscal period (or inception of offering), with all
dividends and distributions reinvested in additional shares on the
reinvestment date, and redemption at the net asset value calculated on
the last business day of the fiscal period. Sales charges are not
reflected in the total returns. Total returns are not annualized for
periods of less than one full year.
5. During the periods noted above, the former Adviser voluntarily waived
a portion of its fees. If such waivers had not been in effect, the
ratios of net investment income (loss) to average net assets and the
ratios of expenses to average net assets for Class A would have been
0.04% expenses to average net assets would have been (0.45)% and 2.51%,
respectively, for Class B and (0.59)% and 2.66%, respectively, for Class
C, for the year ended
14 Oppenheimer Quest Global Value Fund, Inc.
<PAGE> 15
<TABLE>
<CAPTION>
CLASS B CLASS C
- ------------------------------------------------ ----------------------------------------------
YEAR ENDED NOVEMBER 30, YEAR ENDED NOVEMBER 30,
1996 1995(2) 1994 1993(1) 1996 1995(2) 1994 1993(1)
<C> <C> <C> <C> <C> <C> <C> <C>
====================================================================================================
$ 15.30 $14.07 $ 13.52 $13.75 $15.26 $14.06 $13.52 $13.75
- ----------------------------------------------------------------------------------------------------
-- .02(3) (.06)(3) (.02)(3) (.04) --(3) (.08)(3) (.02)(3)
2.26 2.44 1.10 (.21) 2.29 2.43 1.11 (.21)
- ------- ------ -------- ------ ------- ------ ----- -------
2.26 2.46 1.04 (.23) 2.25 2.43 1.03 (.23)
- ----------------------------------------------------------------------------------------------------
(.07) -- -- -- (.05) -- -- --
(1.24) (1.23) (.49) -- (1.24) (1.23) (.49) --
- ------- ------ -------- ------ ------- ------ ----- ------
(1.31) (1.23) (.49) -- (1.29) (1.23) (.49) --
- ----------------------------------------------------------------------------------------------------
$ 16.25 $15.30 $ 14.07 $13.52 $16.22 $15.26 $14.06 $13.52
======= ======= ======== ====== ======= ====== ====== =======
====================================================================================================
16.03% 19.12% $ 7.84% (1.67)% 16.04% 18.90% 7.77% (1.67)%
====================================================================================================
$38,634 $16,980 $ 10,268 $1,676 $16,149 $4,373 $2,415 $244
- ----------------------------------------------------------------------------------------------------
$27,351 $13,908 $ 5,982 $1,015 $10,152 $3,834 $1,150 $200
- ----------------------------------------------------------------------------------------------------
(0.03)% 0.16% (0.44)%(5) (0.76)%(5)(6) (0.07)% 0.03% (0.59)%(5) (0.69)%(5)(6)
2.41% 2.47% 2.50%(5) 2.26%(5)(6) 2.43% 2.60% 2.66%(5) 2.26%(5)(6)
- ----------------------------------------------------------------------------------------------------
47.8% 76.0% 70.0% 46.0% 47.8% 76.0% 70.0% 46.0%
$0.0045 -- -- -- $0.0045 -- -- --
</TABLE>
November 30, 1994, and (0.82)% and 2.32%, annualized, respectively, for
Class B and (0.78)% and 2.35%, annualized, respectively, for Class C, for
the period September 1, 1993 (inception of offering) to November 30,
1993.
6. Annualized.
7. The lesser of purchases or sales of portfolio securities for a
period, divided by the monthly average of the market value of portfolio
securities owned during the period. Securities with a maturity or
expiration date at the time of acquisition of one year or less are
excluded from the calculation. Purchases and sales of investment
securities (excluding short-term securities) for the period ended
November 30, 1996 were $119,030,302 and $95,651,350, respectively.
8. Total brokerage commissions paid on applicable purchases and sales
of portfolio securities for the period, divided by the total number of
related shares purchased and sold. See accompanying Notes to Financial
Statements.
15 Oppenheimer Quest Global Value Fund, Inc.
<PAGE> 16
NOTES TO FINANCIAL STATEMENTS
================================================================================
1. SIGNIFICANT
ACCOUNTING POLICIES
Oppenheimer Quest Global Value Fund, Inc. (the Fund), formerly named
Quest for Value Global Equity Fund, Inc., is registered under the
Investment Company Act of 1940, as amended, as a diversified, open-end
management investment company. The Fund's investment objective is to
seek capital appreciation through the pursuit of a global investment
strategy primarily involving equity securities. The Fund's investment
adviser is OppenheimerFunds, Inc. (the Manager). The Fund offers Class
A, Class B and Class C shares. Class A shares are sold with a front-end
sales charge. Class B and Class C shares may be subject to a contingent
deferred sales charge. All three classes of shares have identical
rights to earnings, assets and voting privileges, except that each
class has its own distribution and/or service plan, expenses directly
attributable to a particular class and exclusive voting rights with
respect to matters affecting a single class. Class B shares will
automatically convert to Class A shares six years after the date of
purchase. The following is a summary of significant accounting policies
consistently followed by the Fund.
-----------------------------------------------------------------------
INVESTMENT VALUATION. Portfolio securities are valued at the close of
the New York Stock Exchange on each trading day. Listed and unlisted
securities for which such information is regularly reported are valued
at the last sale price of the day or, in the absence of sales, at
values based on the closing bid or the last sale price on the prior
trading day. Long-term and short-term ``non-money market'' debt
securities are valued by a portfolio pricing service approved by the
Board of Directors. Such securities which cannot be valued by the
approved portfolio pricing service are valued using dealer-supplied
valuations provided the Manager is satisfied that the firm rendering
the quotes is reliable and that the quotes reflect current market
value, or are valued under consistently applied procedures established
by the Board of Directors to determine fair value in good faith.
Short-term "money market type" debt securities having a remaining
maturity of 60 days or less are valued at cost (or last determined
market value) adjusted for amortization to maturity of any premium or
discount. Forward foreign currency exchange contracts are valued based
on the closing prices of the forward currency contract rates in the
London foreign exchange markets on a daily basis as provided by a
reliable bank or dealer.
-----------------------------------------------------------------------
REPURCHASE AGREEMENTS. The Fund requires the custodian to take
possession, to have legally segregated in the Federal Reserve Book
Entry System or to have segregated within the custodian's vault, all
securities held as collateral for repurchase agreements. The market
value of the underlying securities is required to be at least 102% of
the resale price at the time of purchase. If the seller of the
agreement defaults and the value of the collateral declines, or if the
seller enters an insolvency proceeding, realization of the value of the
collateral by the Fund may be delayed or limited.
-----------------------------------------------------------------------
FOREIGN CURRENCY TRANSLATION. The accounting records of the Fund are
maintained in U.S. dollars. Prices of securities denominated in foreign
currencies are translated into U.S. dollars at the closing rates of
exchange. Amounts related to the purchase and sale of securities and
investment income are translated at the rates of exchange prevailing on
the respective dates of such transactions.
The effect of changes in foreign currency exchange
rates on investments is separately identified from the fluctuations
arising from changes in market values of securities held and reported
with all other foreign currency gains and losses in the Fund's
Statement of Operations.
-----------------------------------------------------------------------
ALLOCATION OF INCOME, EXPENSES, AND GAINS AND LOSSES. Income, expenses
(other than those attributable to a specific class) and gains and
losses are allocated daily to each class of shares based upon the
relative proportion of net assets represented by such class. Operating
expenses directly attributable to a specific class are charged against
the operations of that class.
16 Oppenheimer Quest Global Value Fund, Inc.
<PAGE> 17
================================================================================
1. SIGNIFICANT
ACCOUNTING POLICIES
(CONTINUED)
FEDERAL TAXES. The Fund intends to continue to comply with provisions
of the Internal Revenue Code applicable to regulated investment
companies and to distribute all of its taxable income, including any
net realized gain on investments not offset by loss carryovers, to
shareholders. Therefore, no federal income or excise tax provision is
required.
-----------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS. Dividends and distributions to
shareholders are recorded on the ex-dividend date.
-----------------------------------------------------------------------
CLASSIFICATION OF DISTRIBUTIONS TO SHAREHOLDERS. Net investment income
(loss) and net realized gain (loss) may differ for financial statement
and tax purposes. The character of the distributions made during the
year from net investment income or net realized gains may differ from
their ultimate characterization for federal income tax purposes. Also,
due to timing of dividend distributions, the fiscal year in which
amounts are distributed may differ from the year that the income or
realized gain (loss) was recorded by the Fund.
During the year ended November 30, 1996, the Fund
adjusted the classification of net investment income and capital gain
(loss) to reflect the differences between financial statement amounts
and distributions determined in accordance with income tax regulations.
Accordingly, during the year ended November 30, 1996, amounts have been
reclassified to reflect a decrease in paid-in capital of $43,892.
Overdistributed net investment income was decreased by the same amount.
In addition, to properly reflect foreign currency gain in the
components of capital, $249,904 of foreign exchange loss determined
according to U.S. federal income tax rules has been reclassified from
accumulated net realized loss to overdistributed net investment income.
-----------------------------------------------------------------------
OTHER. Investment transactions are accounted for on the date the
investments are purchased or sold (trade date) and dividend income is
recorded on the ex-dividend date. Realized gains and losses on
investments and unrealized appreciation and depreciation are determined
on an identified cost basis, which is the same basis used for federal
income tax purposes.
The preparation of financial statements in conformity
with generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the reported
amounts of income and expenses during the reporting period. Actual
results could differ from those estimates.
===============================================================================
2. CAPITAL STOCK
The Fund has authorized 100 million shares of $.01 par value capital
stock. Transactions in shares of capital stock were as follows:
<TABLE>
<CAPTION>
YEAR ENDED NOVEMBER 30, 1996 YEAR ENDED
NOVEMBER 30, 1995
----------------------------
- ----------------------------
SHARES AMOUNT SHARES
AMOUNT
- ----------------------------------------------------------------------------------------------------------------
- ---------
<S> <C> <C> <C>
<C>
Class A:
Sold 2,539,864 $38,385,735 2,425,486
$ 34,403,115
Dividends and distributions reinvested 950,833 13,558,877 954,313
12,377,445
Redeemed (2,280,780) (34,732,874) (3,393,068)
(48,138,429)
---------- ----------- ----------
-----------
Net increase (decrease) 1,209,917 $17,211,738 (13,269)
$(1,357,869)
========== =========== ==========
===========
- ----------------------------------------------------------------------------------------------------------------
- ---------
Class B:
Sold 1,411,432 $21,229,261 516,524
$7,279,837
Dividends and distributions reinvested 99,401 1,404,541 64,705
832,752
Redeemed (243,157) (3,657,346) (201,052)
(2,948,802)
---------- ----------- ----------
-----------
Net increase 1,267,676 $18,976,456 380,177
$5,163,787
========== =========== ==========
===========
- ----------------------------------------------------------------------------------------------------------------
- --------
Class C:
Sold 807,869 $12,121,286 204,655
$2,847,478
Dividends and distributions reinvested 29,254 412,482 16,393
210,815
Redeemed (128,191) (1,905,513) (106,327)
(1,560,431)
---------- ----------- ----------
-----------
Net increase 708,932 $10,628,255 114,721
$1,497,862
========== =========== ==========
===========
</TABLE>
===============================================================================
3. UNREALIZED GAINS AND
LOSSES ON INVESTMENTS
At November 30, 1996, net unrealized appreciation on investments of
$56,668,655 was composed of gross appreciation of $63,059,576, and
gross depreciation of $6,390,921.
17 Oppenheimer Quest Global Value Fund, Inc.
<PAGE> 18
NOTES TO FINANCIAL STATEMENTS (Continued)
===============================================================================
4. MANAGEMENT FEES
AND OTHER TRANSACTIONS
WITH AFFILIATES
Management fees paid to the Manager were in accordance with the
investment advisory agreement with the Fund which provides for a fee of
0.75% on the first $400 million of average annual net assets, 0.70% on
the next $400 million and 0.65% on net assets in excess of $800
million. The Manager has agreed to reimburse the Fund if aggregate
expenses (with specified exceptions) exceed the most stringent
applicable regulatory limit on Fund expenses.
The Manager pays OpCap Advisors (the Sub-Adviser) based on
the fee schedule set forth in the Prospectus. For the period ended
November 30, 1996, the Manager paid $820,179 to the Sub-Adviser. The
administration fees are payable monthly to the Manager and are computed
on the Fund's average daily net assets at the annual rate of 0.25%.
For the year ended November 30, 1996, commissions (sales
charges paid by investors) on sales of Class A shares totaled $408,775,
of which $201,003 was retained by OppenheimerFunds Distributor, Inc.
(OFDI), a subsidiary of the Manager, as general distributor, and by
affiliated broker/dealers. Sales charges advanced to broker/dealers by
OFDI on sales of the Fund's Class B and Class C shares totaled $662,161
and $100,103, of which $15,072 and $2,973, respectively, was paid to an
affiliated broker/dealer. During the year ended November 30, 1996, OFDI
received contingent deferred sales charges of $57,426 and $2,235,
respectively, upon redemption of Class B and Class C shares as
reimbursement for sales commissions advanced by OFDI at the time of
sale of such shares.
OppenheimerFunds Services (OFS), a division of the Manager,
is the transfer and shareholder servicing agent for the Fund and for
other registered investment companies. The Fund pays OFS an annual
maintenance fee of $14.85 for each Fund shareholder account and
reimburses OFS for its out-of-pocket expenses. During the year ended
November 30, 1996, the Fund paid OFS $213,105.
The Fund has adopted a Distribution and Service Plan
for Class A shares to compensate OFDI for a portion of its costs
incurred in connection with the personal service and maintenance of
accounts that hold Class A shares. Under the Plan, the Fund pays an
annual asset-based sales charge to OFDI of 0.25% per year on Class A
shares. The Fund also pays a service fee to OFDI of 0.25% per year.
Both fees are computed on the average annual net assets of Class A
shares of the Fund, determined as of the close of each regular business
day. OFDI uses all of the service fee and a portion of the asset-based
sales charge to compensate brokers, dealers, banks and other financial
institutions quarterly for providing personal service and maintenance
of accounts of their customers that hold Class A shares. OFDI retains
the balance of the asset-based sales charge to reimburse itself for its
other expenditures under the Plan. During the year ended November 30,
1996, OFDI paid $2,212 to an affiliated broker/dealer as compensation
for Class A personal service and maintenance expenses.
The Fund has adopted compensation type Distribution and
Service Plans for Class B and Class C shares to compensate OFDI for its
services and costs in distributing Class B and Class C shares and
servicing accounts. Under the Plans, the Fund pays OFDI an annual
asset-based sales charge of 0.75% per year on Class B and Class C
shares, as compensation for sales commissions paid from its own
resources at the time of sale and associated financing costs. OFDI also
receives a service fee of 0.25% per year as compensation for costs
incurred in connection with the personal service and maintenance of
accounts that hold shares of the Fund, including amounts paid to
brokers, dealers, banks and other financial institutions. Both fees are
computed on the average annual net assets of Class B and Class C
shares, determined as of the close of each regular business day. During
the year ended November 30, 1996, OFDI retained $234,056 and $63,112,
respectively, as compensation for Class B and Class C sales commissions
and service fee advances, as well as financing costs. If the Plans are
terminated by the Fund, the Board of Directors may allow the Fund to
continue payments of the asset-based sales charge to OFDI for certain
expenses it incurred before the Plans were terminated. At November 30,
1996, OFDI had incurred unreimbursed expenses of $505,284 for Class B
and $115,873 for Class C.
18 Oppenheimer Quest Global Value Fund, Inc.
<PAGE> 19
===============================================================================
5. FORWARD CONTRACTS
A forward foreign currency exchange contract (forward contract) is a
commitment to purchase or sell a foreign currency at a future date, at
a negotiated rate.
The Fund uses forward contracts to seek to manage foreign
currency risks. They may also be used to tactically shift portfolio
currency risk. The Fund generally enters into forward contracts as a
hedge upon the purchase or sale of a security denominated in a foreign
currency. In addition, the Fund may enter into such contracts as a
hedge against changes in foreign currency exchange rates on portfolio
positions.
Forward contracts are valued based on the closing prices of the
forward currency contract rates in the London foreign exchange markets
on a daily basis as provided by a reliable bank or dealer. The Fund
will realize a gain or loss upon the closing or settlement of the
forward transaction.
Securities held in segregated accounts to cover net exposure on
outstanding forward contracts are noted in the Statement of Investments
where applicable. Unrealized appreciation or depreciation on forward
contracts is reported in the Statement of Assets and Liabilities.
Realized gains and losses are reported with all other foreign currency
gains and losses in the Fund's Statement of Operations. Risks include
the potential inability of the counterparty to meet the terms of the
contract and unanticipated movements in the value of a foreign currency
relative to the U.S. dollar.
At November 30, 1996, the Fund had outstanding forward contracts to
purchase foreign currencies as follows:
<TABLE>
<CAPTION>
CONTRACT AMOUNT VALUATION AS OF UNREALIZED
CONTRACTS TO BUY EXPIRATION DATE (000S) NOV. 30, 1996 DEPRECIATION
------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Indonesian Rupiah (IDR) 12/5/96 815,222 IDR $347,643 $445
======== =====
</TABLE>
===============================================================================
6. SECURITIES LOANED
The Fund has entered into a securities lending arrangement with the
custodian. Under the terms of the agreement, the Fund pays State Street
Bank and Trust Company 35% of the net income earned as a fee for
administering the security lending program. The custodian is authorized
to loan securities on behalf of the Fund, against receipt of cash
collateral at least equal in value to the value of the securities
loaned. The collateral is invested by the custodian in money market
instruments approved by the Manager. As of November 30, 1996, the Fund
had on loan securities valued at $10,674,624. Cash of $10,382,319 was
received as collateral for the loans, and has been invested in the
approved instruments identified below. U.S. Treasury Bonds valued at
$862,250 were also received as collateral. The Fund bears the risk of
any deficiency in the amount of collateral available for return to a
borrower due to a loss in an approved investment.
<TABLE>
<CAPTION>
VALUATION AS OF
SECURITY NOV. 30, 1996
-------------------------------------------------------------------------------------------------
<S> <C>
Provident: Temp Fund $ 4,926,836
-------------------------------------------------------------------------------------------------
Seven Seas Series Prime Money Market Portfolio 2,229,763
-------------------------------------------------------------------------------------------------
Federated Treasury 1,877,557
-------------------------------------------------------------------------------------------------
Dreyfus Government Cash 1,254,670
-------------------------------------------------------------------------------------------------
U.S. Treasury Bonds 862,250
-------------------------------------------------------------------------------------------------
Dreyfus Treasury 93,493
-----------
$11,244,569
===========
</TABLE>
<PAGE>
Appendix A
DESCRIPTION OF RATINGS
Bond Ratings
Moody's Investors Service, Inc.
Aaa: Bonds which are rated "Aaa" are judged to be the best quality
and to carry the smallest degree of investment risk. Interest
payments are protected by a large or by an exceptionally stable
margin and principal is secure. While the various protective
elements are likely to change, the changes that can be expected are
most unlikely to impair the fundamentally strong position of such
issues.
Aa: Bonds which are rated "Aa" are judged to be of high quality by
all standards. Together with the "Aaa" group, they comprise what
are generally known as "high-grade" bonds. They are rated lower
than the best bonds because margins of protection may not be as
large as with "Aaa" securities or fluctuation of protective
elements may be of greater amplitude or there may be other elements
present which make the long-term risks appear somewhat larger than
those of "Aaa" securities.
A: Bonds which are rated "A" possess many favorable investment
attributes and are to be considered as upper-medium grade
obligations. Factors giving security to principal and interest are
considered adequate but elements may be present which suggest a
susceptibility to impairment sometime in the future.
Baa: Bonds which are rated "Baa" are considered medium grade
obligations, i.e., they are neither highly protected nor poorly
secured. Interest payments and principal security appear adequate
for the present but certain protective elements may be lacking or
may be characteristically unreliable over any great length of time.
Such bonds lack outstanding investment characteristics and have
speculative characteristics as well.
Ba: Bonds which are rated "Ba" are judged to have speculative
elements; their future cannot be considered well-assured. Often
the protection of interest and principal payments may be very
moderate and not well safeguarded during both good and bad times
over the future. Uncertainty of position characterizes bonds in
this class.
B: Bonds which are rated "B" generally lack characteristics of
desirable investment. Assurance of interest and principal payments
or of maintenance of other terms of the contract over any long
period of time may be small.
Caa: Bonds which are rated "Caa" are of poor standing and may be in
default or there may be present elements of danger with respect to
principal or interest.
Ca: Bonds which are rated "Ca" represent obligations which are
speculative in a high degree and are often in default or have other
marked shortcomings.
C: Bonds which are rated "C" can be regarded as having extremely
poor prospects of ever retaining any real investment standing.
Standard & Poor's Corporation
AAA: "AAA" is the highest rating assigned to a debt obligation and
indicates an extremely strong capacity to pay principal and
interest.
AA: Bonds rated "AA" also qualify as high quality debt obligations.
Capacity to pay principal and interest is very strong, and in the
majority of instances they differ from "AAA" issues only in small
degree.
A: Bonds rated "A" have a strong capacity to pay principal and
interest, although they are somewhat more susceptible to adverse
effects of change in circumstances and economic conditions.
BBB: Bonds rated "BBB" are regarded as having an adequate capacity
to pay principal and interest. Whereas they normally exhibit
protection parameters, adverse economic conditions or changing
circumstances are more likely to lead to a weakened capacity to pay
principal and interest for bonds in this category than for bonds in
the "A" category.
BB, B, CCC, CC: Bonds rated "BB," "B," "CCC" and "CC" are regarded,
on balance, as predominantly speculative with respect to the
issuer's capacity to pay interest and repay principal in accordance
with the terms of the obligation. "BB" indicates the lowest degree
of speculation and "CC" the highest degree. While such bonds will
likely have some quality and protective characteristics, these are
outweighed by large uncertainties or major risk exposures to
adverse conditions.
C, D: Bonds on which no interest is being paid are rated "C."
Bonds rated "D" are in default and payment of interest and/or
repayment of principal is in arrears.
Fitch Investors Service, Inc.
AAA Bonds considered to be investment grade and of the highest
credit quality. The obligor has an exceptionally strong ability to
pay interest and repay principal, which is unlikely to be affected
by reasonably foreseeable events.
AA Bonds considered to be investment grade and of very high credit
quality. The obligor's ability to pay interest and repay principal
is very strong, although not quite as strong as bonds rated "AAA."
Because bonds rated in the "AAA" and "AA" categories are not
significantly vulnerable to foreseeable future developments, short-
term debt of these issuers is generally rated "F-1+."
A Bonds considered to be investment grade and of high credit
quality. The obligor's ability to pay interest and repay principal
is considered to be strong, but may be more vulnerable to adverse
changes in economic conditions and circumstances than bonds with
higher ratings.
BBB Bonds considered to be investment grade and of satisfactory
credit quality. The obligor's ability to pay interest and repay
principal is considered to be adequate. Adverse changes in
economic conditions and circumstances, however, are more likely to
have adverse impact on these bonds, and therefore impair timely
payment. The likelihood that the ratings of these bonds will fall
below investment grade is higher than for bonds with higher
ratings.
BB Bonds are considered speculative. The obligor's ability to pay
interest and repay principal may be affected over time by adverse
economic changes. However, business and financial alternatives can
be identified which could assist the obligor in satisfying its debt
service requirements.
B Bonds are considered highly speculative. While bonds in this
class are currently meeting debt service requirements, the
probability of continued timely payment of principal and interest
reflects the obligor's limited margin of safety and the need for
reasonable business and economic activity through the life of the
issue.
CCC Bonds have certain identifiable characteristics which, if not
remedied, may lead to default. The ability to meet obligations
requires an advantageous business and economic environment.
CC Bonds are minimally protected. Default in payment of interest
and/or principal seems probable over time.
C Bonds are in imminent default in payment of interest or
principal.
DDD, DD, and D Bonds are in default on interest and/or principal
payments. Such bonds are extremely speculative and should be
valued on the basis of their ultimate recovery value in liquidation
or reorganization of the obligor. "DDD" represents the highest
potential for recovery of these bonds, and "D" represents the
lowest potential for recovery.
Plus (+) Minus (-) Plus and minus signs are used with a rating
symbol to indicate the relative position of a credit within the
rating category. Plus and minus signs, however, are not used in
the "DDD," "DD," or "D" categories.
Short-Term Debt Ratings.
Moody's Investors Service, Inc. The following rating
designations for commercial paper (defined by Moody's as promissory
obligations not having original maturity in excess of nine months),
are judged by Moody's to be investment grade, and indicate the
relative repayment capacity of rated issuers:
Prime-1: Superior capacity for repayment. Capacity will normally
be evidenced by the following characteristics: (a) leveling market
positions in well-established industries; (b) high rates of return
on funds employed; (c) conservative capitalization structures with
moderate reliance on debt and ample asset protection; (d) broad
margins in earning coverage of fixed financial charges and high
internal cash generation; and (e) well established access to a
range of financial markets and assured sources of alternate
liquidity.
Prime-2: Strong capacity for repayment. This will normally be
evidenced by many of the characteristics cited above but to a
lesser degree. Earnings trends and coverage ratios, while sound,
will be more subject to variation. Capitalization characteristics,
while still appropriate, may be more affected by external
conditions. Ample alternate liquidity is maintained.
Moody's ratings for state and municipal short-term obligations are
designated "Moody's Investment Grade" ("MIG"). Short-term notes
which have demand features may also be designated as "VMIG". These
rating categories are as follows:
MIG1/VMIG1: Best quality. There is present strong protection by
established cash flows, superior liquidity support or demonstrated
broadbased access to the market for refinancing.
MIG2/VMIG2: High quality. Margins of protection are ample
although not so large as in the preceding group.
Standard & Poor's Corporation ("S&P"): The following ratings by
S&P for commercial paper (defined by S&P as debt having an original
maturity of no more than 365 days) assess the likelihood of
payment:
A-1: Strong capacity for timely payment. Those issues determined
to possess extremely strong safety characteristics are denoted with
a plus sign (+) designation.
A-2: Satisfactory capacity for timely payment. However, the
relative degree of safety is not as high as for issues designated
"A-1".
S&P's ratings for Municipal Notes due in three years or less are:
SP-1: Very strong or strong capacity to pay principal and
interest. Those issues determined to possess overwhelming safety
characteristics will be given a plus (+) designation.
SP-2: Satisfactory capacity to pay principal and interest.
S&P assigns "dual ratings" to all municipal debt issues that have
a demand or double feature as part of their provisions. The first
rating addresses the likelihood of repayment of principal and
interest as due, and the second rating addresses only the demand
feature. With short-term demand debt, S&P's note rating symbols
are used with the commercial paper symbols (for example, "SP-1+/A-
1+").
Fitch Investors Service, Inc. Fitch assigns the following short-
term ratings to debt obligations that are payable on demand or have
original maturities of generally up to three years, including
commercial paper, certificates of deposit, medium-term notes, and
municipal and investment notes:
F-1+: Exceptionally strong credit quality; the strongest degree of
assurance for timely payment.
F-1: Very strong credit quality; assurance of timely payment is
only slightly less in degree than issues rated "F-1+".
F-2: Good credit quality; satisfactory degree of assurance for
timely payment, but the margin of safety is not as great as for
issues assigned "F-1+" or "F-1" ratings.
Duff & Phelps, Inc. The following ratings are for commercial
paper (defined by Duff & Phelps as obligations with maturities,
when issued, of under one year), asset-backed commercial paper, and
certificates of deposit (the ratings cover all obligations of the
institution with maturities, when issued, of under one year,
including bankers' acceptance and letters of credit):
Duff 1+: Highest certainty of timely payment. Short-term
liquidity, including internal operating factors and/or access to
alternative sources of funds, is outstanding, and safety is just
below risk-free U.S. Treasury short-term obligations.
Duff 1: Very high certainty of timely payment. Liquidity factors
are excellent and supported by good fundamental protection factors.
Risk factors are minor.
Duff 1-: High certainty of timely payment. Liquidity factors are
strong and supported by good fundamental protection factors. Risk
factors are very small.
Duff 2: Good certainty of timely payment. Liquidity factors and
company fundamentals are sound. Although ongoing funding needs may
enlarge total financing requirements, access to capital markets is
good. Risk factors are small.
IBCA Limited or its affiliate IBCA Inc. Short-term ratings,
including commercial paper (with maturities up to 12 months), are
as follows:
A1+: Obligations supported by the highest capacity for timely
repayment.
A1: Obligations supported by a very strong capacity for timely
repayment.
A2: Obligations supported by a strong capacity for timely
repayment, although such capacity may be susceptible to adverse
changes in business, economic, or financial conditions.
Thomson BankWatch, Inc. The following short-term ratings apply
to commercial paper, certificates of deposit, unsecured notes, and
other securities having a maturity of one year or less.
TBW-1: The highest category; indicates the degree of safety
regarding timely repayment of principal and interest is very
strong.
TBW-2: The second highest rating category; while the degree of
safety regarding timely repayment of principal and interest is
strong, the relative degree of safety is not as high as for issues
rated "TBW-1".
<PAGE>
Appendix B
Corporate Industry Classifications
Aerospace/Defense
Air Transportation
Auto Parts Distribution
Automotive
Bank Holding Companies
Banks
Beverages
Broadcasting
Broker-Dealers
Building Materials
Cable Television
Chemicals
Commercial Finance
Computer Hardware
Computer Software
Conglomerates
Consumer Finance
Containers
Convenience Stores
Department Stores
Diversified Financial
Diversified Media
Drug Stores
Drug Wholesalers
Durable Household Goods
Education
Electric Utilities
Electrical Equipment
Electronics
Energy Services & Producers
Entertainment/Film
Environmental
Food
Gas Transmission*
Gas Utilities*
Gold
Health Care/Drugs
Health Care/Supplies & Services
Homebuilders/Real Estate
Hotel/Gaming
Industrial Services
Insurance
Leasing & Factoring
Leisure
Manufacturing
Metals/Mining
Nondurable Household Goods
Oil - Integrated
Paper
Publishing/Printing
Railroads
Restaurants
Savings & Loans
Shipping
Special Purpose Financial
Specialty Retailing
Steel
Supermarkets
Telecommunications - Technology
Telephone - Utility
Textile/Apparel
Tobacco
Toys
Trucking
_________________
* For purposes of the Fund's investment policy not to concentrate
in securities of issuers in the same industry, gas utilities and
gas transmission utilities each will be considered a separate
industry.
<PAGE>
Oppenheimer Quest Global Value Fund, Inc.
Two World Trade Center
New York, New York 10048-0203
1-800-525-7048
Investment Adviser
OppenheimerFunds, Inc.
Two World Trade Center
New York, New York 10048-0203
Sub-Adviser
OpCap Advisors
One World Financial Center
New York, New York 10281
Distributor
OppenheimerFunds Distributor, Inc.
Two World Trade Center
New York, New York 10048-0203
Transfer Agent
OppenheimerFunds Services
P.O. Box 5270
Denver, Colorado 80217
1-800-525-7048
Custodian of Portfolio Securities
State Street Bank and Trust Company
P.O. Box 8505
Boston, Massachusetts 02266-8505
Independent Accountants
Price Waterhouse LLP
950 Seventeenth Street
Denver, Colorado 80202
Legal Counsel
Gordon Altman Butowsky Weitzen
Shalov & Wein
114 West 47th Street
New York, New York 10036
