-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, VcHA6TV2KBcdBPQq1jv8NRomZBbYfGIbKFdiY32FDJnK0DyeECCA+Ablkjp8q43D CCUeFN/i2jR/zCMp0h60Ew== 0000799029-97-000004.txt : 19970223 0000799029-97-000004.hdr.sgml : 19970223 ACCESSION NUMBER: 0000799029-97-000004 CONFORMED SUBMISSION TYPE: N-1A EL/A PUBLIC DOCUMENT COUNT: 9 FILED AS OF DATE: 19970221 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: QUEST FOR VALUE DUAL PURPOSE FUND INC CENTRAL INDEX KEY: 0000799029 STANDARD INDUSTRIAL CLASSIFICATION: UNKNOWN SIC - 0000 [0000] IRS NUMBER: 133387182 STATE OF INCORPORATION: MD FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: N-1A EL/A SEC ACT: 1933 Act SEC FILE NUMBER: 333-16881 FILM NUMBER: 97540736 FILING VALUES: FORM TYPE: N-1A EL/A SEC ACT: 1940 Act SEC FILE NUMBER: 811-04797 FILM NUMBER: 97540737 BUSINESS ADDRESS: STREET 1: OPPENHEIMER TWR STREET 2: ONE WORLD FINANCIAL CTR CITY: NEW YORK STATE: NY ZIP: 10281-1098 BUSINESS PHONE: 2126677333 MAIL ADDRESS: STREET 1: OPPENHEIMER TOWER STREET 2: ONE WORLD FINANCIAL CENTER CITY: NEW YORK STATE: NY ZIP: 10281-1098 FORMER COMPANY: FORMER CONFORMED NAME: QFV DUAL PURPOSE FUND INC DATE OF NAME CHANGE: 19870111 N-1A EL/A 1 QUEST FOR VALUE DUAL PURPOSE FUND, INC. As filed with the Securities and Exchange Commission on February 21, 1997 Registration No. 333-16881 811-4797 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 FORM N-1A REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 / X / PRE-EFFECTIVE AMENDMENT NO. 2 / X / POST-EFFECTIVE AMENDMENT NO. __ / / and/or REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 / X / Amendment No. 11 / X / QUEST FOR VALUE DUAL PURPOSE FUND, INC.* - ------------------------------------------------------------------------- (Exact Name of Registrant as Specified in Charter) Oppenheimer Tower, One World Financial Center, New York, New York 10281 - ------------------------------------------------------------------------- (Address of Principal Executive Offices) (212) 667-7000 - ------------------------------------------------------------------------- (Registrant's Telephone Number) Thomas Duggan, Esq. OpCap Advisors Oppenheimer Tower, One World Financial Center, New York, New York 10281 - ------------------------------------------------------------------------- (Name and Address of Agent for Service) It is proposed that this filing will become effective: Approximate Date of Proposed Offering: As soon as practicable after the effective date of this Registration Statement and thereafter from day to day. / / Immediately upon filing pursuant to paragraph (b) / / On ______________, pursuant to paragraph (b) / / 60 days after filing, pursuant to paragraph (a)(1) / / On ___________, pursuant to paragraph (a)(1) / / 75 days after filing, pursuant to paragraph (a)(2) / / On ____________, pursuant to paragraph (a)(2) of Rule 485. CALCULATION OF REGISTRATION FEE UNDER THE SECURITIES ACT OF 1933 Proposed Title of Maximum Amount Securities Amount Offering of Being Being Price Per Registration Registered Registered Unit Fee _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ Class A,** Class B and Class C Shares of Indefinite*** $_________ N/A Common Stock (par value $0.0001 per share) * On the effective date of this Registration Statement, the Registrant will change its name to Oppenheimer Quest Capital Value Fund, Inc. ** Previously registered under the Securities Act of 1933 (Reg. No. 33-7967) *** An indefinite number of Class A, Class B and Class C Shares of Common Stock of the Registrant is being registered by this Registration Statement pursuant to Rule 24f-2 under the Investment Company Act of 1940. The Registrant hereby amends the Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the Registration Statement shall become effective on such date as the Commission, acting pursuant to Section 8(a), shall determine. CROSS REFERENCE SHEET Part A of Form N-1A Item No. Prospectus Heading 1 Front Cover Page 2 Expenses; A Brief Overview of the Fund 3 Financial Highlights; Performance of the Fund 4 Front Cover Page; A Brief Overview of the Fund; Investment Objective and Policies; Investment Risks; Investment Techniques and Strategies; How the Fund is Managed 5 Expenses; A Brief Overview of the Fund; How the Fund is Managed; Back Cover 5A Performance of the Fund 6 How the Fund is Managed; Dividends, Capital Gains and Taxes 7 How to Buy Shares; How to Exchange Shares; Special Investor Services; How to Sell Shares; Shareholder Account Rules and Policies 8 How to Sell Shares; How to Exchange Shares; Special Investor Services 9 * Part B of Form N-1A Heading in Statement of Item No. Additional Information 10 Cover Page 11 Cover Page 12 * 13 Investment Objective and Policies 14 How the Fund is Managed 15 How the Fund is Managed 16 How the Fund is Managed; Distribution and Service Plans; Additional Information About the Fund; Back Cover 17 Brokerage Policies of the Fund 18 Additional Information about the Fund 19 About Your Investment Account-How to Buy Shares; How to Sell Shares; How to Exchange Shares 20 Dividends, Capital Gains and Taxes 21 How the Fund is Managed; Brokerage Policies of the Fund; Additional Information About the Fund - The Distributor; Distribution and Service Plans 22 Performance of the Fund 23 Financial Statements ______________________________________ * Not applicable or negative answer. prosp\capN1a.#2 OPPENHEIMER QUEST CAPITAL VALUE FUND, INC. Supplement dated March 3, 1997 to the Prospectus dated March 3, 1997 The Prospectus is changed as follows: In addition to paying dealers the regular commission for (1) sales of Class A shares stated in the sales charge table in "Buying Class A Shares," (2) sales of Class B shares described in the fifth paragraph in "Distribution and Service Plans for Class B and Class C Shares," and (3) sales of Class C shares described in the sixth paragraph in "Distribution and Service Plans for Class B and Class C Shares," the Distributor will pay additional commission to each broker, dealer and financial institution that has a sales agreement with the Distributor and agrees to accept that additional commission (these are referred to as "participating firms") for Class A, Class B and Class C shares of the Fund sold in "qualifying transactions" (the "promotion"). The additional commission will be 1.00% of the offering price of shares of the Fund sold by a registered representative or sales representative of a participating firm during the promotion. If the additional commission is paid on the sale of Class A shares of $500,000 or more or the sale of Class A shares to a SEP IRA with 100 or more eligible participants and those shares are redeemed within 13 months from the end of the month in which they were purchased, the participating firm will be required to return the additional commission. "Qualifying transactions" are aggregate sales of $150,000 or more of Class A, Class B and/or Class C shares of any one or more of the Oppenheimer funds (except money market funds and municipal bond funds) for rollovers or trustee-to-trustee transfers from another retirement plan trustee, of IRA assets or other employee benefit plan assets from an account or investment other than an account or investment in the Oppenheimer funds to (1) IRAs, rollover IRAs, SEP IRAs and SAR-SEP IRAs, using the OppenheimerFunds, Inc. prototype IRA agreement, if the rollover contribution is received during the period from March 3, 1997 through April 15, 1997 (the "promotion period"), or the acceptance of a direct rollover or trustee-to-trustee transfer is acknowledged by the trustee of the OppenheimerFunds prototype IRA during the promotion period, and (2) IRAs, rollover IRAs, SEP IRAs and SAR- SEP IRAs using the A.G. Edwards & Sons, Inc. prototype IRA agreement, if the rollover contribution or trustee-to-trustee payment is received during the promotion period. "Qualifying transactions" do not include (1) purchases of Class A shares intended but not yet made under a Letter of Intent, and (2) purchases of Class A, Class B and/or Class C shares with the redemption proceeds from an existing Oppenheimer funds account. March 3, 1997 PS0835.001 Oppenheimer Quest Capital Value Fund, Inc. Prospectus dated March 3, 1997 Oppenheimer Quest Capital Value Fund, Inc. is a mutual fund that seeks capital appreciation as its investment objective. The Fund invests in securities (primarily equity securities) of companies believed to be undervalued in the marketplace in relation to factors such as the companies' assets, earnings, growth potential and cash flows. The Fund may invest its assets in equity securities of companies without limit as to market capitalization. The Fund may invest up to 25% of its net assets in high-yield, lower-grade bonds rated below Baa3 by Moody's Investors Service, Inc. or BBB- by Standard & Poor's Corporation (commonly known as "junk bonds"). Please refer to "Investment Objective and Policies for more information about the types of securities in which the Fund invests and refer to "Investment Risks" for a discussion of the risks of investing in the Fund. This Prospectus explains concisely what you should know before investing in the Fund. Please read this Prospectus carefully and keep it for future reference. You can find more detailed information about the Fund in the March 3, 1997 Statement of Additional Information. For a free copy, call OppenheimerFunds Services, the Fund's Transfer Agent, at 1-800-525-7048, or write to the Transfer Agent at the address on the back cover. The Statement of Additional Information has been filed with the Securities and Exchange Commission and is incorporated into this Prospectus by reference (which means that it is legally part of this Prospectus). (OppenheimerFunds logo) Shares of the Fund are not deposits or obligations of any bank, are not guaranteed by any bank, are not insured by the F.D.I.C. or any other agency, and involve investment risks, including the possible loss of the principal amount invested. THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. Contents ABOUT THE FUND Expenses A Brief Overview of the Fund Financial Highlights Investment Objective and Policies Investment Risks Investment Techniques and Strategies How the Fund is Managed Performance of the Fund ABOUT YOUR ACCOUNT How to Buy Shares Class A Shares Class B Shares Class C Shares Special Investor Services AccountLink Automatic Withdrawal and Exchange Plans Reinvestment Privilege Retirement Plans How to Sell Shares By Mail By Telephone How to Exchange Shares Shareholder Account Rules and Policies Dividends, Capital Gains and Taxes Appendix A: Special Sales Charge Arrangements for Shareholders of the Former Quest for Value Funds Appendix B: Description of Ratings ABOUT THE FUND Expenses The Fund pays a variety of expenses directly for management of its assets, administration, distribution of its shares and other services, and those expenses are subtracted from the Fund's assets to calculate the Fund's net asset value per share. All shareholders therefore pay those expenses indirectly. Shareholders pay other expenses directly, such as sales charges and account transaction charges. The following tables are provided to help you understand your direct expenses of investing in the Fund and your share of the Fund's business operating expenses that you will bear indirectly. The numbers below are based on the Fund's fees and expenses in effect as of the date of this Prospectus. Background. The Fund is a diversified, open-end management investment company. Prior to the date of this Prospectus, the Fund was organized as a closed-end investment company with a dual purpose structure, a dual investment objective of (a) long-term capital appreciation and preservation of capital and (b) current income and long-term growth of income, and had common stock (the Capital Shares ) and preferred stock (the Income Shares ) outstanding. Under the Fund s prior dual purpose structure, the Capital Shares were entitled to all gains and losses on all of the assets of the Fund and no expenses were allocated to such shares; the Income Shares were entitled to receive all of the Fund s income and bore all of the operating expenses of the Fund. The Income Shares were redeemed by the Fund on January 31, 1997 and The Fund s dual purpose structure terminated. With respect to the Capital Shares, the Fund s Board of Directors (the Board of Directors ) determined that it was in the best interests of the holders of the Capital Shares to convert the Fund to an open-end investment company and approved the submission of this proposal to such shareholders. Pursuant to shareholder approval received on December 20, 1996, effective as of the date of this Prospectus, the Fund was converted to an open-end investment company with a single investment objective of capital appreciation. The outstanding Capital Shares of the Fund became Class A shares of common stock and will now bear their allocable share of the Fund s expenses. Other changes to the Fund, including a change in investment adviser to OppenheimerFunds, Inc., are described below in How The Fund is Managed . Shareholder Transaction Expenses are charges you pay when you buy or sell shares of the Fund. Please refer to "About Your Account," starting on page ___, for an explanation of how and when these charges apply.
Class Class Class A Shares B Shares C Shares Maximum Sales Charge on Purchases (as a % of offering price) 5.75% None None _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ __ _ _ _ Maximum Deferred Sales Charge (as a % of the lower of the original offering price or redemption proceeds) None(1) 5% in the first 1% if redeemed year, declining within 12 to 1% in the months of sixth year purchase(2) and eliminated thereafter(2) _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ Maximum Sale Charge on Reinvested Dividends None None None _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ Exchange Fee None None None _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ Redemption Fee None(3) None(3) None(3) (1) If you invest $1 million or more ($500,000 or more for purchases by "Retirement Plans," as defined in "Class A Contingent Deferred Sales Charge" on page __) in Class A shares, you may have to pay a sales charge of up to 1% if you sell your shares within 18 calendar months from the end of the calendar month during which you purchased those shares, depending upon when you purchased such shares. See "How to Buy Shares - Buying Class A Shares," below. (2) See "How to Buy Shares - Buying Class B Shares" and "How to Buy Shares - Buying Class C Shares" below, for more information on the contingent deferred sales charges. (3) There is a $10 transaction fee for redemptions paid by Federal Funds wire, but not for redemptions paid by ACH transfer through AccountLink. See "How to Sell Shares", below.
Annual Fund Operating Expenses are paid out of the Fund's assets and represent the Fund's expenses of operating its business. For example, the Fund pays management fees to its investment adviser, OppenheimerFunds, Inc. (referred to in this Prospectus as the "Manager"). The rates of the Manager's fees are set forth in "How the Fund is Managed," below. The Fund has other regular expenses for services, such as transfer agent fees, custodial fees paid to the bank that holds the Fund's portfolio securities, audit fees and legal expenses. Those expenses are detailed in the Fund's Financial Statements in the Statement of Additional Information. Annual Fund Operating Expenses (as a Percentage of Average Net Assets)
Class A Class B Class C Shares Shares Shares ------- ------- ------- Management Fees .69% .69% .69% (after waiver) _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ __ _ _ _ 12b-1 Distribution .35% 1.00% 1.00% Plan Fees (after waiver) _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ __ _ _ _ Other Expenses .40% .40% .40% _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ __ _ _ _ Total Fund Operating Expenses 1.44% 2.09% 2.09% (after waivers)
The Annual Fund Operating Expenses, including "Other Expenses," shown above are based on restated data estimated to be paid through the end of the Fund's first fiscal year (ending December 31, 1996) as an open-end investment company as if the Fund had operated as an open-end investment company during the entire fiscal year. These amounts are shown as a percentage of the average net assets of each class of the Fund's shares for such year. The 12b-1 Distribution Plan Fees for Class A shares are Service Plan Fees (the maximum fee is 0.25% of average annual net assets of that class), plus the asset-based sales charge of 0.25% of the average annual net assets of that class. For Class B and Class C shares, the 12b-1 Distribution and Service Plan Fees are service fees (the maximum fee is 0.25% of average annual net assets of that class) plus an asset-based sales charge of 0.75%. These plans are described in greater detail in "How to Buy Shares." The "Management Fees", "12b-1 Distribution Plan Fees" and "Total Fund Operating Expenses" in the table above reflect fee waivers by the Manager and the Distributor (as defined below). These fee waivers lowered the Fund's overall expense ratio. Without such fee waivers, the "Management Fees," "12b-1 Distribution Plan Fees" and "Total Fund Operating Expenses" for Class A shares would have been .97%, .50% and 1.87%, respectively; and for Class B and Class C shares would have been .97%, 1.00% and 2.37%, respectively. The fee waivers are described in "How the Fund is Managed - Fees and Expenses" and "Buying Class A Shares - Distribution and Service Plan for Class A Shares," and the Statement of Additional Information. The actual expenses for each class of shares in future years may be more or less than the numbers in the chart above, depending on a number of factors, including changes in the actual value of the Fund's assets represented by each class of shares. Examples. To try to show the effect of these expenses on an investment over time, we have created the hypothetical examples shown below. Assume that you make a $1,000 investment in each class of shares of the Fund, and that the Fund's annual return is 5%, and that its operating expenses for each class are the ones shown in the Annual Fund Operating Expenses table above. If you were to redeem your shares at the end of each period shown below, your investment would incur the following expenses by the end of 1, 3, 5 and 10 years:
1 year 3 years 5 years 10 years(*) Class A Shares $71 $105 $145 $257 Class B Shares $71 $ 98 $141 $242 Class C Shares $31 $ 68 $121 $266 If you did not redeem your investment, it would incur the following expenses: 1 year 3 years 5 years 10 years(*) Class A Shares $71 $105 $145 $257 Class B Shares $21 $ 68 $121 $242 Class C Shares $21 $ 68 $121 $266
_________________________ * The expenses set forth in the examples above are based upon expenses of the Fund that are expected to be incurred during the Fund s first fiscal year as an open-end investment company on an annualized basis. In the first example, expenses include the Class A initial sales charge and the applicable Class B or Class C contingent deferred sales charge. In the second example, Class A expenses include the initial sales charge, but Class B and Class C expenses do not include contingent deferred sales charges. The Class B expenses in years 7 through 10 are based on the Class A expenses shown above, because the Fund automatically converts your Class B shares into Class A shares after 6 years. Because of the effect of the higher asset-based sales charge and the contingent deferred sales charge imposed on Class B and Class C shares, long- term holders of Class B and Class C shares could pay the economic equivalent of more than the maximum front-end sales charge allowed under applicable regulations. For Class B shareholders, the automatic conversion of Class B shares to Class A shares is designed to minimize the likelihood that this will occur. Please refer to "How to Buy Shares -- Buying Class B Shares" for more information. These examples show the effect of expenses on an investment, but are not meant to state or predict actual or expected costs or investment returns of the Fund, which may be more or less than those shown. A Brief Overview of the Fund Some of the important facts about the Fund are summarized below, with references to the section of this Prospectus where more complete information can be found. You should carefully read the entire Prospectus before making a decision about investing in the Fund. Keep the Prospectus for reference after you invest, particularly for information about your account, such as how to sell or exchange shares. What is the Fund's Investment Objective? The Fund's investment objective is to seek capital appreciation. What Does the Fund Invest In? The Fund invests in securities (primarily equity securities) of companies believed by the Sub-Adviser (as defined below) to be undervalued in the marketplace in relation to factors such as the companies' assets, earnings, growth potential and cash flows. The Fund invests primarily in equity securities including common stocks and preferred stocks; bonds, debentures and notes convertible into common stock; and depository receipts for such securities. The Fund may invest its assets in equity securities of companies with no limit as to market capitalization. The Fund may invest up to 25% of its net assets in high-yield, lower-grade bonds rated below Baa3 by Moody's Investors Service, Inc. ("Moody's") or BBB- by Standard & Poor's Corporation ("S&P")(commonly known as "junk bonds"). To provide liquidity, the Fund typically invests a part of its assets in various types of U.S. Government securities and money market instruments. For temporary defensive purposes, the Fund may invest up to 100% of its assets in money market instruments. These investments are more fully explained in "Investment Policies and Strategies," starting on page _. Who Manages the Fund? The Manager supervises the Fund's investment program and handles its day-to-day business. The Manager (including a subsidiary) manages investment company portfolios having over $62 billion in assets as of December 31, 1996. The Manager is paid an advisory fee by the Fund, based on its net assets. The Fund's sub-adviser is OpCap Advisors (the "Sub-Adviser"), which is paid a fee by the Manager, not the Fund. The Sub-Adviser provides day-to-day portfolio management of the Fund. The Fund's portfolio manager is employed by the Sub-Adviser and is primarily responsible for the selection of the Fund's securities. The Board of Directors, elected by shareholders, oversees the Manager, the Sub-Adviser and the portfolio manager. Please refer to "How the Fund is Managed," starting on page __ for more information about the Manager, the Sub-Adviser and their fees. How Risky is the Fund? All investments carry risks to some degree. It is important to remember that the Fund is designed for long-term investors. The Fund's investments in stocks and bonds are subject to changes in their value from a number of factors such as: changes in general stock and bond market movements, the change in value of particular stocks because of an event affecting the issuer, or changes in interest rates that can affect bond prices. These changes affect the value of the Fund's investments and its price per share. Investments in foreign securities involve additional risks not associated with investments in domestic securities, including risks associated with changes in currency rates. While the Sub-Adviser tries to reduce risks by diversifying investments, by carefully researching securities before they are purchased for the Fund's portfolio, and in some cases by using hedging techniques, there is no guarantee of success in achieving the Fund's investment objective, and your shares may be worth more or less than their original cost when you redeem them. Please refer to "Investment Risks" starting on page _ for a more complete discussion of the Fund's investment risks. How Can I Buy Shares? You can buy shares through your dealer or financial institution, or you can purchase shares directly through OppenheimerFunds Distributor, Inc. (the "Distributor") by completing an Application or by using an Automatic Investment Plan under AccountLink. Please refer to "How To Buy Shares" on page __ for more details. Will I Pay a Sales Charge to Buy Shares? The Fund offers Class A, Class B and Class C shares. All classes have the same investment portfolio but have different expenses. Class A shares are offered with a front-end sales charge, starting at 5.75%, and is reduced for larger purchases. Class B and Class C shares are offered without a front-end sales charge, but may be subject to a contingent deferred sales charge if redeemed within six years or 12 months, respectively, of buying them. There is also an annual asset-based sales charge, described on pages ___ and ___, which is higher on Class B and Class C shares. Please review "How To Buy Shares" starting on page __ for more details, including a discussion about factors you and your financial advisor should consider in determining which class may be appropriate for you. How Can I Sell My Shares? Shares can be redeemed by mail or by telephone call to the Transfer Agent on any business day, or through your dealer. Please refer to "How To Sell Shares" on page __. The Fund also offers exchange privileges to other Oppenheimer funds, described in "How to Exchange Shares" on page __. How Has the Fund Performed? Prior to the date of this Prospectus, the Fund operated as a closed-end investment company with a dual-purpose structure and with dual investment objectives. See About the Fund - Expenses - Background. The Fund measures its performance by quoting its average annual total return and cumulative total return, which measure historical performance. The historical performance of the Class A shares of the Fund (formerly, the Capital Shares) has been restated to reflect the fees and expenses of such Class A shares in effect as of the date of this Prospectus as set forth above in "About the Fund" in "Shareholder Transaction Expenses" and "Annual Fund Operating Expenses" (without giving effect to any fee waivers discussed therein). The Fund s total returns can be compared to the returns (over similar periods) of other funds. Of course, other funds may have different objectives, investments, and levels of risk. The Fund's performance can also be compared to a broad-based market index, which we have done on page __. Financial Highlights The financial highlights table on the following page presents selected financial information about the Fund, including per share data, expense ratios and other data based on the Fund's average net assets. This information has been audited by Price Waterhouse LLP, the Fund's independent accountants, whose report on the Fund's financial statements for the fiscal year ended December 31, 1996 is included in the Statement of Additional Information. The financial information below reflects the Fund's performance as a closed-end investment company with a dual purpose structure and with Income Shares and Capital Shares outstanding. The Income Shares were redeemed on January 31, 1997 after the end of the Fund s fiscal year. Accordingly, the financial information below may not be indicative of the Fund s performance as an open- end investment company. Capital Shares of the Fund existing at the time of its conversion to an open-end investment company have been classified as Class A shares. Class B and Class C shares were not offered during the fiscal year ended December 31, 1996; accordingly, financial information for such shares is not set forth below. See About the Fund - Expenses - Background for additional information about the background of the Fund.
Oppenheimer Quest Capital Value Fund, Inc. Financial Highlights Year Ended December 31, - ---------------------------------------------------------------------------- 1996 1995 1994 1993 1992 ------------ ------------ ------------ ------------ ------------ Per Share Operating Data: Income Shares: Net asset value, beginning of period.............. $ 11.63 $ 11.63 $ 11.61 $ 11.61 $ 11.60 Net investment income............................. 1.38 1.39 1.36 1.30 1.35 Provision for income taxes........................ -- -- -- -- -- Dividends from net investment income.............. (1.38) (1.39) (1.34) (1.30) (1.34) Allocation from capital shares of tax basis net realized short-term capital gains............... -- -- -- -- -- Offering expenses................................. -- -- -- -- -- ------------ ------------ ------------ ------------ ------------ Net asset value, end of period.................... $ 11.63 $ 11.63 $ 11.63 $ 11.61 $ 11.61 ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ Market value, end of period....................... $ 11.500 $ 12.000 $ 12.125 $ 13.250 $ 13.000 ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ Total Return, at Market Value(3).................. 7.8% 10.9% 1.8% 12.3% 7.4% ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ Capital Shares: Net asset value, beginning of period.............. $ 33.65 $ 25.79 $ 27.09 $ 26.29 $ 22.59 Net realized and unrealized gain (loss)........... 6.91 9.46 (0.38) 2.45 6.09 Provision for corporate income taxes on net realized long-term capital gain................. (3.31) (1.57) (0.53) (1.43) (1.10) Distributions from net realized short-term gain... -- (0.03) (0.39) (0.22) (1.29) Allocation from capital shares of tax basis net realized short-term capital gains............... -- -- -- -- -- Offering expenses................................. -- -- -- -- -- ------------ ------------ ------------ ------------ ------------ Net asset value, end of period.................... $ 37.25 $ 33.65 $ 25.79 $ 27.09 $ 26.29 ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ Market value, end of period....................... $ 36.125 $ 31.875 $ 23.000 $ 23.750 $ 23.000 ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ Total Return, at Market Value(4).................. 23.6% 45.6% 0.9% 10.5% 44.6% ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ Ratios/Supplemental Data: Net assets, end of period (in thousands).......... $ 879,934 $ 815,179 $ 673,742 $ 696,803 $ 682,374 ------------ ------------ ------------ ------------ ------------ Ratios to average net assets: Expenses........................................ 0.72%(6) 0.73% 0.74% 0.74% 0.74% ------------ ------------ ------------ ------------ ------------ Net investment income........................... 2.82% 3.20% 3.47% 3.29% 3.61% ------------ ------------ ------------ ------------ ------------ Portfolio turnover rate........................... 74% 72% 45% 51% 45% ------------ ------------ ------------ ------------ ------------ Average brokerage commission rate................. $ 0.05 -- -- -- -- ------------ ------------ ------------ ------------ ------------
1. Commencement of operations. 2. The Fund changed its fiscal year end from October 31 to December 31. 3. Change in market price assuming reinvestment of dividends on payable date (at market). 4. Change in market price assuming reinvestment of short-term capital gains distributions, if any, at payable date and federal taxes paid on long-term capital gains on year end (both at market). 5. Annualized. 6. Gross of expense offsets.
Oppenheimer Quest Capital Value Fund, Inc. Financial Highlights Year Ended December 31, ------------------------------------------------------------- 1991 1990 1989 1988 ------------ ------------ ------------ ------------ Per Share Operating Data: Income Shares: Net asset value, beginning of period.............. $ 11.60 $ 11.61 $ 11.69 $ 11.62 Net investment income............................. 1.37 1.57 1.41 1.12 Provision for income taxes........................ -- -- -- -- Dividends from net investment income.............. (1.37) (1.58) (1.49) (1.05) Allocation from capital shares of tax basis net realized short-term capital gains............... -- -- -- -- Offering expenses................................. -- -- -- -- ------------ ------------ ------------ ------------ Net asset value, end of period.................... $ 11.60 $ 11.60 $ 11.61 $ 11.69 ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ Market value, end of period....................... $ 13.375 $ 12.875 $ 13.00 $ 10.50 ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ Total Return, at Market Value(3).................. 15.0% 11.9% 39.8% 32.8% ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ Capital Shares: Net asset value, beginning of period.............. $ 16.43 $ 18.05 $ 11.93 $ 8.70 Net realized and unrealized gain (loss)........... 6.77 (0.91) 6.43 3.23 Provision for corporate income taxes on net realized long-term capital gain................. (0.60) (0.51) (0.31) -- Distributions from net realized short-term gain... (0.01) (0.20) -- -- Allocation from capital shares of tax basis net realized short-term capital gains............... -- -- -- -- Offering expenses................................. -- -- -- -- ------------ ------------ ------------ ------------ Net asset value, end of period.................... $ 22.59 $ 16.43 $ 18.05 $ 11.93 ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ Market value, end of period....................... $ 17.625 $ 12.00 $ 14.125 $ 8.625 ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ Total Return, at Market Value(4).................. 52.1% (9.7)% 67.4% 35.3% ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ Ratios/Supplemental Data: Net assets, end of period (in thousands).......... $ 615,727 $ 504,739 $ 533,994 $ 425,376 ------------ ------------ ------------ ------------ Ratios to average net assets: Expenses........................................ 0.77% 0.81% 0.83% 0.86% ------------ ------------ ------------ ------------ Net investment income........................... 4.39% 5.50% 5.17% 5.04% ------------ ------------ ------------ ------------ Portfolio turnover rate........................... 62% 78% 76% 155% ------------ ------------ ------------ ------------ Average brokerge commission rate.................. $ -- -- -- -- ------------ ------------ ------------ ------------
Oppenheimer Quest Capital Value Fund, Inc. Financial Highlights February 13, Year ended 1987(1) to December 31, October 31, 1987(2) 1987 ------------ ------------ Per Share Operating Data: Income Shares: Net asset value, beginning of period.............. $ 11.86 $ 11.63 Net investment income............................. 0.09 0.64 Provision for income taxes........................ (0.01) -- Dividends from net investment income.............. (0.32) (0.41) Allocation from capital shares of tax basis net realized short-term capital gains............... -- 0.03 Offering expenses................................. -- (0.03) ------------ ------------ Net asset value, end of period.................... $ 11.62 $ 11.86 ------------ ------------ ------------ ------------ Market value, end of period....................... $ 8.750 $ 9.125 ------------ ------------ ------------ ------------ Total Return, at Market Value(3).................. (0.7)% (24.2)% ------------ ------------ ------------ ------------ Capital Shares: Net asset value, beginning of period.............. $ 9.41 $ 11.63 Net realized and unrealized gain (loss)........... 0.07 (2.01) Provision for corporate income taxes on net realized long-term capital gain................. (0.01) (0.15) Distributions from net realized short-term gain... (0.77) -- Allocation from capital shares of tax basis net realized short-term capital gains............... -- (0.03) Offering expenses................................. -- (0.03) ------------ ------------ Net asset value, end of period.................... $ 8.70 $ 9.41 ------------ ------------ ------------ ------------ Market value, end of period....................... $ 6.375 $ 5.875 ------------ ------------ ------------ ------------ Total Return, at Market Value(4).................. 22.4% (51.8)% ------------ ------------ ------------ ------------ Ratios/Supplemental Data: Net assets, end of period (in thousands).......... $ 365,781 $ 382,870 ------------ ------------ Ratios to average net assets: Expenses........................................ 1.06%(5) 0.77%(5) ------------ ------------ Net investment income........................... 2.37%(5) 3.80%(5) ------------ ------------ Portfolio turnover rate........................... 25% 137% ------------ ------------ Average brokerage commission rate................. $ -- -- ------------ ------------
Investment Objective and Policies Objective. The Fund seeks capital appreciation. Investment Policies and Strategies. The Fund invests in securities (primarily equity securities) of companies believed by the Manager to be undervalued in the marketplace in relation to factors such as the companies' assets, earnings, growth potential and cash flows. The Fund may invest its assets in equity securities of companies with no limit as to market capitalization. The Fund may invest up to 25% of its net assets in high-yield, lower-grade bonds (or high- yielding unrated bonds)rated below Baa3 by Moody's or BBB- by S&P(commonly known as "junk bonds"). For the purposes of this Prospectus the term equity securities is defined as common stocks and preferred stocks; bonds, debentures and notes convertible into common stocks; and depository receipts for such securities. To provide liquidity for the purchase of new instruments and to effect redemptions of shares, the Fund typically invests a part of its assets in various types of U.S. Government securities and high quality, short-term debt securities with remaining maturities of one year or less such as government obligations, certificates of deposit, bankers' acceptances, commercial paper, short-term corporate securities and repurchase agreements ("money market instruments"). For temporary defensive purposes, the Fund may invest up to 100% of its assets in money market instruments. At any time that the Fund for temporary defensive purposes invests in money market instruments, to the extent of such investments, it is not pursuing its investment objective. Can the Fund's Investment Objective and Policies Change? The Fund has an investment objective, which is described above, as well as investment policies it follows to try to achieve its objective. Additionally, the Fund uses certain investment techniques and strategies in carrying out those investment policies. The Fund's investment policies and practices are not "fundamental" unless this Prospectus or the Statement of Additional Information says that a particular policy is "fundamental". The Fund's investment objective is a fundamental policy. Fundamental policies are those that cannot be changed without the approval of a "majority" of the Fund's outstanding voting shares. The term "majority" is defined in the Investment Company Act of 1940 to be a particular percentage of outstanding voting shares (and this term is explained in the Statement of Additional Information). The Board of Directors may change non-fundamental policies without shareholder approval, although significant changes will be described in amendments to this Prospectus. Foreign Securities. The Fund may purchase foreign securities that are listed on a domestic or foreign securities exchange, traded in domestic or foreign over-the-counter markets or represented by American Depository Receipts, European Depository Receipts or Global Depository Receipts. There is no limit to the amount of foreign securities the Fund may acquire. The Fund may buy securities in any country; however as a fundamental policy, the Fund may not invest more than 25% of its net assets (at time of purchase) in securities of issuers located in any single foreign country and, as a non-fundamental policy, does not presently intend to invest more than 5% of its net assets in securities issued by emerging market countries, or by companies located in those countries. The Fund will hold foreign currency only in connection with the purchase or sale of foreign securities. Warrants. A warrant is an option to purchase an equity security at a specific price which is valid for a specific period of time. As a fundamental policy the Fund will not invest more than 5% of its net assets at the time of purchase in warrants (other than those that have been acquired in units or attached to other securities)or more than 2% of its net assets at the time of purchase in warrants not listed on the New York or American Stock Exchange. For further details about this type of investment, please refer to "Warrants" in the Statement of Additional Information. Portfolio Turnover. A change in the securities held by the Fund is known as "portfolio turnover." The Fund ordinarily does not engage in short-term trading to try to achieve its objective. As a result, the Fund's portfolio turnover (excluding turnover of securities having a maturity of one year or less) is not expected to be more than 100% each year. Portfolio turnover affects brokerage costs, dealer markups and other transaction costs, and results in the Fund's realization of capital gains or losses for tax purposes. It may also affect the Fund's ability to qualify as a "regulated investment company" under the Internal Revenue Code for tax deductions for dividends and capital gains distributions the Fund pays to shareholders. The Fund qualified in its last fiscal year and intends to do so in the coming year, although there is no guarantee that it will qualify. Investment Risks All investments carry risks to some degree, whether they are risks that market prices of the investment will fluctuate (this is known as "market risk") or that the underlying issuer will experience financial difficulties and may default on its obligation under a fixed-income investment to pay interest and repay principal (this is referred to as "credit risk"). These general investment risks and the special risks of certain types of investments that the Fund may hold are described below. They affect the value of the Fund's investments, its investment performance and the prices of its shares. These risks collectively form the risk profile of the Fund. Because of the types of securities the Fund invests in and the investment techniques the Fund uses, the Fund is designed for investors who are investing for the long term. It is not intended for investors seeking assured income or preservation of capital. While the Manager tries to reduce risks by diversifying investments, by carefully researching securities before they are purchased, and in some case by using hedging techniques, changes in overall market prices can occur at any time, and because the income earned on securities is subject to change, there is no assurance that the Fund will achieve its investment objective. When you redeem your shares, they may be worth more or less than what you paid for them. Stock Investment Risks. Because the Fund may invest a substantial portion of its assets in stocks, the value of the Fund's portfolio will be affected by changes in the stock markets. At times, the stock markets can be volatile and stock prices can change substantially. This market risk will affect the Fund's net asset values per share, which will fluctuate as the values of the Fund's portfolio securities change. Not all stock prices change uniformly or at the same time and not all stock markets move in the same direction at the same time. Other factors can affect a particular stock's prices, for example, poor earnings reports by an issuer, loss of major customers, major litigation against an issuer, or changes in government regulations affecting an industry. Not all of these factors can be predicted. The Fund attempts to limit market risks by diversifying its investments, that is, by not holding a substantial amount of the stock of any one company and by not investing too great a percentage of the Fund's assets in any one company. Because changes in market prices can occur at any time, there is no assurance that the Fund will achieve its investment objective, and when you redeem your shares, they may be worth more or less than what you paid for them. Foreign Securities Have Special Risks. For example, foreign issuers are not subject to the same accounting and disclosure requirements as U.S. companies. The value of foreign investments may be affected by changes in foreign currency rates, exchange control regulations, expropriation or nationalization of a company's assets, foreign taxes, delays in settlement of transactions, changes in governmental economic or monetary policy in the U.S. or abroad, or other political and economic factors. The Fund may invest in emerging market countries; such countries may have relatively unstable governments, economies based on only a few industries that are dependent upon international trade and reduced secondary market liquidity. More information about the risks and potential rewards of investing in foreign securities is contained in the Statement of Additional Information. Risks of Fixed-Income Securities. In addition to credit risks, described above, debt securities are subject to changes in their value due to changes in prevailing interest rates. When prevailing interest rates fall, the value of already-issued debt securities generally rise. When interest rates rise, the values of already-issued debt securities generally decline. The magnitude of these fluctuations will often be greater for longer-term debt securities than shorter-term debt securities. Changes in the value of securities held by the Fund mean that the Fund's share prices can go up or down when interest rates change because of the effect of the change on the value of the Fund's portfolio of debt securities. The Fund may invest up to 25% of its net assets in high- yield, "lower-grade" bonds (or high-yielding unrated bonds), commonly known as "junk bonds." The Fund is not obligated to dispose of securities that are downgraded below investment grade after the Fund buys them. "Lower-grade" debt securities are those rated below "investment grade," which means they have a rating lower than "Baa3" by Moody's or lower than "BBB-" by S&P. The Fund may invest in securities rated as low as "C" or "D" or which may be in default at the time the Fund buys them. Appendix B to this Prospectus describes these rating categories. If a debt security is rated below investment grade by one rating agency and as investment grade by a different rating agency, the Sub-Adviser will make a determination as to the debt security's investment grade quality. High yield, lower-grade securities, whether rated or unrated, often have speculative characteristics and special risks that make them riskier investments than investment grade securities. Generally, higher yielding lower-grade bonds are subject to credit risks to a greater extent than lower yielding, investment grade bonds. 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. More information about investment in fixed-income securities, including convertible securities, is contained in the Statement of Additional Information. Hedging instruments can be volatile investments and may involve special risks. As discussed below, the Fund may invest in certain hedging instruments. The use of hedging instruments requires special skills and knowledge of investment techniques that are different than what is required for normal portfolio management. If the Manager uses a hedging instrument at the wrong time or judges market conditions incorrectly, hedging strategies may reduce the Fund's return. The Fund could also experience losses if the prices of its futures, forwards and options positions were not correlated with its other investments or if it could not close out a position because of an illiquid market for the future or option. Options trading involves the payment or receipt of premiums and has special tax effects on the Fund. There are also special risks in particular hedging strategies. If a covered call written by the Fund is exercised on an investment that has increased in value, the Fund will be required to sell the investment at the call price and will not be able to realize any profit if the investment has increased in value above the call price. In writing a put, there is a risk that the Fund may be required to buy the underlying security at a disadvantageous price. The use of forward contracts may reduce the gain that would otherwise result from a change in the relationship between the U.S. dollar and a foreign currency. These risks are described in greater detail in the Statement of Additional Information. Investment Techniques and Strategies The Fund may also use the investment techniques and strategies described below. These techniques involve certain risks. The Statement of Additional Information contains more information about these practices, including limitations on their use that may help to reduce some of the risks. Investing in Small, Unseasoned Companies. The Fund may invest without limitation in securities of small, unseasoned companies. These are companies that have been in continuous operation for less than three years, counting the operations of any predecessors. Securities of these companies may have limited liquidity (which means that the Fund may have difficulty selling them at an acceptable price when it wants to) and the prices of these securities may be volatile. See "Investing in Small, Unseasoned Companies" in the Statement of Additional Information for a further discussion of the risks involved in such investments. Hedging. The Fund may purchase and sell certain kinds of futures contracts, forward contracts, and options on securities, futures and broadly-based stock indices. These are all referred to as "hedging instruments." The Fund does not use hedging instruments for speculative purposes, and has limits on the use of them, described below. The hedging instruments the Fund may use are described below and in greater detail in "Other Investment Techniques and Strategies" in the Statement of Additional Information. The Fund may buy and sell options, futures and forward contracts for a number of purposes. It may do so to try to manage its exposure to the possibility that the prices of its portfolio securities may decline, or to establish a position in the securities market as a temporary substitute for purchasing individual securities. It may do so to try to manage its exposure to changing interest rates. Some of these strategies, such as selling futures, buying puts and writing covered calls, hedge the Fund's portfolio against price fluctuations. Other hedging strategies, such as buying futures and call options, tend to increase the Fund's exposure to the securities market. Forward contracts are used to try to manage foreign currency risks on the Fund's foreign investments. Foreign currency options are used to try to protect against declines in the dollar value of foreign securities the Fund owns, or to protect against an increase in the dollar cost of buying foreign securities. Futures. The Fund may buy and sell futures contracts that relate to broadly-based stock indices (these are referred to as Stock Index Futures) or foreign currencies (these are called Forward Contracts and are discussed below). Put and Call Options. The Fund may buy and sell put options (puts) and call options (calls) on broadly-based stock indices, foreign currencies or on Stock Index Futures. The Fund may also purchase call options on securities it intends to purchase and may purchase put options on securities it owns. All options purchased or sold by the Fund will be traded on a U.S. or foreign commodities exchange or will result from separate, privately negotiated transactions with a primary government securities dealer recognized by the Board of Governors of the Federal Reserve System or with other broker-dealers approved by the Board of Directors. When the Fund writes (that is, sells) a call, it receives cash (called a premium). The call gives the buyer the ability to buy the investment on which the call was written from the Fund at the call price during the period in which the call may be exercised. If the value of the investment does not rise above the call price, it is likely that the call will lapse without being exercised, while the Fund keeps the cash premium (and the investment). Each call the Fund writes must be "covered" while it is outstanding. That means the Fund owns the investment on which the call was written or the Fund owns and segregates liquid assets to satisfy its obligations if the call is exercised. The Fund may purchase and sell put options. Buying a put on an investment gives the Fund the right to sell the investment at a set price to a seller of a put on that investment. The Fund can buy only those puts that relate to securities it owns, broadly- based stock indices, foreign currencies or Stock Index Futures. The Fund can buy a put on a Stock Index Future whether or not the Fund owns the particular Stock Index Future in its portfolio. The Fund may write puts on broadly-based stock indices, foreign currencies or Stock Index Futures, but only if those puts are covered by segregated liquid assets. The Fund will not write a put if it will require more than 25% of the Fund's total assets to be segregated. Forward Contracts. Forward contracts are foreign currency exchange contracts. They are used to buy or sell foreign currency for future delivery at a fixed price. The Fund uses them to try to "lock in" the U.S. dollar price of a security denominated in a foreign currency that the Fund has bought or sold, or to protect against possible losses from changes in the relative values of the U.S. dollar and foreign currency. The Fund limits its exposure in foreign currency exchange contracts in a particular foreign currency to the amount of its assets denominated in that currency or in a closely-correlated currency. Illiquid and Restricted Securities. Under the policies and procedures established by the Board of Directors, the Manager determines the liquidity of certain of the Fund's investments. Investments may be illiquid because of the absence of an active trading market, making it difficult to value them or dispose of them promptly at an acceptable price. A restricted security is one that has a contractual restriction on its resale or which cannot be sold publicly until it is registered under the Securities Act of 1933. As a fundamental policy, the Fund will not invest in illiquid securities, including securities for which there is no readily available market, repurchase agreements which have a maturity of longer than seven days, securities subject to legal or contractual restrictions and certain over-the-counter options if such acquisition will cause the current value of such securities to exceed 10% of the value of the Fund's net assets. The Fund's percentage limitation on illiquid and restricted investments does not apply to certain restricted securities that are eligible for resale to qualified institutional purchasers. The Manager monitors holdings of illiquid securities on an ongoing basis and at times the Fund may be required to sell some holdings to maintain adequate liquidity. Loans of Portfolio Securities. To attempt to raise cash for liquidity purposes, the Fund may lend its portfolio securities to brokers, dealers and other financial institutions. The Fund must receive collateral for a loan. After any loan, the value of the securities loaned, is not expected to exceed 33-1/3% of the value of the total assets of the Fund. Other conditions to which loans are subject are described in the Statement of Additional Information. There are some risks in connection with securities lending. The Fund might experience a delay in receiving additional collateral to secure a loan or a delay in recovery of the loaned securities. Repurchase Agreements. The Fund may enter into repurchase agreements to generate income for liquidity purposes to meet anticipated redemptions, or pending the investment of proceeds from sales of Fund shares or settlement of purchases of portfolio investments. In a repurchase transaction, the Fund buys a security and simultaneously sells it to the vendor for delivery at a future date. Repurchase agreements must be fully collateralized. However, if the vendor fails to pay the resale price on the delivery date, the Fund may incur costs in disposing of the collateral and may experience losses if there is any delay in its ability to do so. The Fund may enter into reverse repurchase agreements. Under a reverse repurchase agreement, the Fund sells securities and agrees to repurchase them at a mutually agreed upon date and price. Reverse repurchase agreements involve the risk that the market value of the securities retained in lieu of sale by the Fund may decline more than or appreciate less than the securities the Fund has sold but is obligated to repurchase. In the event the buyer of securities under a reverse repurchase agreement files for bankruptcy or becomes insolvent, such buyer or its trustee or receiver may receive an extension of time to determine whether to enforce the Fund's obligation to repurchase the securities and the Fund's use of the proceeds of the reverse repurchase agreements may effectively be restricted pending such decisions. Reverse repurchase agreements create leverage, a speculative factor, and will be considered borrowings by the Fund for purposes of the percentage limitations set forth in Borrowing below. Investment in repurchase agreements having a maturity beyond seven days is subject to the limitations set forth above under "Illiquid and Restricted Securities." There is no limit on the amount of the Fund's net assets that may be subject to repurchase agreements of seven days or less. "When-Issued" and Delayed Delivery Transactions. The Fund may purchase securities on a "when-issued" basis, and may purchase or sell such securities on a "delayed delivery" basis or on a "firm commitment" basis. These terms refer to securities that have been created and for which a market exists, but which are not available for immediate delivery. The Fund does not intend to make such purchases for speculative purposes. During the period between the purchase and settlement, the underlying securities are subject to market fluctuations and no interest accrues prior to delivery of the securities. Borrowing. As a fundamental policy, the Fund may not borrow money, except as a temporary measure for extraordinary or emergency purposes, and in no event in excess of 33-1/3% of the lower of the market value or cost of its total assets, and will not purchase any securities at a time while such borrowings exceed 5% of its total assets. Borrowing for investment purposes is a speculative investment technique known as leveraging . This investment technique may subject the Fund to greater risks and costs, including the burden of interest expense, an expense the Fund would not otherwise incur. The Fund can borrow only if it maintains a 300% ratio of assets to borrowings at all times in the manner set forth in the Investment Company Act. Short Sales "Against-the-Box." In a short sale, the seller does not own the security that is sold, but normally borrows the security to fulfill its delivery obligation. The seller later buys the security to repay the loan, in the expectation that the price of the security will be lower when the purchase is made, resulting in a gain. The Fund may not sell securities short except in collateralized transactions referred to as "short sales against-the-box," where the Fund owns an equivalent amount of the securities sold short. No more than 15% of the Fund's net assets will be held as collateral for such short sales at any one time. Other Investment Restrictions. The Fund has other investment restrictions which are fundamental policies. Under these fundamental policies, the Fund cannot: Invest more than 25% of the value of its total assets (valued at the time of investment) in any one industry. With respect to 75% of its total assets, invest more than 5% of the value of its total assets (taken at market value at time of purchase) in the outstanding securities of any one issuer, excluding obligations issued or guaranteed by the U.S. Government or any agency or instrumentality thereof or own more than 10% of the outstanding voting securities of any one issuer (other than securities issued or guaranteed by the U.S. Government or any agency of instrumentality thereof). Unless this Prospectus states that a percentage restriction applies on an ongoing basis, it applies only at the time the Fund makes an investment, and the Fund need not sell securities to meet the percentage limits if the value of the investment increases in proportion to the size of the Fund. Other investment restrictions are listed in Investment Restrictions in the Statement of Additional Information. How the Fund is Managed Organization and History. The Fund is a diversified, open-end management investment company. The Fund was incorporated as "QFV Dual Purpose Fund, Inc." on August 4, 1986 as a Maryland corporation (and later renamed "Quest for Value Dual Purpose Fund, Inc.") and commenced operations on February 13, 1987 as a closed- end investment company with a dual purpose structure and with Capital Shares and Income Shares. On December 20, 1996, the shareholders of the Fund voted to, among other things, convert the Fund to an open-end investment company. Effective as of the date of this Prospectus, the Fund converted to an open-end investment company with a single investment objective of capital appreciation and with shares of stock designated as common stock (formerly, Capital Shares), and was renamed "Oppenheimer Quest Capital Value Fund, Inc." See About the Fund - Expenses -Background for additional information. The shares of common stock are divided into three classes designated Class A, Class B and Class C, consisting of 300,000,000 Class A shares, and 100,000,000 each of Class B and Class C shares. The remaining 500,000,000 shares of authorized common stock have not been classified. The Board of Directors has the power, without shareholder approval, to issue additional classes of shares of the Fund. All classes invest in the same investment portfolio. Each class has its own dividends and distributions and pays certain expenses which may be different for the different classes. Each class may have a different net asset value. Each share entitles a shareholder to one vote on matters submitted to the shareholders to vote on with fractional shares voting proportionally. Only shares of a particular class vote as a class on matters that affect that class alone. Shares are freely transferrable. Please refer to "How the Fund is Managed" in the Statement of Additional Information for more information on the voting of shares. The Fund is governed by a Board of Directors, which is responsible for protecting the interests of shareholders under Maryland law. The Directors meet periodically throughout the year to oversee the Fund's activities, review its performance, and review the actions of the Manager and the Sub-Adviser. "Directors and Officers of the Fund" in the Statement of Additional Information names the Directors and officers of the Fund and provides more information about them. Although the Fund is not required by law to hold annual meetings, it may hold shareholder meetings from time to time on important matters, and shareholders have the right under certain circumstances to call a meeting to remove a Director or to take other action described in the Fund's Amended and Restated Articles of Incorporation. The Manager. The Fund is managed by the Manager, OppenheimerFunds, Inc., which supervises the Fund's investment program and handles its day-to-day business. The Manager carries out its duties, subject to the policies established by the Board of Directors, under an Investment Advisory Agreement with the Fund which states the Manager's responsibilities. The Agreement sets forth the fees paid by the Fund to the Manager and describes the expenses that the Fund is responsible to pay to conduct its business. The Manager has operated as an investment adviser since 1959. The Manager (including a subsidiary) currently manages investment companies, including other Oppenheimer funds, with assets of more than $62 billion as of December 31, 1996, and with more than 3 million shareholder accounts. The Manager is owned by Oppenheimer Acquisition Corp., a holding company that is owned in part by senior officers of the Manager and controlled by Massachusetts Mutual Life Insurance Company. The Sub-Adviser. The Manager has retained the Sub-Adviser to provide day-to-day portfolio management of the Fund. Prior to February 28, 1997, the Sub-Adviser was the investment adviser to the Fund. Effective on such date, at the time of the conversion of the Fund to an open-end management investment company, the Manager acquired the investment advisory and other contracts and business relationships and certain assets and liabilities of the Sub- Adviser, OCC Distributors and Oppenheimer Capital relating to the Fund. Pursuant to this acquisition and Fund shareholder approval received on December 20, 1996, the Fund entered into the following agreements, effective as February 28, 1997: the Investment Advisory Agreement between the Fund and the Manager, and the Class A Distribution and Service Plan between the Fund and the Distributor. Further, as of February 28,1997, the Manager entered into a subadvisory agreement with the Sub-Adviser for the benefit of the Fund and the Fund entered into the Class B and Class C Distribution and Service Plans with the Distributor. The agreements and plans are described below. The Sub-Adviser is a majority-owned subsidiary of Oppenheimer Capital, a registered investment advisor, whose employees perform all investment advisory services provided to the Fund by the Sub- Adviser. Oppenheimer Financial Corp., a holding company, holds a one-third interest in Oppenheimer Capital and Oppenheimer Capital, L.P., a Delaware limited partnerhsip whose units are traded on The New York Stock Exchange and of which Oppenheimer Financial Corp. is the sole general partner, owns the remaining two-thirds interest. On February 13, 1997, PIMCO Advisors L.P., a registered investment adviser with $110 billion in assets under management through various subsidiaries, signed a definitive agreement with Oppenheimer Group, Inc. and its subsidiary Oppenheimer Financial Corp. for PIMCO Advisors L.P. and its affiliate, Thomson Advisory Group, Inc., to acquire the one-third managing general partner interest in Oppenheimer Capital and the 1.0% general partner interest in Oppenheimer Capital, L.P. The completion of the transaction is subject to certain client, lender, Internal Revenue Service and other approvals. Portfolio Manager. The Fund's portfolio manager, Jeffrey C. Whittington, is employed by the Sub-Adviser and is primarily responsible for the selection of the Fund's securities. Mr. Whittington, who is also a Senior Vice President of Oppenheimer Capital was the Fund's portfolio manager from 1987 to September 1991, and from January 1996 to the present. From October 1991 to July 1993, Mr. Whittington was a portfolio manager with Oppenheimer & Co., Inc., from August 1993 to July 1994 was a portfolio manager with Neuberger & Berman and since August 1994 has been a portfolio manager at Oppenheimer Capital. The Sub-Adviser's equity investment policy is overseen by George Long, President and Chief Investment Officer for Oppenheimer Capital. Mr. Long has been with Oppenheimer Capital since 1981. Fees and Expenses. Under the Investment Advisory Agreement, the Fund has agreed to pay the Manager a monthly fee at the following annual rates, which decline on additional assets as the Fund grows: 1.00% of the first $400 million of average daily net assets, 0.90% of the next $400 million, and 0.85% of average daily net assets over $800 million. This management fee is higher than that paid by most other investment companies. Pursuant to the Agreement, for a period of two years from the date thereof the Manager will waive the following portion of the advisory fee: 0.15% of the first $200 million of average annual net assets, 0.40% of the next $200 million, 0.30% of the next $400 million and 0.25% of average annual net assets over $800 million. The Fund pays expenses related to its daily operations, such as custodian fees, Directors' fees, transfer agency fees and legal and auditing costs. These expenses are paid out of the Fund's assets and are not paid directly by shareholders. However, they reduce the net asset value of shares, and therefore are indirectly borne by shareholders through their investment. More information about the Investment Advisory Agreement and the other expenses paid by the Fund is contained in the Statement of Additional Information. The Manager has agreed to pay the Sub-Adviser an annual fee payable monthly based on the average daily net assets of the Fund equal to 40% of the net advisory fee collected by the Manager based on the total net assets of the Fund as of February 28, 1997 and remaining 120 days later (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, in each case calculated after any waivers, voluntary or otherwise. The Sub-Adviser may select its affiliate, Oppenheimer & Co., Inc. ("Opco"), a registered broker-dealer, to execute transactions for the Fund, provided that the commissions, fees or other remuneration received by Opco are reasonable and fair compared to those paid to other brokers in connection with comparable transactions. When selecting broker-dealers other than Opco, the Sub-Adviser may consider their record of sales of shares of the Fund. Further information about the Fund's brokerage policies and practices is set forth in "Brokerage Policies of the Fund" in the Statement of Additional Information. The Distributor. The Fund's shares are sold through dealers, brokers and other financial institutions that have a sales agreement with OppenheimerFunds Distributor, Inc., a subsidiary of the Manager that acts as the Fund's Distributor. The Distributor also distributes the shares of the other Oppenheimer funds managed by the Manager and is sub-distributor for funds managed by a subsidiary of the Manager. The Transfer Agent and Shareholder Servicing Agent. The transfer agent and shareholder servicing agent for the Fund is OppenheimerFunds Services, a division of the Manager. It also acts as the shareholder servicing agent for certain other Oppenheimer funds. Shareholders should direct inquiries about their accounts to the Transfer Agent at the address and toll-free number shown below in this Prospectus and on the back cover. Performance of the Fund Explanation of Performance Terminology. The Fund uses the terms "total return" and "average annual total return" to illustrate its performance. The performance of each class of shares is shown separately, because the performance of each class of shares will usually be different as a result of the different kinds of expenses each class bears. These returns measure the performance of a hypothetical account in the Fund over various periods, and do not show the performance of each shareholder's investment (which will vary if dividends are received in cash, or shares are sold or additional shares are purchased). The Fund's performance information may help you see how well your investment in the Fund has done over time and to compare it to other funds or market indices, as we have done on page __. Prior to the date of this Prospectus, the Fund operated as a closed-end investment company with a dual-purpose structure and with dual investment objectives. See About the Fund - Expenses - Background. The historical performance of the Class A shares of the Fund (formerly, the Capital Shares) has been restated to reflect the fees and expenses of such Class A shares in effect as of the date of this Prospectus as set forth in "About the Fund" in "Shareholder Transaction Expenses" and "Annual Fund Operating Expenses" (without giving effect to any fee waivers described therein). As discussed in "About the Fund - Expenses - Background", prior to January 31, 1997 (the date of redemption of the Income Shares) the Capital Shares were entitled to all gains and losses attributable to both the Capital Shares as well as the Income Shares. Consequently, the Capital Shares were leveraged financially. Absent the leverage afforded by the former dual- purpose structure, the historical performance of the Capital Shares would have been lower. It is important to understand that the Fund's total returns represent past performance (as adjusted for Class A shares) and should not be considered to be predictions of future returns or performance. This performance data is described below, but more detailed information about how total returns are calculated is contained in the Statement of Additional Information, which also contains information about other ways to measure and compare the Fund's performance. The Fund's investment performance will vary over time, depending on market conditions, the composition of the portfolio, expenses and which class of shares you purchase. Total Returns. There are different types of total returns used to measure the Fund's performance. Total return is the change in value of a hypothetical investment in the Fund over a given period, assuming that all dividends and capital gains distributions are reinvested in additional shares. The cumulative total return measures the change in value over the entire period (for example, ten years). An average annual total return shows the average rate of return for each year in a period that would produce the cumulative total return over the entire period. However, average annual total returns do not show the Fund's actual year-by-year performance. When total returns are quoted for Class A shares, normally the current maximum initial sales charge has been deducted. When total returns are shown for Class B or Class C shares, normally the contingent deferred sales charge that applies to the period for which the total return is shown has been deducted. However, total returns may also be quoted at "net asset value", without including the sales charge, and those returns would be less if sales charges were deducted. How Has the Fund Performed? Below is a discussion by the Manager of the Fund's performance during its last fiscal year ended December 31, 1996, followed by a graphical comparison of the Fund's performance to an appropriate broad-based market index. Prior to the date of this Prospectus, the Fund was known as Quest for Value Dual Purpose Fund, Inc. and the Sub-Adviser was the Fund's investment adviser. Management's Discussion of Performance. During the fiscal year ended December 31, 1996, the Fund operated as a dual purpose fund and had Capital Shares and Income Shares outstanding. See "About the Fund - Expenses - Background." During the year, the Fund's investments were aimed at generating capital appreciation for capital shareholders and income for income shareholders. In selecting securities for capital appreciation, the Sub-Adviser sought to invest in the common stocks of companies believed to have superior, undervalued businesses. Using this investment philosophy, the Fund's five largest common stock holdings at year-end were characterized by companies with perceived quality businesses, a strong competitive position and excellent earnings prospects. Those holdings were MidOcean Ltd., a Bermuda-based provider of excess property and casualty insurance; ACE, Ltd., a Bermuda-based provider of excess directors and officers liability insurance; Canadian Pacific, Ltd., a Canadian transportation and natural resources company; Lucas Varity PLC, a manufacturer of automotive components and other products; and World Com, Inc., the nation's fourth largest long-distance telecommunications company. The Fund's portfolio and its portfolio manager's strategies are subject to change. Comparing the Fund's Performance to the Market. The graph below shows the performance of a hypothetical $10,000 investment in Class A shares of the Fund (formerly, Capital Shares) held from inception (February 13, 1987) until December 31, 1996. Class B and C shares were not publicly offered during the fiscal year ended December 31, 1996; therefore no performance information is presented on Class B and Class C shares in the graph below. The Fund's Class A performance reflects the deduction of the 5.75% current maximum initial sales charge on Class A shares, the reinvestment of any dividends and capital gains distributions and the adjustment for fees and expenses as of the date of this Prospectus as described above in "Explanation of Performance Terminology". The Fund's performance is compared to the performance of the S&P 500 Index, a broad-based index of equity securities widely regarded as the general measure of the performance of the U.S. equity securities market. Index performance reflects the reinvestment of dividends but does not consider the effect of capital gains or transaction costs, and none of the data below shows the effect of taxes. Also, the Fund's performance reflects the effect of Fund business and operating expenses. While index comparisons may be useful to provide a benchmark for the Fund's performance, it must be noted that the Fund's investments are not limited to the securities in the S&P 500 index. Moreover, the index performance data does not reflect any assessment of the risk of the investments included in the index. Class A Shares Comparison of Change in Value of $10,000 Hypothetical Investment in: Oppenheimer Quest Capital Value Fund, Inc. and the Standard & Poor's 500 Index [Graph] Average Annual Total Return of the Fund at 12/31/96 1 Year 5 Years Life1 Class A : 13.57% 14.80% 16.28% Total returns and ending account values in the graph reflect reinvestment of any dividends and capital gains distributions [1] The commencement of operations of the Fund (Class A shares) was 2/13/87. Class A returns are shown net of the current applicable 5.75% maximum initial sales charge and reflect the historical performance of the Class A shares of the Fund (formerly, Capital Shares) as adjusted for the fees and expenses of Class A shares in effect as of the date of this Prospectus (without giving effect to any fee waivers). Past performance is not predictive of future performance. ABOUT YOUR ACCOUNT How to Buy Shares Classes of Shares. The Fund offers investors three different classes of shares. The different classes of shares represent investments in the same portfolio of securities but may be subject to different expenses and will likely have different share prices. Upon the conversion of the Fund to open-end status, the Fund's outstanding shares were designated Class A shares. No sales charge was due as a result of the conversion. Class A Shares. If you buy Class A shares, you may pay an initial sales charge on investments up to $1 million (up to $500,000 for purchases by "Retirement Plans" as defined in "Class A Contingent Deferred Sales Charge" on page __). If you purchase Class A shares as part of an investment of at least $1 million ($500,000 for Retirement Plans) in shares of one or more Oppenheimer funds you will not pay an initial sales charge, but if you sell any of those shares within 18 months of buying them, you may pay a contingent deferred sales charge. The amount of that sales charge will vary depending on the amount you invested. Sales charge rates are described in "Buying Class A Shares" below. Class B Shares. If you buy Class B shares, you pay no sales charge at the time of purchase, but if you sell your shares within six years of buying them you will normally pay a contingent deferred sales charge that varies, depending on how long you have owned your shares as described in "Buying Class B Shares" below. Class C Shares. If you buy Class C shares, you pay no sales charge at the time of purchase, but if you sell your shares within 12 months of buying them, you will normally pay a contingent deferred sales charge of 1% as described in "Buying Class C Shares" below. Which Class of Shares Should You Choose? Once you decide that the Fund is an appropriate investment for you, the decision as to which class of shares is better suited to your needs depends on a number of factors which you should discuss with your financial advisor. The Fund's operating costs that apply to a class of shares and the effect of the different types of sales charges on your investment will vary your investment results over time. The most important factors to consider are how much you plan to invest and how long you plan to hold your investment. If your goals and objectives change over time and you plan to purchase additional shares, you should re-evaluate those factors to see if you should consider another class of shares. In the following discussion, to help provide you and your financial advisor with a framework in which to choose a class, we have made some assumptions using a hypothetical investment in the Fund. We used the sales charge rates that apply to each class, and considered the effect of the higher asset-based sales charges on Class B and Class C expenses (which, like all expenses, will affect your investment return). For the sake of comparison, we have assumed that there is a 10% rate of appreciation in the investment each year. Of course, the actual performance of your investment cannot be predicted and will vary, based on the Fund's actual investment returns and the operating expenses borne by each class of shares, and which class of shares you invest in. The factors discussed below are not intended to be investment advice or recommendations, because each investor's financial considerations are different. The discussion below of the factors to consider in purchasing a particular class of shares assumes that you will purchase only one class of shares and not a combination of shares of different classes. How Long Do You Expect to Hold Your Investment? While future financial needs cannot be predicted with certainty, knowing how long you expect to hold your investment will assist you in selecting the appropriate class of shares. The effect of the sales charge, over time, using our assumptions will generally depend on the amount invested. Because of the effect of class-based expenses, your choice will also depend on how much you plan to invest. For example, the reduced sales charges available for larger purchases of Class A shares may, over time, offset the effect of paying an initial sales charge on your investment (which reduces the amount of your investment dollars used to buy shares for your account), compared to the effect over time of higher class-based expenses on Class B or Class C shares for which no initial sales charge is paid. Investing for the Short Term. If you have a short-term investment horizon (that is, you plan to hold your shares for not more than six years), you should probably consider purchasing Class A or Class C shares rather than Class B shares, because of the effect of the Class B contingent deferred sales charge if you redeem within 6 years, as well as the effect of the higher Class B asset-based sales charge on the investment return for that class in the short-term. Class C shares might be the appropriate choice (especially for investments of less than $100,000), because there is no initial sales charge on Class C Shares, and the contingent deferred sales charge does not apply to amounts you sell after holding them one year. However, if you plan to invest more than $100,000 for the shorter term, then the more you invest and the more your investment horizon increases toward six years, Class C shares might not be as advantageous as Class A shares. That is because the higher annual asset-based sales charge on Class C shares will have a greater economic impact on your account over the longer term than the reduced front-end sales charge available for larger purchases of Class A shares. For example, Class A might be more advantageous than Class C (as well as Class B) for investments of more than $100,000 expected to be held for 5 or 6 years (or more). For investments over $250,000 expected to be held 4 to 6 years (or more), Class A shares may become more advantageous than Class C (and Class B). If investing $500,000 or more, Class A may be more advantageous as your investment horizon approaches 3 years or more. And for most investors who invest $1 million or more, in most cases Class A shares will be the most advantageous choice, no matter how long you intend to hold your shares. For that reason, the Distributor normally will not accept purchase orders of $500,000 or more of Class B shares or $1 million or more of Class C shares from a single investor. Investing for the Longer Term. If you are investing for the longer-term, for example, for retirement, and do not expect to need access to your money for seven years or more, Class B shares may be an appropriate consideration, if you plan to invest less than $100,000. If you plan to invest more than $100,000 over the long term, Class A shares will likely be more advantageous than Class B shares or Class C shares, as discussed above, because of the effect of the expected lower expenses for Class A shares and the reduced initial sales charges available for larger investments in Class A shares under the Fund's Right of Accumulation. Of course, these examples are based on approximations of the effect of current sales charges and expenses on a hypothetical investment over time, using the assumed annual performance return stated above, and therefore you should analyze your options carefully. Are There Differences in Account Features That Matter to You? Because some account features may not be available for Class B or Class C shareholders, or other features (such as Automatic Withdrawal Plans) may not be advisable (because of the effect of the contingent deferred sales charge in non-retirement accounts) for Class B or Class C shareholders, you should carefully review how you plan to use your investment account before deciding which class of shares is better for you. For example, share certificates are not available for Class B or Class C shares, and if you are considering using your shares as collateral for a loan, that may be a factor to consider. Additionally, dividends payable to Class B and Class C shareholders will be reduced by the additional expenses borne solely by those classes or higher expenses, such as the asset-based sales charges to which Class B and Class C shares are subject, as described below and in the Statement of Additional Information. How Does It Affect Payments to My Broker? A salesperson, such as a broker, or any other person who is entitled to receive compensation for selling Fund shares may receive different compensation for selling one class of shares than for selling another class. It is important that investors understand that the purpose of the contingent deferred sales charges and asset-based sales charges for Class B and Class C shares is the same as the purpose of the front-end sales charge on sales of Class A shares: that is, to compensate the Distributor for commissions it pays to dealers and financial institutions for selling shares. How Much Must You Invest? You can open a Fund account with a minimum initial investment of $1,000 and make additional investments at any time with as little as $25. There are reduced minimum investments under special investment plans: With Asset Builder Plans, Automatic Exchange Plans, 403(b)(7) custodial plans and military allotment plans, you can make initial and subsequent investments of as little as $25; and subsequent purchases of at least $25 can be made by telephone through AccountLink. Under pension, profit-sharing plans and 401(k) plans and Individual Retirement Accounts (IRAs), you can make an initial investment of as little as $250 (if your IRA is established under an Asset Builder Plan, the $25 minimum applies), and subsequent investments may be as little as $25. There is no minimum investment requirement if you are buying shares by reinvesting dividends from the Fund or other Oppenheimer funds (a list of them appears in the Statement of Additional Information, or you can ask your dealer or call the Transfer Agent), or by reinvesting distributions from unit investment trusts that have made arrangements with the Distributor. How Are Shares Purchased? You can buy shares several ways: through any dealer, broker or financial institution that has a sales agreement with the Distributor, directly through the Distributor, or automatically from your bank account through an Asset Builder Plan under the OppenheimerFunds AccountLink service. The Distributor may appoint certain servicing agents as the Distributor's agent to accept purchase (and redemption) orders. When you buy shares, be sure to specify Class A, Class B or Class C shares. If you do not choose, your investment will be made in Class A shares. Buying Shares Through Your Dealer. Your dealer will place your order with the Distributor on your behalf. Buying Shares Through the Distributor. Complete an OppenheimerFunds New Account Application and return it with a check payable to "OppenheimerFunds Distributor, Inc." Mail it to P.O. Box 5270, Denver, Colorado 80217. If you don't list a dealer on the application, the Distributor will act as your agent in buying the shares. However, we recommend that you discuss your investment first with a financial advisor, to be sure it is appropriate for you. Buying Shares Through OppenheimerFunds AccountLink. You can use AccountLink to link your Fund account with an account at a U.S. bank or other financial institution that is an Automated Clearing House (ACH) member, to transmit funds electronically to purchase shares, to have the Transfer Agent send redemption proceeds, or to transmit dividends and distributions to your bank account. Shares are purchased for your account on AccountLink on the regular business day the Distributor is instructed by you to initiate the ACH transfer to buy shares. You can provide those instructions automatically, under an Asset Builder Plan, described below, or by telephone instructions using OppenheimerFunds PhoneLink, also described below. You should request AccountLink privileges on the application or dealer settlement instructions used to establish your account. Please refer to "AccountLink" below for more details. Asset Builder Plans. You may purchase shares of the Fund (and up to four other Oppenheimer funds) automatically each month from your account at a bank or other financial institution under an Asset Builder Plan with AccountLink. Details are in the Statement of Additional Information. At What Price Are Shares Sold? Shares are sold at the public offering price based on the net asset value (and any initial sales charge that applies) that is next determined after the Distributor receives the purchase order in Denver, Colorado. In most cases, to enable you to receive that day's offering price, the Distributor or its designated agent must receive your order by the time of day The New York Stock Exchange closes, which is normally 4:00 P.M., New York time, but may be earlier on some days (all references to time in this Prospectus mean "New York time"). The net asset value of each class of shares is determined as of that time on each day The New York Stock Exchange is open (which is a "regular business day"). If you buy shares through a dealer, the dealer must receive your order by the regular close of business of the New York Stock Exchange on a regular business day and transmit it to the Distributor so that it is received before the Distributor's close of business that day, which is normally 5:00 P.M. The Distributor, in its sole discretion, may reject any purchase order for the Fund's shares. Special Sales Charge Arrangements for Certain Persons. Appendix A to this Prospectus sets forth conditions for the waiver of, or exemption from, sales charges or the special sales charge rates that apply to shareholders of one of the Former Quest for Value Funds (as defined in that Appendix). Buying Class A Shares. Class A shares are sold at their offering price, which is normally net asset value plus an initial sales charge. However, in some cases, described below, purchases are not subject to an initial sales charge, and the offering price will be the net asset value. In some cases, reduced sales charges may be available, as described below. Out of the amount you invest, the Fund receives the net asset value to invest for your account. The sales charge varies depending on the amount of your purchase. A portion of the sales charge may be retained by the Distributor and allocated to your dealer as commission. The current initial sales charge rates and commissions paid to dealers and brokers are as follows:
Front-End Sales Charge Commission As a Percentage of as Percentage Offering Amount of Offering Amount of Purchase Price Invested Price - ------------------------------------------------------------------ Less than $25,000 5.75% 6.10% 4.75% $25,000 or more but less than $50,000 5.50% 5.82% 4.75% $50,000 or more but less than $100,000 4.75% 4.99% 4.00% $100,000 or more but less than $250,000 3.75% 3.90% 3.00% $250,000 or more but less than $500,000 2.50% 2.56% 2.00% $500,000 or more but less than $1 million 2.00% 2.04% 1.60%
The Distributor reserves the right to reallow the entire commission to dealers. If that occurs, the dealer may be considered an "underwriter" under Federal securities laws. Class A Contingent Deferred Sales Charge. There is no initial sales charge on purchases of Class A shares of any one or more of the Oppenheimer funds in the following cases: Purchases aggregating $1 million or more. Purchases by a retirement plan qualified under section 401(a) of the Internal Revenue Code if the retirement plan has total plan assets of $500,000 or more. Purchases by a retirement plan qualified under sections 401(a) or 401(k) of the Internal Revenue Code, by a non-qualified deferred compensation plan (not including Section 457 plans), employee benefit plan, group retirement plan (see "How to Buy Shares - Retirement Plans" in the Statement of Additional Information for further details), an employee's 403(b)(7) custodial plan account, SEP IRA, SARSEP, or SIMPLE plan (all of these plans are collectively referred to as "Retirement Plans") that: (1) buy shares costing $500,000 or more or (2) has, at the time of purchase, 100 or more eligible participants, or (3) certifies that it projects to have annual plan purchases of $200,000 or more. Purchases by an OppenheimerFunds Rollover IRA if the purchases are made (1) through a broker, dealer, bank or registered investment adviser that has made special arrangements with the Distributor for these purchases, or (2) by a direct rollover of a distribution from a qualified retirement plan if the administrator of that plan has made special arrangements with the Distributor for those purchases. The Distributor pays dealers of record commissions on those purchases in an amount equal to (i) 1.0% for non-Retirement Plan accounts, and (ii)for Retirement Plan accounts, 1.0% of the first $2.5 million, plus 0.50% of the next $2.5 million, plus 0.25% of purchases over $5 million. That commission will be paid only on those purchases that were not previously subject to a front-end sales charge and dealer commission. No sales commission will be paid to the dealer, broker or financial institution on sales of Class A shares purchased with the redemption proceeds of shares of a mutual fund offered as an investment option in a Retirement Plan in which Oppenheimer funds are also offered as investment options under a special arrangement with the Distributor if the purchase occurs more than 30 days after the addition of the Oppenheimer funds as an investment option to the Retirement Plan. If you redeem any of those shares within 18 months of the end of the calendar month of their purchase, a contingent deferred sales charge (called the "Class A contingent deferred sales charge") will be deducted from the redemption proceeds. That sales charge may be equal to 1.0% of the lesser of (1) the aggregate net asset value of the redeemed shares (not including shares purchased by reinvestment of dividends or capital gain distributions) or (2) the original offering price (which is the original net asset value) of the redeemed shares. However, the Class A contingent deferred sales charge will not exceed the aggregate amount of the commissions the Distributor paid to your dealer on all Class A shares of all Oppenheimer funds you purchased subject to the Class A contingent deferred sales charge. In determining whether a contingent deferred sales charge is payable, the Fund will first redeem shares that are not subject to the sales charge, including shares purchased by reinvestment of dividends and capital gains, and then will redeem other shares in the order that you purchased them. The Class A contingent deferred sales charge is waived in certain cases described in "Waivers of Class A Sales Charges" below. No Class A contingent deferred sales charge is charged on exchanges of shares under the Fund's exchange privilege (described below). However, if the shares acquired by exchange are redeemed within 18 months of the end of the calendar month of the purchase of the exchanged shares, the contingent deferred sales charge will apply. Special Arrangements With Dealers. The Distributor may advance up to 13 months' commissions to dealers that have established special arrangements with the Distributor for Asset Builder Plans for their clients. Reduced Sales Charges for Class A Share Purchases. You may be eligible to buy Class A shares at reduced sales charge rates in one or more of the following ways: Right of Accumulation. To qualify for the lower sales charge rates that apply to larger purchases of Class A shares, you and your spouse can add together Class A and Class B shares you purchase for your individual accounts, or jointly, or for trust or custodial accounts on behalf of your children who are minors. A fiduciary can count all shares purchased for a trust, estate or other fiduciary account (including one or more employee benefit plans of the same employer) that has multiple accounts. Additionally, you can add together current purchases of Class A and Class B shares of the Fund and other Oppenheimer funds to reduce the sales charge rate that applies to current purchases of Class A shares. You can also count Class A and Class B shares of Oppenheimer funds you previously purchased subject to an initial or contingent deferred sales charge to reduce the sales charge rate for current purchases of Class A shares, provided that you still hold your investment in one of the Oppenheimer funds. The value of those shares will be based on the greater of the amount you paid for the shares or their current value (at offering price). The Oppenheimer funds are listed in "Reduced Sales Charges" in the Statement of Additional Information, or a list can be obtained from the Transfer Agent. The reduced sales charge will apply only to current purchases and must be requested when you buy your shares. Letter of Intent. Under a Letter of Intent, if you purchase Class A shares or Class A and Class B shares of the Fund and other Oppenheimer funds during a 13-month period, you can reduce the sales charge rate that applies to your purchases of Class A shares. The total amount of your intended purchases of both Class A and Class B shares will determine the reduced sales charge rate for the Class A shares purchased during that period. This can include purchases made up to 90 days before the date of the Letter. More information is contained in the Application and in "Reduced Sales Charges" in the Statement of Additional Information. Waivers of Class A Sales Charges. The Class A sales charges are not imposed in the circumstances described below. There is an explanation of this policy in "Reduced Sales Charges" in the Statement of Additional Information. Waivers of Initial and Contingent Deferred Sales Charges for Certain Purchasers. Class A shares purchased by the following investors are not subject to any Class A sales charges: the Manager or its affiliates; present or former officers, directors, trustees and employees (and their "immediate families" as defined in "Reduced Sales Charges" in the Statement of Additional Information) of the Fund, the Manager and its affiliates, and retirement plans established by them for their employees; registered management investment companies, or separate accounts of insurance companies having an agreement with the Manager or the Distributor for that purpose; dealers or brokers that have a sales agreement with the Distributor, if they purchase shares for their own accounts or for retirement plans for their employees; employees and registered representatives (and their spouses) of dealers or brokers described above or financial institutions that have entered into sales arrangements with such dealers or brokers (and are identified to the Distributor) or with the Distributor; the purchaser must certify to the Distributor at the time of purchase that the purchase is for the purchaser's own account (or for the benefit of such employee's spouse or minor children); dealers, brokers, banks or registered investment advisers that have entered into an agreement with the Distributor providing specifically for the use of shares of the Fund in particular investment products made available to their clients (those clients may be charged a transaction fee by their dealer, broker or adviser for the purchase or sale of Fund shares); (1) investment advisors and financial planners who charge an advisory, consulting or other fee for their services and buy shares for their own accounts or the accounts of their clients, (2) Retirement Plans and deferred compensation plans and trusts used to fund those Plans (including, for example, plans qualified or created under sections 401(a), 403(b) or 457 of the Internal Revenue Code), and "rabbi trusts" that buy shares for their own accounts, in each case if those purchases are made through a broker or agent or other financial intermediary that has made special arrangements with the Distributor for those purchases; and (3) clients of such investment advisors or financial planners who buy shares for their own accounts may also purchase shares without sales charge but only if their accounts are linked to a master account of their investment advisor or financial planner on the books and records of the broker, agent or financial intermediary with which the Distributor has made such special arrangements (each of these investors may be charged a fee by the broker, agent or financial intermediary for purchasing shares). employee benefit plans purchasing shares through a shareholder servicing agent which the Distributor has appointed as agent to accept those purchase orders; directors, trustees, officers or full time employees of the Sub-Adviser or its affiliates, their relatives or any trust, pension, profit sharing or other benefit plan which beneficially owns shares for those persons; accounts for which Oppenheimer Capital is the investment adviser (the Distributor must be advised of this arrangement) and persons who are directors or trustees of the company or trust which is the beneficial owner of such accounts; any unit investment trust that has entered into an appropriate agreement with the Distributor; a TRAC-2000 401(k) plan (sponsored by the former Quest for Value Advisors) whose Class B or Class C shares of a Former Quest for Value Fund were exchanged for Class A shares of that Fund due to the termination of the Class B and Class C TRAC-2000 program on November 24, 1995; or qualified retirement plans that had agreed with the former Quest for Value Advisors to purchase shares of any of the Former Quest for Value Funds at net asset value, with such shares to be held through DCXchange, a sub-transfer agency mutual fund clearinghouse, provided that such arrangements are consummated and share purchases commence by December 31, 1996. Waivers of Initial and Contingent Deferred Sales Charges in Certain Transactions. Class A shares issued or purchased in the following transactions are not subject to Class A sales charges: shares issued in plans of reorganization, such as mergers, asset acquisitions and exchange offers, to which the Fund is a party; shares purchased by the reinvestment of loan repayments by a participant in a retirement plan for which the Manager or its affiliates acts as sponsor; shares purchased by the reinvestment of dividends or other distributions reinvested from the Fund or other Oppenheimer funds (other than Oppenheimer Cash Reserves) or unit investment trusts for which reinvestment arrangements have been made with the Distributor; shares purchased and paid for with the proceeds of shares redeemed in the past 12 months from a mutual fund (other than a fund managed by the Manager or any of its subsidiaries) on which an initial sales charge or contingent deferred sales charge was paid (this waiver also applies to shares purchased by exchange of shares of Oppenheimer Money Market Fund, Inc. that were purchased and paid for in this manner); this waiver must be requested when the purchase order is placed for your shares of the Fund, and the Distributor may require evidence of your qualification for this waiver; or shares purchased with the proceeds of maturing principal of units of any Qualified Unit Investment Liquid Trust Series. Waivers of the Class A Contingent Deferred Sales Charge for Certain Redemptions. The Class A contingent deferred sales charge is also waived if shares that would otherwise be subject to the contingent deferred sales charge are redeemed in the following cases: to make Automatic Withdrawal Plan payments that are limited annually to no more than 12% of the original account value; involuntary redemptions of shares by operation of law or involuntary redemptions of small accounts (see "Shareholder Account Rules and Policies," below); if, at the time a purchase order is placed for Class A shares that would otherwise be subject to the Class A contingent deferred sales charge, the dealer agrees in writing to accept the dealer's portion of the commission payable on the sale in installments of 1/18th of the commission per month (and no further commission will be payable if the shares are redeemed within 18 months of purchase); for distributions from a TRAC-2000 401(k) plan sponsored by the Distributor due to the termination of the TRAC-2000 program; for distributions from Retirement Plans, deferred compensation plans or other employee benefit plans for any of the following purposes: (1) following the death or disability (as defined in the Internal Revenue Code) of the participant or beneficiary (the death or disability must occur after the participant's account was established); (2) to return excess contributions; (3) to return contributions made due to a mistake of fact; (4) hardship withdrawals, as defined in the plan; (5) under a Qualified Domestic Relations Order, as defined in the Internal Revenue Code; (6) to meet the minimum distribution requirements of the Internal Revenue Code; (7) to establish "substantially equal periodic payments" as described in Section 72(t) of the Internal Revenue Code; (8) for retirement distributions or loans to participants or beneficiaries; (9) separation from service; (10) participant-directed redemptions to purchase shares of a mutual fund (other than a fund managed by the Manager or its subsidiary) offered as an investment option in a Retirement Plan in which Oppenheimer funds are also offered as investment options under a special arrangement with the Distributor; or (11) plan termination or "in-service distributions", if the redemption proceeds are rolled over directly to an OppenheimerFunds IRA. Distribution and Service Plan for Class A Shares. In connection with its conversion to an open-end investment company, the Fund has adopted a Distribution and Service Plan for Class A shares to reimburse the Distributor for a portion of its costs incurred in connection with the personal service and maintenance of shareholder accounts that hold Class A shares. Under the Plan, the Fund pays an annual asset-based sales charge to the Distributor at an annual rate of 0.25% of the average annual net assets of the class. The Fund also pays a service fee to the Distributor at an annual rate of 0.25% of the average annual net assets of the class. For the first two years after the effective date of the Plan, the Distributor has voluntarily agreed to waive 0.15% of the distribution fee payable under the Plan and has agreed that all fees paid to the Distributor will be paid to dealers, brokers, banks and other financial institutions quarterly for providing personal service and maintenance of accounts of their customers that hold Class A shares and will not be retained by the Distributor. Services to be provided include, among others, answering customer inquiries about the Fund, assisting in establishing and maintaining accounts in the Fund, making the Fund's investment plans available and providing other services at the request of the Fund or the Distributor. The payments under the Plan increase the annual expenses of Class A shares. For more details, please refer to "Distribution and Service Plans" in the Statement of Additional Information. Buying Class B Shares. Class B shares are sold at net asset value per share without an initial sales charge. However, if Class B shares are redeemed within 6 years of their purchase, a contingent deferred sales charge will be deducted from the redemption proceeds. That sales charge will not apply to shares purchased by the reinvestment of dividends or capital gains distributions. The contingent deferred sales charge will be based on the lesser of the net asset value of the redeemed shares at the time of redemption or the original offering price (which is the original net asset value). The contingent deferred sales charge is not imposed on the amount of your account value represented by the increase in net asset value over the initial purchase price. The Class B contingent deferred sales charge is paid to the Distributor to reimburse its expenses of providing distribution-related services to the Fund in connection with the sale of Class B shares. To determine whether the contingent deferred sales charge applies to a redemption, the Fund redeems shares in the following order: (1) shares acquired by reinvestment of dividends and capital gains distributions, (2) shares held for over 6 years, and (3) shares held the longest during the 6-year period. The contingent deferred sales charge is not imposed in the circumstances described in "Waivers of Class B and Class C Sales Charges" below. The amount of the contingent deferred sales charge will depend on the number of years since you invested and the dollar amount being redeemed, according to the following schedule: Years Since Beginning Contingent Deferred Sales Charge of Month In Which Purchase on Redemptions in that Year Order was Accepted (As % of Amount Subject to Charge) 0 - 1 5.0% 1 - 2 4.0% 2 - 3 3.0% 3 - 4 3.0% 4 - 5 2.0% 5 - 6 1.0% 6 and following None In the table, a "year" is a 12-month period. All purchases are considered to have been made on the first regular business day of the month in which the purchase was made. Automatic Conversion of Class B Shares. 72 months after you purchase Class B shares, those shares will automatically convert to Class A shares. This conversion feature relieves Class B shareholders of the asset-based sales charge that applies to Class B shares under the Class B Distribution and Service Plan, described below. The conversion is based on the relative net asset value of the two classes, and no sales load or other charge is imposed. When Class B shares convert, any other Class B shares that were acquired by the reinvestment of dividends and distributions on the converted shares will also convert to Class A shares. The conversion feature is subject to the continued availability of a tax ruling described in "Alternative Sales Arrangements - Class A, Class B and Class C Shares" in the Statement of Additional Information. Distribution and Service Plan for Class B Shares. The Fund has adopted a Distribution and Service Plan for Class B shares to compensate the Distributor for distributing Class B shares and servicing accounts. This Plan is described below under "Buying Class C Shares - Distribution and Service Plans for Class B and Class C shares." Waivers of Class B Sales Charges. The Class B contingent deferred sales charge will not apply to shares purchased in certain types of transactions, nor will it apply to shares redeemed in certain circumstances, as described below under "Buying Class C Shares Waivers of Class B and Class C Sales Charges." Buying Class C Shares. Class C shares are sold at net asset value per share without an initial sales charge. However, if Class C shares are redeemed within 12 months of their purchase, a contingent deferred sales charge of 1.0% will be deducted from the redemption proceeds. That sales charge will not apply to shares purchased by the reinvestment of dividends or capital gains distributions. The contingent deferred sales charge will be based on the lesser of the net asset value of the redeemed shares at the time of redemption or the original offering price (which is the original net asset value). The contingent deferred sales charge is not imposed on the amount of your account value represented by the increase in net asset value over the initial purchase price. The Class C contingent deferred sales charge is paid to compensate the Distributor for its expenses of providing distribution-related services to the Fund in connection with the sale of Class C shares. To determine whether the contingent deferred sales charge applies to a redemption, the Fund redeems shares in the following order: (1) shares acquired by reinvestment of dividends and capital gains distributions, (2) shares held for over 12 months, and (3) shares held the longest during the 12-month period. Distribution and Service Plans for Class B and Class C Shares. In connection with its conversion to an open-end investment company, the Fund has adopted Distribution and Service Plans for Class B and Class C shares to compensate the Distributor for its services and costs in distributing Class B and Class C shares and servicing accounts. Under the Plans, the Fund pays the Distributor an annual "asset-based sales charge" of 0.75% per year on Class B shares that are outstanding for 6 years or less and on Class C shares. The Distributor also receives a service fee of 0.25% per year under each Plan. Under each Plan, both fees are computed on the average of the net asset value of shares in the respective class, determined as of the close of each regular business day during the period. The asset-based sales charge and service fees increase Class B and Class C expenses by up to 1.00% of the net assets per year of the respective class. The Distributor uses the service fees to compensate dealers for providing personal services for accounts that hold Class B or Class C shares. Those services are similar to those provided under the Class A Service Plan, described above. The Distributor pays the 0.25% service fees to dealers in advance for the first year after Class B or Class C shares have been sold by the dealer and retains the service fee paid by the Fund in that year. After the shares have been held for a year, the Distributor pays the service fees to dealers on a quarterly basis. The asset-based sales charge allows investors to buy Class B or Class C shares without a front-end sales charge while allowing the Distributor to compensate dealers that sell those shares. The Fund pays the asset-based sales charges to the Distributor for its services rendered in distributing Class B and Class C shares. Those payments are at a fixed rate that is not related to the Distributor's expenses. The services rendered by the Distributor include paying and financing the payment of sales commissions, service fees and other costs of distributing and selling Class B and Class C shares. The Distributor currently pays sales commissions of 3.75% of the purchase price of Class B shares to dealers from its own resources at the time of sale. Including the advance of the service fee, the total amount paid by the Distributor to the dealer at the time of sale of Class B shares is therefore 4.00% of the purchase price. The Distributor retains the Class B asset-based sales charge. The Distributor currently pays sales commissions of 0.75% of the purchase price of Class C shares to dealers from its own resources at the time of sale. Including the advance of the service fee, the total amount paid by the Distributor to the dealer at the time of sale of Class C shares is therefore 1.00% of the purchase price. The Distributor retains the asset-based sales charge during the first year Class C shares are outstanding to recoup sales commissions it has paid, the advances of service fee payments it has made, and its financing costs and other expenses. The Distributor plans to pay the asset-based sales charge as an ongoing commission to the dealer on Class C shares that have been outstanding for a year or more. The Distributor's actual expenses in selling Class B and Class C shares may be more than the payments it receives from contingent deferred sales charges collected on redeemed shares and from the Fund under the Distribution and Service Plans for Class B and Class C shares. If either Plan is terminated by the Fund, the Board of Directors may allow the Fund to continue payments of the service fee and/or asset-based sales charge to the Distributor for distributing shares before the Plan was terminated. Waivers of Class B and Class C Sales Charges. The Class B and Class C contingent deferred sales charges will not be applied to shares purchased in certain types of transactions nor will it apply to Class B or Class C shares redeemed in certain circumstances as described below. The reasons for this policy are in "Reduced Sales Charges" in the Statement of Additional Information. Waivers for Redemptions in Certain Cases. The Class B and Class C contingent deferred sales charges will be waived for redemptions of shares in the following cases if the Transfer Agent is notified that these conditions apply at redemption: distributions to participants or beneficiaries from Retirement Plans, if the distributions are made (a) under an Automatic Withdrawal Plan after the participant reaches age 59-1/2, as long as the payments are no more than 10% of the account value annually (measured from the date the Transfer Agent receives the request), or (b) following the death or disability (as defined in the Internal Revenue Code ("IRC")) of the participant or beneficiary (the death or disability must have occurred after the account was established); redemptions from accounts other than Retirement Plans following the death or disability of the last surviving shareholder, including a trustee of a "grantor" trust or revocable living trust for which the trustee is also the sole beneficiary (the death or disability must have occurred after the account was established, and for disability you must provide evidence of a determination of disability by the Social Security Administration); returns of excess contributions to Retirement Plans; distributions from retirement plans to make "substantially equal periodic payments" under Section 72(t) of the Internal Revenue Code provided the distributions do not exceed 10% of the account value annually, measured from the date the Transfer Agent receives the request; shares redeemed involuntarily, as described in "Shareholder Account Rules and Policies," below; or distributions from OppenheimerFunds prototype 401(k) plans: (1) for hardship withdrawals; (2) under a Qualified Domestic Relations Order, as defined in the Internal Revenue Code; (3) to meet minimum distribution requirements as defined in the Internal Revenue Code; (4) to make "substantially equal periodic payments" as described in Section 72(t) of the Internal Revenue Code; or (5) for separation from service. Waivers for Shares Sold or Issued in Certain Transactions. The contingent deferred sales charge is also waived on Class B and Class C shares sold or issued in the following cases: shares sold to the Manager or its affiliates; shares sold to registered management investment companies or separate accounts of insurance companies having an agreement with the Manager or the Distributor for that purpose; or shares issued in plans of reorganization to which the Fund is a party. Special Investor Services AccountLink. OppenheimerFunds AccountLink links your Fund account to your account at your bank or other financial institution to enable you to send money electronically between those accounts to perform a number of types of account transactions. These include purchases of shares by telephone (either through a service representative or by PhoneLink, described below), automatic investments under Asset Builder Plans, and sending dividends and distributions or Automatic Withdrawal Plan payments directly to your bank account. Please call the Transfer Agent for more information. AccountLink privileges should be requested on your dealer's settlement instructions if you buy your shares through your dealer. After your account is established, you can request AccountLink privileges by sending signature-guaranteed instructions to the Transfer Agent. AccountLink privileges will apply to each shareholder listed in the registration on your account as well as to your dealer representative of record unless and until the Transfer Agent receives written instructions terminating or changing those privileges. After you establish AccountLink for your account, any change of bank account information must be made by signature-guaranteed instructions to the Transfer Agent signed by all shareholders who own the account. Using AccountLink to Buy Shares. Purchases may be made by telephone only after your account has been established. To purchase shares in amounts up to $250,000 through a telephone representative, call the Distributor at 1-800-852-8457. The purchase payment will be debited from your bank account. PhoneLink. PhoneLink is the OppenheimerFunds automated telephone system that enables shareholders to perform a number of account transactions automatically using a touch-tone phone. PhoneLink may be used on already-established Fund accounts after you obtain a Personal Identification Number (PIN), by calling the special PhoneLink number: 1-800-533-3310. Purchasing Shares. You may purchase shares in amounts up to $100,000 by phone, by calling 1-800-533-3310. You must have established AccountLink privileges to link your bank account with the Fund, to pay for these purchases. Exchanging Shares. With the OppenheimerFunds exchange privilege, described below, you can exchange shares automatically by phone from your Fund account to another Oppenheimer funds account you have already established by calling the special PhoneLink number. Please refer to "How to Exchange Shares," below, for details. Selling Shares. You can redeem shares by telephone automatically by calling the PhoneLink number and the Fund will send the proceeds directly to your AccountLink bank account. Please refer to "How to Sell Shares," below, for details. Automatic Withdrawal and Exchange Plans. The Fund has several plans that enable you to sell shares automatically or exchange them to another Oppenheimer funds account on a regular basis: Automatic Withdrawal Plans. If your Fund account is worth $5,000 or more, you can establish an Automatic Withdrawal Plan to receive payments of at least $50 on a monthly, quarterly, semi- annual or annual basis. The checks may be sent to you or sent automatically to your bank account on AccountLink. You may even set up certain types of withdrawals of up to $1,500 per month by telephone. You should consult the Statement of Additional Information for more details. Automatic Exchange Plans. You can authorize the Transfer Agent to exchange an amount you establish in advance automatically for shares of up to five other Oppenheimer funds on a monthly, quarterly, semi-annual or annual basis under an Automatic Exchange Plan. The minimum purchase for each other Oppenheimer funds account is $25. These exchanges are subject to the terms of the exchange privilege, described below. Reinvestment Privilege. If you redeem some or all of your Class A or Class B shares of the Fund, you have up to 6 months to reinvest all or part of the redemption proceeds in Class A shares of the Fund or other Oppenheimer funds without paying a sales charge. This privilege applies to Class A shares that you purchased subject to an initial sales charge and to Class A or Class B shares on which you paid a contingent deferred sales charge when you redeemed them. This privilege does not apply to Class C shares. You must be sure to ask the Distributor for this privilege when you send your payment. Please consult the Statement of Additional Information for more details. Retirement Plans. Fund shares are available as an investment for your retirement plans. If you participate in a plan sponsored by your employer, the plan trustee or administrator must make the purchase of shares for your retirement plan account. The Distributor offers a number of different retirement plans that can be used by individuals and employers: Individual Retirement Accounts including rollover IRAs, for individuals and their spouses 403(b)(7) Custodial Plans for employees of eligible tax- exempt organizations, such as schools, hospitals and charitable organizations SEP-IRAs (Simplified Employee Pension Plans) for small business owners or people with income from self-employment, including SAR/SEP IRAs Pension and Profit-Sharing Plans for self-employed persons and small business owners 401(k) prototype retirement plans for businesses Please call the Distributor for the OppenheimerFunds plan documents, which contain important information and applications. How to Sell Shares You can arrange to take money out of your account by selling (redeeming) some or all of your shares on any regular business day. Your shares will be sold at the next net asset value calculated after your order is received and accepted by the Transfer Agent. The Fund offers you a number of ways to sell your shares: in writing or by telephone. You can also set up Automatic Withdrawal Plans to redeem shares on a regular basis, as described above. If you have questions about any of these procedures, and especially if you are redeeming shares in a special situation, such as due to the death of the owner, or from a retirement plan, please call the Transfer Agent first, at 1-800-525-7048, for assistance. Retirement Accounts. To sell shares in an OppenheimerFunds retirement account in your name, call the Transfer Agent for a distribution request form. There are special income tax withholding requirements for distributions from retirement plans and you must submit a withholding form with your request to avoid delay. If your retirement plan account is held for you by your employer, you must arrange for the distribution request to be sent by the plan administrator or trustee. There are additional details in the Statement of Additional Information. Certain Requests Require A Signature Guarantee. To protect you and the Fund from fraud, certain redemption requests must be in writing and must include a signature guarantee in the following situations (there may be other situations also requiring a signature guarantee): You wish to redeem more than $50,000 worth of shares and receive a check The redemption check is not payable to all shareholders listed on the account statement The redemption check is not sent to the address of record on your account statement Shares are being transferred to a Fund account with a different owner or name Shares are redeemed by someone other than the owners (such as an Executor) Where Can I Have My Signature Guaranteed? The Transfer Agent will accept a guarantee of your signature by a number of financial institutions, including: a U.S. bank, trust company, credit union or savings association, or by a foreign bank that has a U.S. correspondent bank, or by a U.S. registered dealer or broker in securities, municipal securities or government securities, or by a U.S. national securities exchange, a registered securities association or a clearing agency. If you are signing as a fiduciary or on behalf of a corporation, partnership or other business, you must also include your title in the signature. Selling Shares by Mail. Write a "letter of instructions" that includes: Your name The Fund's name Your Fund account number (from your account statement) The dollar amount or number of shares to be redeemed Any special payment instructions Any share certificates for the shares you are selling, The signatures of all registered owners exactly as the account is registered, and Any special requirements or documents requested by the Transfer Agent to assure proper authorization of the person asking to sell shares. Use the following address for Send courier or Express Mail request by mail: requests to: OppenheimerFunds Services OppenheimerFunds Services P.O. Box 5270 10200 E. Girard Ave., Denver, Colorado 80217 Building D Denver, Colorado 80231 Selling Shares by Telephone. You and your dealer representative of record may also sell your shares by telephone. To receive the redemption price on a regular business day, your call must be received by the Transfer Agent by the close of The New York Stock Exchange that day, which is normally 4:00 P.M. but may be earlier on some days. Shares held in an OppenheimerFunds retirement plan or under a share certificate may not be redeemed by telephone. To redeem shares through a service representative, call 1- 800-852-8457 To redeem shares automatically on PhoneLink, call 1-800-533- 3310 Whichever method you use, you may have a check sent to the address on the account statement, or, if you have linked your Fund account to your bank account on AccountLink, you may have the proceeds wired to that bank account. Telephone Redemptions Paid by Check. Up to $50,000 may be redeemed by telephone in any 7-day period. The check must be payable to all owners of record of the shares and must be sent to the address on the account statement. This service is not available within 30 days of changing the address on an account. Telephone Redemptions Through AccountLink or by Wire. There are no dollar limits on telephone redemption proceeds sent to a bank account designated when you establish AccountLink. Normally the ACH transfer to your bank is initiated on the business day after the redemption. You do not receive dividends on the proceeds of the shares you redeemed while they are waiting to be transferred. Shareholders may also have the Transfer Agent send redemption proceeds of $2,500 or more by Federal Funds wire to a designated commercial bank account. The bank must be a member of the Federal Reserve wire system. There is a $10 fee for each Federal Funds wire. To place a wire redemption request, call the Transfer Agent at 1-800-852-8457. The wire will normally be transmitted on the next bank business day after the shares are redeemed. There is a possibility that the wire may be delayed up to seven days to enable the Fund to sell securities to pay the redemption proceeds. No dividends are accrued or paid on the proceeds of shares that have been redeemed and are awaiting transmittal by wire. To establish wire redemption privileges on an account that is already established, please contact the Transfer Agent for instructions. Selling Shares Through Your Dealer. The Distributor has made arrangements to repurchase Fund shares from dealers and brokers on behalf of their customers. Brokers or dealers may charge for that service. Please refer to "Special Arrangements for Repurchase of Shares from Dealers and Brokers" in the Statement of Additional Information for more details. How to Exchange Shares Shares of the Fund may be exchanged for shares of certain Oppenheimer funds at net asset value per share at the time of exchange, without sales charge. To exchange shares, you must meet several conditions: Shares of the fund selected for exchange must be available for sale in your state of residence The prospectuses of this Fund and the fund whose shares you want to buy must offer the exchange privilege You must hold the shares you buy when you establish your account for at least 7 days before you can exchange them; after the account is open 7 days, you can exchange shares every regular business day You must meet the minimum purchase requirements for the fund you purchase by exchange Before exchanging into a fund, you should obtain and read its prospectus Shares of a particular class of the Fund may be exchanged only for shares of the same class in the other Oppenheimer funds. For example, you can exchange Class A shares of this Fund only for Class A shares of another fund. At present, Oppenheimer Money Market Fund, Inc. offers only one class of shares, which are considered to be Class A shares for this purpose. In some cases, sales charges may be imposed on exchange transactions. Please refer to "How to Exchange Shares" in the Statement of Additional Information for more details. Exchanges may be requested in writing or by telephone: Written Exchange Requests. Submit an OppenheimerFunds Exchange Request form, signed by all owners of the account. Send it to the Transfer Agent at the addresses listed in "How to Sell Shares." Telephone Exchange Requests. Telephone exchange requests may be made either by calling a service representative at 1-800-852- 8457 or by using PhoneLink for automated exchanges, by calling 1- 800-533-3310. Telephone exchanges may be made only between accounts that are registered with the same name(s) and address. Shares held under certificates may not be exchanged by telephone. You can find a list of Oppenheimer funds currently available for exchanges in the Statement of Additional Information or obtain one by calling a service representative at 1-800-525-7048. That list can change from time to time. There are certain exchange policies you should be aware of: Shares are normally redeemed from one fund and purchased from the other fund in the exchange transaction on the same regular business day on which the Transfer Agent receives an exchange request that is in proper form by the close of The New York Stock Exchange that day, which is normally 4:00 P.M. but may be earlier on some days. However, either fund may delay the purchase of shares of the fund you are exchanging into up to 7 days if it determines it would be disadvantaged by a same-day transfer of the proceeds to buy shares. For example, the receipt of multiple exchange requests from a dealer in a "market-timing" strategy might require the sale of portfolio securities at a time or price disadvantageous to the Fund. Because excessive trading can hurt fund performance and harm shareholders, the Fund reserves the right to refuse any exchange request that will disadvantage it, or to refuse multiple exchange requests submitted by a shareholder or dealer. The Fund may amend, suspend or terminate the exchange privilege at any time. Although the Fund will attempt to provide you notice whenever it is reasonably able to do so, it may impose these changes at any time. For tax purposes, exchanges of shares involve a redemption of the shares of the Fund you own and a purchase of the shares of the other fund, which may result in a capital gain or loss. For more information about the taxes affecting exchanges, please refer to "How to Exchange Shares" in the Statement of Additional Information. If the Transfer Agent cannot exchange all the shares you request because of a restriction cited above, only the shares eligible for exchange will be exchanged. Shareholder Account Rules and Policies Net Asset Value Per Share is determined for each class of shares as of the close of The New York Stock Exchange that day, which is normally 4:00 P.M. but may be earlier on some days, on each day the Exchange is open by dividing the value of the Fund's net assets attributable to a class by the number of shares of that class that are outstanding. The Fund's Board of Directors has established procedures to value the Fund's securities to determine net asset value. In general, securities values are based on market value. There are special procedures for valuing illiquid and restricted securities and obligations for which market values cannot be readily obtained. These procedures are described more completely in the Statement of Additional Information. The offering of shares may be suspended during any period in which the determination of net asset value is suspended, and the offering may be suspended by the Board of Directors at any time the Board believes it is in the Fund's best interest to do so. Telephone Transaction Privileges for purchases, redemptions or exchanges may be modified, suspended or terminated by the Fund at any time. If an account has more than one owner, the Fund and the Transfer Agent may rely on the instructions of any one owner. Telephone privileges apply to each owner of the account and the dealer representative of record for the account unless and until the Transfer Agent receives cancellation instructions from an owner of the account. The Transfer Agent will record any telephone calls to verify data concerning transactions and has adopted other procedures to confirm that telephone instructions are genuine, by requiring callers to provide tax identification numbers and other account data or by using PINs, and by confirming such transactions in writing. If the Transfer Agent does not use reasonable procedures it may be liable for losses due to unauthorized transactions, but otherwise neither the Transfer Agent nor the Fund will be liable for losses or expenses arising out of telephone instructions reasonably believed to be genuine. If you are unable to reach the Transfer Agent during periods of unusual market activity, you may not be able to complete a telephone transaction and should consider placing your order by mail. Redemption or transfer requests will not be honored until the Transfer Agent receives all required documents in proper form. From time to time, the Transfer Agent in its discretion may waive certain of the requirements for redemptions stated in this Prospectus. Dealers that can perform account transactions for their clients by participating in NETWORKING through the National Securities Clearing Corporation are responsible for obtaining their clients' permission to perform those transactions and are responsible to their clients who are shareholders of the Fund if the dealer performs any transaction erroneously or improperly. The redemption price for shares will vary from day to day because the value of the securities in the Fund's portfolio fluctuates, and the redemption price, which is the net asset value per share, will normally be different for Class A, Class B and Class C shares. Therefore, the redemption value of your shares may be more or less than their original cost. Payment for redeemed shares is made ordinarily in cash and forwarded by check or through AccountLink (as elected by the shareholder under the redemption procedures described above) within 7 days after the Transfer Agent receives redemption instructions in proper form, except under unusual circumstances determined by the Securities and Exchange Commission delaying or suspending such payments. For accounts registered in the name of a broker-dealer, payment will be forwarded within 3 business days. The Transfer Agent may delay forwarding a check or processing a payment via AccountLink for recently purchased shares, but only until the purchase payment has cleared. That delay may be as much as 10 days from the date the shares were purchased. That delay may be avoided if you purchase shares by certified check or arrange to have your bank to provide telephone or written assurance to the Transfer Agent that your purchase payment has cleared. Involuntary redemptions of small accounts may be made by the Fund if the account value has fallen below $500 (or such other amount as may be fixed by the Board of Directors) for reasons other than the fact that the market value of shares has dropped, and in some cases involuntary redemptions may be made to repay the Distributor for losses from the cancellation of share purchase orders. Under unusual circumstances, shares of the Fund may be redeemed "in kind", which means that the redemption proceeds will be paid with securities from the Fund's portfolio. Please refer to "How to Sell Shares" in the Statement of Additional Information for more details. "Backup Withholding" of Federal income tax may be applied at the rate of 31% from dividends, distributions and redemption proceeds (including exchanges) if you fail to furnish the Fund a certified Social Security or Employer Identification Number when you sign your application, or if you violate Internal Revenue Service regulations on tax reporting of dividends. The Fund does not charge a redemption fee, but if your dealer or broker handles your redemption, they may charge a fee. That fee can be avoided by redeeming your Fund shares directly through the Transfer Agent. Under the circumstances described in "How To Buy Shares," you may be subject to a contingent deferred sales charges when redeeming certain Class A, Class B and Class C shares. To avoid sending duplicate copies of materials to households, the Fund will mail only one copy of each annual and semi-annual report to shareholders having the same last name and address on the Fund's records. However, each shareholder may call the Transfer Agent at 1-800-525-7048 to ask that copies of those materials be sent personally to that shareholder. Dividends, Capital Gains and Taxes Dividends. The Fund declares dividends separately for Class A, Class B and Class C shares from net investment income on an annual basis and normally pays those dividends to shareholders following the end of its fiscal year, which is December 31. Dividends paid on Class A shares generally are expected to be higher than for Class B and Class C shares because expenses allocable to Class B and Class C shares will generally be higher than for Class A shares. There is no fixed dividend rate and there can be no assurance as to the payment of any dividends or the realization of any gains. Capital Gains. The Fund may make distributions annually in December out of any net short-term or long-term capital gains, and the Fund may make supplemental distributions of dividends and capital gains following its fiscal year which ended December 31. Short-term capital gains are treated as dividends for tax purposes. Long-term capital gains will be separately identified in the tax information the Fund sends you after the end of the calendar year. There can be no assurances that the Fund will pay any capital gains distributions in a particular year. Distribution Options. When you open your account, specify on your application how you want to receive your distributions. For OppenheimerFunds retirement accounts, all distributions are reinvested. For other accounts, you have four options: Reinvest All Distributions in the Fund. You can elect to reinvest all dividends and long-term capital gains distributions in additional shares of the Fund. Reinvest Long-Term Capital Gains Only. You can elect to reinvest long-term capital gains in the Fund while receiving dividends by check or sent to your bank account on AccountLink. Receive All Distributions in Cash. You can elect to receive a check for all dividends and long-term capital gains distributions or have them sent to your bank on AccountLink. Reinvest Your Distributions in Another Oppenheimer Fund Account. You can reinvest all distributions in another Oppenheimer fund account you have established. Taxes. If your account is not a tax-deferred retirement account, you should be aware of the following tax implications of investing in the Fund. Long-term capital gains are taxable as long-term capital gains when distributed to shareholders. It does not matter how long you have held your shares. Dividends paid from short-term capital gains and net investment income are taxable as ordinary income. Distributions are subject to federal income tax and may be subject to state or local taxes. Your distributions are taxable when paid, whether you reinvest them in additional shares or take them in cash. Every year the Fund will send you and the IRS a statement showing the amount of each taxable distribution you received in the previous year. "Buying a Dividend": When a Fund goes ex-dividend, its share price is reduced by the amount of the distribution. If you buy shares on or just before the ex-dividend date, or just before the Fund declares a capital gains distribution, you will pay the full price for the shares and then receive a portion of the price back as a taxable dividend or capital gain. Taxes on Transactions: Share redemptions, including redemptions for exchanges, are subject to capital gains tax. Generally speaking a capital gain or loss is the difference between the price you paid for the shares and the price you receive when you sell them. Returns of Capital: In certain cases distributions made by the Fund may be considered a non-taxable return of capital to shareholders. If that occurs, it will be identified in notices to shareholders. A non-taxable return of capital may reduce your tax basis in your Fund shares. This information is only a summary of certain federal tax information about your investment. More information is contained in the Statement of Additional Information, and in addition you should consult with your tax adviser about the effect of an investment in the Fund on your particular tax situation. APPENDIX A Special Sales Charge Arrangements for Shareholders of the Fund Who Were Shareholders of the Former Quest for Value Funds The initial and contingent deferred sales charge rates and waivers for Class A, Class B and Class C shares of the Fund described elsewhere in this Prospectus are modified as described below for those shareholders of (i) Oppenheimer Quest Value Fund, Inc., Oppenheimer Quest Growth & Income Value Fund, Oppenheimer Quest Opportunity Value Fund, Oppenheimer Quest Small Cap Value Fund and Oppenheimer Quest Global Value Fund, Inc. on November 24, 1995, when OppenheimerFunds, Inc. became the investment adviser to those funds, and (ii) Quest for Value U.S. Government Income Fund, Quest for Value Investment Quality Income Fund, Quest for Global Income Fund, Quest for Value New York Tax-Exempt Fund, Quest for Value National Tax-Exempt Fund and Quest for Value California Tax-Exempt Fund when those funds merged into various Oppenheimer funds on November 24, 1995. The funds listed above are referred to in this Prospectus as the "Former Quest for Value Funds." The waivers of initial and contingent deferred sales charges described in this Appendix apply to shares of the Fund acquired by such shareholder pursuant to an exchange of shares of one of the Oppenheimer funds that was one of the Former Quest for Value Funds. Class A Sales Charges Reduced Class A Initial Sales Charge Rates for Certain Former Quest Shareholders Purchases by Groups, Associations and Certain Qualified Retirement Plans. The following table sets forth the initial sales charge rates for Class A shares purchased by a "Qualified Retirement Plan" through a single broker, dealer or financial institution, or by members of "Associations" formed for any purpose other than the purchase of securities if that Qualified Retirement Plan or that Association purchased shares of any of the Former Quest for Value Funds or received a proposal to purchase such shares from OCC Distributors prior to November 24, 1995. For this purpose only, a "Qualified Retirement Plan" includes any 401(k) plan, 403(b) plan, and SEP/IRA or IRA plan for employees of a single employer.
Front-End Front-End Commission Sales Charge Sales Charge as as a as a Percentage Number of Percentage Percentage of Eligible Employees of Offering of Amount Offering or Members Price Invested Price 9 or fewer 2.50% 2.56% 2.00% At least 10 but not more than 49 2.00% 2.04% 1.60%
For purchases by Qualified Retirement plans and Associations having 50 or more eligible employees or members, there is no initial sales charge on purchases of Class A shares, but those shares are subject to the Class A contingent deferred sales charge described on pages __ and __ of this Prospectus. Purchases made under this arrangement qualify for the lower of the sales charge rate in the table based on the number of eligible employees in a Qualified Retirement Plan or members of an Association or the sales charge rate that applies under the Rights of Accumulation described above in the Prospectus. In addition, purchases by 401(k) plans that are Qualified Retirement Plans qualify for the waiver of the Class A initial sales charge if they qualified to purchase shares of any of the Former Quest For Value Funds by virtue of projected contributions or investments of $1 million or more each year. Individuals who qualify under this arrangement for reduced sales charge rates as members of Associations, or as eligible employees in Qualified Retirement Plans also may purchase shares for their individual or custodial accounts at these reduced sales charge rates, upon request to the Fund's Distributor. Special Class A Contingent Deferred Sales Charge Rates Class A shares of the Fund purchased by exchange of shares of other Oppenheimer funds that were acquired as a result of the merger of Former Quest for Value Funds into those Oppenheimer funds, and which shares were subject to a Class A contingent deferred sales charge prior to November 24, 1995 will be subject to a contingent deferred sales charge at the following rates: if they are redeemed within 18 months of the end of the calendar month in which they were purchased, at a rate equal to 1.0% if the redemption occurs within 12 months of their initial purchase and at a rate of 0.50 of 1.0% if the redemption occurs in the subsequent six months. Class A shares of any of the Former Quest for Value Funds purchased without an initial sales charge on or before November 22, 1995 will continue to be subject to the applicable contingent deferred sales charge in effect as of that date as set forth in the then-current prospectus for such Fund. Waiver of Class A Sales Charges for Certain Shareholders Class A shares of the Fund purchased by the following investors are not subject to any Class A initial or contingent deferred sales charges: Shareholders of the Fund who were shareholders of the AMA Family of Funds on February 28, 1991 and who acquired shares of any of the Former Quest for Value Funds by merger of a portfolio of the AMA Family of Funds. Shareholders of the Fund who acquired shares of any Former Quest for Value Fund by merger of any of the portfolios of the Unified Funds. Waiver of Class A Contingent Deferred Sales Charge in Certain Transactions The Class A contingent deferred sales charge will not apply to redemptions of Class A shares of the Fund purchased by the following investors who were shareholders of any Former Quest for Value Fund: Investors who purchased Class A shares from a dealer that is not or was not permitted to receive a sales load or redemption fee imposed on a shareholder with whom that dealer has a fiduciary relationship under the Employee Retirement Income Security Act of 1974 and regulations adopted under that law. Participants in Qualified Retirement Plans that purchased shares of any of the Former Quest For Value Funds pursuant to a special "strategic alliance" with the distributor of those funds. The Fund's Distributor will pay a commission to the dealer for purchases of Fund shares as described above in "Class A Contingent Deferred Sales Charge." Class A, Class B and Class C Contingent Deferred Sales Charge Waivers Waivers for Redemptions of Shares Purchased Prior to March 6, 1995 In the following cases, the contingent deferred sales charge will be waived for redemptions of Class A, B or C shares of the Fund acquired by exchange from an Oppenheimer Fund that was a Former Quest for Value Fund or into which such Fund merged, if those shares were purchased prior to March 6, 1995: in connection with (i) distributions to participants or beneficiaries of plans qualified under Section 401(a) of the Internal Revenue Code or from custodial accounts under Section 403(b)(7) of the Code, Individual Retirement Accounts, deferred compensation plans under Section 457 of the Code, and other employee benefit plans, and returns of excess contributions made to each type of plan, (ii) withdrawals under an automatic withdrawal plan holding only either Class B or C shares if the annual withdrawal does not exceed 10% of the initial value of the account, and (iii) liquidation of a shareholder's account if the aggregate net asset value of shares held in the account is less than the required minimum value of such accounts. Waivers for Redemptions of Shares Purchased on or After March 6, 1995 but Prior to November 24, 1995. In the following cases, the contingent deferred sales charge will be waived for redemptions of Class A, B or C shares of the Fund acquired by exchange from an Oppenheimer Fund that was a Former Quest For Value Fund or into which such Fund merged, if those shares were purchased on or after March 6, 1995, but prior to November 24, 1995: (1) distributions to participants or beneficiaries from Individual Retirement Accounts under Section 408(a) of the Internal Revenue Code or retirement plans under Section 401(a), 401(k), 403(b) and 457 of the Code, if those distributions are made either (a) to an individual participant as a result of separation from service or (b) following the death or disability (as defined in the Code) of the participant or beneficiary; (2) returns of excess contributions to such retirement plans; (3) redemptions other than from retirement plans following the death or disability of the shareholder(s) (as evidenced by a determination of total disability by the U.S. Social Security Administration); (4) withdrawals under an automatic withdrawal plan (but only for Class B or C shares) where the annual withdrawals do not exceed 10% of the initial value of the account; and (5) liquidation of a shareholder's account if the aggregate net asset value of shares held in the account is less than the required minimum account value. A shareholder's account will be credited with the amount of any contingent deferred sales charge paid on the redemption of any Class A, B or C shares of the Fund described in this section if within 90 days after that redemption, the proceeds are invested in the same Class of shares in this Fund or another Oppenheimer Fund. Special Dealer Arrangements Dealers who sold Class B shares of a Former Quest for Value Fund to Quest for Value prototype 401(k) plans that were maintained on the TRAC-2000 recordkeeping system and that were transferred to an OppenheimerFunds prototype 401(k) plan shall be eligible for an additional one-time payment by the Distributor of 1% of the value of the plan assets transferred, but that payment may not exceed $5,000 as to any one plan. Dealers who sold Class C shares of a Former Quest for Value Fund to Quest for Value prototype 401(k) plans that were maintained on the TRAC-2000 recordkeeping system and (i) the shares held by those plans were exchanged for Class A shares, or (ii) the plan assets were transferred to an OppenheimerFunds prototype 401(k) plan, shall be eligible for an additional one-time payment by the Distributor of 1% of the value of the plan assets transferred, but that payment may not exceed $5,000. Appendix B DESCRIPTION OF RATINGS Bond Ratings Moody's Investors Service, Inc. Aaa: Bonds which are rated "Aaa" are judged to be the best quality and to carry the smallest degree of investment risk. Interest payments are protected by a large or by an exceptionally stable margin and principal is secure. While the various protective elements are likely to change, the changes that can be expected are most unlikely to impair the fundamentally strong position of such issues. Aa: Bonds which are rated "Aa" are judged to be of high quality by all standards. Together with the "Aaa" group, they comprise what are generally known as "high-grade" bonds. They are rated lower than the best bonds because margins of protection may not be as large as with "Aaa" securities or fluctuation of protective elements may be of greater amplitude or there may be other elements present which make the long-term risks appear somewhat larger than those of "Aaa" securities. A: Bonds which are rated "A" possess many favorable investment attributes and are to be considered as upper-medium grade obligations. Factors giving security to principal and interest are considered adequate but elements may be present which suggest a susceptibility to impairment sometime in the future. Baa: Bonds which are rated "Baa" are considered medium grade obligations, i.e., they are neither highly protected nor poorly secured. Interest payments and principal security appear adequate for the present but certain protective elements may be lacking or may be characteristically unreliable over any great length of time. Such bonds lack outstanding investment characteristics and have speculative characteristics as well. Ba: Bonds which are rated "Ba" are judged to have speculative elements; their future cannot be considered well-assured. Often the protection of interest and principal payments may be very moderate and not well safeguarded during both good and bad times over the future. Uncertainty of position characterizes bonds in this class. B: Bonds which are rated "B" generally lack characteristics of desirable investment. Assurance of interest and principal payments or of maintenance of other terms of the contract over any long period of time may be small. Caa: Bonds which are rated "Caa" are of poor standing and may be in default or there may be present elements of danger with respect to principal or interest. Ca: Bonds which are rated "Ca" represent obligations which are speculative in a high degree and are often in default or have other marked shortcomings. C: Bonds which are rated "C" can be regarded as having extremely poor prospects of ever retaining any real investment standing. Standard & Poor's Corporation AAA: "AAA" is the highest rating assigned to a debt obligation and indicates an extremely strong capacity to pay principal and interest. AA: Bonds rated "AA" also qualify as high quality debt obligations. Capacity to pay principal and interest is very strong, and in the majority of instances they differ from "AAA" issues only in small degree. A: Bonds rated "A" have a strong capacity to pay principal and interest, although they are somewhat more susceptible to adverse effects of change in circumstances and economic conditions. BBB: Bonds rated "BBB" are regarded as having an adequate capacity to pay principal and interest. Whereas they normally exhibit protection parameters, adverse economic conditions or changing circumstances are more likely to lead to a weakened capacity to pay principal and interest for bonds in this category than for bonds in the "A" category. BB, B, CCC, CC: Bonds rated "BB," "B," "CCC" and "CC" are regarded, on balance, as predominantly speculative with respect to the issuer's capacity to pay interest and repay principal in accordance with the terms of the obligation. "BB" indicates the lowest degree of speculation and "CC" the highest degree. While such bonds will likely have some quality and protective characteristics, these are outweighed by large uncertainties or major risk exposures to adverse conditions. C, D: Bonds on which no interest is being paid are rated "C." Bonds rated "D" are in default and payment of interest and/or repayment of principal is in arrears. Fitch Investors Service, Inc. AAA Bonds considered to be investment grade and of the highest credit quality. The obligor has an exceptionally strong ability to pay interest and repay principal, which is unlikely to be affected by reasonably foreseeable events. AA Bonds considered to be investment grade and of very high credit quality. The obligor's ability to pay interest and repay principal is very strong, although not quite as strong as bonds rated "AAA." Because bonds rated in the "AAA" and "AA" categories are not significantly vulnerable to foreseeable future developments, short- term debt of these issuers is generally rated "F-1+." A Bonds considered to be investment grade and of high credit quality. The obligor's ability to pay interest and repay principal is considered to be strong, but may be more vulnerable to adverse changes in economic conditions and circumstances than bonds with higher ratings. BBB Bonds considered to be investment grade and of satisfactory credit quality. The obligor's ability to pay interest and repay principal is considered to be adequate. Adverse changes in economic conditions and circumstances, however, are more likely to have adverse impact on these bonds, and therefore impair timely payment. The likelihood that the ratings of these bonds will fall below investment grade is higher than for bonds with higher ratings. BB Bonds are considered speculative. The obligor's ability to pay interest and repay principal may be affected over time by adverse economic changes. However, business and financial alternatives can be identified which could assist the obligor in satisfying its debt service requirements. B Bonds are considered highly speculative. While bonds in this class are currently meeting debt service requirements, the probability of continued timely payment of principal and interest reflects the obligor's limited margin of safety and the need for reasonable business and economic activity through the life of the issue. CCC Bonds have certain identifiable characteristics which, if not remedied, may lead to default. The ability to meet obligations requires an advantageous business and economic environment. CC Bonds are minimally protected. Default in payment of interest and/or principal seems probable over time. C Bonds are in imminent default in payment of interest or principal. DDD, DD, and D Bonds are in default on interest and/or principal payments. Such bonds are extremely speculative and should be valued on the basis of their ultimate recovery value in liquidation or reorganization of the obligor. "DDD" represents the highest potential for recovery of these bonds, and "D" represents the lowest potential for recovery. Plus (+) Minus (-) Plus and minus signs are used with a rating symbol to indicate the relative position of a credit within the rating category. Plus and minus signs, however, are not used in the "DDD," "DD," or "D" categories. Short-Term Debt Ratings. Moody's Investors Service, Inc. The following rating designations for commercial paper (defined by Moody's as promissory obligations not having original maturity in excess of nine months), are judged by Moody's to be investment grade, and indicate the relative repayment capacity of rated issuers: Prime-1: Superior capacity for repayment. Capacity will normally be evidenced by the following characteristics: (a) leveling market positions in well-established industries; (b) high rates of return on funds employed; (c) conservative capitalization structures with moderate reliance on debt and ample asset protection; (d) broad margins in earning coverage of fixed financial charges and high internal cash generation; and (e) well established access to a range of financial markets and assured sources of alternate liquidity. Prime-2: Strong capacity for repayment. This will normally be evidenced by many of the characteristics cited above but to a lesser degree. Earnings trends and coverage ratios, while sound, will be more subject to variation. Capitalization characteristics, while still appropriate, may be more affected by external conditions. Ample alternate liquidity is maintained. Moody's ratings for state and municipal short-term obligations are designated "Moody's Investment Grade" ("MIG"). Short-term notes which have demand features may also be designated as "VMIG". These rating categories are as follows: MIG1/VMIG1: Best quality. There is present strong protection by established cash flows, superior liquidity support or demonstrated broadbased access to the market for refinancing. MIG2/VMIG2: High quality. Margins of protection are ample although not so large as in the preceding group. Standard & Poor's Corporation ("S&P"): The following ratings by S&P for commercial paper (defined by S&P as debt having an original maturity of no more than 365 days) assess the likelihood of payment: A-1: Strong capacity for timely payment. Those issues determined to possess extremely strong safety characteristics are denoted with a plus sign (+) designation. A-2: Satisfactory capacity for timely payment. However, the relative degree of safety is not as high as for issues designated "A-1". S&P's ratings for Municipal Notes due in three years or less are: SP-1: Very strong or strong capacity to pay principal and interest. Those issues determined to possess overwhelming safety characteristics will be given a plus (+) designation. SP-2: Satisfactory capacity to pay principal and interest. S&P assigns "dual ratings" to all municipal debt issues that have a demand or double feature as part of their provisions. The first rating addresses the likelihood of repayment of principal and interest as due, and the second rating addresses only the demand feature. With short-term demand debt, S&P's note rating symbols are used with the commercial paper symbols (for example, "SP-1+/A- 1+"). Fitch Investors Service, Inc. Fitch assigns the following short- term ratings to debt obligations that are payable on demand or have original maturities of generally up to three years, including commercial paper, certificates of deposit, medium-term notes, and municipal and investment notes: F-1+: Exceptionally strong credit quality; the strongest degree of assurance for timely payment. F-1: Very strong credit quality; assurance of timely payment is only slightly less in degree than issues rated "F-1+". F-2: Good credit quality; satisfactory degree of assurance for timely payment, but the margin of safety is not as great as for issues assigned "F-1+" or "F-1" ratings. Duff & Phelps, Inc. The following ratings are for commercial paper (defined by Duff & Phelps as obligations with maturities, when issued, of under one year), asset-backed commercial paper, and certificates of deposit (the ratings cover all obligations of the institution with maturities, when issued, of under one year, including bankers' acceptance and letters of credit): Duff 1+: Highest certainty of timely payment. Short-term liquidity, including internal operating factors and/or access to alternative sources of funds, is outstanding, and safety is just below risk-free U.S. Treasury short-term obligations. Duff 1: Very high certainty of timely payment. Liquidity factors are excellent and supported by good fundamental protection factors. Risk factors are minor. Duff 1-: High certainty of timely payment. Liquidity factors are strong and supported by good fundamental protection factors. Risk factors are very small. Duff 2: Good certainty of timely payment. Liquidity factors and company fundamentals are sound. Although ongoing funding needs may enlarge total financing requirements, access to capital markets is good. Risk factors are small. IBCA Limited or its affiliate IBCA Inc. Short-term ratings, including commercial paper (with maturities up to 12 months), are as follows: A1+: Obligations supported by the highest capacity for timely repayment. A1: Obligations supported by a very strong capacity for timely repayment. A2: Obligations supported by a strong capacity for timely repayment, although such capacity may be susceptible to adverse changes in business, economic, or financial conditions. Thomson BankWatch, Inc. The following short-term ratings apply to commercial paper, certificates of deposit, unsecured notes, and other securities having a maturity of one year or less. TBW-1: The highest category; indicates the degree of safety regarding timely repayment of principal and interest is very strong. TBW-2: The second highest rating category; while the degree of safety regarding timely repayment of principal and interest is strong, the relative degree of safety is not as high as for issues rated "TBW-1". Oppenheimer Quest Capital 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 No dealer, broker, salesperson or any other person has been authorized to give any information or to make any representations other than those contained in this Prospectus or the Statement of Additional Information, and if given or made, such information and representations must not be relied upon as having been authorized by the Fund, OppenheimerFunds, Inc., OppenheimerFunds Distributor, Inc. or any affiliate thereof. This Prospectus does not constitute an offer to sell or a solicitation of an offer to buy any of the securities offered hereby in any state to any person to whom it is unlawful to make such an offer in such state. prosp\cappsp.#2 APPENDIX TO PROSPECTUS OF OPPENHEIMER QUEST CAPITAL VALUE FUND, INC. Graphic material included in Prospectus of Oppenheimer Quest Capital Value Fund, Inc.: "Comparison of Total Return of Oppenheimer Quest Capital Value Fund, Inc. with the S&P 500 Index - Change in Value of $10,000 Hypothetical Investment". A linear graph will be included in the Prospectus of Oppenheimer Quest Capital Value Fund, Inc. (the "Fund") depicting the initial account value and subsequent account value of a hypothetical $10,000 investment in the Fund. That graph will cover the performance of the Fund's Class A shares since inception (2/13/87)(formerly, the Capital Shares), through 12/31/96. Class B and Class shares are not included as such shares were not outstanding during the fiscal year ended 12/31/96. Fiscal Period/Year Oppenheimer Quest S&P 500 Ended Capital Value Fund, Inc. Index 02/13/87 $ 9,425 $10,000 12/31/87 $ 7,665 $ 9,224 12/31/88 $10,413 $10,752 12/31/89 $15,948 $14,153 12/31/90 $14,815 $13,713 12/31/91 $20,986 $17,882 12/31/92 $25,490 $19,242 12/31/93 $27,513 $21,177 12/31/94 $26,548 $21,456 12/31/95 $36,852 $29,509 12/31/96 $44,404 $36,280 OPPENHEIMER QUEST CAPITAL VALUE FUND, INC. Two World Trade Center, New York, New York 10048 1-800-525-7048 Statement of Additional Information dated March 3, 1997 This Statement of Additional Information of Oppenheimer Quest Capital Value Fund, Inc. is not a Prospectus. This document contains additional information about the Fund and supplements information in the Prospectus dated March 3, 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 Accountants' Report. . . . . . . . . . . . . Financial Statements . . . . . . . . . . . . . . . . . . . Appendix A: Corporate Industry Classifications . . . . A-1 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. The Fund may invest in securities (which may be denominated in U.S. dollars or non-U.S. currencies) issued or guaranteed by foreign corporations, certain supranational equities (described below) and foreign governments or their agencies or instrumentalities, and in securities issued by U.S. corporations denominated in non-U.S. currencies. All such securities are referred to as "foreign securities." Investing in foreign securities offers 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 Fund's Board of Directors to the extent that approval is required under applicable rules of the Securities and Exchange Commission (the "SEC"). In buying foreign securities, the Fund may convert U.S. dollars into foreign currency, but only to effect securities transactions on foreign securities exchanges and not to hold such foreign currency as an investment. Risks of Foreign Investing. Investing in foreign securities involves special additional risks and considerations not typically associated with investing in securities of issuers traded in the U.S. These include: reduction of income by foreign taxes; fluctuation in value of foreign portfolio investments due to changes in currency rates and control regulations (e.g., currency blockage); transaction charges for currency exchange; lack of public information about foreign issuers; lack of uniform accounting, auditing and financial reporting standards comparable to those applicable to domestic issuers; less volume on foreign exchanges than on U.S. exchanges; greater volatility and less liquidity on foreign markets than in the U.S.; less regulation of foreign issuers, stock exchanges and brokers than in the U.S.; greater difficulties in commencing lawsuits and obtaining judgments in foreign courts; higher brokerage commission rates than in the U.S.; increased risks of delays in settlement of portfolio transactions or loss of certificates for portfolio securities; possibilities in some countries of expropriation or nationalization of assets, confiscatory taxation, political, financial or social instability or adverse diplomatic developments; and unfavorable differences between the U.S. economy and foreign economies. In the past, U.S. Government policies have discouraged certain investments abroad by U.S. investors, through taxation or other restrictions, and it is possible that such restrictions could be re-imposed. Emerging Market Countries: Certain developing countries may have relatively unstable governments, economies based on only a few industries that are dependent upon international trade, and reduced secondary market liquidity. Foreign investment in certain emerging market countries is restricted or controlled in varying degrees. In the past, securities in these countries have experienced greater price movement, both positive and negative, than securities of companies located in developed countries. Lower-rated high- yielding emerging market securities may be considered to have speculative elements. U.S. Government Securities. Obligations of U.S. Government agencies or instrumentalities (including mortgage-backed securities) may or may not be guaranteed or supported by the "full faith and credit" of the United States. Some are backed by the right of the issuer to borrow from the U.S. Treasury; others, by discretionary authority of the U.S. Government to purchase the agencies' obligations; while others are supported only by the credit of the instrumentality. All U.S. Treasury obligations are backed by the full faith and credit of the United States. If the securities are not backed by the full faith and credit of the United States, the owner of the securities must look principally to the agency issuing the obligation for repayment and may not be able to assert a claim against the United States in the event that the agency or instrumentality does not meet its commitment. The Fund will invest in U.S. Government Securities of such agencies and instrumentalities only when the Manager is satisfied that the credit risk with respect to such instrumentality is minimal. Money Market Securities. As stated in the Prospectus, the Fund typically invests a part of its assets in money market securities, and may invest up to 100% of its total assets in money market securities for temporary defensive purposes. Money market securities in which the Fund may invest include the following: Time Deposits and Variable Rate Notes. The Fund may invest in fixed time deposits, whether or not subject to withdrawal penalties. However, investment in such deposits which are subject to withdrawal penalties, other than overnight deposits, are subject to the 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. As stated in the Prospectus, the Fund may invest up to 25% of its net assets in bonds rated below Baa3 by Moody's or BBB- by Standard & Poor's (commonly known as "high yield" or "junk bonds"). The Manager will not rely solely on the ratings assigned by rating services and may invest, without limit, in unrated securities which offer, in the opinion of the Manager, yields and risks comparable to those of rated securities in which the Fund may invest. Some of the principal risks of high yield securities include: (i) limited liquidity and secondary market support, (ii) substantial market price volatility resulting from changes in prevailing interest rates, (iii) subordination of the holder's claims to the prior claims of banks and other senior lenders in bankruptcy proceedings, (iv) the operation of mandatory sinking fund or call/redemption provisions during periods of declining interest rates, whereby the holder might receive redemption proceeds at times when only lower-yielding portfolio securities are available for investment, (v) the possibility that earnings of the issuer may be insufficient to meet its debt service, and (vi) the issuer's low creditworthiness and potential for insolvency during periods of rising interest rates and economic downturn. Some high yield bonds pay interest in kind rather than in cash and tend to be more volatile than securities that pay interest in cash. As a result of the limited liquidity of high yield securities, their prices have at times experienced significant and rapid decline when a significant number of holders of high yield securities simultaneously decided to sell them. A decline is also likely in the high yield bond market during an economic downturn. An economic downturn or an increase in interest rates could severely disrupt the market for high yield securities and adversely affect the value of outstanding securities and the ability of the issuers to repay principal and interest. In addition, in recent years there have been several Congressional attempts to limit the use or limit tax and other advantages of high yield bonds. If enacted, such proposals could adversely affect the value of these securities and consequently the Fund's net asset value per share. For example, federally insured savings and loan associations have been required to divest their investments in high yield securities. Warrants. The Fund may purchase warrants subject to the percentage limitations stated in the Prospectus. 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. Warrants have no voting rights, receive no dividends and have no rights with respect to the assets of the issuer. Investing in Small, Unseasoned Companies. The securities of small, unseasoned companies may have a limited trading market, which may adversely affect the Fund's ability to dispose of them and can reduce the price the Fund might be able to obtain for them. If other investment companies and investors that invest in this type of securities trade the same securities when the Fund attempts to dispose of its holdings, the Fund may receive lower prices than might otherwise be obtained, because of the thinner market for such securities. Borrowing. The Fund may increase its ownership of securities by borrowing as a temporary measure for extraordinary or emergency purposes and investing the borrowed funds, subject to the restrictions stated in the Prospectus. Any such borrowing will be made only from banks, and pursuant to the requirements of the Investment Company Act of 1940, as amended (the "1940 Act") will be made only to the extent that the value of that Fund's assets, less its liabilities other than borrowings, is equal to at least 300% of all borrowings as set forth in the 1940 Act including the proposed borrowing and amounts covering the Fund's obligations under "forward roll" transactions. If the value of the Fund's assets so computed should fail to meet the 300% asset coverage requirement, the Fund is required within three days to reduce its bank debt to the extent necessary to meet such requirement and may have to sell a portion of its investments at a time when independent investment judgment would not dictate such sale. Borrowing for investment increases both investment opportunity and risk. Since substantially all of the Fund's assets fluctuate in value, but borrowing obligations are fixed, when the Fund has outstanding borrowings, its net asset value per share correspondingly will tend to increase and decrease more when portfolio assets fluctuate in value than otherwise would be the case. Other Investment Techniques and Strategies When-Issued Securities. The Fund may take advantage of offerings of eligible portfolio securities on a "when-issued" basis where delivery of and payment for such securities takes place sometime after the transaction date on terms established on such date. Normally, settlement on U.S. Government securities takes place within ten days. The Fund only will make when-issued commitments on eligible securities with the intention of actually acquiring the securities. If the Fund chooses to dispose of the right to acquire a when-issued security prior to its acquisition, it could, as with the disposition of any other portfolio obligation, incur a gain or loss due to market fluctuation. When- issued commitments will not be made if, as a result, more than 15% of the net assets of the Fund would be so committed. Repurchase Agreements. The Fund may purchase securities subject to repurchase agreements for liquidity purposes to meet anticipated redemptions, or pending the investment of the proceeds from sales of Fund shares, or pending the settlement of purchases of portfolio securities. In a repurchase transaction, the Fund purchases a security from, and simultaneously resells it to, an approved vendor (a U.S. commercial bank or the U.S. branch of a foreign bank having total domestic assets of at least $1 billion or a broker-dealer with a net worth of at least $50 million and which 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 on an agreed-on 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. The Fund may enter into reverse repurchase agreements. Under a reverse repurchase agreement, the Fund sells securities and agrees to repurchase them at a mutually agreed upon date and price. At the time the Fund enters into a reverse repurchase agreement, it will establish and maintain a segregated account with an approved custodian containing liquid assets of any type, including equity and debt securities of any grade having a value not less than the repurchase price (including accrued interest). Reverse repurchase agreements involve the risk that the market value of the securities retained in lieu of sale by the Fund may decline more than or appreciate less than the securities the Fund has sold but is obligated to repurchase. In the event the buyer of securities under a reverse repurchase agreement files for bankruptcy or becomes insolvent, such buyer or its trustee or receiver may receive an extension of time to determine whether to enforce the Fund's obligation to repurchase the securities and the Fund's use of the proceeds of the reverse repurchase agreements may effectively be restricted pending such decisions. Reverse repurchase agreements create leverage, a speculative factor, and will be considered borrowings for purposes of the Fund's limitation on borrowing. Illiquid and Restricted Securities. To enable the Fund to sell restricted securities not registered under the Securities Act of 1933, the Fund may have to cause those securities to be registered. The expenses of registration of restricted securities may be negotiated by the Fund with the issuer at the time such securities are purchased by the Fund, if such registration is required before such securities may be sold publicly. When registration must be arranged because the Fund wishes to sell the security, a considerable period may elapse between the time the decision is made to sell the securities and the time the Fund would be permitted to sell them. The Fund would bear the risks of any downward price fluctuation during that period. The Fund may also acquire, through private placements, securities having contractual restrictions on their resale, which might limit the Fund's ability to dispose of such securities and might lower the amount realizable upon the sale of such securities. The Fund has percentage limitations that apply to purchases of restricted securities, as stated in the Prospectus. Those percentage restrictions do not limit purchases of restricted securities that are eligible for sale to qualified institutional purchasers pursuant to Rule 144A under the Securities Act of 1933, provided that those securities have been determined to be liquid by the Board of Directors of the Fund or by the Sub-Adviser under Board-approved guidelines. Those guidelines take into account the trading activity for such securities and the availability of reliable pricing information, among other factors. If there is a lack of trading interest in a particular Rule 144A security, the Fund's holding of that security may be deemed to be illiquid. Loans of Portfolio Securities. The Fund may lend its portfolio securities subject to the restrictions stated in the Prospectus and herein. 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. Short Sales Against-the-Box. In this type of short sale, while the short position is open, the Fund must own an equal amount of the securities sold short, or by virtue of ownership of other securities have the right, without payment of further consideration, to obtain an equal amount of the securities sold short. Short sales against-the-box may be made to defer, for Federal income tax purposes, recognition of gain or loss on the sale of securities "in the box" until the short position is closed out. They may also be used to protect a gain on the security "in- the-box" when the Fund does not want to sell it and recognize a capital gain. Hedging With Options and Futures Contracts. The Fund may employ one or more types of Hedging Instruments for the purposes described in the Prospectus. When hedging to attempt to protect against declines in the market value of the Fund's portfolio, or to permit the Fund to retain unrealized gains in the value of portfolio securities which have appreciated, or to facilitate selling securities for investment reasons, the Fund may: (i) sell Stock Index Futures, (ii) buy puts, or (iii) write covered calls (as described in the Prospectus). When hedging to establish a position in the equity securities markets as a temporary substitute for the purchase of individual equity securities the Fund may: (i) buy Stock Index Futures, or (ii) buy calls on Stock Index Futures. Normally, the Fund would then purchase the equity securities and terminate the hedging portion. The Fund's strategy of hedging with Futures and options on Futures will be incidental to the Fund's investment activities in the underlying cash market. In the future, the Fund may employ hedging instruments and strategies that are not presently contemplated but which may be subsequently developed, to the extent such investment methods are consistent with the Fund's investment objective, and are legally permissible and disclosed in the Prospectus. Additional information about the hedging instruments the Fund may use is provided below. Writing Call Options. As described in the Prospectus, the Fund may write covered calls. When the Fund writes a call on an investment, it receives a premium and agrees to sell the callable investment to a purchaser of a corresponding call during the call period (usually not more than 9 months) at a fixed exercise price (which may differ from the market price of the underlying investment) regardless of market price changes during the call period. To terminate its obligation on a call it has written, the Fund may purchase a corresponding call in a "closing purchase transaction." A profit or loss will be realized, depending upon whether the net of the amount of option transaction costs and the premium received on the call the Fund has written is more or less than the price of the call the Fund subsequently purchased. A profit may also be realized if the call lapses unexercised because the Fund retains the underlying investment and the premium received. Those profits are considered short-term capital gains for Federal income tax purposes, as are premiums on lapsed calls, and when distributed by the Fund are taxable as ordinary income. If the Fund could not effect a closing purchase transaction due to the lack of a market, it would have to hold the callable investment until the call lapsed or was exercised. The Fund may also write calls on Futures without owning a futures contract or deliverable securities, provided that at the time the call is written, the Fund covers the call by segregating in escrow an equivalent dollar value of deliverable securities or liquid assets. The Fund will segregate additional liquid assets if the value of the escrowed assets drops below 100% of the current value of the Future. In no circumstances would an exercise notice as to a Future put the Fund in a short futures position. Writing Put Options. A put option on securities gives the purchaser the right to sell, and the writer the obligation to buy, the underlying investment at the exercise price during the option period. Writing a put covered by segregated liquid assets equal to the exercise price of the put has the same economic effect to the Fund as writing a covered call. The premium the Fund receives from writing a put option represents a profit, as long as the price of the underlying investment remains above the exercise price. However, the Fund has also assumed the obligation during the option period to buy the underlying investment from the buyer of the put at the exercise price, even though the value of the investment may fall below the exercise price. If the put expires unexercised, the Fund (as the writer of the put) realizes a gain in the amount of the premium less transaction costs. If the put is exercised, the Fund must fulfill its obligation to purchase the underlying investment at the exercise price, which will usually exceed the market value of the investment at that time. In that case, the Fund may incur a loss, equal to the sum of the sale price of the underlying investment and the premium received minus the sum of the exercise price and any transaction costs incurred. When writing put options on securities, 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 stock indices, has the right to buy the underlying investment from a seller of a corresponding call on the same investment during the call period at a fixed exercise price. In purchasing a call, the Fund benefits only if the call is sold at a profit or if, during the call period, the market price of the underlying investment is above the sum of the exercise price, transaction costs, and the premium paid, and the call is exercised. If the call is not exercised or sold (whether or not at a profit), it will become worthless at its expiration date and the Fund will lose its premium payment and the right to purchase the underlying investment. When the Fund purchases a call on a stock index, it pays a premium, but settlement is in cash rather than by delivery of the underlying investment to the Fund. When the Fund purchases a put, it pays a premium and, except as to puts on stock indices, has the right to sell the underlying investment to a seller of a corresponding put on the same investment during the put period at a fixed exercise price. Buying a put on an investment the Fund owns (a "protective put") enables the Fund to attempt to protect itself during the put period against a decline in the value of the underlying investment below the exercise price by selling the underlying investment at the exercise price to a seller of a corresponding put. If the market price of the underlying investment is equal to or above the exercise price and as a result the put is not exercised or resold, the put will become worthless at its expiration and the Fund will lose the premium payment and the right to sell the underlying investment. However, the put may be sold prior to expiration (whether or not at a profit). Buying a put on an investment it does not own, either a put on an index or a put on a Stock Index Future not held by the Fund, permits the Fund either to 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 its expiration date. In the event of a decline in the stock market, 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. When the Fund purchases a put on an index, or on a Future not held by it, the put protects the Fund to the extent that the index or Future moves in a similar pattern to the securities held. In the case of a put on an index or Future, settlement is in cash rather than by delivery by the Fund of the underlying investment. Puts and calls on broadly-based stock indices or Stock Index Futures are similar to puts and calls on securities or futures contracts except that all settlements are in cash and gain or loss depends on changes in the index in question (and thus on price movements in the stock market generally) rather than on price movements of individual securities or futures contracts. When the Fund buys a call on a stock index or Stock Index Future, it pays a premium. If the Fund exercises the call during the call period, a seller of a corresponding call on the same investment will pay the Fund an amount of cash to settle the call if the closing level of the stock index or Future upon which the call is based is greater than the exercise price of the call. That cash payment is equal to the difference between the closing price of the call and the exercise price of the call times a specified multiple (the "multiplier") which determines the total dollar value for each point of difference. When the Fund buys a put on a stock index or Stock Index Future, it pays a premium and has the right during the put period to require a seller of a corresponding put, upon the Fund's exercise of its put, to deliver cash to the Fund to settle the put if the closing level of the stock index or Stock Index Future upon which the put is based is less than the exercise price of the put. That cash payment is determined by the multiplier, in the same manner as described above as to calls. When the Fund purchases a put on a stock index, or on a Stock Index Future not owned by it, the put protects the Fund to the extent that the index moves in a similar pattern to the securities, the Fund holds. The Fund can either resell the put or, in the case of a put on a Stock Index Future, buy the underlying investment and sell it at the exercise price. The resale price of the put will vary inversely with the price of the underlying investment. If the market price of the underlying investment is above the exercise price, and as a result the put is not exercised, the put will become worthless on the expiration date. In the event of a decline in price of the underlying investment, the Fund could exercise or sell the put at a profit to attempt to offset some or all of its loss on its portfolio securities. The Fund's option activities may affect its portfolio turnover rate and brokerage commissions. The exercise of calls written by the Fund may cause the Fund to sell related portfolio securities, thus increasing its turnover rate. The exercise by the Fund of puts on securities will cause the sale of underlying investments, increasing portfolio turnover. Although the decision whether to exercise a put it holds is within the Fund's control, holding a put might cause the Fund to sell the related investments for reasons that would not exist in the absence of the put. The Fund will pay a brokerage commission each time it buys or sells a call, put or an underlying investment in connection with the exercise of a put or call. Those commissions may be higher than the commissions for direct purchases or sales of the underlying investments. Premiums paid for options are small in relation to the market value of the underlying investments and, consequently, put and call options offer large amounts of leverage. The leverage offered by trading in options could result in the Fund's net asset value being more sensitive to changes in the value of the underlying investments. Stock Index Futures. As described in the Prospectus, the Fund may invest in Stock Index Futures only if they relate to broadly-based stock indices. A stock index is considered to be broadly-based if it includes stocks that are not limited to issuers in any particular industry or group of industries. A stock index assigns relative values to the common stocks included in the index and fluctuates with the changes in the market value of those stocks. Stock indices cannot be purchased or sold directly. Stock index futures are contracts based on the future value of the basket of securities that comprise the underlying stock index. The contracts obligate the seller to deliver, and the purchaser to take, cash to settle the futures transaction or to enter into an offsetting contract. No physical delivery of the securities underlying the index is made on settling the futures obligation. No monetary amount is paid or received by the Fund on the purchase or sale of a Stock Index Future. Upon entering into a Futures transaction, the Fund will be required to deposit an initial margin payment, in cash or U.S. Treasury bills, with the futures commission merchant (the "futures broker"). Initial margin payments will be deposited with the Fund's Custodian in an account registered in the futures broker's name; however, the futures broker can gain access to that account only under certain specified conditions. As the Future is marked to market (that is, its value on the Fund's books is changed) to reflect changes in its market value, subsequent margin payments, called variation margin, will be paid to or by the futures broker on a daily basis. At any time prior to the expiration of the Future, the Fund may elect to close out its position by taking an opposite position, at which time a final determination of variation margin is made and additional cash is required to be paid by or released to the Fund. Any gain or loss is then realized by the Fund on the Future for tax purposes. Although Stock Index Futures by their terms call for settlement by the delivery of cash, in most cases the settlement obligation is fulfilled without such delivery by entering into an offsetting transaction. All futures transactions are effected through a clearing house associated with the exchange on which the contracts are traded. Regulatory Aspects of Hedging Instruments. The Fund is required to operate within certain guidelines and restrictions with respect to its use of futures and options thereon as established by the Commodities Futures Trading Commission ("CFTC"). In particular, the Fund is excluded from registration as a "commodity pool operator" if it complies with the requirements of Rule 4.5 (the "Rule") adopted by the CFTC. Under this Rule, the Fund is not limited regarding the percentage of its assets committed to futures margins and related options premiums subject to a hedge position. However, under the Rule the Fund must limit its aggregate initial futures margins and related options premiums to 5% or less of the Fund's total assets for hedging strategies that are considered bona fide hedging strategies under the Rule. Under the Rule the Fund also must use short future 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 of calls written by the Fund may cause the Fund to sell related portfolio securities, thus increasing its turnover rate in a manner beyond the Fund's control. 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 it reserves the right not to qualify). That qualification enables the Fund to "pass through" its income and realized capital gains to shareholders without the Fund having to pay tax on them. This avoids a "double tax" on that income and capital gains, since shareholders normally will be taxed on the dividends and capital gains they receive from the Fund (unless the Fund's shares are held in a retirement account or the shareholder is otherwise exempt from tax). One of the tests for the Fund's qualification as a regulated investment company is that less than 30% of its gross income must be derived from gains realized on the sale of securities held for less than three months. To comply with this 30% cap, the Fund will limit the extent to which it engages in the following activities, but will not be precluded from them: (i) selling investments, including Stock Index Futures, held for less than three months, whether or not they were purchased on the exercise of a call held by the Fund; (ii) purchasing options which expire in less than three months; (iii) effecting closing transactions with respect to calls or puts written or purchased less than three months previously; (iv) exercising puts or calls held by the Fund for less than three months; or (v) writing calls on investments held less than three months. Certain foreign currency exchange contracts ("Forward Contracts") in which the Fund may invest are treated as "section 1256 contracts." Gains or losses relating to section 1256 contracts generally are characterized under the Internal Revenue Code as 60% long-term and 40% short-term capital gains or losses. However, foreign currency gains or losses arising from certain section 1256 contracts (including Forward Contracts) generally are treated as ordinary income or loss. In addition, section 1256 contracts held by the Fund at the end of each taxable year are "marked-to-market" with the result that unrealized gains or losses are treated as though they were realized. These contracts also may be marked-to-market for purposes of the excise tax applicable to investment company distributions and for other purposes under rules prescribed pursuant to the Internal Revenue Code. An election can be made by the Fund to exempt these transactions from this marked- to-market treatment. Certain Forward Contracts entered into by the Fund may result in "straddles" for Federal income tax purposes. The straddle rules may affect the character and timing of gains (or losses) recognized by the Fund on straddle positions. Generally, a loss sustained on the disposition of a position making up a straddle is allowed only to the extent such loss exceeds any unrecognized gain in the offsetting positions making up the straddle. Disallowed loss is generally allowed at the point where there is no unrecognized gain in the offsetting positions making up the straddle, or the offsetting position is disposed of. Under the Internal Revenue Code, gains or losses attributable to fluctuations in exchange rates that occur between the time the Fund accrues interest or other receivables or accrues expenses or other liabilities denominated in a foreign currency and the time the Fund actually collects such receivables or pays such liabilities generally are treated as ordinary income or ordinary loss. Similarly, on disposition of debt securities denominated in a foreign currency and on disposition foreign currency forward contracts, gains or losses attributable to fluctuations in the value of a foreign currency between the date of acquisition of the security or contract and the date of the disposition also are treated as an ordinary gain or loss. Currency gains and losses are offset against market gains and losses on each trade before determining a net "section 988" gain or loss under the Internal Revenue Code, which may ultimately increase or decrease the amount of the Fund's investment company income available for distribution to its shareholders. Additional Risk Factors in Hedging. An option position may be closed out only on a market that 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. An option position may be closed out only on a market that 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. 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: Purchase shares of other investment companies in an amount exceeding the limitations set forth in Section 12(d) of the 1940 Act and the rules thereunder, except as part of a plan of reorganization, merger, consolidation or an offer of exchange; Purchase securities on margin, except such short-term credits as may be necessary for the clearance of transactions; Invest for the purpose of exercising control over management of any company; Purchase or retain securities of any company if, to the knowledge of the Fund, any officer or director of the Fund, the investment adviser or the Sub-Adviser owns more than 1/2 of 1% of the outstanding securities of such company and such officers or directors who own 1/2 of 1% in the aggregate own more than 5% of the outstanding securities; Make loans of money or property to any person, except (i) through loans of portfolio securities in an amount not to exceed 33-1/3% of the value of the Fund's total assets, (ii) the purchase of fixed income securities consistent with the Fund's investment objective and policies and (iii) by entering into repurchase agreements (for the purpose of this restriction, collateral arrangements with respect to stock options, options on securities and stock indices, stock index futures and securities and options on such futures are not deemed to be loans of assets); Underwrite the securities of other issuers, except to the extent that in connection with the disposition of portfolio securities or the sale of its own shares the Fund may be deemed to be an underwriter; Purchase real estate or interests therein, although the Fund may purchase or sell securities of companies which deal in real estate or interests therein; Purchase or sell commodities or commodity futures contracts except stock index futures and options on such futures under policies adopted by the Fund's board of directors and disclosed to shareholders; Mortgage, hypothecate or pledge any of its assets, except to the extent that the Fund may pledge assets to secure permitted borrowings and in connection with collateral arrangements with respect to options or futures; and Issue senior securities, as defined in the 1940 Act, except that the Fund may enter into repurchase agreements, lend its portfolio securities and borrow money from banks for temporary or emergency purposes. As a non-fundamental policy, the Fund may not (i) purchase oil, gas or other mineral leases, rights or royalty contracts or exploration or development programs except that the Fund may invest in the securities of companies which invest in or sponsor such programs and (ii) make short sales of securities except short sales "against-the-box" but no more than 15% of the Fund's net assets (taken at current value) may be held as collateral for such short sales at any time. For purposes of the Fund's policy not to invest more than 25% of its assets in any one industry as described in the Prospectus, the Fund has adopted, as a matter of non-fundamental policy, the corporate industry classifications set forth in Appendix A to this Statement of Additional Information. How the Fund is Managed Organization and History. The Fund is organized as a Maryland corporation which currently operates as a diversified open-end management investment company. The Fund originally commenced operations as a closed-end investment company. Pursuant to shareholder approval received on December 20, 1996, the Fund converted to an open-end investment company effective as of the date of this Statement of Additional Information. 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 Trustees 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. All of the Directors are also directors or trustees of the Oppenheimer Quest For Value Funds (consisting of the following series: Oppenheimer Quest Growth & Income Value Fund, Oppenheimer Quest Officers Value Fund, Oppenheimer Quest Opportunity Value Fund, and Oppenheimer Quest Small Cap Value Fund), Oppenheimer Quest Global Value Fund, Inc. and Oppenheimer Quest Value Fund, Inc. (the "Oppenheimer Quest Funds"), and Rochester Fund Municipals, Rochester Portfolio Series - Limited Term New York Municipal Fund and Bond Fund Series - Oppenheimer Bond Fund for Growth (the "Oppenheimer Rochester Funds"). As of February 14, 1997, the Directors and officers of the Fund as a group owned less than 1% of the Fund's issued and outstanding shares. The foregoing does not include shares held of record by an employee benefit plan for employees of the Manager (for which one of the officers listed below, Mr. Donohue, is a trustee), other than the shares beneficially owned under that plan by officers of the Fund listed below. Bridget A. Macaskill, Chairman of the Board of Directors and President*; Age: 48. President, Chief Executive Officer and a Director of the Manager and HarbourView Asset Management Corporation ("HarbourView"), a subsidiary of the Manager; President and a Director of Oppenheimer Acquisition Corp. ("OAC"), the Manager's parent holding company, and Oppenheimer Partnership Holdings, Inc.; Chairman and a Director of Shareholder Services, Inc. ("SSI"), a transfer agent subsidiary of the Manager and Shareholder Financial Services, Inc. ("SFSI"); and a director of Oppenheimer Real Asset Management, Inc. _________________________ * A Director who is an "interested person" as defined in the 1940 Act. Paul Y. Clinton, Director; Age: 66 39 Blossom Avenue, Osterville, Massachusetts 02655 Principal of Clinton Management Associates, a financial and venture capital consulting firm; Trustee of Capital Cash Management Trust, a money-market fund and Narraganssett Tax-Free Fund, a tax-exempt bond fund; Director of OCC Cash Reserves, Inc. and Trustee of OCC Accumulation Trust, all of which are open-end investment companies. Formerly: Director, External Affairs, Kravco Corporation, a national real estate owner and property management corporation; President of Essex Management Corporation, a management consulting company; a general partner of Capital Growth Fund, a venture capital partnership; a general partner of Essex Limited Partnership, an investment partnership; President of Geneve Corp., a venture capital fund; Chairman of Woodland Capital Corp., a small business investment company; and Vice President of W.R. Grace & Co. Thomas W, Courtney, Director; Age: 63 P.O. Box 580, Sewickley, Pennsylvania 15143 Principal of Courtney Associates, Inc. (venture capital firm); former General Partner of Trivest Venture Fund (private venture capital fund); former President of Investment Counseling Federated Investors, Inc.; Trustee of Cash Assets Trust, a money market fund; Director of OCC Cash Reserves, Inc., and Trustee of OCC Accumulation Trust, all of which are open-end investment companies; former President of Boston Company Institutional Investors; Trustee of Hawaiian Tax-Free Trust and Tax Free Trust of Arizona, tax- exempt bond funds; Director of several privately owned corpora- tions; 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 Executive Vice President and Director of Equity Investments of the Manager; a Vice President and director of OAC an officer and Portfolio Manager of other Oppenheimer funds. Jeffrey C. Whittington, Portfolio Manager; Age 38 One World Financial Center, 200 Liberty Street, New York, New York 10281 Senior Vice President of Oppenheimer Capital; formerly a portfolio manager at Neuberger & Berman and prior thereto, a portfolio manager at Oppenheimer & Co., Inc. Andrew J. Donohue, Secretary; Age: 46 Executive Vice President, General Counsel and a director of the Manager, OppenheimerFunds Distributor, Inc. (the "Distributor"), HarbourView, SSI, SFSI, Oppenheimer Partnership Holdings, Inc. and MultiSource Services, Inc., (a broker-dealer); President and a director of Centennial; President and a director of Oppenheimer Real Asset Management, Inc.; General Counsel of OAC; an officer of other Oppenheimer funds. George C. Bowen, Treasurer; Age: 60 6803 South Tucson Way, Englewood, Colorado, 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 Asset Management Corporation, an investment advisory subsidiary of the Manager; President, Treasurer and a director of Centennial Capital Corporation; Vice President, Treasurer and Secretary of SFSI; Senior Vice President, Treasurer and Secretary of SSI, Vice President and Treasurer of Oppenheimer Real Asset Management, Inc.; Chief Executive Officer, Treasurer and a director of MultiSource Services, Inc.; an officer of other Oppenheimer funds. Robert G. Zack, Assistant Secretary; Age: 48 Senior Vice President and Associate General Counsel of the Manager; Assistant Secretary of SSI and SFSI; an officer of other Oppenheimer funds. Robert J. 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; previously a Fund Controller for the Manager . 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 December 31, 1996 and (ii) other investment companies (or series thereof) managed by the Manager and the Sub-Adviser during the calendar year ended December 31, 1996. The Sub-Adviser served as the investment adviser to the Fund from its inception to February 28, 1997; effective as of February 28, 1997, the Manager acquired the investment advisory and other contracts and business relationships and certain assets and liabilities of the Sub-Adviser, OCC Distributors and Oppenheimer Capital relating to the Fund.
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(1) Expenses Retirement Complex(2) Paul Y. Clinton None None None $90,225 Thomas W. CourtneyNone None None $87,525 Lacy B. Herrmann None None None $90,225 George Loft $5,475 None None $95,700 (1) Messrs. Clinton, Courtney and Herrmann were not directors of the Fund during the fiscal year ended December 31, 1996. (2) For the purpose of the chart above, "Fund Complex" includes the Fund, the other Oppenheimer Quest Funds, the Oppenheimer Rochester Funds and two funds advised by the Sub-Adviser. For these purposes each series constitutes a separate fund. Messrs. Clinton, Courtney, Herrmann and Loft received $38,550, $35,850, $38,550 and $44,025, respectively, for their services as director or trustee of the Sub-Adviser Funds.
Major Shareholders. As of February 14, 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 shares except Cede & Co . as nominee for Depository Trust Co., which held of record 17,355,453 (96.4%) of such shares for the benefit of clients. No Class B or Class C shares were issued and outstanding as of such date. The Manager and its Affiliates. The Manager is wholly-owned by Oppenheimer Acquisition Corp. ("OAC"), a holding company controlled by Massachusetts Mutual Life Insurance Company. OAC is also owned in part by certain of the Manager s directors and officers, some of whom also serve as officers of the Fund and one of whom (Ms. Macaskill) also serves as an officer and a 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 February 28, 1997. The Sub-Adviser previously served as the Fund's investment adviser from the Fund's inception (February 13, 1987) through February 28, 1997. The Investment Advisory 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 1940 Act) and who have no direct or indirect financial interest in such agreement, on September 17, 1996 and by the shareholders of the Fund at a meeting held for that purpose on December 20, 1996. Under the Investment Advisory Agreement, the Manager acts as the investment adviser for the Fund and supervises the investment program of the Fund. The Investment Advisory Agreement provides that the Manager will provide administrative services for the Fund, including completion and maintenance of records, preparation and filing of reports required by the Securities and Exchange Commission, reports to shareholders, and composition of proxy statements and registration statements required by Federal laws. 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 administrative services to be provided by the Manager under the Investment Advisory Agreement will be at its own expense. 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. The Investment Advisory Agreement provides that for a period of two years from the date thereof, the Manager will waive the following portion of the advisory fee: 0.15% of the first $200 million of average daily net assets, 0.40% of the next $200 million, 0.30% of the next $400 million and 0.25% of average daily net assets over $800 million. Pursuant to the foregoing, the Manager's fee at the end of any month will be reduced or eliminated such that there will not be any accrued but unpaid liability under this fee waiver. Any waiver of fees would lower the Fund's overall expense ratio and increase its total return during any period in which they are in effect. 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 Fund to use the name Oppenheimer or Quest For Value in the name of the Fund for the duration of the Agreement. Pursuant to the Investment Advisory Agreement, the Manager may act as investment adviser for any other person, firm or corporation and may use the name "Oppenheimer" and Quest For Value in connection with its other investment companies for which it may act as an investment adviser or general distributor. If the Manager shall no longer act as investment adviser to a Fund, the right of the Fund to use "Oppenheimer" or Quest For Value as part of its name may be withdrawn. The 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 February 28, 1997, with respect to the Fund. Fees Paid Under the Prior Investment Advisory Agreement and Administration Agreement. The Sub-Adviser served as investment adviser to the Fund from its inception until February 28, 1997. Under the prior Investment Advisory Agreement, the total advisory fees accrued or paid by the Fund were $4,022,621, $4,418,791, and $4,916,973 for the fiscal years ended December 31, 1994, 1995 and 1996, respectively. For the fiscal years ended December 31, 1994, 1995 and 1996, the Fund paid or accrued administration fees to Oppenheimer Capital in the amounts of $704,524, $783,758 and $883,395, respectively. The Administration Agreement between the Fund and Oppenheimer Capital was terminated as of February 28, 1997; the services previously provided thereunder will be provided by the Manager under the Investment Advisory Agreement. 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 to use its reasonable best efforts to retain the services of the Portfolio Manager and agrees not to change the Portfolio Manager of the Fund without the written approval of the Manager. In addition the Portfolio Manager will 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 1940 Act) and who have no direct or indirect financial interest in such agreement, on September 17, 1996 and by the shareholders of the Fund at a meeting held for that purpose on December 20, 1996. Under the Subadvisory Agreement, the Manager will pay the Sub- Adviser an annual fee payable monthly, based on the average daily net assets of the Fund, equal to 40% of the investment advisory fee collected by the Manager from the Fund based on the total net assets of the Fund as of the effective date of the Subadvisory Agreement and remaining 120 days later (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, in each case calculated after any waivers, voluntary or otherwise. The Subadvisory Agreement provides that in the absence of willful misfeasance, bad faith, negligence or reckless disregard of its duties or obligations, the Sub-Adviser shall not be liable to the Manager for any act or omission in the course of or connected with rendering services under the Subadvisory Agreement or for any losses that may be sustained in the purchase, holding or sale of any security. The Distributor. Under a General Distributor s Agreement with the Fund dated as of February 28, 1997, 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. 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, a division of the Manager, acts as the Fund's Transfer Agent pursuant to a Transfer Agency and Service Agency Agreement dated February 28, 1997. 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. 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. In addition, the Subadvisory Agreement permits the Sub-Adviser to enter into "soft dollar" arrangements through the agency of third parties on behalf of the Manager. Soft dollar arrangements for services may be entered into in order to facilitate an improvement in performance in respect of the Sub-Adviser's service to the Manager with respect to the Fund. Pursuant to these arrangements, the Sub-Adviser will undertake to place brokerage business with broker-dealers who pay third parties that provide these services. Any such soft dollar arrangements will be made in accordance with policies adopted by the Manager and the Board of the Fund and in compliance with Section 28(e) of the Securities Exchange Act of 1934, as amended. Description of Brokerage Practices. Portfolio decisions are based upon recommendations of the portfolio manager and the judgment of the portfolio managers. The Fund will pay brokerage commissions on transactions in listed options and equity securities. Prices of portfolio securities purchased from underwriters of new issues include a commission or concession paid by the issuer to the underwriter, and prices of debt securities purchased from dealers include a spread between the bid and asked prices. Transactions may be directed to dealers during the course of an underwriting in return for their brokerage and research services, which are intangible and on which no dollar value can be placed. There is no formula for such allocation. The research information may or may not be useful to one or more of the Fund and/or other accounts of the Manager or the Sub-Adviser; information received in connection with directed orders of other accounts managed by the Manager or the Sub-Adviser or its affiliates may or may not be useful to one or more of the Funds. Such information may be in written or oral form and includes information on particular companies and industries as well as market, economic or institutional activity areas. It serves to broaden the scope and supplement the research activities of the Manager or the Sub-Adviser, to make available additional views for consideration and comparison, and to enable the Manager or the Sub- Adviser to obtain market information for the valuation of securities held in the Fund's assets. Sales of shares of the Fund, subject to applicable rules covering the Distributor's activities in this area, will also be considered as a factor in the direction of portfolio transactions to dealers, but only in conformity with the price, execution and other considerations and practices discussed above. The Fund will not purchase any securities from or sell any securities to an affiliated broker-dealer including Oppenheimer & Co., Inc. ("Opco"), an affiliate of the Sub-Adviser, acting as principal for its own account. The Sub-Adviser currently serves as investment manager to a number of clients, including other investment companies, and may in the future act as investment manager or advisor to others. It is the practice of the Sub-Adviser to cause purchase or sale transactions to be allocated among the Fund and others whose assets it manages in such manner as it deems equitable. In making such allocations among the Fund and other client accounts, the main factors considered are the respective investment objectives, the relative size of portfolio holdings of the same or comparable securities, the availability of cash for investment, the size of investment commitments generally held and the opinions of the persons responsible for managing the portfolios of each Fund and other client accounts. When orders to purchase or sell the same security on identical terms are placed by more than one of the funds and/or other advisory accounts managed by the Sub-Adviser or its affiliates, the transactions are generally executed as received, although a fund or advisory account that does not direct trades to a specific broker ("free trades") usually will have its order executed first. Purchases are combined where possible for the purpose of negotiating brokerage commissions, which in some cases might have a detrimental effect on the price or volume of the security in a particular transaction as far as the Fund is concerned. Orders placed by accounts that direct trades to a specific broker will generally be executed after the free trades. All orders placed on behalf of the Fund are considered free trades. However, having an order placed first in the market does not necessarily guarantee the most favorable price. The following table presents information as to the allocation of brokerage commissions paid by the Fund for the fiscal years ended December 31, 1994, 1995 and 1996:
Total Amount of Total Transactions Where For the Brokerage Brokerage Commissions Brokerage Fiscal Year Commissions Paid to Opco Paid to Opco Ended December 31 Paid Dollar Amount % Dollar Amount % 1994 $ 667,465 $250,361 37.5% $183,726,135 40.6% 1995 $1,051,545 $267,394 25.4% $251,309,982 31.3% 1996 $1,040,957 $319,406 30.7% $245,963,037 31.0%
During the Fund's fiscal year ended December 31, 1996, $80,243 paid by the Fund to brokers as commissions in return for research services; the aggregate dollar amount of those transactions was $67,851,055. 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 SEC, 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. Class B and Class C shares were not publicly offered during the Fund's fiscal year ended December 31, 1996; accordingly, no performance information for such classes of shares is set forth below. Prior to the date of this Statement of Additional Information, the Fund operated as a closed-end investment company with a dual purpose structure and with dual investment objectives of (a) long- term capital appreciation and preservation of capital and (b) current income and long-term growth of income, and had common stock (the Capital Shares ) and preferred stock (the Income Shares ) outstanding. The Income Shares were redeemed by the Fund on January 31, 1997 and the Fund s dual purpose structure terminated. With respect to the Capital Shares, the Fund s Board of Directors determined that it was in the best interests of the holders of the Capital Shares to convert the Fund to an open-end investment company and approved the submission of this proposal to such shareholders. Pursuant to shareholder approval received on December 20, 1996, effective as of the date of this Prospectus, the Fund was converted to an open-end investment company with a single investment objective of capital appreciation. The outstanding Capital Shares of the Fund became Class A shares of common stock and will now bear their allocable share of the Fund s expenses. The historical performance of the Class A shares of the Fund (formerly, the Capital Shares) has been restated to reflect the fees and expenses of such Class A shares in effect as of the date of this Statement of Additional Information without giving effect to any fee waivers. 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 ) Cumulative Total Returns. The cumulative "total return" calculation measures the change in value of a hypothetical investment of $1,000 over an entire period of years. Its calculation uses some of the same factors as average annual total return, but it does not average the rate of return on an annual basis. Cumulative total return is determined as follows: ERV - P ------- = Total Return P In calculating total returns for Class A shares, the current maximum sales charge of 5.75% (as a percentage of the offering price) is deducted from the initial investment ("P") (unless the return is shown at net asset value, as described below). Prior to the date hereof, the Fund operated as a closed-end investment company and no initial sales charge was imposed on Fund shares. 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. As discussed above, total returns for Class A shares have been adjusted to reflect the fees and expenses of such Class of shares in effect as of the date thereof without giving effect to any fee waivers. The "average annual total returns" on an investment in Class A shares of the Fund (using the method described above) for the one year and five year periods ended December 31, 1996 and for the period from February 13, 1987 (commencement of operations) to December 31, 1996 (all of which preceded the open-end conversion) were 13.57%, 14.80% and 16.28%, respectively. The "cumulative total return" on Class A shares for the period from February 13, 1987 (commencement of operations) to December 31, 1996 was 344.04%. 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 cumulative total return at net asset value on the Fund's Class A shares for the period from February 13, 1987 (commencement of operations) to December 31, 1996 was 371.14%. The average annual total return at net asset value for Class A shares for the one and five year periods ended December 31, 1996 and for the period from February 13, 1987 through December 31, 1996 were 20.50%, 16.17% and 16.98%, respectively. Other Performance Comparisons. From time to time the Fund may publish the ranking of its Class A, Class B or Class C shares by Lipper Analytical Services, Inc. ("Lipper"), a widely-recognized independent mutual fund monitoring service. Lipper monitors the performance of regulated investment companies, including the Fund, and ranks their performance for various periods based on categories relating to investment objectives. The performance of the Fund is ranked against (i) all other funds and (ii) all other capital appreciation funds. The Lipper performance rankings are based on total returns that include the reinvestment of capital gain distributions and income dividends but do not take sales charges or taxes into consideration. From time to time the Fund may publish the star ranking of the performance of its Class A, Class B or Class C shares by Morningstar Inc., an independent mutual fund monitoring service. Morningstar ranks mutual funds in broad investment categories: domestic stock funds, international stock funds, taxable bond funds and municipal bond funds, based on risk-adjusted total investment returns. The Fund is ranked among capital appreciation 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. From time to time, the Fund's performance also may be compared to other mutual funds tracked by financial or business publications and periodicals. For example, the Fund may quote Morningstar, Inc. in its advertising materials. Morningstar, Inc. is a mutual fund rating service that rates mutual funds on the basis of risk- adjusted performance. The total return on an investment in the Fund's Class A, Class B and Class C shares may be compared with performance for the same period of the S&P 500 Index as described in the Prospectus. The performance of the index includes a factor for the reinvestment of income dividends, but does not reflect reinvestment of capital gains, expenses or taxes. The performance of the Fund's Class A, Class B, or Class C shares may also be compared in publications to (i) the performance of various market indices or to other investments for which reliable performance data is available, and (ii) to averages, performance rankings or other benchmarks prepared by recognized mutual fund statistical services. 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 shares 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 or insured 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 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 September 17, 1996 called for the purpose, among others, of voting on that Plan, and (ii) the holders of a "majority" (as defined in the 1940 Act) of the shares of each class. For the Class A Plan Fund, shareholder approval was received on December 20, 1996; for the Class B and Class C Plans, the vote was cast by the Manager as the sole initial holder of Class B and Class C shares of the Fund. Prior to the date of this Statement of Additional Information the Fund operated as a closed- end investment company and did not have Distribution and Service Plans and Agreements. 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 A, 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 the shares of that class sold. An exchange of shares does not entitle the Recipient to an advance service fee payment. In the event Class A, Class B or Class C shares are redeemed during the first year such shares are outstanding, the Recipient will be obligated to repay a pro rata portion of such advance payment to the Distributor. Although the Plans permit the Distributor to retain both the asset-based sales charge and the service fee, or to pay Recipients the service fee on a quarterly basis, without payment in advance, the Distributor presently intends to pay the service fee to Recipients in the manner described above. A minimum holding period may be established from time to time under the Plans by the Board. Initially, the Board has set no minimum holding period. All payments under the Plans are subject to the limitations imposed by the Conduct Rules of the National Association of Securities Dealers, Inc. on payments of asset-based sales charges and service fees. The Plans provide for the Distributor to be compensated at a flat rate, whether the Distributor's expenses are more or less than the amounts paid by the Fund during that period. The asset-based sales charges paid to the Distributor by the Fund under the Plans are intended to allow the Distributor to recoup the cost of sales commissions paid to authorized brokers and dealers at the time of sale, plus financing costs, as described in the Prospectus. Such payments may also be used to pay for the following expenses in connection with the distribution of shares: (i) financing the advance of the service fee payment to Recipients under the 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). ABOUT YOUR ACCOUNT How To Buy Shares Alternative Sales Arrangements - Class A, Class B and Class C Shares. The Fund is authorized to issue three different classes of shares. The availability of three classes of shares permits the individual investor to choose the method of purchasing shares that is more beneficial to the investor depending on the amount of the purchase, the length of time the investor expects to hold shares and other relevant circumstances. Investors should understand that the purpose and function of the deferred sales charge and asset- based sales charge with respect to Class B and Class C shares are the same as those of the initial sales charge with respect to Class A shares. Any salesperson or other person entitled to receive compensation for selling Fund shares may receive different compensation with respect to one class of shares than another. The Distributor will not generally accept any order for $500,000 or more of Class B shares or $1 million or more of Class C shares on behalf of a single investor (not including dealer "street name" or omnibus accounts) because generally it will be more advantageous for that investor to purchase Class A shares of the Fund instead. The three classes of shares each represent an interest in the same portfolio investments of the Fund. However, each class has different shareholder privileges and features. The net income attributable to Class B and Class C shares and the dividends payable on Class B and Class C shares will be reduced by incremental expenses borne solely by that class, respectively, including the asset-based sales charges to which Class B and Class C shares are subject. The conversion of Class B shares to Class A shares after six years is subject to the continuing availability of a private letter ruling from the Internal Revenue Service, or an opinion of counsel or tax adviser, to the effect that the conversion of Class B shares does not constitute a taxable event for the holder under Federal income tax law. If such a revenue ruling or opinion is no longer available, the automatic conversion feature may be suspended, in which event no further conversions of Class B shares would occur while such suspension remained in effect. Although Class B shares could then be exchanged for Class A shares on the basis of relative net asset value of the two classes, without the imposition of a sales charge or fee, such exchange could constitute a taxable event for the holder, and absent such exchange, Class B shares might continue to be subject to the asset-based sales charge for longer than six years. The methodology for calculating the net asset value, dividends and distributions of the Fund's Class A, Class B and Class C shares recognizes two types of expenses. General expenses that do not pertain specifically to any class are allocated pro rata to the shares of each class, based on the percentage of the net assets of such class to the Fund's total net assets, and then equally to each outstanding share within a given class. Such general expenses include (i) management fees, (ii) legal, bookkeeping and audit fees, (iii) printing and mailing costs of shareholder reports, Prospectuses, Statements of Additional Information and other materials for current shareholders, (iv) fees to Independent 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 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 on 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 generally are valued 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 a "matrix" comparison to the prices for comparable instruments on the basis of quality, yield, maturity and other special factors involved. The Manager may use pricing services approved by the Board of Directors to price any of the types of securities described above 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 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 securities 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, determines that the particular event is likely to effect a material change in the value of such security. 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. The values of securities denominated in foreign currency will be converted to U.S. dollars at the closing price in the London foreign exchange market that day as provided by a reliable bank, dealer or pricing service. In the case of U.S. government securities and corporate bonds, where last sale information is not generally available, such pricing procedures may include "matrix" comparisons to the prices for comparable instruments on the basis of quality, yield, maturity and other special factors involved. The Directors will monitor the accuracy of pricing services by comparing prices used for portfolio evaluation to actual sales prices of selected securities. Puts, calls and Futures are valued at the last sales price on the principal exchanges on which they are traded or on NASDAQ, as applicable, as determined by a pricing service approved by the Board of 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 asked 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 asked prices obtained by the Manager from two active market makers (which in certain cases may be the bid price if no asked price is available). When the Fund writes an option, an amount equal to the premium received is included in the Fund's Statement of Assets and Liabilities as an asset, and an equivalent credit is included in the liability section. Credit is adjusted ("marked-to-market") to reflect the current market value of the option. In determining the Fund's gain on investments, if a call or put written by the Fund is exercised, the proceeds are increased by the premium received. If a call or put written by the Fund expires, the Fund has a gain in the amount of the premium; if the Fund enters into a closing purchase transaction, it will have a gain or loss depending on whether the premium received was more or less than the cost of the closing transaction. If the Fund exercises a put it holds, the amount the Fund receives on its sale of the underlying investment is reduced by the amount of premium paid by the Fund. AccountLink. When shares are purchased through AccountLink, each purchase must be at least $25.00. Shares will be purchased on the regular business day the Distributor is instructed to initiate the Automated Clearing House ("ACH") transfer to buy the shares. Dividends will begin to accrue on shares purchased by the proceeds of ACH transfers on the business day the Fund receives Federal Funds for the purchase through the ACH system before the close of The New York Stock Exchange. The Exchange normally closes at 4:00 P.M., but may close earlier on certain days. If Federal Funds are received on a business day after the close of the Exchange, the shares will be purchased and dividends will begin to accrue on the next regular business day. The proceeds of ACH transfers are normally received by the Fund 3 days after the transfers are initiated. The Distributor and the Fund are not responsible for any delays in purchasing shares resulting from delays in ACH transmissions. Reduced Sales Charges. As discussed in the Prospectus, a reduced sales charge rate may be obtained for Class A shares under Rights of Accumulation and Letters of Intent because of the economies of sales efforts and reduction in expenses realized by the Distributor, dealers and brokers making such sales. No sales charge is imposed in certain other circumstances described in the Prospectus because the Distributor or dealer or broker incurs little or no selling expenses. The term "immediate family" refers to one's spouse, children, grandchildren, parents, grandparents, parents-in-law, sons- and daughters-in-law, aunt, uncle, niece, nephew, 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 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 International Growth Fund Oppenheimer Developing Markets 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 these funds. There is an initial sales charge on the purchase of Class A shares of each of the Oppenheimer funds except Money Market Funds (under certain circumstances described herein, redemption proceeds of Money Market Fund shares may be subject to a contingent deferred sales charge). Letters of Intent. A Letter of Intent ("Letter") is the investor's statement 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 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 automatically be 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 Fund's Board of Directors has the right to cause the involuntary redemption of the shares held in any Fund account if the aggregate net asset value of those shares is less than $500 or such lesser amount as the Board may fix. The Board of Directors will not cause the involuntary redemption of shares in an account if the aggregate net asset value of the shares has fallen below the stated minimum solely as a result of market fluctuations. Should the Board elect to exercise this right, it may also fix, in accordance with the 1940 Act, and the provisions of Maryland law, 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 a 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 or Class C contingent deferred sales charge will be followed in determining the order in which shares are transferred. Distributions From Retirement Plans. Requests for distributions from OppenheimerFunds-sponsored IRAs, 403(b)(7) custodial plans, 401(k) plans, or pension or profit-sharing plans should be addressed to "Trustee, OppenheimerFunds Retirement Plans," c/o the Transfer Agent at its address listed in "How To Sell Shares" in the Prospectus or on the back cover of the Statement of Additional Information. The request must: (i) state the reason for the distribution; (ii) state the owner's awareness of tax penalties if the distribution is premature; and (iii) conform to the requirements of the plan and the Fund's other redemption requirements. Participants, other than self-employed persons maintaining a plan account in their own name, in OppenheimerFunds- sponsored prototype pension or profit-sharing or 401(k) plans may not directly redeem or exchange shares held for their account under those plans. The employer or plan administrator must sign the request. Distributions from pension plans, 401(k) or profit sharing plans are subject to special requirements under the Internal Revenue Code and certain documents (available from the Transfer Agent) must be completed before the distribution may be made. Distributions from retirement plans are subject to withholding requirements under the Internal Revenue Code, and IRS Form W-4P (available from the Transfer Agent) must be submitted to the Transfer Agent with the distribution request, or the distribution may be delayed. Unless the shareholder has provided the Transfer Agent with a certified tax identification number, the Internal Revenue Code requires that tax be withheld from any distribution even if the shareholder elects not to have tax withheld. The Fund, the Manager, the Distributor, the Trustee and the Transfer Agent assume no responsibility to determine whether a distribution satisfies the conditions of applicable tax laws and will not be responsible for any tax penalties assessed in connection with a distribution. Special Arrangements for Repurchase of Shares from Dealers and Brokers. The Distributor is the Fund's agent to repurchase its shares from authorized dealers or brokers on behalf of their customers. The shareholder should contact the broker or dealer to arrange this type of redemption. The repurchase price per share will be the net asset value next computed after the Distributor receives the order placed by the dealer or broker, except that if the Distributor receives a repurchase order from the dealer or broker after the close of The New York Stock Exchange on a regular business day, it will be processed at that day's net asset value, if the order was received by the dealer or broker from its customer prior to the time the Exchange closes (normally, that is 4:00 P.M., but may be earlier on some days) and the order was transmitted to and received by the Distributor prior to its close of business that day (normally 5:00 P.M.). Ordinarily, for accounts redeemed by a broker-dealer under this procedure, payment will be made within three business days after the shares have been redeemed upon the Distributor's receipt of the required redemption documents in proper form, with the signature(s) of the registered owners guaranteed on the redemption document as described in the Prospectus. Automatic Withdrawal and Exchange Plans. Investors owning shares of the Fund valued at $5,000 or more can authorize the Transfer Agent to redeem shares (minimum $50) automatically on a monthly, quarterly, semi-annual or annual basis under an Automatic Withdrawal Plan. Shares will be redeemed three business days prior to the date requested by the shareholder for receipt of the payment. Automatic withdrawals of up to $1,500 per month may be requested by telephone if payments are to be made by check payable to all shareholders of record and sent to the address of record for the account (and if the address has not been changed within the prior 30 days). Required minimum distributions from OppenheimerFunds-sponsored retirement plans may not be arranged on this basis. Payments are normally made by check, but shareholders having AccountLink privileges (see "How To Buy Shares") may arrange to have Automatic Withdrawal Plan payments transferred to the bank account designated on the OppenheimerFunds New Account Application or signature-guaranteed instructions. Shares are normally redeemed pursuant to an Automatic Withdrawal Plan three 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 deducted 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 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. 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, Class B and Class C shares except Oppenheimer Money Market Fund, Inc., Centennial Money Market Trust, Centennial Tax-Exempt Trust, Centennial Money Market Trust, Centennial Government Trust, Centennial New York Tax Exempt Trust, Centennial California Tax- Exempt Trust, Centennial America Fund, L.P., and Daily Cash Accumulation Fund, Inc., which only offer Class A shares and Oppenheimer Main Street California 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. QUEST FOR VALUE DUAL PURPOSE FUND, INC. REPORT OF INDEPENDENT ACCOUNTANTS To the Shareholders and Board of Directors of Quest for Value Dual Purpose Fund, Inc. In our opinion, the accompanying statement of assets and liabilities, including the schedule of investments, and the related statements of operations, of changes in net assets and of changes in undistributed net investment income, realized and unrealized gains (losses) and the financial highlights present fairly, in all material respects, the financial position of Quest for Value Dual Purpose Fund, Inc. (the 'Fund') at December 31, 1996, the results of its operations for the year then ended, the changes in its net assets and the changes in its undistributed net investment income, realized and unrealized gains (losses) for each of the two years in the period then ended and the financial highlights for each of the five years in the period then ended, 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 December 31, 1996 by correspondence with the custodian and brokers, provide a reasonable basis for the opinion expressed above. As described in Notes 7 and 8, the Income Shares of the Fund will be redeemed on January 31, 1997 at $11.60 per share, plus accumulated and unpaid dividends and on February 28, 1997 the Capital Shares will be converted into Class A shares of an open-end management investment company. /s/ Price Waterhouse LLP PRICE WATERHOUSE LLP 1177 Avenue of the Americas New York, New York 10036 January 22, 1997, except as to the last paragraph of Note 8, which is as of February 20, 1997. QUEST FOR VALUE DUAL PURPOSE FUND, INC. SCHEDULE OF INVESTMENTS DECEMBER 31, 1996 PRINCIPAL AMOUNT VALUE - ------------- ------------ REPURCHASE AGREEMENT--1.5% $ 13,185,000 Lehman Brothers, 6.85%, 1/2/97, (dated 12/31/96, proceeds at maturity: $13,190,018, collateralized by $13,000,000 par, $13,448,909 value, U.S. Treasury Notes, 6.50%, 8/31/01) (cost--$13,185,000)................... $ 13,185,000 ------------ SHORT-TERM CORPORATE NOTES--13.6% Automotive--2.3% $ 20,000,000 Ford Credit Europe Plc. 5.40%, 1/8/97......................... $ 19,979,000 ------------ Computers--3.9% 35,000,000 IBM Credit Corp. 5.33%, 1/29/97........................ 34,854,905 ------------ Miscellaneous Financial Services--7.4% 30,000,000 Household Finance Corp. 5.35%, 1/21/97........................ 29,910,833 15,000,000 Merrill Lynch & Co., Inc. 5.70%, 1/6/97......................... 14,988,125 20,000,000 Morgan Stanley Group, Inc. 5.43%, 1/15/97........................ 19,957,767 ------------ 64,856,725 ------------ Total Short-Term Corporate Notes (cost--$119,690,630)............ $119,690,630 ------------ U.S. TREASURY BOND--11.5% $ 100,000,000 6.75%, 8/15/26 (cost--$102,355,632).................. $100,750,000 ------------ CORPORATE NOTE--0.6% Casinos/Gaming $ 5,000,000 Trump Holdings & Funding Sr. Sub. Notes 15.50%, 6/15/05 (cost--$5,090,359).................... $ 5,700,000 ------------ CONVERTIBLE CORPORATE BOND--2.5% Real Estate $ 18,442,152 Security Capital Group, Inc. Conv. Sub. Deb. 12.00%, 6/30/14 (A) (cost--$17,383,098)................... $ 22,310,258 ------------ SHARES VALUE - ------------- ------------ CONVERTIBLE PREFERRED STOCKS--2.3% Media/Broadcasting--1.0% 200,000 American Radio Systems Corp. $3.50 Conv. Exch. Pfd................. $ 9,300,000 ------------ Miscellaneous Financial Services--1.3% 500,000 Merrill Lynch & Co., Inc. Cox--STRYPES** $1.37 Conv. Exch. Pfd................. 11,125,000 ------------ Total Convertible Preferred Stocks (cost--$21,599,768)................... $ 20,425,000 ------------ COMMON STOCKS--74.5% Automotive--6.0% 1,380,000 LucasVarity Plc.*....................... $ 52,440,000 ------------ Casinos/Gaming--1.6% 1,200,000 Trump Hotels & Casino Resorts, Inc.*........................ 14,400,000 ------------ Conglomerates--6.6% 2,200,000 Canadian Pacific, Ltd................... 58,300,000 ------------ Electronics--4.6% 1,080,100 UCAR International, Inc.*............... 40,638,762 ------------ Insurance--27.2% 1,000,000 ACE, Ltd................................ 60,125,000 1,327,000 EXEL Ltd................................ 50,260,125 1,150,000 Mid Ocean Ltd........................... 60,375,000 1,035,000 PartnerRe Ltd........................... 35,190,000 500,000 Progressive Corp., Ohio................. 33,687,500 ------------ 239,637,625 ------------ Miscellaneous Financial Services--4.4% 1,346,900 Countrywide Credit Industries, Inc....................... 38,555,013 ------------ Oil/Gas--7.8% 466,600 Chesapeake Energy Corp.................. 25,954,625 875,040 Triton Energy Ltd. (Class A)*........... 42,439,440 ------------ 68,394,065 ------------ Real Estate--3.5% 24,346 Security Capital Group, Inc. (A)........ 30,305,502 ------------ Telecommunications--5.9% 2,000,000 WorldCom, Inc.*......................... 52,126,000 ------------ SHARES VALUE - ------------- ------------ COMMON STOCKS (cont'd) Tobacco/Beverages/Food Products--6.9% 250,000 Philip Morris Companies, Inc............ $ 28,156,250 1,000,000 UST, Inc................................ 32,375,000 ------------ 60,531,250 ------------ Total Common Stocks (cost--$513,198,649).................. $655,328,217 ------------ VALUE ------------ TOTAL INVESTMENTS (cost--$792,503,136).................. 106.5% $937,389,105 Other Liabilities in Excess of Other Assets.......................... (6.5) (57,454,954) ----- ------------ TOTAL NET ASSETS........................ 100.0% $879,934,151 ----- ------------ ----- ------------ See accompanying notes to financial statements. - -------------------------------------------------------------------------------- * Non-income producing security. ** Structured yield product exchangeable for common stock. NOTES TO SCHEDULE OF INVESTMENTS: (A) Restricted Securities (The Fund will not bear any costs, including those involved in registration under the Securities Act of 1933, in connection with the disposition of these securities.):
FAIR VALUE DATE OF PAR AVERAGE AS OF DESCRIPTION ACQUISITION AMOUNT SHARES COST DECEMBER 31, 1996 - ----------------------------------- ----------- ----------- ------------ ------- ----------------- Security Capital Group, Inc.(1) 12.00%, 6/30/14.................. 6/16/94 $18,442,153 -- $ 94 $ 121 Security Capital Group, Inc. Common Stock..................... 8/02/93 -- 24,346 699 1,245
- ------------------ (1) At December 31, 1996, this security had $1,059,480 worth of deferred interest accrued which is included as part of dividends and interest receivable on the Statement of Assets and Liabilities. QUEST FOR VALUE DUAL PURPOSE FUND, INC. STATEMENT OF ASSETS AND LIABILITIES DECEMBER 31, 1996 ASSETS Investments, at value (cost--$792,503,136)........................................ $937,389,105 Cash.............................................................................. 910 Dividends and interest receivable................................................. 6,588,500 Income tax receivable............................................................. 377,087 Prepaid expenses and other assets................................................. 15,938 ------------ Total assets.................................................................... $944,371,540 LIABILITIES Long-term capital gains tax payable............................................... 59,139,583 Dividends payable to Income Shareholders.......................................... 5,131,226 Other payables and accrued expenses............................................... 166,580 ------------ Total liabilities............................................................... 64,437,389 ------------ NET ASSETS (Shareholders' Equity) Net assets applicable to 18,004,302 Income Shares outstanding of $.01 par value................................................................. $209,327,886 Net assets applicable to 18,004,302 Capital Shares outstanding of $.01 par value................................................................. 670,606,265 ------------ Total Net Assets................................................................ $879,934,151 ------------ ------------ INCOME CAPITAL SHARES SHARES ------------ ------------ Net asset value per share......................................................... $ 11.63 $ 37.25 ------------ ------------ ------------ ------------
See accompanying notes to financial statements. - -------------------------------------------------------------------------------- QUEST FOR VALUE DUAL PURPOSE FUND, INC. STATEMENT OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 1996 INVESTMENT INCOME: Interest......................................................................... $16,424,805 Dividends........................................................................ 14,786,008 ----------- Total investment income....................................................... $ 31,210,813 OPERATING EXPENSES: Investment advisory fees (note 2a)............................................... $ 4,916,973 Administration fees (note 2b).................................................... 883,395 Reports and notices to shareholders.............................................. 184,107 Custodian fees................................................................... 84,899 Auditing, consulting and tax return preparation fees............................. 62,400 Transfer and dividend disbursing agent fees...................................... 52,832 Directors' fees and expenses..................................................... 42,500 Exchange fees.................................................................... 40,844 Legal fees....................................................................... 17,000 Miscellaneous.................................................................... 50,941 ----------- Total operating expenses...................................................... 6,335,891 Less: Expense offset arrangement (note 2d).................................... (13,092) ----------- Net operating expenses...................................................... 6,322,799 ------------ Net investment income....................................................... 24,888,014 ------------ REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS--NET: Net realized gain on investments................................................. $173,198,410 Net change in unrealized appreciation (depreciation) on investments.............. (48,825,541) ------------ Net realized gain and change in unrealized appreciation (depreciation) on investments before provision for corporate income taxes on net long-term capital gains retained....................................................... 124,372,869 Provision for corporate income taxes (including $429,916 for state and local taxes) on net long-term capital gains retained (note 1b)..................... (59,569,499) ------------ Net realized gain and change in unrealized appreciation (depreciation) on investments after provision for corporate income taxes on net long-term capital gains retained....................................................... 64,803,370 ------------ Net increase in net assets resulting from operations............................... $ 89,691,384 ------------ ------------
See accompanying notes to financial statements. - -------------------------------------------------------------------------------- QUEST FOR VALUE DUAL PURPOSE FUND, INC. STATEMENT OF CHANGES IN NET ASSETS
YEAR ENDED DECEMBER 31, ------------------------------ 1996 1995 ------------ ------------ Net investment income............................................................. $ 24,888,014 $ 25,044,472 Net realized gain on investments, options and futures transactions................ 173,198,410 75,958,250 Net change in unrealized appreciation (depreciation) on investments, options and futures transactions........................................................... (48,825,541) 94,400,856 Provision for income taxes on capital gains retained (note 1b).................... (59,569,499) (28,346,378) ------------ ------------ Net increase in net assets resulting from operations............................ 89,691,384 167,057,200 Dividends to Income Shareholders ($1.385 and $1.39 per share, respectively)..................................... (24,935,959) (25,025,980) Distributions to Capital Shareholders ($0 and $.033 per share, respectively)......................................... -- (594,142) ------------ ------------ Total increase in net assets.................................................... 64,755,425 141,437,078 Net Assets: Beginning of year............................................................... 815,178,726 673,741,648 ------------ ------------ End of year (including undistributed net investment income of $469,962 and $517,907, respectively)...................................... $879,934,151 $815,178,726 ------------ ------------ ------------ ------------
See accompanying notes to financial statements. - -------------------------------------------------------------------------------- QUEST FOR VALUE DUAL PURPOSE FUND, INC. STATEMENT OF CHANGES IN UNDISTRIBUTED NET INVESTMENT INCOME, REALIZED AND UNREALIZED GAINS (LOSSES)
YEAR ENDED DECEMBER 31, ------------------------------ 1996 1995 ------------ ------------ Net investment income available for distribution: Balance, beginning of year....................................................... $ 517,907 $ 499,415 Net investment income............................................................ 24,888,014 25,044,472 Dividends to Income Shareholders ($1.385 and $1.39 per share, respectively).................................... (24,935,959) (25,025,980) ------------ ------------ Balance, end of year.......................................................... $ 469,962 $ 517,907 ------------ ------------ ------------ ------------ Accumulated net realized gains: Balance, beginning of year....................................................... $203,233,461 $156,215,731 Net realized gain on investments, options and futures transactions............... 173,198,410 75,958,250 Provision for income taxes on net long-term capital gains retained (note 1b)..... (59,569,499) (28,346,378) Distributions to Capital Shareholders ($0 and $.033 per share, respectively)........................................ -- (594,142) ------------ ------------ Balance, end of year.......................................................... $316,862,372 $203,233,461 ------------ ------------ ------------ ------------ Net unrealized appreciation (depreciation) on investments: Balance, beginning of year....................................................... $193,711,510 $ 99,310,654 Net change in unrealized appreciation (depreciation) on investments, options and futures transactions.............................................. (48,825,541) 94,400,856 ------------ ------------ Balance, end of year.......................................................... $144,885,969 $193,711,510 ------------ ------------ ------------ ------------
See accompanying notes to financial statements. - -------------------------------------------------------------------------------- QUEST FOR VALUE DUAL PURPOSE FUND, INC. NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1996 (1) ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES Quest for Value Dual Purpose Fund, Inc. (the 'Fund') is a diversified, closed-end, 'dual-purpose' investment company. The Fund commenced investment operations on February 13, 1987. OpCap Advisors (the 'Adviser'), a majority- owned (99%) subsidiary of Oppenheimer Capital, serves as the Fund's investment adviser. Oppenheimer Capital (the 'Administrator') serves as the Fund's administrator. The preparation of financial statements in accordance with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts and disclosures in the financial statements. Actual results could differ from those estimates. The following is a summary of significant accounting policies consistently followed by the Fund: (A) VALUATION OF INVESTMENTS Investment securities listed on a national securities exchange and securities traded in the over-the-counter National Market System are valued at the last reported sale price on the valuation date; if there are no such reported sales, the securities are valued at their last quoted bid price. Other securities traded over-the-counter and not part of the National Market System are valued at the last quoted bid price. Investment debt securities (other than short-term obligations) are valued each day by an independent pricing service using methods which include current market quotations from a major market maker in the securities and trader-reviewed 'matrix' prices. Short-term debt securities having a remaining maturity of sixty days or less are valued at amortized cost or amortized value, which approximates market value. Any securities or other assets for which market quotations are not readily available are valued at their fair value as determined in good faith under procedures established by the Fund's Board of Directors. At December 31, 1996, securities with an aggregate value of $52,615,760 (6.0% of net assets) were valued in such manner. The ability of issuers of debt instruments to meet their obligations may be affected by economic developments in a specific industry or region. (B) FEDERAL INCOME TAXES It is the Fund's intention to comply with the requirements of the Internal Revenue Code applicable to regulated investment companies and to distribute substantially all of its taxable ordinary income to its shareholders; accordingly, no Federal income tax provision is required. Net realized long-term capital gains, if any, on investment transactions are retained and applicable taxes thereon were accrued at the end of the Fund's fiscal year. (C) INVESTMENT TRANSACTIONS AND OTHER INCOME Investment transactions are accounted for on the trade date. In determining the gain or loss from the sale of investments, the cost of investments sold has been determined on the basis of identified cost. Dividend income is recorded on the ex-dividend date and interest income is accrued as earned. Discounts or premiums on debt securities are accreted or amortized to interest income over the lives of the respective securities. (D) REPURCHASE AGREEMENTS The Fund enters into repurchase agreements as part of its investment program. The Fund's custodian takes possession of collateral pledged by the counterparty. The collateral is marked-to market daily to ensure that the value, plus accrued interest, is at least equal to the repurchase price. In the event of default of the obligor to repurchase, the Fund has the right to liquidate the collateral and apply the proceeds in satisfaction of the obligation. Under certain circumstances, in the event of default or bankruptcy by the counterparty to the agreement, realization and/or retention of the collateral or proceeds may be subject to legal proceedings. (E) DIVIDENDS AND DISTRIBUTIONS The Fund distributes its net investment income to holders of the Income Shares at a fixed monthly rate (currently $.10 a share) with any excess net investment income generally declared by year end. Income Shares are entitled to cumulative dividends in an amount equivalent to net investment income with a minimum annual rate of $.875 per share. To the extent that any such minimum cumulative dividend cannot be satisfied from net investment income, it will be paid from any tax basis net realized short-term or long-term capital gains. Capital Shares will not be entitled to receive dividends from net investment income as long as Income Shares are outstanding. QUEST FOR VALUE DUAL PURPOSE FUND, INC. NOTES TO FINANCIAL STATEMENTS (CONTINUED) DECEMBER 31, 1996 The Fund declared dividends of $1.385 per Income Share during the year ended December 31, 1996. To the extent not needed to pay the Income Shares' minimum cumulative dividends, distributions from tax basis net realized short-term capital gains, if any, may be paid to holders of the Capital Shares. The Fund will not distribute tax basis net realized long-term capital gains except to the limited extent described previously. Dividends and distributions to shareholders are recorded on the ex-dividend date. On January 31, 1997 Income Shares will be redeemed at $11.60 per share, plus accumulated and unpaid dividends amounting to $.0813 per share. (2) INVESTMENT ADVISORY FEE, ADMINISTRATION FEE AND OTHER TRANSACTIONS WITH AFFILIATES (a) The investment advisory fee is payable monthly to the Adviser and is computed on the average weekly net assets of the Fund as of the close of business each week at the following annual rates: .75% on the first $200 million; and .50% on net assets in excess of $200 million. (b) The administration fee is payable monthly to the Administrator and is computed on the average weekly net assets of the Fund as of the close of business each week at the annual rate of .10%. (c) Total brokerage commissions paid by the Fund during the year ended December 31, 1996 amounted to $1,040,957 of which Oppenheimer & Co., Inc., an affiliate of the Adviser, received $319,406. (d) The Fund benefits from an expense offset arrangement with its custodian bank where uninvested cash balances earn credits that reduce monthly fees. Had these cash balances been invested in income producing securities, they would have generated income for the Fund. (3) PURCHASES AND SALES OF SECURITIES During the year ended December 31, 1996, purchases and sales of investment securities, other than short-term securities, aggregated $634,222,148 and $787,797,418, respectively. (4) FEDERAL INCOME TAXES (A) COST OF INVESTMENTS At December 31, 1996, the cost of investments for Federal income tax purposes was $792,698,292. Aggregate gross unrealized appreciation (all securities in which there is an excess of value over tax cost) amounted to $161,949,524 and aggregate gross unrealized depreciation (all securities in which there is an excess of tax cost over value) amounted to $17,258,711, resulting in net unrealized appreciation of $144,690,813. (B) LONG-TERM CAPITAL GAINS For the year ended December 31, 1996, the Fund retained net tax basis realized long-term capital gains of $168,970,238 and accrued Federal income taxes of $59,139,583. (5) CAPITAL STOCK The Fund is authorized to issue 20 million Capital Shares and 20 million Income Shares at $.01 par value, respectively. Each class of shares has 18,004,302 issued and outstanding, representing $180,043 at par and $208,677,881 paid-in-excess of par. QUEST FOR VALUE DUAL PURPOSE FUND, INC. NOTES TO FINANCIAL STATEMENTS (CONTINUED) DECEMBER 31, 1996 (6) QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)
REALIZED AND UNREALIZED NET GAIN (LOSS) ON INVESTMENT INVESTMENT INVESTMENTS, INCOME INCOME OPTIONS AND FUTURES--NET -------------------- -------------------- -------------------------- PER PER PER QUARTER ENDED TOTAL SHARE TOTAL SHARE TOTAL SHARE - ------------------------------------------------ ----------- ----- ----------- ----- ------------ ---------- March 31, 1996.................................. $ 7,608,934 $0.42 $ 6,096,637 $0.34 $ 58,115,335 $ 3.23 June 30, 1996................................... 8,261,241 0.46 6,684,414 0.37 35,666,898 1.98 September 30, 1996.............................. 7,554,467 0.42 5,973,296 0.33 (20,628,310) (1.15) December 31, 1996............................... 7,786,171 0.43 6,133,667 0.34 (8,350,553)* (0.46) ----------- ----- ----------- ----- ------------ ---------- $31,210,813 $1.73 $24,888,014 $1.38 $ 64,803,370* $ 3.60 ----------- ----- ----------- ----- ------------ ---------- ----------- ----- ----------- ----- ------------ ---------- March 31, 1995.................................. $ 7,638,860 $0.43 $ 6,365,976 $0.35 $ 57,584,502 $ 3.20 June 30, 1995................................... 7,777,455 0.43 6,387,012 0.36 60,006,065 3.33 September 30, 1995.............................. 6,404,802 0.35 4,899,611 0.27 60,450,460 3.36 December 31, 1995............................... 8,932,620 0.50 7,391,873 0.41 (36,028,299)* (2.00) ----------- ----- ----------- ----- ------------ ---------- $30,753,737 $1.71 $25,044,472 $1.39 $142,012,728* $ 7.89 ----------- ----- ----------- ----- ------------ ---------- ----------- ----- ----------- ----- ------------ ----------
- ------------------ * After provision for income taxes accrued on net realized long-term capital gains. (7) SPECIAL MEETING OF THE CAPITAL SHAREHOLDERS On December 20, 1996, Capital Shareholders approved a change in the Fund's subclassification under the Investment Company Act of 1940 from a closed-end management investment company to an open-end management investment company. The Fund also approved a new Investment Advisory Agreement with OppenheimerFunds, Inc. ('OFI'), a new Subadvisory Agreement between OFI and OpCap Advisors, a new Distribution and Service Plan and Agreement with OFI in respect to Class A shares, approved the Fund's Articles of Amendment and Restatement, a change in the Fund's fundamental investment objective to capital appreciation, changes to certain of the Fund's fundamental investment restrictions and the election of Directors. The Fund will pay OFI under the new Investment Advisory Agreement a fee at the rate of 1.00% of the first $400 million of net assets, .90% of the next $400 million of net assets and .85% of net assets over $800 million. For a two year period after the effective date of the new Investment Advisory Agreement, OFI will waive the following portion of the advisory fee--.15% of the first $200 million of net assets; .40% of the next $200 million of net assets; .30% of the next $400 million of net assets and .25% of net assets over $800 million. The fee under the new Distribution and Service Plan and Agreement with respect to Class A shares will consist of a service fee of .25% of net assets and a distribution fee of .25% of net assets. For the first two years after the effective date of the Class A Plan, the new Distributor has agreed to waive .15% of the distribution fee payable under the Class A Plan. OFI will pay OpCap Advisors' fee under the new Subadvisory Agreement. The approved changes become effective at the close of business February 28, 1997. (8) SUBSEQUENT EVENTS Trading on the NYSE and all transfer books will permanently cease after the close of business on January 24, 1997 for the Income Shares and February 28, 1997 for the Capital Shares. Once the Income Shares are redeemed on January 31, 1997, the Capital Shares will bear all Fund operating expenses. Additionally, Capital Shares will bear a portion of the expenses associated with their conversion to an open-end fund and are estimated to be $102,000. Oppenheimer Financial Corp., a holding company, holds a one-third interest in Oppenheimer Capital and Oppenheimer Capital, L.P., a Delaware limited partnership whose units are traded on the New York Stock Exchange and of which Oppenheimer Financial Corp. is the sole general partner, owns the remaining two-thirds interest. On February 13, 1997 PIMCO Advisors L.P., a registered investment adviser, signed a definitive agreement with Oppenheimer Group, Inc. and its subsidiary Oppenheimer Financial Corp. for PIMCO Advisors L.P. and its affiliate, Thomson Advisory Group, Inc., to acquire the one-third managing general partner interest in Oppenheimer Capital and the 1.0% general partner interest in Oppenheimer Capital L.P. The completion of the transaction is subject to certain client, lender, IRS and other approvals. QUEST FOR VALUE DUAL PURPOSE FUND, INC. FINANCIAL HIGHLIGHTS
YEAR ENDED DECEMBER 31, ---------------------------------------------------------------------------- 1996 1995 1994 1993 1992 ------------ ------------ ------------ ------------ ------------ PER SHARE OPERATING PERFORMANCE: Income Shares: Net Asset Value, Beginning of Year................ $ 11.63 $ 11.63 $ 11.61 $ 11.61 $ 11.60 Net investment income............................. 1.38 1.39 1.36 1.30 1.35 Dividends from net investment income.............. (1.38) (1.39) (1.34) (1.30) (1.34) ------------ ------------ ------------ ------------ ------------ Net Asset Value, End of Year...................... $ 11.63 $ 11.63 $ 11.63 $ 11.61 $ 11.61 ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ Market Value, End of Year......................... $ 11.500 $ 12.000 $ 12.125 $ 13.25 $ 13.00 ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ Total Investment Return (1)....................... 7.8% 10.9% 1.8% 12.3% 7.4% ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ Capital Shares: Net Asset Value, Beginning of Year................ $ 33.65 $ 25.79 $ 27.09 $ 26.29 $ 22.59 Net realized and unrealized gain (loss) on investments, options and futures transactions... 6.91 9.46 (0.38) 2.45 6.09 Provision for corporate income taxes on net realized long-term capital gains................ (3.31) (1.57) (0.53) (1.43) (1.10) Distributions from net realized short-term capital gains................................... -- (0.03) (0.39) (0.22) (1.29) ------------ ------------ ------------ ------------ ------------ Net Asset Value, End of Year...................... $ 37.25 $ 33.65 $ 25.79 $ 27.09 $ 26.29 ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ Market Value, End of Year......................... $ 36.125 $ 31.875 $ 23.00 $ 23.75 $ 23.00 ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ Total Investment Return (2)....................... 23.6% 45.6% 0.9% 10.5% 44.6% ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ RATIOS/SUPPLEMENTAL DATA: Net Assets, End of Year........................... $879,934,151 $815,178,726 $673,741,648 $696,802,938 $682,373,943 ------------ ------------ ------------ ------------ ------------ Ratio of Operating Expenses to Average Net Assets.......................................... 0.72%(3,4) 0.73% 0.74% 0.74% 0.74% ------------ ------------ ------------ ------------ ------------ Ratio of Net Investment Income to Average Net Assets.......................................... 2.82%(3) 3.20% 3.47% 3.29% 3.61% ------------ ------------ ------------ ------------ ------------ Portfolio Turnover Rate........................... 74% 72% 45% 51% 45% ------------ ------------ ------------ ------------ ------------ Average Commission Rate........................... $ 0.05 -- -- -- -- ------------ ------------ ------------ ------------ ------------ Number of each class of Income and Capital Shares outstanding at the end of year.................. 18,004,302 18,004,302 18,004,302 18,004,302 18,004,302 ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
- ------------------ (1) Change in market price assuming reinvestment of dividends on payable date (at market). (2) Change in market price assuming reinvestment of short-term capital gains distributions, if any, on payable date and federal taxes paid on long-term capital gains on year end (both at market). (3) Average net assets for the year ended December 31, 1996 were $883,394,597. (4) Gross of expense offsets (see note 2d in Notes to Financial Statements). Appendix A Corporate Industry Classifications Aerospace/Defense Air Transportation Auto Parts Distribution Automotive Bank Holding Companies Banks Beverages Broadcasting Broker-Dealers Building Materials Cable Television Chemicals Commercial Finance Computer Hardware Computer Software Conglomerates Consumer Finance Containers Convenience Stores Department Stores Diversified Financial Diversified Media Drug Stores Drug Wholesalers Durable Household Goods Education Electric Utilities Electrical Equipment Electronics Energy Services & Producers Entertainment/Film Environmental Food Gas 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. Oppenheimer Quest Capital 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 prosp\capsai.#2 QUEST FOR VALUE DUAL PURPOSE FUND, INC. Part C Other Information Item 24. Financial Statements and Exhibits - ------- --------------------------------- (a) Financial Statements: -------------------- (1) Financial Highlights - See Parts A and B: Filed herewith. (2) Independent Accountants' Report - Filed herewith. (3) Statement of Investments at 12/31/96 (audited)- Filed herewith. (4) Statement of Assets and Liabilities at 12/31/96 (audited)- See Part B: Filed herewith. (5) Statement of Operations at 12/31/96 (audited) - See Part B: Filed herewith. (6) Statement of Changes in Net Assets at 12/31/96 (audited) - - See Part B: Filed herewith. (7) Notes to Financial Statements at 12/31/96 (audited) - See Part B: Filed herewith. (8) Independent Accountants' Consent: Filed herewith. b) Exhibits: -------- (1)Articles of Amendment and Restatement of the Fund: Filed herewith. (2)Amended By Laws: Filed herewith. (3)Not Applicable. (4)(i)Specimen Class A Share Certificate: Previously filed with Registrant's Registration Statement on Form N-1A, 11/27/96, and incorporated herein by reference. (ii) Specimen Class B Share Certificate: Previously filed with Registrant's Registration Statement on Form N-1A, 11/27/96, and incorporated herein by reference. (iii) Specimen Class C Share Certificate: Previously filed with Registrant's Registration Statement on Form N-1A, 11/27/96, and incorporated herein by reference. (5)(a)Form of Investment Advisory Agreement: Previously filed with Registrant's Registration Statement on Form N-1A, 11/27/96, and incorporated herein by reference. (b)Form of Subadvisory Agreement: Previously filed with Registrant's Registration Statement on Form N-1A, 11/27/96, and incorporated herein by reference. (6)(a) Form of General Distributor s Agreement: Previously filed with Registrant's Registration Statement on Form N-1A, 11/27/96, and incorporated herein by reference. (b)(1) Form of Dealer Agreement of OppenheimerFunds Distributor, Inc.: Filed with Post-Effective Amendment No. 14 of Oppenheimer Main Street Funds, Inc. (Reg. No. 33-17850), 9/30/94, and incorporated herein by reference. (2) Form of OppenheimerFunds Distributor, Inc. Broker Agreement: Filed with Post-Effective Amendment No. 14 of Oppenheimer Main Street Funds, Inc. (Reg. No. 33-17850), 9/30/94, and incorporated herein by reference. (3) Form of OppenheimerFunds Distributor, Inc. Agency Agreement: Filed with Post-Effective Amendment No. 14 of Oppenheimer Main Street Funds, Inc. (Reg. No. 33-17850), 9/30/94, and incorporated herein by reference. (4)Broker Agreement between OppenheimerFunds Distributor, Inc. and Newbridge Securities dated 10/1/86: Filed with Post- Effective Amendment No. 25 of Oppenheimer Special Fund (Reg. No. 2- 45272), 11/1/86, refiled with Post-Effective Amendment No. 45 of Oppenheimer Special Fund (Reg. No. 2-45272), 8/22/94, pursuant to Item 102 of Regulation S-T, and incorporated herein by reference. (7)Not Applicable. (8)Custody Agreement: Filed herewith. (9)Not Applicable. (10)(a) Opinion and consent of counsel as to the legality of the Capital Shares previously registered, indicating whether they will when sold be legally issued, fully paid and non-assessable: Previously filed as Exhibit 10 to Pre-Effective Amendment No.1 and refiled herewith pursuant to Item 102 of Regulation S-T, and incorporated herein by reference. (b) Opinion and consent of counsel as to the legality of the securities being registered, indicating whether they will when sold be legally issued, fully-paid and non-assessable: Filed herewith. (11)Not Applicable. (12)Not Applicable. (13)(a) Investment Letter of Quest for Value Advisors, Inc.: Previously filed as Exhibit 1 to Post-Effective Amendment No. 1 and refiled herewith pursuant to Item 102 or Regulation S-T, and incorporated herein by reference. (b) Investment Letter of OppenheimerFunds, Inc.: Filed herewith. (14)(i) Form of Individual Retirement Account Trust Agreement: Filed as Exhibit 14 of Post-Effective Amendment No. 21 of Oppenheimer U.S. Government Trust (Reg. No. 2-76645), 8/25/93, and incorporated herein by reference. (ii) Form of prototype Standardized and Non-Standardized Profit-Sharing Plan and Money Purchase Pension Plan for self- employed persons and corporations: Filed with Post-Effective Amendment No. 3 of Oppenheimer Global Growth & Income Fund (File No. 33-33799), 1/31/92, and refiled with Post-Effective Amendment No. 7 to the Registration Statement of Oppenheimer Global Growth & Income Fund (Reg. No. 33-33799), 12/1/94, pursuant to Item 102 of Regulation S-T, and incorporated herein by reference. (iii) Form of Tax-Sheltered Retirement Plan and Custody Agreement for employees of public schools and tax-exempt organizations: Filed with Post-Effective Amendment No. 47 to the Registration Statement of Oppenheimer Growth Fund (Reg. No. 2- 45272), 10/21/94, and incorporated herein by reference. (iv) Form of Simplified Employee Pension IRA: Filed with Post-Effective Amendment No. 42 to the Registration Statement of Oppenheimer Equity Income Fund (Reg. No. 2-33043), 10/28/94, and incorporated herein by reference. (v) Form of SAR-SEP Simplified Employee Pension IRA: Filed with Post-Effective Amendment No. 15 to the Registration Statement of Oppenheimer Mortgage Income Fund, (File No. 33-6614), 2/20/94, and incorporated herein by reference. (vi) Form of Prototype 401(k) plan: Filed with Post-Effective Amendment No. 7 to the Registration Statement of Oppenheimer Strategic Income & Growth Fund (33-47378), 9/28/95, and incorporated herein by reference. (15)(a) Form of Distribution and Service Plan and Agreement with respect to Class A shares: Previously filed with Registrant's Registration Statement on Form N-1A, 11/27/96, and incorporated herein by reference. (b) Form of Distribution and Service Plan and Agreement with respect to Class B shares: Previously filed with Registrant's Registration Statement on Form N-1A, 11/27/96, and incorporated herein by reference. (c) Form of Distribution and Service Plan and Agreement with respect to Class C shares: Previously filed with Registrant's Registration Statement on Form N-1A, 11/27/96, and incorporated herein by reference. (16) Performance Computation Schedule: Filed herewith. (17)(1) Financial Data Schedule for Class A shares: Filed herewith. (2) Financial Data Schedule for Class B shares: Not applicable. (3) Financial Data Schedule for Class C shares: Not applicable. (18)Oppenheimer Funds Multiple Class Plan under Rule 18f-3 dated 10/24/95: Filed with Post-Effective Amendment No. 12 to the Registration Statement of Oppenheimer California Tax-Exempt Fund (33-23566), 11/1/95, and incorporated herein by reference. -- Powers of Attorney and Certified Board Resolutions signed by Registrant's Directors: To be filed by Amendment. Item 25.Persons Controlled by or Under Common Control with Registrant - ---------------------------------------------------------------- No person is presently controlled by or under common control with Registrant. Item 26. Number of Holders of Securities - -------------------------------------- Number of Record Holders as of Title of Class February 14, 1997 - -------------- ---------------- Shares of Beneficial Interest Class A 14,000 Class B 0 Class C 0 Item 27. Indemnification - ------- --------------- Reference is made to the provisions of Article SEVEN of Registrant's Articles of Amendment and Restatement filed as Exhibit 24(b)(1) to this Registration Statement. Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of Registrant pursuant to the foregoing provisions or otherwise, Registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act of 1933 and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by Registrant of expenses incurred or paid by a director, officer or controlling person of Registrant in the successful defense of any action, suit or proceeding) is asserted by such trustee, officer or controlling person, Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act of 1933 and will be governed by the final adjudication of such issue. Item 28. Business and Other Connections of Investment Adviser - -------- ---------------------------------------------------- (a) OppenheimerFunds, Inc. is the investment adviser of the Registrant; it and certain subsidiaries and affiliates act in the same capacity to other registered investment companies as described in Parts A and B hereof and listed in Item 28(b) below. (a) The directors and executive officers of OpCap Advisors, their positions and their other business affiliations and business experience for the past two years are listed in Item 28(b) below. (b) There is set forth below information as to any other business, profession, vocation or employment of a substantial nature in which each officer and director of OppenheimerFunds, Inc. is, or at any time during the past two fiscal years has been, engaged for his/her own account or in the capacity of director, officer, employee, partner or trustee. Name & Current Position Other Business and Connections with OppenheimerFunds, Inc. During the Past Two Years - --------------------------- --------------------------- Mark J.P. Anson, Vice President Vice President of Oppenheimer Real Asset Management, Inc. ("ORAMI"); formerly Vice President of Equity Derivatives at Salomon Brothers, Inc. Peter M. Antos, Senior Vice President An officer and/or portfolio manager of certain Oppenheimer funds; a Chartered Financial Analyst; Senior Vice President of HarbourView; prior to March, 1996 he was the senior equity portfolio manager for the Panorama Series Fund, Inc. (the "Company") and other mutual funds and pension funds managed by G.R. Phelps & Co. Inc. ("G.R. Phelps"), the Company's former investment adviser, which was a subsidiary of Connecticut Mutual Life Insurance Company; was also responsible for managing the common stock department and common stock investments of Connecticut Mutual Life Insurance Co. Lawrence Apolito, Vice President None. Victor Babin, Senior Vice President None. Bruce Bartlett, Vice President An officer and/or portfolio manager of certain Oppenheimer funds; formerly a Vice President and Senior Portfolio Manager at First of America Investment Corp. Ellen Batt, Assistant Vice President None Kathleen Beichert, Assistant Vice President Formerly employed by Smith Barney, Inc. David Bernard, Vice President Previously a Regional Sales Director for Retirement Plan Services at Charles Schwab & Co., Inc. Rajeev Bhaman, Assistant Vice President Formerly Vice President of Asian Equities for Barclays de Zoete Wedd, Inc. Robert J. Bishop, Vice President Assistant Treasurer of the Oppenheimer Funds (listed below); previously a Fund Controller for OppenheimerFunds, Inc. (the "Manager"). George Bowen, Senior Vice President Treasurer of the New York-based & Treasurer Oppenheimer Funds; Vice President, Assistant Secretary and Treasurer of the Denver- based Oppenheimer Funds. Vice President and Treasurer of OppenheimerFunds Distributor, Inc. (the "Distributor") and HarbourView Asset Management Corporation ("HarbourView"), an investment adviser subsidiary of the Manager; Senior Vice President, Treasurer, Assistant Secretary and a director of Centennial Asset Management Corporation ("Centennial"), an investment adviser subsidiary of the Manager; Vice President, Treasurer and Secretary of Shareholder Services, Inc. ("SSI") and Shareholder Financial Services, Inc. ("SFSI"), transfer agent subsidiaries of the Manager; Director, Treasurer and Chief Executive Officer of MultiSource Services, Inc.; Vice President and Treasurer of Oppenheimer Real Asset Management, Inc.; President, Treasurer and Director of Centennial Capital Corporation; Vice President and Treasurer of Main Street Advisers. Scott Brooks, Assistant Vice President None. Susan Burton, Assistant Vice President Previously a Director of Educational Services for H.D. Vest Investment Securities, Inc. Michael A. Carbuto, Vice President An officer and/or portfolio manager of certain Oppenheimer funds; Vice President of Centennial. Ruxandra Chivu, Assistant Vice President None. O. Leonard Darling, Executive Vice President Formerly Co-Director of Fixed Income for State Street Research & Management Co. Robert A. Densen, Senior Vice President None. Sheri Devereux, Assistant Vice President None. Robert Doll, Jr., Executive Vice President and Director An officer and/or portfolio manager of certain Oppenheimer funds. John Doney, Vice President An officer and/or portfolio manager of certain Oppenheimer funds. Andrew J. Donohue, Executive Vice President, General Counsel and Director Secretary of the New York- based Oppenheimer Funds; Vice President and Secretary of the Denver-based Oppenheimer Funds; Secretary of the Oppenheimer Quest and Oppenheimer Rochester Funds; Executive Vice President, Director and General Counsel of the Distributor; President and a Director of Centennial; Chief Legal Officer and a Director of MultiSource Services, Inc.; President and a Director of Oppenheimer Real Asset Management, Inc.; Executive Vice President, General Counsel and Director of SFSI and SSI; formerly Senior Vice President and Associate General Counsel of the Manager and the Distributor. George Evans, Vice President An officer and/or portfolio manager of certain Oppenheimer funds. Scott Farrar, Vice President Assistant Treasurer of the New York-based and Denver-based Oppenheimer funds. Leslie A. Falconio, Assistant Vice President None. Katherine P. Feld, Vice President and Secretary Vice President and Secretary of OppenheimerFunds Distributor, Inc.; Secretary of HarbourView Asset Management Corporation, MultiSource Services, Inc. and Centennial Asset Management Corporation; Secretary, Vice President and Director of Centennial Capital Corporation; Vice President and Secretary of ORAMI. Ronald H. Fielding, Senior Vice President; Chairman: Rochester Division An officer, Director and/or portfolio manager of certain Oppenheimer funds. Formerly Chairman of the Board and Director of Rochester Fund Distributors, Inc. ("RFD"), President and Director of Fielding Management Company, Inc. ("FMC"), President and Director of Rochester Capital Advisors, Inc. ("RCAI"), Managing Partner of Rochester Capital Advisors, L.P., President and Director of Rochester Fund Services, Inc. ("RFS"), President and Director of Rochester Tax Managed Fund, Inc. John Fortuna, Vice President None. Patricia Foster, Vice President Formerly she held the following positions: An officer of certain Oppenheimer funds; Secretary and General Counsel of Rochester Capital Advisors, L.P. and Secretary of Rochester Tax Managed Fund, Inc. Jennifer Foxson, Assistant Vice President None. Robert G. Galli, Vice Chairman Trustee of the New York-based Oppenheimer Funds; Vice President and Counsel of OAC; formerly he held the following positions: Vice President and a director of HarbourView and Centennial, a director of SFSI and SSI, an officer of other Oppenheimer Funds. Linda Gardner, Assistant Vice President None. Jill Glazerman, None. Assistant Vice President Ginger Gonzalez, Vice President, Director of Marketing Communications Formerly 1st Vice President / Director of Graphic and Print Communications for Shearson Lehman Brothers. Mildred Gottlieb, Assistant Vice President Formerly served as a Strategy Consultant for the Private Client Division of Merrill Lynch. Caryn Halbrecht, Vice President An officer and/or portfolio manager of certain Oppenheimer funds; formerly Vice President of Fixed Income Portfolio Management at Bankers Trust. Barbara Hennigar, Executive Vice President and President and Chief Executive Officer of OppenheimerFunds Services, a division of the Manager President and Director of SFSI; President and Chief Executive Officer of SSI. Dorothy Hirshman, Assistant Vice President None. Alan Hoden, Vice President None. Merryl Hoffman, Vice President None. Scott T. Huebl, Assistant Vice President None. Richard Hymes, Assistant Vice President None. Jane Ingalls, Assistant Vice President Formerly a Senior Associate with Robinson, Lake/Sawyer Miller. Ronald Jamison, Vice President Formerly Vice President and Associate General Counsel at Prudential Securities, Inc. Frank Jennings, Vice President An officer and/or portfolio manager of certain Oppenheimer funds. Formerly a Managing Director of Global Equities at Paine Webber's Mitchell Hutchins division. Heidi Kagan, Assistant Vice President None. Thomas W. Keffer, Vice President Formerly Senior Managing Director of Van Eck Global. Avram Kornberg, Vice President Formerly a Vice President with Bankers Trust. Joseph Krist, Assistant Vice President None. Paul LaRocco, Vice President An officer and/or portfolio manager of certain Oppenheimer funds. Formerly a Securities Analyst for Columbus Circle Investors. Michael Levine, Assistant Vice President None. Shanquan Li, Assistant Vice President Director of Board (since 2/96), Chinese Finance Society; formerly Chairman (11/94- 2/96)), Chinese Finance Society; and Director (6/94- 6/95), Greater China Business Networks. Stephen F. Libera, Vice President An officer and/or portfolio manager of certain Oppenheimer funds; a Chartered Financial Analyst; a Vice President of HarbourView; prior to March, 1996 he was the senior bond portfolio manager for Panorama Series Fund, Inc., other mutual funds and pension accounts managed by G.R. Phelps; was also responsible for managing the public fixed-income securities department at Connecticut Mutual Life Insurance Co. Mitchell J. Lindauer, Vice President None. Loretta McCarthy, Executive Vice President None. Bridget Macaskill, President, Chief Executive Officer and Director President, Director and Trustee of the New York-based and the Denver-based Oppenheimer funds; President and a Director of OAC, HarbourView and Oppenheimer Partnership Holdings, Inc.; Director of ORAMI; Chairman and Director of SSI; a Director of Oppenheimer Real Asset Management, Inc. Timothy Martin, Assistant Vice President Formerly Vice President, Mortgage Trading, at S.N. Phleps & Co Salomon Brothers, and Kidder Peabody. Sally Marzouk, Vice President None. Michelle McCann, Assistant Vice President Formerly Vice President, Quest for Value Distributors, Oppenheimer Capital Corporation. Lisa Migan, Assistant Vice President, None. Robert J. Milnamow, Vice President An officer and/or portfolio manager of certain Oppenheimer funds. Formerly a Portfolio Manager with Phoenix Securities Group. Denis R. Molleur, Vice President None. Linda Moore, Vice President Formerly Marketing Manager (July, 1995 - November, 1996) for Chase Investment Services Corp. Kenneth Nadler, Vice President None. David Negri, Vice President An officer and/or portfolio manager of certain Oppenheimer funds. Barbara Niederbrach, Assistant Vice President None. Robert A. Nowaczyk, Vice President None. Gina M. Palmieri, Assistant Vice President None. Robert E. Patterson, Senior Vice President An officer and/or portfolio manager of certain Oppenheimer funds. John Pirie, Assistant Vice President Formerly a Vice President with Cohane Rafferty Securities, Inc. Tilghman G. Pitts III, Executive Vice President Chairman and Director of the Distributor. Jane Putnam, Vice President An officer and/or portfolio manager of certain Oppenheimer funds. Formerly Senior Investment Officer and Portfolio Manager with Chemical Bank. Russell Read, Vice President Consultant for Prudential Insurance on behalf of the General Motors Pension Plan. Thomas Reedy, Vice President An officer and/or portfolio manager of certain Oppenheimer funds. Formerly a Securities Analyst for the Manager. David Robertson, Vice President None. Adam Rochlin, Vice President Formerly a Product Manager for Metropolitan Life Insurance Company. Michael S. Rosen Vice President; President: Rochester Division An officer and/or portfolio manager of certain Oppenheimer funds. Formerly Vice President of RFS, President and Director of RFD, Vice President and Director of FMC, Vice President and director of RCAI, General Partner of RCA, an officer and/or portfolio manager of certain Oppenheimer funds. David Rosenberg, Vice President An officer and/or portfolio manager of certain Oppenheimer funds. Richard H. Rubinstein, Senior Vice President An officer and/or portfolio manager of certain Oppenheimer funds; formerly Vice President and Portfolio Manager/Security Analyst for Oppenheimer Capital Corp., an investment adviser. Lawrence Rudnick, Assistant Vice President Formerly Vice President of Dollar Dry Dock Bank. James Ruff, Executive Vice President None. Valerie Sanders, Vice President None. Ellen Schoenfeld, Assistant Vice President None. Stephanie Seminara, Vice President Formerly Vice President of Citicorp Investment Services. Diane Sobin, Vice President An officer and/or portfolio manager of certain Oppenheimer funds; formerly a Vice President and Senior Portfolio Manager for Dean Witter InterCapital, Inc. Richard A. Soper, None. Assistant Vice President Nancy Sperte, Executive Vice President None. Donald W. Spiro, Chairman Emeritus and Director Vice Chairman and Trustee of the New York-based Oppenheimer Funds; formerly Chairman of the Manager and the Distributor. Arthur Steinmetz, Senior Vice President An officer and/or portfolio manager of certain Oppenheimer funds. Ralph Stellmacher, Senior Vice President An officer and/or portfolio manager of certain Oppenheimer funds. John Stoma, Senior Vice President, Director Retirement Plans Formerly Vice President of U.S. Group Pension Strategy and Marketing for Manulife Financial. Michael C. Strathearn, Vice President An officer and/or portfolio manager of certain Oppenheimer funds; a Chartered Financial Analyst; a Vice President of HarbourView; prior to March, 1996 he was an equity portfolio manager for Panorama Series Fund, Inc. and other mutual funds and pension accounts managed by G.R. Phelps. James C. Swain, Vice Chairman of the Board Chairman, CEO and Trustee, Director or Managing Partner of the Denver-based Oppenheimer Funds; President and a Director of Centennial; formerly President and Director of OAMC, and Chairman of the Board of SSI. James Tobin, Vice President None. Jay Tracey, Vice President Vice President of the Manager; Vice President and Portfolio Manager of Oppenheimer Discovery Fund, Oppenheimer Global Emerging Growth Fund and Oppenheimer Enterprise Fund. Formerly Managing Director of Buckingham Capital Management. Gary Tyc, Vice President, Assistant Secretary and Assistant Treasurer Assistant Treasurer of the Distributor and SFSI. Ashwin Vasan, Vice President An officer and/or portfolio manager of certain Oppenheimer funds. Dorothy Warmack, Vice President An officer and/or portfolio manager of certain Oppenheimer funds. Jerry A. Webman, Senior Vice President Director of New York-based tax- exempt fixed income Oppenheimer Funds; Formerly Managing Director and Chief Fixed Income Strategist at Prudential Mutual Funds. Christine Wells, Vice President None. Joseph Welsh, Assistant Vice President None. Kenneth B. White, Vice President An officer and/or portfolio manager of certain Oppenheimer funds; a Chartered Financial Analyst; Vice President of HarbourView; prior to March, 1996 he was an equity portfolio manager for Panorama Series Fund, Inc. and other mutual funds and pension funds managed by G.R. Phelps. William L. Wilby, Senior Vice President An officer and/or portfolio manager of certain Oppenheimer funds; Vice President of HarbourView. Carol Wolf, Vice President An officer and/or portfolio manager of certain Oppenheimer funds; Vice President of Centennial; Vice President, Finance and Accounting and member of the Board of Directors of the Junior League of Denver, Inc. Robert G. Zack, Senior Vice President and Assistant Secretary Associate General Counsel of the Manager; Assistant Secretary of the Oppenheimer Funds; Assistant Secretary of SSI, SFSI; an officer of other Oppenheimer Funds. Arthur J. Zimmer, Vice President An officer and/or portfolio manager of certain Oppenheimer funds; Vice President of Centennial. The Oppenheimer Funds include the New York-based Oppenheimer Funds, the Denver-based Oppenheimer Funds, and the Quest/Rochester Funds, set forth below: New York-based Oppenheimer Funds - -------------------------------- Oppenheimer Multiple Strategies Fund Oppenheimer California Municipal Fund Oppenheimer Capital Appreciation Fund Oppenheimer Discovery Fund Oppenheimer Enterprise Fund Oppenheimer Global Emerging Growth Fund Oppenheimer Global Fund Oppenheimer Global Growth & Income Fund Oppenheimer Gold & Special Minerals Fund Oppenheimer Growth Fund Oppenheimer International Growth Fund Oppenheimer Money Market Fund, Inc. Oppenheimer Multi-Sector Income Trust Oppenheimer Multi-State Municipal Trust Oppenheimer New York Municipal Fund Oppenheimer Fund Oppenheimer Series Fund, Inc. Oppenheimer Municipal Bond Fund Oppenheimer U.S. Government Trust Oppenheimer World Bond Fund Oppenheimer Developing Markets Fund Denver-based Oppenheimer Funds - ------------------------------ Centennial America Fund, L.P. Centennial California Tax Exempt Trust Centennial Government Trust Centennial Money Market Trust Centennial New York Tax Exempt Trust Centennial Tax Exempt Trust Daily Cash Accumulation Fund, Inc. Oppenheimer Cash Reserves Oppenheimer Champion Income Fund Oppenheimer Equity Income Fund Oppenheimer High Yield Fund Oppenheimer Integrity Funds Oppenheimer International Bond Fund Oppenheimer Limited-Term Government Fund Oppenheimer Main Street Funds, Inc. Oppenheimer Strategic Income Fund Oppenheimer Strategic Income & Growth Fund Oppenheimer Municipal Fund Oppenheimer Total Return Fund, Inc. Oppenheimer Variable Account Funds Panorama Series Fund, Inc. The New York Tax-Exempt Income Fund, Inc. Quest/Rochester Funds - --------------------------------- Oppenheimer Quest Global Value Fund, Inc. Oppenheimer Quest Value Fund, Inc. Oppenheimer Quest For Value Funds Oppenheimer Quest Capital Value Fund, Inc. Oppenheimer Bond Fund For Growth Rochester Fund Municipals Limited-Term New York Municipal Fund The address of OppenheimerFunds, Inc., the New York-based Oppenheimer Funds, Quest funds, OppenheimerFunds Distributor, Inc., HarbourView Asset Management Corp., Oppenheimer Partnership Holdings, Inc., and Oppenheimer Acquisition Corp. is Two World Trade Center, New York, New York 10048-0203. The address of the Denver-based Oppenheimer Funds, Shareholder Financial Services, Inc., Shareholder Services, Inc., OppenheimerFunds Services, Centennial Asset Management Corporation, Centennial Capital Corp., and Oppenheimer Real Asset Management, Inc. is 6803 South Tuscon Way, Englewood, Colorado 80112. The address of MultiSource Services, Inc. is 1700 Lincoln Street, Denver, Colorado 80203. The address of Oppenheimer Bond Fund For Growth, Rochester Fund Municipals and Limited Term New York Municipal Fund is 350 Linden Oaks, Rochester, New York 14625-2807. Name & Current Position with Other Business and Connections OpCap Advisors During the Past Two Years - ------------------------ --------------------------- Robert J. Bluestone, Director of Fixed Income Management Managing Director of Oppenheimer Capital; Director of Oppenheimer Capital Trust Company. Pierre Dariron, Portfolio Manager President, Oppenheimer Capital International Division. Thomas E. Duggan, General Counsel & Secretary Managing Director & General Counsel of Oppenheimer Capital; Assistant Secretary of Oppenheimer Financial Corp; General Counsel of Oppenheimer Capital Limited. Linda S. Ferrante, Portfolio Manager Managing Director of Oppenheimer Capital. Bernard H. Garil, President Senior Vice President of Oppenheimer Capital and Oppenheimer & Co., Inc; Director of Oppenheimer Capital Trust Company. John Giusio, Portfolio Manager Vice President of Oppenheimer Capital. Richard J. Glasebrook, II, Portfolio Manager Managing Director of Oppenheimer Capital. Colin Glinsman, Portfolio Manager Senior Vice President of Oppen-heimer Capital. Louis Goldstein, Assistant Portfolio Manager Senior Vice President of Oppen-heimer Capital. Matthew Greenwald, Portfolio Manager Vice President of Oppenheimer Capital. Vikki Y. Hanges, Portfolio Manager Vice President of Oppenheimer Capital. Joseph M. LaMotta, Chairman Chairman and Chief Executive Officer of Oppenheimer Capital; Director & Executive Vice President of Oppenheimer Financial Corp. and Oppenheimer Group, Inc.; General Partner of Oppenheimer & Co., L.P.; Director of Oppenheimer Capital Trust Company; Director and President of Oppenheimer Capital Limited. George A. Long, Chief Investment Officer President of Oppenheimer Capital. Elisa A. Mazen, Portfolio Manager Vice President of Oppenheimer Capital International Division. Timothy McCormack, Portfolio Manager Vice President of Oppenheimer Capital; formerly Assistant Vice President of Oppenheimer Capital. Susan Murphy, President of an affiliate President of OCC Cash Management Services Division and Oppenheimer Capital Trust Company; Senior Vice President of Oppenheimer Capital. Eileen Rominger, Portfolio Manager Managing Director of Oppenheimer Capital. Sheldon M. Siegel, Treasurer and Chief Financial Officer Managing Director/Treasurer/Chief Financial Officer of Oppenheimer Capital; Director of Oppenheimer Capital Trust Company; Treasurer and Chief Financial Officer of Oppenheimer Capital Limited. Jeffrey Whittington, Portfolio Manager Senior Vice President of Oppenheimer Capital. The address of OpCap Advisors is 200 Liberty Street, New York, New York 10281. For information as to the business, profession, vocation or employment of a substantial nature of the officers of Oppenheimer Capital, reference is made to Form ADV filed by OpCap Advisors, under the Investment Advisers Act of 1940, which is incorporated herein by reference. Item 29. Principal Underwriter - -------- --------------------- (a) OppenheimerFunds Distributor, Inc. is the Distributor of Registrant's shares. It is also the Distributor of each of the other registered open-end investment companies for which OppenheimerFunds, Inc. is the investment adviser, as described in Part A and B of this Registration Statement and listed in Item 28(b) above. (b) The directors and officers of the Registrant's principal underwriter are:
Positions and Name & Principal Positions & Offices Offices with Business Address with Underwriter Registrant - ---------------- ------------------- --------- George Clarence Bowen+ Vice President & Treasurer Vice President and Treasurer of the NY- based Oppenheimer funds / Vice President, Secretary and Treasurer of the Denver-based Oppenheimer funds Julie Bowers Vice President None 21 Dreamwold Road Scituate, MA 02066 Peter W. Brennan Vice President None 1940 Cotswold Drive Orlando, FL 32825 Maryann Bruce* Senior Vice President - None Director - Financial Institution Div. Robert Coli Vice President None 12 White Tail Lane Bedminster, NJ 07921 Ronald T. Collins Vice President None 710-3 E. Ponce DeLeon Ave. Decatur, GA 30030 Bill Coughlin Vice President None 3425-1/2 Irving Avenue So. Minneapolis, MN 55408 Mary Crooks+ Senior Vice President None E. Drew Devereaux ++ Assistant Vice President None Andrew John Donohue* Executive Vice Secretary of President, General the New York- Counsel and Director based Oppenheimer funds/Vice President of the Denver- based Oppenheimer funds Wendy H. Ehrlich Vice President None 4 Craig Street Jericho, NY 11753 Kent Elwell Vice President None 41 Craig Place Cranford, NJ 07016 John Ewalt Vice President None 2301 Overview Dr. NE Tacoma, WA 98422 Katherine P. Feld* Vice President & Secretary None Mark Ferro Vice President None 43 Market Street Breezy Point, NY 11697 Ronald H. Fielding++ Vice President; Chairman: Rochester Division None Reed F. Finley Vice President - None 320 E. Maple, Ste. 254 Financial Institution Div. Birmingham, MI 48009 Wendy Fishler* Vice President - None Financial Institution Div. Ronald R. Foster Senior Vice President None 139 Avant Lane Cincinatti, OH 45249 Patricia Gadecki Vice President None 3906 Americana Drive Tampa, FL 3334 Luiggino Galletto Vice President None 10239 Rougemont Lane Charlotte, NC 28277 Mark Giles Vice President - None 5506 Bryn Mawr Financial Institution Div. Dallas, TX 75209 Ralph Grant* Vice President/National None Sales Manager - Financial Institution Div. Sharon Hamilton Vice President None 720 N. Juanita Ave. - #1 Redondo Beach, CA 90277 Mark D. Johnson Vice President None 7512 Cromwell Dr. Apt 1 Clayton, MO 63105 Michael Keogh* Vice President None Richard Klein Vice President None 4820 Fremont Avenue So. Minneapolis, MN 55409 Ilene Kutno* Vice President - None Director - Regional Sales Wayne A. LeBlang Senior Vice President - None 23 Fox Trail Director Eastern Div. Lincolnshire, IL 60069 Dawn Lind Vice President - None 7 Maize Court Financial Institution Div. Melville, NY 11747 James Loehle Vice President None 30 John Street Cranford, NJ 07016 John McDonough Vice President None P.O. Box 760 50 Riverview Road New Castle, NH 03854 Laura Mulhall* Senior Vice President - None Director of Key Accounts Charles Murray Vice President None 50 Deerwood Drive Littleton, CO 80127 Wendy Murray Vice President None 114-B Larchmont Acres West Larchmont, NY 10538 Joseph Norton Vice President None 2518 Fillmore Street Apt. 1 San Francisco, CA 94115 Patrick Palmer Vice President None 958 Blue Mountain Cr. West Lake Village, CA 91362 Kevin Parchinski Vice President None 1105 Harney St., #310 Omaha, NE 68102 Randall Payne Vice President - None 1307 Wandering Way Dr. Financial Institution Div. Charlotte, NC 28226 Gayle Pereira Vice President None 2707 Via Arboleda San Clemente, CA 92672 Charles K. Pettit Vice President None 22 Fall Meadow Dr. Pittsford, NY 14534 Bill Presutti Vice President None 1777 Larimer St. #807 Denver, CO 80202 Tilghman G. Pitts, III* Chairman & Director None Elaine Puleo* Vice President - None Financial Institution Div., Director - Key Accounts Minnie Ra Vice President - None 0895 Thirty-First Ave. Financial Institution Div. Apt. 4 San Francisco, CA 94121 Michael Raso Vice President None 30 Hommocks Road Apt. 30 Larchmont, NY 10538 John C. Reinhardt ++ Vice President None Ian Robertson Vice President None 4204 Summit Way Marietta, GA 30066 Michael S. Rosen++ Vice President, President: Rochester Division None Kenneth Rosenson Vice President None 3802 Knickerbocker Place Apt. 3D Indianapolis, IN 46240 James Ruff* President None Timothy Schoeffler Vice President None 1717 Fox Hall Road Wasington, DC 20007 Michael Sciortino Vice President None 3114 Hickory Run Sugarland, TX 77479 Robert Shore Vice President - None 26 Baroness Lane Financial Institution Div. Laguna Niguel, CA 92677 Peggy Spilker ++ Vice President None George Sweeney Vice President None 1855 O'Hara Lane Middletown, PA 17057 Scott McGregor Tatum Vice President None 7123 Cornelia Lane Dallas, TX 75214 David G. Thomas Vice President - None 111 South Joliet Circle Financial Institution Div. #304 Aurora, CO 80112 Philip Trimble Vice President None 2213 West Homer Chicago, IL 60647 Gary Paul Tyc+ Assistant Treasurer None Mark Stephen Vandehey+ Vice President None
* Two World Trade Center, New York, NY 10048-0203 + 6803 South Tuscon Way, Englewood, CO 80112 ++ 350 Linden Oaks, Rochester, NY 14625-2807 (the "Rochester Division") (c) Not applicable. Item 30. Location of Accounts and Records - -------- -------------------------------- The accounts, books and other documents required to be maintained by Registrant pursuant to Section 31(a) of the Investment Company Act of 1940 and rules promulgated thereunder are in the possession of OppenheimerFunds, Inc. at its offices at 6803 South Tucson Way, Englewood, Colorado 80112 and Two World Trade Center, New York, New York 10048-0203 Item 31. Management Services - ------- ------------------- Not Applicable. Item 32. Undertakings - ------- ------------ (a) Not applicable. (b) Not applicable. (c) Not applicable. (d) Not applicable. SIGNATURES Pursuant to the requirements of the Securities Act of 1933 and/or the Investment Company Act of 1940, the Registrant has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of New York and State of New York on the 19th day of February, 1997. QUEST FOR VALUE DUAL PURPOSE FUND, INC. By: /s/ Joseph La Motta Joseph La Motta, President Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed below by the following persons in the capacities and on the dates indicated:
Signatures Title Date /s/ Joseph La Motta Chairman of the February 19, 1997 ______________________ Board of Directors, Joseph La Motta Principal Executive Officer and President /s/ Sheldon Siegel ______________________ Treasurer and Principal February 19, 1997 Sheldon Siegel Financial and Accounting Officer /s/ Eugene Brody ______________________ Director February 19, 1997 Eugene Brody /s/ George D. Langdon ______________________ Director February 19, 1997 George D. Langdon /s/ George Loft ______________________ Director February 19, 1997 George Loft /s/ Pamela W. McCann ______________________ Director February 19, 1997 Pamela W. McCann /s/ Thomas W. Murnane ______________________ Director February 19, 1997 Thomas W. Murnane /s/ Lawrence M. Sherman ______________________ Director February 19, 1997 Lawrence M. Sherman
QUEST FOR VALUE DUAL PURPOSE FUND, INC. INDEX TO EXHIBITS Exhibit Number Description 24(a)(8) Independent Accountants' Consent 24(b)(1) Articles of Amendment and Restatement 24(b)(2) Amended By-Laws 24(b)(8) Custody Agreement 24(b)(10)(b) Opinion and Consent of Counsel 24(b)(13)(b) Investment Letter 24(b)(16) Performance Computation Schedule 24(b)(17)(1) Financial Data Schedule (Unaudited) EX-23 2 INDEPENDENT AUDITORS CONSENT Consent of Independent Accountants We hereby consent to the use in the Statement of Additional Information constituting part of this Pre-Effective Amendment No. 2 to the registration statement on Form N-1A (the "Registration Statement") of our report dated January 22, 1997, relating to the financial statements and financial highlights of Quest for Value Dual Purpose Fund, Inc. (to be named Oppenheimer Quest Capital Value Fund, Inc.) which appears in such Statement of Additional Information, and to the incorporation by reference of our report into the Prospectus which constitutes part of this Registration Statement. We also consent to the reference to us under the heading and to the reference to us under the heading "Financial Highlights" in such Prospectus. /s/ Price Waterhouse LLP - -------------------------- PRICE WATERHOUSE LLP 1177 Avenue of the Americas New York, New York February 20, 1997 PROSP\capitcon.#1 EX-99 3 ARTICLES OF AMENDMENT AND RESTATEMENT ARTICLES OF AMENDMENT AND RESTATEMENT OF QUEST FOR VALUE DUAL PURPOSE FUND, INC. Quest for Value Dual Purpose Fund, Inc., a Maryland corporation (the Corporation), hereby certifies to the State Department of Assessments and Taxation of Maryland that: FIRST: The charter of the Corporation is hereby amended by: Changing and reclassifying each of the shares of Common Stock (par value $.01 per share) of the Corporation, which is issued at the close of business on the effective date of this amendment, into one share of Common Stock of the Oppenheimer Quest Capital Value Fund Series of Common Stock (par value $.0001 per share) and by transferring to the account designated capital in excess of par value $.0099 for each share of Common Stock outstanding immediately after the change and reclassification. SECOND: The charter of the Corporation is hereby amended and restated to read in its entirety as follows: OPPENHEIMER QUEST CAPITAL VALUE FUND, INC. ARTICLES OF INCORPORATION ARTICLE I The name of the Corporation is Oppenheimer Quest Capital Value Fund, Inc. ARTICLE II (a) The purposes for which the Corporation is formed and the business and objects to be carried on and promoted by it are: (1) To engage primarily in the business of investing, reinvesting or trading in securities as an investment company classified under the Investment Company Act of 1940 as an open-end, management company. (2) To engage in any one or more businesses or transactions, or to acquire all or any portion of any entity engaged in any one or more businesses or transactions, which the Board of Directors may from time to time authorize or approve, whether or not related to the business described elsewhere in this article or to any other business at the time or theretofore engaged in by the Corporation. (b) The foregoing enumerated purposes and objects shall be in no way limited or restricted by reference to, or inference from, the terms of any other clause of this or any other Article of the Charter of the Corporation, and each shall be regarded as independent; and they are intended to be and shall be construed as powers as well as purposes and objects of the Corporation and shall be in addition to and not in limitation of the general powers of corporations under the General Laws of the State of Maryland. ARTICLE III The post office address of the principal office of the Corporation in this State is c/o The Corporation Trust Incorporated, 32 South Street, Baltimore, Maryland 21202. ARTICLE IV THE name of the resident agent of the Corporation in this State is The Corporation Trust Incorporated, a corporation of this state and the post office address of the resident agent is 32 South Street, Baltimore, Maryland 21202. ARTICLE V (a) The total number of shares of stock of all classes and series which the Corporation initially has authority to issue is 1,000,000,000 (one billion) shares of common stock (par value $.0001 per share), amounting in aggregate par value to $100,000 (one hundred thousand). Of the authorized shares of capital stock of the Corporation, 500,000,000 (five hundred million) shares are further initially classified as a series of Common Stock designated the Oppenheimer Quest Capital Value Fund . This series of Common Stock shall initially have three classes of shares, designated Class A, Class B and Class C, consisting, until further changed, of 300,000,000 (three hundred million) Class A shares, 100,000,000(one hundred million) Class B shares and 100,000,000 (one hundred million) Class C shares. The Board of Directors may classify and reclassify any unissued shares of capital stock by setting or changing in any one or more respects the preferences, conversion or other rights, voting powers, restrictions, limitations as to dividends, qualifications, or terms or conditions of redemption of such shares of stock. (b) Unless otherwise prohibited by law, so long as the Corporation is registered as an open-end company under the Investment Company Act of 1940, the Board of Directors shall have the power and authority, without the approval of the holders of any outstanding shares, to increase or decrease the number of shares of capital stock, or the number of shares of capital stock of any class or series, that the Corporation has authority to issue. (c) The following is a description of the preferences, conversion and other rights, voting powers, restrictions, limitations as to dividends, qualifications, and terms and conditions of redemption of the Oppenheimer Quest Capital Value Fund, and any additional series of Common Stock of the Corporation (unless otherwise provided in the articles supplementary or other charter document classifying or reclassifying such series) and Class A, Class B and Class C of each series of Common Stock of the Corporation. (1) All consideration received by the Corporation from the issue or sale of shares of a particular series of Common Stock, together with all assets in which such consideration is invested or reinvested, all income, earnings, profits and proceeds thereof, including any proceeds derived from the sale, exchange or liquidation of such assets, and any funds or payments derived from any investment or reinvestment of such proceeds in whatever form the same may be, shall irrevocably belong to that series for all purposes and shall be so recorded upon the books of account of the Corporation. Such consideration, assets, income, earnings, profits and proceeds, together with any items allocated as provided in the following sentence, are hereinafter referred to collectively as the assets belonging to that series. In the event that there are any assets, income, profits or proceeds which are not identifiable as belonging to a particular series of Common Stock, such items shall be allocated by or under the supervision of the Board of Directors to and among one or more of the series of Common Stock from time to time classified or reclassified, in such manner and on such basis as the Board of Directors, in it sole discretion, deems fair and equitable. Each such allocation shall be conclusive and binding for all purposes. No holder of a particular series of Common Stock shall have any right or claim against the assets belonging to any other series, except as a holder of the shares of such other series. (2) The assets belonging to each series of Common Stock shall be charged with the liabilities of the Corporation in respect of that series and all expenses, costs, charges and reserves attributable to that series. Any liabilities, expenses, costs, charges or reserves of the Corporation which are attributable to more than one series of Common Stock, or are not identifiable as pertaining to any series, shall be allocated and charged by or under the supervision of the Board of Directors to and among one or more of the series of Common Stock from time to time classified or reclassified, in such manner and on such basis as the Board of Directors, in its sole discretion, deems fair and equitable. Each such allocation shall be conclusive and binding for all purposes. The liabilities, expenses, costs, charges and reserves charged to a series of Common Stock are hereinafter referred to collectively as the liabilities of that series. All persons who have extended credit with respect to, or who have a claim or contract in respect of, a particular series of Common Stock shall look only to the assets belonging to that series for payment or satisfaction of such credit, claim or contract. (3) The net asset value per share of a particular series of Common Stock shall be the quotient obtained by dividing the value of the net assets of the series (being the value of the assets belonging to that series less the liabilities of that series) by the total number of shares of that series outstanding, all as determined by or under the discretion of the Board of Directors in accordance with generally accepted accounting principles and the Investment Company Act of 1940. Subject to the applicable provisions of the Investment Company Act of 1940, the Board of Directors, in its sole discretion, may prescribe and shall set forth in the by-laws of the Corporation, or in a duly adopted resolution of the Board of Directors, such bases and times for determining the current net asset value per share of each series of Common Stock and the net income attributable to such series, as the Board of Directors deems necessary or desirable. The Board of Directors shall have full discretion, to the extent not inconsistent with the Investment Company Act of 1940, to determine whether any moneys or other assets received by the Corporation shall be treated as income or capital and whether any item of expense shall be charged to income or capital, and each such determination shall be conclusive and binding for all purposes. (4) Subject to the provisions of law and any preferences of any class or series of stock from time to time classified or reclassified, dividends, including dividends payable in shares of another class or series of the Corporation s stock, may be paid on a particular class or series of Common Stock of the Corporation at such time and in such amounts as the Board of Directors may deem advisable. Dividends and other distributions on the shares of a particular series of Common Stock shall be paid only out of the assets belonging to that series after providing for the liabilities of that series. (5) Each holder of Common Stock shall have one vote for each share standing in his name on the books of the Corporation, irrespective of the class or series thereof, and the exclusive voting power for all purposes shall be vested in the holders of the Common Stock. All classes and series of Common Stock shall vote together as a single class; provided, however, that as to any matter with respect to which a separate vote of a particular class or series is required by the Investment Company Act of 1940 or the Maryland General Corporation Law, such requirement shall apply and, in that event, the other classes and series entitled to vote on the matter shall vote together as a single class; and provided, further, that the holders of a particular class or series of Common Stock shall not be entitled to vote on any matter which does not affect any interest of that class or series (as determined by the Board of Directors in its sole discretion), including liquidation of another class or series, except as otherwise required by the Investment Company Act of 1940 or the Maryland General Corporation Law. (6) Each holder of Common Stock shall have the right to require the Corporation to redeem all or any part of his shares of any class or series at a redemption price equal to the current net asset value per share of that class or series which is next computed after receipt of a tender of such shares for redemption, less such redemption fee or deferred sales charge, if any, as the Board of Directors may from time to time establish in accordance with the Investment Company Act of 1940 and the Rules of Fair Practice adopted by the National Association of Securities Dealers, Inc. Payment of the redemption price shall be made by the Corporation only from the assets belonging to the series whose shares are being redeemed. The redemption price shall be paid in cash; provided, however, that if the Board of Directors determines, which determination shall be conclusive, that conditions exist which make payment wholly in cash unwise or undesirable, the Corporation may, to the extent and in the manner permitted by law, make payment wholly or partly in securities or other assets, at the value of such securities or other assets used in such determination of current net asset value. Notwithstanding the foregoing, the Corporation may suspend the right of holders of any series of Common Stock to require the Corporation to redeem their shares, or postpone the date of payment or satisfaction upon such redemption for more than seven days after tender of such shares for redemption, during any period or at any time when and to the extent permitted under the Investment Company Act of 1940. (7) To the extent and in the manner permitted by the Investment Company Act of 1940 and the Maryland General Corporation Law, the Board of Directors may cause the Corporation to redeem, at their current net asset value, the shares of any series of Common Stock held in the account of any stockholder having, because of redemptions or exchanges, an aggregate net asset value which is less than the minimum initial investment in that series specified by the Board of Directors from time to time in its sole discretion. The Board of Directors of the Corporation may also, from time to time in its discretion, authorize the Corporation to require the redemption of all or any part of the outstanding shares of its capital stock of any series for the proportionate interest in the assets of the Corporation represented by those shares or the cash equivalent thereof (which shall be the net asset value of those shares determined as provided hereof), upon the sending of written or telegraphic notice of redemption to each holder whose shares are so redeemed and upon such terms and conditions as the Board of Directors of the Corporation shall deem advisable. (8) In the event of any liquidation, dissolution or winding up of the Corporation, whether voluntary or involuntary, or of the liquidation of a particular series of Common Stock, the holders of each series that is being liquidated shall be entitled, after payment or provision for payment of the liabilities of that series and the amount to which the holders of any class of that series shall be entitled, as a class, to share ratably in the remaining assets belonging to the series. The holders of shares of any particular series shall not be entitled thereby to any distribution upon the liquidation of any other series. The liquidation of any series of Common Stock of which there are shares then outstanding shall be approved by the vote of a majority (as defined in the Investment Company Act of 1940) of the outstanding shares of that series, and without the vote of the holders of shares of any other series of Common Stock. (9) Subject to compliance with the Investment Company Act of 1940, the Board of Directors shall have authority to provide that holders of any series of Common Stock shall have the right to exchange their shares for shares of one or more other series in accordance with such requirements and procedures as may be established by the Board of Directors. (10) Except to the extent provided otherwise by the charter of the Corporation, the Class A, Class B and Class C shares of each series of Common Stock shall represent an equal proportionate interest in the assets belonging to that series (subject to the liabilities of that series) and each share of a particular series shall have identical voting, dividend, liquidation and other rights; provided, however, that notwithstanding anything in the charter of the Corporation to the contrary: (i) The Class A, Class B and Class C shares may be issued and sold subject to such different sales or charges, whether initial, deferred or contingent, or any combination thereof, as the Board of Directors may from time to time establish in accordance with the Investment Company Act of 1940 and the Rules of Fair Practice adopted by the National Association of Securities Dealers, Inc. (ii) Expenses, costs and charges which are determined by or under the supervision of the Board of Directors to be attributable to a particular class of a series may be charged to that class and appropriately reflected in the net asset value of, or dividends payable on, the shares of that class of the series. (iii) The Class A, Class B and Class C shares of a particular series may have such different exchange and conversion rights as the Board of Directors shall provide in compliance with the Investment Company Act of 1940. (d) Subject to the foregoing and to the Investment Company Act of 1940, the power of the Board of Directors to classify and reclassify any of the shares of capital stock shall include, without limitation, subject to the provisions of the charter of the Corporation, authority to classify or reclassify any unissued shares of such stock into one or more classes or series of preferred stock, preference stock, special stock or other stock, and to divide and classify shares of any class or series into one or more classes or series of such class or series, by determining, fixing or altering one or more of the following: (1) The distinctive designation of such class or series and the number of shares to constitute such class or series; provided that, unless otherwise prohibited by the terms of such or any other class or series, the number of shares of any class or series may be decreased by the Board of Directors in connection with any classification or reclassification of unissued shares and the number of shares of such class or series may be increased by the Board of Directors in connection with any such classification or reclassification, and any shares of any class or series which have been redeemed, purchased, otherwise acquired or converted into shares of any other class or series shall become part of the authorized capital stock and be subject to classification and reclassification as herein provided. (2) Whether or not and, if so, the rates, amounts and times at which, and the conditions under which, dividends shall be payable on shares of such class or series, whether any such dividends shall rank senior or junior to or on a parity with the dividends payable on any other class or series of stock, and the status of any such dividends as cumulative, cumulative to a limited extent or non-cumulative and as participating or non-participating. (3) Whether or not shares of such class or series shall have voting rights, in addition to any voting rights provided by law and, if so, the terms of such voting rights. (4) Whether or not shares of such class or series shall have conversion or exchange privileges and, if so, the terms and conditions thereof, including provision for adjustment of the conversion or exchange rate in such events or at such times as the Board of Directors shall determine. (5) Whether or not shares of such class or series shall be subject to redemption and, if so, the terms and conditions of such redemption, including the date or dates upon or after which they shall be redeemable and the amount per share payable in case of redemption, which amount may vary under different conditions and at different redemption dates; and whether or not there shall be any sinking fund or purchase account in respect thereof and, if so, the terms thereof. (6) The rights of the holders of shares of such class or series upon the liquidation, dissolution or winding up of the affairs of, or upon any distribution of the assets of, the Corporation, which rights may vary depending upon whether such liquidation, dissolution or winding up is voluntary or involuntary and, if voluntary, may vary at different dates, and whether such rights shall rank senior or junior to or on a parity with such rights of any other class or series of stock. (7) Whether or not there shall be any limitations applicable, while shares of such class or series are outstanding, upon the payment of dividends or making of distributions on, or the acquisition of, or the use of monies for purchase or redemption of, any stock of the Corporation, or upon any other action of the Corporation, including action under this paragraph and, if so, the terms and conditions thereof. (8) Any other preferences, rights, restrictions, including restrictions on transferability, and qualifications of shares of such class or series, not inconsistent with law and the charter of the Corporation. (e) For the purposes hereof and of any articles supplementary to the charter providing for the classification or reclassification of any shares of capital stock or of any other charter document of the Corporation (unless otherwise provided in any such articles or document), any class or series of stock of the Corporation shall be deemed to rank: (1) prior to another class or series either as to dividends or upon liquidation, if the holders of such class or series be entitled to the receipt of dividends or of amounts distributable on liquidation, dissolution or winding up, as the case may be, in preference or priority to holders of such other class or series; (2) on a parity with another class or series either as to dividends or upon liquidation, whether or not the dividend rates, dividend payment dates or redemption or liquidation price per share thereof be different from those of such others, if the holders of such class or series of stock shall be entitled to receipt of dividends or amounts distributable upon liquidation, dissolution or winding up, as the case may be, in proportion to their respective dividend rates or redemption or liquidation prices, without preference or priority over the holders of such other class or series; and (3) junior to another class or series either as to dividends or upon liquidation, if the rights of the holders of such class or series shall be subject or subordinate to the rights of the holders of such other class or series in respect of the receipt of dividends or the amounts distributable upon liquidation, dissolution or winding up, as the case may be. (f) The Corporation may issue and sell fractions of shares of capital stock having pro rata all the rights of full shares, including, without limitation, the right to vote and to receive dividends, and wherever the words share or shares are used in the charter or by-laws of the Corporation, they shall be deemed to include fractions of shares where the context does not clearly indicate that only full shares are intended. (g) The Corporation shall not be obligated to issue certificates representing shares of capital stock of any class or series. At the time of issue or transfer of shares without certificates, the Corporation shall provide the stockholder with such information as may be required under the Maryland General Corporation Law. ARTICLE SIX The number of directors of the Corporation shall be five, which number may be increased or decreased pursuant to the by- laws of the Corporation, but shall never be less than the minimum number permitted by the General Laws of the State of Maryland now or hereafter in force. The names of the directors who will serve until the next annual meeting and until their successors are elected and qualified are as follows: Paul Clinton Thomas Courtney Lacy Herrmann George Loft Bridget A. Macaskill ARTICLE SEVEN (a) The following provisions are hereby adopted for the purpose of defining, limiting and regulating the powers of the Corporation and of the directors and stockholders: (1) The Board of Directors is hereby empowered to authorize the issuance from time to time of shares of its stock of any class or series, whether now or hereafter authorized, or securities convertible into shares of its stock of any class or series, whether now or hereafter authorized, for such consideration as may be deemed advisable by the Board of Directors and without any action by the stockholders. (2) No holder of any stock or any other securities of the Corporation, whether now or hereafter authorized, shall have any preemptive right to subscribe for or purchase any stock or any other securities of the Corporation other than such, if any, as the Board of Directors, in its sole discretion, may determine and at such price or prices and upon such other terms as the Board of Directors, in its sole discretion, may fix; and any stock or other securities which the Board of Directors may determine to offer for subscription may, as the Board of Directors in its sole discretion shall determine, be offered to the holders of any class, series or type of stock or other securities at the time outstanding to the exclusion of the holders of any or all other classes, series or types of stock or other securities at the time outstanding. (3) The Board of Directors of the Corporation shall, consistent with applicable law, have power in its sole discretion to determine from time to time in accordance with sound accounting practice or other reasonable valuation methods what constitutes annual or other net profits, earnings, surplus or net assets in excess of capital; to determine that retained earnings or surplus shall remain in the hands of the Corporation; to set apart out of any funds of the Corporation such reserve or reserves in such amount or amounts and for such proper purpose or purposes as it shall determine and to abolish any such reserve or any part thereof; to distribute and pay distributions or dividends in stock, cash or other securities or property, out of surplus or any other funds or amounts legally available therefor, at such times and to the stockholders of record on such dates as it may, from time to time, determine; and to determine whether and to what extent and at what times and places and under what conditions and regulations the books, accounts and documents of the Corporation, or any of them, shall be open to the inspection of stockholders, except as otherwise provided by statue of the by-laws of the Corporation, and, except as so provided, no stockholder shall have any right to inspect any book, account or document of the Corporation unless authorized to do so by resolution of the Board of Directors. (4) Notwithstanding any provision of law requiring the authorization of any action by a greater proportion than a majority of the total number of shares of capital stock or of any class or series of capital stock, such action shall be valid and effective if authorized by the affirmative vote of the holders of a majority of the total number of shares of capital stock or of such class or series, as the case may be, outstanding and entitled to vote thereon, except as otherwise provided in the charter of the Corporation. At a meeting of stockholders the presence in person or by proxy of stockholders entitled to cast a majority of all the votes entitled to be cast on any matter with respect to which one or more classes or series of capital stock are entitled to vote as a separate class shall constitute a quorum of such separate class for action on that matter. Whether or not a quorum of such a separate class for action on any such matter is present, a meeting of stockholders convened on the date for which it was called may be adjourned as to that matter from time to time without further notice by a majority vote of the stockholders of the separate class present in person or by proxy to a date not more than 120 days after the original record date. (5) The Corporation shall indemnify (i) its currently acting and its former directors and officers, whether serving the Corporation or at its request any other entity, to the full extent required or permitted by the General Laws of the State of Maryland now or hereafter in force, including the advance of expenses under the procedures and to the full extent permitted by law, and (ii) other employees and agents to such extent as shall be authorized by the Board of Directors or the by-laws of the Corporation and as permitted by law. The foregoing rights of indemnification shall not be exclusive of any other rights to which those seeking indemnification may be entitled. The Board of Directors may take such action as is necessary to carry out these indemnification provisions and is expressly empowered to adopt, approve and amend from time to time such by-laws, resolutions or contracts implementing such provisions or such further indemnification arrangements as may be permitted by law. The right of indemnification provided hereunder shall not be construed to protect any director or officer of the Corporation against any liability to the Corporation or its security holders to which he would otherwise be subject by reason of willful misfeasance, bad faith, gross negligence or reckless disregard of the duties involved in the conduct of his office. (6) To the fullest extent permitted by Maryland statutory or decisional law, as amended or interpreted, no director or officer of the Corporation shall be personally liable to the Corporation or its stockholders for money damages; provided, however, that this provision shall not be construed to protect any director or officer against any liability to the Corporation or its security holders to which he would otherwise be subject by reason of willful misfeasance, bad faith, gross negligence or reckless disregard of the duties involved in the conduct of his office. No amendment, modification or repeal of this provision shall adversely affect any right or protection provided hereunder that exists at the time of such amendment, modification or repeal. (7) The Corporation reserves the right from time to time to make any amendments of its charter which may now or hereafter be authorized by law, including any amendments changing the terms or contract rights, as expressly set forth in its charter, of any of its outstanding stock by classification, reclassification or otherwise. (b) The enumeration and definition of particular powers of the Board of Directors included in the foregoing shall in no way be limited or restricted by reference to or inference from the terms of any other clause of this or any other article of the charter of the Corporation, or construed as or deemed by inference or otherwise in any manner to exclude or limit any powers conferred upon the Board of Directors under the General Laws of the State of Maryland now or hereafter in force. ARTICLE EIGHT The duration of the Corporation shall be perpetual. THIRD: The provisions hereunder set forth are all the provisions of the charter of the Corporation currently in effect. FOURTH: (a) As of immediately before the amendment the total number of shares of stock of all classes which the Corporation has authority to issue is 40,000,000 shares of capital stock, of which 20,000,000 shares are Income Shares (par value $.01 per share) and 20,000,000 shares are Capital Shares (par value $.01 per share). (b) As amended the total number of shares of stock of all classes which the Corporation has authority to issue is 1,000,000,000 shares, of which 500,000,000 shares are Common Stock --- Oppenheimer Quest Capital Value Fund Series (par value $.0001 per share), consisting of 300,000,000 Class A shares, 100,000,000 Class B shares and 100,000,000 Class C shares and 500,000,000 shares are undesignated as to class or series (par value $.0001 per share). (c) The aggregate par value of all shares having a par value is $400,000 before the amendment and $100,000 as amended. (d) The preferences, conversion or other rights, voting powers, restrictions, limitations as to dividends, qualifications, and terms and conditions of redemption of each class of capital stock of the Corporation have been changed to provide that all shares of capital stock are redeemable shares of an open-end management investment company and as specified in Article V above. FIFTH: In accordance with the provisions of section 2-604 of the General Corporation Law of the State of Maryland, the foregoing amendment was duly approved by a majority of the entire Board of Directors and by a vote of two-thirds (2/3) of the outstanding stock entitled to vote on the matter. SIXTH: These Articles of Amendment and Restatement shall become effective upon the latter to occur of (1) 12:01 a.m. on March 3, 1997 or (2) the effectiveness of the Corporation's Registration Statement on Form N-1A (file no. 333-16881), as conclusively determined by the U.S. Securities and Exchange Commission (the "Commission"); provided, however, that these Articles of Amendment and Restatement may be abandoned by a majority vote of the Corporation's Board of Directors on or before March __, 1997 if such registration shall not have been declared effective by the Commission by the time such abandonment is approved. IN WITNESS WHEREOF, the Corporation has caused these present to be signed in its name and on its behalf by its President and witnessed by its Secretary on this _____ day of __________, 1996. QUEST FOR VALUE DUAL PURPOSE FUND, INC. By: /s/ Joseph LaMotta Joseph LaMotta, President Witness: /s/ Deborah Kaback Deborah Kaback, Secretary THE UNDERSIGNED, President of Quest For Value Dual Purpose Fund, Inc., who executed on behalf of the Corporation the foregoing Articles of Amendment and Restatement of which this certificate is made a part, hereby acknowledges in the name and on behalf of said Corporation the foregoing Articles of Amendment and Restatement to be the corporate act of said Corporation and hereby certifies that to the best of his knowledge, information and belief the matters set forth therein with respect to the authorization and approval thereof are true in all material respects under the penalties of perjury. /s/ Joseph M. LaMotta Joseph M. LaMotta President orgzn\qcap.cha EX-3 4 AMENDED BY-LAWS (Revised 2/28/97) BY-LAWS OF OPPENHEIMER QUEST CAPITAL VALUE FUND, INC. (the "Corporation") ARTICLE 1 Fiscal Year and Offices Section 1. Fiscal Year. Unless otherwise provided by resolution of the board of directors, the fiscal year of the Corporation shall begin January 1 and end on the last day of December. Section 2. Registered Office. The registered office of the Corporation in Maryland shall be located at 32 South Street, Baltimore, Maryland 21202, and the name of its resident agent at such address is The Corporation Trust Incorporated. Section 3. Other Offices. The Corporation shall have the power to open offices for the conduct of its business, either within or outside the State of Maryland, at such places as the board of directors may from time to time designate. ARTICLE II Meetings of Stockholders Section 1. Place of Meeting. Meetings of stockholders may be held at the Corporation's principal office or at such other place as shall be fixed by resolution of the board of directors and stated in the notice of the meeting, or in a duly executed waiver of notice thereof. Section 2. Stockholder Meetings. Meetings of stockholders for any purpose or purposes may be called at any time by the chairman of the board or the president, or by a majority of the board of directors, and shall be called by the chairman of the board, president or secretary upon written request of the holders of shares entitled to cast not less than twenty-five percent of all the votes entitled to be cast at such meeting provided that (a) such request shall state the purposes of such meeting and the matters proposed to be acted on, and (b) the stockholders requesting such meeting shall have paid to the Corporation the reasonably estimated cost of preparing and mailing the notice thereof, which the secretary shall determine and specify to such stockholders. No meeting need be called to consider any matter which is substantially the same as a matter voted on at any meeting of the stockholders held during the preceding twelve months. Section 3. Notice. Not less than ten days before the date of the stockholders' meeting, the secretary shall cause to be mailed to each stockholder entitled to vote at such meeting at his address (as it appears on the records of the Corporation at the time of mailing) written notice stating the time and place of the meeting and, in the case of a special meeting of stockholders shall be limited to the purposes stated in the notice. Notice of any stockholders' meeting need not be given to any stockholder who shall sign a written waiver of such notice whether before or after the time of such meeting, or to any stockholder who shall attend such meeting in person or by proxy. Notice of adjournment of a stockholders' meeting to another time or place need not be given, if such time and place are announced at the meeting. Section 4. Record Date for Meetings. The board of directors may fix in advance a date not more than sixty days, nor less than ten days, prior to the date of any meeting of the stockholders as a record date for the determination of the stockholders entitled to receive notice of, and to vote at any meeting and any adjournment thereof; and in such case such stockholders and only such stockholders as shall be stockholders of record on the date so fixed shall be entitled to receive notice of and to vote at such meeting and any adjournment thereof, notwithstanding any transfer of any stock on the books of the Corporation after any such record date fixed as aforesaid. Section 5. Quorum. At any meeting of stockholders, the presence in person or by proxy of the holders of a majority of the aggregate number of shares of the Corporation at the time outstanding shall constitute a quorum for the transaction of business at the meeting, except that where any provision of law or the Articles of Incorporation require that the holders of any class of shares shall vote as a class, then a majority of the aggregate number of shares of that class at the time outstanding shall be necessary to constitute a quorum for the transaction of such business. If, however, such quorum shall not be present or represented at any meeting of stockholders, any officer entitled to preside at or act as secretary of such meeting shall have the power to adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum shall be present or represented. At such adjourned meeting at which a quorum shall be present or represented, any business may be transacted which might have been transacted at the meeting as originally noticed. Section 6. Voting. Each stockholder shall have one vote for each full share and a fractional vote for each fractional share of stock held by such stockholder on the record date set pursuant to Section 4 of this Article II on each matter submitted to a vote at a meeting of stockholders. Such vote may be made in person or by proxy. If no record date has been fixed for the determination of stockholders entitled to notice of or to vote at a meeting of stockholders, the record date for such determination shall be (a) at the close of business (i) on the day ten days before the day on which notice of the meeting is mailed or (ii) on the day sixty days before the meeting, whichever is the closer date to the meeting; or (b) if notice is waived by all stockholders entitled to notice of or to vote at the meeting, at the close of business on the tenth day next preceding the day on which the meeting is held. At all meetings of the stockholders at which a quorum is present, all matters shall be decided by majority vote of the shares of stock entitled to vote held by stockholders present in person or by proxy, unless the question is one which by express provision of the laws of the State of Maryland, the Investment Company Act of 1940, as from time to time amended, or the Articles of Incorporation, a different vote is required, in which case such express provision shall control the decision of such question. At all meetings of stockholders, unless the voting is conducted by inspectors, all questions relating to the qualifications of voters and the validity of proxies and the acceptance or rejection of votes shall be decided by the chairman of the meeting. Section 7. Voting - Proxies. The right to vote by proxy shall exist only if the instrument authorizing such proxy to act shall have been executed in writing by the stockholder himself or by his attorney thereunto duly authorized in writing. No proxy shall be voted after eleven months from its date unless the proxy provides for a longer period. Each proxy shall be in writing subscribed by the stockholder or his duly authorized attorney and shall be dated, but need not be sealed, witnessed or acknowledged. Proxies shall be delivered to the secretary of the Corporation or person acting as secretary of the meeting before being voted. A proxy with respect to stock held in the name of two or more persons shall be valid if executed by one of them unless at or prior to exercise of such proxy the Corporation receives a specific written notice to the contrary from any one of them. A proxy purporting to be executed by or on behalf of a stockholder shall be deemed valid unless challenged at or prior to its exercise. Section 8. Inspectors. At any election of directors, the board of directors prior thereto may, or if it has not so acted, the chairman of the meeting may appoint one or more inspectors of election who shall first subscribe an oath or affirmation to execute faithfully the duties of inspectors at such election with strict impartiality and according to the best of their ability, and shall after the election make a certificate of the result of the vote taken. No candidate for the office of director shall be appointed as an inspector. Section 9. Stock Ledger and List of Stockholders. It shall be the duty of the secretary or assistant secretary of the Corporation to cause an original or duplicate stock ledger to be maintained at the office of the Corporation's transfer agent. Such stock ledger may be in written form or any other form capable of being converted into written form within a reasonable time for visual inspection. Any one or more persons, each of whom has been a stockholder of record of the Corporation for more than six months next preceding such request, who owns or own in the aggregate 5% or more of the outstanding capital stock of the Corporation, may submit a written request to any officer of the Corporation or its resident agent in Maryland for a list of the stockholders of the Corporation. Within twenty days after such a request, there shall be prepared and filed at the Corporation's principal office a list containing the names and addresses of all stockholders of the corporation and the number of shares of each class held by each stockholder, certified as correct by an officer of the Corporation, by its stock transfer agent, or by its registrar. Section 10. Action Without Meeting. Any action to be taken by stockholders may be taken without a meeting if all stockholders entitled to vote on the matter consent to the action in writing, and the written consents are filed with the records of the meetings of stockholders. Such consent shall be treated for all purposes as a vote at a meeting. ARTICLE III Directors Section 1. General Powers. The business of the Corporation shall be under the direction of its board of directors, which may exercise all powers of the Corporation, except such as are by the laws of the State of Maryland, the Articles of Incorporation , or these By-laws conferred upon or reserved to the stockholders. All acts done by any meeting of the directors or by an person acting as a director, so long as his successor shall not have been duly elected or appointed, notwithstanding that it be afterwards discovered that there was some defect in the election of the directors or of such person acting as aforesaid or that they or any of them were disqualified, shall be as valid as if the directors or such other person, as the case may be, had been duly elected and were or was qualified to be directors or a director of the corporation. Section 2. Number and Term of Office. The number of directors which shall constitute the whole board shall be five, which number may be increased or decreased as provided in Section 4 of this Article. Each director elected shall hold office until his successor is elected and qualified. Directors need not be stockholders. Section 3. Election. Initially the directors shall be those persons named as such in the Corporation's Articles of Incorporation. Each director shall be elected by the vote of a majority of the shares entitled to elect such director, as provided in the Articles of Incorporation, present in person or by proxy at the meeting of the stockholders. Vacancies in the board of directors may be filled by a majority vote of the board of directors, if permitted by the Articles of Incorporation. A newly- created directorship may be filled only by a vote of the entire board of directors. Section 4. Increase or Decrease in Number of Directors; Removal of Directors. Subject to the Investment Company Act of 1940, the board of directors, by the vote of a majority of the entire board, may increase the number of directors to a number not exceeding ten, and may elect directors to fill the vacancies created by any such increase in the number of directors and to hold office until the next meeting of the stockholders called for the purpose of electing directors and until their successor are duly elected and qualify. The board of directors, by the vote of a majority of the entire board, may likewise decrease the number of directors to a number not less than three, but the tenure of office of any director shall not be affected by any such decrease made by the board. Any director may at any time be removed either with or without cause by resolution duly adopted by the affirmative votes of the holders of a majority of the shares of the Corporation present in person or by proxy at any meeting of stockholders provided that a quorum is present or by such larger vote as may be required by Maryland law. Any director may at any time be removed for cause by resolution duly adopted at any meeting of stockholders provided that a quorum is present or by such larger vote as may be required by Maryland law. Any director may at any time be removed for cause by resolution duly adopted at any meeting of the board of directors provided that notice thereof is contained in the notice of such meeting and that such resolution is adopted by the vote of at least two thirds of those directors whose removal is not proposed. Section 5. Place of Meeting. Meetings of the board of directors, regular or special, may be held at any place in or out of the State of Maryland as the board may from time to time determine. Section 6. Quorum. At all meetings of the board of directors a majority of the entire board of directors shall constitute a quorum for the transaction of business, and the action of a majority of the directors present at any meeting at which a quorum is present shall be the action of the board of directors unless the concurrence of a greater proportion is required for such action by the laws of the State of Maryland, the Investment Company Act of 1940, these By-laws or the Articles of Incorporation. If a quorum shall not be present at any meeting of directors, the directors present thereat may be a majority vote adjourn the meeting from time to time without notice other than announcement at the meeting, until a quorum shall be present. Section 7. Regular Meetings. Regular meetings of the board of directors may be held without notice at such time and place as shall from time to time be determined by the board of directors provided that notice of any change in the time or place of such meetings shall be sent promptly to each director not present at the meeting at which such change was made in the manner provided for notice of special meetings. Members of the board of directors or any committee designated thereby may participate in a meeting of such board or committee by means of a conference telephone call or similar communications equipment by means of which all persons participating in the meeting can hear one another at the same time, and participation by such means shall constitute presence in person at a meeting. Section 8. Special Meetings. Special meetings of the board of directors may be called by the chairman of the board or the president on one day's notice to each director. Special meetings shall be called by the chairman of the board, president or secretary in like manner and on like notice on the written request of two directors. Section 9. Informal Actions. Any action required or permitted to be taken at any meeting of the board of directors or of any committee thereof may be taken without a meeting, if a written consent to such action is signed in one or more counterparts by all members of the board or of such committee, as the case may be, and such written consent is filed with the minutes of proceedings of the board or committee. Section 10. Committees. The board of directors may by resolution passed by a majority of the entire board appoint from among its members an executive committee and other committees composed of two or more directors, and may delegate to such committees, in the intervals between meetings of the board of directors, any or all of the powers of the board of directors in the management of the business and affairs of the Corporation, except the powers to declare dividends, to issue stock or to recommend to stockholders any action requiring stockholder approval. Section 11. Action of Committees. In the absence of an appropriate resolution of the board of directors, each committee may adopt such rules and regulations governing the proceedings, quorum and manner of acting as it shall deem proper and desirable, provided that the quorum shall not be less than two directors. The committees shall keep minutes of their proceedings and shall report the same to the board of directors at the meeting next succeeding, and any action by the committee shall be subject to revision and alteration by the board of directors, provided that no rights of third persons shall be affected by any such revision or alteration. In the absence of any member of such committee the members thereof present at any meeting, whether or not they constitute a quorum, may appoint a member of the board of directors to act in the place of such absent member. Section 12. Compensation. Any director, whether or not he is a salaried officer or employee of the Corporation, may be compensated for his services as director or as a member of a committee of directors, or as chairman of the board or chairman of a committee by fixed periodic payments or by fees for attendance at meetings or by both, and in addition may be reimbursed for transportation and other expenses, all in such manner and amounts as the board of directors may from time to time determine. ARTICLE IV Notices Section 1. Form. Notices to stockholders shall be in writing and delivered personally or mailed to the stockholders at their addresses appearing on the books of the Corporation. Notices to directors shall be oral or by telephone or telegram or in writing delivered personally or mailed to the directors at their addresses appearing on the books of the Corporation. Notice by mail shall be deemed to be given at the time when the same shall be mailed. Notice to directors need not state the purpose of a regular or special meeting. Section 2. Waiver. Whenever any notice of the time, place or purpose of any meeting of stockholders, directors or a committee is required to be given under the provisions of Maryland law or under the provisions of the Articles of Incorporation or these By- laws, a waiver thereof in writing, signed by the person or persons entitled to such notice and filed with the records of the meeting, whether before or after the holding thereof, or actual attendance at the meeting of stockholders in person or by proxy, or at the meeting of directors of committee in person, shall be deemed equivalent to the giving of such notice to such persons. ARTICLE V Officers Section 1. Executive Officers. The officers of the Corporation shall be chosen by the board of directors and shall include a president, who shall be a director, a secretary and a treasurer. The board of directors may, from time to time, elect or appoint a controller, one or more vice presidents, assistant secretaries and assistant treasurers. The board of directors, at its discretion, may also appoint a director as chairman of the board who shall perform and execute such executive and administrative duties and powers as the board of directors shall from time to time prescribe. The same person may hold two or more offices, except that no person shall be both president and secretary and no officer shall execute, acknowledge or verify any instrument in more than one capacity, if such instrument is required by law, the Articles of Incorporation or these By-laws to be executed, acknowledged or verified by two or more officers. Section 2. Election. The board of directors shall choose a president, a secretary and a treasurer at its first meeting and thereafter at the next meeting following a stockholders' meeting at which directors were elected. Section 3. Other Officers. The board of directors from time to time may appoint such other officers and agents as it shall deem advisable, who shall hold their offices for such terms and shall exercise such powers and perform such duties as shall be determined from time to time by the board. The board of directors from time to time may delegate to one or more officers or agents the power to appoint any such subordinate officers or agent and to prescribe their respective rights, terms of office, authorities and duties. Section 4. Compensation. The salaries or other compensation of all officers and agents of the Corporation shall be fixed by the board of directors, except that the board of directors may delegate to any person or group of persons the power to fix the salary or other compensation of any subordinate officers or agents appointed pursuant to Section 3 of this Article V. Section 5. Tenure. The officers of the Corporation shall serve for one year and until their successors are chosen and shall qualify. Any officer or agent may be removed by the affirmative vote of a majority of the board of directors whenever, in its judgment, the best interests of the Corporation will be served thereby. In addition, any officer or agent appointed pursuant to Section 3 of this Article V may be removed, either with or without cause, by any officer upon whom such power of removal shall have been conferred by the board of directors. Any vacancy occurring in any office of the Corporation by death, resignation, removal or otherwise shall be filled by the board of directors, unless pursuant to Section 3 of this Article V the power of appointment has been conferred by the board of directors on any other officer. Section 6. President. The president, unless the chairman has been so designated, shall be the chief executive officer of the Corporation. He shall preside at all meetings of the stockholders and directors, and shall see that all orders and resolutions of the board are carried into effect. The president, unless the chairman has been so designated, shall also be the chief administrative officer of the Corporation and shall perform such other duties and have such other powers as the board of directors may from time to time prescribe. Section 7. Chairman of the Board. The chairman of the board, if one shall be chosen, shall preside at all meetings of the board of directors and stockholders, and shall perform and execute such executive duties and administrative powers as the board of directors shall from time to time prescribe. Section 8. Vice-President. The vice-presidents, in the order of their seniority, shall, in the absence or disability of the president, perform the duties and exercise the powers of the president and shall perform such other duties as the board of directors of the chief executive officer may from time to time prescribe. Section 9. Secretary. The secretary shall attend all meetings of the board of directors and all meetings of the stockholders and record all the proceedings thereof and shall perform like duties for any committee when required. He shall give, or cause to be given, notice of meetings of the stockholders and of the board of directors, shall have charge of the records of the Corporation, including the stock books, and shall perform such other duties as may be prescribed by the board of directors or chief executive officer, under whose supervision he shall be. He shall keep in safe custody the seal of the Corporation and, when authorized by the board of directors, shall affix and attest the same to any instrument requiring it. The board of directors may give general authority to any officer to affix the seal of the Corporation and to attest the affixing by his signature. Section 10. Assistant Secretaries. The assistant secretaries in order of their seniority, shall, in the absence or disability of the secretary, perform the duties and exercise the powers of the secretary and shall perform such other duties as the board of directors shall prescribe. Section 11. Treasurer. The treasurer, unless another officer has been so designated, shall be the chief financial officer of the Corporation. He shall have general supervision of the funds and property of the Corporation and of the performance by the custodian of its duties with respect thereto. He shall render to the board of directors whenever directed by the board, an account of the financial condition of the Corporation and of all his transactions as Treasurer; and as soon as possible after the close of each financial year he shall make and submit to the board of directors a like report for such financial year. He shall perform all the acts incidental to the office of treasurer, subject to the control of the board of directors. Section 12. Controller. The controller shall be under the direct supervision of the chief financial officer of the Corporation. He shall maintain adequate records of all assets, liabilities and transactions of the Corporation, establish and maintain internal accounting control and, in cooperation with the independent public accountants selected by the board of directors shall supervise internal auditing. He shall have such further powers and duties as may be conferred upon him from time to time by the president or the board of directors. Section 13. Assistant Treasurer. The assistant treasurers, in the order of their seniority, shall, in the absence or disability of the treasurer, perform the duties and exercise the powers of the treasurer and shall perform such other duties as the board of directors may from time to time prescribe. Section 14. Surety Bonds. The board of directors may require any officer or agent of the Corporation to execute a bond (including, without limitation, any bond required by the federal Investment Company Act of 1940, as amended, and the rules and regulations of the Securities and Exchange Commission) to the Corporation in such sum and with such surety or sureties as the board of directors may determine, conditioned upon the faithful performance of his duties to the Corporation, including responsibility for negligence and for the accounting of any of the Corporation's property, funds or securities that may come into his hands. ARTICLE VI Investment Limitations Without the approval of the lesser of (i) 67% or more of the voting securities of the Corporation present at a meeting if the holders of more than 50% of the outstanding voting securities of the Corporation are present or represented by proxy, or (ii) more than 50% of the outstanding voting securities of the Corporation, the Corporation shall not: (a) with respect to 75% of its total assets, invest more than 5% of the value of its total assets (taken at market value at the time of purchase) in the securities of any one issuer, excluding obligations issued or guaranteed by the U.S. Government or any agency or instrumentality thereof; (b) own more than 10% of the outstanding voting securities of any one issuer (other than securities issued or guaranteed by the U.S. Government or any agency or instrumentality thereof); (c) purchase shares of other investment companies in an amount exceeding the limitations set forth in Section 12(d) of the Investment Company Act of 1940 and the rules and regulations thereunder, except as part of a plan of reorganization, merger, consolidation or an offer of exchange; (d) borrow money, except as a temporary measure for extraordinary or emergency purposes, and in no event in excess of 33-1/3% of the lower of the market value or cost of its total assets and shall not purchase any securities at a time when such borrowings exceed 5% of total assets; (e) purchase securities on margin, except such short-term credits as may be necessary for the clearance of transactions; (f) invest for the purpose of exercising control over management of any company; (g) purchase or retain securities of any company if, to the knowledge of the Corporation, any officer or director of the Corporation or its investment adviser or sub-adviser owns more than 1/2 of 1% of the outstanding securities of such Company and such officers or directors who own 1/2 of 1% in the aggregate own more than 5% of such securities; (h) make loans of money or property to any person, except (1) through loans of portfolio securities in an amount not expected to exceed 33-1/3% of the value of the Corporation's total assets; (2) the purchase of fixed- income securities consistent with the Corporation's investment objectives and policies, and (3) by entering into repurchase agreements. For purposes of this restriction, collateral arrangements with respect to stock options, options on securities, stock indices, stock index futures and options on such futures are not deemed to be loans of assets; (i) underwrite the securities of other issuers except to the extent that, in connection with the disposition of portfolio securities or the sale of its own shares the Corporation may be deemed to be an underwriter; (j) purchase real estate or interests therein, although the Corporation may purchase or sell securities of companies which deal in real estate or interests therein; (k) purchase or sell commodities or commodities futures contracts, except stock index futures and options on such futures under policies adopted by the board of directors and disclosed to shareholders; (l) invest more than 25% of the value of its total assets in any one industry; (m) mortgage, hypothecate or pledge any of its assets, except to the extent the Corporation may pledge assets to secure permitted borrowings and in connection with collateral arrangements with respect to options and futures; (n) issue senior securities, as defined in the Investment Company Act of 1940, except that the Corporation may enter into repurchase agreements, lend its portfolio securities and borrow money from banks for temporary or emergency purposes; (o) invest more than 5% of its assets at the time of purchase in warrants (other than warrants acquired in units or attached to securities) or more than 2% of assets at time of purchase in warrants not listed on the New York or American Stock Exchange; (p) invest in restricted securities or securities for which there is no readily available market (including private placements and repurchase transactions maturing beyond seven days), if such acquisition will cause the current value of such securities to exceed 10% of the value of the Company's net assets; and (q) invest more than 25% of the Corporation's net assets (at time of purchase) in securities of issuers located in any single foreign country. If a percentage restriction on investment or use of assets set forth above is adhered to at the time a transaction is effected, later changes in percentages resulting from changing values will not be considered a violation. Notwithstanding these limitations, the Corporation may own all or any portion of the securities of, or make loans to, or contribute to the costs or other financial requirements of any company which will be wholly-owned by the Corporation and one or more other investment companies and is primarily engaged in the business of providing, at-cost, management, administrative distribution or related services to the Corporation and other investment companies. ARTICLE VII Stock Section 1. Certificates. No stockholder shall be entitled to a certificate or certificates in connection with the purchase of shares of the Corporation unless specifically authorized by the Board of Directors. Each certificate issued shall be signed by the president or vice-president and countersigned by the secretary or an assistant secretary of the treasurer or an assistant treasurer. Section 2. Signature. Where a certificate is signed (1) by a transfer agent or an assistant transfer agent or (2) by a transfer clerk acting on behalf of the Corporation and a registrar, the signature of any such president, vice-president, treasurer, assistant treasurer, secretary or assistant secretary may be a facsimile. In case any officer who has signed any certificate ceases to be an officer of the Corporation before the certificate is issued, the certificate may nevertheless be issued by the Corporation with the same effect as if the officer had not ceased to be such officer as of the date of its issue. Section 3. Recording and Transfer without Certificates. Notwithstanding the foregoing provisions of this Article VII, the Corporation shall have full power to participate in any program approved by the board of directors providing for the recording and transfer of ownership of shares of the Corporation's stock by electronic or other means without the issuance of certificates. Section 4. Lost Certificates. The board of directors may direct a new certificate or certificates to be issued in place of any certificate or certificates theretofore issued by the Corporation alleged to have been stolen, lost or destroyed, upon the making of an affidavit of that fact by the person claiming the certificate of stock to have been stolen, lost or destroyed, or upon other satisfactory evidence of such theft, loss or destruction. When authorizing such issuance of a new certificate or certificates, the board of directors may, in its discretion and as a condition precedent to the issuance thereof, require the owner of such stolen, lost or destroyed certificate or certificates, or his legal representative, to advertise the same in such manner as it shall require and to give the Corporation a bond with sufficient surety, to the Corporation to indemnify it against any loss or claim that may be made by reason of the issuance of a new certificate. Section 5. Transfer of Capital Stock. Transfers of shares of the stock of the Corporation shall be made on the books of the Corporation by the holder of record thereof (in person or by his attorney thereunto duly authorized by a power of attorney duly executed in writing and filed with the secretary of the Corporation) (i) if a certificate or certificates have been issued, upon the surrender of the certificate or certificates, properly endorsed or accompanied by proper instruments of transfer representing such shares, or (ii) as otherwise prescribed by the board of directors. Every certificate exchanged, surrendered for redemption or otherwise returned to the Corporation shall be marked "Cancelled" with the date of cancellation. Section 6. Registered Stockholders. The Corporation shall be entitled to recognize the exclusive right of a person registered on its books as the owner of shares to receive dividends, and to vote as such owner, and to hold liable for calls and assessments a person registered on its books as the owner of shares, and shall not be bound to recognize any equitable or other claim to or interest in such shares on the part of any other person, whether or not it shall have express or other notice thereof, except as otherwise provided by the General Laws of the State of Maryland. Section 7. Transfer Agents and Registrars. The board of directors may, from time to time, appoint or remove transfer agents and/or registrars of transfers of shares of stock of the Corporation, and it may appoint the same person as both transfer agent and registrar. Upon any such appointment being made all certificates representing shares of stock thereafter issued shall be countersigned by one of such transfer agents or by one of such registrars of transfers or by both and shall not be valid unless so countersigned. If the same person shall be both transfer agent and registrar, only one countersignature by such person shall be required. Section 8. Stock Ledger. The Corporation shall maintain an original stock ledger containing the names and addresses of all stockholders and the number and class of shares held by each stockholder. Such stock ledger may be in written form or any other form capable of being converted into written form within a reasonable time for visual inspection. ARTICLE VIII General Provisions Section 1. Rights in Securities. The board of directors, on behalf of the Corporation, shall have the authority to exercise all of the rights of the Corporation as owner of any securities which might be exercised by any individual owning such securities in his own right, including, but not limited to, the right to vote by proxy for any and all purposes, to consent to the reorganization, merger or consolidation of any issuer or to consent to the sale, lease or mortgage of all or substantially all of the property and assets of any issuer; and to exchange any of the shares of stock of any issuer for the shares of stock issued therefor upon any such reorganization, merger, consolidation, sale lease or mortgage. The board of directors shall have the right to authorize any officer of the investment adviser to execute proxies and the right to delegate the authority granted to any officer of the Corporation by this Section 1 of Article VIII. Section 2. Reports. Not less than semi-annually, the Corporation shall transmit to the stockholders a report of the operations of the Corporation, based at least annually upon an audit by independent public accountants. Section 3. Seal. The corporate seal shall have inscribed thereon the name of the Corporation, the year of its organization and the words "Corporate Seal, Maryland". The seal may be used by causing it or a facsimile thereof to be impressed or affixed or reproduced or otherwise. Section 4. Execution of Instruments. All deeds, documents, transfers, contracts, agreements and other instruments requiring execution by the Corporation shall be signed by the chairman or the president or a vice-president and by the treasurer or secretary or an assistant treasurer or an assistant secretary, or as the board of directors may otherwise, from time to time, authorize. Any such authorization may be general or confined to specific instances. Except as otherwise authorized by the board of directors, all requisitions or orders for the assignment of securities standing in the name of the custodian or its nominee, or for the execution of powers to transfer the same, shall be signed in the name of the Corporation by the chairman or the president or a vice-president and by the secretary, treasurer or an assistant treasurer. ARTICLE IX Amendments The By-laws of the Corporation may be altered, amended or repealed either by the affirmative vote of a majority of the stock issued and outstanding and entitled to vote in respect thereof and represented in person or by proxy at any meeting of the stockholders, or by the board of directors at any regular or special meeting of the board of directors; provided, that the board of directors may not alter, amend or repeal Article VI, and that the vote of stockholders required for alteration, amendment or repeal of any such provisions shall be subject to all applicable requirements of federal or state laws or of the Articles of Incorporation. orgzn\QCap.1 EX-10 5 CUSTODY AGREEMENT CUSTODIAN CONTRACT Between QUEST FOR VALUE DUAL PURPOSE FUND, INC. and STATE STREET BANK AND TRUST COMPANY TABLE OF CONTENTS Page 1. Employment of Custodian and Property to be Held By It . . . . . . . .1 2. Duties of the Custodian with Respect to Property of the Fund Held by the Custodian. . . . . . . . . . . . . . . . . . . . . .1 2.1 Holding Securities. . . . . . . . . . . . . . . . . . . . . . . . . .1 2.2 Delivery of Securities. . . . . . . . . . . . . . . . . . . . . . . .2 2.3 Registration of Securities. . . . . . . . . . . . . . . . . . . . . .4 2.4 Bank Accounts4 . 2.5 Availability of Federal Funds . . . . . . . . . . . . . . . . . . . .5 2.6 Collection of Income. . . . . . . . . . . . . . . . . . . . . . . . .5 2.7 Payment of Fund Monies. . . . . . . . . . . . . . . . . . . . . . . .6 2.8 Liability for Payment in Advance of Receipt of Securities Purchased . . . . . . . . . . . . . . . . . . . . . . .7 2.9 Appointment of Agents . . . . . . . . . . . . . . . . . . . . . . . .7 2.10 Deposit of Fund Assets in Securities System . . . . . . . . . . . . .7 2.10AFund Assets Held in the Custodian's Direct Paper System. . . . . . . . . . . . . . . . . . . . . . . . . . . . .9 2.11 Segregated Account. . . . . . . . . . . . . . . . . . . . . . . . . 10 2.12 Ownership Certificates for Tax Purposes . . . . . . . . . . . . . . 11 2.13 Proxies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 2.14 Communications Relating to Fund Portfolio Securities. . . . . . . . 11 2.15 Proper Instructions . . . . . . . . . . . . . . . . . . . . . . . . 12 2.16 Actions Permitted Without Express Authority . . . . . . . . . . . . 12 2.17 Evidence of Authority . . . . . . . . . . . . . . . . . . . . . . . 12 3. Duties of the Custodian with Respect to the Books of Account and Calculation of Net Asset Value and Net Income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 4. Records . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 5. Opinion of Fund's Independent Accountant. . . . . . . . . . . . . . 14 6. Reports to Fund by Independent Public Accountants . . . . . . . . . 14 7. Compensation of Custodian . . . . . . . . . . . . . . . . . . . . . 14 8. Responsibility of Custodian . . . . . . . . . . . . . . . . . . . . 14 9. Effective Period, Termination and Amendment . . . . . . . . . . . . 15 10. Successor Custodian . . . . . . . . . . . . . . . . . . . . . . . . 16 11. Interpretive and Additional Provisions. . . . . . . . . . . . . . . 17 12. Massachusetts Law to Apply. . . . . . . . . . . . . . . . . . . . . 17 13. Prior Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . 17 CUSTODIAN CONTRACT This Contract between Quest for Value Dual Purpose Fund, Inc., a corporation organized and existing under the laws of Maryland, having its principal place of business at 200 Liberty Street, New York, New York 10281, hereinafter called the "Fund," and State Street Bank and Trust Company, a Massachusetts trust company, having its principal place of business at 225 Franklin Street, Boston, Massachusetts 02110, hereinafter called the "Custodian," WITNESSETH: that in consideration of the mutual covenants and agreements hereinafter contained, the parties hereto agree as follows: 1. Employment of Custodian and Property to be Held by It The Fund hereby employs the Custodian as the custodian of its assets pursuant to the provisions of the Articles of Incorporation. The Fund agrees to deliver to the Custodian all securities and cash owned by it, and all payments of income, payments of principal or capital distributions received by it with respect to all securities owned by the Fund from time to time, and the cash consideration received by it for such new or treasury shares of capital stock, $.01 par value, ("Shares") of the Fund as may be issued or sold from time to time. The Custodian shall not be responsible for any property of the Fund held or received by the Fund and not delivered to the Custodian. Upon receipt of "Proper Instructions" (within the meaning of Section 2.15), the Custodian shall from time to time employ one or more sub-custodians, but only in accordance with an applicable vote by the Board of Directors of the Fund, and provided that the Custodian shall have no more or less responsibility or liability to the Fund on account of any actions or omissions of any sub- custodian so employed than any such sub-custodian has to the Custodian. 2. Duties of the Custodian with Respect to Property of the Fund Held By the Custodian 2.1 Holding Securities. The Custodian shall hold and physically segregate for the account of the Fund all non-cash property, including all securities owned by the Fund, other than (a) securities which are maintained pursuant to Section 2.10 in a clearing agency which acts as a securities depository or in a book-entry system authorized by the U.S. Department of the Treasury, collectively referred to herein as "Securities System" and (b) commercial paper of an issuer for which State Street Bank and Trust Company acts as issuing and paying agent ("Direct Paper") which is deposited and/or maintained in the Direct Paper System of the Custodian pursuant to Section 2.10A. 2.2 Delivery of Securities. The Custodian shall release and deliver securities owned by the Fund held by the Custodian or in a Securities System account of the Custodian or in the Custodian's Direct Paper book-entry system account ("Direct Paper System Account") only upon receipt of Proper Instructions, which may be continuing instructions when deemed appropriate by the parties, and only in the following cases: (1) Upon sale of such securities for the account of the Fund and receipt of payment therefor; (2) Upon the receipt of payment in connection with any repurchase agreement related to such securities entered into by the Fund; (3) In the case of a sale effected through a Securities System, in accordance with the provisions of Section 2.10 hereof; (4) To the depository agent in connection with tender or other similar offers for portfolio securities of the Fund; (5) To the issuer thereof or its agent when such securities are called, redeemed, retired or otherwise become payable; provided that, in any such case, the cash or other consideration is to be delivered to the Custodian; (6) To the issuer thereof, or its agent, for transfer into the name of the Fund or into the name of any nominee or nominees of the Custodian or into the name or nominee name of any agent appointed pursuant to Section 2.9 or into the name or nominee name of any sub-custodian appointed pursuant to Article 1; or for exchange for a different number of bonds, certificates or other evidence representing the same aggregate face amount or number of units; provided that, in any such case, the new securities are to be delivered to the Custodian; (7) Upon the sale of such securities for the account of the Fund, to the broker or its clearing agent, against a receipt, for examination in accordance with "street delivery" custom; provided that in any such case, the Custodian shall have no responsibility or liability for any loss arising from the delivery of such securities prior to receiving payment for such securities except as may arise from the Custodian's own negligence or willful misconduct; (8) For exchange or conversion pursuant to any plan of merger, consolidation, recapitalization, reorganization or readjustment of the securities of the issuer of such securities, or pursuant to provisions for conversion contained in such securities, or pursuant to any deposit agreement; provided that, in any such case, the new securities and cash, if any, are to be delivered to the Custodian; (9) In the case of warrants, rights or similar securities, the surrender thereof in the exercise of such warrants, rights or similar securities or the surrender of interim receipts or temporary securities for definitive securities; provided that, in any such case, the new securities and cash, if any, are to be delivered to the Custodian; (10) For delivery in connection with any loans of securities made by the Fund, but only against receipt of adequate collateral as agreed upon from time to time by the Custodian and the Fund, which may be in the form of cash or obligations issued by the United States government, its agencies or instrumentalities, except that in connection with any loans for which collateral is to be credited to the Custodian's account in the book-entry system authorized by the U.S. Department of the Treasury, the Custodian will not be held liable or responsible for the delivery of securities owned by the Fund prior to the receipt of such collateral; (11) For delivery as security in connection with any borrowings by the Fund requiring a pledge of assets by the Fund, but only against receipt of amounts borrowed; (12) For delivery in accordance with the provisions of any agreement among the Fund, the Custodian and a broker- dealer registered under the Securities Exchange Act of 1934 (the "Exchange Act") and a member of The National Association of Securities Dealers, Inc. ("NASD"), relating to compliance with the rules of The Options Clearing Corporation and of any registered national securities exchange, or of any similar organization or organizations, regarding escrow or other arrangements in connection with transactions by the Fund; (13) For delivery in accordance with the provisions of any agreement among the Fund, the Custodian, and a Futures Commission Merchant registered under the Commodity Exchange Act, relating to compliance with the rules of the Commodity Futures Trading Commission and/or any Contract Market, or any similar organization or organizations, regarding account deposits in connection with transactions by the Fund; (14) For any other proper corporate purpose, but only upon receipt of, in addition to Proper Instructions, a certified copy of a resolution of the Board of Directors or of the Executive Committee signed by an officer of the Fund and certified by the Secretary or an Assistant Secretary, specifying the securities to be delivered, setting forth the purpose for which such delivery is to be made, declaring such purpose to be a proper corporate purpose, and naming the person or persons to whom delivery of such securities shall be made. 2.3 Registration of Securities. Securities held by the Custodian (other than bearer securities) shall be registered in the name of the Fund or in the name of any nominee of the Fund or of any nominee of the Custodian which nominee shall be assigned exclusively to the Fund, unless the Fund has authorized in writing the appointment of a nominee to be used in common with other registered investment companies having the same investment adviser as the Fund, or in the name or nominee name of any agent appointed pursuant to Section 2.9 or in the name or nominee name of any sub- custodian appointed pursuant to Article 1. All securities accepted by the Custodian on behalf of the Fund under the terms of this Contract shall be in "street name" or other good delivery form. If, however, the Fund directs the Custodian to maintain securities in "street name," the Custodian shall utilize its best efforts only to timely collect income due the Fund on such securities and to notify the Fund on a best efforts basis only of relevant corporate actions including, without limitation, pendency of calls, maturities, tender or exchange offers. 2.4 Bank Accounts. The Custodian shall open and maintain a separate bank account or accounts in the name of the Fund, subject only to draft or order by the Custodian acting pursuant to the terms of this Contract, and shall hold in such account or accounts, subject to the provisions hereof, all cash received by it from or for the account of the Fund, other than cash maintained by the Fund in a bank account established and used in accordance with Rule 17f-3 under the Investment Company Act of 1940. Funds held by the Custodian for the Fund may be deposited by it to its credit as Custodian in the Banking Department of the Custodian or in such other banks or trust companies as it may in its discretion deem necessary or desirable; provided, however, that every such bank or trust company shall be qualified to act as a custodian under the Investment Company Act of 1940 and that each such bank or trust company and the funds to be deposited with each such bank or trust company shall be approved by vote of a majority of the Board of Directors of the Fund. Such funds shall be deposited by the Custodian in its capacity as Custodian and shall be withdrawable by the Custodian only in that capacity. 2.5 Availability of Federal Funds. Upon mutual agreement between the Fund and the Custodian, the Custodian shall, upon the receipt of Proper Instructions, make federal funds available to the Fund as of specified times agreed upon from time to time by the Fund and the Custodian in the amount of checks received in payment for Shares of the Fund which are deposited into the Fund's account. 2.6 Collection of Income. Subject to the provisions of Section 2.3, the Custodian shall collect on a timely basis all income and other payments with respect to registered securities held hereunder to which the Fund shall be entitled either by law or pursuant to custom in the securities business, and shall collect on a timely basis all income and other payments with respect to bearer securities if, on the date of payment by the issuer, such securities are held by the Custodian or its agent thereof and shall credit such income, as collected, to the Fund's custodian account. Without limiting the generality of the foregoing, the Custodian shall detach and present for payment all coupons and other income items requiring presentation as and when they become due and shall collect interest when due on securities held hereunder. Income due the Fund securities loaned pursuant to the provisions of Section 2.2 (10) shall be the responsibility of the Fund. The Custodian will have no duty or responsibility in connection therewith, other than to provide the Fund with such information or data as may be necessary to assist the Fund in arranging for the timely delivery to the Custodian of the income to which the Fund is properly entitled. 2.7 Payment of Fund Monies. Upon receipt of Proper Instructions, which may be continuing instructions when deemed appropriate by the parties, the Custodian shall pay out monies of the Fund in the following cases only: (1) Upon the purchase of securities, options, futures contracts or options on futures contracts for the account of the Fund but only (a) against the delivery of such securities, or evidence of title to such options, futures contracts or options on futures contracts to the Custodian (or any bank, banking firm or trust company doing business in the United States or abroad which is qualified under the Investment Company Act of 1940, as amended, to act as a custodian and has been designated by the Custodian as its agent for this purpose) registered in the name of the Fund or in the name of a nominee of the Custodian referred to in Section 2.3 hereof or in proper form for transfer; (b) in the case of a purchase effected through a Securities System, in accordance with the conditions set forth in Section 2.10 hereof; (c) in the case of a purchase involving the Direct Paper System, in accordance with the conditions set forth in Section 2.10A; (d) in the case of repurchase agreements entered into between the Fund and the Custodian, or another bank, or a broker- dealer which is a member of the NASD, (i) against delivery of the securities either in certificate form or through an entry crediting the Custodian's account at the Federal Reserve Bank with such securities or (ii) against delivery of the receipt evidencing purchase by the Fund of securities owned by the Custodian along with written evidence of the agreement by the Custodian to repurchase such securities from the Fund or (e) for transfer to a time deposit account of the Fund in any bank, whether domestic or foreign; such transfer may be effected prior to receipt of a confirmation from a broker and/or the applicable bank pursuant to Proper Instructions from the Fund as defined in Section 2.15; (2) In connection with conversion, exchange or surrender of securities owned by the Fund as set forth in Section 2.2 hereof; (3) For the payment of any expense or liability incurred by the Fund, including but not limited to the following payments for the account of the Fund: interest, taxes, management, accounting, transfer agent and legal fees, and operating expenses of the Fund whether or not such expenses are to be in whole or part capitalized or treated as deferred expenses; (4) For the payment of any dividends declared pursuant to the governing documents of the Fund; (5) For payment of the amount of dividends received in respect of securities sold short; (6) For any other proper purpose, but only upon receipt of, in addition to Proper Instructions, a certified copy of a resolution of the Board of Directors or of the Executive Committee of the Fund signed by an officer of the Fund and certified by its Secretary or an Assistant Secretary, specifying the amount of such payment, setting forth the purpose for which such payment is to be made, declaring such purpose to be a proper purpose, and naming the person or persons to whom such payment is to be made. 2.8 Liability for Payment in Advance of Receipt of Securities Purchased. Except as specifically stated otherwise in this Contract, in any and every case where payment for purchase of securities for the account of the Fund is made by the Custodian in advance of receipt of the securities purchased in the absence of specific written instructions from the Fund to so pay in advance, the Custodian shall be absolutely liable to the Fund for such securities to the same extent as if the securities had been received by the Custodian. 2.9 Appointment of Agents. The Custodian may at any time or times in its discretion appoint (and may at any time remove) any other bank or trust company which is itself qualified under the Investment Company Act of 1940, as amended, to act as a custodian, as its agent to carry out such of the provisions of this Article 2 as the Custodian may from time to time direct; provided, however, that the appointment of any agent shall not relieve the Custodian of its responsibilities or liabilities hereunder. 2.10 Deposit of Fund Assets in Securities Systems. The Custodian may deposit and/or maintain securities owned by the Fund in a clearing agency registered with the Securities and Exchange Commission under Section 17A of the Securities Exchange Act of 1934, which acts as a securities depository, or in the book-entry system authorized by the U.S. Department of the Treasury and certain federal agencies, collectively referred to herein as "Securities System" in accordance with applicable Federal Reserve Board and Securities and Exchange Commission rules and regulations, if any, and subject to the following provisions: (1) The Custodian may keep securities of the Fund in a Securities System provided that such securities are represented in an account ("Account") of the Custodian in the Securities System which shall not include any assets of the Custodian other than assets held as a fiduciary, custodian or otherwise for customers; (2) The records of the Custodian with respect to securities of the Fund which are maintained in a Securities System shall identify by book-entry those securities belonging to the Fund; (3) The Custodian shall pay for securities purchased for the account of the Fund upon (i) receipt of advice from the Securities System that such securities have been transferred to the Account, and (ii) the making of an entry on the records of the Custodian to reflect such payment and transfer for the account of the Fund. The Custodian shall transfer securities sold for the account of the Fund upon (i) receipt of advice from the Securities System that payment for such securities has been transferred to the Account, and (ii) the making of an entry on the records of the Custodian to reflect such transfer and payment for the account of the Fund. Copies of all advices from the Securities System of transfers of securities for the account of the Fund shall identify the Fund, be maintained for the Fund by the Custodian and be provided to the Fund at its request. Upon request, the Custodian shall furnish the Fund confirmation of each transfer to or from the account of the Fund in the form of a written advice or notice and shall furnish to the Fund copies of daily transaction sheets reflecting each day's transactions in the Securities System for the account of the Fund. (4) The Custodian shall provide the Fund with any report obtained by the Custodian on the Securities System's accounting system, internal accounting control and procedures for safeguarding domestic securities deposited in the Securities System; (5) The Custodian shall have received the initial or annual certificate, as the case may be, required by Article 9 hereof; (6) Anything to the contrary in this Contract notwithstanding, the Custodian shall be liable to the Fund for any loss or damage to the Fund resulting from use of the Securities System by reason of any negligence, misfeasance or misconduct of the Custodian or any of its agents or of any of its or their employees or from failure of the Custodian or any such agent to enforce effectively such rights as it may have against the Securities System; at the election of the Fund, it shall be entitled to be subrogated to the rights of the Custodian with respect to any claim against the Securities System or any other person which the Custodian may have as a consequence of any such loss or damage if and to the extent that the Fund has not been made whole for any such loss or damage. 2.10A Fund Assets Held in the Custodian's Direct Paper System The Custodian may deposit and/or maintain securities owned by the Fund in the Direct Paper System of the Custodian subject to the following provisions: (1) No transaction relating to securities in the Direct Paper System will be effected in the absence of Proper Instructions; (2) The Custodian may keep securities of the Fund in the Direct Paper System only if such securities are represented in an account ("Account") of the Custodian in the Direct Paper System which shall not include any assets of the Custodian other than assets held as a fiduciary, custodian or otherwise for customers; (3) The records of the Custodian with respect to securities of the Fund which are maintained in the Direct Paper System shall identify by book-entry those securities belonging to the Fund; (4) The Custodian shall pay for securities purchased for the account of the Fund upon the making of an entry on the records of the Custodian to reflect such payment and transfer of securities to the account of the Fund. The Custodian shall transfer securities sold for the account of the Fund upon the making of an entry on the records of the Custodian to reflect such transfer and receipt of payment for the account of the Fund; (5) The Custodian shall furnish the Fund confirmation of each transfer to or from the account of the Fund, in the form of a written advice or notice, of Direct Paper on the next business day following such transfer and shall furnish to the Fund copies of daily transaction sheets reflecting each day's transactions in the Securities System for the account of the Fund; (6) The Custodian shall provide the Fund with any report on its system of internal accounting control as the Fund may reasonably request from time to time; 2.11 Segregated Account. The Custodian shall upon receipt of Proper Instructions establish and maintain a segregated account or accounts for and on behalf of the Fund, into which account or accounts may be transferred cash and/or securities, including securities maintained in an account by the Custodian pursuant to Section 2.10 hereof, (i) in accordance with the provisions of any agreement among the Fund, the Custodian and a broker-dealer registered under the Exchange Act and a member of the NASD (or any futures commission merchant registered under the Commodity Exchange Act), relating to compliance with the rules of The Options Clearing Corporation and of any registered national securities exchange (or the Commodity Futures Trading Commission or any registered contract market), or of any similar organization or organizations, regarding escrow or other arrangements in connection with transactions by the Fund, (ii) for purposes of segregating cash or government securities in connection with options purchased, sold or written by the Fund or commodity futures contracts or options thereon purchased or sold by the Fund, (iii) for the purposes of compliance by the Fund with the procedures required by Investment Company Act Release No. 10666, or any subsequent release or releases of the Securities and Exchange Commission relating to the maintenance of segregated accounts by registered investment companies and (iv) for other proper corporate purposes, but only, in the case of clause (iv), upon receipt of, in addition to Proper Instructions, a certified copy of a resolution of the Board of Directors or of the Executive Committee signed by an officer of the Fund and certified by the Secretary or an Assistant Secretary, setting forth the purpose or purposes of such segregated account and declaring such purposes to be proper corporate purposes. 2.12 Ownership Certificates for Tax Purposes. The Custodian shall execute ownership and other certificates and affidavits for all federal and state tax purposes in connection with receipt of income or other payments with respect to securities of the Fund held by it and in connection with transfers of such securities. 2.13 Proxies. The Custodian shall, with respect to the securities held hereunder, cause to be promptly executed by the registered holder of such securities, if the securities are registered otherwise than in the name of the Fund or a nominee of the Fund, all proxies, without indication of the manner in which such proxies are to be voted, and shall promptly deliver to the Fund such proxies, all proxy soliciting materials and all notices relating to such securities. 2.14 Communications Relating to Fund Portfolio Securities Subject to the provisions of Section 2.3, the Custodian shall transmit promptly to the Fund all written information (including, without limitation, pendency of calls and maturities of securities and expirations of rights in connection therewith and notices of exercise of call and put options' written by the Fund and the maturity of futures contracts purchased or sold by the Fund) received by the Custodian from issuers of the securities being held for the Fund. With respect to tender or exchange offers, the Custodian shall transmit promptly to the Fund all written information received by the Custodian from issuers of the securities whose tender or exchange is sought and from the party (or his agents) making the tender or exchange offer. If the Fund desires to take action with respect to any tender offer, exchange offer or any other similar transaction, the Fund shall notify the Custodian at least three business days prior to the date on which the Custodian is to take such action. 2.15 Proper Instructions. Proper Instructions as used throughout this Article 2 means a writing signed or initialled by one or more person or persons as the Board of Directors shall have from time to time authorized. Each such writing shall set forth the specific transaction or type of transaction involved, including a specific statement of the purpose for which such action is requested. Oral instructions will be considered Proper Instructions if the Custodian reasonably believes them to have been given by a person authorized to give such instructions with respect to the transaction involved. The Fund shall cause all oral instructions to be confirmed in writing. Upon receipt of a certificate of the Secretary or an Assistant Secretary as to the authorization by the Board of Directors of the Fund accompanied by a detailed description of procedures approved by the Board of Directors, Proper Instructions may include communications effected directly between electro-mechanical or electronic devices provided that the Board of Directors and the Custodian are satisfied that such procedures afford adequate safeguards for the Fund's assets. For purposes of this Section, Proper Instructions shall include instructions received by the Custodian pursuant to any three-party agreement which requires a segregated asset account in accordance with Section 2.11. 2.16 Actions Permitted without Express Authority. The Custodian may in its discretion, without express authority from the Fund: 1) make payments to itself or others for minor expenses of handling securities or other similar items relating to its duties under this Contract, provided that all such payments shall be accounted for to the Fund; 2) surrender securities in temporary form for securities in definitive form; 3) endorse for collection, in the name of the Fund, checks, drafts and other negotiable instruments; and 4) in general, attend to all non-discretionary details in connection with the sale, exchange, substitution, purchase, transfer and other dealings with the securities and property of the Fund except as otherwise directed by the Board of Directors of the Fund. 2.17 Evidence of Authority. The Custodian shall be protected in acting upon any instructions, notice, request, consent, certificate or other instrument or paper believed by it to be genuine and to have been properly executed by or on behalf of the Fund. The Custodian may receive and accept a certified copy of a vote of the Board of Directors of the Fund as conclusive evidence (a) of the authority of any person to act in accordance with such vote or (b) of any determination or of any action by the Board of Directors pursuant to the Articles of Incorporation as described in such vote, and such vote may be considered as in full force and effect until receipt by the Custodian of written notice to the contrary. 3. Duties of Custodian with Respect to the Books of Account and Calculation of Net Asset Value and Net Income The Custodian shall cooperate with and supply necessary information to the entity or entities appointed by the Board of Directors of the Fund to keep the books of account of the Fund and/or compute the net asset value per share of the outstanding shares of the Fund or, if directed in writing to do so by the Fund, shall itself keep such books of account and/or compute such net asset value per share. If so directed, the Custodian shall also calculate weekly the net income of the Fund as described in the Fund's currently effective prospectus and shall advise the Fund and the Transfer Agent weekly of the total amounts of such net income and, if instructed in writing by an officer of the Fund to do so, shall advise the Transfer Agent periodically of the division of such net income among its various components. The calculations of the net asset value per share and the weekly income of the Fund shall be made at the time of times described form time to time in the Fund's currently effective prospectus. 4. Records The Custodian shall create and maintain all records relating to its activities and obligations under this Contract in such manner as will meet the obligations of the Fund under the Investment Company of 1940, with particular attention to Section 31 thereof and Rules 31a-1 and 31a-2 thereunder, applicable federal and state tax laws and any other law or administrative rules or procedures which may be applicable to the Fund. All such records shall be the property of the Fund and shall at all times during the regular business hours of the Custodian be open for inspection by duly authorized officers, employees or agents of the Fund and employees and agents of the Securities and Exchange Commission. The Custodian shall, at the Fund's request, supply the Fund with a tabulation of securities owned by the Fund and held by the Custodian and shall, when requested to do so by the Fund and for such compensation as shall be agreed upon between the Fund and the Custodian, include certificate numbers in such tabulations. 5. Opinion of Fund's Independent Account The Custodian shall take all reasonable action, as the Fund may from time to time request, to obtain from year to year favorable opinions from the Fund's independent accountants with respect to its activities hereunder in connection with the preparation of the Fund's Form N-2, and Form N-SAR or other annual reports to the Securities and Exchange Commission and with respect to any other requirements of such Commission. 6. Reports to Fund by Independent Public Accountants The Custodian shall provide the Fund, at such times as the Fund may reasonably require, with reports by independent public accountants on the accounting system, internal accounting control and procedures for safeguarding securities, futures contracts and options on futures contracts, including securities deposited and/or maintained in a Securities System, relating to the services provided by the Custodian under this Contract; such reports, shall be of sufficient scope and in sufficient detail, as may reasonably be required by the Fund to provide reasonable assurance that any material inadequacies would be disclosed by such examination, and, if there are no such inadequacies, the reports shall so state. 7. Compensation of Custodian. The Custodian shall be entitled to reasonable compensation for its services and expenses as Custodian, as agreed upon from time to time between the Fund and the Custodian. 8. Responsibility of Custodian. So long as and to the extent that it is in the exercise of reasonable care, the Custodian shall not be responsible for the title, validity or genuineness of any property or evidence of title thereto received by it or delivered by it pursuant to this Contract and shall be held harmless in acting upon any notice, request, consent, certificate or other instrument reasonably believed by it to be genuine and to be signed by the proper party or parties, including any futures commission merchant acting pursuant to the terms of a three-party futures or options agreement. The Custodian shall be held to the exercise of reasonable care in carrying out the provisions of this Contract, but shall be kept indemnified by and shall be without liability to the Fund for any action taken or omitted by it in good faith without negligence. It shall be entitled to rely on and may act upon advice of counsel (who may be counsel for the Fund) on all matters, and shall be without liability for any action reasonably taken or omitted pursuant to such advice. If the Fund requires the Custodian to take any action with respect to securities, which action involves the payment of money or which action may, in the opinion of the Custodian, result in the Custodian or its nominee assigned to the Fund being liable for the payment of money or incurring liability of some other form, the Fund, as a prerequisite to requiring the Custodian to take such action, shall provide indemnity to the Custodian in an amount and form satisfactory to it. If the Fund requires the Custodian to advance cash or securities for any purpose or in the event that the Custodian or its nominee shall incur or be assessed any taxes, charges, expenses, assessments, claims or liabilities in connection with the performance of this Contract, except such as may arise from its or its nominee's own negligent action, negligent failure to act or willful misconduct, any property at any time held for the account of the Fund shall be security therefor and should the Fund fail to repay the Custodian promptly, the Custodian shall be entitled to utilize available cash and to dispose of the Fund assets to the extent necessary to obtain reimbursement. 9. Effective Period, Termination and Amendment. This Contract shall become effective as of its execution, shall continue in full force and effect until terminated as hereinafter provided, may be amended at any time by mutual agreement of the parties hereto and may be terminated by either party by an instrument in writing delivered or mailed, postage prepaid to the other party, such termination to take effect not sooner than thirty (30) days after the date of such delivery or mailing; provided, however that the Custodian shall not act under Section 2.10 hereof in the absence of receipt of an initial certificate of the Secretary or an Assistant Secretary that the Board of Directors of the Fund has approved the initial use of a particular Securities System and the receipt of an annual certificate of the Secretary or an Assistant Secretary that the Board of Directors has reviewed the use by the Fund of such Securities System, as required in each case by Rule 17f-4 under the Investment Company Act of 1940, as amended and that the Custodian shall not act under Section 2.10A hereof in the absence of receipt of an initial certificate of the Secretary or an Assistant Secretary that the Board of Directors has approved the initial use of the Direct Paper System and the receipt of an annual certificate of the Secretary or an Assistant Secretary that the Board of Directors has reviewed the use by the Fund of the Direct Paper System; provided further, however, that the Fund shall not amend or terminate this Contract in contravention of any applicable federal or state regulations, or any provision of the Articles of Incorporation, and further provided, that the Fund may at any time by action of its Board of Directors (i) substitute another bank or trust company for the Custodian by giving notice as described above to the Custodian, or (ii) immediately terminate this Contract in the event of the appointment of a conservator or receiver for the Custodian by the Comptroller of the Currency or upon the happening of a like event at the direction of an appropriate regulatory agency or court of competent jurisdiction. Upon termination of the Contract, the Fund shall pay to the Custodian such compensation as may be due as of the date of such termination and shall likewise reimburse the Custodian for its costs, expenses and disbursements. 10. Successor Custodian. If a successor custodian shall be appointed by the Board of Directors of the Fund, the Custodian shall, upon termination, deliver to such successor custodian at the office of the Custodian, duly endorsed and in the form for transfer, all securities then held by it hereunder and shall transfer to an account of the successor custodian all of the Fund's securities held in a Securities System. If no such successor custodian shall be appointed, the Custodian shall, in like manner, upon receipt of a certified copy of a vote of the Board of Directors of the Fund, deliver at the office of the Custodian and transfer such securities, funds and other properties in accordance with such vote. In the event that no written order designating a successor custodian or certified copy of a vote of the Board of Directors shall have been delivered to the Custodian on or before the date when such termination shall become effective, then the Custodian shall have the right to deliver to a bank or trust company, which is a "bank" as defined in the Investment Company Act of 1940, doing business in Boston, Massachusetts, of its own selection, having an aggregate capital, surplus, and undivided profits, as shown by its last published report, of not less than $25,000,000, all securities, funds and other properties held by the Custodian and all instruments held by the Custodian relative thereto and all other property held by it under this Contract and to transfer to an account of such successor custodian all of the Fund's securities held in any Securities System. Thereafter, such bank or trust company shall be the successor of the Custodian under this Contract. In the event that securities, funds and other properties remain in the possession of the Custodian after the date of termination hereof owing to failure of the Fund to procure the certified copy of the vote referred to or of the Board of Directors to appoint a successor custodian, the Custodian shall be entitled to fair compensation for its services during such period as the Custodian retains possession of such securities, funds and other properties and the provisions of this Contract relating to the duties and obligations of the Custodian shall remain in full force and effect. 11. Interpretive and Additional Provisions. In connection with the operation of this Contract, the Custodian and the Fund may from time to time agree on such provisions interpretive of or in addition to the provisions of this Contract as may in their joint opinion be consistent with the general tenor of this Contract. Any such interpretive or additional provisions shall be in writing signed by both parties and shall be annexed hereto, provided that no such interpretive or additional provisions shall contravene any applicable federal or state regulations or any provision of the Articles of Incorporation of the Fund. No interpretive or additional provisions made as provided in the preceding sentence shall be deemed to be an amendment of this Contract. 12. Massachusetts Law to Apply. This Contract shall be construed and the provisions thereof interpreted under and in accordance with laws of the Commonwealth of Massachusetts. 13. Prior Contracts. This Contract supersedes and terminates, as of the date hereof, all prior contracts between the Fund and the Custodian relating to the custody of the Fund's assets. IN WITNESS WHEREOF, each of the parties has caused this instrument to be executed in its name and behalf by its duly authorized representative and its seal to be hereunder affixed as of the 1st day of November, 1989. QUEST FOR VALUE DUAL PURPOSE FUND, INC. ATTEST __________________________ By: ___________________________ ATTEST STATE STREET BANK AND TRUST COMPANY __________________________ By: ____________________________ Assistant Secretary Vice President CUSTODY\CAPITAL.CUS EX-23 6 OPINION AND CONSENT OF COUNSEL [Letterhead of Gordon Altman Butowsky Weitzen Shalov & Wein] February 21, 1997 Oppenheimer Quest Capital Value Fund, Inc. Two World Trade Center New York, NY 10048-0203 Dear Sir/Madam: This opinion is being furnished in connection with the registration by Oppenheimer Quest Capital Value Fund, Inc., a Maryland corporation (the "Company"), of an indefinite number of shares of its Common Stock, $.0001 par value (the "Shares"), pursuant to a registration statement on Form N-1A (File No. 333- 16881), as amended (the "Registration Statement"), under the Securities Act of 1933, as amended and the Investment Company Act of 1940, as amended. The Registration Statement was filed under the name Quest for Value Dual Purpose Fund, Inc. The Company's shareholders have approved an amendment to the Company's Articles of Incorporation, changing the name to Oppenheimer Quest Capital Value Fund, Inc., which amendment will be effective prior to issuance of the Shares. As counsel for the Company, we have examined such Company records, certificates and other documents and reviewed such questions of law as we have considered necessary or appropriate for purposes of this opinion. As to matters of Maryland law contained in this opinion, we have relied upon the opinion of Piper & Marbury dated February 21, 1997. Based upon the foregoing, we are of the opinion that the Shares, upon issuance and sale in the manner referred to in the Registration Statement, will be duly and validly issued, fully paid and non-assessable by the Company. We hereby consent to the filing of this opinion as an exhibit to the Registration Statement and to the use of our name in the prospectus constituting a part thereof. In giving this consent, we do not thereby admit that we are within the category of person whose consent is required under Section 7 of the 1933 Act or the rules and regulations of the Securities and Exchange Commission promulgated thereunder. Very truly yours, Gordon Altman Butowsky Weitzen Shalov & Wein opinion/capital.op EX-4 7 INVESTMENT LETTER February 28, 1997 The Board of Directors Oppenheimer Quest Capital Value Fund, Inc. Two World Trade Center New York, New York 10048-0203 To the Board of Directors: OppenheimerFunds, Inc.("OFI") herewith purchases an amount of Class B shares and Class C shares of Oppenheimer Quest Capital Value Fund, Inc. (the "Fund") equal in each case to $1,000 divided by the net asset value per share of a Class A share of the Fund as of the close of business on February 28, 1997. In connection with such purchase, OFI represents that such purchase is made for investment purposes by OFI without any present intention of redeeming or selling such shares. Very truly yours, OppenheimerFunds, Inc. By: /s/ Merryl Hoffman Merryl Hoffman Vice President ADVISORY/capital.LTR EX-99 8 PERFORMANCE COMPUTATION SCHEDULE Oppenheimer Dual Purpose Fund 2 Exhibit 24(b)(16) to Form N-1A Performance Data Computation Schedule The Fund's average annual total returns and total returns are calculated as described below, on the basis of the Fund's distributions, for the past 10 years which are as follows: Distribution Amount From Amount From Reinvestment Investment Long or Short-Term Reinvestment (Ex)Date Income Capital Gains Price Class A Shares 10/31/87 0.0000000 0.1561000 9.230 11/16/87 0.0000000 0.6743000 8.120 12/24/87 0.0000000 0.0930000 9.200 12/29/89 0.0000000 0.3130000 17.330 12/24/90 0.0000000 0.6966000 15.470 12/31/90 0.0000000 0.0156000 15.390 01/14/91 0.0000000 0.0140000 16.110 12/31/91 0.0000000 0.6018000 21.180 12/24/92 0.0000000 1.2950000 24.320 12/31/92 0.0000000 0.0349000 24.390 12/27/93 0.0000000 0.2160000 25.000 12/31/93 0.0000000 1.4305000 24.670 02/09/94 0.0000000 0.0693000 25.620 12/23/94 0.0000000 0.3200000 23.180 12/30/94 0.0000000 0.5616000 23.050 02/07/95 0.0000000 0.0330000 25.610 12/29/95 0.0000000 1.5599000 30.100 12/31/96 0.0000000 3.2848000 33.020 Oppenheimer Dual Purpose Fund 2 Page 2 1. Average Annual Total Returns for the Periods Ended 12/31/96: The formula for calculating average annual total return is as follows: 1 ERV n - --------------- = n (---) - 1 = average annual total return number of years P Where: ERV = ending redeemable value of a hypothetical $1,000 payment made at the beginning of the period P = hypothetical initial investment of $1,000 Class A Shares Examples, assuming a maximum sales charge of 5.75%: One Year Five Year $1,135.66 1 $1,994.21 .2 (---------) - 1 = 13.57% (---------) - 1 = 14.80% $1,000 $1,000 Inception $4,440.43 .1012 (---------) - 1 = 16.28% $1,000 Examples at NAV: Class A Shares One Year Five Year $1,204.97 1 $2,115.82 .2 (---------) - 1 = 20.50% (---------) - 1 = 16.17% $1,000 $1,000 Inception $4,711.36 .1012 (---------) - 1 = 16.98% $1,000 Oppenheimer Dual Purpose Fund 2 Page 3 2. Cumulative Total Returns for the Periods Ended 12/31/96: The formula for calculating cumulative total return is as follows: ERV - P ------- = Cumulative Total Return P Class A Shares Examples, assuming a maximum sales charge of 5.75%: One Year Five Year $1,135.66 - $1,000 $1,994.21 - $1,000 - ------------------ = 13.57% ------------------ = 99.42% $1,000 $1,000 Inception $4,440.43 - $1,000 ------------------ = 344.04% $1,000 Examples at NAV: Class A Shares One Year Five Year $1,204.97 - $1,000 $2,115.82 - $1,000 - ------------------ = 20.50%------------------ = 111.58% $1,000 $1,000 Inception $4,711.36 - $1,000 ------------------ = 236.55% $1,000 EX-27 9 FINANCIAL DATA SCHEDULE WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
6 Quest for Value Dual Purpose Fund, Inc. Annual report dated December 31, 1996. Capital Shares. 0000799029 QUEST FOR VALUE DUAL PURPOSE FUND, INC. 1 CAPITAL SHARES YEAR DEC-31-1996 JAN-01-1996 DEC-31-1996 792503136 937389105 6965587 16848 0 944371540 0 0 64437389 64437389 0 208857924 18004302 18004302 469962 0 316862372 0 144885969 879934151 14786008 16424805 0 (6322799) 24888014 173198410 (48825541) 149260883 0 0 0 (59569499) 0 0 0 64755425 517907 203233461 0 0 4916973 0 6335891 883394597 33.65 0 6.91 0 0 (3.31) 37.25 0 0 0 Taxes paid on Retained L/T Capital Gains. Net Assets of both Income & Capital shares. Quest for Value Dual Purpose Fund, Inc. Annual Report dated December 31, 1996. Income shares. [/LEGEND] 0000799029 QUEST FOR VALUE DUAL PURPOSE FUND, INC. [NUMBER] 2 INCOME SHARES YEAR DEC-31-1996 JAN-01-1996 DEC-31-1996 [INVESTMENTS-AT-COST] 792503136 [INVESTMENTS-AT-VALUE] 937389105 [RECEIVABLES] 6965587 [ASSETS-OTHER] 16848 [OTHER-ITEMS-ASSETS] 0 [TOTAL-ASSETS] 944371540 [PAYABLE-FOR-SECURITIES] 0 [SENIOR-LONG-TERM-DEBT] 0 [OTHER-ITEMS-LIABILITIES] 64437389 [TOTAL-LIABILITIES] 64437389 [SENIOR-EQUITY] 0 [PAID-IN-CAPITAL-COMMON] 208857924 [SHARES-COMMON-STOCK] 18004302 [SHARES-COMMON-PRIOR] 18004302 [ACCUMULATED-NII-CURRENT] 469962 [OVERDISTRIBUTION-NII] 0 [ACCUMULATED-NET-GAINS] 316862372 [OVERDISTRIBUTION-GAINS] 0 [ACCUM-APPREC-OR-DEPREC] 144885969 [NET-ASSETS] 879934151 [DIVIDEND-INCOME] 14786008 [INTEREST-INCOME] 16424805 [OTHER-INCOME] 0 [EXPENSES-NET] (6322799) [NET-INVESTMENT-INCOME] 24888014 [REALIZED-GAINS-CURRENT] 173198410 [APPREC-INCREASE-CURRENT] (48825541) [NET-CHANGE-FROM-OPS] 149260803 [EQUALIZATION] 0 [DISTRIBUTIONS-OF-INCOME] (24935959) [DISTRIBUTIONS-OF-GAINS] 0 [DISTRIBUTIONS-OTHER] 0 [NUMBER-OF-SHARES-SOLD] 0 [NUMBER-OF-SHARES-REDEEMED] 0 [SHARES-REINVESTED] 0 [NET-CHANGE-IN-ASSETS] 64755425 [ACCUMULATED-NII-PRIOR] 517907 [ACCUMULATED-GAINS-PRIOR] 203233461 [OVERDISTRIB-NII-PRIOR] 0 [OVERDIST-NET-GAINS-PRIOR] 0 [GROSS-ADVISORY-FEES] 4916973 [INTEREST-EXPENSE] 0 [GROSS-EXPENSE] 6335891 [AVERAGE-NET-ASSETS] 883394597 [PER-SHARE-NAV-BEGIN] 11.63 [PER-SHARE-NII] 1.38 [PER-SHARE-GAIN-APPREC] 0 [PER-SHARE-DIVIDEND] (1.38) [PER-SHARE-DISTRIBUTIONS] 0 [RETURNS-OF-CAPITAL] 0 [PER-SHARE-NAV-END] 11.63 [EXPENSE-RATIO] .72 [AVG-DEBT-OUTSTANDING] 0 [AVG-DEBT-PER-SHARE] 0 Net Assets of both Income & Capital shares. Preferred shares.
-----END PRIVACY-ENHANCED MESSAGE-----