UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT
INVESTMENT COMPANIES
Investment Company Act file number 811-04797
Oppenheimer Quest Capital Value Fund, Inc.
(Exact name of registrant as specified in charter)
6803 South Tucson Way, Centennial, Colorado 80112-3924
(Address of principal executive offices) (Zip code)
Robert G. Zack, Esq.
OppenheimerFunds, Inc.
Two World Financial Center, New York, New York 10281-1008
(Name and address of agent for service)
Registrant's telephone number, including area code: (303) 768-3200
Date of fiscal year end: October 31
Date of reporting period: November 1, 2003 - October 31, 2004
ITEM 1. REPORTS TO STOCKHOLDERS.
TOP HOLDINGS AND ALLOCATIONS
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TOP TEN COMMON STOCK HOLDINGS
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Canadian National Railway Co. 3.9%
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Lamar Advertising Co., Cl. A 3.8
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Alliant Techsystems, Inc. 3.6
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Omnicom Group, Inc. 3.6
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Oshkosh Truck Corp. 3.3
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Laboratory Corp. of America Holdings 3.1
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Citigroup, Inc. 3.1
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Eaton Corp. 3.0
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Anadarko Petroleum Corp. 2.6
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Pacer International, Inc. 2.6
Portfolio holdings and allocations are subject to change. Percentages are as of
October 31, 2004, and are based on net assets.
For more current Fund holdings, please visit www.oppenheimerfunds.com.
TOP TEN COMMON STOCK INDUSTRIES
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Media 9.5%
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Machinery 8.9
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Road & Rail 6.5
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Health Care Providers & Services 6.2
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Oil & Gas 5.7
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Diversified Financial Services 5.1
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Aerospace & Defense 4.4
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Energy Equipment & Services 4.2
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Electronic Equipment & Instruments 3.9
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Metals & Mining 3.9
Portfolio holdings and allocations are subject to change. Percentages are as of
October 31, 2004, and are based on net assets.
8 | OPPENHEIMER QUEST CAPITAL VALUE FUND, INC.
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SECTOR ALLOCATION
[THE FOLLOWING TABLE WAS REPRESENTED BY A PIE CHART IN THE PRINTED MATERIAL.]
Industrials 28.9%
Machinery 9.5
Road & Rail 7.0
Aerospace & Defense 4.7
Electrical Equipment 3.4
Commercial Services & Supplies 2.4
Industrial Conglomerates 1.9
Consumer Discretionary 18.6
Financials 16.1
Health Care 11.8
Energy 10.6
Information Technology 6.8
Materials 4.2
Utilities 2.2
Consumer Staples 0.8
Portfolio holdings and allocations are subject to change. Percentages are as of
October 31, 2004, and are based on common stocks.
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9 | OPPENHEIMER QUEST CAPITAL VALUE FUND, INC.
FUND PERFORMANCE DISCUSSION
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HOW HAS THE FUND PERFORMED? BELOW IS A DISCUSSION BY OPPENHEIMERFUNDS, INC., OF
THE FUND'S PERFORMANCE DURING ITS FISCAL YEAR ENDED OCTOBER 31, 2004, FOLLOWED
BY A GRAPHICAL COMPARISON OF THE FUND'S PERFORMANCE TO AN APPROPRIATE BROAD-
BASED MARKET INDEX.
MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE. Oppenheimer Quest Capital Value
Fund, Inc., outperformed the broad U.S. equity market by a wide margin during
the one year period ended October 31, 2004. We attribute the Fund's strong
results to our individual selections in the health care sector, plus emphases in
energy and industrials, two of the better performing sectors of the S&P 500
Index during this twelve-month period.
Among the largest contributors to the Fund's total return were companies
that supply products to or support the research efforts of larger
pharmaceuticals companies. Chief among them were Inveresk Research Group and
Millipore Corp. Millipore, a manufacturer of filtration products for
pharmaceuticals production and research, could stand to benefit if certain new
drugs currently in development and testing are approved by the Food and Drug
Administration. The reason: Their filtration process would become an integral
part of the manufacturing of those new drugs, replaceable with another company's
filtration product only with FDA approval. While FDA approvals of these drugs
are not likely to come in a steady stream, each FDA approval could boost
Millipore's earnings. Inveresk, which offers outsourced contract research
services to pharmaceuticals, was acquired during the period at a relatively
attractive price per share.
Also performing very well were a number of industrial stocks selected for
the companies' unique or individual merits. For instance, Canadian National
Railway has been a holding of the Fund for some time. We were attracted to the
company for its efficient operations, low expense ratios and worker
productivity. As shipping volumes have increased in an expanding worldwide
economy, Canadian National Railway earnings and share price have risen as well.
At this juncture, we are seeking investment opportunities that may fare
well in a modest recovery due to the company's inherent strengths and/or the
ability to leverage long-term secular trends. These trends include a high demand
for healthcare and life science related products, increased defense spending,
and demand among rapidly developing nations like China for energy and materials.
10 | OPPENHEIMER QUEST CAPITAL VALUE FUND, INC.
COMPARING THE FUND'S PERFORMANCE TO THE MARKET. The graphs that follow show the
performance of a hypothetical $10,000 investment in each class of shares of the
Fund held until October 31, 2004. In the case of Class A, shares performance is
measured over a ten-fiscal-year period. In the case of Class B and Class C,
performance is measured from inception of those classes on March 3, 1997. In the
case of Class N shares, performance is measured from inception of the Class on
March 1, 2001. The Fund's performance reflects the deduction of the maximum
initial sales charge on Class A shares, the applicable contingent deferred sales
charge on Class B, Class C, and Class N shares, and reinvestments of all
dividends and capital gains distributions. Past performance cannot guarantee
future results.
The Fund's performance is compared to the performance of the Standard &
Poor's (S&P) 500 Index, a broad-based index of equity securities widely regarded
as a general measure of the performance of the U.S. equity securities market.
Index performance reflects the reinvestment of income but does not consider the
effect of transaction costs, and none of the data in the graphs shows the effect
of taxes. The Fund's performance reflects the effects of the Fund's 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 investments in the index.
11 | OPPENHEIMER QUEST CAPITAL VALUE FUND, INC.
FUND PERFORMANCE DISCUSSION
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CLASS A SHARES
COMPARISON OF CHANGE IN VALUE OF $10,000 HYPOTHETICAL INVESTMENTS IN:
Oppenheimer Quest Capital Value Fund, Inc. SM (Class A)
S&P 500 Index
[THE FOLLOWING TABLE WAS REPRESENTED BY A LINE GRAPH IN THE PRINTED MATERIAL.]
Oppenheimer Quest
Capital Value Fund,
Date Inc. SM (Class A) S&P 500 Index
12/31/1993 9,425 10,000
03/31/1994 9,239 9,621
06/30/1994 9,355 9,662
09/30/1994 9,506 10,133
12/31/1994 9,132 10,131
03/31/1995 10,223 11,117
06/30/1995 11,345 12,176
09/30/1995 12,467 13,143
12/31/1995 12,256 13,934
03/31/1996 13,372 14,682
06/30/1996 14,024 15,340
09/30/1996 13,543 15,814
10/31/1996 1 14,095 16,250
01/31/1997 14,314 18,201
04/30/1997 13,515 18,641
07/31/1997 15,637 22,303
10/31/1997 16,145 21,466
01/31/1998 16,409 23,097
04/30/1998 18,704 26,295
07/31/1998 18,642 26,609
10/31/1998 18,289 26,191
01/31/1999 20,433 30,606
04/30/1999 20,739 32,035
07/31/1999 19,737 31,985
10/31/1999 19,837 32,913
01/31/2000 19,691 33,771
04/30/2000 21,953 35,278
07/31/2000 22,351 34,852
10/31/2000 23,929 34,913
01/31/2001 24,722 33,467
04/30/2001 24,217 30,704
07/31/2001 23,795 29,861
10/31/2001 21,557 26,224
01/31/2002 23,375 28,067
04/30/2002 23,754 26,830
07/31/2002 19,892 22,809
10/31/2002 20,071 22,265
01/31/2003 19,808 21,610
04/30/2003 20,902 23,260
07/31/2003 22,986 25,235
10/31/2003 24,954 26,893
01/31/2004 27,092 29,075
04/30/2004 26,933 28,579
07/31/2004 27,569 28,556
10/31/2004 28,501 29,424
AVERAGE ANNUAL TOTAL RETURNS OF CLASS A SHARES WITH SALES CHARGE OF THE FUND AT
10/31/04
1-Year 7.65% 5-Year 6.25% 10-Year 10.77%
1. The Fund changed its fiscal year end from 12/31 to 10/31.
12 | OPPENHEIMER QUEST CAPITAL VALUE FUND, INC.
CLASS B SHARES
COMPARISON OF CHANGE IN VALUE OF $10,000 HYPOTHETICAL INVESTMENTS IN:
Oppenheimer Quest Capital Value Fund, Inc. SM (Class B)
S&P 500 Index
Oppenheimer Quest
Capital Value Fund,
Date Inc. SM (Class B) S&P 500 Index
03/03/1997 10,000 10,000
04/30/1997 9,387 10,162
07/31/1997 10,842 12,158
10/31/1997 11,180 11,702
01/31/1998 11,344 12,591
04/30/1998 12,911 14,335
07/31/1998 12,844 14,506
10/31/1998 12,582 14,278
01/31/1999 14,034 16,685
04/30/1999 14,223 17,464
07/31/1999 13,517 17,436
10/31/1999 13,566 17,942
01/31/2000 13,455 18,410
04/30/2000 14,976 19,231
07/31/2000 15,229 19,000
10/31/2000 16,283 19,033
01/31/2001 16,801 18,244
04/30/2001 16,429 16,738
07/31/2001 16,115 16,278
10/31/2001 14,577 14,296
01/31/2002 15,782 15,300
04/30/2002 16,013 14,626
07/31/2002 13,390 12,434
10/31/2002 13,480 12,138
01/31/2003 13,278 11,780
04/30/2003 14,012 12,680
07/31/2003 15,409 13,757
10/31/2003 16,729 14,661
01/31/2004 18,162 15,850
04/30/2004 18,055 15,580
07/31/2004 18,481 15,567
10/31/2004 19,107 16,040
AVERAGE ANNUAL TOTAL RETURNS OF CLASS B SHARES WITH SALES CHARGE OF THE FUND AT
10/31/04
1-Year 8.22% 5-Year 6.53% Since Inception (3/3/97) 8.82%
THE PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE, WHICH DOES NOT
GUARANTEE FUTURE RESULTS. THE INVESTMENT RETURN AND PRINCIPAL VALUE OF AN
INVESTMENT IN THE FUND WILL FLUCTUATE SO THAT AN INVESTOR'S SHARES, WHEN
REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. CURRENT
PERFORMANCE MAY BE LOWER OR HIGHER THAN THE PERFORMANCE QUOTED. FOR PERFORMANCE
DATA CURRENT TO THE MOST RECENT MONTH END, VISIT US AT WWW.OPPENHEIMERFUNDS.COM,
OR CALL US AT 1.800.525.7048. FUND RETURNS INCLUDE CHANGES IN SHARE PRICE,
REINVESTED DISTRIBUTIONS, AND THE APPLICABLE SALES CHARGE: FOR CLASS A SHARES,
THE CURRENT MAXIMUM INITIAL SALES CHARGE OF 5.75%; FOR CLASS B SHARES, THE
CONTINGENT DEFERRED SALES CHARGE OF 5% (1-YEAR) AND 2% (5-YEAR); AND FOR CLASS C
AND N SHARES, THE CONTINGENT 1% DEFERRED SALES CHARGE FOR THE 1-YEAR PERIOD.
BECAUSE CLASS B SHARES CONVERT TO CLASS A SHARES 72 MONTHS AFTER PURCHASE, THE
SINCE-INCEPTION RETURN FOR CLASS B USES CLASS A PERFORMANCE FOR THE PERIOD AFTER
CONVERSION. SEE PAGE 16 FOR FURTHER INFORMATION.
13 | OPPENHEIMER QUEST CAPITAL VALUE FUND, INC.
FUND PERFORMANCE DISCUSSION
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CLASS C SHARES
COMPARISON OF CHANGE IN VALUE OF $10,000 HYPOTHETICAL INVESTMENTS IN:
Oppenheimer Quest Capital Value Fund, Inc. SM (Class C)
S&P 500 Index
[THE FOLLOWING TABLE WAS REPRESENTED BY A LINE GRAPH IN THE PRINTED MATERIAL.]
Oppenheimer Quest
Capital Value Fund,
Date Inc. SM (Class C) S&P 500 Index
03/03/1997 10,000 10,000
04/30/1997 9,390 10,162
07/31/1997 10,845 12,158
10/31/1997 11,182 11,702
01/31/1998 11,346 12,591
04/30/1998 12,912 14,335
07/31/1998 12,845 14,506
10/31/1998 12,579 14,278
01/31/1999 14,030 16,685
04/30/1999 14,218 17,464
07/31/1999 13,513 17,436
10/31/1999 13,562 17,942
01/31/2000 13,451 18,410
04/30/2000 14,975 19,231
07/31/2000 15,223 19,000
10/31/2000 16,281 19,033
01/31/2001 16,793 18,244
04/30/2001 16,429 16,738
07/31/2001 16,116 16,278
10/31/2001 14,572 14,296
01/31/2002 15,783 15,300
04/30/2002 16,014 14,626
07/31/2002 13,387 12,434
10/31/2002 13,476 12,138
01/31/2003 13,275 11,780
04/30/2003 13,982 12,680
07/31/2003 15,344 13,757
10/31/2003 16,624 14,661
01/31/2004 18,008 15,850
04/30/2004 17,866 15,580
07/31/2004 18,241 15,567
10/31/2004 18,818 16,040
AVERAGE ANNUAL TOTAL RETURNS OF CLASS C SHARES WITH SALES CHARGE OF THE FUND AT
10/31/04
1-Year 12.20% 5-Year 6.77% Since Inception (3/3/97) 8.60%
14 | OPPENHEIMER QUEST CAPITAL VALUE FUND, INC.
CLASS N SHARES
COMPARISON OF CHANGE IN VALUE OF $10,000 HYPOTHETICAL INVESTMENTS IN:
Oppenheimer Quest Capital Value Fund, Inc. SM (Class N)
S&P 500 Index
[THE FOLLOWING TABLE WAS REPRESENTED BY A LINE GRAPH IN THE PRINTED MATERIAL.]
Oppenheimer Quest
Capital Value Fund,
Date Inc. SM (Class N) S&P 500 Index
03/01/2001 10,000 10,000
04/30/2001 10,103 10,094
07/31/2001 9,914 9,817
10/31/2001 8,981 8,621
01/31/2002 9,739 9,227
04/30/2002 9,884 8,821
07/31/2002 8,277 7,499
10/31/2002 8,343 7,320
01/31/2003 8,233 7,104
04/30/2003 8,677 7,647
07/31/2003 9,537 8,296
10/31/2003 10,345 8,841
01/31/2004 11,219 9,559
04/30/2004 11,144 9,396
07/31/2004 11,392 9,388
10/31/2004 11,768 9,674
AVERAGE ANNUAL TOTAL RETURNS OF CLASS N SHARES WITH SALES CHARGE OF THE FUND AT
10/31/04
1-Year 12.75% 5-Year N/A Since Inception (3/1/01) 4.54%
THE PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE, WHICH DOES NOT
GUARANTEE FUTURE RESULTS. THE INVESTMENT RETURN AND PRINCIPAL VALUE OF AN
INVESTMENT IN THE FUND WILL FLUCTUATE SO THAT AN INVESTOR'S SHARES, WHEN
REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. CURRENT
PERFORMANCE MAY BE LOWER OR HIGHER THAN THE PERFORMANCE QUOTED. FOR PERFORMANCE
DATA CURRENT TO THE MOST RECENT MONTH END, VISIT US AT WWW.OPPENHEIMERFUNDS.COM,
OR CALL US AT 1.800.525.7048. FUND RETURNS INCLUDE CHANGES IN SHARE PRICE,
REINVESTED DISTRIBUTIONS, AND THE APPLICABLE SALES CHARGE: FOR CLASS A SHARES,
THE CURRENT MAXIMUM INITIAL SALES CHARGE OF 5.75%; FOR CLASS B SHARES, THE
CONTINGENT DEFERRED SALES CHARGE OF 5% (1-YEAR) AND 2% (5-YEAR); AND FOR CLASS C
AND N SHARES, THE CONTINGENT 1% DEFERRED SALES CHARGE FOR THE 1-YEAR PERIOD. SEE
PAGE 16 FOR FURTHER INFORMATION.
15 | OPPENHEIMER QUEST CAPITAL VALUE FUND, INC.
NOTES
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Total returns and the ending account values in the graphs include changes in
share price and reinvestment of dividends and capital gains distributions in a
hypothetical investment for the periods shown. The Fund's total returns shown do
not reflect the deduction of income taxes on an individual's investment. Taxes
may reduce your actual investment returns on income or gains paid by the Fund or
any gains you may realize if you sell your shares.
Investors should consider the Fund's investment objectives, risks, and other
charges and expenses carefully before investing. The Fund's prospectus contains
this and other information about the Fund, and may be obtained by asking your
financial advisor, calling us at 1.800.525.7048 or visiting our website at
www.oppenheimerfunds.com. Read the prospectus carefully before investing.
The Fund's investment strategy and focus can change over time. The mention of
specific fund holdings does not constitute a recommendation by OppenheimerFunds,
Inc.
OppenheimerFunds, Inc. became the Fund's advisor on 2/28/97. The Fund's
Subadvisor is OpCap Advisors (the Fund's advisor until 2/28/97). The Fund
commenced operations on 2/13/87 as a closed-end investment company, formerly
named Quest for Value Dual Purpose Fund, Inc., with a dual purpose structure and
two classes of shares, Income shares and Capital shares. Under the prior
dual-purpose structure, Capital shares were entitled to all gains and losses on
all Fund assets and no expenses were allocated to such shares; the Income shares
bore all of the Fund's operating expenses. On 1/31/97, the Fund redeemed its
Income shares, which are no longer outstanding, and its dual-purpose structure
terminated. On 3/3/97, the Fund converted from a closed-end fund to an open-end
fund, and its outstanding Capital shares were designated as Class A shares now
bearing their allocable share of the Fund's expenses.
CLASS A (formerly Capital) shares of the Fund were first publicly offered on
2/13/87. Unless otherwise noted, Class A shares total returns 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
3/3/97 (without giving effect to any fee waivers). Unless otherwise noted,
average annual total returns for Class A shares includes the current 5.75%
maximum initial sales charge. Class A shares are subject to a maximum annual
0.25% asset-based sales charge currently. The asset-based sales charge is
subject to a voluntary waiver of a portion or all of the charge as described in
the Prospectus, and the Board of Trustees has set the rate at zero.
CLASS B shares of the Fund were first publicly offered on 3/3/97. Unless
otherwise noted, Class B returns include the applicable contingent deferred
sales charge of 5% (1-year) and 2% (5-year). Because Class B shares convert to
Class A shares 72 months after purchase, the "10-year" returns for Class B uses
Class A performance for the period after conversion. Class B shares are subject
to a maximum annual 0.75% asset-based sales charge.
16 | OPPENHEIMER QUEST CAPITAL VALUE FUND, INC.
CLASS C shares of the Fund were first publicly offered on 3/3/97. Unless
otherwise noted, Class C returns include the contingent deferred sales charge of
1% for the 1-year period. Class C shares are subject to an annual 0.75%
asset-based sales charge.
CLASS N shares of the Fund were first publicly offered on 3/1/01. Class N shares
are offered only through retirement plans. Unless otherwise noted, Class N
returns include the contingent deferred sales charge of 1% for the 1-year
period. Class N shares are subject to an annual 0.25% asset-based sales charge.
An explanation of the calculation of performance is in the Fund's Statement of
Additional Information.
17 | OPPENHEIMER QUEST CAPITAL VALUE FUND, INC.
FUND EXPENSES
- --------------------------------------------------------------------------------
FUND EXPENSES. As a shareholder of the Fund, you incur two types of costs: (1)
transaction costs, which may include sales charges (loads) on purchase payments,
contingent deferred sales charges on redemptions; and redemption fees, if any;
and (2) ongoing costs, including management fees; distribution and service fees;
and other Fund expenses. These examples are intended to help you understand your
ongoing costs (in dollars) of investing in the Fund and to compare these costs
with the ongoing costs of investing in other mutual funds.
The examples are based on an investment of $1,000.00 invested at the beginning
of the period and held for the entire 6-month period ended October 31, 2004.
ACTUAL EXPENSES. The "actual" lines of the table provide information about
actual account values and actual expenses. You may use the information on this
line for the class of shares you hold, together with the amount you invested, to
estimate the expense that you paid over the period. Simply divide your account
value by $1,000.00 (for example, an $8,600.00 account value divided by $1,000.00
= 8.60), then multiply the result by the number in the "actual" line under the
heading entitled "Expenses Paid During Period" to estimate the expenses you paid
on your account during this period.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES. The "hypothetical" lines of the
table provide information about hypothetical account values and hypothetical
expenses based on the Fund's actual expense ratio for each class of shares, and
an assumed rate of return of 5% per year before expenses, which is not the
Fund's actual return. The hypothetical account values and expenses may not be
used to estimate the actual ending account balance or expenses you paid for the
period. You may use this information to compare the ongoing costs of investing
in the Fund and other funds. To do so, compare this 5% hypothetical example for
the class of shares you hold with the 5% hypothetical examples that appear in
the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs, such as front-end
or contingent deferred sales charges (loads), or a $12.00 fee imposed annually
on accounts valued at less than $500.00 (subject to exceptions described in
18 | OPPENHEIMER QUEST CAPITAL VALUE FUND, INC.
the Statement of Additional Information). Therefore, the "hypothetical" lines of
the table are useful in comparing ongoing costs only, and will not help you
determine the relative total costs of owning different funds. In addition, if
these transactional costs were included, your costs would have been higher.
BEGINNING ENDING EXPENSES
ACCOUNT ACCOUNT PAID DURING
VALUE VALUE 6 MONTHS ENDED
(5/1/04) (10/31/04) OCTOBER 31, 2004
- -------------------------------------------------------------------
Class A Actual $ 1,000.00 $ 1,058.30 $ 7.27
- -------------------------------------------------------------------
Class A Hypothetical 1,000.00 1,018.10 7.13
- -------------------------------------------------------------------
Class B Actual 1,000.00 1,053.40 11.94
- -------------------------------------------------------------------
Class B Hypothetical 1,000.00 1,013.57 11.71
- -------------------------------------------------------------------
Class C Actual 1,000.00 1,053.30 12.09
- -------------------------------------------------------------------
Class C Hypothetical 1,000.00 1,013.42 11.86
- -------------------------------------------------------------------
Class N Actual 1,000.00 1,056.00 9.40
- -------------------------------------------------------------------
Class N Hypothetical 1,000.00 1,016.04 9.21
Hypothetical assumes 5% annual return before expenses.
Expenses are equal to the Fund's annualized expense ratio for that class,
multiplied by the average account value over the period, multiplied by 184/366
(to reflect the one-half year period). Those annualized expense ratios based on
the 6-month period ended October 31, 2004 are as follows:
CLASS EXPENSE RATIOS
- ------------------------
Class A 1.40%
- ------------------------
Class B 2.30
- ------------------------
Class C 2.33
- ------------------------
Class N 1.81
The expense ratios reflect voluntary waivers or reimbursements of expenses by
the Fund's Transfer Agent that can be terminated at any time, without advance
notice. The "Financial Highlights" tables in the Fund's financial statements,
included in this report, also show the gross expense ratios, without such
waivers or reimbursements.
19 | OPPENHEIMER QUEST CAPITAL VALUE FUND, INC.
STATEMENT OF INVESTMENTS October 31, 2004
- --------------------------------------------------------------------------------
VALUE
SHARES SEE NOTE 1
- --------------------------------------------------------------------------------
COMMON STOCKS--93.0%
- --------------------------------------------------------------------------------
CONSUMER DISCRETIONARY--17.3%
- --------------------------------------------------------------------------------
HOTELS, RESTAURANTS & LEISURE--3.6%
Ruby Tuesday, Inc. 239,700 $ 5,920,590
- --------------------------------------------------------------------------------
Yum! Brands, Inc. 165,700 7,207,950
-------------
13,128,540
- --------------------------------------------------------------------------------
MEDIA--9.5%
Lamar Advertising
Co., Cl. A 1 327,900 13,581,618
- --------------------------------------------------------------------------------
Omnicom Group, Inc. 164,121 12,949,147
- --------------------------------------------------------------------------------
WPP Group plc,
Sponsored ADR 154,600 7,770,196
-------------
34,300,961
- --------------------------------------------------------------------------------
MULTILINE RETAIL--1.2%
Dollar General Corp. 215,200 4,142,600
- --------------------------------------------------------------------------------
SPECIALTY RETAIL--2.0%
Ross Stores, Inc. 277,300 7,284,671
- --------------------------------------------------------------------------------
TEXTILES, APPAREL & LUXURY GOODS--1.0%
Columbia
Sportswear Co. 1 61,000 3,681,960
- --------------------------------------------------------------------------------
CONSUMER STAPLES--0.7%
- --------------------------------------------------------------------------------
FOOD PRODUCTS--0.7%
Dean Foods Co. 1 90,500 2,701,425
- --------------------------------------------------------------------------------
ENERGY--9.9%
- --------------------------------------------------------------------------------
ENERGY EQUIPMENT & SERVICES--4.2%
Nabors Industries
Ltd. 1 142,800 7,014,336
- --------------------------------------------------------------------------------
National-Oilwell, Inc. 1 241,800 8,151,078
-------------
15,165,414
- --------------------------------------------------------------------------------
OIL & GAS--5.7%
Anadarko Petroleum
Corp. 141,100 9,517,195
- --------------------------------------------------------------------------------
BP plc, ADR 156,700 9,127,775
- --------------------------------------------------------------------------------
ConocoPhillips 23,100 1,947,561
-------------
20,592,531
- --------------------------------------------------------------------------------
FINANCIALS--15.0%
- --------------------------------------------------------------------------------
COMMERCIAL BANKS--3.6%
M&T Bank Corp. 45,300 4,665,900
Trustmark Corp. 119,800 3,777,294
- --------------------------------------------------------------------------------
Zions Bancorp 68,400 4,526,028
-------------
12,969,222
- --------------------------------------------------------------------------------
CONSUMER FINANCE--0.6%
MoneyGram
International, Inc. 121,700 2,263,620
- --------------------------------------------------------------------------------
DIVERSIFIED FINANCIAL SERVICES--5.1%
American Express Co. 63,000 3,343,410
- --------------------------------------------------------------------------------
Ameritrade
Holding Corp. 1 310,000 4,036,200
- --------------------------------------------------------------------------------
Citigroup, Inc. 248,800 11,039,256
-------------
18,418,866
- --------------------------------------------------------------------------------
INSURANCE--2.0%
Nationwide Financial
Services, Inc., Cl. A 133,200 4,608,720
- --------------------------------------------------------------------------------
Platinum Underwriters
Holdings Ltd. 89,000 2,603,250
-------------
7,211,970
- --------------------------------------------------------------------------------
THRIFTS & MORTGAGE FINANCE--3.7%
Freddie Mac 79,800 5,314,680
- --------------------------------------------------------------------------------
MGIC Investment
Corp. 126,300 8,122,353
-------------
13,437,033
- --------------------------------------------------------------------------------
HEALTH CARE--11.0%
- --------------------------------------------------------------------------------
BIOTECHNOLOGY--1.0%
Amgen, Inc. 1 64,000 3,635,200
- --------------------------------------------------------------------------------
HEALTH CARE EQUIPMENT & SUPPLIES--1.8%
Millipore Corp. 1 144,332 6,637,829
- --------------------------------------------------------------------------------
HEALTH CARE PROVIDERS & SERVICES--6.2%
Community Health
Systems, Inc. 1 286,300 7,678,566
- --------------------------------------------------------------------------------
DaVita, Inc. 1 115,100 3,409,262
- --------------------------------------------------------------------------------
Laboratory Corp. of
America Holdings 1 243,100 11,133,980
-------------
22,221,808
20 | OPPENHEIMER QUEST CAPITAL VALUE FUND, INC.
VALUE
SHARES SEE NOTE 1
- --------------------------------------------------------------------------------
PHARMACEUTICALS--2.0%
Barr Pharmaceuticals,
Inc. 1 140,500 $ 5,289,825
- --------------------------------------------------------------------------------
Par Pharmaceutical
Cos., Inc. 1 46,200 1,822,590
-------------
7,112,415
- --------------------------------------------------------------------------------
INDUSTRIALS--26.8%
- --------------------------------------------------------------------------------
AEROSPACE & DEFENSE--4.4%
Alliant Techsystems,
Inc. 1 226,726 13,034,478
- --------------------------------------------------------------------------------
General Dynamics
Corp. 26,500 2,706,180
-------------
15,740,658
- --------------------------------------------------------------------------------
COMMERCIAL SERVICES & SUPPLIES--2.2%
Aramark Corp., Cl. B 359,700 8,111,235
- --------------------------------------------------------------------------------
ELECTRICAL EQUIPMENT--3.1%
AMETEK, Inc. 133,400 4,391,528
- --------------------------------------------------------------------------------
Roper Industries, Inc. 112,000 6,905,920
-------------
11,297,448
- --------------------------------------------------------------------------------
INDUSTRIAL CONGLOMERATES--1.7%
General Electric Co. 185,100 6,315,612
- --------------------------------------------------------------------------------
MACHINERY--8.9%
Actuant Corp., Cl. A 1 151,100 5,994,137
- --------------------------------------------------------------------------------
Eaton Corp. 171,100 10,941,845
- --------------------------------------------------------------------------------
Oshkosh Truck Corp. 203,000 11,956,700
- --------------------------------------------------------------------------------
Wabash National
Corp. 1 132,000 3,244,560
-------------
32,137,242
- --------------------------------------------------------------------------------
ROAD & RAIL--6.5%
Canadian National
Railway Co. 259,050 14,001,653
- --------------------------------------------------------------------------------
Pacer International,
Inc. 1 533,300 9,466,075
-------------
23,467,728
- --------------------------------------------------------------------------------
INFORMATION TECHNOLOGY--6.3%
- --------------------------------------------------------------------------------
ELECTRONIC EQUIPMENT & INSTRUMENTS--3.9%
Arrow Electronics,
Inc. 1 257,300 6,164,908
- --------------------------------------------------------------------------------
Diebold, Inc. 135,800 6,498,030
- --------------------------------------------------------------------------------
Jabil Circuit, Inc. 1 60,200 1,463,462
-------------
14,126,400
- --------------------------------------------------------------------------------
IT SERVICES--0.2%
Unisys Corp. 1 91,500 971,730
- --------------------------------------------------------------------------------
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT--2.2%
Freescale
Semiconductor, Inc.,
Cl. A 1 248,000 3,853,920
- --------------------------------------------------------------------------------
Intel Corp. 180,000 4,006,800
-------------
7,860,720
- --------------------------------------------------------------------------------
MATERIALS--3.9%
- --------------------------------------------------------------------------------
METALS & MINING--3.9%
Alcan, Inc. 173,500 8,036,519
- --------------------------------------------------------------------------------
Inco Ltd. 1 167,400 5,925,960
-------------
13,962,479
- --------------------------------------------------------------------------------
UTILITIES--2.1%
- --------------------------------------------------------------------------------
ELECTRIC UTILITIES--2.1%
Cinergy Corp. 188,300 7,441,616
-------------
Total Common Stocks
(Cost $284,236,912) 336,338,933
PRINCIPAL
AMOUNT
- --------------------------------------------------------------------------------
SHORT-TERM NOTES--5.9%
- --------------------------------------------------------------------------------
American Express
Credit Corp., 1.73%,
11/3/04 $ 6,000,000 5,999,423
- --------------------------------------------------------------------------------
Federal Home
Loan Bank:
1.69%, 11/1/04 9,334,000 9,334,000
1.72%, 11/17/04 6,000,000 5,995,413
-------------
Total Short-Term Notes
(Cost $21,328,836) 21,328,836
21 | OPPENHEIMER QUEST CAPITAL VALUE FUND, INC.
STATEMENT OF INVESTMENTS Continued
- --------------------------------------------------------------------------------
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- --------------------------------------------------------------------------------
Total Investments,
at Value (excluding
investments purchased
with cash collateral
from securities loaned)
(Cost $305,565,748) $ 357,667,769
- --------------------------------------------------------------------------------
INVESTMENTS PURCHASED WITH CASH COLLATERAL
FROM SECURITIES LOANED--2.1%
- --------------------------------------------------------------------------------
REPURCHASE AGREEMENTS--2.1%
Greenwich Capital 2
(Cost $7,540,000) $ 7,540,000 7,540,000
- --------------------------------------------------------------------------------
TOTAL INVESTMENTS,
AT VALUE
(COST $313,105,748) 101.0% 365,207,769
- --------------------------------------------------------------------------------
LIABILITIES IN EXCESS
OF OTHER ASSETS (1.0) (3,508,754)
-----------------------------
NET ASSETS 100.0% $ 361,699,015
=============================
FOOTNOTES TO STATEMENT OF INVESTMENTS
1. Non-income producing security.
2. The security has been segregated to satisfy the forward commitment to return
the cash collateral received in securities lending transactions upon the
borrower's return of the securities loaned. See Note 6 of Notes to Financial
Statements.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
22 | OPPENHEIMER QUEST CAPITAL VALUE FUND, INC.
STATEMENT OF ASSETS AND LIABILITIES October 31, 2004
- --------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------
ASSETS
- ---------------------------------------------------------------------------------------------------------
Investments, at value (including securities loaned of $7,287,700)
(cost $313,105,748)--see accompanying statement of investments $ 365,207,769
- ---------------------------------------------------------------------------------------------------------
Cash 160,014
- ---------------------------------------------------------------------------------------------------------
Receivables and other assets:
Investments sold 3,275,529
Shares of capital stock sold 1,037,623
Interest and dividends 258,264
Other 27,444
----------------
Total assets 369,966,643
- ---------------------------------------------------------------------------------------------------------
LIABILITIES
- ---------------------------------------------------------------------------------------------------------
Return of collateral for securities loaned 7,540,000
- ---------------------------------------------------------------------------------------------------------
Payables and other liabilities:
Shares of capital stock redeemed 471,350
Distribution and service plan fees 73,280
Transfer and shareholder servicing agent fees 72,086
Shareholder communications 46,328
Directors' compensation 34,106
Other 30,478
----------------
Total liabilities 8,267,628
- ---------------------------------------------------------------------------------------------------------
NET ASSETS $ 361,699,015
================
- ---------------------------------------------------------------------------------------------------------
COMPOSITION OF NET ASSETS
- ---------------------------------------------------------------------------------------------------------
Par value of shares of capital stock $ 1,372
- ---------------------------------------------------------------------------------------------------------
Additional paid-in capital 280,343,212
- ---------------------------------------------------------------------------------------------------------
Accumulated net investment loss (32,742)
- ---------------------------------------------------------------------------------------------------------
Accumulated net realized gain on investments and foreign currency transactions 29,285,152
- ---------------------------------------------------------------------------------------------------------
Net unrealized appreciation on investments 52,102,021
----------------
NET ASSETS $ 361,699,015
================
23 | OPPENHEIMER QUEST CAPITAL VALUE FUND, INC.
STATEMENT OF ASSETS AND LIABILITIES Continued
- --------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------
NET ASSET VALUE PER SHARE
- ---------------------------------------------------------------------------------------------------------
Class A Shares:
Net asset value and redemption price per share (based on net assets of $252,661,282 and
9,395,635 shares of capital stock outstanding) $ 26.89
Maximum offering price per share (net asset value plus sales charge of 5.75% of offering price) $ 28.53
- ---------------------------------------------------------------------------------------------------------
Class B Shares:
Net asset value, redemption price (excludes applicable contingent deferred sales charge)
and offering price per share (based on net assets of $64,069,242 and 2,555,344 shares
of capital stock outstanding) $ 25.07
- ---------------------------------------------------------------------------------------------------------
Class C Shares:
Net asset value, redemption price (excludes applicable contingent deferred sales charge)
and offering price per share (based on net assets of $34,414,347 and 1,371,125 shares
of capital stock outstanding) $ 25.10
- ---------------------------------------------------------------------------------------------------------
Class N Shares:
Net asset value, redemption price (excludes applicable contingent deferred sales charge)
and offering price per share (based on net assets of $10,554,144 and 396,648 shares
of capital stock outstanding) $ 26.61
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
24 | OPPENHEIMER QUEST CAPITAL VALUE FUND, INC.
STATEMENT OF OPERATIONS For the Year Ended October 31, 2004
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
INVESTMENT INCOME
- --------------------------------------------------------------------------------
Dividends (net of foreign withholding taxes of $29,416) $ 3,161,239
- --------------------------------------------------------------------------------
Interest 224,128
- --------------------------------------------------------------------------------
Portfolio lending fees 8,304
--------------
Total investment income 3,393,671
- --------------------------------------------------------------------------------
EXPENSES
- --------------------------------------------------------------------------------
Management fees 2,941,882
- --------------------------------------------------------------------------------
Distribution and service plan fees:
Class A 538,041
Class B 604,097
Class C 320,463
Class N 43,569
- --------------------------------------------------------------------------------
Transfer and shareholder servicing agent fees:
Class A 480,385
Class B 185,435
Class C 103,604
Class N 65,202
- --------------------------------------------------------------------------------
Shareholder communications:
Class A 33,145
Class B 35,455
Class C 17,149
Class N 1,782
- --------------------------------------------------------------------------------
Directors' compensation 33,990
- --------------------------------------------------------------------------------
Custodian fees and expenses 3,862
- --------------------------------------------------------------------------------
Other 79,013
--------------
Total expenses 5,487,074
Less reduction to custodian expenses (1,430)
Less payments and waivers of expenses (35,194)
--------------
Net expenses 5,450,450
- --------------------------------------------------------------------------------
NET INVESTMENT LOSS (2,056,779)
- --------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN
- --------------------------------------------------------------------------------
Net realized gain on:
Investments 35,014,419
Foreign currency transactions 880
Net increase from payment by affiliate 179,218
--------------
Net realized gain 35,194,517
- --------------------------------------------------------------------------------
Net change in unrealized appreciation on investments 7,472,308
- --------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 40,610,046
==============
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
25 | OPPENHEIMER QUEST CAPITAL VALUE FUND, INC.
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
YEAR ENDED OCTOBER 31, 2004 2003
- ---------------------------------------------------------------------------------------------
OPERATIONS
- ---------------------------------------------------------------------------------------------
Net investment loss $ (2,056,779) $ (1,575,259)
- ---------------------------------------------------------------------------------------------
Net realized gain 35,194,517 8,272,859
- ---------------------------------------------------------------------------------------------
Net change in unrealized appreciation (depreciation) 7,472,308 46,887,264
----------------------------------
Net increase in net assets resulting from operations 40,610,046 53,584,864
- ---------------------------------------------------------------------------------------------
DIVIDENDS AND/OR DISTRIBUTIONS TO SHAREHOLDERS
- ---------------------------------------------------------------------------------------------
Distributions from net realized gain:
Class A (1,407,511) --
Class B (421,504) --
Class C (234,513) --
Class N (47,778) --
- ---------------------------------------------------------------------------------------------
CAPITAL STOCK TRANSACTIONS
- ---------------------------------------------------------------------------------------------
Net increase in net assets resulting
from capital stock transactions:
Class A 31,831,708 6,104,178
Class B 1,735,308 3,216,603
Class C 144,639 8,915,736
Class N 3,167,760 2,367,129
- ---------------------------------------------------------------------------------------------
NET ASSETS
- ---------------------------------------------------------------------------------------------
Total increase 75,378,155 74,188,510
- ---------------------------------------------------------------------------------------------
Beginning of period 286,320,860 212,132,350
----------------------------------
End of period (including accumulated net investment loss
of $32,742 and $23,341, respectively) $ 361,699,015 $ 286,320,860
==================================
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
26 | OPPENHEIMER QUEST CAPITAL VALUE FUND, INC.
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
CLASS A YEAR ENDED OCTOBER 31, 2004 2003 2002 2001 2000
- ------------------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING DATA
- ------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 23.71 $ 19.07 $ 20.91 $ 33.65 $ 33.66
- ------------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment loss (.10) (.09) (.13) (.11) (.25)
Net realized and unrealized gain (loss) 3.45 4.73 (1.25) (2.59) 6.08
----------------------------------------------------------------------------
Total from investment operations 3.35 4.64 (1.38) (2.70) 5.83
- ------------------------------------------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Distributions from net realized gain (.17) -- (.46) (10.04) (5.84)
- ------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 26.89 $ 23.71 $ 19.07 $ 20.91 $ 33.65
============================================================================
- ------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE 1 14.22% 24.33% (6.90)% (9.91)% 20.63%
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- ------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $ 252,661 $ 193,955 $ 150,161 $ 154,346 $ 177,876
- ------------------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $ 225,711 $ 165,906 $ 164,479 $ 161,187 $ 181,216
- ------------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets: 2
Net investment loss (0.37)% (0.43)% (0.61)% (0.44)% (0.73)%
Total expenses 1.40% 3,4 1.56% 3,4 1.71% 3,4 1.67% 3 1.73% 3
- ------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 61% 74% 75% 80% 77%
1. Assumes an investment on the business day before the first day of the fiscal
period, with all dividends and distributions reinvested in additional shares on
the reinvestment date, and redemption at the net asset value calculated on the
last business day of the fiscal period. Sales charges are not reflected in the
total returns. Total returns are not annualized for periods of less than one
full year. Returns do not reflect the deduction of taxes that a shareholder
would pay on Fund distributions or the redemption of Fund shares.
2. Annualized for periods of less than one full year.
3. Reduction to custodian expenses less than 0.01%.
4. Voluntary waiver of transfer agent fees less than 0.01%.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
27 | OPPENHEIMER QUEST CAPITAL VALUE FUND, INC.
FINANCIAL HIGHLIGHTS Continued
- --------------------------------------------------------------------------------
CLASS B YEAR ENDED OCTOBER 31, 2004 2003 2002 2001 2000
- -----------------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING DATA
- -----------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 22.31 $ 18.09 $ 19.99 $ 32.77 $ 33.07
- -----------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income (loss) (.29) (.22) (.19) .05 (.34)
Net realized and unrealized gain (loss) 3.22 4.44 (1.25) (2.79) 5.88
---------------------------------------------------------------------------
Total from investment operations 2.93 4.22 (1.44) (2.74) 5.54
- -----------------------------------------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Distributions from net realized gain (.17) -- (.46) (10.04) (5.84)
- -----------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 25.07 $ 22.31 $ 18.09 $ 19.99 $ 32.77
===========================================================================
- -----------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE 1 13.22% 23.33% (7.53)% (10.48)% 20.02%
- -----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- -----------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $ 64,069 $ 55,449 $ 42,010 $ 34,278 $ 17,429
- -----------------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $ 60,460 $ 46,785 $ 42,900 $ 27,144 $ 15,719
- -----------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets: 2
Net investment loss (1.26)% (1.23)% (1.30)% (1.13)% (1.26)%
Total expenses 2.30% 2.43% 2.41% 2.26% 2.27%
Expenses after payments and waivers and
reduction to custodian expenses N/A 3 2.36% N/A 3,4 N/A 3 N/A 3
- -----------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 61% 74% 75% 80% 77%
1. Assumes an investment on the business day before the first day of the fiscal
period, with all dividends and distributions reinvested in additional shares on
the reinvestment date, and redemption at the net asset value calculated on the
last business day of the fiscal period. Sales charges are not reflected in the
total returns. Total returns are not annualized for periods of less than one
full year. Returns do not reflect the deduction of taxes that a shareholder
would pay on Fund distributions or the redemption of Fund shares.
2. Annualized for periods of less than one full year.
3. Reduction to custodian expenses less than 0.01%.
4. Voluntary waiver of transfer agent fees less than 0.01%.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
28 | OPPENHEIMER QUEST CAPITAL VALUE FUND, INC.
CLASS C YEAR ENDED OCTOBER 31, 2004 2003 2002 2001 2000
- -----------------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING DATA
- -----------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 22.34 $ 18.11 $ 20.01 $ 32.80 $ 33.09
- -----------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income (loss) (.29) (.14) (.13) .11 (.38)
Net realized and unrealized gain (loss) 3.22 4.37 (1.31) (2.86) 5.93
---------------------------------------------------------------------------
Total from investment operations 2.93 4.23 (1.44) (2.75) 5.55
- -----------------------------------------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Distributions from net realized gain (.17) -- (.46) (10.04) (5.84)
- -----------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 25.10 $ 22.34 $ 18.11 $ 20.01 $ 32.80
===========================================================================
- -----------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE 1 13.20% 23.36% (7.52)% (10.50)% 20.05%
- -----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- -----------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $ 34,414 $ 30,510 $ 16,979 $ 10,272 $ 5,053
- -----------------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $ 32,051 $ 20,901 $ 15,323 $ 7,898 $ 4,969
- -----------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets: 2
Net investment loss (1.26)% (1.24)% (1.30)% (1.13)% (1.25)%
Total expenses 2.31% 2.43% 2.41% 2.26% 2.27%
Expenses after payments and waivers and
reduction to custodian expenses N/A 3 2.36% N/A 3,4 N/A 3 N/A 3
- -----------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 61% 74% 75% 80% 77%
1. Assumes an investment on the business day before the first day of the fiscal
period, with all dividends and distributions reinvested in additional shares on
the reinvestment date, and redemption at the net asset value calculated on the
last business day of the fiscal period. Sales charges are not reflected in the
total returns. Total returns are not annualized for periods of less than one
full year. Returns do not reflect the deduction of taxes that a shareholder
would pay on Fund distributions or the redemption of Fund shares.
2. Annualized for periods of less than one full year.
3. Reduction to custodian expenses less than 0.01%.
4. Voluntary waiver of transfer agent fees less than 0.01%.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
29 | OPPENHEIMER QUEST CAPITAL VALUE FUND, INC.
FINANCIAL HIGHLIGHTS Continued
- --------------------------------------------------------------------------------
CLASS N YEAR ENDED OCTOBER 31, 2004 2003 2002 2001 1
- -----------------------------------------------------------------------------------------------------------
PER SHARE OPERATING DATA
- -----------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 23.56 $ 19.00 $ 20.88 $ 23.25
- -----------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment loss (.19) (.15) (.17) (.03)
Net realized and unrealized gain (loss) 3.41 4.71 (1.25) (2.34)
---------------------------------------------------------
Total from investment operations 3.22 4.56 (1.42) (2.37)
- -----------------------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Distributions from net realized gain (.17) -- (.46) --
- -----------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 26.61 $ 23.56 $ 19.00 $ 20.88
=========================================================
- -----------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE 2 13.75% 24.00% (7.10)% (10.19)%
- -----------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- -----------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $ 10,554 $ 6,408 $ 2,983 $ 187
- -----------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $ 8,724 $ 4,218 $ 1,475 $ 38
- -----------------------------------------------------------------------------------------------------------
Ratios to average net assets: 3
Net investment loss (0.78)% (0.75)% (0.88)% (0.96)%
Total expenses 2.20% 1.97% 1.87% 1.75%
Expenses after payments and waivers and
reduction to custodian expenses 1.81% 1.87% N/A 4,5 N/A 4
- -----------------------------------------------------------------------------------------------------------
Portfolio turnover rate 61% 74% 75% 80%
1. For the period from March 1, 2001 (inception of offering) to October 31,
2001.
2. Assumes an investment on the business day before the first day of the fiscal
period, with all dividends and distributions reinvested in additional shares on
the reinvestment date, and redemption at the net asset value calculated on the
last business day of the fiscal period. Sales charges are not reflected in the
total returns. Total returns are not annualized for periods of less than one
full year. Returns do not reflect the deduction of taxes that a shareholder
would pay on Fund distributions or the redemption of Fund shares.
3. Annualized for periods of less than one full year.
4. Reduction to custodian expenses less than 0.01%.
5. Voluntary waiver of transfer agent fees less than 0.01%.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
30 | OPPENHEIMER QUEST CAPITAL VALUE FUND, INC.
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES
Oppenheimer Quest Capital Value Fund, Inc. (the Fund) is registered under the
Investment Company Act of 1940, as amended, as an open-end management investment
company. The Fund's investment objective is to seek capital appreciation. The
Fund's investment advisor is OppenheimerFunds, Inc. (the Manager). The Manager
has entered into a subadvisory agreement with OpCap Advisors.
The Fund offers Class A, Class B, Class C and Class N shares. Class A
shares are sold at their offering price, which is normally net asset value plus
a front-end sales charge. Class B, Class C and Class N shares are sold without a
front-end sales charge but may be subject to a contingent deferred sales charge
(CDSC). Class N shares are sold only through retirement plans. Retirement plans
that offer Class N shares may impose charges on those accounts. All classes of
shares have identical rights and voting privileges with respect to the Fund in
general and exclusive voting rights on matters that affect that class alone.
Earnings, net assets and net asset value per share may differ due to each class
having its own expenses, such as transfer and shareholder servicing agent fees
and shareholder communications, directly attributable to that class. Class A, B,
C and N have separate distribution and/or service plans. Class B shares will
automatically convert to Class A shares six years after the date of purchase.
The following is a summary of significant accounting policies consistently
followed by the Fund.
- --------------------------------------------------------------------------------
SECURITIES VALUATION. The Fund calculates the net asset value of its shares as
of the close of The New York Stock Exchange (the Exchange), normally 4:00 P.M.
Eastern time, on each day the Exchange is open for business. Securities listed
or traded on National Stock Exchanges or other domestic or foreign exchanges are
valued based on the last sale price of the security traded on that exchange
prior to the time when the Fund's assets are valued. Securities traded on NASDAQ
are valued based on the closing price provided by NASDAQ prior to the time when
the Fund's assets are valued. In the absence of a sale, the security is valued
at the last sale price on the prior trading day, if it is within the spread of
the closing bid and asked prices, and if not, at the closing bid price.
Corporate, government and municipal debt instruments having a remaining maturity
in excess of 60 days and all mortgage-backed securities will be valued at the
mean between the "bid" and "asked" prices. Securities may be valued primarily
using dealer-supplied valuations or a portfolio pricing service authorized by
the Board of Directors. Securities (including restricted securities) for which
market quotations are not readily available are valued at their fair value.
Foreign and domestic securities whose values have been materially affected by
what the Manager identifies as a significant event occurring before the Fund's
assets are valued but after the close of their respective exchanges will be fair
valued. Fair value is determined in good faith using consistently applied
procedures under the supervision of the Board of Directors. Short-term "money
market type" debt securities with remaining maturities of sixty days or less are
valued at amortized cost (which approximates market value).
31 | OPPENHEIMER QUEST CAPITAL VALUE FUND, INC.
NOTES TO FINANCIAL STATEMENTS Continued
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES Continued
FOREIGN CURRENCY TRANSLATION. The Fund's accounting records are maintained in
U.S. dollars. Prices of securities denominated in foreign currencies are
translated into U.S. dollars as of the close of The New York Stock Exchange (the
Exchange), normally 4:00 P.M. Eastern time, on each day the Exchange is open for
business. Amounts related to the purchase and sale of foreign securities and
investment income are translated at the rates of exchange prevailing on the
respective dates of such transactions. Foreign exchange rates may be valued
primarily using dealer supplied valuations or a portfolio pricing service
authorized by the Board of Directors.
Reported net realized foreign exchange gains or losses arise from sales of
portfolio securities, sales and maturities of short-term securities, sales of
foreign currencies, currency gains or losses realized between the trade and
settlement dates on securities transactions, and the difference between the
amounts of dividends, interest, and foreign withholding taxes recorded on the
Fund's books and the U.S. dollar equivalent of the amounts actually received or
paid. Net unrealized foreign exchange gains and losses arise from changes in the
values of assets and liabilities, including investments in securities at fiscal
period end, resulting from changes in exchange rates.
The effect of changes in foreign currency exchange rates on investments is
separately identified from the fluctuations arising from changes in market
values of securities held and reported with all other foreign currency gains and
losses in the Fund's Statement of Operations.
- --------------------------------------------------------------------------------
ALLOCATION OF INCOME, EXPENSES, GAINS AND LOSSES. Income, expenses (other than
those attributable to a specific class), gains and losses are allocated on a
daily basis to each class of shares based upon the relative proportion of net
assets represented by such class. Operating expenses directly attributable to a
specific class are charged against the operations of that class.
- --------------------------------------------------------------------------------
FEDERAL TAXES. The Fund intends to comply with provisions of the Internal
Revenue Code applicable to regulated investment companies and to distribute
substantially all of its investment company taxable income, including any net
realized gain on investments not offset by capital loss carryforwards, if any,
to shareholders, therefore, no federal income or excise tax provision is
required.
The tax components of capital shown in the table below represent distribution
requirements the Fund must satisfy under the income tax regulations, losses the
Fund may be able to offset against income and gains realized in future years and
unrealized appreciation or depreciation of securities and other investments for
federal income tax purposes.
32 | OPPENHEIMER QUEST CAPITAL VALUE FUND, INC.
NET UNREALIZED
APPRECIATION
BASED ON COST OF
SECURITIES AND
UNDISTRIBUTED UNDISTRIBUTED ACCUMULATED OTHER INVESTMENTS
NET INVESTMENT LONG-TERM LOSS FOR FEDERAL INCOME
INCOME GAIN CARRYFORWARD 1,2 TAX PURPOSES
------------------------------------------------------------------------
$ 7,499,783 $ 21,785,369 $ -- $ 52,102,021
1. During the fiscal year ended October 31, 2004, the Fund did not utilize any
capital loss carryforward.
2. During the fiscal year ended October 31, 2003, the Fund utilized $3,944,756
of capital loss carryforward to offset capital gains realized in that fiscal
year.
Net investment income (loss) and net realized gain (loss) may differ for
financial statement and tax purposes. The character of dividends and
distributions made during the fiscal year from net investment income or net
realized gains may differ from their ultimate characterization for federal
income tax purposes. Also, due to timing of dividends and distributions, the
fiscal year in which amounts are distributed may differ from the fiscal year in
which the income or net realized gain was recorded by the Fund. Accordingly, the
following amounts have been reclassified for October 31, 2004. Net assets of the
Fund were unaffected by the reclassifications.
REDUCTION TO
REDUCTION TO ACCUMULATED NET
INCREASE TO ACCUMULATED NET REALIZED GAIN
PAID-IN CAPITAL INVESTMENT LOSS ON INVESTMENTS 3
------------------------------------------------------------
$ 3,802,099 $ 2,047,378 $ 5,849,477
3. $3,802,099, including $2,828,400 of long-term capital gain, was distributed
in connection with Fund share redemptions.
The tax character of distributions paid during the years ended October 31, 2004
and October 31, 2003 was as follows:
YEAR ENDED YEAR ENDED
OCTOBER 31, 2004 OCTOBER 31, 2003
------------------------------------------------------------
Distributions paid from:
Ordinary income $ 1,717,729 $ --
Long-term capital gain 393,577 --
-------------------------------
Total $ 2,111,306 $ --
===============================
The aggregate cost of securities and other investments and the composition of
unrealized appreciation and depreciation of securities and other investments for
federal income tax purposes as of October 31, 2004 are noted below. The primary
difference between book and tax appreciation or depreciation of securities and
other investments, if applicable, is attributable to the tax deferral of losses
or tax realization of financial statement unrealized gain or loss.
Federal tax cost of securities $ 313,105,748
===============
Gross unrealized appreciation $ 56,077,802
Gross unrealized depreciation (3,975,781)
---------------
Net unrealized appreciation $ 52,102,021
===============
33 | OPPENHEIMER QUEST CAPITAL VALUE FUND, INC.
NOTES TO FINANCIAL STATEMENTS Continued
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES Continued
DIRECTORS' COMPENSATION. The Fund has adopted an unfunded retirement plan for
the Fund's independent directors. Benefits are based on years of service and
fees paid to each director during the years of service. During the year ended
October 31, 2004, the Fund's projected benefit obligations were increased by
$5,112 and payments of $563 were made to retired directors, resulting in an
accumulated liability of $27,888 as of October 31, 2004.
The Board of Directors has adopted a deferred compensation plan for
independent directors that enables directors to elect to defer receipt of all or
a portion of the annual compensation they are entitled to receive from the Fund.
For purposes of determining the amount owed to the under the plan, deferred
amounts are treated as though equal dollar amounts had been invested in shares
of the Fund or in other Oppenheimer funds selected by the Director. The Fund
purchases shares of the funds selected for deferral by the Director in amounts
equal to his or her deemed investment, resulting in a Fund asset equal to the
deferred compensation liability. Such assets are included as a component of
"Other" within the asset section of the Statement of Assets and Liabilities.
Deferral of directors' fees under the plan will not affect the net assets of the
Fund, and will not materially affect the Fund's assets, liabilities or net
investment income per share. Amounts will be deferred until distributed in
accordance to the Plan.
- --------------------------------------------------------------------------------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS. Dividends and distributions to
shareholders, which are determined in accordance with income tax regulations,
are recorded on the ex-dividend date. Income and capital gain distributions, if
any, are declared and paid annually.
- --------------------------------------------------------------------------------
INVESTMENT INCOME. Dividend income is recorded on the ex-dividend date or upon
ex-dividend notification in the case of certain foreign dividends where the
ex-dividend date may have passed. Non-cash dividends included in dividend
income, if any, are recorded at the fair market value of the securities
received. Interest income, which includes accretion of discount and amortization
of premium, is accrued as earned.
- --------------------------------------------------------------------------------
CUSTODIAN FEES. Custodian Fees and Expenses in the Statement of Operations may
include interest expense incurred by the Fund on any cash overdrafts of its
custodian account during the period. The Fund pays interest to its custodian on
such cash overdrafts at a rate equal to the Federal Funds Rate plus 0.50%. The
Reduction to Custodian Expenses line item, if applicable, represents earnings on
cash balances maintained by the Fund during the period. Such interest expense
and other custodian fees may be paid with these earnings.
- --------------------------------------------------------------------------------
SECURITY TRANSACTIONS. Security transactions are recorded on the trade date.
Realized gains and losses on securities sold are determined on the basis of
identified cost.
- --------------------------------------------------------------------------------
OTHER. The preparation of financial statements in conformity with U.S. generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets
34 | OPPENHEIMER QUEST CAPITAL VALUE FUND, INC.
and liabilities at the date of the financial statements and the reported amounts
of income and expenses during the reporting period. Actual results could differ
from those estimates.
- --------------------------------------------------------------------------------
2. SHARES OF CAPITAL STOCK
The Fund has authorized one billion shares of $0.0001 par value capital stock in
the aggregate to be apportioned among each class of shares. Transactions in
shares of capital stock were as follows:
YEAR ENDED OCTOBER 31, 2004 YEAR ENDED OCTOBER 31, 2003
SHARES AMOUNT SHARES AMOUNT
- ----------------------------------------------------------------------------------------
CLASS A
Sold 2,915,233 $ 75,259,490 2,110,627 $ 42,829,597
Dividends and/or
distributions reinvested 49,931 1,200,855 -- --
Redeemed (1,750,878) (44,628,637) (1,805,326) (36,725,419)
------------------------------------------------------------
Net increase 1,214,286 $ 31,831,708 305,301 $ 6,104,178
============================================================
- ----------------------------------------------------------------------------------------
CLASS B
Sold 778,873 $ 18,762,947 849,036 $ 16,481,174
Dividends and/or
distributions reinvested 17,259 390,238 -- --
Redeemed (725,869) (17,417,877) (686,631) (13,264,571)
------------------------------------------------------------
Net increase 70,263 $ 1,735,308 162,405 $ 3,216,603
============================================================
- ----------------------------------------------------------------------------------------
CLASS C
Sold 495,377 $ 11,909,650 902,743 $ 18,309,043
Dividends and/or
distributions reinvested 8,074 182,716 -- --
Redeemed (498,192) (11,947,727) (474,437) (9,393,307)
------------------------------------------------------------
Net increase 5,259 $ 144,639 428,306 $ 8,915,736
============================================================
- ----------------------------------------------------------------------------------------
CLASS N
Sold 208,517 $ 5,296,582 176,429 $ 3,643,164
Dividends and/or
distributions reinvested 1,999 47,770 -- --
Redeemed (85,885) (2,176,592) (61,386) (1,276,035)
------------------------------------------------------------
Net increase 124,631 $ 3,167,760 115,043 $ 2,367,129
============================================================
- --------------------------------------------------------------------------------
3. PURCHASES AND SALES OF SECURITIES
The aggregate cost of purchases and proceeds from sales of securities, other
than short-term obligations, for the year ended October 31, 2004, were
$215,239,234 and $187,788,551, respectively.
- --------------------------------------------------------------------------------
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES
MANAGEMENT FEES. Management fees paid to the Manager were in accordance with the
investment advisory agreement with the Fund. Effective January 1, 2004, the
agreement
35 | OPPENHEIMER QUEST CAPITAL VALUE FUND, INC.
NOTES TO FINANCIAL STATEMENTS Continued
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES Continued
provides for a fee at an annual rate of 0.90% of the first $400 million of
average annual net assets of the Fund, 0.85% of the next $400 million, 0.80% of
the next $400 million, 0.70% of the next $400 million, 0.65% of the next $400
million and 0.60% of average annual net assets in excess of $2 billion. From
June 15, 2003 through December 31, 2003, the annual advisory fee rate was 0.90%
of the first $400 million of average annual net assets of the Fund, 0.85% of the
next $600 million, 0.80% of the next $2 billion, 0.70% of the next $1 billion,
0.65% of the next $1 billion and 0.60% of average annual net assets in excess of
$5 billion.
- --------------------------------------------------------------------------------
ADMINISTRATION SERVICES. The Fund pays the Manager a fee of $1,500 per year for
preparing and filing the Fund's tax returns.
- --------------------------------------------------------------------------------
SUB-ADVISOR FEES. The Manager retains OpCap Advisors (the Sub-Advisor) to
provide the day-to-day portfolio management of the Fund. The Manager pays the
Sub-Advisor a monthly fee based on the fee schedule set forth in the Fund's
prospectus. For the year ended October 31, 2004, the Manager paid $1,154,356 to
the Sub-Advisor for its services to the Fund.
- --------------------------------------------------------------------------------
TRANSFER AGENT FEES. OppenheimerFunds Services (OFS), a division of the Manager,
acts as the transfer and shareholder servicing agent for the Fund. The Fund pays
OFS a per account fee. For the year ended October 31, 2004, the Fund paid
$788,496 to OFS for services to the Fund.
- --------------------------------------------------------------------------------
DISTRIBUTION AND SERVICE PLAN (12b-1) FEES. Under its General Distributor's
Agreement with the Fund, OppenheimerFunds Distributor, Inc. (the Distributor)
acts as the Fund's principal underwriter in the continuous public offering of
the Fund's classes of shares.
- --------------------------------------------------------------------------------
DISTRIBUTION AND SERVICE PLAN FOR CLASS A SHARES. The Fund has adopted a
Distribution and Service Plan for Class A shares. Under the Plan, the Fund pays
a service fee to the Distributor of 0.25% of the average annual net assets of
Class A shares. The Distributor currently uses all of those fees to pay dealers,
brokers, banks and other financial institutions quarterly for providing personal
services and maintenance of accounts of their customers that hold Class A
shares. Under the Plan, the Fund may also pay an asset-based sales charge to the
Distributor. The Board of Directors has set the annual asset-based sales charge
rate at zero. Fees incurred by the Fund under the Plan are detailed in the
Statement of Operations.
- --------------------------------------------------------------------------------
DISTRIBUTION AND SERVICE PLANS FOR CLASS B, CLASS C AND CLASS N SHARES. The Fund
has adopted Distribution and Service Plans for Class B, Class C and Class N
shares to compensate the Distributor for its services in connection with the
distribution of those 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 and Class C shares and 0.25% per year on Class N shares. The Distributor
also receives a service fee of up to 0.25% per year under each plan. If either
the Class B, Class C or Class N plan is terminated by the Fund or by
36 | OPPENHEIMER QUEST CAPITAL VALUE FUND, INC.
the shareholders of a class, the Board of Directors and its independent
directors must determine whether the Distributor shall be entitled to payment
from the Fund of all or a portion of the service fee and/or asset-based sales
charge in respect to shares sold prior to the effective date of such
termination. The Distributor's aggregate uncompensated expenses under the plan
at October 31, 2004 for Class B, Class C and Class N shares were $948,764,
$375,150 and $139,319, respectively. Fees incurred by the Fund under the plans
are detailed in the Statement of Operations.
- --------------------------------------------------------------------------------
SALES CHARGES. Front-end sales charges and contingent deferred sales charges
(CDSC) do not represent expenses of the Fund. They are deducted from the
proceeds of sales of Fund shares prior to investment or from redemption proceeds
prior to remittance, as applicable. The sales charges retained by the
Distributor from the sale of shares and the CDSC retained by the Distributor on
the redemption of shares is shown in the table below for the period indicated.
CLASS A CLASS B CLASS C CLASS N
CLASS A CONTINGENT CONTINGENT CONTINGENT CONTINGENT
FRONT-END DEFERRED DEFERRED DEFERRED DEFERRED
SALES CHARGES SALES CHARGES SALES CHARGES SALES CHARGES SALES CHARGES
RETAINED BY RETAINED BY RETAINED BY RETAINED BY RETAINED BY
YEAR ENDED DISTRIBUTOR DISTRIBUTOR DISTRIBUTOR DISTRIBUTOR DISTRIBUTOR
- -------------------------------------------------------------------------------------------------
October 31, 2004 $ 204,395 $ 1,323 $ 101,232 $ 9,922 $ 4,636
- --------------------------------------------------------------------------------
PAYMENTS AND WAIVERS OF EXPENSES. Following a review of its use of brokerage
commissions for sales that is permitted under its investment advisory agreement,
the Fund's Manager terminated that practice in July 2003. Subsequently, the
Manager paid the Fund $179,218, an amount equivalent to certain of such
commissions incurred in prior years.
OFS has voluntarily agreed to limit transfer and shareholder servicing
agent fees for all classes to 0.35% of average annual net assets per class.
During the year ended October 31, 2004, OFS waived $689, and $34,505 for Class A
and Class N shares, respectively. This undertaking may be amended or withdrawn
at any time.
- --------------------------------------------------------------------------------
5. FOREIGN CURRENCY CONTRACTS
A foreign currency contract is a commitment to purchase or sell a foreign
currency at a future date, at a negotiated rate. The Fund may enter into foreign
currency contracts to settle specific purchases or sales of securities
denominated in a foreign currency and for protection from adverse exchange rate
fluctuation. Risks to the Fund include the potential inability of the
counterparty to meet the terms of the contract.
The net U.S. dollar value of foreign currency underlying all contractual
commitments held by the Fund and the resulting unrealized appreciation or
depreciation are determined using prevailing foreign currency exchange rates.
Unrealized appreciation and depreciation on foreign currency contracts are
reported in the Statement of Assets and Liabilities as a receivable or payable
and in the Statement of Operations with the change in unrealized appreciation or
depreciation.
The Fund may realize a gain or loss upon the closing or settlement of the
foreign transaction. Contracts closed or settled with the same broker are
recorded as net realized
37 | OPPENHEIMER QUEST CAPITAL VALUE FUND, INC.
NOTES TO FINANCIAL STATEMENTS Continued
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
5. FOREIGN CURRENCY CONTRACTS Continued
gains or losses. Such realized gains and losses are reported with all other
foreign currency gains and losses in the Statement of Operations.
As of October 31, 2004, the Fund had no outstanding foreign currency
contracts.
- --------------------------------------------------------------------------------
6. SECURITIES LENDING
The Fund lends portfolio securities from time to time in order to earn
additional income. In return, the Fund receives collateral in the form of US
Treasury obligations or cash, against the loaned securities and maintains
collateral in an amount not less than 100% of the market value of the loaned
securities during the period of the loan. The market value of the loaned
securities is determined at the close of business of the funds and any
additional required collateral is delivered to the Fund on the next business
day. If the borrower defaults on its obligation to return the securities loaned
because of insolvency or other reasons, the Fund could experience delays and
cost in recovering the securities loaned or in gaining access to the collateral.
Cash collateral is invested in cash equivalents. The Fund retains a portion of
the interest earned from the collateral. The Fund also continues to receive
interest or dividends paid on the securities loaned. As of October 31, 2004, the
Fund had on loan securities valued at $7,287,700. Cash of $7,540,000 was
received as collateral for the loans, and has been invested in approved
instruments.
- --------------------------------------------------------------------------------
7. LITIGATION
Six complaints have been filed as putative derivative and class actions against
the Manager, OFS and the Distributor (collectively, "OppenheimerFunds"), as well
as 51 of the Oppenheimer funds (collectively, the "Funds") including this Fund,
and nine Directors/ Trustees of certain of the Funds other than this Fund
(collectively, the "Directors/Trustees"). The complaints allege that the Manager
charged excessive fees for distribution and other costs, improperly used assets
of the Funds in the form of directed brokerage commissions and 12b-1 fees to pay
brokers to promote sales of the Funds, and failed to properly disclose the use
of Fund assets to make those payments in violation of the Investment Company Act
of 1940 and the Investment Advisers Act of 1940. The complaints further allege
that by permitting and/or participating in those actions, the Directors/Trustees
breached their fiduciary duties to Fund shareholders under the Investment
Company Act of 1940 and at common law. By order dated October 27, 2004, these
six actions, and future related actions, were consolidated by the U.S. District
Court for the Southern District of New York into a single consolidated
proceeding in contemplation of the filing of a superseding consolidated and
amended complaint.
OppenheimerFunds believes that it is premature to render any opinion as to
the likelihood of an outcome unfavorable to them, the Funds or the
Directors/Trustees and that no estimate can yet be made with any degree of
certainty as to the amount or range of any potential loss. However,
OppenheimerFunds, the Funds and the Directors/Trustees believe that the
allegations contained in the complaints are without merit and intend to defend
these lawsuits vigorously.
38 | OPPENHEIMER QUEST CAPITAL VALUE FUND, INC.
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
THE BOARD OF DIRECTORS AND SHAREHOLDERS OF OPPENHEIMER QUEST CAPITAL VALUE
FUND, INC.:
We have audited the accompanying statement of assets and liabilities of
Oppenheimer Quest Capital Value Fund, Inc., including the statement of
investments, as of October 31, 2004, and the related statement of operations for
the year then ended, the statements of changes in net assets 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. These financial statements and financial
highlights are the responsibility of the Fund's management. Our responsibility
is to express an opinion on these financial statements and financial highlights
based on our audits.
We conducted our audits in accordance with the standards of the Public
Company Accounting Oversight Board (United States). Those standards require that
we plan and perform the audit to obtain reasonable assurance about whether the
financial statements and financial highlights are free of material misstatement.
An audit includes examining, on a test basis, evidence supporting the amounts
and disclosures in the financial statements. Our procedures included
confirmation of securities owned as of October 31, 2004, by correspondence with
the custodian. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of
Oppenheimer Quest Capital Value Fund, Inc. as of October 31, 2004, the results
of its operations for the year then ended, the changes in its net assets for
each of the two years in the period then ended, and the financial highlights for
each of the five years in the period then ended, in conformity with U.S.
generally accepted accounting principles.
KPMG LLP
Denver, Colorado
December 16, 2004
39 | OPPENHEIMER QUEST CAPITAL VALUE FUND, INC.
FEDERAL INCOME TAX INFORMATION Unaudited
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
In early 2005, if applicable, shareholders of record will receive information
regarding all dividends and distributions paid to them by the Fund during
calendar year 2004. Regulations of the U.S. Treasury Department require the Fund
to report this information to the Internal Revenue Service.
Distributions of $0.1703 per share were paid to Class A, Class B, Class C,
and Class N shareholders, on December 10, 2003, of which $0.0317 was designated
as a "capital gain distribution" for federal income tax purposes. Whether
received in stock or in cash, the capital gain distribution should be treated by
shareholders as a gain from the sale of the capital assets held for more than
one year (long-term capital gains).
Dividends, if any, paid by the Fund during the fiscal year ended October
31, 2004 which are not designated as capital gain distributions should be
multiplied by 28.07% to arrive at the amount eligible for the corporate dividend
received deduction.
A portion, if any, of the dividends paid by the Fund during the fiscal
year ended October 31, 2004 which are not designated as capital gain
distributions are eligible for lower individual income tax rates to the extent
that the Fund has received qualified dividend income as stipulated by recent tax
legislation. $2,986,334 of the Fund's fiscal year taxable income may be eligible
for the lower individual income tax rates. In early 2005, shareholders of record
will receive information regarding the percentage of distributions that are
eligible for lower individual income tax rates.
The foregoing information is presented to assist shareholders in reporting
distributions received from the Fund to the Internal Revenue Service. Because of
the complexity of the federal regulations which may affect your individual tax
return and the many variations in state and local tax regulations, we recommend
that you consult your tax advisor for specific guidance.
40 | OPPENHEIMER QUEST CAPITAL VALUE FUND, INC.
PORTFOLIO PROXY VOTING POLICIES AND PROCEDURES; UPDATES TO STATEMENTS OF
INVESTMENTS Unaudited
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
The Fund has adopted Portfolio Proxy Voting Policies and Procedures under which
the Fund votes proxies relating to securities ("portfolio proxies") held by the
Fund. A description of the Fund's Portfolio Proxy Voting Policies and Procedures
is available (i) without charge, upon request, by calling the Fund toll-free at
1.800.525.7048, (ii) on the Fund's website at www.oppenheimerfunds.com, and
(iii) on the SEC's website at www.sec.gov. In addition, the Fund is required to
file new Form N-PX, with its complete proxy voting record for the 12 months
ended June 30th, no later than August 31st of each year. The Fund's Form N-PX
filing is available (i) without charge, upon request, by calling the Fund
toll-free at 1.800.525.7048, and (ii) on the SEC's website at www.sec.gov.
The Fund files its complete schedule of portfolio holdings with the SEC
for the first quarter and the third quarter of each fiscal year on Form N-Q. The
Fund's Form N-Q filings are available on the SEC's website at www.sec.gov. Those
forms may be reviewed and copied at the SEC's Public Reference Room in
Washington D.C. Information on the operation of the Public Reference Room may be
obtained by calling 1-800-SEC-0330.
41 | OPPENHEIMER QUEST CAPITAL VALUE FUND, INC.
DIRECTORS AND OFFICERS Unaudited
- --------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
NAME, POSITION(S) HELD WITH PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS; OTHER TRUSTEESHIPS/DIRECTORSHIPS HELD
FUND, LENGTH OF SERVICE, BY DIRECTOR; NUMBER OF PORTFOLIOS IN FUND COMPLEX CURRENTLY OVERSEEN BY DIRECTOR
AGE
INDEPENDENT THE ADDRESS OF EACH DIRECTOR IN THE CHART BELOW IS 6803 S. TUCSON WAY, CENTENNIAL,
DIRECTORS CO 80112-3924. EACH DIRECTOR SERVES FOR AN INDEFINITE TERM, UNTIL HIS RESIGNATION,
RETIREMENT, DEATH OR REMOVAL.
THOMAS W. COURTNEY, Principal of Courtney Associates, Inc. (venture capital firm); former General
Chairman of the Board Partner of Trivest Venture Fund (private venture capital fund); former President
of Directors, Director of Investment Counseling Federated Investors, Inc.; Trustee of the following
(since 1996) open-end investment companies: Cash Assets Trust, PIMCO ADVISORS VIT, Tax Free
Age: 71 Trust of Arizona and 4 funds for the Hawaiian Tax Free Trust. Oversees 11
portfolios in the OppenheimerFunds complex.
PAUL Y. CLINTON, Principal of Clinton Management Associates, a financial and venture capital
Director (since 1996) consulting firm; Trustee of the following open-end investment companies: Trustee
Age: 72 of Capital Cash Management Trust, Prime Cash Fund, PIMCO ADVISORS VIT and
Narragansett Insured Tax-Free Income Fund. Formerly a director of OCC Cash
Reserves, Inc. (open-end investment company) (1989-December 2002). Oversees 11
portfolios in the OppenheimerFunds complex.
ROBERT G. GALLI, A trustee or director of other Oppenheimer funds. Oversees 35 portfolios in the
Director (since 1998) OppenheimerFunds complex.
Age: 71
LACY B. HERRMANN, Chairman and Chief Executive Officer of Aquila Management Corporation, the
Director (since 1996) sponsoring organization and manager, administrator and/or sub-adviser to the
Age: 75 following open-end investment companies, and Chairman of the Board of Trustees and
President of each: Churchill Cash Reserves Trust, Aquila-Cascadia Equity Fund,
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, and Aquila Rocky
Mountain Equity Fund and PIMCO ADVISORS VIT; 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;
Trustee Emeritus of Brown University. Formerly Chairman of the Board of Trustees
and President of Hawaiian Tax-Free Trust. Oversees 11 portfolios in the
OppenheimerFunds complex.
BRIAN WRUBLE, General Partner (since September 1995) of Odyssey Partners, L.P. (hedge funds in
Director (since 2001) distribution since 1/1/97); Director (since September 2004) of Special Value
Age: 61 Opportunities Fund, LLC; Investment Advisory Board (since October 2004) of Zurich
Financial Services; Board of Governing Trustees (since August 1990) of The Jackson
Laboratory (genetics laboratory, non profit); Trustee (since May 1992) of
Institute for Advanced Study (educational institute); Formerly Special Limited
Partner (1999-2004) and Managing Principal (through December 1998) of Odyssey
Investment Partners, LLC (private equity investment); Trustee (2000-2002) of
Research Foundation of AIMR (investment research, non-profit); Governor, Jerome
Levy Economics Institute of Bard College (economics research) (August
1990-September 2001); Director of Ray & Berendtson, Inc. (executive search firm)
(May 2000-April 2002). Oversees 10 portfolios in the OppenheimerFunds complex.
42 | OPPENHEIMER QUEST CAPITAL VALUE FUND, INC.
- ---------------------------------------------------------------------------------------------------------------------
OFFICERS THE ADDRESS OF THE OFFICERS IN THE CHART BELOW IS AS FOLLOWS: FOR MESSRS. MURPHY
AND ZACK, TWO WORLD FINANCIAL CENTER, 225 LIBERTY STREET, 11TH FLOOR, NEW YORK, NY
10281-1008, AND FOR MR. WIXTED AND MR. VANDEHEY, 6803 S. TUCSON WAY, CENTENNIAL,
CO 80112-3924. EACH OFFICER SERVES FOR AN INDEFINITE TERM OR UNTIL HIS EARLIER
RESIGNATION, DEATH OR REMOVAL.
JOHN V. MURPHY, Chairman, Chief Executive Officer and director (since June 2001) and President
President (since 2001) (since September 2000) of the Manager; President and a director or trustee of
Age: 55 other Oppenheimer funds; President and a director (since July 2001) of Oppenheimer
Acquisition Corp. (the Manager's parent holding company) and of Oppenheimer
Partnership Holdings, Inc. (a holding company subsidiary of the Manager); a
director (since November 2001) of OppenheimerFunds Distributor, Inc. (a subsidiary
of the Manager); Chairman and a director (since July 2001) of Shareholder
Services, Inc. and of Shareholder Financial Services, Inc. (transfer agent
subsidiaries of the Manager); President and a director (since July 2001) of
OppenheimerFunds Legacy Program (a charitable trust program established by the
Manager); a director of the following investment advisory subsidiaries of the
Manager: OFI Institutional Asset Management, Inc., Centennial Asset Management
Corporation, Trinity Investment Management Corporation and Tremont Capital
Management, Inc. (since November 2001), HarbourView Asset Management Corporation
and OFI Private Investments, Inc. (since July 2001); President (since November 1,
2001) and a director (since July 2001) of Oppenheimer Real Asset Management, Inc.;
Executive Vice President (since February 1997) of Massachusetts Mutual Life
Insurance Company (the Manager's parent company); a director (since June 1995) of
DLB Acquisition Corporation (a holding company that owns the shares of Babson
Capital Management LLC); a member of the Investment Company Institute's Board of
Governors (elected to serve from October 3, 2003 through September 30, 2006).
Formerly, Chief Operating Officer (September 2000-June 2001) of the Manager;
President and trustee (November 1999-November 2001) of MML Series Investment Fund
and MassMutual Institutional Funds (open-end investment companies); a director
(September 1999-August 2000) of C.M. Life Insurance Company; President, Chief
Executive Officer and director (September 1999-August 2000) of MML Bay State Life
Insurance Company; a director (June 1989-June 1998) of Emerald Isle Bancorp and
Hibernia Savings Bank (a wholly-owned subsidiary of Emerald Isle Bancorp).
Oversees 63 portfolios as Trustee/Director and 21 additional portfolios as Officer
in the OppenheimerFunds complex.
BRIAN W. WIXTED, Senior Vice President and Treasurer (since March 1999) of the Manager; Treasurer
Treasurer (since 1999) of HarbourView Asset Management Corporation, Shareholder Financial Services, Inc.,
Age: 45 Shareholder Services, Inc., Oppenheimer Real Asset Management Corporation, and
Oppenheimer Partnership Holdings, Inc. (since March 1999), of OFI Private
Investments, Inc. (since March 2000), of OppenheimerFunds International Ltd. and
OppenheimerFunds plc (since May 2000), of OFI Institutional Asset Management, Inc.
(since November 2000), and of OppenheimerFunds Legacy Program (a Colorado
non-profit corporation) (since June 2003); Treasurer and Chief Financial Officer
(since May 2000) of OFI Trust Company (a trust company subsidiary of the Manager);
Assistant Treasurer (since March 1999) of Oppenheimer Acquisition Corp. Formerly
Assistant Treasurer of Centennial Asset Management Corporation (March 1999-October
2003) and OppenheimerFunds Legacy Program (April 2000-June 2003); Principal and
Chief Operating Officer (March 1995-March 1999) at Bankers Trust Company-Mutual
Fund Services Division. An officer of 84 portfolios in the OppenheimerFunds
complex.
43 | OPPENHEIMER QUEST CAPITAL VALUE FUND, INC.
DIRECTORS AND OFFICERS Unaudited / Continued
- --------------------------------------------------------------------------------
ROBERT G. ZACK, Executive Vice President (since January 2004) and General Counsel (since February
Secretary (since 2001) 2002) of the Manager; General Counsel and a director (since November 2001) of the
Age: 56 Distributor; General Counsel (since November 2001) of Centennial Asset Management
Corporation; Senior Vice President and General Counsel (since November 2001) of
HarbourView Asset Management Corporation; Secretary and General Counsel (since
November 2001) of Oppenheimer Acquisition Corp.; Assistant Secretary and a
director (since October 1997) of OppenheimerFunds International Ltd. and
OppenheimerFunds plc; Vice President and a director (since November 2001) of
Oppenheimer Partnership Holdings, Inc.; a director (since November 2001) of
Oppenheimer Real Asset Management, Inc.; Senior Vice President, General Counsel
and a director (since November 2001) of Shareholder Financial Services, Inc.,
Shareholder Services, Inc., OFI Private Investments, Inc. and OFI Trust Company;
Vice President (since November 2001) of OppenheimerFunds Legacy Program; Senior
Vice President and General Counsel (since November 2001) of OFI Institutional
Asset Management, Inc.; a director (since June 2003) of OppenheimerFunds (Asia)
Limited. Formerly Senior Vice President (May 1985-December 2003), Acting General
Counsel (November 2001-February 2002) and Associate General Counsel (May
1981-October 2001) of the Manager; Assistant Secretary of Shareholder Services,
Inc. (May 1985-November 2001), Shareholder Financial Services, Inc. (November
1989-November 2001); and OppenheimerFunds International Ltd. (October
1997-November 2001). An officer of 84 portfolios in the OppenheimerFunds complex.
MARK S. VANDEHEY, Senior Vice President and Chief Compliance Officer (since March 2004) of the
Vice President and Manager; Vice President (since June 1983) of OppenheimerFunds Distributor, Inc.,
Chief Compliance Officer Centennial Asset Management Corporation and Shareholder Services, Inc. Formerly
(since 2004) (until February 2004) Vice President and Director of Internal Audit of the
Age: 54 Manager. An officer of 84 portfolios in the OppenheimerFunds complex.
THE FUND'S STATEMENT OF ADDITIONAL INFORMATION CONTAINS ADDITIONAL INFORMATION
ABOUT THE FUND'S DIRECTORS AND IS AVAILABLE WITHOUT CHARGE UPON REQUEST, BY
CALLING 1.800.525.7048.
44 | OPPENHEIMER QUEST CAPITAL VALUE FUND, INC.
ITEM 2. CODE OF ETHICS
The registrant has adopted a code of ethics that applies to the
registrant's principal executive officer, principal financial officer, principal
accounting officer or controller or persons performing similar functions.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT
The Board of Directors of the registrant has determined that the
registrant does not have an audit committee financial expert serving on its
Audit Committee. In this regard, no member of the Audit Committee was identified
as having all of the technical attributes identified in Instruction 2(b) to Item
3 of Form N-CSR to qualify as an "audit committee financial expert," whether
through the type of specialized education or experience described in that
Instruction. The Board has concluded that while the members of the Audit
Committee collectively have the necessary attributes and experience required to
serve effectively as an Audit Committee, no single member possesses all of the
required technical attributes through the particular methods of education or
experience set forth in the Instructions to be designated as an audit committee
financial expert.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES
(a) Audit Fees
The principal accountant for the audit of the registrant's annual
financial statements billed $10,000 in fiscal 2004 and $10,000 in
fiscal 2003.
(b) Audit-Related Fees
The principal accountant for the audit of the registrant's annual
financial statements billed no such fees during the last two fiscal
years.
The principal accountant for the audit of the registrant's annual
financial statements billed $39,500 in fiscal 2004 and no such fees
in fiscal 2003 to the registrant's investment adviser or any entity
controlling, controlled by, or under common control with the adviser
that provides ongoing services to the registrant.
Such fees include, among others: internal control reviews.
(c) Tax Fees
The principal accountant for the audit of the registrant's annual
financial statements billed no such fees to the registrant during
the last two fiscal years.
The principal accountant for the audit of the registrant's annual
financial statements billed $6,000 in fiscal 2004 and $5,000 in
fiscal 2003 to the registrant's investment adviser or any entity
controlling, controlled by, or under common control with the adviser
that provides ongoing services to the registrant.
Such fees include, among others: tax compliance, tax planning and
tax advice. Tax compliance generally involves preparation of
original and amended tax returns, claims for a refund and tax
payment-planning services. Tax planning and tax advice includes
assistance with tax audits and appeals, tax advice related to
mergers and acquisitions and requests for rulings or technical
advice from taxing authorities.
(d) All Other Fees
The principal accountant for the audit of the registrant's annual
financial statements billed $37 in fiscal 2004 and $38 in fiscal
2003.
The principal accountant for the audit of the registrant's annual
financial statements billed no such fees during the last two fiscal
years to the registrant's investment adviser or any entity
controlling, controlled by, or under common control with the adviser
that provides ongoing services to the registrant.
Such fees include the cost to the principal accountant of attending
audit committee meetings.
(e) (1) During its regularly scheduled periodic meetings, the
registrant's audit committee will pre-approve all audit,
audit-related, tax and other services to be provided by the
principal accountants of the registrant.
The audit committee has delegated pre-approval authority to its
Chairman for any subsequent new engagements that arise between
regularly scheduled meeting dates provided that any fees such
pre-approved are presented to the audit committee at its next
regularly scheduled meeting.
Pre-approval of non-audit services is waived provided that: 1) the
aggregate amount of all such services provided constitutes no more
than five percent of the total amount of fees paid by the registrant
to it principal accountant during the fiscal year in which services
are provided 2) such services were not recognized by the registrant
at the time of engagement as non-audit services and 3) such services
are promptly brought to the attention of the audit committee of the
registrant and approved prior to the completion of the audit.
(2) 100%
(f) Not applicable as less than 50%.
(g) The principal accountant for the audit of the registrant's annual
financial statements billed $45,537 in fiscal 2004 and $5,038 in
fiscal 2003 to the registrant and the registrant's investment
adviser or any entity controlling, controlled by, or under common
control with the adviser that provides ongoing services to the
registrant related to non-audit fees. Those billings did not include
any prohibited non-audit services as defined by the Securities
Exchange Act of 1934.
(h) The registrant's audit committee of the board of directors has
considered whether the provision of non-audit services that were
rendered to the registrant's investment adviser, and any entity
controlling, controlled by, or under common control with the
investment adviser that provides ongoing services to the registrant
that were not pre-approved pursuant to paragraph (c)(7)(ii) of Rule
2-01 of Regulation S-X is compatible with maintaining the principal
account's independence. No such services were rendered.
ITEM 5. NOT APPLICABLE
ITEM 6. SCHEDULE OF INVESTMENTS
Not applicable
ITEM 7. NOT APPLICABLE
ITEM 8. NOT APPLICABLE
ITEM 9. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Board is responsible for approving nominees for election as directors.
To assist in this task, the Board has designated the Audit Committee as the
nominating committee for the Board. It reviews and recommends nominees to the
Board. The Committee is comprised entirely of disinterested directors as defined
in Section 2(a)(19) of the Investment Company Act of 1940.
The Audit Committee charter describes the responsibilities of the
Committee in nominating candidates for election as independent Directors of the
Registrant. The Registrant's Board has adopted a written charter for the
Committee. A current copy of the Audit Committee charter is available to
shareholders on the OppenheimerFunds website at WWW.OPPENHEIMERFUNDS.COM.
Under the current policy, if the Board determines that a vacancy exists or
is likely to exist on the Board, the Audit Committee of the Board will consider
candidates for Board membership including recommended by Registrant
shareholders. The Audit Committee will consider nominees recommended by
independent Board members or recommended by any other Board members including
Board members affiliated with the Registrant's investment advisors. The
Committee may, upon Board approval, retain an executive search firm to assist in
screening potential candidates. Upon Board approval, the Audit Committee may
also use the services of legal, financial, or other external counsel that it
deems necessary or desirable in the screening process. Shareholders wishing to
submit a nominee for election to the Board may do so by mailing their submission
to the offices of OppenheimerFunds, Inc., 6803 South Tucson Way, Centennial, CO
80112, to the attention of the Board of Directors of the named Registrant, c/o
the Secretary of the Registrant.
The Committee's process for identifying and evaluating nominees for
directors includes a number of factors. In screening candidates for board
membership, whether the candidate is suggested by Board members, shareholders or
others, the Committee considers the candidate's professional experience,
soundness of judgment, integrity, ability to make independent, analytical
inquiries, collegiality, willingness and ability to devote the time required to
perform Board activities adequately, ability to represent the interests of all
shareholders of the Registrant, and diversity relative to the board's
composition. Candidates are expected to provide a mix of
A-19
attributes, experience, perspective and skills necessary to effectively advance
the interests of shareholders.
ITEM 10. CONTROLS AND PROCEDURES
(a) Based on their evaluation of registrant's disclosure controls and
procedures (as defined in rule 30a-2(c) under the Investment Company
Act of 1940 (17 CFR 270.30a-2(c)) as of October 31, 2004,
registrant's principal executive officer and principal financial
officer found registrant's disclosure controls and procedures to
provide reasonable assurances that information required to be
disclosed by registrant in the reports that it files under the
Securities Exchange Act of 1934 (a) is accumulated and communicated
to registrant's management, including its principal executive
officer and principal financial officer, to allow timely decisions
regarding required disclosure, and (b) is recorded, processed,
summarized and reported, within the time periods specified in the
rules and forms adopted by the U.S. Securities and Exchange
Commission.
(b) There have been no significant changes in registrant's internal
controls over financial reporting that occurred during the
registrant's last fiscal half-year that has materially affected, or
is reasonably likely to materially affect, the registrant's internal
control over financial reporting.
ITEM 11. EXHIBITS.
(A) EXHIBIT ATTACHED HERETO. (ATTACH CODE OF ETHICS AS EXHIBIT)(NOT
APPLICABLE TO SEMIANNUAL REPORTS)
(B) EXHIBITS ATTACHED HERETO. (ATTACH CERTIFICATIONS AS EXHIBITS)