-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, kJg5E+nXETjn7+sKy6q2VCzt3I6vmoB+L1Lj7ZzFBoja0VHaQBiTO/cpUuBS+IdQ D71OCUh+IVmAO9/0qMFigw== 0000912057-95-004508.txt : 19950612 0000912057-95-004508.hdr.sgml : 19950612 ACCESSION NUMBER: 0000912057-95-004508 CONFORMED SUBMISSION TYPE: N-30B-2 PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19950331 FILED AS OF DATE: 19950609 SROS: NYSE 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-30B-2 SEC ACT: 1940 Act SEC FILE NUMBER: 811-04797 FILM NUMBER: 95546244 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-30B-2 1 N-30B-2 QUEST FOR VALUE DUAL PURPOSE FUND, INC. MAY 12, 1995 DEAR SHAREHOLDER: The Dual Purpose Fund continued its QUEST FOR VALUE favorable performance in the 1995 DUAL PURPOSE first quarter, a period of strongly FUND, INC. rising stock prices. The total return on the Fund's portfolio was 9.5%, One World Financial well above the average total returns Center of 7.5% and 8.1% for equity income New York, NY 10281 and growth and income mutual funds, 1-800-232-3863 respectively, as calculated by Morningstar, Inc., and slightly below THE OTHER FUNDS OF the total return of 9.7% for the QUEST FOR VALUE: Standard & Poor's 500 Index including dividends (S&P 500). In the eight-plus years since its inception on February 13, 1987, EQUITY FUNDS the Fund has generated a ------------ compound annual total return of QUEST FOR VALUE FUND 14.9% on its portfolio, exceeding GLOBAL EQUITY FUND the 10.9% annual return of the OPPORTUNITY FUND S&P 500 by a wide margin. SMALL CAPITALIZATION FUND The Fund is a closed-end investment GROWTH AND INCOME FUND Company with an equal number of Capital Shares and Income Shares. Capital Shares FIXED INCOME FUNDS receive all the capital appreciation ------------------ and absorb any losses from the Fund's entire portfolio, while Income Shares TAXABLE receive all net income. Both classes U.S. GOVERNMENT of shares provided positive returns INCOME FUND in the first quarter. INVESTMENT QUALITY INCOME FUND PORTFOLIO ACTIVITY GLOBAL INCOME FUND By investing in undervalued quality TAX-EXEMPT businesses with high cash flow and NATIONAL TAX-EXEMPT FUND above-average returns on equity, CALIFORNIA TAX-EXEMPT FUND we seek to control risk and achieve NEW YORK TAX-EXEMPT FUND superior performance over time. First-quarter results of the Fund MONEY MARKET FUNDS were driven by excellent stock ------------------ selection, as our equity holdings provided a total return of 12.0%, QUEST CASH RESERVES: handily beating the S&P 500. Price gains were especially strong TAXABLE for some of our stocks in the PRIMARY PORTFOLIO financial services sector: AFLAC, GOVERNMENT PORTFOLIO Inc., up 26% in the quarter; American Express Co., up 18%; TAX-EXEMPT Federal Home Loan Mortgage Corp. GENERAL MUNICIPAL PORTFOLIO (Freddie Mac), up 20%; Mellon CALIFORNIA MUNICIPAL PORTFOLIO Bank Corp., up 33%; and NEW YORK MUNICIPAL PORTFOLIO Travelers, Inc., up 19%. Although the intrinsic values of FOR INFORMATION these companies are not particularly ABOUT ANY OF THE sensitive to interest rates, they QUEST FOR VALUE FUNDS, are frequently perceived as being CALL YOUR BROKER. 'interest rate plays' and, accordingly, they benefited in the quarter from a more benign interest rate environment. Another favorite theme of ours -- companies improving their performance through restructuring -- played out well as several large holdings, including Hercules, Inc., McDonnell Douglas Corp. and Monsanto Co., outperformed the market. Toward the end of the quarter, we adopted a more cautious investment stance because valuations were getting stretched and, also, because we felt the U.S. dollar might be vulnerable to further declines. Reflecting these concerns, we increased the Fund's cash reserves from 1% of net assets at the end of 1994 to 9% at the end of the first quarter and reduced its holdings of common stocks from 69% of net assets to 63%. In addition, late in the quarter we reinstituted our portfolio hedging program. By quarter's end, 32.7% of the Fund's common stock holdings were hedged through the sale of Standard & Poor's 500 Index futures and an additional 6.0% through other hedging techniques, versus no futures hedging and only a minimal use of other hedges at the end of 1994. Hedging reduces risk, but could limit the Fund's returns in a generally rising market. The Fund's five largest equity positions (common stocks and securities convertible into common stocks) at the end of the quarter were Security Capital Realty, Inc., Citicorp, Federal Home Loan Mortgage Corp. (Freddie Mac), Hercules, Inc. and Transamerica Corp. Together, they represented approximately 25% of the Fund's net assets. In the quarter, we established a new position in the common stock of May Department Stores Co. and increased our investments in Citicorp, Freeport McMoRan Copper & Gold and Sprint Corp. We eliminated our positions in the common stocks of Fruit of The Loom, Inc. (Class A), Lehman Brothers Holdings, Inc., Philip Morris Companies, Inc. and Student Loan Marketing Association (Sallie Mae) and reduced our investments in Avon Products, Inc., Becton, Dickinson & Co., Federal Home Loan Mortgage Corp. (Freddie Mac) and Warner-Lambert Co. In addition to our investments in common stocks and cash equivalents, the Fund's net assets were allocated 19% to convertible securities and other equity-related issues at the end of March and 9% to fixed income securities. These percentages represented an increase in our holdings of equity-related issues during the quarter and a decrease in our holdings of fixed income securities. In the equity-related segment, we established a new position in AMR Corp. convertible bonds and increased our investment in Flagstar Companies, Inc. convertible preferred. In the fixed income and preferred stock sector, we eliminated our holdings of the fixed income securities of Delta Air Lines, Inc. and Stone Container, Inc. and the preferred stock of UAL Corp., in each case at a profit. Within the equity-related segment, our convertible bonds had a total return of 11.6% in the quarter and our convertible preferred stocks a total return of 1.1%. The fixed income and preferred stock segment of the portfolio provided a total return of 6.9%. These segments are an important part of the Fund's current portfolio strategy, which is to combine relatively high-yielding fixed income and convertible securities with common stocks chosen primarily for their appreciation potential. We believe that over time the flexibility provided by this strategy produces superior total returns to a strategy which would always emphasize high-dividend common stocks chosen solely for their yield. CAPITAL SHARES The Capital Shares are intended for investors seeking capital appreciation, leverage and professional management at no cost (the management fees and expenses of the Fund are paid out of current income by the Income Shareholders). The net asset value (NAV) of the Capital Shares advanced 12.4% in the first quarter, compared with the 9.7% gain for the S&P 500. The Capital Shares tend to exaggerate the performance of the total portfolio, up or down, because of their leverage. At March 31, 1995, the Capital Shares had an NAV of $28.96 each and were entitled to the capital appreciation or depreciation on the entire net assets of the Fund, equal to $40.64 per Capital Share --thereby magnifying changes in value, up or down, of the Fund's portfolio by approximately 1.4 times. This leverage was tempered somewhat by our hedging program, described previously. The Capital Shares have been excellent performers over time. From the Fund's inception on February 13, 1987 through March 31, 1995, they provided a compound annual pretax return of 17.2% (based on the NAV, after adjustment for short-term capital gains distributions and for taxes paid on net realized long-term capital gains retained by the Fund), far surpassing the 10.9% return for the S&P 500. This strong performance reflects a combination of above-average investment returns and the impact of leverage. The market price of the Capital Shares increased 11.0%, adjusted for short-term capital gains distributions, in the first quarter. As of March 31, 1995, the Capital Shares were priced at $25.50 per share on the New York Stock Exchange, an 11.9% discount from NAV. The Capital Shares will be redeemable at their full NAV and any remaining discount will automatically disappear after January 31, 1997, when the Fund will either liquidate or, following a vote of shareholders, convert to an open-end fund. INCOME SHARES The Income Shares are intended for investors seeking high current income and relative safety of principal. They provided a total return (dividends paid and change in market price assuming the reinvestment of dividends) of 3.5% in the quarter, matching the return of a Treasury security with an equivalent maturity. Our goal is to deliver competitive returns that equal or exceed benchmark indices. From inception on February 13, 1987 through March 31, 1995, the compound annual total return on the Income Shares was 10.7% at market, assuming reinvestment of dividends, exceeding the 7.8% compound return for a Treasury security maturing in February 1997. The Fund paid regular monthly dividends of $.10 per Income Share in the first quarter, or a total of $.30 per share for the period. Income earned in the first quarter exceeded the $.30 of dividends, and a portion of this additional income was distributed through an extra dividend of $.05 per Income Share declared in April. The portfolio continues to generate income in excess of $.10 per month. Consequently, we currently expect to pay total dividends -- monthly dividends plus extras -- in 1995 exceeding the $1.34 per Income Share paid in 1994. We will inform you in future quarterly reports if there is any significant change in this outlook. The current yield on the Income Shares was 10.9% as of March 31, 1995, based on the market price of $12.25 per share and the $1.34 in dividends paid in the 12 months ended March 31, 1995. The Income Shares are scheduled to be redeemed on January 31, 1997 at $11.60 per share plus all accumulated and unpaid dividends. SUMMARY Looking at today's stock market, we believe some degree of caution is warranted. While we do not expect a price collapse, neither are we finding as many values as we would like. We continue to manage the Fund with a goal of preserving capital and generating superior returns over time, and we remain alert to opportunities to buy quality businesses at reasonable prices as these opportunities arise. Thank you for investing with us at Quest for Value. Sincerely, Joseph M. La Motta President QUEST FOR VALUE DUAL PURPOSE FUND, INC. SCHEDULE OF INVESTMENTS AND NET ASSETS (UNAUDITED) MARCH 31, 1995
PRINCIPAL AMOUNT VALUE (A) - ----------- ------------- U.S. TREASURY BILLS--0.9% $ 6,900,000 5.815%, 7/13/95 (B)............... $ 6,788,910 ------------- REPURCHASE AGREEMENT--3.6% $26,207,000 Lehman Brothers 6.25%, 4/03/95 (proceeds at maturity: $26,220,649, collateralized by $14,255,000 and $11,935,000 par, $14,302,042 and $12,531,750 value, U.S. Treasury Notes, 6.875%, 7/31/99 and 8.00%, 8/15/99, respectively)..................... $ 26,207,000 ------------- SHORT-TERM CORPORATE NOTES--5.5% Automotive--4.1% $20,000,000 Ford Motor Credit Co. 5.96%, 5/01/95.................... $ 19,900,667 10,000,000 General Motors Acceptance Corp. 6.15%, 5/01/95.................... 9,948,750 ------------- 29,849,417 ------------- Insurance--1.4% 10,000,000 Prudential Funding Corp. 5.95%, 4/10/95.................... 9,985,125 ------------- Total Short-Term Corporate Notes.... $ 39,834,542 ------------- CORPORATE NOTES AND BONDS--9.3% Chemicals--0.7% $ 5,000,000 IMC Fertilizer Group, Inc. Sr. Notes 10.75%, 6/15/03................... $ 5,218,750 ------------- Energy--1.7% 16,000,000 Triton Energy Corp. Sr. Sub. Disc. Notes Zero Coupon, 11/01/97............. 12,380,000 ------------- Gaming--1.8% 12,500,000 Harrah's Jazz Co. First Mortgage Notes 14.25%, 11/15/01.................. 13,375,000 ------------- PRINCIPAL AMOUNT VALUE (A) - ----------- ------------- Insurance--1.1% $ 8,750,000 Reliance Group Holdings, Inc. Sr. Sub. Deb. 9.75%, 11/15/03................... $ 8,006,250 ------------- Telecommunications--3.3% 15,000,000 Comcast Corp. Sr. Sub. Deb. 10.625%, 7/15/12.................. 15,337,500 20,000,000 Nextel Communications, Inc. Sr. Sub. Disc. Notes 0.00%/11.50%, 9/01/03**........... 8,850,000 ------------- 24,187,500 ------------- Tobacco/Beverages/Food Products--0.7% 5,000,000 Chiquita Brands International, Inc. Sub. Notes 11.50%, 6/01/01................... 5,100,000 ------------- Total Corporate Notes and Bonds..... $ 68,267,500 ------------- CONVERTIBLE CORPORATE NOTES AND BONDS--14.7% Airlines--4.5% $22,000,000 AMR Corp. Conv. Sub. Deb. 6.125%, 11/01/24.................. $ 20,680,000 12,560,000 WorldCorp, Inc. Conv. Sub. Deb. 7.00%, 5/15/04.................... 11,932,000 ------------- 32,612,000 ------------- Drugs & Medical Products--2.7% 56,380,000 Alza Corp. Conv. Sub. Notes Zero Coupon, 7/14/14.............. 20,085,375 ------------- Energy--2.1% 12,970,545 Crusader Limited Conv. Sub. Notes 6.00%, 2/14/04 (C)................ 15,602,268 ------------- Insurance--2.8% 20,000,000 Equitable Co. Conv. Sub. Notes 6.125%, 12/15/24.................. 20,725,000 ------------- Real Estate--2.6% 18,728,536 Security Capital Realty, Inc. Conv. Sub. Notes 12.00%, 6/30/14 (C)............... 18,728,536 ------------- Total Convertible Corporate Notes and Bonds......................... $ 107,753,179 -------------
SHARES VALUE (A) - ----------- ------------- CONVERTIBLE PREFERRED STOCKS--4.4% Insurance--1.3% 170,000 Travelers, Inc. $2.75 Conv. Pfd. Series B......... $ 9,732,500 ------------- Tobacco/Beverages/Food Products--3.1% 1,250,000 Flagstar Companies, Inc. $2.28 Conv. Exch. Pfd. ........... 22,500,000 ------------- Total Convertible Preferred Stocks.. $ 32,232,500 ------------- COMMON STOCKS--63.1% Aerospace--4.6% 600,000 McDonnell Douglas Corp.(B).......... $ 33,450,000 ------------- Banking--8.4% 900,000 Citicorp............................ 38,250,000 574,084 Mellon Bank Corp.(B)................ 23,393,923 ------------- 61,643,923 ------------- Chemicals--7.4% 735,600 Hercules, Inc. (B).................. 34,297,350 250,000 Monsanto Co. ....................... 20,062,500 ------------- 54,359,850 ------------- Consumer Products--0.7% 81,800 Avon Products, Inc. (B)............. 4,948,900 ------------- Drugs & Medical Products--4.4% 300,000 Becton, Dickinson & Co. ............ 16,275,000 200,000 Warner-Lambert Co. ................. 15,650,000 ------------- 31,925,000 ------------- Electronics--2.9% 500,000 Arrow Electronics, Inc.*............ 21,062,500 ------------- SHARES VALUE (A) - ----------- ------------- Energy--2.5% 475,000 Triton Energy Corp.*................ $ 18,168,750 ------------- Insurance--13.1% 454,500 AFLAC, Inc. ........................ 18,350,437 400,000 EXEL Limited........................ 17,650,000 77,400 Progressive Corp., Ohio............. 3,144,375 600,000 Transamerica Corp. ................. 33,975,000 600,000 Travelers, Inc. .................... 23,175,000 ------------- 96,294,812 ------------- Metals/Mining--3.2% 246,250 Freeport McMoRan Copper & Gold............................ 5,386,719 1,000,000 Freeport McMoRan, Inc. ............. 18,125,000 ------------- 23,511,719 ------------- Miscellaneous Financial Services--8.7% 700,000 American Express Co. ............... 24,412,500 600,000 Federal Home Loan Mortgage Corp. ... 36,300,000 146,300 John Alden Financial Corp. ......... 2,688,262 ------------- 63,400,762 ------------- Real Estate--2.9% 24,346 Security Capital Realty, Inc. (C)... 21,473,235 ------------- Retail--1.0% 200,000 May Department Stores Co. .......... 7,400,000 ------------- Telecommunications--3.3% 800,000 Sprint Corp. ....................... 24,200,000 ------------- Total Common Stocks................. $ 461,839,451 ------------- TOTAL INVESTMENTS......................101.5% $ 742,923,082 ------ -------------
CONTRACTS VALUE (A) - ----------- ------------- WRITTEN CALL OPTIONS OUTSTANDING--(0.3%) 818 Avon Products, Inc. expiring April '95 @ $60................. $ (102,250) -------------- 2,000 Hercules, Inc. expiring June '95 @ $40.................. (1,475,000) -------------- McDonnell Douglas Corp. 150 expiring April '95 @ $55................. (26,250) -------------- 1,850 expiring May '95 @ $55................... (439,375) -------------- (465,625) -------------- 1,000 Mellon Bank Corp. expiring June '95 @ $35.................. $ (637,500) -------------- Total Written Call Options Outstanding..... $ (2,680,375) -------------- Other Liabilities in Excess of Other Assets..............................(1.2) (8,546,014) ------ -------------- TOTAL NET ASSETS........................... 100.0% $ 731,696,693 ------ --------------
- ------------------------------------------------------------------------------- *Non-income producing security. **Represents a step-up floater which will receive 0.00% interest until 9/01/98, then will "step-up" to 11.50% until maturity. NOTES TO SCHEDULE OF INVESTMENTS AND NET ASSETS: (A) Each listed security is valued at the last reported sales price. Any security having a remaining maturity of sixty days or less is valued at amortized cost or amortized value, which approximates market. (B) Securities segregated (full or partial) as collateral for written call options and futures contracts outstanding. The market value of such segregated securities is $36,287,810. Open futures contracts at March 31, 1995 were as follows:
Number of Short Net Unrealized Type Contracts Value Expiration Loss --------------------------- --------- ------------ ---------- -------------- Standard & Poor's 500 Index 618 $151,097,498 June '95 $4,762,102 (C) Restricted Securities: Date of Par Valuation as of Description Acquisition Amount Shares Unit Cost March 31, 1995 - -------------------------------------------------------- ----------- ----------- ------ --------- --------------- Crusader Limited 6.00%, 2/14/04..................... 4/28/94 $12,970,545 -- $100 $120 Security Capital Realty, Inc. 12.00%, 6/30/94................................... 6/16/94 18,728,536 -- 94 100 Security Capital Realty, Inc. Common Stock..................................... 8/02/93 -- 14,286 686 882 3/07/94 -- 10,060 686 882
QUEST FOR VALUE QUEST FOR VALUE Q DUAL PURPOSE DUAL PURPOSE U FUND, INC. FUND, INC. E S T DIRECTORS AND OFFICERS JOSEPH M. LA MOTTA DIRECTOR, PRESIDENT (1) EUGENE D. BRODY DIRECTOR (2) GEORGE D. LANGDON, JR. DIRECTOR (1) GEORGE LOFT DIRECTOR (2) PAMELA W. MCCANN DIRECTOR (3) DR. THOMAS W. MURNANE DIRECTOR (3) LAWRENCE SHERMAN DIRECTOR (1) GEORGE A. LONG VICE PRESIDENT BERNARD H. GARIL VICE PRESIDENT SHELDON SIEGEL TREASURER THOMAS E. DUGGAN SECRETARY LESLIE KLEIN ASSISTANT TREASURER DEBORAH KABACK ASSISTANT SECRETARY QUARTERLY REPORT INVESTMENT ADVISER QUEST FOR VALUE ADVISORS ONE WORLD FINANCIAL CENTER NEW YORK, NY 10281 MARCH 31, 1995 CUSTODIAN, TRANSFER AND SHAREHOLDER SERVICING AGENT STATE STREET BANK AND TRUST COMPANY P.O. BOX 366 BOSTON, MA 02101 INDEPENDENT ACCOUNTANTS PRICE WATERHOUSE LLP 1177 AVENUE OF AMERICAS NEW YORK, NY 10036 KEY: (1) DIRECTOR FOR BOTH CAPITAL AND INCOME SHARES (2) DIRECTOR FOR CAPITAL SHARES (3) DIRECTOR FOR INCOME SHARES THIS REPORT, INCLUDING THE FINANCIAL INFORMATION HEREIN, IS TRANSMITTED TO THE SHAREHOLDERS OF QUEST FOR VALUE DUAL PURPOSE FUND, INC. FOR THEIR INFORMATION. IT IS NOT A PROSPECTUS, CIRCULAR OR REPRESENTATION INTENDED FOR USE IN THE PURCHASE OF SHARES OF THE FUND OR ANY SECURITIES MENTIONED IN THIS REPORT. MANAGED BY QUEST FOR VALUE ADVISORS -----END PRIVACY-ENHANCED MESSAGE-----