-----------------------------------------
Annual Report August 31, 1998
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O P P E N H E I M E R
Real Asset
Fund(SM)
[GRAPHIC OMITTED]
[LOGO]
OppenheimerFunds(R)
THE RIGHT WAY TO INVEST
<PAGE>
Contents
3 President's Letter
4 An Interview
with Your Fund's
Managers
9 Fund Performance
- --------------------------
13 Financial
Statements
31 Independent
Auditors' Report
- --------------------------
32 Federal
Income Tax
Information
33 Officers and
Trustees
36 Information and
Services
Report highlights
- --------------------------------------------------------------------------------
o Most commodities prices declined over the past year in a low-inflation global
economic environment.
o Unusual worldwide weather patterns and the financial crisis in Asia reduced
demand for energy, precious metals and industrial metals.
o The Fund continued to demonstrate its ability to provide additional portfolio
diversification by complementing the performance of stocks and bonds.
- ---------------------------------------
Avg Annual Total Returns
- ---------------------------------------
For the 1-Year Period
Ended 8/31/98
Class A
Without With
Sales Chg.(1) Sales Chg.(2)
- ---------------------------------------
(42.43)% (45.74)%
- ---------------------------------------
Class B
Without With
Sales Chg.(1) Sales Chg.(2)
- ---------------------------------------
(42.89)% (45.70)%
- ---------------------------------------
Class C
Without With
Sales Chg.(1) Sales Chg.(2)
- ---------------------------------------
(42.87)% (43.43)%
- ---------------------------------------
Class Y
Without With
Sales Chg.(1) Sales Chg.(2)
- ---------------------------------------
(42.38)% (42.38)%
- ---------------------------------------
Total returns include changes in share price and reinvestment of dividends and
capital gains distributions in a hypothetical investment for the periods shown.
In reviewing performance and rankings, please remember that past performance
does not guarantee future results. 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 the original cost. Because of ongoing
market volatility, the Fund's performance may be subject to substantial
short-term changes. For updates on the Fund's performance, please contact your
financial advisor, call us at 1-800-525-7048 or visit our website,
www.oppenheimerfunds.com. It is important to note that Oppenheimer Real Asset
Fund has a limited operating history, having been first offered 3/31/97, is
non-diversified and invests a substantial portion of its assets in derivative
instruments that entail potentially higher volatility and risk of loss than
traditional equity or debt securities. The Fund is not intended as a complete
investment program and is intended for investors with long-term investment goals
who are willing to accept this greater risk.
(1). Includes changes in net asset value per share without deducting any sales
charges. Such performance would have been lower if sales charges were taken into
account.
(2). Class A shares return includes the maximum 5.75% sales charge. Class B
return includes the applicable contingent deferred sales charge of 5%. Class C
return includes the contingent deferred sales charge of 1%. An explanation of
the different performance calculations is in the Fund's prospectus. All classes
have the same portfolio but different expenses. Class B and C shares are subject
to a 0.75% asset-based sales charge. Class Y shares are available principally to
certain institutional investors.
2 Oppenheimer Real Asset Fund
<PAGE>
James C. Swain
Chairman
Oppenheimer
Real Asset Fund
[PHOTO OMITTED]
Bridget A. Macaskill
President
Oppenheimer
Real Asset Fund
[PHOTO OMITTED]
Dear Shareholder,
- --------------------------------------------------------------------------------
The performance of the financial markets over the past several months could be
viewed as "A Tale of Two Markets." Until mid-July, the excitement surrounding
the stock market's continued ascent to new record highs overshadowed the
favorable economic environment that existed for bonds: low inflation and
declining interest rates. However, since that time, stocks have declined sharply
amid heightened volatility. Yet, the bond market remains poised to benefit from
the same positive economic conditions that existed earlier in the year.
Why have stocks faltered lately? The financial crises in Asia and Russia
have negatively affected the earnings of some large U.S. corporations and have
contributed to a slow-down in U.S. economic growth. Although slower economic
growth has been negative for stocks, it should not adversely impact bonds.
That's because slower economic growth generally means fewer inflationary
pressures and less likelihood that interest rates will rise.
What should you do during this period of relative uncertainty? If you have
well-defined long-term financial goals and an investment strategy designed to
achieve them, we encourage you to stay the course. However, if you feel your
financial plan is out-of-date or incomplete, now is the time to make
improvements. The best way to cope with short-term volatility is to adhere to a
long-term plan that contains proven strategies, such as diversification among
various financial markets, geographic regions, investment styles and individual
securities. A long-term plan will give you the focus and perspective you need to
put short-term volatility in its proper context.
As longstanding advocates of financial planning, we have been encouraged by
our shareholders' rational responses to the latest market events. Many of you
tell us that you have a long-term strategy in place, which includes diversifying
your investment portfolio among a number of different asset classes in
accordance with your tolerance for risk. At OppenheimerFunds, our portfolio
management teams include seasoned professionals who have encountered extreme
market volatility in the past, giving them the per spective required to address
risks and take advantage of opportunities in turbulent markets. In our view,
having a well-defined set of financial goals, a disciplined long-term strategy
and the help of experienced investment professionals are all fundamental parts
of The Right Way to Invest.
Sincerely,
/s/ James C. Swain /s/ Bridget A. Macaskill
James C. Swain Bridget A. Macaskill
September 22, 1998
3 Oppenheimer Real Asset Fund
<PAGE>
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"Commodities markets tend to move in directions opposite those of stocks and
bonds."
An interview with your Fund's managers
- --------------------------------------------------------------------------------
How did the Fund perform during the 12-month period that ended August 31, 1998?
The Fund's performance continued to closely match that of its unmanaged
benchmark, the Goldman Sachs Commodities Index (GSCI).1 In fact, the Fund's per
formance was 97% correlated to that of the GSCI. Therefore, we remain encouraged
by Oppenheimer Real Asset Fund's ability to serve as a source of greater
portfolio diversification.
The commodities markets experienced sharp declines over the past year. What
happened?
Four significant factors negatively affected the commodity markets over the past
12 months. First, the agreement in late 1997 by OPEC, a consortium of Arab
oil-producing nations, to increase crude oil production quotas by 10%
dramatically increased the supply of oil in international markets. Second, Iraq
began exporting crude oil for the first time since 1991, essentially going from
no production to 2.2 million barrels a day. Third, the onset of the Asian
financial crisis reduced demand for energy products, industrial metals, precious
metals, agriculture and livestock. Fourth, the El Nino weather phenomenon raised
temperatures in many developed nations over the winter, significantly reducing
demand for natural gas and heating oil.
4 Oppenheimer Real Asset Fund
<PAGE>
[PHOTO OMITTED]
Portfolio Management
Team (l to r)
Mark Anson
Russell Read
Why did the stock and bond markets do so well in the same environment?
The forces that reduce commodities prices tend to be good for corporate earnings
and, by extension, stock prices. When the costs of commodities go down, manu
facturers pay less for raw materials, enabling them either to lower prices or
increase profitability. Conversely, when the prices of raw materials rise,
profits tend to decline.
Bonds received a boost over the past year because weakness in the
commodity markets calmed inflation fears. When fixed-income investors are
confident that inflation will not erode the value of their principal or future
interest payments, bond prices tend to rise.
How has the Fund performed relative to the broad commodities market?
In accordance with its design, the Fund's performance had a positive correlation
of more than 97% to its benchmark, the GSCI.(1) We attempt to match the GSCI's
performance because we consider it well diversified among the 22 individual
commodities in five distinct sectors of the commodities markets: energy,
agriculture, livestock, industrial metals and precious metals.
(1). The Fund seeks to maintain a 90% or greater correlation with the GSCI. This
projected correlation is a portfolio management technique and not a formal
investment policy of the Fund. The correlation strategy can be changed by the
Manager at any time.
5 Oppenheimer Real Asset Fund
<PAGE>
An interview with your Fund's managers
- --------------------------------------------------------------------------------
Within the remaining two percent to three percent difference in the Fund's
correlation to the GSCI, we sought to enhance performance by managing our
exposure to the various market sectors. For example, in late 1997 we modestly
reduced our exposure to natural gas in anticipation of El Nino's effects on
weather patterns and the need for heating energy. When natural gas prices fell
because of reduced demand, our position helped protect the Fund from some of the
effects of lower natural gas prices.
Given its performance, is the Fund doing what it is supposed to do for its
shareholders?
Oppenheimer Real Asset Fund is designed to produce higher returns than
traditional equity and debt securities during adverse economic times. As such,
the Fund serves as an additional source of diversification, helping to shelter
shareholders' investment portfolios from the brunt of stock and bond market
declines. In our view, reducing potential volatility through diversification is
always a good thing to do, regardless of where we are in the business cycle,
whether inflation is high or low or whether the stock market is up or down. When
viewed from this perspective, commodities are simply one additional asset class
to which investors can commit a small portion of their investment.
We have seen ample evidence that the commodities markets do, in fact, tend
to move in directions opposite those of stocks and bonds, and that the Fund can
act as a natural complement to stocks and bonds. We believe that this
relationship will serve shareholders well, if stocks and bonds fall out of
favor.
6 Oppenheimer Real Asset Fund
<PAGE>
- ---------------------------------------
Avg Annual Total Returns
- ---------------------------------------
For the Periods Ended 9/30/98(2)
Class A
Since
1 year Inception
- ---------------------------------------
(39.47)% (26.35)%
- ---------------------------------------
Class B
Since
1 year Inception
- ---------------------------------------
(39.39)% (26.02)%
- ---------------------------------------
Class C
Since
1 year Inception
- ---------------------------------------
(36.90)% (24.12)%
- ---------------------------------------
Class Y
Since
1 year Inception
- ---------------------------------------
(35.71)% (23.33)%
- ---------------------------------------
What is your outlook for the various sectors of the commodities markets?
Energy prices have declined to historically low levels, and we believe that they
will recover as the supply of energy achieves a better balance with demand. This
should occur if the OPEC nations curtail production as planned, and if more
normal weather conditions prevail throughout the industrialized world this
winter.
In the agriculture sector, we believe that grain producers will encounter
less favorable growing conditions than last year. As a result, corn, wheat and
oat prices should rise. We also expect smaller livestock herds this summer,
helping to support cattle prices.
In the industrial metals sector, we are optimistic that prices will rise
when demand for raw materials from Asian manufacturers strengthens. In the
precious metals sector, we expect strength in gold prices as long as political
uncertainty continues in the U.S. However, we expect that in the long term,
central banks will likely continue to be net sellers of gold reserves.
(2). Class A returns include the maximum 5.75% sales charge. Class A, B, C and Y
shares were first publicly offered on 3/31/97. Class B returns include the
applicable contingent deferred sales charge of 5% (1-year) and 4% (since
inception). Class C returns include the contingent deferred sales charge of 1%.
An explanation of the different performance calculations is in the Fund's
prospectus. All classes have the same portfolio but different expenses. Class B
and C shares are subject to a 0.75% asset-based sales charge. Class Y shares are
available principally to certain institutional investors.
7 Oppenheimer Real Asset Fund
<PAGE>
Portfolio Composition(3)
[PIE CHART OMITTED]
o U.S. Government
Agencies &
Mortgages 48.7%
o Commodity-Linked
Notes 33.9
o U.S. Corporate
Securities 15.1
o Cash Equivalents 2.3
In summary, we are optimistic that the broad commodities market--as measured by
the GSCI--will bounce back during the months ahead. Regardless of the short-term
fluctuations of the commodities markets, however, we believe that Oppenheimer
Real Asset Fund has a valuable role to play in investors' portfolios. The Fund's
true value as a source of greater diversification will likely become more
obvious when stock prices decline. Reducing risks through diversification is an
essential part of The Right Way to Invest.(4)
- --------------------------------------------------------------------------------
Sector Weights(5)
Percentage of Commodity-Linked Notes
- --------------------------------------------------------------------------------
Petroleum 39.3%
- --------------------------------------------------------------------------------
Agriculture 25.8
- --------------------------------------------------------------------------------
Livestock 13.1
- --------------------------------------------------------------------------------
Natural Gas 12.4
- --------------------------------------------------------------------------------
Precious Metals 5.0
- --------------------------------------------------------------------------------
Industrial Metals 4.4
- --------------------------------------------------------------------------------
(3). Portfolio is subject to change. Portfolio data are as of 8/31/98 and are
dollar-weighted based on total investments.
(4). The Fund's portfolio is non-diversified.
(5). Portfolio is subject to change. Portfolio data are as of 8/31/98 and are
dollar-weighted based on commodity-linked notes.
8 Oppenheimer Real Asset Fund
<PAGE>
Fund performance
- --------------------------------------------------------------------------------
How Has the Fund Performed? Below is a discussion by the Manager of the Fund's
performance during its fiscal year ended August 31, 1998, followed by a
graphical comparison of the Fund's performance to an appropriate broad-based
market index.
o Management's Discussion of Performance. During the fiscal year ended
August 31, 1998, Oppenheimer Real Asset Fund's performance was negatively
affected by a number of factors, including weak market conditions for energy
products, agricultural products, livestock, industrial metals and gold.
Unusually mild weather conditions worldwide contributed to ample supplies of
corn, wheat, oats and livestock while reducing demand for natural gas and
heating oil. Higher OPEC production quotas and sales of gold reserves by central
banks contributed to supply-and-demand imbalances for crude oil and gold,
respectively. The Fund's portfolio holdings, allocations and strategies are
subject to change.
o 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 August 31, 1998. The graphs assume that all
dividends and capital gains distributions were reinvested in additional shares.
Class A, B, C and Y shares were first publicly offered on March 31, 1997. The
graphs reflect the deduction of the 5.75% current maximum initial sales charge
on Class A shares and the applicable contingent deferred sales charge for Class
B and Class C shares. Class Y shares are available principally to certain
institutional investors.
The Fund's performance is compared to the performance of the Goldman Sachs
Commodity Index (GSCI). The GSCI is comprised of the near term futures prices
for 22 commodities within five major commodity sectors: energy, agriculture,
livestock, industrial metals and precious metals. Index performance reflects the
reinvestment of dividends but does not consider the effect of capital gains or
transaction cost, and none of the data in the graphs shows the effect of taxes.
The Fund's performance reflects the effects of Fund business and operating
expenses. While index comparisons may be useful to provide a benchmark for the
Fund's performance, it must be noted that the Fund's investments are not limited
to the securities in the index.
9 Oppenheimer Real Asset Fund
<PAGE>
Fund performance
- --------------------------------------------------------------------------------
Class A Shares
Comparison of Change in Value of $10,000 Hypothetical Investments in:
Oppenheimer Real Asset Fund (Class A) and Goldman Sachs Commodity Index
[The following table was represented by a line graph in the printed materials.]
- --------------------------------------------------------------------------------
Oppenheimer Real Asset Fund Cls A Goldman Sachs Commodity Index
- --------------------------------------------------------------------------------
3.31.97 $9,425 $10,000
- --------------------------------------------------------------------------------
8.31.97 $9,717 $10,403
- --------------------------------------------------------------------------------
8.31.98 $5,594 $6,527
- --------------------------------------------------------------------------------
Average Annual Total Return of Class AShares of the Fund at 8/31/98(1)
1 Year -45.74% Life -33.64%
Class B Shares
Comparison of Change in Value of $10,000 Hypothetical Investments in:
Oppenheimer Real Asset Fund (Class B) and Goldman Sachs Commodity Index
[The following table was represented by a line graph in the printed materials.]
- --------------------------------------------------------------------------------
Oppenheimer Real Asset Fund Cls B Goldman Sachs Commodity Index
- --------------------------------------------------------------------------------
3.31.97 $10,000 $10,000
- --------------------------------------------------------------------------------
8.31.97 $10,270 $10,403
- --------------------------------------------------------------------------------
8.31.98 $5,635 $6,527
- --------------------------------------------------------------------------------
Average Annual Total Return of Class B Shares of the Fund at 8/31/98(2)
1 Year -45.70% Life -33.30%
The returns and the ending account values in the graphs show change in share
value and include reinvestment of all dividends and capital gains distributions.
(1). The inception date of the Fund's Class A shares was 3/31/97. The average
annual total return is shown net of the applicable 5.75% maximum initial sales
charge.
(2). Class B shares of the Fund were first publicly offered on 3/31/97. The
average annual total return is shown net of the applicable 5% and 4% contingent
deferred sales charge respectively, for the 1-year and the life of the class.
The ending account value in the graph is net of the applicable 4% contingent
deferred sales charge.
10 Oppenheimer Real Asset Fund
<PAGE>
Class C Shares
Comparison of Change in Value of $10,000 Hypothetical Investments in:
Oppenheimer Real Asset Fund (Class C) and Goldman Sachs Commodity Index
[The following table was represented by a line graph in the printed materials.]
- --------------------------------------------------------------------------------
Oppenheimer Real Asset Fund Cls C Goldman Sachs Commodity Index
- --------------------------------------------------------------------------------
3.31.97 $10,000 $10,000
- --------------------------------------------------------------------------------
8.31.97 $10,260 $10,403
- --------------------------------------------------------------------------------
8.31.98 $5,862 $6,527
- --------------------------------------------------------------------------------
Average Annual Total Return of Class C Shares of the Fund at 8/31/98(3)
1 Year -43.43% Life -31.41%
Class Y Shares
Comparison of Change in Value of $10,000 Hypothetical Investments in:
Oppenheimer Real Asset Fund (Class Y) and Goldman Sachs Commodity Index
[The following table was represented by a line graph in the printed materials.]
- --------------------------------------------------------------------------------
Oppenheimer Real Asset Fund Cls Y Goldman Sachs Commodity Index
- --------------------------------------------------------------------------------
3.31.97 $10,000 $10,000
- --------------------------------------------------------------------------------
8.31.97 $10,310 $10,403
- --------------------------------------------------------------------------------
8.31.98 $5,941 $6,527
- --------------------------------------------------------------------------------
Average Annual Total Return of Class Y Shares of the Fund at 8/31/98(4)
1 Year -42.38% Life -30.76%
(3). Class C shares of the Fund were first publicly offered on 3/31/97. The
average annual total return is shown net of the applicable 1% contingent
deferred sales charge for the 1-year period.
(4). Class Y shares of the Fund, first publicly offered on 3/31/97, are offered
at net asset value without sales charge principally to certain institutional
investors.
Past performance is not predictive of future performance.
11 Oppenheimer Real Asset Fund
<PAGE>
Financials
- --------------------------------------------------------------------------------
12 Oppenheimer Real Asset Fund
<PAGE>
- --------------------------------------------------------------------------------
Statement of Investments August 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Face Market Value
Amount See Note 1
===============================================================================================
<S> <C> <C>
Mortgage-Backed Obligations--58.2%
- -----------------------------------------------------------------------------------------------
Government Agency--48.7%
- -----------------------------------------------------------------------------------------------
Federal Home Loan Mortgage Corp., Collateralized Mtg.
Obligations, Gtd. Multiclass Mtg. Participation Certificates,
Series 1451, Cl. G, 7%, 9/15/06 $ 8,000,000 $ 8,212,480
- -----------------------------------------------------------------------------------------------
Federal Home Loan Mortgage Corp., Interest-Only Stripped
Mtg.-Backed Security, Series 1820, Cl. PI, 7.93%, 2/15/10(1) 14,450,277 1,774,675
- -----------------------------------------------------------------------------------------------
Federal National Mortgage Assn.:
6%, 6/30/99(2) 6,500,000 6,536,530
6.03%, 7/7/99(2) 6,540,000 6,578,847
6.07%, 7/1/99(2) 1,220,000 1,227,625
6.29%, 5/7/99(2) 3,480,000 3,502,307
Collateralized Mtg. Obligations, Gtd. Real Estate Mtg
Investment Conduit Pass-Through Certificates,
Trust 1992-188, Cl. PG, 6.65%, 1/25/17 7,711,350 7,807,742
Gtd. Real Estate Mtg. Investment Conduit Pass-Through Certificates,
Trust 1993-183, Cl. G, 6%, 1/25/19 3,000,000 3,045,930
Gtd. Real Estate Mtg. Investment Conduit Pass-Through Certificates,
Trust 1996-64, Cl. PB, 6.50%, 1/18/19 3,000,000 3,041,250
Interest-Only Stripped Mtg.-Backed Security, Trust 1993-23,
Cl. PN, (3.484)%, 4/25/22(1) 3,624,240 1,141,635
Interest-Only Stripped Mtg.-Backed Security, Trust 1997-3,
5.62%, 3/18/26(1)(2) 3,424,713 736,313
- -----------------------------------------------------------------------------------------------
Government National Mortgage Assn., Interest-Only Stripped
Mtg.-Backed Security, Series 1997-5, Cl. PJ, 1.96%, 5/20/22(1) 2,442,142 309,847
-----------
43,915,181
- -----------------------------------------------------------------------------------------------
Private--9.5%
- -----------------------------------------------------------------------------------------------
Commercial--6.6%
NC Finance Trust, Collateralized Mtg. Obligations,
Series 1998-I, Cl. 1, 5%, 5/25/28(3) 5,196,967 4,989,089
- -----------------------------------------------------------------------------------------------
Resolution Trust Corp., Commercial Mtg. Pass-Through Certificates,
Series 1994-C2, Cl. G, 8%, 4/25/25 906,993 908,269
-----------
5,897,358
- -----------------------------------------------------------------------------------------------
Residential--2.9%
Salomon Brothers Mortgage Securities VII,
Series 1998-2, Cl. 1, 5%, 11/25/27(3) 2,751,347 2,644,733
-----------
Total Mortgage-Backed Obligations (Cost $52,821,471) 52,457,272
</TABLE>
13 Oppenheimer Real Asset Fund
<PAGE>
- --------------------------------------------------------------------------------
Statement of Investments (Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Face Market Value
Amount See Note 1
============================================================================================
<S> <C> <C>
Corporate Bonds and Notes--5.6%
- --------------------------------------------------------------------------------------------
Federal Home Loan Mortgage Corp., 6.52% Debs., 1/2/02
(Cost $4,997,691) $ 4,870,000 $ 5,051,218
============================================================================================
Structured Instruments--33.9%
- --------------------------------------------------------------------------------------------
AIG International, Inc.:
Commodity Index Excess Return Linked Nts., 5.813%, 8/4/99(6) 2,000,000 1,682,886
Commodity Index Total Return Linked Nts., 5.50%, 9/15/99(4) 6,000,000 5,519,742
- --------------------------------------------------------------------------------------------
Bank of America NT & SA (London Branch), Goldman Sachs
Commodity Index Excess Return Linked Nts., 5.50%, 1/5/00(4) 8,000,000 4,817,600
- --------------------------------------------------------------------------------------------
Business Development Bank Canada, Goldman Sachs Commodity
Index Excess Return Linked Nts., 5.45%, 1/24/00(4) 2,000,000 1,367,200
- --------------------------------------------------------------------------------------------
Cargill Financial Services Corp., Goldman Sachs Commodity
Index Total Return Linked Nts., Series 2, 5.80%, 9/13/99(4) 8,000,000 6,879,751
- --------------------------------------------------------------------------------------------
Chase Manhattan Bank USA, National Assn.:
Chase Physical Commodity Index Linked Deposit Nts.,
5.40%, 8/30/99(5) 5,500,000 5,244,250
Chase Physical Commodity Index Linked Nts.,
5.60%, 7/26/99(5) 5,000,000 3,697,000
- --------------------------------------------------------------------------------------------
Commerzbank International SA, Natural Gas Linked Nts.,
5.25%, 5/22/99 2,000,000 1,375,200
- --------------------------------------------------------------------------------------------
Total Structured Instruments (Cost $38,500,000) 30,583,629
============================================================================================
Repurchase Agreements--2.3%
- --------------------------------------------------------------------------------------------
Repurchase agreement with Zion First National Bank, 5.75%,
dated 8/31/98, to be repurchased at $2,100,335 on 9/1/98,
collateralized by U.S. Treasury Bonds, 9.125%, 5/15/18,
with a value of $2,145,512 (Cost $2,100,000) 2,100,000 2,100,000
- --------------------------------------------------------------------------------------------
Total Investments, at Value (Cost $98,419,162) 100.0% 90,192,119
- --------------------------------------------------------------------------------------------
Liabilities in Excess of Other Assets (0.0) (24,403)
------------ ------------
Net Assets 100.0% $90,167,716
============ ============
</TABLE>
14 Oppenheimer Real Asset Fund
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(1). Interest-Only Strips represent the right to receive the monthly interest
payments on an underlying pool of mortgage loans. These securities typically
decline in price as interest rates decline. Most other fixed income securities
increase in price when interest rates decline. The principal amount of the
underlying pool represents the notional amount on which current interest is
calculated. The price of these securities is typically more sensitive to changes
in prepayment rates than traditional mortgage-backed securities (for example,
GNMA pass-throughs). Interest rates disclosed represent current yields based
upon the current cost basis and estimated timing and amount of future cash
flows.
(2). Securities with an aggregate market value of $18,581,622 are held in
collateralized accounts to cover initial margin requirements on open futures
sales contracts. See Note 5 of Notes to Financial Statements.
(3). Identifies issues considered to be illiquid or restricted--See Note 7 of
Notes to Financial Statements.
(4). Security is linked to the Goldman Sachs Commodity Index or the Goldman
Sachs Commodity Excess Return Index. The indexes are composed of the future
prices of twenty-two different commodities in five main commodity groups
(energy, agriculture, livestock, industrial metals and precious metals) in rough
proportion to the value of their production in the world economy.
(5). The CPCI is the Chase Physical Commodity Index. It is a total return
commodity index that is passively managed. The index holds unleveraged long
positions in the futures contracts of physical commodities. The index invests
across five main commodity markets: energy, grains, livestock, metals, and
food/fiber.
(6). Security is linked to the AIG Commodity Index (AIGCI). The AIGCI is a
passively managed index showing the total return from holding unleveraged long
positions in futures contracts of physical commodities. Twenty commodity markets
representing six major commodity industry groups [grains, base metals, precious
metals, energy, livestock, and softs (food/fiber)] are included in the
calculation of the AIGCI.
See accompanying Notes to Financial Statements.
15 Oppenheimer Real Asset Fund
<PAGE>
- --------------------------------------------------------------------------------
Statement of Assets and Liabilities August 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
====================================================================================
Assets
Investments, at value (cost $98,419,162)--see accompanying statement $ 90,192,119
- ------------------------------------------------------------------------------------
Cash 143,014
- ------------------------------------------------------------------------------------
Receivables:
Investments sold 5,021,954
Interest and dividends 901,607
Shares of beneficial interest sold 382,296
Daily variation on futures contracts--Note 5 16,250
- ------------------------------------------------------------------------------------
Deferred organization costs--Note 1 26,993
- ------------------------------------------------------------------------------------
Other 1,908
-------------
Total assets 96,686,141
====================================================================================
Liabilities
Options written, at value (premiums received $95,750)--
see accompanying statement--Note 6 216,000
- ------------------------------------------------------------------------------------
Payables and other liabilities:
Investments purchased 5,500,000
Shares of beneficial interest redeemed 630,713
Daily variation on futures contracts--Note 5 89,827
Distribution and service plan fees 42,721
Shareholder reports 4,912
Transfer and shareholder servicing agent fees 2,493
Other 31,759
-------------
Total liabilities 6,518,425
====================================================================================
Net Assets $ 90,167,716
=============
====================================================================================
Composition of Net Assets
Paid-in capital $144,675,754
- ------------------------------------------------------------------------------------
Undistributed net investment income 2,823,015
- ------------------------------------------------------------------------------------
Accumulated net realized loss on investment transactions (48,003,142)
- ------------------------------------------------------------------------------------
Net unrealized depreciation on investments (9,327,911)
-------------
Net assets $ 90,167,716
=============
</TABLE>
16 Oppenheimer Real Asset Fund
<PAGE>
================================================================================
Net Asset Value Per Share
Class A Shares:
Net asset value and redemption price per share (based on net assets of
$62,567,785 and 10,765,358 shares of beneficial interest outstanding) $5.81
Maximum offering price per share (net asset value plus sales charge
of 5.75% of offering price) $6.16
- --------------------------------------------------------------------------------
Class B Shares:
Net asset value, redemption price (excludes applicable contingent
deferred sales charge) and offering price per share (based on net
assets of $17,356,789 and 3,012,187 shares of beneficial interest
outstanding) $5.76
- --------------------------------------------------------------------------------
Class C Shares:
Net asset value, redemption price (excludes applicable contingent
deferred sales charge) and offering price per share (based on net
assets of $10,242,561 and 1,778,693 shares of beneficial interest
outstanding) $5.76
- --------------------------------------------------------------------------------
Class Y Shares:
Net asset value, redemption price and offering price per share (based
on net assets of $581 and 100 shares of beneficial interest outstanding) $5.81
See accompanying Notes to Financial Statements.
17 Oppenheimer Real Asset Fund
<PAGE>
- --------------------------------------------------------------------------------
Statement of Operations For the Year Ended August 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
===================================================================================
Investment Income
Interest $ 5,880,931
===================================================================================
Expenses
Management fees--Note 4 938,980
- -----------------------------------------------------------------------------------
Distribution and service plan fees--Note 4:
Class A 144,458
Class B 226,561
Class C 120,605
- -----------------------------------------------------------------------------------
Transfer and shareholder servicing agent fees--Note 4 182,526
- -----------------------------------------------------------------------------------
Shareholder reports 89,716
- -----------------------------------------------------------------------------------
Legal, auditing and other professional fees 63,533
- -----------------------------------------------------------------------------------
Registration and filing fees 14,064
- -----------------------------------------------------------------------------------
Custodian fees and expenses 11,678
- -----------------------------------------------------------------------------------
Deferred organization expenses 9,465
- -----------------------------------------------------------------------------------
Insurance expenses 3,878
- -----------------------------------------------------------------------------------
Trustees' fees and expenses 2,931
- -----------------------------------------------------------------------------------
Other 5,624
------------
Total expenses 1,814,019
===================================================================================
Net Investment Income 4,066,912
===================================================================================
Realized and Unrealized Gain (Loss)
Net realized gain (loss) on:
Investments (50,795,170)
Closing of futures contracts 1,718,464
Closing and expiration of option contracts written--Note 6 1,347,690
------------
Net realized loss (47,729,016)
- -----------------------------------------------------------------------------------
Net change in unrealized appreciation or depreciation on investments (10,943,262)
------------
Net realized and unrealized loss (58,672,278)
===================================================================================
Net Decrease in Net Assets Resulting from Operations $(54,605,366)
============
</TABLE>
See accompanying Notes to Financial Statements.
18 Oppenheimer Real Asset Fund
<PAGE>
- --------------------------------------------------------------------------------
Statements of Changes in Net Assets
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended Period Ended
August 31, August 31,
1998 1997(1)
=========================================================================================================
<S> <C> <C>
Operations
Net investment income $ 4,066,912 $ 514,287
- ---------------------------------------------------------------------------------------------------------
Net realized loss (47,729,016) (273,092)
- ---------------------------------------------------------------------------------------------------------
Net change in unrealized appreciation or depreciation (10,943,262) 1,615,351
------------ ------------
Net increase (decrease) in net assets resulting from operations (54,605,366) 1,856,546
=========================================================================================================
Dividends to Shareholders Dividends from net investment income:
Class A (1,102,914) --
Class B (441,240) --
Class C (236,846) --
Class Y (21) --
=========================================================================================================
Beneficial Interest Transactions
Net increase in net assets resulting from
beneficial interest transactions--Note 2:
Class A 61,012,518 36,531,028
Class B 14,242,312 16,023,891
Class C 6,523,710 10,363,098
Class Y -- 1,000
=========================================================================================================
Net Assets
Total increase 25,392,153 64,775,563
- ---------------------------------------------------------------------------------------------------------
Beginning of period 64,775,563 --
------------ ------------
End of period (including undistributed net investment
income of $2,823,015 and $537,526, respectively) $ 90,167,716 $ 64,775,563
============ ============
</TABLE>
(1). For the period from March 31, 1997 (commencement of operations) to August
31, 1997.
See accompanying Notes to Financial Statements.
19 Oppenheimer Real Asset Fund
<PAGE>
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
Class A
------------------------
Year Ended August 31,
1998 1997(1)
================================================================================
Per Share Operating Data
Net asset value, beginning of period $10.31 $10.00
- --------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income .29 .09
Net realized and unrealized gain (loss) (4.59) .22
------ ------
Total income (loss) from investment operations (4.30) .31
- --------------------------------------------------------------------------------
Dividends from net investment income (.20) --
------ ------
Total dividends and distributions to shareholders (.20) --
- --------------------------------------------------------------------------------
Net asset value, end of period $5.81 $10.31
====== ======
================================================================================
Total Return, at Net Asset Value(2) (42.43)% 3.10%
================================================================================
Ratios/Supplemental Data
Net assets, end of period (in thousands) $62,568 $37,687
- --------------------------------------------------------------------------------
Average net assets (in thousands) $59,251 $18,361
- --------------------------------------------------------------------------------
Ratios to average net assets:
Net investment income 4.59% 4.27%(3)
Expenses 1.66% 1.74%(3)
- --------------------------------------------------------------------------------
Portfolio turnover rate(4) 105.2% 38.9%
1. For the period from March 31, 1997 (commencement of operations) to August 31,
1997.
2. Assumes a hypothetical initial investment on the business day before the
first day of the fiscal period (or commencement of operations), 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.
3. Annualized.
20 Oppenheimer Real Asset Fund
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Class B Class C Class Y
----------------------- ---------------------- ---------------------
Year Ended August 31, Year Ended August 31, Year Ended August 31,
1998 1997(1) 1998 1997(1) 1998 1997(1)
================================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Per Share Operating Data
Net asset value, beginning of period $10.27 $10.00 $10.26 $10.00 $10.31 $10.00
- --------------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income .28 .07 .26 .08 .42 .20
Net realized and unrealized gain (loss) (4.62) .20 (4.60) .18 (4.71) .11
------ ------ ------ ------ ------ ------
Total income (loss) from investment operations (4.34) .27 (4.34) .26 (4.29) .31
- --------------------------------------------------------------------------------------------------------------------------------
Dividends from net investment income (.17) -- (.16) -- (.21) --
------ ------ ------ ------ ------ ------
Total dividends and distributions to shareholders (.17) -- (.16) -- (.21) --
- --------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $5.76 $10.27 $5.76 $10.26 $5.81 $10.31
====== ====== ====== ====== ====== ======
================================================================================================================================
Total Return, at Net Asset Value(2) (42.89)% 2.70% (42.87)% 2.60% (42.38)% 3.10%
================================================================================================================================
Ratios/Supplemental Data
Net assets, end of period (in thousands) $17,357 $16,471 $10,243 $10,616 $1 $1
- --------------------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $22,659 $7,388 $12,060 $5,599 $1 $1
- --------------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets:
Net investment income 3.87% 3.35%(3) 3.87% 3.34%(3) 4.84% 4.75%(3)
Expenses 2.39% 2.56%(3) 2.38% 2.56%(3) 1.40% 1.57%(3)
- --------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate(4) 105.2% 38.9% 105.2% 38.9% 105.2% 38.9%
</TABLE>
4. The lesser of purchases or sales of portfolio securities for a period,
divided by the monthly average of the market value of portfolio securities owned
during the period. Securities with a maturity or expiration date at the time of
acquisition of one year or less are excluded from the calculation. Purchases and
sales of investment securities (excluding short-term securities) for the period
ended August 31, 1998 were $189,668,387 and $78,381,855, respectively.
See accompanying Notes to Financial Statements.
21 Oppenheimer Real Asset Fund
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements
- --------------------------------------------------------------------------------
================================================================================
1. Significant Accounting Policies
Oppenheimer Real Asset Fund (the Fund) is a non-diversified, open-end management
investment company registered under the Investment Company Act of 1940, as
amended. Oppenheimer Real Asset Fund is a mutual fund that seeks to provide
total return as its investment objective. The Fund's investment advisor is
OppenheimerFunds, Inc. (the Advisor). The Sub-Advisor is Oppenheimer Real Asset
Management, Inc. (the Manager), a wholly owned subsidiary of the Advisor. The
Fund offers Class A, Class B, Class C and Class Y shares. Class A shares are
sold with a front-end sales charge. Class B and Class C shares may be subject to
a contingent deferred sales charge. All classes of shares have identical rights
to earnings, assets and voting privileges, except that each class has its own
expenses directly attributable to that class and exclusive voting rights with
respect to matters affecting that class. Classes A, B and C have separate
distribution and/or service plans. No such plan has been adopted for Class Y
shares. 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.
- --------------------------------------------------------------------------------
Structured Notes. The Fund invests in commodity-linked structured notes whereby
the market value and redemption price are linked to commodity indices. The
structured notes are leveraged, which increases the Fund's exposure to
commodities and increases the notes' volatility relative to the face value of
the security. At August 31, 1998, the Fund owned such securities with a face
amount of $38,500,000, which generated exposure to commodity indices of
$107,583,629. Fluctuations in the value of the security related to this
commodity exposure are recorded as unrealized gains and losses in the
accompanying financial statements. During the year ended August 31, 1998, the
market value of these securities comprised an average of 39% of the Fund's net
assets, and resulted in realized and unrealized losses of $58,867,596. The Fund
also hedges a portion of the commodity exposure generated by these securities,
as discussed in Note 5.
22 Oppenheimer Real Asset Fund
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
================================================================================
Investment Valuation. Portfolio securities are valued at the close of the New
York Stock Exchange on each trading day. Listed and unlisted securities for
which such information is regularly reported are valued at the last sale price
of the day or, in the absence of sales, at values based on the closing bid or
the last sale price on the prior trading day. Long-term and short-term
"non-money market" debt securities are valued by a portfolio pricing service
approved by the Board of Trustees. Such securities which cannot be valued by an
approved portfolio pricing service are valued using dealer-supplied valuations
provided the Manager is satisfied that the firm rendering the quotes is reliable
and that the quotes reflect current market value, or are valued under
consistently applied procedures established by the Board of Trustees to
determine fair value in good faith. Short-term "money market type" debt
securities having a remaining maturity of 60 days or less are valued at cost (or
last determined market value) adjusted for amortization to maturity of any
premium or discount. Forward foreign currency exchange contracts are valued
based on the closing prices of the forward currency contract rates in the London
foreign exchange markets on a daily basis as provided by a reliable bank or
dealer. Options are valued based upon the last sale price on the principal
exchange on which the option is traded or, in the absence of any transactions
that day, the value is based upon the last sale price on the prior trading date
if it is within the spread between the closing bid and asked prices. If the last
sale price is outside the spread, the closing bid is used.
- --------------------------------------------------------------------------------
Repurchase Agreements. The Fund requires the custodian to take possession, to
have legally segregated in the Federal Reserve Book Entry System or to have
segregated within the custodian's vault, all securities held as collateral for
repurchase agreements. The market value of the underlying securities is required
to be at least 102% of the resale price at the time of purchase. If the seller
of the agreement defaults and the value of the collateral declines, or if the
seller enters an insolvency proceeding, realization of the value of the
collateral by the Fund may be delayed or limited.
- --------------------------------------------------------------------------------
Allocation of Income, Expenses, Gains and Losses. Income, expenses (other than
those attributable to a specific class), gains and losses are allocated daily to
each class of shares based upon the relative proportion of net assets
represented by such class. Operating expenses directly attributable to a
specific class are charged against the operations of that class.
- --------------------------------------------------------------------------------
Federal Taxes. The Fund intends to continue to comply with provisions of the
Internal Revenue Code applicable to regulated investment companies and to
distribute all of its taxable income, including any net realized gain on
investments not offset by loss carryovers, to shareholders. Therefore, no
federal income or excise tax provision is required. At August 31, 1998, the Fund
had available for federal income tax purposes an unused capital loss carryover
of approximately $49,041,000, which expires in 2006.
23 Oppenheimer Real Asset Fund
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (Continued)
- --------------------------------------------------------------------------------
================================================================================
1. Significant Accounting Policies (continued)
Distributions to Shareholders. The Fund intends to declare dividends separately
for Class A, Class B, Class C and Class Y shares from net investment income
annually. Distributions from net realized gains on investments, if any, will be
declared at least once each year.
- --------------------------------------------------------------------------------
Organization Costs. The Advisor advanced $37,476 for organization and start-up
costs of the Fund. Such expenses are being amortized over a five-year period
from the date operations commenced. In the event that all or part of the
Advisor's initial investment in shares of the Fund is withdrawn during the
amortization period, by any holder thereof, the redemption proceeds will be
reduced by the proportionate amount of the unamortized organization costs
represented by the ratio that the number of shares redeemed bears to the number
of initial shares outstanding at the time of such redemption.
- --------------------------------------------------------------------------------
Classification of Distributions to Shareholders. Net investment income (loss)
and net realized gain (loss) may differ for financial statement and tax purposes
primarily because of paydown gains and losses. The character of distributions
made during the year from net investment income or net realized gains may differ
from its ultimate characterization for federal income tax purposes. Also, due to
timing of dividend distributions, the fiscal year in which amounts are
distributed may differ from the fiscal year in which the income or realized gain
was recorded by the Fund.
The Fund adjusts the classification of distributions to shareholders
to reflect the differences between financial statement amounts and distributions
determined in accordance with income tax regulations. Accordingly, during the
year ended August 31, 1998, amounts have been reclassified to reflect a decrease
in paid-in capital of $41, a decrease in undistributed net investment income of
$402, and a decrease in accumulated net realized loss on investments of $443.
- --------------------------------------------------------------------------------
Other. Investment transactions are accounted for on the date the investments are
purchased or sold (trade date) and dividend income is recorded on the
ex-dividend date. Discount on securities purchased is amortized over the life of
the respective securities, in accordance with federal income tax requirements.
Realized gains and losses on investments and options written and unrealized
appreciation and depreciation are determined on an identified cost basis, which
is the same basis used for federal income tax purposes.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of income and expenses during the reporting
period. Actual results could differ from those estimates.
24 Oppenheimer Real Asset Fund
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
================================================================================
2. Shares of Beneficial Interest
The Fund has authorized an unlimited number of no par value shares of beneficial
interest of each class. Transactions in shares of beneficial interest were as
follows:
<TABLE>
<CAPTION>
Year Ended August 31, 1998 Period Ended August 31, 1997(1)
--------------------------- -------------------------------
Shares Amount Shares Amount
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class A:
Sold 11,980,392 $101,952,769 4,102,350 $40,994,666
Dividends reinvested 111,164 1,045,978 -- --
Redeemed (4,981,608) (41,986,229) (446,940) (4,463,638)
---------- ------------ --------- -----------
Net increase 7,109,948 $ 61,012,518 3,655,410 $36,531,028
========== ============ ========= ===========
- --------------------------------------------------------------------------------------------
Class B:
Sold 2,490,310 $ 22,171,281 1,629,263 $16,280,408
Dividends reinvested 42,367 397,911 -- --
Redeemed (1,124,288) (8,326,880) (25,465) (256,517)
---------- ------------ --------- -----------
Net increase 1,408,389 $ 14,242,312 1,603,798 $16,023,891
========== ============ ========= ===========
- --------------------------------------------------------------------------------------------
Class C:
Sold 1,579,842 $ 13,009,004 1,071,035 $10,719,401
Dividends reinvested 24,009 227,456 -- --
Redeemed (860,150) (6,712,750) (36,043) (356,303)
---------- ------------ --------- -----------
Net increase 743,701 $ 6,523,710 1,034,992 $10,363,098
========== ============ ========= ===========
- --------------------------------------------------------------------------------------------
Class Y:
Sold -- $ -- 100 $ 1,000
Dividends reinvested -- -- -- --
Redeemed -- -- -- --
---------- ------------ --------- -----------
Net increase -- $ -- 100 $ 1,000
========== ============ ========= ===========
</TABLE>
(1). For the period from March 31, 1997 (commencement of operations) to August
31, 1997.
================================================================================
3. Unrealized Gains and Losses on Investments
At August 31, 1998, net unrealized depreciation on investments and options
written of $8,347,293 was composed of gross appreciation of $365,499, and gross
depreciation of $8,712,792.
25 Oppenheimer Real Asset Fund
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (Continued)
- --------------------------------------------------------------------------------
================================================================================
4. Management Fees and Other Transactions with Affiliates
Management fees paid to the Advisor were in accordance with the investment
advisory agreement with the Fund which provides for a fee of 1.00% of the first
$200 million of average net assets, 0.90% of the next $200 million, 0.85% of the
next $200 million, 0.80% of the next $200 million, and 0.75% of net assets in
excess of $800 million. Under the Sub-Advisory Agreement, the Manager receives
from the Advisor the following portions of the annual fees: 0.50% of the first
$200 million of average net assets, 0.45% of the next $200 million, 0.425% of
the next $200 million, 0.40% of the next $200 million, and 0.375% of the net
assets in excess of $800 million.
For the year ended August 31, 1998, commissions (sales charges paid
by investors) on sales of Class A shares totaled $725,009, of which $155,030 was
retained by OppenheimerFunds Distributor, Inc. (OFDI), a subsidiary of the
Advisor, as general distributor, and by an affiliated broker/dealer. Sales
charges advanced to broker/dealers by OFDI on sales of the Fund's Class B and
Class C shares totaled $774,603 and $111,824, respectively, of which $20,063 was
paid to an affiliated broker/dealer for Class B shares. During the year ended
August 31, 1998, OFDI received contingent deferred sales charges of $145,593 and
$39,184, respectively, upon redemption of Class B and C shares as reimbursement
for sales commissions advanced by OFDI at the time of sale of such shares.
OppenheimerFunds Services (OFS), a division of the Advisor, is the
transfer and shareholder servicing agent for the Fund and other Oppenheimer
funds. OFS's total costs of providing such services are allocated ratably to
these funds.
The Fund has adopted a Service Plan for Class A shares to reimburse
OFDI for a portion of its costs incurred in connection with the personal service
and maintenance of shareholder accounts that hold Class A shares. Reimbursement
is made quarterly at an annual rate that may not exceed 0.25% of the average
annual net assets of Class A shares of the Fund. OFDI uses the service fee to
reimburse brokers, dealers, banks and other financial institutions quarterly for
providing personal service and maintenance of accounts of their customers that
hold Class A shares. During the year ended August 31, 1998, OFDI paid $3,360 to
an affiliated broker/dealer as reimbursement for Class A personal service and
maintenance expenses.
26 Oppenheimer Real Asset Fund
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
================================================================================
The Fund has adopted Distribution and Service Plans for Class B and Class C
shares to compensate OFDI for its costs in distributing Class B and Class C
shares and servicing accounts. Under the Plans, the Fund pays OFDI an annual
asset-based sales charge of 0.75% per year on Class B and Class C shares for its
services rendered in distributing Class B and Class C shares. OFDI also receives
a service fee of 0.25% per year to compensate dealers for providing personal
services for accounts that hold Class B and Class C shares. Each fee is computed
on the average annual net assets of Class B or Class C shares, determined as of
the close of each regular business day. During the year ended August 31, 1998,
OFDI retained $221,715 and $114,437, respectively, as compensation for Class B
and Class C sales commissions and service fee advances, as well as financing
costs. If either Plan is terminated by the Fund, the Board of Trustees may allow
the Fund to continue payments of the asset-based sales charge to OFDI for
distributing shares before the Plan was terminated. As of August 31, 1998, OFDI
had incurred excess distribution and servicing costs of $1,408,959 for Class B
and $40,178 for Class C.
================================================================================
5. Futures Contracts
The Fund may buy and sell interest rate futures contracts in order to gain
exposure to or protect against changes in interest rates. The Fund may buy and
sell commodity futures contracts, primarily to hedge the various exposures
inherent in its holdings structured notes that are linked to commodities
indices. The Fund may also buy or write put or call options on these futures
contracts.
The Fund generally sells futures contracts to hedge against
increases in interest rates or decreases in commodity prices and the resulting
negative effect on the value of fixed rate portfolio securities. The Fund may
also purchase futures contracts without owning the underlying fixed-income
security as an efficient or cost effective means to gain exposure to changes in
interest rates or commodity prices. The Fund will then either purchase the
underlying fixed-income security or close out the futures contract.
Upon entering into a futures contract, the Fund is required to
deposit either cash or securities (initial margin) in an amount equal to a
certain percentage of the contract value. Subsequent payments (variation margin)
are made or received by the Fund each day. The variation margin payments are
equal to the daily changes in the contract value and are recorded as unrealized
gains and losses. The Fund recognizes a realized gain or loss when the contract
is closed or expires.
27 Oppenheimer Real Asset Fund
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (Continued)
- --------------------------------------------------------------------------------
================================================================================
5. Futures Contracts (continued)
Securities held in collateralized accounts to cover initial margin requirements
on open futures contracts are noted in the Statement of Investments. The
Statement of Assets and Liabilities reflects a receivable or payable for the
daily mark to market for variation margin.
Risks of entering into futures contracts (and related options)
include the possibility that there may be an illiquid market and that a change
in the value of the contract or option may not correlate with changes in the
value of the underlying securities.
At August 31, 1998, the Fund had outstanding futures contracts as follows:
<TABLE>
<CAPTION>
Unrealized
Expiration Number of Valuation as of Appreciation
Date Contracts August 31, 1998 (Depreciation)
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Contracts to Purchase
- ---------------------
COMMODITIES
Agriculture
Corn 12/98 165 $ 1,645,875 $ (409,188)
Soybean 11/98 15 383,625 (74,625)
Wheat 12/98 100 1,270,000 (68,625)
Energy
Crude Oil 11/98 667 9,251,290 (1,030,610)
Crude Oil 9/98 532 7,096,880 (75,480)
Natural Gas 12/98 150 3,574,500 (500)
Precious Metals
Silver 12/98 150 3,508,500 (518,000)
----------
(2,177,028)
----------
Contracts to Sell
- -----------------
COMMODITIES
Agriculture
Corn 3/99 100 1,058,750 74,750
Wheat 12/98 40 557,500 101,000
Energy
Crude Oil 11/99 667 10,718,690 714,620
Industrial Metals
Copper 12/98 85 1,516,188 56,313
Aluminum 9/98 30 1,009,523 (24,023)
INDICES
Goldman Sachs
Commodities Index 9/98 150 5,130,000 273,750
----------
1,196,410
----------
$ (980,618)
==========
</TABLE>
28 Oppenheimer Real Asset Fund
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
================================================================================
6. Option Activity
The Fund may buy and sell put and call options, or write put and covered call
options on portfolio securities in order to produce incremental earnings or
protect against changes in the value of portfolio securities.
The Fund generally purchases put options or writes covered call
options to hedge against adverse movements in the value of portfolio holdings.
When an option is written, the Fund receives a premium and becomes obligated to
sell or purchase the underlying securities at a fixed price, upon exercise of
the option.
Options are valued daily based upon the last sale price on the
principal exchange on which the option is traded and unrealized appreciation or
depreciation is recorded. The Fund will realize a gain or loss upon the
expiration or closing of the option transaction. When an option is exercised,
the proceeds on sales for a written call option, the purchase cost for a written
put option, or the cost of the security for a purchased put or call option is
adjusted by the amount of premium received or paid.
Securities designated to cover outstanding call options are noted in
the Statement of Investments where applicable. Shares subject to call,
expiration date, exercise price, premium received and market value are detailed
in a footnote to the Statement of Investments. Options written are reported as a
liability in the Statement of Assets and Liabilities. Gains and losses are
reported in the Statement of Operations.
The risk in writing a call option is that the Fund gives up the
opportunity for profit if the market price of the security increases and the
option is exercised. The risk in writing a put option is that the Fund may incur
a loss if the market price of the security decreases and the option is
exercised. The risk in buying an option is that the Fund pays a premium whether
or not the option is exercised. The Fund also has the additional risk of not
being able to enter into a closing transaction if a liquid secondary market does
not exist.
Written option activity for the year ended August 31, 1998 was as follows:
<TABLE>
<CAPTION>
Call Options Put Options
---------------------- --------------------
Number of Amount of Number of Amount of
Options Premiums Options Premiums
- ------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Options outstanding at
August 31, 1997 -- $ -- -- $ --
Options written 1,195 1,099,790 675 555,500
Options closed or expired (1,195) (1,099,790) (575) (459,750)
------ ----------- ---- -----------
Options outstanding at
August 31, 1998 -- $ -- 100 $ 95,750
====== =========== ==== ===========
</TABLE>
29 Oppenheimer Real Asset Fund
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (Continued)
- --------------------------------------------------------------------------------
================================================================================
6. Option Activity (continued)
A sufficient amount of liquid assets are available to cover outstanding written
put options described as follows:
<TABLE>
<CAPTION>
Contracts Expiration Exercise Premium Market
Subject to Put Date Price Received Value
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
December 98 Silver
Futures Contracts 100 11/13/98 $5.00 $95,750 $216,000
</TABLE>
================================================================================
7. Illiquid and Restricted Securities
At August 31, 1998, investments in securities included issues that are illiquid
or restricted. Restricted securities are often purchased in private placement
transactions, are not registered under the Securities Act of 1933, may have
contractual restrictions on resale, and are valued under methods approved by the
Board of Trustees as reflecting fair value. A security may be considered
illiquid if it lacks a readily available market or if its valuation has not
changed for a certain period of time. The Fund intends to invest no more than
10% of its net assets (determined at the time of purchase and reviewed
periodically) in illiquid or restricted securities. Certain restricted
securities, eligible for resale to qualified institutional investors, are not
subject to that limit. The aggregate value of illiquid or restricted securities
subject to this limitation at August 31, 1998, was $7,633,822, which represents
8.47% of the Fund's net assets.
================================================================================
8. Bank Borrowings
The Fund may borrow from a bank for temporary or emergency purposes including,
without limitation, funding of shareholder redemptions provided asset coverage
for borrowings exceeds 300%. The Fund has entered into an agreement which
enables it to participate with other Oppenheimer funds in an unsecured line of
credit with a bank, which permits borrowings up to $400 million, collectively.
Interest is charged to each fund, based on its borrowings, at a rate equal to
the Federal Funds Rate plus 0.35%. Borrowings are payable 30 days after such
loan is executed. The Fund also pays a commitment fee equal to its pro rata
share of the average unutilized amount of the credit facility at a rate of
0.0575% per annum.
The Fund had no borrowings outstanding during the year ended August
31, 1998.
30 Oppenheimer Real Asset Fund
<PAGE>
- --------------------------------------------------------------------------------
Independent Auditors' Report
- --------------------------------------------------------------------------------
================================================================================
The Board of Trustees and Shareholders of
Oppenheimer Real Asset Fund:
We have audited the accompanying statement of assets and liabilities, including
the statement of investments, of Oppenheimer Real Asset Fund as of August 31,
1998, the related statements of operations for the year then ended, the
statements of changes in net assets for the year ended August 31, 1998 and the
period ended August 31, 1997, and the financial highlights for the period March
31, 1997 to August 31, 1998. 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 generally accepted
auditing standards. 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 at August 31, 1998 by correspondence with the custodian and brokers; and
where replies were not received from brokers, we performed other auditing
procedures. 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, such financial statements and financial highlights
present fairly, in all material respects, the financial position of Oppenheimer
Real Asset Fund at August 31, 1998, the results of its operations, the changes
in its net assets, and the financial highlights for the respective stated
periods, in conformity with generally accepted accounting principles.
Deloitte & Touche LLP
Denver, Colorado
September 22, 1998
31 Oppenheimer Real Asset Fund
<PAGE>
- --------------------------------------------------------------------------------
Federal Income Tax Information (Unaudited)
- --------------------------------------------------------------------------------
================================================================================
In early 1999, shareholders will receive information regarding all dividends and
distributions paid to them by the Fund during calendar year 1998. Regulations of
the U.S. Treasury Department require the Fund to report this information to the
Internal Revenue Service.
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.
32 Oppenheimer Real Asset Fund
<PAGE>
- --------------------------------------------------------------------------------
Oppenheimer Real Asset Fund
- --------------------------------------------------------------------------------
================================================================================
Officers and Trustees James C. Swain, Chairman and Chief Executive Officer
Bridget A. Macaskill, President
Robert G. Avis, Trustee
William A. Baker, Trustee
Charles Conrad, Jr., Trustee
Jon S. Fossel, Trustee
Sam Freedman, Trustee
Raymond J. Kalinowski, Trustee
C. Howard Kast, Trustee
Robert M. Kirchner, Trustee
Ned M. Steel, Trustee
George C. Bowen, Trustee, Vice President, Treasurer and
Assistant Secretary
Andrew J. Donohue, Vice President and Secretary
Mark J.P. Anson, Vice President
Russell Read, Sr. Vice President
Robert J. Bishop, Assistant Treasurer
Scott T. Farrar, Assistant Treasurer
Robert G. Zack, Assistant Secretary
================================================================================
Investment Advisor OppenheimerFunds, Inc.
================================================================================
Sub-Advisor Oppenheimer Real Asset Management, Inc.
================================================================================
Distributor OppenheimerFunds Distributor, Inc.
================================================================================
Transfer and OppenheimerFunds Services
Shareholder
Servicing Agent
================================================================================
Custodian of The Bank of New York
Portfolio Securities
================================================================================
Independent Auditors Deloitte & Touche LLP
================================================================================
Legal Counsel Myer, Swanson, Adams & Wolf, P.C.
================================================================================
Special Counsel Kramer, Levin, Naftalis & Frankel
This is a copy of a report to shareholders of
Oppenheimer Real Asset Fund. This report must be
preceded or accompanied by a Prospectus of Oppenheimer
Real Asset Fund. For material information concerning
the Fund, see the Prospectus.
Shares of Oppenheimer funds are not deposits or
obligations of any bank, are not guaranteed by any
bank, and are not insured by the FDIC or any other
agency, and involve investment risks, including
possible loss of the principal amount invested.
33 Oppenheimer Real Asset Fund
<PAGE>
- --------------------------------------------------------------------------------
OppenheimerFunds Family
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
=================================================================================================================
Real Asset Funds
- -----------------------------------------------------------------------------------------------------------------
Real Asset Fund Gold & Special Minerals Fund
=================================================================================================================
Global Stock Funds
- -----------------------------------------------------------------------------------------------------------------
Developing Markets Fund International Growth Fund Quest Global Value Fund
International Small Global Fund Global Growth & Income Fund
Company Fund
=================================================================================================================
Stock Funds
- -----------------------------------------------------------------------------------------------------------------
Enterprise Fund MidCap Fund Growth Fund
Discovery Fund Capital Appreciation Fund Disciplined Value Fund
Quest Small Cap Value Fund Quest Capital Value Fund Quest Value Fund
=================================================================================================================
Stock & Bond Funds
- -----------------------------------------------------------------------------------------------------------------
Main Street Income & Total Return Fund Disciplined Allocation Fund
Growth Fund Quest Balanced Multiple Strategies Fund
Quest Opportunity Value Fund(1) Convertible Securities Fund(2)
Value Fund Equity Income Fund
=================================================================================================================
Taxable Bond Funds
- -----------------------------------------------------------------------------------------------------------------
International Bond Fund Champion Income Fund U.S. Government Trust
World Bond Fund Strategic Income Fund Limited-Term Government Fund
High Yield Fund Bond Fund
=================================================================================================================
Municipal Bond Funds
- -----------------------------------------------------------------------------------------------------------------
California Municipal Fund(3) Pennsylvania Municipal Fund(3) Rochester Division:
Florida Municipal Fund(3) Municipal Bond Fund Rochester Fund Municipals
New Jersey Municipal Fund(3) Insured Municipal Fund Limited Term New York
New York Municipal Fund(3) Intermediate Municipal Fund Municipal Fund
=================================================================================================================
Money Market Funds(4)
- -----------------------------------------------------------------------------------------------------------------
Money Market Fund Cash Reserves
</TABLE>
1. On 5/18/98, the Fund's name was changed from "Quest Growth & Income Value
Fund."
2. On 4/28/98, the Fund's name was changed from "Bond Fund for Growth."
3. Available only to investors in certain states.
4. An investment in money market funds is neither insured nor guaranteed by the
Federal Deposit Insurance Corporation or any other government agency. Although
these funds may seek to preserve the value of your investment at $1.00 per
share, it is possible to lose money by investing in these funds. Oppenheimer
funds are distributed by OppenheimerFunds Distributor, Inc., Two World Trade
Center, New York, NY 10048-0203.
(C) Copyright 1998 OppenheimerFunds, Inc. All rights reserved.
34 Oppenheimer Real Asset Fund
<PAGE>
[GRAPHIC OMITTED]
<PAGE>
Internet
24-hr access to account
information. Online
trans actions now available
- ---------------------------------------
www.oppenheimerfunds.com
- ---------------------------------------
General Information
Mon-Fri 8:30am-9pm ET
Sat 10am-4pm ET
- ---------------------------------------
1-800-525-7048
- ---------------------------------------
Account Transactions
Mon-Fri 8:30am-8pm ET
- ---------------------------------------
1-800-852-8457
- ---------------------------------------
PhoneLink
24-hr automated information
and automated transactions
- ---------------------------------------
1-800-533-3310
- ---------------------------------------
Telecommunication Device
for the Deaf (TDD)
Mon-Fri 8:30am-2pm ET
- ---------------------------------------
1-800-843-4461
- ---------------------------------------
OppenheimerFunds
Information Hotline
24 hours a day, timely and
insightful messages on the
economy and issues that
affect your investments
- ---------------------------------------
1-800-835-3104
- ---------------------------------------
Information and services
- --------------------------------------------------------------------------------
As an Oppenheimer fund shareholder, you have some special privileges. Whether
it's automatic investment plans, informative newsletters and hotlines, or ready
account access, you can benefit from services designed to make investing simple.
And when you need help, our Customer Service Representatives are only a
toll-free phone call away. They can provide information about your account and
handle administrative requests. You can reach them at our General Information
number.
When you want to make a transaction, you can do it easily by calling our
toll-free Telephone Transactions number or by visiting our website. And, by
enrolling in AccountLink, a convenient service that "links" your Oppenheimer
funds accounts and your bank checking or savings account, you can use the
Telephone Transactions number or website to make investments.
For added convenience, you can get automated information with
OppenheimerFunds PhoneLink service, available 24 hours a day, 7 days a week.
PhoneLink gives you access to a variety of fund, account, and market
information. Of course, you can always speak with a Customer Service
Representative during the General Information hours shown at the left.
You can count on us whenever you need assistance. That's why the
International Customer Service Association, an independent, nonprofit
organization made up of over 3,200 customer service management professionals
from around the country, honored the Oppenheimer funds' transfer agent,
OppenheimerFunds Services, with their Award of Excellence in 1993.
So call us today, or visit us at our website at
www.oppenheimerfunds.com--we're here to help.
[LOGO] OppenheimerFunds(R)
Distributor, Inc.
RA0735.001.0898 October 30, 1998
