OPPENHEIMER
Gold & Special Minerals Fund
Prospectus dated October 15, 1997
Oppenheimer Gold & Special Minerals Fund is a mutual fund that seeks capital
appreciation as its investment objective. The Fund does not invest to earn
current income to distribute to shareholders.
In seeking its objective, the Fund invests mainly in securities of companies
engaged in mining, processing, fabricating or distributing gold or other metals
or minerals in the United States and in foreign countries. Normally at least 50%
of the Fund's investments are expected to be in foreign securities. The Fund may
also invest to a limited extent in gold or silver bullion, other precious
metals, strategic metals, and other metals naturally occurring with such metals,
and gold or silver coins. The Fund also uses "hedging" instruments, to try to
reduce the risks of market and currency fluctuations that affect the value of
the securities the Fund holds.
Some investment techniques the Fund uses may be considered to be
speculative. These techniques may increase the risks of investing in the Fund
and the Fund's operating costs. You should carefully review the risks associated
with an investment in the Fund. Please refer to "Investment Objective and
Policies" for more information about the types of securities the Fund invests in
and refer to "Investment Risks" for a discussion on the risks of investing in
the Fund.
This Prospectus explains concisely what you should know before investing in
the Fund. Please read this Prospectus carefully and keep it for future
reference. You can find more detailed information about the Fund in the October
15, 1997 Statement of Additional Information. For a free copy, call
OppenheimerFunds Services, the Fund's Transfer Agent, at 1-800-525- 7048, or
write to the Transfer Agent at the address on the back cover. The Statement of
Additional Information has been filed with the Securities and Exchange
Commission and is incorporated into this Prospectus by reference (which means
that it is legally part of this Prospectus).
OppenheimerFunds logo
Because of the Fund's investment policies and practices, the Fund's shares may
be considered to be speculative.
Shares of the Fund are not deposits or obligations of any bank, are not
guaranteed by any bank, are not insured by the F.D.I.C. or any other agency, and
involve investment risks, including the possible loss of the principal amount
invested.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
3
<PAGE>
Contents
ABOUT THE FUND
Expenses
A Brief Overview of the Fund
Financial Highlights
Investment Objective and Policies
Investment Risks
Investment Techniques and Strategies
How the Fund is Managed
Performance of the Fund
ABOUT YOUR ACCOUNT
How to Buy Shares
Class A Shares
Class B Shares
Class C Shares
Special Investor Services
AccountLink
Automatic Withdrawal and Exchange Plans
Reinvestment Privilege
Retirement Plans
How to Sell Shares
By Mail
By Telephone
How to Exchange Shares
Shareholder Account Rules and Policies
Dividends, Capital Gains and Taxes
Appendix A: Special Sales Charge Arrangements
4
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A B O U T T H E F U N D
Expenses
The Fund pays a variety of expenses directly for management of its assets,
administration, distribution of its shares and other services, and those
expenses are subtracted from the Fund's assets to calculate the Fund's net asset
value per share. All shareholders therefore pay those expenses indirectly.
Shareholders pay other expenses directly, such as sales charges and account
transaction charges. The following tables are provided to help you understand
your direct expenses of investing in the Fund and your share of the Fund's
business operating expenses that you will bear indirectly. The numbers below are
based on the Fund's expenses during its last fiscal year ended June 30, 1997.
o Shareholder Transaction Expenses are charges you pay when you buy or
sell shares of the Fund. Please refer to "About Your Account" starting on page
24 for an explanation of how and when these charges apply.
<TABLE>
<CAPTION>
Class A Class B Class C
Shares Shares Shares
- -----------------------------------------------------------------
<S> <C> <C> <C>
Maximum Sales Charge on
Purchases(as a % of
offering price) 5.75% None None
- -----------------------------------------------------------------
Maximum Deferred Sales None(1) 5% in the first 1% if shares
Charge (as a % o the year, declining are redeemed
lower of the original to 1% in the within 12
offering price or sixth year months of
redemption proceeds) and eliminated
purchase(2)
thereafter(2)
- -----------------------------------------------------------------
Maximum Sales Charge on
Reinvested Dividends None None None
- -----------------------------------------------------------------
Exchange Fee None None None
- -----------------------------------------------------------------
Redemption Fee None(3) None(3) None(3)
</TABLE>
(1) If you invest $1 million or more ($500,000 or more for purchases by
plans)}"Retirement Plans," as defined in "Class A Contingent Deferred Sales
Charge" on pages 29 & 30, in Class A shares, you may have to pay a sales charge
of up to 1% if you sell your shares within 12
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calendar months (18 months for shares purchased prior to May 1, 1997) from the
end of the calendar month during which you purchased those shares. See "How to
Buy Shares - Buying Class A Shares," below.
(2) See "How to Buy Shares - Buying Class B Shares" and "How to Buy Shares -
Buying Class C Shares" below, for more information on the
contingent deferred sales charge.
(3) There is a $10 transaction fee for redemptions paid by Federal Funds wire,
but not for redemptions paid by ACH transfer through
AccountLink. See "How to Sell Shares."
o Annual Fund Operating Expenses are paid out of the Fund's assets and
represent the Fund's expenses in operating its business. For example, the Fund
pays management fees to its investment adviser, OppenheimerFunds, Inc. (which is
referred to in this Prospectus as the "Manager"). The rates of the Manager's
fees are set forth in "How the Fund is Managed," below. The Fund has other
regular expenses for services, such as transfer agent fees, custodial fees paid
to the bank that holds the Fund's portfolio securities, audit fees and legal
expenses. Those expenses are detailed in the Fund's Financial Statements in the
Statement of Additional Information.
Annual Fund Operating Expenses (as a Percentage of Average Net
Assets):
<TABLE>
<CAPTION>
Class A Class B Class C
Shares Shares Shares
- --------------------------------------------------------------
<S> <C> <C> <C>
Management Fees 0.75% 0.75% 0.75%
- --------------------------------------------------------------
12b-1 Plan Fees 0.21% 1.00% 1.00%
- --------------------------------------------------------------
Other Expenses 0.38% 0.41% 0.43%
- --------------------------------------------------------------
Total Fund Operating Expenses 1.34% 2.16% 2.18%
</TABLE>
The numbers in the chart above are based upon the Fund's expenses in its
last fiscal year ended June 30, 1997. The amounts are shown above as a
percentage of the average net assets of each class of the Fund's shares for the
year ended June 30, 1997. The actual expenses for each class of shares in future
years may be more or
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less than the numbers in the chart, depending on a number of factors, including
the actual amount of the Fund's assets represented by each class of shares. The
"12b-1 Plan Fees" for Class A shares are the service fees (the maximum fee is
0.25% of average annual net assets of that class). Currently, the Board of
Trustees has set the maximum fee at 0.15% for assets representing Class A shares
sold before April 1, 1991, and 0.25% for assets representing Class A shares sold
on or after that date. For Class B and Class C shares, the 12b-1 Plan fees are
the service fees (0.25% of average annual net assets of that class) and the
asset-based sales charge of 0.75%.
o Examples. To try to show the effect of these expenses on an investment
over time, we have created the hypothetical examples shown below. Assume that
you make a $1,000 investment in each class of shares of the Fund, and that the
Fund's annual return is 5%, and that its operating expenses for each class are
the ones shown in the Annual Fund Operating Expenses table above. If you were to
redeem your shares at the end of each period shown below, your investment would
incur the following expenses by the end of 1, 3, 5 and 10 years:
<TABLE>
<CAPTION>
1 year 3 years 5 years 10 years*
- ------------------------------------------------------------
<S> <C> <C> <C> <C>
Class A Shares $70 $98 $127 $210
- ------------------------------------------------------------
Class B Shares $72 $98 $136 $209
- ------------------------------------------------------------
Class C Shares $32 $68 $117 $251
</TABLE>
If you did not redeem your investment, it would incur the
following
expenses:
<TABLE>
<CAPTION>
1 year 3 years 5 years 10 years*
- ------------------------------------------------------------
<S> <C> <C> <C> <C>
Class A Shares $70 $98 $127 $210
- ------------------------------------------------------------
Class B Shares $22 $68 $116 $209
- ------------------------------------------------------------
Class C Shares $22 $68 $117 $251
</TABLE>
*In the first example, expenses include the Class A initial sales charge and the
applicable Class B or Class C contingent
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<PAGE>
deferred sales charge. In the second example, Class A expenses include the
initial sales charge but Class B and Class C expenses do not include contingent
deferred sales charges. The Class B expenses in years 7 through 10 are based on
the Class A expenses shown above, because the Fund automatically converts your
Class B shares into Class A shares after 6 years. Because of the effect of the
asset-based sales charge and the contingent deferred sales charge imposed on
Class B and Class C shares, long-term holders of Class B and Class C shares
could pay the economic equivalent of more than the maximum front-end sales
charge allowed under applicable regulations. For Class B shareholders, the
automatic conversion of Class B shares to Class A shares is designed to minimize
the likelihood that this will occur. Please refer to "How to Buy Shares - Buying
Class B Shares" for more information.
These examples show the effect of expenses on an investment, but are not
meant to state or predict actual or expected costs or investment returns of the
Fund, all of which may be more or less than those shown.
A Brief Overview of the Fund
Some of the important facts about the Fund are summarized below, with references
to the section of this Prospectus where more complete information can be found.
You should carefully read the entire Prospectus before making a decision about
investing in the Fund. Keep the Prospectus for reference after you invest,
particularly for information about your account, such as how to sell or exchange
shares.
o What is the Fund's Investment Objective? The Fund's investment objective
is to seek capital appreciation (that is, growth in the value of its shares). It
does not invest to earn current income to pay to shareholders.
o What Does the Fund Invest in? The Fund primarily invests in common
stocks (these are called "equity securities") or other types of securities
convertible into equity securities. It focuses on companies that mine or produce
gold or other metals and minerals. The Fund may also invest to a limited extent
in gold or silver bullion, certain other precious metals and gold or silver
coins. The Fund may also use hedging instruments and some derivative investments
to try to manage investment risks. These investments are more fully explained in
"Investment Objective and Policies," starting on page 10.
o Who Manages the Fund? The Fund's investment adviser (the "Manager") is
OppenheimerFunds, Inc. Prior to January 6, 1996, the Manager was known as
Oppenheimer Management Corporation. The Manager (including subsidiaries)
manages
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<PAGE>
investment company portfolios having over $75 billion in assets at September 30,
1997. The Manager is paid an advisory fee by the Fund, based on its net assets.
Effective July 18, 1997, the Fund's portfolio managers, who are employed by the
Manager and are primarily responsible for the selection of the Fund's
securities, are Frank Jennings and Shanquan Li. The Fund's Board of Trustees,
elected by shareholders, oversees the investment adviser and the portfolio
manager. Please refer to "How the Fund is Managed," starting on page 18 for more
information about the Manager and its fees.
o How Risky is the Fund? All investments carry risks to some degree. It is
important to remember that the Fund is designed for long-term investors. The
Fund's investments in stocks are subject to changes in their value from a number
of factors such as changes in general stock and bond market movements. A change
in value of particular stocks may result from an event affecting the issuer.
Because the Fund normally invests heavily in foreign securities, it is subject
to additional risks associated with investing abroad, such as the effect of
currency rate changes on stock values. By focusing on investments in the gold
and metals industries, the Fund is sensitive to events that affect those
industries and its share price will be more volatile than funds that don't
concentrate investments in a limited group of industries. These changes affect
the value of the Fund's investments and its price per share.
In the Oppenheimer funds spectrum, the Fund is generally more volatile
than other stock funds, as well as income and growth funds and more conservative
income funds. While the Manager tries to reduce risks by diversifying
investments, by carefully researching securities before they are purchased for
the portfolio, and in some cases by using hedging techniques, there is no
guarantee of success in achieving the Fund's objective and your shares may be
worth more or less than their original cost when you redeem them. Please refer
to "Investment Risks" starting on page 11 for a more complete discussion of the
Fund's investment risks.
o How Can I Buy Shares? You can buy shares through your dealer or
financial institution, or you can purchase shares directly through the
Distributor by completing an Application or by using an Automatic Investment
Plan under AccountLink. Please refer to "How to Buy Shares" on page 24 for more
details.
o Will I Pay a Sales Charge to Buy Shares? The Fund has three classes of
shares. Each class of shares has the same investment portfolio, but different
expenses. Class A shares are offered with a front-end sales charge, starting at
5.75%, and reduced for larger purchases. Class B shares and Class C shares are
offered without a front-end sales charge, but may be subject to a contingent
deferred sales charge if redeemed within 6 years or 12
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<PAGE>
months, respectively, of purchase. There is also an annual asset- based sales
charge on Class B and Class C shares. Please review "How to Buy Shares" starting
on page 24 for more details, including a discussion about factors you and your
financial advisor should consider in determining which class may be appropriate
for you.
o How Can I Sell My Shares? Shares can be redeemed by mail or by telephone
call to the Transfer Agent on any business day, or through your dealer. Please
refer to "How to Sell Shares" on page 40. The Fund also offers exchange
privileges to other Oppenheimer funds, described in "How to Exchange Shares" on
page 42.
o How Has the Fund Performed? The Fund measures its performance by quoting
its average annual total returns and cumulative total returns, which measure
historical performance. Those returns can be compared to the returns (over
similar periods) of other funds. Of course, other funds may have different
objectives, investments, and levels of risk. The Fund's performance can also be
compared to a broad market index, which we have done on pages 22 and 23. Please
remember that past performance does not guarantee future results.
Financial Highlights
The table on the following pages presents selected financial information about
the Fund, including per share data and expense ratios and other data based on
the Fund's average net assets. This information has been audited by KPMG Peat
Marwick LLP, the Fund's independent auditors, whose report on the Fund's
financial statements for the fiscal year ended June 30, 1997, is included in the
Statement of Additional Information.
<TABLE>
<CAPTION>
Financial Highlights
Class A
------------------------------------------------------------------------
Year Ended June 30,
1997 1996 1995 1994 1993 1992
=========================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Per Share Operating Data:
Net asset value, beginning of period $14.15 $13.48 $13.28 $12.32 $10.68 $10.36
- -------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income (loss) .04 .04 .06 .06 .06 .16
Net realized and unrealized gain (loss) (1.48) .69 .21 .96 1.72 .35
-------- -------- -------- -------- -------- --------
Total income (loss) from investment
operations (1.44) .73 .27 1.02 1.78 .51
- -------------------------------------------------------------------------------------------------------------------------
Dividends and distributions to shareholders:
Dividends from net investment
income (.03) (.06) (.07) (.06) (.14) (.19)
Distributions from net realized gain -- -- -- -- -- --
-------- -------- -------- -------- -------- --------
Total dividends and distributions to
shareholders (.03) (.06) (.07) (.06) (.14) (.19)
- -------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $12.68 $14.15 $13.48 $13.28 $12.32 $10.68
======== ======== ======== ======== ======== ========
=========================================================================================================================
Total Return, at Net Asset Value(2) (10.20)% 5.44% 2.03% 8.25% 17.15% 5.08%
=========================================================================================================================
Ratios/Supplemental Data:
Net assets, end of period
(in thousands) $126,086 $161,769 $171,721 $179,015 $158,982 $133,345
- -------------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $149,564 $171,427 $178,579 $175,093 $124,869 $137,906
- -------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets:
Net investment income (loss) 0.28% 0.25% 0.45% 0.50% 0.61% 1.25%
Expenses 1.34% 1.38% 1.36% 1.31% 1.38% 1.38%
- -------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate(4) 20.5% 37.6% 35.8% 29.5% 23.9% 39.4%
Average brokerge commission rate(5) $0.0030 $0.0211 $0.0204 -- -- --
</TABLE>
1. For the period from November 1, 1995 (inception of offering) to June 30,
1996. 2. Assumes a hypothetical initial investment on the business day before
the first day of the fiscal period (or inception of offering), with all
dividends and distributions reinvested in additional shares on the reinvestment
date, and redemption at the net asset value calculated on the last business day
of the fiscal period. Sales charges are not reflected in the total returns.
Total returns are not annualized for periods of less than one full year.
3. Annualized.
<PAGE>
<TABLE>
<CAPTION>
Class A Class B Class C
- ---------------------------------------------------- ---------------------------- ----------------------
Year Ended June 30, Year Ended June 30, Year Ended June 30,
1991 1990 1989 1988 1997 1996(1) 1997 1996(1)
============================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C>
$11.65 $12.58 $12.82 $12.10 $14.11 $12.33 $14.13 $12.33
- ------------------------------------------------------------------------------------------------------------
.17 .14 .23 .26 (.04) (.01) (.02) (.01)
(1.42) .54 .50 3.39 (1.51) 1.79 (1.52) 1.81
- -------- -------- -------- -------- -------- -------- -------- --------
(1.25) .68 .73 3.65 (1.55) 1.78 (1.54) 1.80
- ------------------------------------------------------------------------------------------------------------
(.04) (.27) (.18) (.36) -- -- -- --
-- (1.34) (.79) (2.57) -- -- -- --
- -------- -------- -------- -------- -------- -------- -------- --------
(.04) (1.61) (.97) (2.93) -- -- -- --
- ------------------------------------------------------------------------------------------------------------
$10.36 $11.65 $12.58 $12.82 $12.56 $14.11 $12.59 $14.13
======== ======== ======== ======== ======== ======== ======== ========
============================================================================================================
(10.71)% 3.10% 6.43% 33.24% (10.99)% 14.25% (10.90)% 14.41%
============================================================================================================
$150,907 $163,118 $120,198 $107,264 $8,716 $4,882 $3,935 $1,390
- ------------------------------------------------------------------------------------------------------------
$154,318 $154,079 $110,873 $90,672 $7,361 $2,588 $2,672 $840
- ------------------------------------------------------------------------------------------------------------
1.67% 1.17% 1.97% 2.38% (0.48)% (0.25)%(3) (0.45)% (0.26)%(3)
1.43% 1.37% 1.22% 1.22% 2.16% 2.22%(3) 2.18% 2.19%(3)
- ------------------------------------------------------------------------------------------------------------
113.3% 82.3% 111.7% 175.8% 20.5% 37.6% 20.5% 37.6%
-- -- -- -- $0.0030 $0.0211 $0.0030 $0.0211
</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 June 30, 1997 were $30,398,518 and $38,564,264, respectively. 5. Total
brokerage commissions paid on applicable purchases and sales of portfolio
securities for the period, divided by the total number of related shares
purchased and sold. Generally, non-U.S. commissions are lower than U.S.
commissions when expressed as cents per share but higher when expressed as a
percentage of transactions because of the lower per-share prices of many
non-U.S. securities.
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<PAGE>
Investment Objective and Policies
Objective. The Fund seeks capital appreciation for shareholders. The Fund does
not seek current income to pay to shareholders.
Investment Policies and Strategies. The Fund seeks its investment objective by
emphasizing investments in securities of companies involved directly or
indirectly in mining, fabricating, processing or otherwise dealing in gold or
other metals or minerals. This Prospectus refers to those securities as "Mining
Securities." The Manager expects that ordinarily a substantial portion of the
Fund's assets will be invested in securities of gold mining companies. The Fund
will normally invest in common stocks or other equity securities, as well as
securities that are convertible into common stocks, such as convertible
preferred stock, convertible debentures, and warrants. These securities may be
traded on securities exchanges or in the over-the-counter markets.
The Fund may also invest in gold or silver bullion, in other precious
metals, strategic metals, and other metals naturally occurring with precious or
strategic metals, in certificates representing an ownership interest in those
metals, and in gold or silver coins. These investments are referred to as "Metal
Investments." While the Fund may hold gold or silver coins that have an active,
quoted trading market, it will not hold them for their value as "collectibles."
To seek the Fund's objective, the Manager looks for Mining Securities and
Metal Investments that it believes may appreciate in value, by continuously
monitoring the gold and special minerals markets for new developments and
economic trends. When investing the Fund's assets, the Manager considers many
factors, including the financial condition of particular companies as well as
general economic conditions in the U.S. relative to foreign economies, and the
trends in domestic and foreign stock markets.
The Fund may try to hedge against losses in the value of its portfolio
securities by using hedging strategies described below. The Fund's portfolio
manager may employ special investment techniques in selecting securities for the
Fund. These are also described below. Additional information may be found about
them under the same headings in the Statement of Additional Information.
o Can the Fund's Investment Objective and Policies Change? The Fund has an
investment objective, which is described above, as well as investment policies
it follows to try to achieve its objective. Additionally, the Fund uses certain
investment techniques and strategies in carrying out those investment policies.
The Fund's investment policies and techniques are not "fundamental" unless this
Prospectus or the Statement of Additional
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Information says that a particular policy is "fundamental." The Fund's
investment objective is a fundamental policy.
Fundamental policies are those that cannot be changed without the approval
of a "majority" of the Fund's outstanding voting shares. The term "majority" is
defined in the Investment Company Act to be a particular percentage of
outstanding voting shares (and this term is explained in the Statement of
Additional Information). The Fund's Board of Trustees may change non-fundamental
policies without shareholder approval, although significant changes will be
described in amendments to this Prospectus.
o The Fund "Concentrates" in Mining Securities and Metal Investments.
Under the Investment Company Act, "concentrating" investments means that a fund
invests at least 25% of its assets in a particular industry or group of
industries. As a fundamental policy, the Fund will concentrate its investments
in Mining Securities and Metal Investments. Under normal conditions (when the
Manager believes that the markets for Mining Securities and Metal Investments
are not in a volatile or unstable period), at least 80% and up to 100% of the
Fund's assets will be invested in Mining Securities and Metal Investments.
However, the Fund may not acquire additional Metal Investments if acquiring them
would result in more than 10% of the Fund's total assets being invested in Metal
Investments.
When market conditions are unstable, or there are adverse economic,
political or market conditions affecting Mining Securities and Metal
Investments, the Fund may invest substantial amounts of its assets in debt
securities, such as money market instruments or U.S. government securities, as
described in "Temporary Defensive Investments," below.
Investment Risks
All investments carry risks to some degree, whether they are risks that market
prices of the investment will fluctuate (this is known as "market risk") or that
the underlying issuer will experience financial difficulties and may default on
its obligations under a fixed-income investment to pay interest and repay
principal (this is referred to as "credit risk"). These general investment
risks, and the special risks of certain types of investments that the Fund may
hold are described below. They affect the value of the Fund's investments, its
investment performance, and the prices of its shares. These risks collectively
form the risk profile of the Fund.
Because of the types of securities the Fund invests in and the investment
techniques the Fund uses, the Fund is designed for investors who are investing
for the long term. It is not intended
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<PAGE>
for investors seeking assured income or preservation of capital. While the
Manager tries to reduce risks by diversifying investments, by carefully
researching securities before they are purchased, and in some cases by using
hedging techniques, changes in overall market prices can occur at any time, and
because the income earned on securities is subject to change, there is no
assurance that the Fund will achieve its investment objective. When you redeem
your shares, they may be worth more or less than what you paid for them.
o Stock Investment Risks. Because the Fund invests a substantial portion
of its assets in stocks, the value of the Fund's portfolio will be affected by
changes in the stock markets. At times, the stock markets can be volatile, and
stock prices can change substantially. This market risk will affect the Fund's
net asset values per share, which will fluctuate as the values of the Fund's
portfolio securities change. Not all stock prices change uniformly or at the
same time, not all stock markets move in the same direction at the same time and
other factors can affect a particular stock's price (for example poor earnings
reports by an issuer, loss of major customers, major litigation against an
issuer and changes in government regulations affecting an industry). Not all of
these factors can be predicted. Changes in the overall market prices can occur
at any time. The Fund attempts to limit market risks by diversifying its
investments, that is, by not holding a substantial amount of the stock of any
one company, and by not investing too great a percentage of the Fund's assets in
any one company.
o Special Risks of Concentrating Investments in Mining Securities and
Metal Investments. Investments in Mining Securities and Metal Investments are
considered speculative and involve substantial risks and special considerations.
Investing in one segment of the stock market, for example, the mining and metal
industries, rather than in a broad spectrum of types of companies makes the
Fund's share price particularly sensitive to market and economic events that
affect that segment. These risks include: (i) the risk that prices of gold and
precious metals may fluctuate substantially; (ii) the principal sources of the
supply of gold are basically concentrated in only five countries or territories:
South Africa, Australia, the Commonwealth of Independent States (which includes
Russia and certain other countries that were part of the former Soviet Union),
Canada and the United States; (iii) changes in international monetary policies,
economic and political conditions, all of which affect the supply of gold and
precious metals as well as the value of Metal Investments and Mining Securities;
(iv) possible regulation of Metal Investments by the U.S. or foreign
governments; and (v) possible adverse tax consequences for the Fund in making
Metal Investments, if holding those investments should cause it to fail to
qualify as a
13
<PAGE>
"regulated investment company" under the Internal Revenue Code. The Statement of
Additional Information contains more details about those risks, which can affect
the Fund's net asset value per share and cause the value of an investment in the
Fund to fluctuate.
o Foreign Securities Have Special Risks. While foreign securities offer
special investment opportunities, there are also special risks. The change in
value of a foreign currency against the U.S. dollar will result in a change in
the U.S. dollar value of securities denominated in that foreign currency.
Foreign issuers are not subject to the same accounting and disclosure
requirements that U.S. companies are subject to. The value of foreign
investments may be affected by exchange control regulations, expropriation or
nationalization of a company's assets, foreign taxes, delays in settlement of
transactions, changes in governmental economic or monetary policy in the U.S. or
abroad, or other political and economic factors. More information about the
risks and potential rewards of investing in foreign securities is contained in
the Statement of Additional Information.
o Borrowing for Leverage. The Fund may borrow money from banks to buy
securities. The Fund will borrow only if it can do so without putting up assets
as security for a loan. This is a speculative investment method known as
"leverage." This investing technique may subject the Fund to greater risks and
costs than funds that do not borrow. These risks may include the possibility
that the Fund's net asset value per share will fluctuate more than funds that
don't borrow. The Fund can borrow only if it maintains a 300% ratio of assets to
borrowings at all times in the manner set forth in the Investment Company Act.
Borrowing for leverage is subject to limits under the Investment Company Act,
described in more detail in "Borrowing for Leverage" in the Statement of
Additional Information.
o Hedging Instruments Can Be Volatile Investments and May Involve Special
Risks. The use of hedging instruments requires special skills and knowledge of
investment techniques that are different than what is required for normal
portfolio management. If the Manager uses a hedging instrument at the wrong time
or judges market conditions incorrectly, hedging strategies may reduce the
Fund's return. The Fund could also experience losses if the prices of its
futures and options positions were not correlated with its other investments or
if it could not close out a position because of an illiquid market for the
future or option.
Options trading involves the payment of premiums and has special tax
effects on the Fund. There are also special risks in particular hedging
strategies. If a covered call written by the Fund is exercised on a security
that has increased in value, the Fund will be required to sell the security at
the call price and
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will not be able to realize profits to the extent that the security has
increased in value above the call price plus the premium received by the Fund.
The use of forward contracts may reduce the gain that would otherwise result
from a change in the relationship between the U.S. dollar and a foreign
currency. These risks and the hedging strategies the Fund may use are described
in greater detail in the Statement of Additional Information.
Investment Techniques and Strategies
The Fund may also use the investment techniques and strategies described below.
These techniques involve certain risks. The Statement of Additional Information
contains more detailed information about these practices, including limitations
on their use that may help to reduce some of the risks.
o Foreign Securities. Because generally over 90% of the world's gold
production currently is in foreign countries, it is anticipated that the Fund
will normally invest a substantial amount of its assets in securities of foreign
issuers. The Fund may purchase equity (and debt) securities issued or guaranteed
by foreign companies or foreign governments, including foreign government
agencies. The Fund may buy securities of companies or governments in any
country, developed or underdeveloped. Investments in securities of issuers in
underdeveloped countries generally involve more risk and may be considered
highly speculative. There is no limit on the amount of the Fund's assets that
may be invested in foreign securities.
o ADRs, EDRs and GDRs. ADRs are receipts issued by a U.S. bank or trust
company which evidence ownership of underlying securities of foreign companies.
ADRs are traded on domestic exchanges or in the U.S. over-the-counter market and
generally are in registered form. If ADRs are bought through banks that do not
have a contractual relationship with the foreign issuer of the security
underlying the ADR to issue and service the ADR, there is a risk that the Fund
will not learn of corporate actions affecting the issuer in a timely manner.
EDRs and GDRs are receipts evidencing an arrangement with a non-U.S. bank
similar to that for ADRs and are designed for use in non-U.S. securities
markets. EDRs and GDRs are not necessarily quoted in the same currency as the
underlying security.
o Temporary Defensive Investments. Under unusual economic, political or
business circumstances adversely affecting Mining Securities or Metal
Investments, the Fund may depart from its usual policy of concentrating at least
80% of its assets in those investments. Instead, the Fund may invest a portion
of its assets in other types of securities for "defensive purposes." Securities
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selected for defensive purposes will usually be short-term securities and may
include debt securities. These may be rated or unrated bonds and debentures,
preferred stocks, cash or cash equivalents, such as U.S. Treasury Bills and
other short-term obligations of the U.S. Government, its agencies or
instrumentalities, or commercial paper rated "A-1" or better by Standard &
Poor's Corporation or "P-1" or better by Moody's Investors Service, Inc. For
defensive purposes, the Fund may also invest for capital appreciation in equity
securities other than Mining Securities.
o Warrants and Rights. Warrants are options to purchase stock at set
prices that are valid for a limited period of time. Rights are similar to
warrants but normally have a short duration and are distributed by the issuer to
its shareholders. The Fund may invest up to 5% of its total assets in warrants
and rights. That 5% does not apply to warrants or rights the Fund acquired as
part of units with other securities or that were attached to other securities.
No more than 2% of the Fund's total assets may be invested in warrants and
rights that are not listed on the New York or American Stock Exchanges. These
percentage limitations are fundamental policies. For further details about these
investments, see "Warrants" in the Statement of Additional Information.
o Convertible Securities. Convertible securities are bonds, preferred
stocks and other securities that normally pay a fixed rate of interest or
dividend and give the owner the option to convert the security into common
stock. While the value of convertible securities depends in part on interest
rate changes and the credit quality of the issuer, the price will also change
based on the price of the underlying stock. While convertible securities
generally have less potential for gain than common stock, their income provides
a cushion against the stock price's declines. They generally pay less income
than non-convertible bonds. The Manager generally analyzes these investments
from the perspective of the growth potential of the underlying stock and treats
them as "equity substitutes."
o Preferred Stock. The Fund may invest in preferred stock. Generally,
preferred stock is an equity security that has a specified dividend and ranks
after bonds and before common stocks in its claim on income for dividend
payments and on assets should the issuing company be liquidated. While most
preferred stocks pay a dividend, the Fund may purchase preferred stock where the
issuer has omitted, or is in danger of omitting, payment of its dividend. Such
investments would be made primarily for their capital appreciation potential.
Certain preferred stock may be convertible into or exchangeable for a given
number of common shares. Such preferred stock tends to be more volatile than
nonconvertible preferred stock, which behaves more like a fixed-income security.
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o Investing in Small, Unseasoned Companies. The Fund may invest in
securities of small, unseasoned companies. These are companies that have been in
operation for less than three years, even after including the operations of any
predecessors. Securities of these companies may have limited liquidity (which
means that the Fund may have difficulty selling them at an acceptable price when
it wants to) and the prices of these securities may be volatile. The Fund
currently intends to invest no more than 5% of its net assets in securities of
small, unseasoned issuers.
o Illiquid and Restricted Securities. Under the policies and procedures
established by the Fund's Board of Trustees, the Manager determines the
liquidity of certain of the Fund's investments. Investments may be illiquid
because of the absence of an active trading market, making it difficult to value
them or dispose of them promptly at an acceptable price. A restricted security
is one that has a contractual restriction on its resale or which cannot be sold
publicly until it is registered under the Securities Act of 1933. The Fund will
not invest more than 10% of its net assets in illiquid or restricted securities
(the Board may increase that limit to 15%). The Fund's percentage limitation on
these investments does not apply to certain restricted securities that are
eligible for resale to qualified institutional purchasers. The Manager monitors
holdings of illiquid securities on an ongoing basis and at times the Fund may be
required to sell some holdings to maintain adequate liquidity. See "Illiquid and
Restricted Securities" in the Statement of Additional Information.
o Loans of Portfolio Investments. To raise cash for liquidity purposes, the
Fund may lend its portfolio investments to brokers, dealers and other types of
financial institutions approved by the Board of Trustees. The Fund must receive
collateral for a loan. As a fundamental policy, these loans are limited to not
more than 25% of the value of the Fund's total assets. There are some risks in
connection with securities lending. The Fund might experience a delay in
receiving additional collateral to secure a loan, or a delay in recovering
loaned securities if the borrower defaults. The Fund presently does not intend
to make loans of portfolio securities that will exceed 5% of the value of the
Fund's total assets in the coming year.
o Repurchase Agreements. The Fund may enter into repurchase agreements. In
a repurchase transaction, the Fund buys a security and simultaneously sells it
to the vendor for delivery at a future date. They are used primarily for cash
liquidity purposes. There is no limit on the amount of the Fund's net assets
that may be subject to repurchase agreements of seven days or less. Repurchase
agreements must be fully collateralized. However, if the vendor fails to pay the
resale price on the delivery date, the Fund may
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incur costs in disposing of the collateral and may experience losses if there is
any delay in its ability to do so. The Fund will not enter into a repurchase
agreement that causes more than 10% of its net assets to be subject to
repurchase agreements having a maturity beyond seven days.
o Hedging. As described below, the Fund may purchase and sell certain
kinds of futures contracts, put and call options, forward contracts, and options
on futures, broadly-based stock indices and foreign currencies. These are all
referred to as "hedging instruments." While the Fund currently does not engage
extensively in hedging, the fund may use these instruments for hedging purposes
and, in the case of covered calls, non-hedging purposes as described below.
The Fund may write covered call options and buy and sell options, futures
and forward contracts for a number of purposes. It may do so to try to manage
its exposure to the possibility that the prices of its portfolio securities may
decline, or to establish a position in the equity securities market as a
temporary substitute for purchasing individual securities. Some of these
strategies, such as selling futures and writing covered calls, hedge the Fund's
portfolio against price fluctuations. Other hedging strategies, such as buying
futures, tend to increase the Fund's exposure to the securities market.
Forward contracts may be used to try to manage foreign currency risks on
the Fund's foreign investments. Foreign currency options may be used to try to
protect against declines in the dollar value of foreign securities the Fund
owns, or to protect against an increase in the dollar cost of buying foreign
securities. Writing covered call options may also provide income to the Fund for
liquidity purposes or for defensive reasons.
o Futures. The Fund may buy and sell futures contracts that relate to
broadly-based securities indices (these are referred to as "Stock Index
Futures"). This limitation is a fundamental policy.
o Put and Call Options. The Fund may buy and sell certain kinds of put
options (puts) and call options (calls). A call or put option may not be
purchased if as a result of that purchase the value of all of the Fund's put and
call options would exceed 10% of the Fund's total assets.
The Fund can buy or sell only those puts that relate to (1) securities or
Stock Index Futures (whether or not the Fund owns the particular security or
Stock Index Future in its portfolio), (2) broadly-based stock indices, or (3)
foreign currencies. Writing a put requires segregation of liquid assets to cover
the put. The
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Fund will not write a put if it will require more than 25% of the Fund's total
assets to be segregated to cover the put obligation.
The Fund may purchase calls only on securities, broadly-based stock
indices, foreign currencies, or Stock Index Futures, or to terminate its
obligation on a call the Fund previously wrote. The Fund may write (that is,
sell) call options. Each call the Fund writes must be "covered" while it is
outstanding. That means the Fund must own the investment on which the call was
written or the Fund owns and segregates liquid assets to satisfy its obligation
if the call is exercised. After the Fund writes a call, not more than 25% of the
Fund's total assets may be subject to calls. The Fund will not write or purchase
any call that will cause the value of the Fund's calls on a particular security
to exceed 3% of the Fund's total assets. That restriction applies to warrants on
a security but not to calls purchased in closing transactions. Covered call
options sold by the Fund must be listed on a domestic securities exchange or
quoted on the Automated Quotation System (NASDAQ) of the Nasdaq Stock Market,
Inc.
The Fund may buy or sell foreign currency puts and calls only if they are
traded on a securities or commodities exchange or over-the-counter market, or
are quoted by recognized dealers in those options.
o Forward Contracts. Forward contracts are foreign currency exchange
contracts. They are used to buy or sell foreign currency for future delivery at
a fixed price. The Fund uses them to try to "lock in" the U.S. dollar price of a
security denominated in a foreign currency that the Fund has bought or sold, or
to protect against possible losses from changes in the relative values of the
U.S. dollar and foreign currency. The Fund may also use "cross- hedging" where
the Fund hedges against changes in currencies other than the currency in which a
security it holds is denominated.
o Derivative Investments. In general, a "derivative investment" is a
specially designed investment. Its performance is linked to the performance of
another investment or security. Examples of derivative investments in which the
Fund may invest include index-linked notes (principal or interest payments on
the note depend on performance of a market index) or equity-linked debt
securities (at maturity, principal is payable in an amount based on the issuer's
common stock price at maturity). In the broadest sense, exchange-traded options
and futures contracts (discussed in "Hedging," above) may be considered
"derivative investments."
o Short Sales "Against-the-Box". In a short sale, the seller does not own
the security that is sold, but normally borrows the security to fulfill the
delivery obligation. The seller later buys the security to repay the loan, in
the expectation that the price of the security will be lower when the purchase
is made, resulting
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in a gain. The Fund may not sell securities short except in collateralized
transactions referred to as short sales "against- the-box," where the Fund owns
an equivalent amount of the securities sold short. No more than 15% of the
Fund's net assets will be held as collateral for short sales at any one time.
Other Investment Restrictions. The Fund has other investment restrictions which
are fundamental policies. Under these fundamental policies, the Fund cannot do
any of the following: o The Fund cannot invest in Metal Investments if, as a
result, more than 10% of the Fund's total assets would be invested in Metal
Investments. o The Fund cannot invest either more than 10% of its total assets
in the securities of any one issuer, or, with respect to 75% of its total
assets, invest more than 5% of its total assets in securities of any one issuer
(for this purpose, an "issuer" is one other than the U.S. Government or its
agencies or instrumentalities). o The Fund cannot acquire more than 10% of the
outstanding voting securities of any one issuer. o The Fund cannot invest in
other open-end investment companies, or invest more than 10% of its net assets
in closed-end investment companies, including small business investment
companies (and investments in closed-end investment companies may be made only
in open-market purchases and only at commission rates that are not in excess of
normal brokerage commissions).
o The Fund cannot lend money (this does not prohibit the Fund from
acquiring publicly-distributed debt securities that the Fund's other investment
policies and restrictions permit it to purchase, and the Fund may also make
loans of portfolio securities and Metal Investments as described above) .
o The Fund cannot deviate from the percentage limitations on investments
set forth in the sections of "Other Investment Techniques and Strategies" above
(other than those under "Illiquid and Restricted Securities").
Unless the Prospectus states that a percentage restriction applies on an ongoing
basis, it applies only at the time the Fund makes an investment and the Fund
need not sell securities to meet the percentage limits if the value of the
investment increases in proportion to the size of the Fund. Other investment
restrictions are listed in the Statement of Additional Information.
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How the Fund is Managed
Organization and History. The Fund was organized in 1983 as a Maryland
corporation but was reorganized in 1985 as a Massachusetts business trust. The
Fund is an open-end management investment company.
The Fund is governed by a Board of Trustees, which is responsible for
protecting the interests of shareholders under Massachusetts law. The Trustees
meet periodically throughout the year to oversee the Fund's activities, review
its performance, and review the actions of the Manager. "Trustees and Officers
of the Fund" in the Statement of Additional Information names the Trustees and
officers of the Fund, and provides more information about them . Although the
Fund will not normally hold annual meetings of its shareholders, it may hold
shareholder meetings from time to time on important matters, and shareholders
have the right to call a meeting to remove a Trustee or to take other action
described in the Fund's Declaration of Trust.
The Board of Trustees has the power, without shareholder approval, to
divide unissued shares of the Fund into two or more classes. The Board has done
so, and the Fund currently has three classes of shares, Class A, Class B and
Class C. All classes invest in the same investment portfolio. Each class has its
own dividends and distributions and pays certain expenses which may be different
for the different classes. Each class may have a different net asset value. Each
share has one vote at shareholder meetings, with fractional shares voting
proportionally on matters submitted to the vote of shareholders. Shares of each
class may have separate voting rights on matters in which interests of one class
are different from interests of another class, and shares of a particular class
vote as a class on matters that affect that class alone. Shares are freely
transferrable.
The Manager and Its Affiliates. The Fund is managed by the Manager,
OppenheimerFunds, Inc., which is responsible for selecting the Fund's
investments and handles its day-to-day business. The Manager carries out its
duties, subject to the policies established by the Board of Trustees, under an
Investment Advisory Agreement with the Fund which states the Manager's
responsibilities. The Agreement sets forth the fees paid by the Fund to the
Manager, and describes the expenses that the Fund is responsible to pay to
conduct its business.
The Manager has operated as an investment adviser since 1959. The Manager
(including subsidiaries) currently manages investment companies, including other
Oppenheimer funds, with assets of more than $75 billion as of September 30,
1997, and with more than 3 million
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shareholder accounts. The Manager is owned by Oppenheimer Acquisition Corp., a
holding company that is owned in part by senior officers of the Manager and
controlled by Massachusetts Mutual Life Insurance Company.
o Portfolio Manager.
Effective July 18, 1997, the Fund's portfolio managers are Frank Jennings and
Shanquan Li. Messrs. Jennings and Li are the persons principally responsible
for the day-to-day management of the Fund's portfolio. Mr. Jennings also serves
as an officer and portfolio manager of other Oppenheimer funds, prior to which
he was a Managing Director of Global Equities at Mitchell Hutchins Asset
Management, Inc., a subsidiary of PaineWebber, Inc. Prior to joining the
Manager , Mr. Li was a senior quantitative analyst in the Investment Management
Policy Group of Brown Brothers Harriman & Co. Prior to that, Mr. Li was a
consultant for Acadian Asset Management, Inc.
o Fees and Expenses. Under the Investment Advisory Agreement, the Fund pays
the Manager a monthly fee at the following annual rates, which decline on
additional assets as the Fund grows: 0.75% of the first $200 million of
aggregate net assets, 0.72% of the next $200 million, 0.69% of the next $200
million, 0.66% of the next $200 million and 0.60% of net assets in excess of
$800 million. The Fund's management fee for its last fiscal year was 0.75% of
average annual net assets of Class A shares, Class B shares and Class C shares.
This rate may be higher than the rate paid by some other mutual funds.
The Fund pays expenses related to its daily operations, such as custodian
fees, Trustees' fees, transfer agency fees, legal and auditing costs. Those
expenses are paid out of the Fund's assets and are not paid directly by
shareholders. However, those expenses reduce the net asset value of shares, and
therefore are indirectly borne by shareholders through their investment. More
information about the Investment Advisory Agreement and the other expenses paid
by the Fund is contained in the Statement of Additional Information.
There is also information about the Fund's brokerage policies and
practices in "Brokerage Policies of the Fund" in the Statement of Additional
Information. That section discusses how brokers and dealers are selected for the
Fund's portfolio transactions. When deciding which brokers to use, the Manager
is permitted by the Investment Advisory Agreement to consider whether brokers
have sold shares of the Fund or any other funds for which the Manager serves as
investment adviser.
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o The Distributor. The Fund's shares are sold through dealers, brokers and
other financial institutions that have a sales agreement with OppenheimerFunds
Distributor, Inc., a subsidiary of the Manager that acts as the Fund's
Distributor. The Distributor also distributes the shares of other "Oppenheimer
funds" managed by the Manager and is sub-distributor for funds managed by a
subsidiary of the Manager.
o The Transfer Agent. The Fund's Transfer Agent is OppenheimerFunds
Services, a division of the Manager, which acts as the shareholder servicing
agent for the Fund on an "at-cost" basis. It also acts as the shareholder
servicing agent for the other Oppenheimer funds. Shareholders should direct
inquiries about their account to the Transfer Agent at the address and toll-free
numbers shown below in this Prospectus and on the back cover.
Performance of the Fund
Explanation of Performance Terminology. The Fund uses the term "total return" to
illustrate its performance. The performance of each class of shares is shown
separately, because the performance of each class of shares will usually be
different as a result of the different kinds of expenses each class bears. These
returns measure the performance of a hypothetical account in the Fund over
various periods, and do not show the performance of each shareholder's account
(which will vary if dividends are received in cash, or shares are sold or
purchased). The Fund's performance data may be useful to help you see how well
your investment has done over time and to compare it to market indices.
It is important to understand that the Fund's total returns represent past
performance and should not be considered to be predictions of future returns or
performance. More detailed information about how total returns are calculated is
contained in the Statement of Additional Information, which also contains
information about other ways to measure and compare the Fund's performance. The
Fund's investment performance will vary over time, depending on market
conditions, the composition of the portfolio, expenses and which class of shares
you purchase.
o Total Returns. There are different types of "total returns" used to
measure the Fund's performance. Total return is the change in value of a
hypothetical investment in the Fund over a given period, assuming that all
dividends and capital gains distributions are reinvested in additional shares.
The cumulative total return measures the change in value over the entire period
(for example, ten years). An average annual total return shows the average rate
of return for each year in a period that would produce the cumulative total
return over the entire period. However, average
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<PAGE>
annual total returns do not show the Fund's actual year-by-year
performance.
When total returns are quoted for Class A shares, normally the current
maximum initial sales charge has been deducted. When total returns are shown for
Class B and Class C shares, normally the contingent deferred sales charge that
applies to the period for which total return is shown has been deducted.
However, total returns may also be quoted "at net asset value," without
considering the effect of either the front-end or the appropriate contingent
deferred sales charge, as applicable, and those returns would be less if sales
charges were deducted. Total returns for Class B and Class C shares may also be
shown based on the change in net asset value, without including the contingent
deferred sales charge.
How Has the Fund Performed? Below is a discussion by the Manager of the Fund's
performance during its past fiscal year ended June 30, 1997, followed by a
graphical comparison of the Fund's performance to an appropriate broad-based
market index.
o Management's Discussion of Performance. The Fund's performance during
its past fiscal year ended June 30, 1997 was negatively affected by a number of
economic factors, including low levels of U.S. inflation, a strong U.S. dollar
relative to other currencies, and the sale of significant amounts of gold by
many central banks in Western Europe and Australia. When inflation is low, gold
must compete with high real rates of return (a security's yield less the rate of
inflation) provided by other investments. When the U.S. dollar is strong, gold
imports become more expensive for U.S. companies and consumers. When central
banks sell significant amounts of gold reserves, this increases the supply of
gold available for purchase. The Fund did benefit from continued strong consumer
demand for gold jewelry. The Fund also benefited from its focus on investments
in securities of companies that were lower-cost mineral producers with rising
production capacities. The Fund's other metal investments performed well, due to
increased demand for these metals as a result of relatively strong economies in
the U.S. and abroad. The Fund's portfolio holdings, allocations and strategies
are subject to change.
o Comparing the Fund's Performance to the Market. The graphs below show the
performance of a hypothetical $10,000 investment in Class A, Class B and Class C
shares of the Fund at June 30,1997. In the case of Class A shares, performance
is measured over a ten-year period. In the case of Class B and Class C shares,
performance is measured from inception of the class on November 1,
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<PAGE>
1995. The Fund's performance reflects the deduction of the 5.75% current maximum
initial sales charge on Class A shares, the applicable contingent deferred sales
charge on Class B and Class C shares, and reinvestment of all dividends and
capital gains distributions.
The Fund's performance is compared to the performance of the Morgan
Stanley World Index, an unmanaged index of issuers listed on the stock exchanges
of 20 foreign countries and the U.S. That index is widely recognized as a
measure of global stock market performance. Index performance reflects the
reinvestment of dividends but does not consider the effect of expenses or taxes.
Also, the Fund's performance reflects the effect of Fund business and operating
expenses. While index comparisons may be useful to provide a benchmark for the
Fund's performance, it must be noted that the Fund's investments are not limited
to the securities in the Morgan Stanley World Index. The Fund's investments are
concentrated in one group of industries while the Morgan Stanley World Index
includes companies from different industries with different degrees of
volatility and returns. Moreover, the index data does not reflect any assessment
of the risk of the investments included in the index.
Class A Shares
Comparison of Change in Value of $10,000 Hypothetical
Investments in:
Oppenheimer Gold & Special Minerals Fund (Class A)
and Morgan Stanley World Index
Graph
Average Annual Total Returns of Class A Shares of the Fund at 6/30/97(1)
1-Year 5-Year 10-Year
(15.37%) 2.92% 4.71%
Class B Shares
Comparison of Change in Value of $10,000 Hypothetical
Investments in:
Oppenheimer Gold & Special Minerals Fund Class B)
and Morgan Stanley World Index
Graph
Average Annual Total Return of Class B Shares of the Fund at
6/30/97(2)
1-year Life
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(15.44%) (1.39%)
Class C Shares
Comparison of Change in Value of $10,000 Hypothetical
Investments in:
Oppenheimer Gold & Special Minerals Fund (Class C)
and Morgan Stanley World Index
Graph
Average Annual Total Return of Class C Shares of the Fund at
6/30/97(3)
1-year Life
(11.79%) 1.16%
Total returns and the ending account values in the graphs reflect reinvestment
of all dividends and capital gains distributions. Graphs are not drawn to same
scale. Past performance is not predictive of future performance. (1) The
inception date of the Fund (Class A shares) was 7/19/83. Class A returns are
shown net of the applicable 5.75% maximum initial sales charge. (2) Class B
shares of the Fund were first publicly offered on 11/1/95. The average annual
total returns are shown net of the applicable 5% and 4% contingent deferred
sales charge, respectively, for the one year period and the life of the class.
The ending account value in the graph is net of the applicable 4% of contingent
deferred sales charge. (3) Class C shares of the Fund were first publicly
offered on 11/1/95. The average annual total return for the one year period is
shown net of the applicable 1% contingent deferred sales charge .
ABOUT YOUR ACCOUNT
How to Buy Shares
Classes of Shares. The Fund offers investors three different classes of shares.
The different classes of shares represent investments in the same portfolio of
securities but are subject to different expenses and will likely have different
share prices.
o Class A Shares. If you buy Class A shares, you may pay an initial sales
charge on investments up to $1 million (up to
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$500,000 for purchases by "Retirement Plans," as defined in "Class A Contingent
Deferred Sales Charge" on page 29. If you purchase Class A shares as part of an
investment of at least $1 million ($500,000 for Retirement Plans) in shares of
one or more Oppenheimer funds, you will not pay an initial sales charge, but if
you sell any of those shares within 12 months of buying them (18 months if the
shares were purchased prior to May 1, 1997), you may pay a contingent deferred
sales charge. The amount of that sales charge will vary depending on the amount
you invested. Sales charge rates are described in "Buying Class A Shares" below.
o Class B Shares. If you buy Class B shares, you pay no sales charge at the
time of purchase, but if you sell your shares within six years of buying them,
you will normally pay a contingent deferred sales charge. That sales charge
varies depending on how long you own your shares as described in "Buying Class B
Shares" below.
o Class C Shares. If you buy Class C shares, you pay no sales charge at
the time of purchase, but if you sell your shares within 12 months of buying
them, you will normally pay a contingent deferred sales charge of 1% as
discussed in "Buying Class C Shares" below.
Which Class of Shares Should You Choose? Once you decide that the Fund is an
appropriate investment for you, the decision as to which class of shares is
better suited to your needs depends on a number of factors which you should
discuss with your financial advisor. The Fund's operating costs that apply to a
class of shares and the effect of the different types of sales charges on your
investment will vary your investment results over time. The most important
factors to consider are how much you plan to invest and how long you plan to
hold your investment. If your goals and objectives change over time and you plan
to purchase additional shares, you should re-evaluate those factors to see if
you should consider another class of shares.
In the following discussion, to help provide you and your financial
advisor with a framework in which to choose a class, we have made some
assumptions using a hypothetical investment in the Fund. We used the sales
charge rates that apply to each class, considering the effect of the annual
asset-based sales charge on Class B and Class C expenses (which, like all
expenses, will affect your investment return). For the sake of comparison, we
have assumed that there is a 10% rate of appreciation in the investment each
year. Of course, the actual performance of your investment cannot be predicted
and will vary, based on the Fund's actual investment returns and the operating
expenses borne by each class of shares, and which class of shares you invest in.
The factors
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discussed below are not intended to be investment advice or recommendations,
because each investor's financial considerations are different. The discussion
below of the factors to consider in purchasing a particular class of shares
assumes that you will purchase only one class of shares and not a combination of
shares of different classes.
o How Long Do You Expect to Hold Your Investment? While future financial
needs cannot be predicted with certainty, knowing how long you expect to hold
your investment will assist you in selecting the appropriate class of shares.
Because of the effect of class-based expenses, your choice will also depend on
how much you plan to invest. For example, the reduced sales charges available
for larger purchases of Class A shares may, over time, offset the effect of
paying an initial sales charge on your investment (which reduces the amount of
your investment dollars used to buy shares for your account), compared to the
effect over time of higher class-based expenses on Class B or Class C shares for
which no initial sales charge is paid.
o Investing for the Short Term. If you have a short-term investment
horizon (that is, you plan to hold your shares for not more than six years), you
should probably consider purchasing Class A or Class C shares rather than Class
B shares, because of the effect of the Class B contingent deferred sales charge
if you redeem in less than 7 years, as well as the effect of the Class B
asset-based sales charge on the investment return for that class in the
short-term. Class C shares might be the appropriate choice (especially for
investments of less than $100,000), because there is no initial sales charge on
Class C shares, and the contingent deferred sales charge does not apply to
amounts you sell after holding them one year.
However, if you plan to invest more than $100,000 for the shorter term,
then the more you invest and the more your investment horizon increases toward
six years, Class C shares might not be as advantageous as Class A shares. That
is because the annual asset-based sales charge on Class C shares will have a
greater impact on your account over the longer term than the reduced front-end
sales charge available for larger purchases of Class A shares. For example,
Class A shares might be more advantageous than Class C (as well as Class B)
shares for investments of more than $100,000 expected to be held for 5 or 6
years (or more). For investments over $250,000 expected to be held 4 to 6 years
(or more), Class A shares may become more advantageous than Class C (and Class
B) shares. If investing $500,000 or more, Class A shares may be more
advantageous as your investment horizon approaches 3 years or more.
And for investors who invest $1 million or more, in most cases Class A
shares will be the most advantageous choice, no matter how long you intend to
hold your shares. For that reason, the
28
<PAGE>
Distributor normally will not accept purchase orders of $500,000 or more of
Class B shares or $1 million or more of Class C shares, from a single investor.
o Investing for the Longer Term. If you are investing for the longer term,
for example, for retirement, and do not expect to need access to your money for
seven years or more, Class B shares may be an appropriate consideration, if you
plan to invest less than $100,000. If you plan to invest more than $100,000 over
the long term, Class A shares will likely be more advantageous than Class B
shares or Class C shares, as discussed above, because of the effect of the
expected lower expenses for Class A shares and the reduced initial sales charges
available for larger investments in Class A shares under the Fund's Right of
Accumulation.
Of course, these examples are based on approximations of the effect of
current sales charges and expenses on a hypothetical investment over time, using
the assumed annual performance returns stated above, and therefore, you should
analyze your options carefully.
o Are There Differences in Account Features That Matter to You? Because
some account features may not be available to Class B or Class C shareholders,
or other features (such as Automatic Withdrawal Plans) might not be advisable
(because of the effect of the contingent deferred sales charge) for Class B or
Class C shareholders, you should carefully review how you plan to use your
investment account before deciding which class of shares to buy. Share
certificates are not available for Class B or Class C shares, and if you are
considering using your shares as collateral for a loan, that may be a factor to
consider.
o How Does It Affect Payments to My Broker? A salesperson, such as a
broker, or any other person who is entitled to receive compensation for selling
Fund shares may receive different compensation for selling one class of shares
than for selling another class. It is important that investors understand that
the purpose of the Class B and Class C contingent deferred sales charge and
asset-based sales charges are the same as the purpose of the front-end sales
charge on sales of Class A shares: that is, to compensate the Distributor for
commissions it pays to dealers and financial institutions for selling shares.
The Distributor may pay additional periodic compensation from its own resources
to securities dealers or financial institutions based upon the value of shares
of the Fund owned by the dealer or financial institution for its own account or
for its customers.
How Much Must You Invest? You can open a Fund account with a minimum initial
investment of $1,000 and make additional investments at any time with as little
as $25. There are reduced
29
<PAGE>
minimum investments under special investment plans.
o With Asset Builder Plans, Automatic Exchange Plans, 403(b)(7) custodial
plans and military allotment plans, you can make initial and subsequent
investments of as little as $25; and subsequent purchases of at least $25 can be
made by telephone through AccountLink.
o Under pension, profit-sharing and 401(k) plans and Individual Retirement
Accounts (IRAs), you can make an initial investment of as little as $250 (if
your IRA is established under an Asset Builder Plan, the $25 minimum applies),
and subsequent investments may be as little as $25.
o There is no minimum investment requirement if you are buying shares by
reinvesting dividends or distributions from the Fund or other Oppenheimer funds
(a list of them appears in the Statement of Additional Information, or you can
ask your dealer or call the Transfer Agent), or by reinvesting distributions
from unit investment trusts that have made arrangements with the Distributor.
o How Are Shares Purchased? You can buy shares several ways -- through any
dealer, broker or financial institution that has a sales agreement with the
Distributor, directly through the Distributor or automatically from your bank
account through an Asset Builder Plan under the OppenheimerFunds AccountLink
service. The Distributor may appoint certain servicing agents as the
Distributor's agent to accept purchase and redemption orders. When you buy
shares, be sure to specify Class A, Class B or Class C shares. If you do not
choose, your investment will be made in Class A shares.
o Buying Shares Through Your Dealer. Your dealer will place your order with
the Distributor on your behalf.
o Buying Shares Through the Distributor. Complete an OppenheimerFunds New
Account Application and return it with a check payable to "OppenheimerFunds
Distributor, Inc." Mail it to P.O. Box 5270, Denver, Colorado 80217. If you
don't list a dealer on the application, the Distributor will act as your agent
in buying the shares. However, we recommend that you discuss your investment
first with a financial advisor, to be sure it is appropriate for you.
o Payments by Federal Funds Wire. Shares may be purchased by Federal Funds
wire. The minimum investment is $2,500. You must first call the Distributor's
Wire Department at 1-800-525-7041 to notify the Distributor of the wire, and
receive further instructions.
30
<PAGE>
o Buying Shares Through OppenheimerFunds AccountLink. You can use
AccountLink to link your Fund account with an account at a U.S. bank or other
financial institution that is an Automated Clearing House (ACH) member. You can
then transmit funds electronically to purchase shares, to have the Transfer
Agent send redemption proceeds, or to transmit dividends and distributions.
Shares are purchased for your account on AccountLink on the regular
business day the Distributor is instructed by you to initiate the ACH transfer
to buy shares. You can provide those instructions automatically, under an Asset
Builder Plan, described below, or by telephone instructions using
OppenheimerFunds PhoneLink, also described below. You should request AccountLink
privileges on the application or dealer settlement instructions used to
establish your account. Please refer to "AccountLink" below for more details.
o Asset Builder Plans. You may purchase shares of the Fund (and up to four
other Oppenheimer funds) automatically each month from your account at a bank or
other financial institution under an Asset Builder Plan with AccountLink.
Details are in the Statement of Additional Information.
o At What Price Are Shares Sold? Shares are sold at the public offering
price based on the net asset value (and any initial sales charge that applies)
that is next determined after the Distributor receives the purchase order in
Denver, Colorado. In most cases, to enable you to receive that day's offering
price, the Distributor or its designated agent must receive your order by the
time of day The New York Stock Exchange closes, which is normally 4:00 P.M., New
York time, but may be earlier on some days (all references to time in this
Prospectus mean "New York time"). The net asset value of each class of shares is
determined as of that time on each day The New York Stock Exchange is open
(which is a "regular business day").
If you buy shares through a dealer, the dealer must receive your order by
the close of The New York Stock Exchange on a regular business day and transmit
it to the Distributor so that it is received before the Distributor's close of
business that day, which is normally 5:00 P.M. The Distributor may reject any
purchase order for the Fund's shares, in its sole discretion.
Special Sales Charge Arrangements for Certain Persons. Appendix A to this
Prospectus sets forth conditions for the waiver of, or exemption from, sales
charges or the special sales charge rates that apply to purchases of shares of
the Fund (including purchases by exchange) by a person who was a shareholder of
one of the Former Quest for Value Funds (as defined in that Appendix).
31
<PAGE>
Buying Class A Shares. Class A shares are sold at their offering price, which is
normally net asset value plus an initial sales charge. However, in some cases,
described below, purchases are not subject to an initial sales charge, and the
offering price will be the net asset value. In some cases, reduced sales charges
may be available, as described below. Out of the amount you invest, the Fund
receives the net asset value to invest for your account. The sales charge varies
depending on the amount of your purchase. A portion of the sales charge may be
retained by the Distributor and allocated to your dealer as commission. The
current sales charge rates and commissions paid to dealers and brokers are as
follows:
<TABLE>
<CAPTION>
Front-End Front-End
Sales Charge Sales Charge
as Percentage as Percentage Commission as
of Offering of Amount Percentage of
Amount of Purchase Price Invested Offering Price
- ---------------------------------------------------------------------------
<S> <C> <C> <C>
Less than $25,000 5.75% 6.10% 4.75%
- ---------------------------------------------------------------------------
$25,000 or more but
less than $50,000 5.50% 5.82% 4.75%
- ---------------------------------------------------------------------------
$50,000 or more but
less than $100,000 4.75% 4.99% 4.00%
- ---------------------------------------------------------------------------
$100,000 or more but
less than $250,000 3.75% 3.90% 3.00%
- ---------------------------------------------------------------------------
$250,000 or more but
less than $500,000 2.50% 2.56% 2.00%
- ---------------------------------------------------------------------------
$500,000 or more but
less than $1 million 2.00% 2.04% 1.60%
</TABLE>
The Distributor reserves the right to reallow the entire commission to
dealers. If that occurs, the dealer may be considered an "underwriter" under
Federal securities laws.
o Class A Contingent Deferred Sales Charge. There is no initial sales
charge on purchases of Class A shares of any one or more of the Oppenheimer
funds in the following cases:
o Purchases aggregating $1 million or more;
o Purchases by a retirement plan qualified under section 401 (a) if the
retirement plan has total plan assets of $500,000 or more;
}o Purchases by a retirement plan qualified under sections 401(a) or
32
<PAGE>
401(k) of the Internal Revenue Code, by a non-qualified deferred compensation
plan (not including Section 457 plans), employee benefit plan, group retirement
plan (see "How to Buy Shares Retirement Plans" in the Statement of Additional
Information for further details, an employees's 403(b)(7) custodial plan
account, SEP IRA, SARSEP, or SIMPLE plan (all of these plans are collectively
referred to as "Retirement Plans"); that: (1) buys shares costing $500,000 or
more or (2) has, at the time of purchase, 100 or more eligible participants, or
(3) certifies that it projects to have annual plan purchases of $200,000 or
more;
o Purchases by an OppenheimerFunds Rollover IRA if the purchases are made
(1) through a broker, dealer, bank or registered investment advisor that has
made special arrangements with the Distributor for these purchases, or (2) by a
direct rollover of a distribution form a qualified retirement plan if the
administrator of that plan has made special arrangements with the Distributor
for these purchases.
The Distributor pays dealers of record commissions on those purchases in
an amount equal to (i) 1.0% for non- Retirement Plan accounts, and (ii) for
Retirement Plan accounts, 1.0% of the first $2.5 million, plus 0.50% of the next
$2.5 million, plus 0.25% of purchases over $5 million, calculated on a calendar
year basis. That commission will be paid only on those purchases that were not
previously subject to a front end sales charge and dealer commission. No sales
commission will be paid to the dealer, broker or financial institution on sales
of Class A shares purchased with the redemption proceeds of shares of a mutual
fund offered as an investment option in a Retirement Plan in which Oppenheimer
funds are also offered as investment option under a special arrangement with the
Distributor if the purchase occurs more than 30 days after the addition of the
Oppenheimer funds as an investment option to the Retirement Plan.
If you redeem any of those shares purchased prior to May 1, 1997, within 18
months of the end of the calendar month of their purchase, a contingent deferred
sales charge (called the "Class A contingent deferred sales charge") may be
deducted from the redemption proceeds. A Class A contingent deferred sales
charge may be deducted from the redemption proceeds of any of those shares
purchased on or after May 1, 1997 that are redeemed within 12 months of the end
of the calendar month of their purchase. That sales charge will be equal to 1.0%
of the lesser of (1) the aggregate net asset value of the redeemed shares (not
including shares purchased by reinvestment of dividends or capital gains
distributions) or (2) the original offering price (which is the original net
asset value) of the redeemed shares.
33
<PAGE>
The Class A contingent deferred sales charge will not exceed the aggregate
amount of the commissions the Distributor paid to your dealer on all Class A
shares of all Oppenheimer funds you purchased subject to the Class A contingent
deferred sales charge.
In determining whether a contingent deferred sales charge is payable, the
Fund will first redeem shares that are not subject to the sales charge,
including shares purchased by reinvestment of dividends and capital gains, and
then will redeem other shares in the order that you purchased them. The Class A
contingent deferred sales charge is waived in certain cases described in
"Waivers of Class A Sales Charges" below.
No Class A contingent deferred sales charge is charged on exchanges of
shares under the Fund's Exchange Privilege (described below). However, if the
shares acquired by exchange are redeemed within 12 calendar months (18 months
for shares purchased prior to May 1, 1997) of the end of the calendar month of
the purchase of the exchanged shares, the contingent deferred sales charge will
apply.
o Special Arrangements With Dealers. The Distributor may advance up to 13
months' commissions to dealers that have established special arrangements with
the Distributor for Asset Builder Plans for their clients.
Reduced Sales Charges for Class A Share Purchases. You may be eligible to buy
Class A shares at reduced sales charge rates in one or more of the following
ways:
o Right of Accumulation. To qualify for the lower sales charge rates that
apply to larger purchases of Class A shares, you and your spouse can add
together Class A and Class B shares you purchase for your individual accounts,
or jointly, or for trust or custodial accounts on behalf of your children who
are minors. A fiduciary can count all shares purchased for a trust, estate or
other fiduciary account (including one or more employee benefit plans of the
same employer) that has multiple accounts.
Additionally, you can add together current purchases of Class A and Class
B shares of the Fund and other Oppenheimer funds to reduce the sales charge rate
that applies to current purchases of Class A shares. You can also include Class
A and Class B shares of Oppenheimer funds you previously purchased subject to an
initial or
34
<PAGE>
contingent deferred sales charge to reduce the sales charge rate for current
purchases of Class A shares, provided that you still hold your investment in one
of the Oppenheimer funds. The Distributor will add the value, at current
offering price, of the shares you previously purchased and currently own to the
value of current purchases to determine the sales charge rate that applies. The
Oppenheimer funds are listed in "Reduced Sales Charges" in the Statement of
Additional Information, or a list can be obtained from the Distributor. The
reduced sales charge will apply only to current purchases and must be requested
when you buy your shares.
o Letter of Intent. Under a Letter of Intent, if you purchase Class A
shares or Class A and Class B shares of the Fund and other Oppenheimer funds
during a 13-month period, you can reduce the sales charge rate that applies to
your purchases of Class A shares. The total amount of your intended purchases of
both Class A and Class B shares will determine the reduced sales charge rate for
the Class A shares purchased during that period. This can include purchases made
up to 90 days before the date of the Letter. More information is contained in
the Application and in "Reduced Sales Charges" in the Statement of Additional
Information.
o Waivers of Class A Sales Charges. The Class A sales charges are not
imposed in the circumstances described below. There is an explanation of this
policy in "Reduced Sales Charges" in the Statement of Additional Information.
Waivers of Initial and Contingent Deferred Sales Charges for Certain
Purchasers. Class A shares purchased by the following investors are not subject
to any Class A sales charges:
o the Manager or its affiliates;
o present or former officers, directors, trustees and employees (and their
"immediate families" as defined in "Reduced Sales Charges" in the Statement of
Additional Information) of the Fund, the Manager and its affiliates, and
retirement plans established by them for their employees;
o registered management investment companies, or separate accounts of
insurance companies having an agreement with the Manager or the Distributor for
that purpose;
o dealers or brokers that have a sales agreement with the Distributor, if
they purchase shares for their own accounts or for retirement plans for their
employees;
o employees and registered representatives (and their spouses)
35
<PAGE>
of dealers or brokers described above or financial institutions that have
entered into sales arrangements with such dealers or brokers (and are identified
to the Distributor) or with the Distributor; the purchaser must certify to the
Distributor at the time of purchase that the purchase is for the purchaser's own
account (or for the benefit of such employee's spouse or minor children);
o dealers, brokers, banks or registered investment advisers that have
entered into an agreement with the Distributor providing specifically for the
use of shares of the Fund in particular investment products or employee benefit
plans made available to their clients (those clients may be charged a
transaction fee by their dealer, broker or adviser for the purchase or sale of
shares of the Fund);
o (1) investment advisors and financial planners who charge an advisory,
consulting or other fee for their services and buy shares for their own accounts
or the accounts of their clients, (2) Retirement Plans and deferred compensation
plans and trusts used to fund those Plans (including, for example, plans
qualified or created under sections 401(a), 403(b) or 457 of the Internal
Revenue Code), and "rabbi trusts" that buy shares for their own accounts, in
each case if those purchases are made through a broker or agent or other
financial intermediary that has made special arrangements with the Distributor
for those purchases; and (3) clients of such investment advisors or financial
planners who buy shares for their own accounts may also purchase shares without
sales charge but only if their accounts are linked to a master account of their
investment advisor or financial planner on the books and records of the broker,
agent or financial intermediary with which the Distributor has made such special
arrangements (each of these investors may be charged a fee by the broker, agent
or financial intermediary for purchasing shares);
o directors, trustees, officers or full-time employees of OpCap Advisors
or its affiliates, their relatives or any trust, pension, profit sharing or
other benefit plan which beneficially owns shares for those persons;
o accounts for which Oppenheimer Capital is the investment adviser (the
Distributor must be advised of this arrangement) and persons who are directors
or trustees of the company or trust which is the beneficial owner of such
accounts;
o any unit investment trust that has entered into an appropriate agreement
with the Distributor;
o a TRAC-2000 401(k) plan (sponsored by the former Quest for
36
<PAGE>
Value Advisors) whose Class B or Class C shares of a Former Quest for Value Fund
were exchanged for Class A shares of that Fund due to the termination of the
Class B and Class C TRAC-2000 program on November 24, 1995; or
o qualified retirement plans that had agreed with the former Quest for
Value Advisors to purchase shares of any of the Former Quest for Value Funds at
net asset value, with such shares to be held through DCXchange, a sub-transfer
agency mutual fund clearinghouse, provided that such arrangements are
consummated and share purchases commence by December 31, 1996.
Waivers of Initial and Contingent Deferred Sales Charges in Certain
Transactions. Class A shares issued or purchased in the following transactions
are not subject to Class A sales charges:
o shares issued in plans of reorganization, such as mergers, asset
acquisitions and exchange offers, to which the Fund is a party;
o shares purchased by the reinvestment of loan repayments by a participant
in a retirement plan for which the Manager or its affiliates acts as sponsor;
o shares purchased by the reinvestment of dividends or other distributions
reinvested from the Fund or other Oppenheimer funds (other than Oppenheimer Cash
Reserves) or unit investment trusts for which reinvestment arrangements have
been made with the Distributor;
o shares purchased and paid for with the proceeds of shares redeemed in the
past 12 months from a mutual fund (other than a fund managed by the Manager or
any of its subsidiaries) on which an initial sales charge or contingent deferred
sales charge was paid (this waiver also applies to shares purchased by exchange
of shares of Oppenheimer Money Market Fund, Inc. that were purchased and paid
for in this manner); this waiver must be requested when the purchase order is
placed for your shares of the Fund, and the Distributor may require evidence of
your qualification for this waiver; or
o shares purchased with the proceeds of maturing principal of units of any
Qualified Unit Investment Liquid Trust Series.
Waivers of the Class A Contingent Deferred Sales Charge for Certain
Redemptions. The Class A contingent deferred sales charge is also waived if
shares that would otherwise be subject to the contingent deferred sales charge
are redeemed in the following cases:
37
<PAGE>
o to make Automatic Withdrawal Plan payments that are limited annually to
no more than 12% of the original account value; o involuntary redemptions of
shares by operation of law or involuntary redemptions of small accounts (see
"Shareholder Account Rules and Policies," below);
o if, at the time of purchase of shares (prior to May 1, 1997) the dealer
agreed in writing to accept the dealer's portion of the sales commission sale}
in installments of 1/18th of the commission per month (and no further commission
will be payable if the shares are redeemed within 18 months of purchase);
o if, at the time of purchase of shares (on or after May 1, 1997) the
dealer agrees in writing to accept the dealer's portion of the sales commission
in installments of 1/12th of the commission per month (and no further commission
will be payable if the shares are redeemed within 12 months of purchase);
o for distributions from TRAC-2000 401(k) plan sponsored by the
Distributor due to the termination of the TRAC-2000 program;
o for distributions from Retirement Plans, deferred
compensation plans or other employee benefit plans for any of the following
purposes: (1) following the death or disability (as defined in the Internal
Revenue Code) of the participant or beneficiary (the death or disability must
occur after the participant's account was established); (2) to return excess
contributions; (3) to return contributions made due to a mistake of fact; (4)
hardship withdrawals, as defined in the plan; (5) under a Qualified Domestic
Relations Order, as defined in the Internal Revenue Code; (6) to meet the
minimum distribution requirements of the Internal Revenue Code; {(5)}(7) to
establish "substantially equal periodic payments" as described in Section 72(t)
of the Internal Revenue Code; (8) for retirement distributions or loans to
participants or beneficiaries; (9) separation from service; (10)
participant-directed redemptions to purchase shares of a mutual fund (other than
a fund managed by the Manager or its subsidiary) offered as an investment option
in a Retirement Plan in which Oppenheimer funds are also offered as investment
options under a special arrangement with the Distributor; or (11) plan
termination or "in-service distributions", if the redemption proceeds are rolled
over directly to an OppenheimerFunds IRA.
o for distributions from Retirement Plans having 500 or
more
38
<PAGE>
eligible participants, except distributions due to termination of all of the
Oppenheimer funds as an investment option under the Plan; and
o for distributions from 401(k) plans sponsored by broker-dealers that
have entered into a special agreement with the Distributor allowing this waiver.
o Service Plan for Class A Shares. The Fund has adopted a Service Plan to
reimburse the Distributor for a portion of its costs incurred in connection with
the personal service and maintenance of shareholder accounts that hold Class A
shares. Reimbursement is made quarterly at an annual rate that may not exceed
0.25% of the average annual net assets of the Fund. The Fund's Board of Trustees
has set the maximum annual rate for assets representing shares of the Fund sold
on or after April 1, 1991 at 0.25%, and has set the maximum annual rate for
assets representing shares sold before April 1, 1991, at 0.15% (the Board has
the authority to increase that rate to no more than 0.25%). The Distributor uses
all of those fees to compensate dealers, brokers, banks and other financial
institutions quarterly for providing personal service and maintenance of
accounts of their customers that hold Class A shares and to reimburse itself (if
the Fund's Board of Trustees authorizes such reimbursements, which it has not
yet done) for its other expenditures under the Plan.
Services to be provided include, among others, answering customer
inquiries about the Fund, assisting in establishing and maintaining accounts in
the Fund, making the Fund's investment plans available and providing other
services at the request of the Fund or the Distributor. Payments are made by the
Distributor quarterly at an annual rate not to exceed 0.25% of the average
annual net assets of Class A shares held in accounts of the service providers or
their customers. The payments under the Plan increase the annual expenses of
Class A shares. For more details, please refer to "Distribution and Service
Plans" in the Statement of Additional Information.
Buying Class B Shares. Class B shares are sold at net asset value per share
without an initial sales charge. However, if Class B shares are redeemed within
6 years of their purchase, a contingent deferred sales charge will be deducted
from the redemption proceeds. That sales charge will not apply to shares
purchased by the reinvestment of dividends or capital gains distributions. The
contingent deferred sales charge will be based on the lesser of the net asset
value of the redeemed shares at the time of redemption or the original offering
price (which is the original net asset value). The contingent deferred sales
charge is not imposed on the amount of your account value represented by the
increase in net asset value over the initial purchase price. The Class B
contingent deferred sales charge is paid to the Distributor to reimburse its
expenses of
39
<PAGE>
providing distribution-related services to the Fund in connection with the sale
of Class B shares.
To determine whether the contingent deferred sales charge applies to a
redemption, the Fund redeems shares in the following order: (1) shares acquired
by reinvestment of dividends and capital gains distributions, (2) shares held
for over 6 years, and (3) shares held the longest during the 6-year period. The
contingent deferred sales charge is not imposed in the circumstances described
in "Waivers of Class B and Class C Sales Charges," below.
The amount of the contingent deferred sales charge will depend on the
number of years since you invested and the dollar amount being redeemed,
according to the following schedule:
<TABLE>
<CAPTION>
Contingent Deferred Sales Charge
Years Since Beginning of Month In on Redemptions in that Year
Which Purchase Order Was Accepted (As % of Amount Subject to Charge)
- --------------------------------- ----------------------------------
<S> <C>
0 - 1 5.0%
1 - 2 4.0%
2 - 3 3.0%
3 - 4 3.0%
4 - 5 2.0%
5 - 6 1.0%
6 and following None
</TABLE>
In the table, a "year" is a 12-month period. All purchases are considered to
have been made on the first regular business day of the month in which the
purchase was made.
o Automatic Conversion of Class B Shares. 72 months after you purchase
Class B shares, those shares will automatically convert to Class A shares. This
conversion feature relieves Class B shareholders at that time of the asset-based
sales charge that applies to Class B shares under the Class B Distribution and
Service Plan, described below. The conversion is based on the relative net asset
value of the two classes, and no sales load or other charge is imposed. When
Class B shares convert, any other Class B shares that were acquired by the
reinvestment of dividends and distributions on the converted shares will also
convert to Class A shares. The conversion feature is subject to the continued
availability of a tax ruling described in "Alternative Sales Arrangements Class
A, Class B and Class C Shares" in the Statement of Additional Information.
o Distribution and Service Plan for Class B Shares. The Fund has adopted a
Distribution and Service Plan for Class B shares to compensate the Distributor
for distributing Class B shares and
40
<PAGE>
servicing accounts. This Plan is described below under "Distribution and Service
Plans for Class B and Class C Shares".
o Waivers of Class B Sales Charges. The Class B contingent deferred sales
charge will not apply to shares purchased in certain types of transactions, nor
will it apply to shares redeemed in certain circumstances, as described below
under "Waivers of Class B and Class C Sales Charges."
Buying Class C Shares. Class C shares are sold at net asset value per share
without an initial sales charge. However, if Class C shares are redeemed within
12 months of their purchase, a contingent deferred sales charge of 1.0% will be
deducted from the redemption proceeds. That sales charge will not apply to
shares purchased by the reinvestment of dividends or capital gains
distributions. The contingent deferred sales charge will be based on the lesser
of the net asset value of the redeemed shares at the time of redemption or the
offering price (which is the original net asset value). The contingent deferred
sales charge is not imposed on the amount of your account value represented by
the increase in net asset value over the initial purchase price. The Class C
contingent deferred sales charge is paid to compensate the Distributor for its
expenses of providing distribution-related services to the Fund in connection
with the sale of Class C shares.
To determine whether the contingent deferred sales charge applies to a
redemption, the Fund redeems shares in the following order: (1) shares acquired
by reinvestment of dividends and capital gains distributions, (2) shares held
for over 12 months, and (3) shares held the longest during the 12-month period.
o Distribution and Service Plans for Class B and Class C Shares. The Fund
has adopted Distribution and Service Plans for Class B and Class C shares to
compensate the Distributor for its services and costs in distributing Class B
and Class C shares and servicing accounts. Under the Plans, the Fund pays the
Distributor an annual "asset-based sales charge" of 0.75% per year on Class B
shares that are outstanding for 6 years or less and on Class C shares. The
Distributor also receives a service fee of 0.25% per year under each plan.
Under each Plan, both fees are computed on the average of the net asset
value of shares in the respective class, determined as of the close of each
regular business day during the period. The asset-based sales charge and service
fees increase Class B and Class C expenses by up to 1.00% of the net assets per
year of the respective class.
The Distributor uses the service fees to compensate dealers
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for providing personal services for accounts that hold Class B or Class C
shares. Those services are similar to those provided under the Class A Service
Plan, described above. The Distributor pays the 0.25% service fees to dealers in
advance for the first year after Class B or Class C shares have been sold by the
dealer. After the shares have been held for a year, the Distributor pays the
service fees to dealers on a quarterly basis.
The asset-based sales charge allows investors to buy Class B or Class C
shares without a front-end sales charge while allowing the Distributor to
compensate dealers that sell those shares. The Fund pays the asset-based sales
charges to the Distributor for its services rendered in distributing Class B and
Class C shares. Those payments are at a fixed rate that is not related to the
Distributor's expenses. The services rendered by the Distributor include paying
and financing the payment of sales commissions, service fees and other costs of
distributing and selling Class B and Class C shares.
The Distributor currently pays sales commissions of 3.75% of the purchase
price of Class B shares to dealers from its own resources at the time of sale.
Including the advance of the service fee, the total amount paid by the
Distributor to the dealer at the time of sale of Class B shares is therefore
4.00% of the purchase price. The Distributor retains the Class B asset-based
sales charge. The Distributor currently pays sales commissions of 0.75% of the
purchase price of Class C shares to dealers from its own resources at the time
of sale. Including the advance of the service fee, the total amount paid by the
Distributor to the dealer at the time of sale of Class C shares is therefore
1.00% of the purchase price. The Distributor plans to pay the asset-based sales
charge as an ongoing commission to the dealer on Class C shares that have been
outstanding for a year or more. If a dealer has a special agreement with the
Distributor, the Distributor may pay the Class B and Class C service fees and
the asset-based sales charges to the dealer quarterly in lieu of paying the
sales commission and service fee advance at the time of purchase.
The Distributor's actual expenses in selling Class B and Class C shares
may be more than the payments it receives from contingent deferred sales charges
collected on redeemed shares and from the Fund under the Distribution and
Service Plans for Class B and Class C shares. If either Plan is terminated by
the Fund, the Board of Trustees may allow the Fund to continue payments of the
asset-based sales charge to the Distributor for distributing shares before the
Plan was terminated. At June 30, 1997, the end of the Class B Plan year, the
Distributor had incurred unreimbursed expenses in connection with sales of Class
B shares of $339,068 (equal to 3.89% of the Fund's net assets represented by
Class B shares on that
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date). At June 30, 1997, the end of the Class C Plan year, the Distributor had
incurred unreimbursed expenses in connection with sales of Class C shares of
$64,753 (equal to 1.65% of the Fund's net assets represented by Class C shares
on that date).
o Waivers of Class B and Class C Sales Charges. The Class B and Class C
contingent deferred sales charges will not be applied to shares purchased in
certain types of transactions nor will it apply to Class B or Class C shares
redeemed in certain circumstances as described below. The reasons for this
policy are in "Reduced Sales Charges" in the Statement of Additional
Information.
Waivers for Redemptions of Shares in Certain Cases. The Class B and Class
C contingent deferred sales charges will be waived for redemptions of shares in
the following cases if the Transfer Agent is notified that these conditions
apply to the redemption:
o distributions to participants or beneficiaries from Retirement Plans, if
the distributions are made (a) under an Automatic Withdrawal Plan after the
participant reaches age 59-1/2, as long as the payments are no more than 10% of
the account value annually (measured from the date the Transfer Agent receives
the request), or (b) following the death or disability (as defined in the
Internal Revenue Code) of the participant or beneficiary (the death or
disability must have occurred after the account was established);
o redemptions from accounts other than Retirement Plans following the death
or disability of the last surviving shareholder, including a trustee of a
"grantor" trust or revocable living trust for which the trustee is also the sole
beneficiary(the death or disability must have occurred after the account was
established and for disability you must provide evidence of a determination of
disability by the Social Security Administration);
o returns of excess contributions to Retirement Plans;
o distributions from retirement plans to make "substantially equal periodic
payments" as permitted in Section 72(t) of the Internal Revenue Code that do not
exceed 10% of the account value annually, measured from the date the Transfer
Agent receives the request;
o shares redeemed involuntarily, as described in "Shareholder Account Rules
and Policies," below; or
o distributions from OppenheimerFunds prototype 401(k) plans and from
certain Massachusetts Mutual Life Insurance Company
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prototype 401(k) plans (1) for hardship withdrawals; (2) under a Qualified
Domestic Relations Order, as defined in the Internal Revenue Code; (3) to meet
minimum distribution requirements as defined in the Internal Revenue Code; (4)
to make "substantially equal periodic payments" as described in Section 72(t) of
the Internal Revenue Code; (5) for separation from service; or (6) for loans to
participants or beneficiaries.
o distributions from 401(k) plans sponsored by broker-dealers that have
entered into a special agreement with the Distributor allowing this waiver.
Waivers for Shares Sold or Issued in Certain Transactions. The contingent
deferred sales charge is also waived on Class B and Class C shares sold or
issued in the following cases:
o shares sold to the Manager or its affiliates;
o shares sold to registered management investment companies or separate
accounts of insurance companies having an agreement with the Manager or the
Distributor for that purpose; or
o shares issued in plans of reorganization to which the Fund is a party.
Special Investor Services
AccountLink. OppenheimerFunds AccountLink links your Fund account to your
account at your bank or other financial institution to enable you to send money
electronically between those accounts to perform a number of types of account
transactions. These include purchases of shares by telephone (either through a
service representative or by PhoneLink, described below), automatic investments
under Asset Builder Plans, and sending dividends and distributions or Automatic
Withdrawal Plan payments directly to your bank account. Please call the Transfer
Agent for more information.
AccountLink privileges should be requested on your dealer's settlement
instructions if you buy your shares through your dealer. After your account is
established, you can request AccountLink privileges by sending
signature-guaranteed instructions to the Transfer Agent. AccountLink privileges
will apply to each shareholder listed in the registration on your account as
well as to your dealer representative of record unless and until the Transfer
Agent receives written instructions terminating or changing those privileges.
After you establish AccountLink for your account, any change of bank account
information must be made by signature- guaranteed instructions to the Transfer
Agent signed by all
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shareholders who own the account.
o Using AccountLink to Buy Shares. Purchases may be made by telephone only
after your account has been established. To purchase shares in amounts up to
$250,000 through a telephone representative, call the Distributor at
1-800-852-8457. The purchase payment will be debited from your bank account.
o PhoneLink. PhoneLink is the OppenheimerFunds automated telephone system
that enables shareholders to perform a number of account transactions
automatically using a touch-tone phone. PhoneLink may be used on
already-established Fund accounts after you obtain a Personal Identification
Number (PIN), by calling the special PhoneLink number: 1-800-533-3310.
o Purchasing Shares. You may purchase shares in amounts up to $100,000 by
phone, by calling 1-800-533-3310. You must have established AccountLink
privileges to link your bank account with the Fund, to pay for these purchases.
o Exchanging Shares. With the OppenheimerFunds Exchange Privilege,
described below, you can exchange shares automatically by phone from your Fund
account to another Oppenheimer funds account you have already established by
calling the special PhoneLink number. Please refer to "How to Exchange Shares,"
below, for details.
o Selling Shares. You can redeem shares by telephone automatically by
calling the PhoneLink number and the Fund will send the proceeds directly to
your AccountLink bank account. Please refer to "How to Sell Shares," below, for
details.
Shareholder Transactions by Fax. Beginning May 30, 1997, requests for certain
account transactions may be sent to the Transfer Agent by fax (telecopier).
Please call 1-800-525-7048 for information about which transactions are
included. Transaction requests submitted by fax are subject to the same rules
and restrictions as written and telephone requests described in this
Prospectus.
Automatic Withdrawal and Exchange Plans. The Fund has several plans that enable
you to sell shares automatically or exchange them to another Oppenheimer funds
account on a regular basis:
o Automatic Withdrawal Plans. If your Fund account is worth $5,000 or
more, you can establish an Automatic Withdrawal Plan to receive payments of at
least $50 on a monthly, quarterly, semi-annual or annual basis. The checks may
be sent to you or sent automatically to your bank account on AccountLink. You
may even set up certain types of withdrawals of up to $1,500 per month by
telephone. You should consult the Statement of
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Additional Information for more details.
o Automatic Exchange Plans. You can authorize the Transfer Agent to
exchange an amount you establish in advance automatically for shares of up to
five other Oppenheimer funds on a monthly, quarterly, semi-annual or annual
basis under an Automatic Exchange Plan. The minimum purchase for each
Oppenheimer funds account is $25. These exchanges are subject to the terms of
the Exchange Privilege, described below.
Reinvestment Privilege. If you redeem some or all of your Class A or Class B
shares of the Fund, you have up to 6 months to reinvest all or part of the
redemption proceeds in Class A shares of the Fund or Class A shares of other
Oppenheimer funds without paying a sales charge. This privilege applies to Class
A shares that you purchased subject to an initial sales charge and to Class A or
Class B shares on which you paid a contingent deferred sales charge when you
redeemed them. This privilege does not apply to Class C shares. You must be sure
to ask the Distributor for this privilege when you send your payment. Please
consult the Statement of Additional Information for more details.
Retirement Plans. Fund shares are available as an investment for your retirement
plans. If you participate in a plan sponsored by your employer, the plan trustee
or administrator must make the purchase of shares for your retirement plan
account. The Distributor offers a number of different retirement plans that can
be used by individuals and employers:
o Individual Retirement Accounts including rollover IRAs, for individuals
and their spouses
o 403(b)(7) Custodial Plans for employees of eligible tax-exempt
organizations, such as schools, hospitals and charitable organizations
o SEP-IRAs (Simplified Employee Pension Plans) for small business owners
or people with income from self-employment, including SAR/SEP-IRAs
o Pension and Profit-Sharing Plans for self-employed persons and other
employers
o 401(k) Prototype Retirement Plans for businesses
Please call the Distributor for the OppenheimerFunds plan documents, which
contain important information and applications.
How to Sell Shares
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You can arrange to take money out of your account by selling (redeeming)
some or all of your shares on any regular business day. Your shares will be sold
at the next net asset value calculated after your order is received and accepted
by the Transfer Agent. The Fund offers you a number of ways to sell your shares:
in writing or by telephone. You can also set up Automatic Withdrawal Plans to
redeem shares on a regular basis, as described above. If you have questions
about any of these procedures, and especially if you are redeeming shares in a
special situation, such as due to the death of the owner, or from a retirement
plan, please call the Transfer Agent first, at 1-800-525-7048, for assistance.
o Retirement Accounts. To sell shares in an OppenheimerFunds retirement
account in your name, call the Transfer Agent for a distribution request form.
There are special income tax withholding requirements for distributions from
retirement plans and you must submit a withholding form with your request to
avoid delay. If your retirement plan account is held for you by your employer,
you must arrange for the distribution request to be sent by the plan
administrator or trustee. There are additional details in the Statement of
Additional Information.
o Certain Requests Require a Signature Guarantee. To protect you and the
Fund from fraud, certain redemption requests must be in writing and must include
a signature guarantee in the following situations (there may be other situations
also requiring a signature guarantee):
o You wish to redeem more than $50,000 worth of shares and receive a check
o The redemption check is not payable to all shareholders listed on the
account statement
o The redemption check is not sent to the address of record on your
account statement
o Shares are being transferred to a Fund account with a different owner or
name
o Shares are redeemed by someone other than the owners (such as an
Executor)
o Where Can I Have My Signature Guaranteed? The Transfer Agent will accept
a guarantee of your signature by a number of financial institutions, including:
a U.S. bank, trust company, credit union or savings association, or by a foreign
bank that has a U.S. correspondent bank, or by a U.S. registered dealer or
broker in securities, municipal securities or government securities, or by a
U.S. national securities exchange, a registered securities association or a
clearing agency. If you are signing as a fiduciary or on behalf of a
corporation, partnership or other business, you must also include your title in
the signature.
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Selling Shares by Mail. Write a "letter of instructions" that includes:
o Your name
o The Fund's name
o Your Fund account number (from your account statement) o The dollar
amount or number of shares to be redeemed o Any special payment
instructions o Any share certificates for the shares you are selling o The
signatures of all registered owners exactly as the account is registered,
and
o Any special requirements or documents requested by the Transfer Agent to
assure proper authorization of the person asking to sell shares.
Use the following address for requests by mail:
OppenheimerFunds Services
P.O. Box 5270
Denver, Colorado 80217
Send courier or Express Mail requests to:
OppenheimerFunds Services
10200 E. Girard Avenue, Building D
Denver, Colorado 80231
Selling Shares by Telephone. You and your dealer representative of record may
also sell your shares by telephone. To receive the redemption price on a regular
business day, your call must be received by the Transfer Agent by the close of
The New York Stock Exchange that day, which is normally 4:00 P.M., but may be
earlier on some days. You may not redeem shares held in an OppenheimerFunds
retirement plan or under a share certificate by telephone.
o To redeem shares through a service representative, call 1- 800-852-8457
o To redeem shares automatically on PhoneLink, call 1-800-533- 3310
Whichever method you use, you may have a check sent to the address on the
account statement, or, if you have linked your Fund account to your bank account
on AccountLink, you may have the proceeds wired to that bank account.
o Telephone Redemptions Paid by Check. Up to $50,000 may be redeemed by
telephone, once in any 7-day period. The check must be payable to all owners of
record of the shares and must be sent to the address on the account statement.
This service is not available within 30 days of changing the address on an
account.
o Telephone Redemptions Through AccountLink or by Wire.
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There are no dollar limits on telephone redemption proceeds sent to a bank
account designated when you establish AccountLink. Normally the ACH transfer to
your bank is initiated on the business day after the redemption. You do not
receive dividends on the proceeds of the shares you redeemed while they are
waiting to be transferred.
Shareholders may also have the Transfer Agent send redemption proceeds of
$2,500 or more by Federal Funds wire to a designated commercial bank account if
the bank is a member of the Federal Reserve wire system. There is a $10 fee for
each Federal Funds wire. To place a wire redemption request, call the Transfer
Agent at 1-800-852-8457. The wire will normally be transmitted on the next bank
business day after the shares are redeemed. There is a possibility that the wire
may be delayed up to seven days to enable the Fund to sell securities to pay the
redemption proceeds. No dividends are accrued or paid on the proceeds of shares
that have been redeemed and are awaiting transmittal by wire. To establish wire
redemption privileges on an account that is already established, please contact
the Transfer Agent for instructions.
Selling Shares Through Your Dealer. The Distributor has made arrangements to
repurchase Fund shares from dealers and brokers on behalf of their customers.
Brokers or dealers may charge for that service. Please call your dealer for more
information about this procedure. Please refer to "Special Arrangements For
Repurchase of Shares From Dealers and Brokers" in the Statement of Additional
Information for more details.
How to Exchange Shares
Shares of the Fund may be exchanged for shares of certain Oppenheimer
funds at net asset value per share at the time of exchange, without sales
charge. To exchange shares, you must meet several conditions:
o Shares of the fund selected for exchange must be available for sale in
your state of residence
o The prospectuses of this Fund and the fund whose shares you want to buy
must offer the exchange privilege
o You must hold the shares you buy when you establish your account for at
least 7 days before you can exchange them; after the account is open 7 days, you
can exchange shares every regular business day
o You must meet the minimum purchase requirements for the fund you purchase
by exchange
o Before exchanging into a fund, you should obtain and read its prospectus
Shares of a particular class of the Fund may be exchanged only
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for shares of the same class in the other Oppenheimer funds. For example, you
can exchange Class A shares of this Fund only for Class A shares of another
fund. At present, Oppenheimer Money Market Fund, Inc., offers only one class of
shares, which are considered to be Class A shares for this purpose. In some
cases, sales charges may be imposed on exchange transactions. Please refer to
"How to Exchange Shares" in the Statement of Additional Information for more
details.
Exchanges may be requested in writing or by telephone:
o Written Exchange Requests. Submit an OppenheimerFunds Exchange Request
form, signed by all owners of the account. Send it to the Transfer Agent at the
addresses listed in "How to Sell Shares."
o Telephone Exchange Requests. Telephone exchange requests may be made
either by calling a service representative at 1-800-852-8457 or by using
PhoneLink for automated exchanges, by calling 1-800-533-3310. Telephone
exchanges may be made only between accounts that are registered with the same
name(s) and address. Shares held under certificates may not be exchanged by
telephone.
You can find a list of Oppenheimer funds currently available for exchanges
in the Statement of Additional Information or obtain one by calling a service
representative at 1-800-525-7048. That list can change from time to time.
There are certain exchange policies you should be aware of:
o Shares are normally redeemed from one fund and purchased from the other
fund in the exchange transaction on the same regular business day on which the
Transfer Agent receives an exchange request that is in proper form by the close
of The New York Stock Exchange that day, which is normally 4:00 P.M., but may be
earlier on some days. However, either fund may delay the purchase of shares of
the fund you are exchanging into up to seven days if it determines it would be
disadvantaged by a same-day transfer of the proceeds to buy shares. For example,
the receipt of multiple exchange requests from a dealer in a "market-timing"
strategy might require the sale of portfolio securities at a time or price
disadvantageous to the Fund.
o Because excessive trading can hurt fund performance and harm
shareholders, the Fund reserves the right to refuse any exchange request that
will disadvantage it, or to refuse multiple exchange requests submitted by a
shareholder or dealer.
o The Fund may amend, suspend or terminate the exchange privilege at any
time. Although the Fund will attempt to provide
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you notice whenever it is reasonably able to do so, it may impose these changes
at any time.
o For tax purposes, exchanges of shares involve a redemption of the shares
of the Fund you own and a purchase of the shares of the other fund, which may
result in a capital gain or loss. For more information about taxes affecting
exchanges, please refer to "How to Exchange Shares" in the Statement of
Additional Information.
o If the Transfer Agent cannot exchange all the shares you request because
of a restriction cited above, only the shares eligible for exchange will be
exchanged.
Shareholder Account Rules and Policies
o Net Asset Value Per Share is determined for each class of shares as of
the close of The New York Stock Exchange that day, which is normally 4:00 P.M.
but may be earlier on some days, on each day the Exchange is open by dividing
the value of the Fund's net assets attributable to a class by the number of
shares of that class that are outstanding. The Fund's Board of Trustees has
established procedures to value the Fund's securities to determine net asset
value. In general, securities values are based on market value. There are
special procedures for valuing illiquid and restricted securities and
obligations for which market values cannot be readily obtained. These procedures
are described more completely in the Statement of Additional Information.
o The offering of shares may be suspended during any period in which the
determination of net asset value is suspended, and the offering may be suspended
by the Board of Trustees at any time the Board believes it is in the Fund's best
interest to do so.
o Telephone Transaction Privileges for purchases, redemptions or exchanges
may be modified, suspended or terminated by the Fund at any time. If an account
has more than one owner, the Fund and the Transfer Agent may rely on the
instructions of any one owner. Telephone privileges apply to each owner of the
account and the dealer representative of record for the account unless and until
the Transfer Agent receives cancellation instructions from an owner of the
account.
o The Transfer Agent will record any telephone calls to verify data
concerning transactions and has adopted other procedures to confirm that
telephone instructions are genuine, by requiring callers to provide tax
identification numbers and other account data or by using PINs, and by
confirming such transactions in writing. If the Transfer Agent does not use
reasonable procedures it may be liable for losses due to unauthorized
transactions, but
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otherwise neither the Transfer Agent nor the Fund will be liable for losses or
expenses arising out of telephone instructions reasonably believed to be
genuine. If you are unable to reach the Transfer Agent during periods of unusual
market activity, you may not be able to complete a telephone transaction and
should consider placing your order by mail.
o Redemption or transfer requests will not be honored until the Transfer
Agent receives all required documents in proper form. From time to time, the
Transfer Agent in its discretion may waive certain of the requirements for
redemptions stated in this Prospectus.
o Dealers that can perform account transactions for their clients by
participating in NETWORKING through the National Securities Clearing Corporation
are responsible for obtaining their clients' permission to perform those
transactions and are responsible to their clients who are shareholders of the
Fund if the dealer performs any transaction erroneously or improperly.
o The redemption price for shares will vary from day to day because the
values of the securities in the Fund's portfolio fluctuate, and the redemption
price, which is the net asset value per share, will normally be different for
Class A, Class B and Class C shares. Therefore, the redemption value of your
shares may be more or less than their original cost.
o Payment for redeemed shares is made ordinarily in cash and forwarded by
check or through AccountLink (as elected by the shareholder under the redemption
procedures described above) within 7 days after the Transfer Agent receives
redemption instructions in proper form, except under unusual circumstances
determined by the Securities and Exchange Commission delaying or suspending such
payments. For accounts registered in the name of a broker/dealer, payment will
be forwarded within 3 business days. The Transfer Agent may delay forwarding a
check or processing a payment via AccountLink for recently purchased shares, but
only until the purchase payment has cleared. That delay may be as much as 10
days from the date the shares were purchased. That delay may be avoided if you
purchase shares by certified check or arrange with your bank to provide
telephone or written assurance to the Transfer Agent that your purchase payment
has cleared.
o Involuntary redemptions of small accounts may be made by the Fund if the
account value has fallen below $500 for reasons other than the fact that the
market value of shares has dropped, and in some cases involuntary redemptions
may be made to repay the Distributor for losses from the cancellation of share
purchase orders.
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o Under unusual circumstances, shares of the Fund may be redeemed "in
kind," which means that the redemption proceeds will be paid with securities
from the Fund's portfolio. Please refer to "How to Sell Shares" in the Statement
of Additional Information for more details.
o "Backup Withholding" of Federal income tax may be applied at the rate of
31% from taxable dividends, distributions and redemption proceeds (including
exchanges) if you fail to furnish the Fund a certified Social Security or
Employer Identification Number when you sign your application, or if you violate
Internal Revenue Service regulations on tax reporting of income.
o The Fund does not charge a redemption fee, but if your dealer or broker
handles your redemption, they may charge a fee. That fee can be avoided by
redeeming your Fund shares directly through the Transfer Agent. Under the
circumstances described in "How to Buy Shares," you may be subject to a
contingent deferred sales charges when redeeming certain Class A, Class B and
Class C shares.
o To avoid sending duplicate copies of materials to households, the Fund
will mail only one copy of each annual and semi-annual report to shareholders
having the same last name and address on the Fund's records. However, each
shareholder may call the Transfer Agent at 1-800-525-7048 to ask that copies of
those materials be sent personally to that shareholder.
Dividends, Capital Gains and Taxes
Dividends. The Fund declares dividends separately for Class A, Class B and Class
C shares from net investment income, if any, on an annual basis and normally
pays those dividends to shareholders in December, but the Board of Trustees can
change that date. The Board may also cause the Fund to declare dividends after
the close of the Fund's fiscal year (which ends June 30th). Because the Fund
does not have an objective of seeking current income, the amounts of dividends
it pays, if any, will likely be small. Also dividends paid on Class A shares
will generally be higher than for Class B or Class C shares because expenses
allocable to Class B or Class C shares are expected to be higher. There is no
fixed dividend rate and there can be no assurance that the Fund will pay any
dividends.
Capital Gains. The Fund may make distributions annually in December out of any
net short-term or long-term capital gains, and the Fund may make supplemental
distributions of capital gains following the end of its fiscal year. Long-term
capital gains will be separately identified in the tax information the Fund
sends you after the end of the year. Short-term capital gains are treated as
dividends for
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tax purposes. There can be no assurance that the Fund will pay any capital gains
distributions in a particular year.
Distribution Options. When you open your account, specify on your application
how you want to receive your distributions. For OppenheimerFunds retirement
accounts, all distributions are reinvested. For other accounts, you have four
options:
o Reinvest All Distributions in the Fund. You can elect to reinvest all
dividends and long-term capital gains distributions in additional shares of the
Fund.
o Reinvest Long-Term Capital Gains Only. You can elect to reinvest
long-term capital gains in the Fund while receiving dividends by check or sent
to your bank account on AccountLink.
o Receive All Distributions in Cash. You can elect to receive a check for
all dividends and long-term capital gains distributions or have them sent to
your bank on AccountLink.
o Reinvest Your Distributions in Another Oppenheimer Fund Account. You can
reinvest all distributions in another Oppenheimer fund account you have
established.
Taxes. If your account is not a tax-deferred retirement account, you should be
aware of the following tax implications of investing in the Fund. The Fund's
distributions from long-term capital gains are taxable to shareholders as
long-term capital gains, no matter how long you held your shares. Dividends paid
by the Fund from short-term capital gains and net investment income, including
certain net realized foreign exchange gains, are taxable as ordinary income.
These dividends and distributions are subject to Federal income tax and may be
subject to state or local taxes. Your distributions are taxable as described
above, whether you reinvest them in additional shares or take them in cash.
Corporate shareholders may be entitled to the corporate dividends-received
deduction for some portion of the Fund's distributions treated as ordinary
income, subject to applicable limitations under the Internal Revenue Code. Every
year the Fund will send you and the IRS a statement showing the aggregate amount
and character of the dividends and other distributions you received for the
previous year.
When more than 50% of its assets are invested in foreign securities at the
end of any fiscal year, the Fund may elect that Section 853 of the Internal
Revenue Code will apply to it to permit shareholders to take a credit (or a
deduction) on their own federal income tax returns for foreign taxes paid by the
Fund. "Dividends, Capital Gains and Taxes" in the Statement of Additional
Information contains further information about this tax provision.
o "Buying a Dividend": When a fund goes ex-dividend, its share price is
reduced by the amount of the distribution. If you
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buy shares on or just before the ex-dividend date, or just before the Fund
declares a capital gains distribution, you will pay the full price for the
shares and then receive a portion of the price back as a taxable dividend or
capital gain.
o Taxes on Transactions: Share redemptions, including redemptions for
exchanges, are subject to capital gains tax. Generally speaking, a capital gain
or loss is the difference between the price you paid for the shares and the
price you received when you sold them.
o Returns of Capital: In certain cases distributions made by the Fund may
be considered a non-taxable return of capital to shareholders. If that occurs,
it will be identified in notices to shareholders. A non-taxable return of
capital may reduce your tax basis in your Fund shares.
This information is only a summary of certain federal tax information
about your investment. More information is contained in the Statement of
Additional Information, and in addition you should consult with your tax adviser
about the effect of an investment in the Fund on your particular tax situation.
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APPENDIX A
Special Sales Charge Arrangements for Shareholders of the Fund
Who Were Shareholders of the Former Quest for Value Funds
The initial and contingent sales charge rates and waivers for Class A, Class B
and Class C shares of the Fund described elsewhere in this Prospectus are
modified as described below for those shareholders of (i) Quest for Value Fund,
Inc., Quest for Value Growth and Income Fund, Quest for Value Opportunity Fund,
Quest for Value Small Capitalization Fund and Quest for Value Global Equity
Fund, Inc. on November 24, 1995, when OppenheimerFunds, Inc. became the
investment adviser to those funds, and (ii) Quest for Value U.S. Government
Income Fund, Quest for Value Investment Quality Income Fund, Quest for Global
Income Fund, Quest for Value New York Tax-Exempt Fund, Quest for Value National
Tax-Exempt Fund and Quest for Value California Tax-Exempt Fund when those funds
merged into various Oppenheimer funds on November 24, 1995. The funds listed
above are referred to in this Prospectus as the "Former Quest for Value Funds."
The waivers of initial and contingent deferred sales charges described in this
Appendix apply to shares of the Fund (i) acquired by such shareholder pursuant
to an exchange of shares of one of the Oppenheimer funds that was one of the
Former Quest for Value Funds or (ii) received by such shareholder pursuant to
the merger of any of the Former Quest for Value Funds into an Oppenheimer fund
on November 24, 1995.
Class A Sales Charges
o Reduced Class A Initial Sales Charge Rates for Certain
Former Quest Shareholders
o Purchases by Groups, Associations and Certain Qualified Retirement
Plans. The following table sets forth the initial sales charge rates for Class A
shares purchased by a "Qualified Retirement Plan" through a single broker,
dealer or financial institution, or by members of "Associations" formed for any
purpose other than the purchase of securities if that Qualified Retirement Plan
or that Association purchased shares of any of the Former Quest for Value Funds
or received a proposal to purchase such shares from OCC Distributors prior to
November 24, 1995. For this purpose only, a "Qualified Retirement Plan" includes
any 401(k) plan, 403(b) plan, and SEP/IRA or IRA plan for employees of a single
employer.
A-1
<PAGE>
<TABLE>
<CAPTION>
Front-End Front-End
Sales Sales Commission
Charge Charge as
Number of as a as a Percentage
Eligible Percentage Percentage of
Employees of Offering of Amount Offering
or Members Price Invested Price
- -------------------------------------------------------------
<S> <C> <C> <C>
9 or fewer 2.50% 2.56% 2.00%
- -------------------------------------------------------------
At least 10 but
not more than 49 2.00% 2.04% 1.60%
</TABLE>
For purchases by Qualified Retirement Plans and Associations having 50 or
more eligible employees or members, there is no initial sales charge on
purchases of Class A shares, but those shares are subject to the Class A
contingent deferred sales charge described on pages 29 and 30 of this
Prospectus.
Purchases made under this arrangement qualify for the lower of the sales
charge rate in the table based on the number of eligible employees in a
Qualified Retirement Plan or members of an Association or the sales charge rate
that applies under the Rights of Accumulation described above in the Prospectus.
In addition, purchases by 401(k) plans that are Qualified Retirement Plans
qualify for the waiver of the Class A initial sales charge if they qualified to
purchase shares of any of the Former Quest For Value Funds by virtue of
projected contributions or investments of $1 million or more each year.
Individuals who qualify under this arrangement for reduced sales charge rates as
members of Associations, or as eligible employees in Qualified Retirement Plans
also may purchase shares for their individual or custodial accounts at these
reduced sales charge rates, upon request to the Fund's Distributor.
o Special Class A Contingent Deferred Sales Charge Rates Class A shares of
the Fund purchased by exchange of shares of other Oppenheimer funds that were
acquired as a result of the merger of Former Quest for Value Funds into those
Oppenheimer funds, and which shares were subject to a Class A contingent
deferred sales charge prior to November 24, 1995 will be subject to a contingent
deferred sales charge at the following rates: if they are redeemed within 18
months of the end of the calendar month in which they were purchased, at a rate
equal to 1.0% if the redemption occurs within 12 months of their initial
purchase and at a rate of 0.50 of 1.0% if the redemption occurs in the
subsequent six months. Class A shares of any of the Former Quest for Value
A-2
<PAGE>
Funds purchased without an initial sales charge on or before November 22, 1995
will continue to be subject to the applicable contingent deferred sales charge
in effect as of that date as set forth in the then-current prospectus for such
fund.
o Waiver of Class A Sales Charges for Certain Shareholders
Class A shares of the Fund purchased by the following investors are not
subject to any Class A initial or contingent deferred sales charges:
o Shareholders of the Fund who were shareholders of the AMA Family of
Funds on February 28, 1991 and who acquired shares of any of the Former Quest
for Value Funds by merger of a portfolio of the AMA Family of Funds.
o Shareholders of the Fund who acquired shares of any Former Quest for
Value Fund by merger of any of the portfolios of the Unified Funds.
o Waiver of Class A Contingent Deferred Sales Charge in
Certain Transactions
The Class A contingent deferred sales charge will not apply to redemptions
of Class A shares of the Fund purchased by the following investors who were
shareholders of any Former Quest for Value Fund:
o Investors who purchased Class A shares from a dealer that is not or was
not permitted to receive a sales load or redemption fee imposed on a shareholder
with whom that dealer has a fiduciary relationship under the Employee Retirement
Income Security Act of 1974 and regulations adopted under that law.
o Participants in Qualified Retirement Plans that purchased shares of any
of the Former Quest For Value Funds pursuant to a special "strategic alliance"
with the distributor of those funds. The Fund's Distributor will pay a
commission to the dealer for purchases of Fund shares as described above in
"Class A Contingent Deferred Sales Charge."
Class A, Class B and Class C Contingent Deferred Sales Charge Waivers
o Waivers for Redemptions of Shares Purchased Prior to March 6, 1995.
In the following cases, the contingent deferred sales charge will be waived
for redemptions of Class A, B or C shares of the Fund acquired by merger of a
Former Quest for Value Fund into the Fund or by exchange from an Oppenheimer
fund that was a Former Quest for Value Fund or into which such fund merged, if
those shares were purchased prior to March 6, 1995: in connection with (i)
distributions to participants or beneficiaries of plans
A-3
<PAGE>
qualified under Section 401(a) of the Internal Revenue Code or from custodial
accounts under Section 403(b)(7) of the Code, Individual Retirement Accounts,
deferred compensation plans under Section 457 of the Code, and other employee
benefit plans, and returns of excess contributions made to each type of plan,
(ii) withdrawals under an automatic withdrawal plan holding only either Class B
or C shares if the annual withdrawal does not exceed 10% of the initial value of
the account, and (iii) liquidation of a shareholder's account if the aggregate
net asset value of shares held in the account is less than the required minimum
value of such accounts.
o Waivers for Redemptions of Shares Purchased on or After March 6, 1995 but
Prior to November 24, 1995.
In the following cases, the contingent deferred sales charge will be waived
for redemptions of Class A, B or C shares of the Fund acquired by merger of a
Former Quest for Value Fund into the Fund or by exchange from an Oppenheimer
fund that was a Former Quest For Value Fund or into which such fund merged, if
those shares were purchased on or after March 6, 1995, but prior to November 24,
1995: (1) distributions to participants or beneficiaries from Individual
Retirement Accounts under Section 408(a) of the Internal Revenue Code or
retirement plans under Section 401(a), 401(k), 403(b) and 457 of the Code, if
those distributions are made either (a) to an individual participant as a result
of separation from service or (b) following the death or disability (as defined
in the Code) of the participant or beneficiary; (2) returns of excess
contributions to such retirement plans; (3) redemptions other than from
retirement plans following the death or disability of the shareholder(s) (as
evidenced by a determination of total disability by the U.S. Social Security
Administration); (4) withdrawals under an automatic withdrawal plan (but only
for Class B or C shares) where the annual withdrawals do not exceed 10% of the
initial value of the account; and (5) liquidation of a shareholder's account if
the aggregate net asset value of shares held in the account is less than the
required minimum account value. A shareholder's account will be credited with
the amount of any contingent deferred sales charge paid on the redemption of any
Class A, B or C shares of the Fund described in this section if within 90 days
after that redemption, the proceeds are invested in the same Class of shares in
this Fund or another Oppenheimer fund.
Special Dealer Arrangements
Dealers who sold Class B shares of a Former Quest for Value Fund to Quest for
Value prototype 401(k) plans that were maintained on the TRAC-2000 recordkeeping
system and that were transferred to an OppenheimerFunds prototype 401(k) plan
shall be eligible for an additional one-time payment by the Distributor of 1% of
the value of the plan assets transferred, but that payment may not exceed
A-4
<PAGE>
$5,000 as to any one plan. Dealers who sold Class C shares of a Former Quest for
Value Fund to Quest for Value prototype 401(k) plans that were maintained on the
TRAC-2000 recordkeeping system and (i) the shares held by those plans were
exchanged for Class A shares, or (ii) the plan assets were transferred to an
OppenheimerFunds prototype 401(k) plan, shall be eligible for an additional
one-time payment by the Distributor of 1% of the value of the plan assets
transferred, but that payment may not exceed $5,000.
A-5
<PAGE>
APPENDIX TO PROSPECTUS OF
OPPENHEIMER GOLD & SPECIAL MINERALS FUND
Graphic material included in Prospectus of Oppenheimer Gold & Special
Minerals Fund: "Comparison of Total Return of Oppenheimer Gold & Special
Minerals Fund with the Morgan Stanley World Index- Change in Value of a $10,000
Hypothetical Investment"
A linear graph will be included in the Prospectus of Oppenheimer Gold &
Special Minerals Fund (the "Fund") depicting the initial account value and
subsequent account value of a hypothetical $10,000 investment in each class of
shares of the Fund. For Class A Shares, that graph will cover each of the Fund's
last ten fiscal years from 6/30/87 through 6/30/97 and in the case of the Fund's
Class B and Class C shares the graphs will cover the period from the inception
of the Classes (November 1, 1995) through June 30, 1997. The graphs will compare
such values with hypothetical $10,000 investments over the same time periods in
the Morgan Stanley World Index. Set forth below are the relevant data points
that will appear on the linear graph. Additional information with respect to the
foregoing, including a description of the Morgan Stanley World Index, is set
forth in the Prospectus under "Performance of the Fund Comparing the Fund's
Performance to the Market."
<TABLE>
<CAPTION>
Oppenheimer Morgan
Fiscal Year Gold & Special Stanley
(Period) Ended Minerals Fund A World Index
- -------------- --------------- -----------
<S> <C> <C>
06/30/87 $ 9,425 $10,000
06/30/88 $12,558 $ 9,948
06/30/89 $13,366 $11,248
06/30/90 $13,779 $12,109
06/30/91 $12,305 $11,587
06/30/92 $12,929 $12,146
06/30/93 $15,146 $14,262
06/30/94 $16,395 $15,798
06/30/95 $16,729 $17,571
06/30/96 $17,640 $20,908
06/30/97 $15,840 $25,677
</TABLE>
<TABLE>
<CAPTION>
Oppenheimer Morgan
Fiscal Year Gold & Special Stanley
(Period) Ended Minerals Fund B World Index
- -------------- --------------- -----------
<S> <C> <C>
11/01/95(1) $10,000 $10,000
06/30/96 $11,425 $11,434
06/30/97 $ 9,770 $14,042
<PAGE>
</TABLE>
<TABLE>
<CAPTION>
Oppenheimer Morgan
Fiscal Year Gold & Special Stanley
(Period) Ended Minerals Fund C World Index
- -------------- --------------- -----------
<S> <C> <C>
11/01/95(2) $10,000 $10,000
06/30/96 $11,441 $11,434
06/30/97 $10,194 $14,042
</TABLE>
- ----------------------
(1)Class B shares of the Fund were first publicly offered on November 1, 1995
(2)Class C shares of the Fund were first publicly offered on November 1, 1995
<PAGE>
Oppenheimer Gold & Special Minerals Fund
Two World Trade Center
New York, New York 10048-0203
1-800-525-7048
Investment Adviser
OppenheimerFunds, Inc.
Two World Trade Center
New York, New York 10048-0203
Distributor
OppenheimerFunds Distributor, Inc.
Two World Trade Center
New York, New York 10048-0203
Transfer Agent
OppenheimerFunds Services
P.O. Box 5270
Denver, Colorado 80217
1-800-525-7048
Custodian of Portfolio Securities
The Bank of New York
One Wall Street
New York, New York 10015
Independent Auditors
KPMG Peat Marwick LLP
707 Seventeenth Street
Denver, Colorado 80202
Legal Counsel
Gordon Altman Butowsky Weitzen
Shalov & Wein
114 West 47th Street
New York, New York 10036
No dealer, broker, salesperson or any other person has been authorized to give
any information or to make any representations other than those contained in
this Prospectus or the Statement of Additional Information, and, if given or
made, such information and representations must not be relied upon as having
been authorized by the Fund, OppenheimerFunds Inc., OppenheimerFunds
Distributor, Inc. or any affiliate thereof. This Prospectus does not constitute
an offer to sell or a solicitation of an offer to buy any of the securities
offered hereby in any state to any person to whom it is unlawful to make such an
offer in such state.
PRO410.001.1097 Printed on recycled paper
<PAGE>
Oppenheimer Gold & Special Minerals Fund
Two World Trade Center, New York, New York 10048-0203
1-800-525-7048
Statement of Additional Information dated October 15, 1997
This Statement of Additional Information of Oppenheimer Gold & Special
Minerals Fund is not a Prospectus. This document contains additional information
about the Fund and supplements information in the Prospectus dated October 15,
1997. It should be read together with the Prospectus, which may be obtained by
writing to the Fund's Transfer Agent, OppenheimerFunds Services, at P.O. Box
5270, Denver, Colorado 80217 or by calling the Transfer Agent at the toll-free
number shown above.
Contents
Page
About the Fund
Investment Objective and Policies.......................................
Investment Policies and Strategies...................................
Other Investment Techniques and Strategies...........................
Other Investment Restrictions........................................
How the Fund is Managed ................................................
Organization and History.............................................
Trustees and Officers of the Fund....................................
The Manager and Its Affiliates.......................................
Brokerage Policies of the Fund..........................................
Performance of the Fund.................................................
Distribution and Service Plans..........................................
About Your Account
How To Buy Shares....................................................
How To Sell Shares...................................................
How To Exchange Shares...............................................
Dividends, Capital Gains and Taxes......................................
Additional Information About the Fund...................................
Financial Information About the Fund
Independent Auditors' Report............................................
Financial Statements....................................................
Appendix A: Industry Classifications................................... A-1
-9-
<PAGE>
ABOUT THE FUND
Investment Objective and Policies
Investment Policies and Strategies. The investment objective and policies of the
Fund are described in the Prospectus. Set forth below is supplemental
information about those policies and the types of securities in which the Fund
may invest, as well as the strategies the Fund may use to try to achieve its
objective. Capitalized terms used in this Statement of Additional Information
have the same meanings as those terms have in the Prospectus.
In selecting securities for the Fund's portfolio, the Fund's investment
advisor, OppenheimerFunds, Inc. (the "Manager"), evaluates the merits of
securities primarily through the exercise of its own investment analysis. This
may include, among other things, evaluation of the history of the issuer's
operations, prospects for the industry of which the issuer is part, the issuer's
financial condition, the issuer's pending product developments and developments
by competitors, the effect of general market and economic conditions on the
issuer's business, and legislative proposals or new laws that might affect the
issuer. Current income is not a consideration in the selection of portfolio
securities for the Fund, whether for appreciation, defensive or liquidity
purposes. The fact that a security has a low yield or does not pay current
income will not be an adverse factor in selecting securities to try to achieve
the Fund's investment objective of capital appreciation unless the Manager
believes that the lack of yield might adversely affect appreciation
possibilities.
The portion of the Fund's assets allocated to securities selected for
capital appreciation and the investment techniques used will depend upon the
judgment of the Manager as to the future movement of the equity securities
markets. If the Manager believes that economic conditions favor a rising market,
the Fund will emphasize securities and investment methods selected for high
capital growth. If the Manager believes that a market decline is likely,
defensive securities and investment methods may be emphasized (See "Temporary
Defensive Investments," below).
o Foreign Securities. As noted in the Prospectus, the Fund may invest in
securities (which may be dominated in U.S. dollars or non-U.S. currencies)
issued or guaranteed by foreign corporations, certain supranational entities
(described below) and foreign governments or their agencies or
instrumentalities, and in securities issued by U.S. corporations denominated in
non-U.S. currencies. All of these are considered to be "foreign securities."
Securities of foreign issuers that are represented by American Depository
Receipts or that are listed on a U.S. securities exchange or traded in the U.S.
over-the-counter markets are not considered "foreign securities" for the purpose
of the Fund's investment allocations, because they are not subject to many of
the special considerations and risks, discussed below, that apply to foreign
securities traded and held abroad.
Investing in foreign securities offers potential benefits not available
from investing solely in securities of domestic issuers, including the
opportunity to invest in foreign issuers that appear to offer growth potential,
or in foreign countries with economic policies or business cycles different from
those of the U.S., or to reduce fluctuations in portfolio value by taking
advantage of foreign stock markets that do not move in a manner parallel to U.S.
markets. If the Fund's portfolio securities
-10-
<PAGE>
are held abroad, the sub-custodians or depositories holding them must be
approved by the Fund's Board of Trustees to the extent that approval is required
under applicable rules of the Securities and Exchange Commission. In buying
foreign securities, the Fund may convert U.S. dollars into foreign currency, but
only to effect securities transactions on foreign securities exchanges and not
to hold such currency as an investment.
o Risks of Foreign Investing. Investments in foreign securities present
special additional risks and considerations not typically associated with
investments in domestic securities: reduction of income by foreign taxes;
fluctuation in value of foreign portfolio investments due to changes in currency
rates and control regulations (e.g., currency blockage); transaction charges for
currency exchange; lack of public information about foreign issuers; lack of
uniform accounting, auditing and financial reporting standards comparable to
those applicable to domestic issuers; less volume on foreign exchanges than on
U.S. exchanges; greater volatility and less liquidity on foreign markets than in
the U.S.; less regulation of foreign issuers, stock exchanges and brokers than
in the U.S.; greater difficulties in commencing lawsuits; higher brokerage
commission rates than in the U.S.; increased risks of delays in settlement of
portfolio transactions or loss of certificates for portfolio securities;
possibilities in some countries of expropriation, confiscatory taxation,
political, financial or social instability or adverse diplomatic developments;
and unfavorable differences between the U.S. economy and foreign economies. In
the past, U.S. Government policies have discouraged certain investments abroad
by U.S. investors, through taxation or other restrictions, and it is possible
that such restrictions could be re-imposed.
o Investing in Mining Securities and Metal Investments. The type of
securities that will be emphasized in the Fund's portfolio are Mining Securities
and Metal Investments. Mining Securities are securities of companies engaged in
mining, processing, or distributing gold and other metals or minerals. Metal
Investments consist of gold or silver bullion, other precious metals, strategic
metals, other metals naturally occurring with such metals, certificates
representing an ownership interest in such metals, and gold or silver coins.
o Special Risks of Concentrating Investments in Mining Securities and
Metal Investments. Investments in Mining Securities and Metal Investments
involve additional risks and considerations not typically associated with other
types of investments: (1) the risk of substantial price fluctuations of gold and
precious metals; (2) the concentration of gold supply is mainly in five
territories (South Africa, Australia, the Commonwealth of Independent States
(the former Soviet Union), Canada and the United States), and the prevailing
economic and political conditions of these countries may have a direct effect on
the production and marketing of gold and sales of central bank gold holdings;
(3) unpredictable international monetary policies, economic and political
conditions; (4) possible U.S. governmental regulation of Metal Investments, as
well as foreign regulation of such investments; and (5) possible adverse tax
consequences for the Fund in making Metal Investments, if it fails to qualify as
a "regulated investment company" under the Internal Revenue Code.
Because the Fund concentrates its investments in Mining Securities and
Metal Investments, an adverse change with respect to any of these risk factors
could have a significant negative effect on the Fund's net asset value per
share. These risks are discussed in greater detail below.
-11-
<PAGE>
o Risk of Price Fluctuations. The prices of precious and strategic metals
are affected by various factors such as economic conditions, political events,
governmental monetary and regulatory policies and market events. The prices of
Mining Securities and Metal Investments held by the Fund may fluctuate sharply,
which will affect the value of the Fund's shares.
o Concentration of Source of Gold Supply and Control of Gold Sales.
Currently, the four largest producers of gold are the Republic of South Africa,
the Commonwealth of Independent States (which includes Russia and certain other
countries that were part of the former Soviet Union), Canada and the United
States. Economic and political conditions in those countries may have a direct
effect on the production and marketing of gold and on sales of central bank gold
holdings. In South Africa, the activities of companies engaged in gold mining
are subject to the policies adopted by the Ministry of Mines. The Reserve Bank
of South Africa, as the sole authorized sales agent for South African gold, has
an influence on the price and timing of sales of South African gold. Political
and social conditions in South Africa are still somewhat unsettled and may pose
certain risks to the Fund (in addition to the risks described below under the
caption "Foreign Securities"), because the Fund may hold a portion of its assets
in securities of South African issuers.
o Unpredictable International Monetary Policies, Economic and Political
Conditions. There is the possibility that unusual international monetary or
political conditions may make the Fund's portfolio assets less liquid, or that
the value of the Fund's assets might be more volatile, than would be the case
with other investments. In particular, the price of gold is affected by its
direct and indirect use to settle net balance of payments deficits and surpluses
between nations. Because the prices of precious or strategic metals may be
affected by unpredictable international monetary policies and economic
conditions, there may be greater likelihood of a more dramatic fluctuation of
the market prices of the Fund's investments than of other investments.
o Commodities Regulations. The trading of Metal Investments in the United
States could become subject to the rules that govern the trading of agricultural
and certain other commodities and commodity futures. In the opinion of the
Fund's counsel, at present the Fund's permitted Metal Investments are either not
subject to regulation by the Commodity Futures Trading Commission ("CFTC") or an
exemption from regulation is available. The absence of CFTC regulation may
adversely affect the continued development of an orderly market in Metal
Investments trading in the United States. The development of a regulated futures
market in Metal Investments trading may affect the development of a market in,
and the price of, Metal Investments in the United States.
o Effect on the Fund's Tax Status. By making Metal Investments, the Fund
risks failing to qualify as a regulated investment company under the Internal
Revenue Code. If the Fund should fail to qualify, it would lose the beneficial
tax treatment accorded to qualifying investment companies under Subchapter M of
the Code. Failure to qualify would occur if in any fiscal year the Fund either
(a) derived 10% or more of its gross income (as defined in the Internal Revenue
Code, which disregards losses for this purpose) from sales or other dispositions
of Metal Investments, or (b) held more than 50% of its net assets in the form of
Metal Investments or in securities not meeting certain tests under the Internal
Revenue Code (see "Dividends, Capital Gains and Taxes"). Accordingly, the Fund
will endeavor to manage its portfolio within the limitations described above,
and the Fund has adopted an investment restriction limiting the amount of its
total assets that can be invested in
-12-
<PAGE>
Metal Investments. There can be no assurance that the Fund will qualify in every
fiscal year. Furthermore, to comply with the limitations described above, the
Fund may be required to make investment decisions the Manager would otherwise
not make, foregoing the opportunity to realize gains, if necessary, to permit
the Fund to qualify. See "Investment Restrictions."
o Borrowing for Leverage. From time to time, the Fund may increase its
ownership of securities by borrowing from banks on an unsecured basis to invest
the borrowed funds in portfolio securities. Borrowing is subject to the
restrictions stated in the Prospectus. Pursuant to the requirements of the
Investment Company Act of 1940 (the "Investment Company Act"), any borrowing for
this purpose will only be made if the value of the Fund's assets, less its
liabilities other than borrowings, is equal to at least 300% of all borrowings
including the proposed borrowing. If the value of the Fund's assets, when
computed in that manner, should fail to meet the 300% asset coverage
requirement, the Fund is required to reduce its bank debt within three days to
the extent necessary to meet that coverage requirement. To do so, the Fund may
have to sell a portion of its investments at a time when it would otherwise not
want to sell the securities. Interest on money the Fund borrows is an expense
the Fund would not otherwise incur, so that during periods of substantial
borrowings, its expenses may increase more than the expenses of funds that do
not borrow.
Other Investment Techniques and Strategies
o Temporary Defensive Investments. If economic, political or financial
conditions adversely affect Mining Securities or Metal Investments, the Fund may
depart from its usual concentration policy and may commit an increasing portion
of its assets to defensive securities. These may include the types of securities
described in the Prospectus. When investing for defensive purposes, the Fund
will normally emphasize investment in short-term debt securities (that is,
securities maturing in one year or less from the date of purchase), since those
types of securities are generally more liquid and usually may be disposed of
quickly without significant gains or losses so that the Manager may have liquid
assets when it wishes to make investments in securities for appreciation
possibilities.
o Warrants. Warrants are options to purchase equity securities at set
prices valid for a specified period of time. The prices of warrants do not
necessarily move in a manner parallel to the prices of the underlying
securities. The price the Fund pays for a warrant will be lost unless the
warrant is exercised prior to its expiration. Rights are similar to warrants,
but normally have a short duration and are distributed directly by the issuer to
its shareholders. Rights and warrants have no voting rights, receive no
dividends and have no rights with respect to the assets of the issuer.
o Investing in Small, Unseasoned Companies. The securities of small,
unseasoned companies may have a limited trading market, which may adversely
affect the Fund's ability to sell them and can reduce the price the Fund might
be able to obtain for them. If other investors holding the same securities as
the Fund sell them when the Fund attempts to dispose of its holdings, the Fund
may receive lower prices than might otherwise be obtained, because of the
thinner market for such securities.
o Illiquid and Restricted Securities. To enable the Fund to sell
restricted securities not
-13-
<PAGE>
registered under the Securities Act of 1933, the Fund may have to cause those
securities to be registered. The expenses of registration of restricted
securities may be negotiated by the Fund with the issuer at the time such
securities are purchased by the Fund, if such registration is required before
such securities may be sold publicly. When registration must be arranged because
the Fund wishes to sell the security, a considerable period may elapse between
the time the decision is made to sell the securities and the time the Fund would
be permitted to sell them. The Fund would bear the risks of any downward price
fluctuation during that period. The Fund may also acquire, through private
placements, securities having contractual restrictions on their resale, which
might limit the Fund's ability to dispose of such securities and might lower the
amount realizable upon the sale of such securities. Illiquid securities include
repurchase agreements maturing in more than seven days, or certain participation
interests other than those with puts exercisable within seven days.
The Fund has percentage limitations that apply to purchases of restricted
securities, as stated in the Prospectus. Those percentage restrictions do not
limit purchases of restricted securities that are eligible for sale to qualified
institutional purchasers pursuant to Rule 144A under the Securities Act of 1933,
provided that those securities have been determined to be liquid by the Board of
Trustees of the Fund or by the Manager under Board-approved guidelines. Those
guidelines take into account the trading activity for such securities and the
availability of reliable pricing information, among other factors. If there is a
lack of trading interest in a particular Rule 144A security, the Fund's holding
of that security may be deemed to be illiquid.
o Loans of Portfolio Investments. The Fund may lend its portfolio
investments subject to the restrictions stated in the Prospectus. Repurchase
transactions are not considered "loans" for the purpose of the Fund's limit on
the percentage of its assets that can be loaned. Under applicable regulatory
requirements (which are subject to change), the loan collateral on each business
day must at least equal the value of the loaned securities and must consist of
cash, bank letters of credit or securities of the U.S. Government (or its
agencies or instrumentalities). To be acceptable as collateral, letters of
credit must obligate a bank to pay amounts demanded by the Fund if the demand
meets the terms of the letter. Such terms and the issuing bank must be
satisfactory to the Fund. In a portfolio securities lending transaction, the
Fund receives from the borrower an amount equal to the interest paid or the
dividends declared on the loaned securities during the term of the loan as well
as the interest on the collateral securities, less any finders' administrative
or other fees the Fund pays in connection with the loan. The terms of the Fund's
loans must meet applicable tests under the Internal Revenue Code and must permit
the Fund to reacquire loaned securities on five days' notice or in time to vote
on any important matter.
o Repurchase Agreements. The Fund may acquire securities subject to
repurchase agreements for liquidity purposes to meet anticipated redemptions, or
pending the investment of the proceeds from sales of Fund shares, or pending the
settlement of purchases of portfolio securities.
In a repurchase transaction, the Fund acquires a security from, and
simultaneously resells it to, an approved vendor. An "approved vendor" is a U.S.
commercial bank or the U.S. branch of a foreign bank or a broker-dealer which
has been designated a primary dealer in government securities, which must meet
credit requirements set by the Fund's Board of Trustees from time to time. The
resale price exceeds the purchase price by an amount that reflects an
agreed-upon interest rate
-14-
<PAGE>
effective for the period during which the repurchase agreement is in effect. The
majority of these transactions run from day to day, and delivery pursuant to the
resale typically will occur within one to five days of the purchase. Repurchase
agreements are considered "loans" under the Investment Company Act,
collateralized by the underlying security. The Fund's repurchase agreements
require that at all times while the repurchase agreement is in effect, the value
of the collateral must equal or exceed the repurchase price to fully
collateralize the repayment obligation. Additionally, the Manager will impose
creditworthiness requirements to confirm that the vendor is financially sound
and will continuously monitor the collateral's value.
o Hedging. The Fund may use hedging instruments for the purposes described
in the Prospectus. When hedging to attempt to protect against declines in the
market value of the Fund's portfolio, or to permit the Fund to retain unrealized
gains in the value of portfolio securities which have appreciated, or to
facilitate selling securities for investment reasons, the Fund may: (i) sell
Stock Index Futures, (ii) buy puts, or (iii) write covered calls on securities
held by it or on Stock Index Futures (as described in the Prospectus). When
hedging to establish a position in the equity securities markets as a temporary
substitute for the purchase of individual equity securities the Fund may: (i)
buy Stock Index Futures, or (ii) buy calls on Stock Index Futures or securities
held by it. Normally, the Fund would then purchase the equity securities and
terminate the hedging portion.
The Fund's strategy of hedging with Futures and options on Futures will be
incidental to the Fund's investment activities in the underlying cash market. In
the future, the Fund may employ hedging instruments and strategies that are not
presently contemplated but which may be subsequently developed, to the extent
such investment methods are consistent with the Fund's investment objective, and
are legally permissible and disclosed in the Prospectus. Additional information
about the hedging instruments the Fund may use is provided below.
o Stock Index Futures. As described in the Prospectus, the Fund may invest
in Stock Index Futures only if they relate to broadly-based stock indices. A
stock index is considered to be broadly- based if it includes stocks that are
not limited to issuers in any particular industry or group of industries. A
stock index assigns relative values to the common stocks included in the index
and fluctuates with the changes in the market value of those stocks. Stock
indices cannot be purchased or sold directly.
Stock index futures are contracts based on the future value of the basket
of securities that comprise the underlying stock index. The contracts obligate
the seller to deliver, and the purchaser to take, cash to settle the futures
transaction or to enter into an offsetting contract. No physical delivery of the
securities underlying the index is made on settling the futures obligation. No
monetary amount is paid or received by the Fund on the purchase or sale of a
Stock Index Future. Upon entering into a Futures transaction, the Fund will be
required to deposit an initial margin payment, in cash or U.S. Treasury bills,
with the futures commission merchant (the "futures broker"). Initial margin
payments will be deposited with the Fund's Custodian in an account registered in
the futures broker's name; however, the futures broker can gain access to that
account only under certain specified conditions. As the Future is marked to
market (that is, its value on the Fund's books is changed) to reflect changes in
its market value, subsequent margin payments, called variation margin, will be
paid to or by the futures broker on a daily basis.
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At any time prior to the expiration of the Future, the Fund may elect to
close out its position by taking an opposite position, at which time a final
determination of variation margin is made and additional cash is required to be
paid by or released to the Fund. Any gain or loss is then realized by the Fund
on the Future for tax purposes. Although Stock Index Futures by their terms call
for settlement by the delivery of cash, in most cases the settlement obligation
is fulfilled without such delivery by entering into an offsetting transaction.
All futures transactions are effected through a clearing house associated with
the exchange on which the contracts are traded.
o Writing Covered Call. When the Fund writes a call on a security, it
receives a premium and agrees to sell the callable investment to a purchaser of
a corresponding call during the call period (usually not more than 9 months) at
a fixed exercise price (which may differ from the market price of the underlying
investment) regardless of market price changes during the call period. The Fund
retains the risk of loss should the price of the underlying security decline
during the call period, which may be offset to some by the premium.
To terminate its obligation on a call it has written, the Fund may
purchase a corresponding call in a "closing purchase transaction." A profit or
loss will be realized, depending upon whether the net of the amount of option
transaction costs and the premium received on the call the Fund has written is
more or less than the price of the call the Fund subsequently purchased. A
profit may also be realized if the call lapses unexercised, because the Fund
retains the underlying investment and the premium received. Those profits are
considered short-term capital gains for Federal income tax purposes, and when
distributed by the Fund are taxable as ordinary income. If the Fund could not
effect a closing purchase transaction due to the lack of a market, it would have
to hold the callable investment until the call lapsed or was exercised.
The Fund may also write calls on Futures without owning a futures contract
or deliverable securities, provided that at the time the call is written, the
Fund covers the call by segregating in escrow an equivalent dollar value of
deliverable securities or liquid assets. The Fund will segregate additional
liquid assets if the value of the escrowed assets drops below 100% of the
current value of the Future. In no circumstances would an exercise notice as to
a Future put the Fund in a short futures position.
o Writing Put Options. A put option on an investment gives the purchaser
the right to sell, and the writer the obligation to buy, the underlying
investment at the exercise price during the option period. Writing a put covered
by segregated liquid assets equal to the exercise price of the put has the same
economic effect to the Fund as writing a covered call. The premium the Fund
receives from writing a put option represents a profit, as long as the price of
the underlying investment remains above the exercise price. However, the Fund
has also assumed the obligation during the option period to buy the underlying
investment from the buyer of the put at the exercise price, even though the
value of the investment may fall below the exercise price. If the put expires
unexercised, the Fund (as the writer of the put) realizes a gain in the amount
of the premium less transaction costs. If the put is exercised, the Fund must
fulfill its obligation to purchase the underlying investment at the exercise
price, which will usually exceed the market value of the investment at that
time. In that case, the Fund may incur a loss, equal to the sum of the sale
price of the underlying investment and the premium received minus the sum of the
exercise price and any transaction costs incurred.
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When writing put options on securities or on foreign currencies, to secure its
obligation to pay for the underlying security, the Fund will deposit in escrow
liquid assets with a value equal to or greater than the exercise price of the
underlying securities. The Fund therefore forgoes the opportunity of investing
the segregated assets or writing calls against those assets. As long as the
obligation of the Fund as the put writer continues, it may be assigned an
exercise notice by the broker-dealer through whom such option was sold,
requiring the Fund to take delivery of the underlying security against payment
of the exercise price. The Fund has no control over when it may be required to
purchase the underlying security, since it may be assigned an exercise notice at
any time prior to the termination of its obligation as the writer of the put.
This obligation terminates upon expiration of the put, or such earlier time at
which the Fund effects a closing purchase transaction by purchasing a put of the
same series as that previously sold. Once the Fund has been assigned an exercise
notice, it is thereafter not allowed to effect a closing purchase transaction.
The Fund may effect a closing purchase transaction to realize a profit on
an outstanding put option it has written or to prevent an underlying security
from being put. Furthermore, effecting such a closing purchase transaction will
permit the Fund to write another put option to the extent that the exercise
price thereof is secured by the deposited assets, or to utilize the proceeds
from the sale of such assets for other investments by the Fund. The Fund will
realize a profit or loss from a closing purchase transaction if the cost of the
transaction is less or more than the premium received from writing the option.
As above for writing covered calls, any and all such profits described herein
from writing puts are considered short-term gains for Federal tax purposes, and
when distributed by the Fund, are taxable as ordinary income.
o Purchasing Puts and Calls. When the Fund purchases a call (other than in
a closing purchase transaction), it pays a premium, and, except as to calls on
stock indices or futures, has the right to buy the underlying investment from a
seller of a corresponding call on the same investment during the call period at
a fixed exercise price. In purchasing a call, the Fund benefits only if the call
is sold at a profit or if, during the call period, the market price of the
underlying investment is above the sum of the exercise price, transaction costs
and the premium paid, and the call is exercised. If the call is not exercised or
sold (whether or not at a profit), it will become worthless at its expiration
date and the Fund will lose its premium payment and the right to purchase the
underlying investment.
When the Fund purchases a put, it pays a premium and, except as to puts on
stock indices, has the right to sell the underlying investment to a seller of a
corresponding put on the same investment during the put period at a fixed
exercise price. Buying a put on an investment the Fund owns (a "protective put")
enables the Fund to attempt to protect itself during the put period against a
decline in the value of the underlying investment below the exercise price by
selling the underlying investment at the exercise price to a seller of a
corresponding put. If the market price of the underlying investment is equal to
or above the exercise price and as a result the put is not exercised or resold,
the put will become worthless at its expiration and the Fund will lose the
premium payment and the right to sell the underlying investment. However, the
put may be sold prior to expiration (whether or not at a profit).
The Fund's option activities may affect its portfolio turnover rate and
brokerage
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commissions. The exercise of calls written by the Fund may cause the Fund to
sell related portfolio securities, thus increasing its turnover rate. The
exercise by the Fund of puts on securities will cause the sale of underlying
investments, increasing portfolio turnover. Although the decision whether to
exercise a put it holds is within the Fund's control, holding a put might cause
the Fund to sell the related investments for reasons that would not exist in the
absence of the put. The Fund will pay a brokerage commission each time it buys
or sells a call, put or an underlying investment in connection with the exercise
of a put or call. Those commissions may be higher than the commissions for
direct purchases or sales of the underlying investments.
Premiums paid for options are small in relation to the market value of the
underlying investments and, consequently, put and call options offer large
amounts of leverage. The leverage offered by trading in options could result in
the Fund's net asset value being more sensitive to changes in the value of the
underlying investments.
o Options on Indices and Futures. Puts and calls on broadly-based stock
indices or Stock Index Futures are similar to puts and calls on securities or
futures contracts except that all settlements are in cash and gain or loss
depends on changes in the index in question (and thus on price movements in the
stock market generally) rather than on price movements of individual securities
or futures contracts. When the Fund buys a call on a stock index or Stock Index
Future, it pays a premium. If the Fund exercises the call during the call
period, a seller of a corresponding call on the same investment will pay the
Fund an amount of cash to settle the call if the closing level of the stock
index or Future upon which the call is based is greater than the exercise price
of the call. That cash payment is equal to the difference between the closing
price of the call and the exercise price of the call times a specified multiple
(the "multiplier") which determines the total dollar value for each point of
difference.
When the Fund buys a put on a stock index or Stock Index Future, it pays a
premium and has the right during the put period to require a seller of a
corresponding put, upon the Fund's exercise of its put, to deliver cash to the
Fund to settle the put if the closing level of the stock index or Stock Index
Future upon which the put is based is less than the exercise price of the put.
That cash payment is determined by the multiplier, in the same manner as
described above as to calls. The put protects the Fund to the extent that the
index moves in a similar pattern to the securities the Fund holds. The Fund can
either resell the put or, in the case of a put on a Stock Index Future, buy the
underlying investment and sell it at the exercise price. The resale price of the
put will vary inversely with the price of the underlying investment. If the
market price of the underlying investment is above the exercise price, and as a
result the put is not exercised, the put will become worthless on the expiration
date. In the event of a decline in price of the underlying investment, the Fund
could exercise or sell the put at a profit to attempt to offset some or all of
its loss on its portfolio securities.
o Options on Foreign Currency. The Fund may write and purchase puts and
calls on foreign currencies that are traded on a securities or commodities
exchange or over-the-counter markets or are quoted by major recognized dealers
in such options. The Fund does so to protect against declines in the dollar
value of foreign securities and against increases in the dollar cost of foreign
securities to be acquired. If the Manager anticipates a rise in the dollar value
of a foreign currency in which securities to be acquired are denominated, the
increased cost of such securities may be partially
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offset by purchasing calls or writing puts on that foreign currency. If a
decline in the dollar value of a foreign currency is anticipated, the decline in
value of portfolio securities denominated in that currency may be partially
offset by writing calls or purchasing puts on that foreign currency. However, in
the event of currency rate fluctuations adverse to the Fund's position, it would
lose the premium it paid and transactions costs.
A call written on a foreign currency by the Fund is covered if the Fund
owns the underlying foreign currency covered by the call or has an absolute and
immediate right to acquire that foreign currency without additional cash
consideration (or for additional cash consideration held in a segregated account
by its custodian) upon conversion or exchange of other foreign currency held in
its portfolio. A call may be written by the Fund on a foreign currency to
provide a hedge against a decline due to an expected adverse change in the
exchange rate in the U.S. dollar value of a security which the Fund owns or has
the right to acquire and which is denominated in the currency underlying the
option. This is a "cross-hedging" strategy. In such circumstances, the Fund
covers the option by maintaining in a segregated account with the Fund's
custodian, liquid assets in an amount not less than the exercise price of the
option.
o Forward Contracts. A Forward Contract involves bilateral obligations of
one party to purchase, and another party to sell, a specific currency at a
future date (which may be any fixed number of days from the date of the contract
agreed upon by the parties), at a price set at the time the contract is entered
into. These contracts are traded in the interbank market conducted directly
between currency traders (usually large commercial banks) and their customers.
The Fund may enter into a Forward Contract to "lock in" the U.S. dollar price of
a security denominated in a foreign currency which it has purchased or sold but
which has not yet settled, or to protect against a possible loss resulting from
an adverse change in the relationship between the U.S. dollar and a foreign
currency.
The Fund may use Forward Contracts to protect against uncertainty in the
level of future exchange rates. The use of Forward Contracts does not eliminate
fluctuations in the prices of the underlying securities the Fund owns or intends
to acquire, but it does fix a rate of exchange in advance. In addition, although
Forward Contracts limit the risk of loss due to a decline in the value of the
hedged currencies, at the same time they limit any potential gain that might
result should the value of the currencies increase.
The Fund may enter into Forward Contracts with respect to specific
transactions. For example, when the Fund enters into a contract for the purchase
of sale of a security denominated in a foreign currency, or when the fund
anticipates receipt of dividend payments in a foreign currency, the Fund may
desire to "lock-in" the U.S. dollar price of the security or the U.S. dollar
equivalent of such payment. To do so, the Fund enters into a Forward Contract,
for a fixed amount of U.S. dollars per unit of foreign currency, for the
purchase or sale of the amount of foreign currency involved in the underlying
transaction ("transaction hedge"). The fund will thereby be able to protect
itself against a possible loss resulting from an adverse change in the
relationship between the currency exchange rates during the period between the
date on which the security is purchased or sold, or on which the payment is
declared, and the date on which such payments are made or received.
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The Fund may also use Forward Contracts to lock in the value of portfolio
positions ("position hedges"). In a position hedge, for example, when the Fund
believes that a foreign currency in which the Fund has security holdings may
suffer a substantial decline against the U.S. dollar, the Fund may enter into a
forward sale contract to sell an amount of that foreign currency for a fixed
U.S. dollar amount. Additionally, when the Fund believes that the U.S. dollar
may suffer a substantial decline against a foreign currency, it may enter into a
forward purchase contract to buy that foreign currency for a fixed U.S. dollar
amount.
The Fund may also enter into a forward contract to sell a foreign currency
other than that in which the underlying security is denominated. This technique
is referred to as "cross hedging," and is done when the foreign currency sold
through the forward contract is correlated with the foreign currency or
currencies in which the underlying security positions are denominated. The
foreign currency sold through the forward contract may be sold for a fixed U.S.
dollar amount or for a fixed amount of another currency correlated with the U.S.
dollar.
The Fund may also cross hedge its portfolio positions by entering into a
forward contract to buy or sell a foreign currency other than the currency in
which its underlying securities are denominated for a fixed amount in U.S.
dollars or a fixed amount in another currency which is correlated with the U.S.
dollar. If the Fund does not own portfolio securities denominated in the
currency on the long side of the cross hedge, the Fund will not be required to
later purchase portfolio securities denominated in that currency. Instead, the
Fund may unwind the cross hedge by reversing the original transaction, that is,
by transacting in a forward contract that is opposite to the original cross
hedge or it may extend the hedge by "rolling" the hedge forward.
The success of cross hedging is dependent on many factors, including the
ability of the Manager to correctly identify and monitor the correlation among
foreign currencies and between foreign currencies and the U.S. dollar. To the
extent that these correlations are not identical, the Fund may experience losses
or gains on both the underlying security and the cross currency hedge. However,
the Manager shall determine that any cross hedge is a bona fide hedge in that it
is expected to reduce the volatility of the Fund's total return.
The Fund's Custodian will identify liquid assets of the Fund having a
value equal to the aggregate amount of the Fund's commitment under Forward
Contracts to cover its short positions. The Fund will not enter into such
Forward Contracts or maintain a net exposure to such contracts where the
consummation of the contracts would obligate the Fund to deliver an amount of
foreign currency in excess of the value of the Fund's portfolio securities or
other assets denominated in that currency or another currency that is the
subject of the hedge. The Fund, however, in order to avoid excess transactions
and transaction costs, may maintain a net exposure to Forward Contracts in
excess of the value of the Fund's portfolio securities or other assets
denominated in these currencies provided the excess amount is "covered" by
liquid securities denominated in any currency, at lest equal at all times to the
amount of such excess. As an alternative, the Fund may purchase a call option
permitting the Fund to purchase the amount of foreign currency being hedged by a
forward sale contract at a price no higher than the forward contract price or
the Fund may purchase a put option permitting the Fund to sell the amount of
foreign currency subject to a forward purchase contract at a price as high or
higher than the forward contact price. Unanticipated changes in
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<PAGE>
currency prices may result in poorer overall performance for the Fund than if it
had not entered into such contracts.
The precise matching of the Forward Contract amounts and the value of the
securities involved will not generally be possible because the future value of
such securities in foreign currencies will change as a consequence of market
movements in the value of these securities between the date the Forward Contract
is entered into and the date it is sold. Accordingly, it may be necessary for
the Fund to purchase additional foreign currency on the spot (i.e., cash) market
(and bear the expense of such purchase), if the market value of the security is
less than the amount of foreign currency the Fund is obligated to deliver and if
a decision is made to sell the security and make delivery of the foreign
currency. Conversely, it may be necessary to sell on the spot market some of the
foreign currency received upon the sale of the portfolio security if its market
value exceeds the amount of foreign currency the Fund is obligated to deliver.
The projection of short-term currency market movements is extremely difficult,
and the successful execution of a short-term hedging strategy is highly
uncertain. Forward Contracts involve the risk that anticipated currency
movements will not be accurately predicted, causing the Fund to sustain losses
on these contracts and incur transactions costs.
At or before the maturity of a Forward Contract requiring the Fund to sell
a currency, the Fund may either sell a portfolio security and use the sale
proceeds to make delivery of the currency or retain the security and offset its
contractual obligation to deliver the currency by purchasing a second contract
pursuant to which the Fund will obtain, on the same maturity date, the same
amount of the currency that it is obligated to deliver. Similarly, the Fund may
close out a Forward Contract requiring it to purchase a specified currency by
entering into a second contract entitling it to sell the same amount of the same
currency on the maturity date of the first contract. The Fund would realize a
gain or loss as a result of entering into such an offsetting Forward Contract
under either circumstance to the extent the exchange rate or rates between the
currencies involved moved between the execution dates of the first contract and
offsetting contract.
The cost to the Fund of engaging in Forward Contracts varies with factors
such as the currencies involved, the length of the contract period and the
market conditions then prevailing. Because Forward Contracts are usually entered
into on a principal basis, no fees or commissions are involved. Such contracts
are not traded on an exchange. Therefore, the Fund must evaluate the credit and
performance risk of each particular counterparty under a Forward Contract.
Although the Fund values its assets daily in terms of U.S. dollars, it
does not intend to convert all of its holdings of foreign currency deposits into
U.S. dollars on a daily basis. The Fund may convert foreign currency from time
to time, and investors should be aware of the costs of currency conversion.
Foreign exchange dealers do not charge a fee for conversion, by they do seek to
realize a profit based on the difference between the prices at which they buy
and sell various currencies. Thus, a dealer may offer to sell a foreign currency
to the Fund at one rate, while offering a lesser rate of exchange should the
Fund desire to resell that currency to the dealer.
o Additional Information About Hedging Instruments and Their Use. The
Fund's Custodian, or a securities depository acting for the Custodian, will act
as the Fund's escrow agent, through the
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facilities of the Options Clearing Corporation ("OCC"), as to the investments on
which the Fund has written options that are traded on exchanges, or as to other
acceptable escrow securities, so that no margin will be required from the Fund
for such option transactions. OCC will release the securities covering a call on
the expiration of the call or when the Fund enters into a closing purchase
transaction. An option position may be closed out only on a market that provides
secondary trading for options of the same series, and there is no assurance that
a liquid secondary market will exist for any particular option.
When the Fund writes an over-the-counter("OTC") option, it will enter into
an arrangement with a primary U.S. Government securities dealer, which would
establish a formula price at which the Fund would have the absolute right to
repurchase that OTC option. That formula price would generally be based on a
multiple of the premium received for the option, plus the amount by which the
option is exercisable below the market price of the underlying security (that
is, the extent to which the option is "in-the-money"). When the Fund writes an
OTC option, it will treat as illiquid (for purposes of the limit on its assets
that may be invested in illiquid securities, stated in the Prospectus) the
mark-to-market value of any OTC option held by it unless the option is subject
to a buy-back agreement with the executing broker, which broker the Manager has
determined to be appropriate for this purpose. The Securities and Exchange
Commission is evaluating whether OTC options should be considered liquid
securities, and the procedure described above could be affected by the outcome
of that evaluation.
o Regulatory Aspects of Hedging Instruments. The Fund is required to
operate within certain restrictions and guidelines with respect to its use of
Futures and options on Futures established by the Commodity Futures Trading
Commission ("CFTC"). In particular, the Fund is exempted from registration with
the CFTC as a "commodity pool operator" if the Fund complies with the
requirements of Rule 4.5 adopted by the CFTC. The Rule does not limit the
percentage of the Fund's assets that may be used for Futures margin and related
options premiums for a bona fide hedging position. However, under the Rule, the
Fund limits its aggregate initial Futures margin and related options premiums to
no more than 5% of the Fund's total assets for hedging purposes that are not
considered bona fide hedging strategies under the Rule. Under the Rule, the Fund
also must use short Futures and Futures options positions solely for "bona fide
hedging purposes" within the meaning and intent of the applicable provisions of
the Commodities Exchange Act.
Transactions in options by the Fund are subject to limitations established
by option exchanges governing the maximum number of options that may be written
or held by a single investor or group of investors acting in concert, regardless
of whether the options were written or purchased on the same or different
exchanges or are held in one or more accounts or through one or more different
exchanges or through one or more brokers. Thus the number of options which the
Fund may write or hold may be affected by options written or held by other
entities, including other investment companies having the same adviser as the
Fund (or an adviser that is an affiliate of the Fund's adviser). Position limits
also apply to Futures. An exchange may order the liquidation of positions found
to be in violation of those limits and may impose certain other sanctions. Due
to requirements under the Investment Company Act of 1940 (the "Investment
Company Act"), when the Fund purchases a Stock Index Future, the Fund will
maintain, in a segregated account or accounts with its Custodian, liquid assets
of any type, including equity and debt securities of any
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grade, in an amount equal to the market value of the securities underlying such
Future, less the margin deposit applicable to it.
o Tax Aspects of Covered Calls and Hedging Instruments. The Fund intends
to qualify as a "regulated investment company" under the Internal Revenue Code
(although it reserves the right not to qualify). That qualification enables the
Fund to "pass through" its income and realized capital gains to shareholders
without having to pay tax on them. This avoids a "double tax" on that income and
capital gains, since shareholders normally will be taxed on the dividends and
capital gains they receive from the Fund (unless the Fund's shares are held in a
retirement account or the shareholder is otherwise exempt from tax). One of the
tests for the Fund's qualification as a regulated investment company is that
less than 30% of its gross income must be derived from gains realized on the
sale of securities held for less than three months. To comply with this 30% cap,
the Fund will limit the extent to which it engages in the following activities,
but will not be precluded from them: (1) selling investments, including Stock
Index Futures, held for less than three months, whether or not they were
purchased on the exercise of a call held by the Fund; (2) purchasing calls or
puts which expire in less than three months; (3) effecting closing transactions
with respect to calls or puts written or purchased less than three months
previously; (4) exercising puts or calls held by the Fund for less than three
months; or (5) writing calls on investments held less than three months.
Certain foreign currency exchange contracts (Forward Contracts) in which
the Fund may invest are treated as "Section 1256 contracts." Gains or losses
relating to Section 1256 contracts generally are characterized under the
Internal Revenue Code as 60% long-term and 40% short-term capital gains or
losses. However, foreign currency gains or losses arising from certain Section
1256 contracts (including Forward Contracts) generally are treated as ordinary
income or loss. In addition, Section 1256 contracts held by the Fund at the end
of each taxable year are "marked-to- market" with the result that unrealized
gains or losses are treated as though they were realized. These contracts also
may be marked-to-market for purposes of the excise tax applicable to investment
company distributions and for other purposes under rules prescribed pursuant to
the Internal Revenue Code. An election can be made by the Fund to exempt these
transactions from this marked-to-market treatment.
Certain Forward Contracts entered into by the Fund may result in
"straddles" for federal income tax purposes. The straddle rules may affect the
timing and the character of gains or losses recognized by the Fund on straddle
positions. Generally, a loss sustained on the disposition of a position(s)
making up a straddle is allowed only to the extent such loss exceeds any
unrecognized gain in the offsetting positions making up the straddle. Disallowed
loss is generally allowed at the point where there is no unrecognized gain in
the offsetting positions making up the straddle, or the offsetting position is
disposed of.
Under the Internal Revenue Code, generally gains or losses attributable to
fluctuations in exchange rates which occur between the time the Fund accrues
interest or other receivables or accrues expenses or other liabilities
denominated in a foreign currency and the time the Fund actually collects such
receivables or pays such liabilities are treated as ordinary income or ordinary
loss. Similarly, on disposition of debt securities denominated in a foreign
currency and on disposition of foreign currency forward contracts, gains or
losses attributable to fluctuations in the
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value of a foreign currency between the date of acquisition of the security or
contract and the date of the disposition also are treated as an ordinary gain or
loss. Currency gains and losses are offset against market gains and losses
before determining a net "Section 988" gain or loss under the Internal Revenue
Code, which may increase or decrease the amount of the Fund's investment company
income available for distribution to its shareholders.
o Risks of Hedging With Options and Futures. In addition to the risks
associated with hedging that are discussed in the Prospectus and above, there is
a risk in using short hedging by selling Stock Index Futures to attempt to
protect against declines in the value of the Fund's equity securities. The risk
is that the prices of Stock Index Futures will correlate imperfectly with the
behavior of the cash (i.e., market value) prices of the Fund's equity
securities. The ordinary spreads between prices in the cash and futures markets
are subject to distortions, due to differences in the natures of those markets.
First, all participants in the futures markets are subject to margin deposit and
maintenance requirements. Rather than meeting additional margin deposit
requirements, investors may close out futures contracts through offsetting
transactions which could distort the normal relationship between the cash and
futures markets. Second, the liquidity of the futures markets depends on
participants entering into offsetting transactions rather than making or taking
delivery. To the extent participants decide to make or take delivery, liquidity
in the futures markets could be reduced, thus producing distortion. Third, from
the point of view of speculators, the deposit requirements in the futures
markets are less onerous than margin requirements in the securities markets.
Therefore, increased participation by speculators in the futures markets may
cause temporary price distortions.
The risk of imperfect correlation increases as the composition of the
Fund's portfolio diverges from the securities included in the applicable index.
To compensate for the imperfect correlation of movements in the price of the
equity securities being hedged and movements in the price of the hedging
instruments, the Fund may use hedging instruments in a greater dollar amount
than the dollar amount of equity securities being hedged if the historical
volatility of the prices of the equity securities being hedged is more than the
historical volatility of the applicable index. It is also possible that if the
Fund has used hedging instruments in a short hedge, the market may advance and
the value of equity securities held in the Fund's portfolio may decline. If that
occurred, the Fund would lose money on the hedging instruments and also
experience a decline in value in its portfolio securities. However, while this
could occur for a very brief period or to a very small degree, over time the
value of a diversified portfolio of equity securities will tend to move in the
same direction as the indices upon which the hedging instruments are based.
If the Fund uses hedging instruments to establish a position in the
equities markets as a temporary substitute for the purchase of individual equity
securities (long hedging) by buying Stock Index Futures and/or calls on such
Futures, on securities or on stock indices, it is possible that the market may
decline. If the Fund then concludes not to invest in equity securities at that
time because of concerns as to a possible further market decline or for other
reasons, the Fund will realize a loss on the hedging instruments that is not
offset by a reduction in the price of the equity securities purchased.
o Short Sales Against-the-Box. In this type of short sale, while the
short position is open,
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<PAGE>
the Fund must own an equal amount of the securities sold short, or by virtue of
ownership of other securities have the right, without payment of further
consideration, to obtain an equal amount of the securities sold short. Short
sales against-the-box may be made to defer, for Federal income tax purposes,
recognition of gain or loss on the sale of securities "in the box" until the
short position is closed out. They may also be used to protect a gain on the
security "in-the-box" when the Fund does not want to sell it and recognize a
capital gain. No more than 15% of the Fund's net assets may be held as
collateral for these short sales.
Other Investment Restrictions
The Fund's most significant investment restrictions are described in the
Prospectus. The following are fundamental policies, and together with the Fund's
fundamental policies described in the Prospectus, cannot be changed without the
approval of a "majority" of the Fund's outstanding voting securities. Such a
"majority" vote is defined in the Investment Company Act as the vote of the
holders of the lesser of (1) 67% or more of the shares present or represented by
proxy at a shareholders meeting, if the holders of more than 50% of the
outstanding shares are present or represented by proxy; or (2) more than 50% of
the outstanding shares.
Under these additional restrictions, the Fund cannot:
o invest in commodities or commodities contracts; Metal Investments shall
not be deemed an investment in a commodity for the purpose of the Fund's
investment restrictions; however, the Fund may buy and sell any of the hedging
instruments permitted by any of its other non-fundamental or fundamental
policies, whether or not any such hedging instrument is considered to be a
commodity;
o invest in real estate or in interests in real estate, but may purchase
readily marketable securities of companies holding real estate or interests
therein;
o purchase securities on margin; however, the Fund may make margin
deposits in connection with any of the hedging instruments permitted by any of
its other fundamental or non- fundamental policies;
o mortgage, hypothecate or pledge any of its assets; however, this does
not prohibit the escrow arrangements contemplated by the option activities of
the Fund or other collateral or margin arrangements in connection with any of
the hedging instruments permitted by any of its other fundamental or
non-fundamental policies;
o underwrite securities of other companies, except insofar as the Fund
might be deemed to be an underwriter in the resale of any securities held in its
portfolio;
o invest in or hold securities of any issuer if those officers and
trustees or directors of the Fund or its adviser owning individually more than
.5% of the securities of such issuer together own more than 5% of the securities
of such issuer;
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<PAGE>
o invest in interests in oil or gas exploration or development
programs; or
o invest in companies for the purpose of acquiring control or
management thereof.
o Non-Fundamental Investment Restrictions. For purposes of the Fund's
policy not to concentrate its assets as described under the second investment
restriction in "Other Investment Restrictions" in the Prospectus, the Fund has
adopted the industry classifications set forth in Appendix A to this Statement
of Additional Information. This is not a fundamental policy.
In connection with the registration of its shares in certain states, the
Fund has made the following undertakings. These undertakings, which are
non-fundamental policies of the Fund, shall terminate if the Fund ceases to
qualify its shares for sale in that state or if the state's applicable rules or
regulations are amended. The Fund has undertaken that: (1) it will not invest in
oil, gas or other mineral leases; and (2) it will not invest in real property,
including limited partnership interests.
How the Fund Is Managed
Organization and History. As a Massachusetts business trust, the Fund is not
required to hold, and does not plan to hold, regular annual meetings of
shareholders. The Fund will hold meetings when required to do so by the
Investment Company Act or other applicable law, or when a shareholder meeting is
called by the Trustees or upon proper request of the shareholders. Shareholders
have the right, upon the declaration in writing or vote of two-thirds of the
outstanding shares of the Fund, to remove a Trustee. The Trustees will call a
meeting of shareholders to vote on the removal of a Trustee upon the written
request of the record holders of 10% of its outstanding shares. In addition, if
the Trustees receive a request from at least 10 shareholders (who have been
shareholders for at least six months) holding shares of the Fund valued at
$25,000 or more or holding at least 1% of the Fund's outstanding shares,
whichever is less, stating that they wish to communicate with other shareholders
to request a meeting to remove a Trustee, the Trustees will then either make the
Fund's shareholder list available to the applicants or mail their communication
to all other shareholders at the applicants' expense, or the Trustees may take
such other action as set forth under Section 16(c) of the Investment Company
Act.
The Fund's Declaration of Trust contains an express disclaimer of
shareholder or Trustee liability for the Fund's obligations, and provides for
indemnification and reimbursement of expenses out of its property for any
shareholder held personally liable for its obligations. The Declaration of Trust
also provides that the Fund shall, upon request, assume the defense of any claim
made against any shareholder for any act or obligation of the Fund and satisfy
any judgment thereon. Thus, while Massachusetts law permits a shareholder of a
business trust (such as the Fund) to be held personally liable as a "partner"
under certain circumstances, the risk of a Fund shareholder incurring financial
loss on account of shareholder liability is limited to the relatively remote
circumstances in which the Fund would be unable to meet its obligations
described above. Any person doing business with the Trust, and any shareholder
of the Trust, agrees under the Trust's Declaration of Trust to look solely to
the assets of the Trust for satisfaction of any claim or demand which may arise
out of any dealings with the Trust, and the Trustees shall have no personal
liability to any such person, to the extent permitted by law.
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<PAGE>
Trustees and Officers of the Fund. The Fund's Trustees and officers and their
principal occupations and business affiliations during the past five years are
listed below. The address of each Trustee and officer is Two World Trade Center,
New York, New York 10048-0203, unless another address is listed below. Ms.
Macaskill is not a director of Oppenheimer Money Market Fund, Inc. Otherwise,
all of the Trustees are also trustees or directors of Oppenheimer Fund,
Oppenheimer Global Fund, Oppenheimer Growth Fund, Oppenheimer Discovery Fund,
Oppenheimer Enterprise Fund, Oppenheimer Global Growth & Income Fund,
Oppenheimer International Growth Fund, Oppenheimer Municipal Bond Fund,
Oppenheimer Capital Appreciation Fund, Oppenheimer New York Municipal Fund,
Oppenheimer California Municipal Fund, Oppenheimer Money Market Fund, Inc.,
Oppenheimer Multi-State Municipal Trust, Oppenheimer Multiple Strategies Fund,
Oppenheimer U.S. Government Trust, Oppenheimer Developing Markets Fund,
Oppenheimer Series Fund, Inc., Oppenheimer Multi-Sector Income Trust and
Oppenheimer World Bond Fund (collectively the "New York-based Oppenheimer
funds"). Ms. Macaskill and Messrs. Spiro, Bishop, Bowen, Donohue, Farrar and
Zack, respectively, hold the same offices with the other New York- based
Oppenheimer funds as with the Fund. As of September 26, 1997, the Trustees and
officers of the Fund as a group owned of record or beneficially less than 1% of
the outstanding shares of each class of the Fund. The foregoing statement does
not reflect ownership of shares held of record by an employee benefit plan for
employees of the Manager (for which plan a Trustee and an officer listed below,
Ms. Macaskill and Mr. Donohue, respectively, are trustees) other than the shares
beneficially owned under that plan by the officers of the Fund listed above.
Leon Levy, Chairman of the Board of Trustees; Age: 71
31 West 52nd Street, New York, New York 10019
General Partner of Odyssey Partners, L.P. (investment partnership) and
Chairman of Avatar
Holdings, Inc. (real estate development).
Robert G. Galli, Trustee*; Age: 64
Vice Chairman of OppenheimerFunds, Inc. (the
"Manager"); formerly he
held the following positions: Vice President and Counsel of Oppenheimer
Acquisition Corp.
("OAC"), the Manager's parent holding company; Executive Vice President
and General Counsel and a director of the Manager and Oppenheimer Funds
Distributor, Inc. (the "Distributor"), Vice President and a director of
HarbourView Asset Management Corporation ("HarbourView") and Centennial
Asset Management Corporation ("Centennial"), investment advisor
subsidiaries of the Manager, a director of Shareholder Financial Services,
Inc. ("SFSI") and Shareholder Services, Inc. ("SSI"), transfer agent
subsidiaries of the Manager, an officer of other Oppenheimer funds.
Benjamin Lipstein, Trustee; Age: 74
591 Breezy Hill Road, Hillsdale, New York 12529
Professor Emeritus of Marketing, Stern Graduate School of Business
Administration, New
York University; a director of Sussex Publishers, Inc. (Publishers of
Psychology Today and
Mother Earth News) and Spy Magazine, L.P.
- --------
*A Trustee who is an "interested person" of the Fund as defined in the
Investment Company Act.
-27-
<PAGE>
Bridget A. Macaskill, President and Trustee*; Age: 49 President, CEO and a
Director of the Manager and HarbourView; Chairman and a director of SSI
and SFSI President and a director of OAC and Oppenheimer Partnership
Holdings, Inc., a holding company subsidiary of the Manager; a director of
Oppenheimer Real Asset Management, Inc.; formerly Executive
Vice President of the Manager.
Elizabeth B. Moynihan, Trustee; Age: 68
801 Pennsylvania Avenue, N.W., Washington, DC 20004
Author and architectural historian; a trustee of the Freer Gallery of
Art (Smithsonian
Institution), the Institute of Fine Arts (New York University),
National Building Museum;
a member of the Trustees Council, Preservation League of New York State
and the Indo-U.S.
Sub-Commission on Education and Culture.
Kenneth A. Randall, Trustee; Age: 70
6 Whittaker's Mill, Williamsburg, Virginia 23185
A director of Dominion Resources, Inc. (electric utility holding company),
Dominion Energy, Inc. (electric power and oil & gas producer), Texan
Cogeneration Company (cogeneration company) , Prime Retail, Inc. (real
estate investment trust); formerly President and Chief Executive Officer
of The Conference Board, Inc. (international economic and business
research) and a director of Lumbermens Mutual Casualty Company, American
Motorists Insurance Company and American Manufacturers Mutual Insurance
Company.
Edward V. Regan, Trustee; Age: 67
40 Park Avenue, New York, New York 10016
Chairman of Municipal Assistance Corporation for the City of New York;
Senior Fellows of Jerome Levy Economics Institute, Bard College; a member
of the U.S. Competitiveness Policy Council; a director of GranCare, Inc.
(healthcare provider); formerly New York State Comptroller and a trustee,
New York State and Local Retirement Fund.
Russell S. Reynolds, Jr., Trustee; Age: 65
8 Sound Shore Drive,
Greenwich,
Connecticut 06830
Founder Chairman of Russell Reynolds Associates, Inc. (executive
recruiting); Chairman of
Directorship Inc. (corporate
governance consulting);
a director of Professional Staff Limited
(U.K); a trustee of Mystic Seaport Museum,
International House,
Greenwich Historical Society.
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<PAGE>
Donald W. Spiro, Vice Chairman and Trustee*; Age: 71
Chairman Emeritus and a director of the Manager; formerly Chairman of
the Manager and
the Distributor.
Pauline Trigere, Trustee; Age: 84
498 Seventh Avenue, New York, New York 10018
Chairman and Chief Executive Officer of Trigere, Inc. (design and sale
of women's
fashions).
Clayton K. Yeutter, Trustee; Age: 66
1325 Merrie Ridge Road, McLean, Virginia 22101
Of Counsel to Hogan & Hartson (a law firm); a director of B.A.T.
Industries, Ltd. (tobacco and financial services), Caterpillar, Inc.
(machinery), ConAgra, Inc. (food and agricultural products), Farmers
Insurance Company (insurance), FMC Corp. (chemicals and machinery), IMC
Global Inc. (chemicals and animal feed) and Texas Instruments, Inc.
(electronics); formerly (in descending chronological order) Counselor to
the President (Bush) for Domestic Policy, Chairman of the Republican
National Committee, Secretary of the U.S. Department of Agriculture, and
U.S. Trade Representative.
Andrew J. Donohue, Secretary; Age: 47
Executive Vice President (since January 1993), General Counsel (since
October 1991) and a Director (since September 1995) of the Manager ;
Executive Vice President (since September 1993), and a director (since
January 1992) of the Distributor; Executive Vice President, General
Counsel and a director of HarbourView, SSI, SFSI and Oppenheimer
Partnership Holdings, Inc. since (September 1995) and MultiSource
Services, Inc. (a broker-dealer) (since December 1995); President and a
director of Centennial (since September 1995); President and a director of
Oppenheimer Real Asset Management, Inc. (since July 1996); General Counsel
(since May 1996) and Secretary (since April 1997) of OAC; an officer of
other Oppenheimer funds .
- --------
*A Trustee who is an "interested person" of the Fund as defined in the
Investment Company Act.
-29-
<PAGE>
Frank Jennings, Vice President and Portfolio Manager; Age: 50 Vice
President of the Manager (since September 1995); and an officer of other
Oppenheimer funds; formerly Managing Director of Global Equities at
Mitchell Hutchins Asset Management, Inc., a subsidiary of PaineWebber Inc.
Shanquan Li, Vice President and Portfolio Manager; Age: 43
Assistant Vice President of the Manager
(July 1997);
formerly a Senior Quantitative Analyst in the Investment Management
Policy Group of
Brown Brothers Harriman, and a Consultant for Acadian Asset
Management, Inc.
George C. Bowen, Treasurer; Age: 61
6803 South Tucson Way, Englewood,
Colorado
80112
Senior Vice President (since September 1987) and Treasurer (since March
1985) of the Manager; Vice President (since June 1983) and Treasurer
(since March 1985) of the Distributor ; Vice President (since October
1989) and Treasurer (since April 1986) of HarbourView; Senior Vice
President (since February 1992), Treasurer (since July 1991)and a director
(since December 1991) of Centennial; President, Treasurer and a director
of Centennial Capital Corporation (since June 1989); Vice President and
Treasurer (since August 1978) and Secretary (since April 1981) of SSI;
Vice President, Treasurer and Secretary of SFSI (since November 1989);
Treasurer of OAC (since June 1990); Treasurer of Oppenheimer Partnership
Holdings, Inc. (since November 1989); Vice President and Treasurer of
Oppenheimer Real Asset Management, Inc. (since July 1996); Chief Executive
Officer, Treasurer and a director of MultiSource Services, Inc., a
broker-dealer ince December 1995); an officer of other Oppenheimer funds.
Robert G. Zack, Assistant Secretary; Age: 49 Senior Vice President (since
May 1985) and Associate General Counsel (since May 1981) of the Manager,
Assistant Secretary of SSI (since May 1985), and SFSI (since November
1989); an officer of other Oppenheimer funds.
Robert J. Bishop, Assistant Treasurer; Age: 38
6803 South Tucson Way, Englewood,
Colorado
80112
Vice President of the Manager/Mutual Fund Accounting (since May 1996); an
officer of other Oppenheimer funds; formerly an Assistant Vice President
of the Manager/Mutual Fund Accounting (April 1994-May 1996), and a Fund
Controller for the Manager .
Scott T. Farrar, Assistant Treasurer; Age: 32
6803 South Tucson Way, Englewood,
Colorado
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<PAGE>
80112
Vice President of the Manager/Mutual Fund Accounting (since May 1996); an
officer of other Oppenheimer funds; formerly an Assistant Vice President
of the Manager/Mutual Fund Accounting (April 1994-May 1996), and a Fund
Controller for the Manager .
Remuneration of Trustees. All officers of the Fund and certain Trustees of
the Fund (Ms. Macaskill and Messrs. Galli and Spiro ) who are affiliated with
the Manager receive no salary or fees from the Fund. The remaining Trustees of
the Fund received the compensation shown below. The compensation from the Fund
was paid during its fiscal year ended June 30, 1997. The compensation from all
of the New York-based Oppenheimer funds includes the Fund and is compensation
received as a director, trustee or managing general partner or member of a
committee of the Board of those funds during calendar year 1996.
<TABLE>
<CAPTION>
Retirement Total
Benefits Compensation
Aggregate Accrued From All
Compensation as Part of New York-based
Name and Position From Fund Fund Expenses Oppenheimer funds1
<S> <C> <C> <C>
Leon Levy, Chairman $5,488 ($1,719) $152,750
and Trustee
Benjamin Lipstein, $3,282 ($1,028) $91,350
Study Committee Chairman,
Audit Committee Member
and Trustee2
Elizabeth B. Moynihan, $3,282 ($1 ,028) $91,350
Study Committee Member
and Trustee
Kenneth A. Randall, $2,998 ($939) $83,450
Audit Committee Chairman
and Trustee
Edward V. Regan, $2,808 ($880) $78,150
-31-
<PAGE>
Proxy Committee Chairman,
Audit Committee Member
and Trustee
Russell S. Reynolds, Jr., $2,113 ($662) $58,800
Proxy Committee Member
and Trustee
Pauline Trigere, Trustee $1,987 ($622) $55,300
Clayton K. Yeutter, $2,113 ($662) $58,800
Proxy Committee Member
and Trustee
</TABLE>
- --------------------
1For the 1995 calendar year (prior to the inception of the Proxy Committee)
during which the New York-based Oppenheimer funds, listed in the first paragraph
of this section, including Oppenheimer Mortgage Income Fund and Oppenheimer Time
Fund (which ceased operation following the acquisition of their assets by
certain other Oppenheimer funds) but excluding Oppenheimer International Growth
Fund, which had not yet commenced operations. 2Committee position held during a
portion of the period shown. The Study and Audit Committees meet for all of the
New York-based Oppenheimer funds and the fees are allocated among the funds by
the Board.
The Fund has adopted a retirement plan that provides for payment to a
retired Trustee of up to 80% of the average compensation paid during that
Trustee's five years of service in which the highest compensation was received.
A Trustee must serve in that capacity for any of the New York- based Oppenheimer
funds for at least 15 years to be eligible for the maximum payment. Because each
Trustee's retirement benefits will depend on the amount of the Trustee's future
compensation and length of service, the amount of those benefits cannot be
determined at this time, nor can the Fund estimate the number of years of
credited service that will be used to determine those benefits. During the
fiscal year ended June 30, 1997 a credit of $9,193 was made for the Fund's
projected retirement obligations and payments of $1,013 were made to retired
trustees, resulting in an accumulated liability of $81,234 at June 30, 1997.
o Major Shareholders. As of September 26, 1997, no person owned of record
or was known by the Fund to own beneficially 5% or more of the Fund's
outstanding Class A, Class B or Class C shares except: (i) Merrill Lynch Fenner
& Smith , 4800 Deer Lake Drive East Fl. 3, Jacksonville, Florida 32246-6484, who
owned of record 512,521.194 Class A shares (5.20% of the Fund's outstanding
Class {C} A shares as of such date), (ii) Merrill Lynch Fenner & Smith, 4800
Deer Lake Drive East Fl. 3, Jacksonville, Florida 32246-6484, who owned of
record 79,652.946 Class B shares
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<PAGE>
(9.48% of the Fund's outstanding Class B shares as of such date)
, (iii) Merrill Lynch Fenner & Smith, 4800 Deer Lake Drive East Fl. 3,
Jacksonville, Florida 32246-6484, who owned of record 58,091 shares (15.29% of
the Fund's outstanding Class C shares as of such date) and (iv) Smith Barney
Inc., 388 Greenwich St., New York, NY 10013, who owned of record 22,710.068
Class C shares (6.02% of the Fund's outstanding Class C shares as of such date).
The Manager and Its Affiliates. The Manager is wholly-owned by Oppenheimer
Acquisition Corp. ("OAC"), a holding company controlled by Massachusetts Mutual
Life Insurance Company. OAC is also owned in part by certain of the Manager's
directors and officers, some of whom also serve as officers of the Fund, and two
of whom (Messrs. Galli and Spiro) serve as Trustees of the Fund.
The Manager and the Fund have a Code of Ethics. It is designed to detect
and prevent improper personal trading by certain employees, including portfolio
managers, that would compete with or take advantage of the Fund's portfolio
transactions. Compliance with the Code of Ethics is carefully monitored and
strictly enforced by the Manager.
o The Investment Advisory Agreement. A management fee is payable monthly
to the Manager under the terms of the Investment Advisory Agreement between the
Manager and the Fund and is computed on the aggregate net assets of the Fund as
of the close of business each day. The investment advisory agreement requires
the Manager, at its expense, to provide the Fund with adequate office space,
facilities and equipment, and to provide and supervise the activities of all
administrative and clerical personnel required to provide effective corporate
administration for the Fund, including the compilation and maintenance of
records with respect to its operations, the preparation and filing of specified
reports, and composition of proxy materials and registration statements for
continuous public sale of shares of the Fund.
Expenses not expressly assumed by the Manager under the Investment
Advisory Agreement or by the Distributor under the General Distributors
Agreement are paid by the Fund. The Investment Advisory Agreement lists examples
of expenses paid by the Fund, the major categories of which relate to interest,
taxes, brokerage commissions, fees to certain Trustees, legal and audit
expenses, custodian and transfer agent expenses, share issuance costs, certain
printing and registration costs and non-recurring expenses, including litigation
costs. For the Fund's fiscal years ended June 30, 1995 , 1996 and 1997, the
management fees paid by the Fund to the Manager were $1,339,091 , $1,302,108 and
$1,195,285, respectively.
The Advisory Agreement contains no expense limitation. However, because of
state regulations limiting fund expenses that previously applied, the Manager
had voluntarily undertaken that the Fund's total expenses in any fiscal year
(including the investment advisory fee but excluding taxes, interest, brokerage
commissions, distribution plan payments and any extraordinary non-recurring
expenses , including litigation costs) would not exceed the most stringent
-33-
<PAGE>
state regulatory limitation applicable to the Fund. Due to changes in federal
securities laws, such state regulations no longer apply and the Manager's
undertaking is therefore inapplicable and has been withdrawn. During the Fund's
last fiscal year, the Fund's expenses did not exceed the most stringent state
regulatory limit and the voluntary undertaking was not invoked.
The Investment Advisory Agreement provides that so long as it has acted
with due care and in good faith, the Manager shall not be liable for any loss
sustained by reason of any investment, the adoption of any investment policy, or
the purchase, sale or retention of securities, irrespective of whether the
determinations of the Manager relative thereto shall have been based, wholly or
partly, upon the investigation or research of any other individual, firm or
corporation believed by it to be reliable. However, the Investment Advisory
Agreement does not protect the Manager against liability by reason of its
willful misfeasance, bad faith or gross negligence in the performance of its
duties or its reckless disregard of its obligations and duties under the
Investment Advisory Agreement. The Investment Advisory Agreement permits the
Manager to act as investment adviser for any other person, firm or corporation
and to use the name "Oppenheimer" in connection with other investment companies
for which it may act as investment adviser or general distributor. If the
Manager shall no longer act as investment adviser to the Fund, the right of the
Fund to use the name "Oppenheimer" as part of its name may be withdrawn.
o The Distributor. Under its General Distributor's Agreement with the Fund,
the Distributor acts as the Fund's principal underwriter in the continuous
public offering of the Fund's Class A, Class B and Class C shares but is not
obligated to sell a specific number of shares.
Expenses normally attributable to sales, (other than those expenses paid under
the Distribution and Service Plans, but including advertising and the cost of
printing and mailing prospectuses, other than those furnished to existing
shareholders), are borne by the Distributor. During the Fund's fiscal years
ended June 30, 1995 , 1996 and 1997, the aggregate sales charges on sales of the
Fund's Class A shares were $842,093 , $632,631 and $412,453, respectively, of
which the Distributor and an affiliated broker-dealer retained in the aggregate
$202,059 , $149,888 and $96,752 in those respective years. During the Fund's
fiscal year ended June 30, 1997, the contingent deferred sales charges on the
Fund's Class B shares totaled $34,108, all of which the Distributor retained.
During the Fund's fiscal year ended June 30, 1997, the contingent deferred sales
charges collected on the Fund's Class C shares totaled $3,974, all of which the
Distributor retained. For additional information about distribution of the
Fund's shares and the payments made by the Fund to the Distributor in connection
with such activities, please refer to "Distribution and Service Plans," below.
-34-
<PAGE>
o The Transfer Agent. OppenheimerFunds Services, the Fund's Transfer Agent,
is responsible for maintaining the Fund's shareholder registry and shareholder
accounting records, and for shareholder servicing and administrative functions.
Brokerage Policies of the Fund
Brokerage Provisions of the Investment Advisory Agreement. One of the duties of
the Manager under the Investment Advisory Agreement is to arrange the portfolio
transactions for the Fund. The advisory agreement contains provisions relating
to the employment of broker-dealers ("brokers") to effect the Fund's portfolio
transactions. In doing so, the Manager is authorized by the advisory agreement
to employ broker-dealers, including "affiliated" brokers, as that term is
defined in the Investment Company Act, as may, in its best judgment based on all
relevant factors, implement the policy of the Fund to obtain, at reasonable
expense, the "best execution" (prompt and reliable execution at the most
favorable price obtainable) of such transactions. The Manager need not seek
competitive commission bidding but is expected to be aware of the current rates
of eligible brokers and to minimize the commissions paid to the extent
consistent with the interest and policies of the Fund as established by its
Board of Trustees. Purchases of securities from underwriters include a
commission or concession paid by the issuer to the underwriter, and purchases
from dealers include a spread between the bid and asked price.
Under the Investment Advisory Agreement, the Manager is authorized to
select brokers that provide brokerage and/or research services for the Fund
and/or the other accounts over which the Manager or its affiliates have
investment discretion. The commissions paid to such brokers may be higher than
another qualified broker would have charged if a good faith determination is
made by the Manager that the commission is fair and reasonable in relation to
the services provided. Subject to the foregoing considerations, the Manager may
also consider sales of shares of the Fund and other investment companies managed
by the Manager or its affiliates as a factor in the selection of brokers for the
Fund's portfolio transactions.
Description of Brokerage Practices Followed by the Manager. Subject to the
provisions of the Investment Advisory Agreement, and the procedures and rules
described above, allocations of brokerage are generally made by the Manager's
portfolio traders based upon recommendations from the Manager's portfolio
managers. In certain instances, portfolio managers may directly place trades and
allocate brokerage, also subject to the provisions of the investment advisory
agreement and the procedures and rules described above. In either case,
brokerage is allocated under the supervision of the Manager's executive
officers. Transactions in securities other than those for which an exchange is
the primary market are generally done with principals or market makers.
Transactions in Metal Investments will be made through recognized dealers in
such investments or, in the case of certificates representing such investments,
directly with the issuers of such certificates. In connection with transactions
on foreign exchanges, the Fund may be required to pay fixed brokerage
commissions and thereby forego the benefit of negotiated commissions available
in U.S. markets. Brokerage commissions are paid primarily for effecting
transactions in listed securities or for certain fixed-income agency
transactions in the secondary market, and are otherwise paid only if it appears
likely that a better price or execution can be obtained. When the Fund engages
in an option transaction, ordinarily the same broker will be used for the
purchase or sale of the option and any
-35-
<PAGE>
transaction in the securities to which the option relates. When possible,
concurrent orders to purchase or sell the same security by more than one of the
accounts managed by the Manager or its affiliates are combined. The transactions
effected pursuant to such combined orders are averaged as to price and allocated
in accordance with the purchase or sale orders actually placed for each account.
Option commissions may be relatively higher than those which would apply to
direct purchases and sales of portfolio securities.
Most purchases of money market instruments and debt obligations are
principal transactions at net prices. For those transactions, instead of using a
broker the Fund normally deals directly with the selling or purchasing principal
or market maker unless it is determined that a better price or execution can be
obtained by using a broker. Purchases of these securities from underwriters
include a commission or concession paid by the issuer to the underwriter, and
purchases from dealers include a spread between the bid and asked price. The
Fund seeks to obtain prompt execution of such orders at the most favorable net
price.
The research services provided by a particular broker may be useful only
to one or more of the advisory accounts of the Manager and its affiliates, and
investment research received for the commissions of those other accounts may be
useful both to the Fund and one or more of such other accounts. Such research,
which may be supplied by a third party at the instance of a broker, includes
information and analyses on particular companies and industries as well as
market or economic trends and portfolio strategy, receipt of market quotations
for portfolio evaluations, information systems, computer hardware and similar
products and services. If a research service also assists the Manager in a
non-research capacity (such as bookkeeping or other administrative functions),
then only the percentage or component that provides assistance to the Manager in
the investment decision-making process may be paid for in commission dollars.
The Board of Trustees has permitted the Manager to use concessions on fixed
price offerings to obtain research, in the same manner as is permitted for
agency transactions. The Board has also permitted the Manager to use stated
commissions on secondary fixed-income agency trades to obtain research where the
broker has represented to the Manager that: (i) the trade is not from or for the
broker's own inventory, (ii) the trade was executed by the broker on an agency
basis at the stated commission, and (iii) the trade is not a riskless principal
transaction.
The research services provided by brokers broadens the scope and
supplement the research activities of the Manager, by making available
additional views for consideration and comparisons, and by enabling the Manager
to obtain market information for the valuation of securities held in the Fund's
portfolio or being considered for purchase. The Board of Trustees, including the
"independent" Trustees of the Fund (those Trustees of the Fund who are not
"interested persons" as defined in the Investment Company Act, and who have no
direct or indirect financial interest in the operation of the Investment
Advisory Agreement or the Distribution and Service Plans described below)
annually reviews information furnished by the Manager as to the commissions paid
to brokers furnishing such services so that the Board may ascertain whether the
amount of such commissions was reasonably related to the value or benefit of
such services.
During the Fund's fiscal years ended June 30, 1995 , 1996 and 1997, total
brokerage commissions paid by the Fund (not including spreads or concessions on
principal
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transactions on a net trade basis) were $780,211 , $394,900 and $211,912,
respectively. Of that amount, during the fiscal year ended June 30, 1997,
$145,586 was paid to brokers as commissions in return for research services; the
aggregate dollar amount of those transactions was $35,853,506. The transactions
giving rise to those commissions were allocated in accordance with the Manager's
internal allocation procedures.
Performance of the Fund
Total Return Information. As described in the Prospectus, from time to time the
"average annual total return," "cumulative total return," "average annual total
return at net asset value" and "total return at net asset value" of an
investment in a class of shares of the Fund may be advertised. An explanation of
how these total returns are calculated for each class and the components of
those calculations is set forth below.
The Fund's advertisements of its performance data must, under applicable
rules of the Securities and Exchange Commission, include the average annual
total returns for each advertised class of shares of the Fund for the 1, 5, and
10-year periods (or the life of the class, if less) ending as of the most
recently-ended calendar quarter prior to the publication of the advertisement.
This enables an investor to compare the Fund's performance to the performance of
other funds for the same periods. However, a number of factors should be
considered before using such information as a basis for comparison with other
investments. An investment in the Fund is not insured; its returns and share
prices are not guaranteed and normally will fluctuate on a daily basis. When
redeemed, an investor's shares may be worth more or less than their original
cost. Returns for any given past period are not a prediction or representation
by the Fund of future returns. The returns of each class of shares of the Fund
are affected by portfolio quality, the type of investments the Fund holds and
its operating expenses allocated to the particular class.
o Average Annual Total Returns. The Fund's "average annual total return"
of each class is an average annual compounded rate of return for each year in a
specified number of years. It is the rate of return based on the change in value
of a hypothetical initial investment of $1,000 ("P" in the formula below) held
for a number of years ("n") to achieve an Ending Redeemable Value ("ERV") of
that investment, according to the following formula:
1/n
(ERV)
(---) -1 = Average Annual Total Return
( P )
o Cumulative Total Returns. The cumulative "total return" calculation
measures the change in value of a hypothetical investment of $1,000 over an
entire period of years. Its calculation uses some of the same factors as average
annual total return, but it does not average the rate of return on an annual
basis. Cumulative total return is determined as follows:
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ERV - P
------- = Total Return
P
In calculating total returns for shares of the Fund, the current maximum
sales charge of 5.75% (as a percentage of the offering price) is deducted from
the initial investment ("P")(unless the return is shown at net asset value, as
described below). For Class B shares, the payment of the applicable contingent
deferred sales charge (5.0% for the first year, 4.0% for the second year, 3.0%
for the third and fourth years, 2.0% in the fifth year, 1.0% in the sixth year
and none thereafter) is applied to the investment result for the period shown
(unless the total return is shown at net asset value, as described below). For
Class C shares, the payment of the 1.0% contingent deferred sales charge is
applied to the investment result for the one-year period (or less). Total
returns also assume that all dividends and capital gains distributions during
the period are reinvested to buy additional shares at net asset value per share,
and that the investment is redeemed at the end of the period.
The "average annual total returns" on an investment in Class A shares of
the Fund for the one, five and ten year periods ended June 30, 1997 were
(15.37%), 2.92% and 4.71%, respectively. The cumulative "total return" on Class
A shares of the Fund for the ten year period ended June 30, 1997 was 58.34%. The
cumulative total return on Class B shares of the Fund for the period June 30,
1997 was (2.37%). The cumulative total return on Class C shares for the period
from November 1, 1995, through June 30, 1997 was 1.94%.
o Total Returns at Net Asset Value. From time to time the Fund may also
quote an average annual total return at net asset value or a cumulative total
return at net asset value for Class A, Class B and Class C shares. Each is
based on the difference in net asset value per share at the beginning and the
end of the period for a hypothetical investment in that class of shares (without
considering front-end or contingent deferred sales charges) and takes into
consideration the reinvestment of dividends and capital gains distributions. The
cumulative total return at net asset value of the Fund's Class A shares for the
ten-year period ended June 30, 1997 was 68.00%. The average annual total returns
at net asset value for the one, five and ten-year periods ended June 30, 1997,
for Class A shares of the Fund were (10.20%), 4.14% and 5.33%, respectively. The
cumulative total return at net asset value for Class B shares for the period
from November 1, 1995 through June 30, 1997 was 1.70%. The cumulative total
return at net asset value for Class C shares for the period from November 1,
1995 through June 30, 1997 was 1.94%.
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Total return information may be useful to investors in reviewing the
performance of the Fund's Class A, Class B and Class C shares. However, when
comparing total return of an investment in shares of the Fund with that of other
alternatives, investors should understand that as the Fund is an aggressive
equity fund seeking capital appreciation, its shares are subject to greater
market risks than shares of funds having other investment objectives and that
the Fund is designed for investors who are willing to accept greater risk of
loss in the hopes of realizing greater gains.
Other Performance Comparisons. From time to time the Fund may publish the
ranking of its Class A, Class B, Class C or Class Y shares by Lipper Analytical
Services, Inc. ("Lipper") or Morningstar, Inc. and Lipper is a widely-
recognized independent mutual fund monitoring service. Lipper monitors the
performance of regulated investment companies, including the Fund, and ranks
their performance for various periods based on categories relating to investment
objectives. The performance of the Fund's classes of shares is ranked against
(i) all other funds and (ii) all other gold-oriented funds. The Lipper
performance rankings are based on total returns that include the reinvestment of
capital gain distributions and income dividends but do not take sales charges or
taxes into consideration.
From time to time the Fund may publish the star ranking of the performance
of its Class A, Class B, Class C or Class Y shares by Morningstar, Inc., an
independent mutual fund monitoring service . Morningstar ranks mutual funds in
broad investment categories (domestic stock funds, international stock funds,
taxable bond funds and municipal bond funds) based on risk-adjusted investment
return. The Fund is ranked among the domestic equity funds. Investment return
measures a fund's or class's one, three, five and ten-year average annual total
returns (depending on the inception of the fund or class) in excess of 90-day
U.S. Treasury bill returns after considering sales charges and expenses. Risk
measures fund performance below 90-day U.S. Treasury bill monthly returns. Risk
and investment return are combined to produce star rankings reflecting
performance relative to the average fund in a fund's category. Five stars is the
"highest" ranking (top 10%), four stars is "above average" (next 22.5%), three
stars is "average" (next 35%), two stars is "below average" (next 22.5%) and one
star is "lowest" (bottom 10%). Rankings are subject to change monthly. The
current star ranking is the fund's or class's 3-year ranking or its combined 3-
and 5- year ranking (weighted 60%/40%, respectively, or its combined 3-, 5- and
10-year ranking (weighted 40%, 30% and 30%, respectively),
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depending on the inception of the fund or class.
The Fund may also compare its performance to that of other funds in its
Morningstar Category. In addition to its star ranking, Morningstar also
categorizes and compares a fund's 3-year performance based on Morningstar's
classification of the fund's investments objective. Morningstar's four broad
categories are each further subdivided into categories based on types of
investments and investment styles. Those comparisons by Morningstar are based on
the same risk and return measurements as its star rankings but do not consider
the effect of sales charges.
From time to time, the Fund's Manager may publish rankings or ratings of
the Manager (or Transfer Agent) or the investor services provided by them to
shareholders of the Oppenheimer funds, other than performance rankings of the
Oppenheimer funds themselves. Those ratings or rankings of shareholder/investor
services by third parties may compare the Oppenheimer funds services to those of
other mutual fund families selected by the rating or ranking services, and may
be based upon the opinions of the rating or ranking service itself, using its
own research or judgment, or based upon surveys of investors, brokers,
shareholders or others.
Distribution and Service Plans
The Fund has adopted a Service Plan for Class A shares and Distribution
and Service Plans for Class B and Class C shares of the Fund under Rule 12b-1 of
the Investment Company Act pursuant to which the Fund makes payments to the
Distributor in connection with the distribution and/or servicing of the shares
of that class, as described in the Prospectus. Each Plan has been approved by a
vote of (i) the Board of Trustees of the Fund, including a majority of the
Independent Trustees, cast in person at a meeting called for the purpose of
voting on that Plan, and (ii) the holders of a "majority" (as defined in the
Investment Company Act) of the shares of each class. For the Distribution and
Service Plans for Class B and Class C shares, that vote was cast by the Manager
as the sole initial holder of Class B and Class C shares of the Fund.
In addition, under the Plans, the Manager and the Distributor, in their
sole discretion, from time to time, may use their own resources (which, in the
case of the Manager, may include profits from the advisory fee it receives from
the Fund), to make payments to brokers, dealers or other financial institutions
(each is referred to as a "Recipient" under the Plans) for distribution and
administrative services they perform, at no cost to the Fund. The Distributor
and the Manager may, in their sole discretion, increase or decrease the amount
of payments they make from their own resources to Recipients.
Unless terminated as described below, each Plan continues in effect from
year to year but only as long as its continuance is specifically approved at
least annually by the Fund's Board of Trustees and its Independent Trustees by a
vote cast in person at a meeting called for the purpose of voting on such
continuance. Any Plan may be terminated at any time by the vote of a majority of
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the Independent Trustees or by the vote of the holders of a "majority" (as
defined in the Investment Company Act) of the outstanding shares of that class.
No Plan may be amended to increase materially the amount of payments to be made
unless such amendment is approved by shareholders of the class affected by the
amendment. In addition, because Class B shares of the Fund automatically convert
into Class A shares after six years, the Fund is required by a Securities and
Exchange Commission rule to obtain the approval of Class B as well as Class A
shareholders for a proposed amendment to the Class A Plan that would materially
increase the amount to be paid by Class A shareholders under the Class A Plan.
Such amendment must be by a "majority" of the Class A and Class B shares (as
defined in the Investment Company Act), voting separately by class. All material
amendments must be approved by the Independent Trustees.
While the Plans are in effect, the Treasurer of the Fund shall provide
separate written reports to the Fund's Board of Trustees at least quarterly on
the amount of all payments made pursuant to each Plan, the purpose for which
payments were made and the services rendered in connection with the distribution
of shares. Those reports, including the allocations on which they are based,
will be subject to the review and approval of the Independent Trustees in the
exercise of their fiduciary duty. Each Plan further provides that while it is in
effect, the selection and nomination of those Trustees of the Fund who are not
"interested persons" of the Fund is committed to the discretion of the
Independent Trustees. This does not prevent the involvement of others in such
selection and nomination if the final decision on selection or nomination is
approved by a majority of the Independent Trustees.
Under the Plans, no payment will be made to any Recipient in any quarter
if the aggregate net asset value of all Fund shares held by the Recipient for
itself and its customers did not exceed a minimum amount, if any, that may be
determined from time to time by a majority of the Fund's Independent Trustees.
Currently, the Board of Trustees has set the fees at the maximum rate and set no
minimum amount. However, while the maximum fee rate under the Class A Plan is
0.25% of average annual net assets of the Fund, the Board of Trustees has set
the maximum rate for assets representing shares of the Fund acquired before
April 1, 1991, at 0.15%, and for assets representing Class A shares acquired on
or after April 1, 1991, at 0.25%.
For the fiscal year ended June 30, 1997, payments under the Plan for Class
A shares totaled $308,600, all of which was paid by the Distributor to
Recipients including $7,782 that was paid to an affiliate of the Distributor.
Any unreimbursed expenses incurred by the Distributor with respect to Class A
shares for any fiscal year may not be recovered in subsequent fiscal years.
Payments received by the Distributor under the Plan for Class A shares will not
be used to pay any interest expense, carrying charges, or other financial costs,
or allocation of overhead by the Distributor.
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The Class B and Class C Plans allow the service fee payment to be paid by
the Distributor to Recipients in advance for the first year such shares are
outstanding, and thereafter on a quarterly basis, as described in the
Prospectus. The advance payment is based on the net asset value of shares sold.
An exchange of shares does not entitle the Recipient to an advance service fee
payment. In the event shares are redeemed during the first year such shares are
outstanding, the Recipient will be obligated to repay a pro rata portion of such
advance payment to the Distributor. Payments made under the Class B plan during
the period from November 1, 1995 through June 30, 1997 totaled $73,620, of which
$68,461 was retained by the Distributor. Payments made under the Class C Plan
during the period from November 1, 1995 through June 30, 1997 totaled $26,693,
of which $21,390 was retained by the Distributor. As of June 30, 1997, the
Distributor had incurred unreimbursed expenses under the Class B and Class C
Plans of $339,068 and $64,753, respectively (equal to 3.89% and 1.65% of Class B
and Class C shares, respectively, on that date) which have been carried into the
present Plan year.
Although the Class B and the Class C Plans permit the Distributor to
retain both the asset-based sales charges and the service fees on such shares,
or to pay Recipients the service fee on a quarterly basis without payment in
advance, the Distributor presently intends to pay the service fee to Recipients
in the manner described above. A minimum holding period may be established from
time to time under the Class B and the Class C Plan by the Board. Initially, the
Board has set no minimum holding period. All payments under the Class B and the
Class C Plan are subject to the limitations imposed by the Conduct Rules of the
National Association of Securities Dealers, Inc. The Distributor anticipates
that it will take a number of years for it to recoup (from the Fund's payments
to the Distributor under the Class B or Class C Plan and from contingent
deferred sales charges collected on redeemed Class B or Class C shares) the
sales commissions paid to authorized brokers or dealers.
ABOUT YOUR ACCOUNT
How To Buy Shares
Alternative Sales Arrangements - Class A, Class B and Class C Shares. The
availability of three classes of shares permits an investor to choose the method
of purchasing shares that is more beneficial to the investor depending on the
amount of the purchase, the length of time the investor expects to hold shares
and other relevant circumstances. Investors should understand that the purpose
and function of the deferred sales charge and asset-based sales charge with
respect to Class B and Class C shares are the same as those of the initial sales
charge with respect to Class A shares. Any salesperson or other person entitled
to receive compensation for selling Fund shares may receive different
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compensation with respect to one class of shares than the other. The Distributor
normally will not accept any order for $500,000 or more of Class B shares or $1
million or more of Class C shares on behalf of a single investor (not including
dealer "street name" or omnibus accounts) because generally it will be more
advantageous for that investor to purchase Class A shares of the Fund instead.
The three classes of shares each represent an interest in the same
portfolio investments of the Fund. However, each class has different shareholder
privileges and features. The net income attributable to Class B and Class C
shares and the dividends payable on such shares will be reduced by incremental
expenses borne solely by those classes, including the asset-based sales charge
to which both classes of shares are subject.
The conversion of Class B shares to Class A shares after six years is
subject to the continuing availability of a private letter ruling from the
Internal Revenue Service, or an opinion of counsel or tax adviser, to the effect
that the conversion of B shares does not constitute a taxable event for the
holder under Federal income tax law. If such a revenue ruling or opinion is no
longer available, the automatic conversion feature may be suspended, in which
event no further conversions of Class B shares would occur while such suspension
remained in effect. Although Class B shares could then be exchanged for Class A
shares on the basis of relative net asset value of the two classes, without the
imposition of a sales charge or fee, such exchange could constitute a taxable
event for the holder, and absent such exchange, Class B shares might continue to
be subject to the asset-based sales charge for longer than six years.
The methodology for calculating the net asset value, dividends and
distributions of the Fund's Class A, Class B and Class C shares recognizes two
types of expenses. General expenses that do not pertain specifically to any
class are allocated pro rata to the shares of each class, based on the
percentage of the net assets of such class to the Fund's total assets, and then
equally to each outstanding share within a given class. Such general expenses
include (i) management fees, (ii) legal, bookkeeping and audit fees, (iii)
printing and mailing costs of shareholder reports, Prospectuses, Statements of
Additional Information and other materials for current shareholders, (iv) fees
to Independent Trustees, (v) custodian expenses, (vi) share issuance costs,
(vii) organization and start-up costs, (viii) interest, taxes and brokerage
commissions, and (ix) non-recurring expenses, such as litigation costs. Other
expenses that are directly attributable to a class are allocated equally to each
outstanding share within that class. Such expenses include (i) Distribution
and/or Service Plan fees, (ii) incremental transfer and shareholder servicing
agent fees and expenses, (iii) registration fees and (iv) shareholder meeting
expenses, to the extent that such expenses pertain to a specific class rather
than to the Fund as a whole.
Determination of Net Asset Values Per Share. The net asset values
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per share of Class A, Class B and Class C shares of the Fund are determined as
of the close of business of The New York Stock Exchange (the "Exchange") on each
day that the Exchange is open, by dividing the value of the Fund's net assets
attributable to that class by the number of shares of that class that are
outstanding. The Exchange normally closes at 4:00 P.M. New York time, but may
close earlier on some days (for example, in case of weather emergencies or on
days falling before a holiday). The Exchange's most recent annual announcement
(which is subject to change) states that it will close on New Year's Day,
Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving Day and Christmas Day. It may also close on other days. The Fund
may invest a substantial portion of its assets in foreign securities primarily
listed on foreign exchanges which may trade on Saturdays or customary U.S.
business holidays on which the Exchange is closed. Because the Fund's net asset
value will not be calculated on those days, the Fund's net asset values per
share of Class A, Class B and Class C shares of the Fund may be significantly
affected on such days when shareholders may not purchase or redeem shares.
The Fund's Board of Trustees has established procedures for the valuation
of the Fund's securities, generally as follows: (i) equity securities traded on
a U.S. securities exchange or on the Automated Quotation System ("NASDAQ") of
the Nasdaq Stock Market, Inc. for which last sale information is regularly
reported are valued at the last reported sale price on their primary exchange or
NASDAQ that day (or, in the absence of sales that day, at values based on the
last sale price of the preceding trading day, or closing bid prices that day);
(ii) securities traded on a foreign securities exchange are generally valued at
the last sales price available to the pricing service approved by the Fund's
Board of Trustees or to the Manager as reported by the principal exchange on
which the security is traded date}, or at the mean between "bid" and "asked"
prices obtained from the principal exchange or two active market makers in the
security on the basis of reasonable inquiry; (iii) long-term debt securities
having a remaining maturity in excess of 60 days are valued based on the mean
between the "bid" and "asked" prices determined by a portfolio pricing service
approved by the Fund's Board of Trustees or obtained by the Manager from two
active market makers in the security on the basis of reasonable inquiry; (iv)
debt instruments having a maturity of more than 397 days when issued, and
non-money market type instruments having a maturity of 397 days or less when
issued, which have a remaining maturity of 60 days or less are valued at the
mean between "bid" and "asked" prices determined by a pricing service approved
by the Fund's Board of Trustees or obtained by the Manager from two active
market makers in the security on the basis of reasonable inquiry; (v) money
market-type debt securities held by a non-money market fund that had a maturity
of less than 397 days when issued that have a remaining maturity of 60 days or
less , and debt instruments held by a money market fund that
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have a remaining maturity of 397 days or less, shall be valued at cost, adjusted
for amortization of premiums and accretion of discount; and (vi) securities
(including restricted securities) not having readily-available market quotations
are valued at fair value determined under the Board's procedures. If the Manager
is unable to locate two market makers willing to give quotes (see (ii), (iii)
and (iv) above), the security may be priced at the mean between the "bid" and
"asked" prices provided by a single active market maker (which in certain cases
may be the "bid" price if no "asked" price is available).
In the case of U.S. Government Securities and mortgage-backed securities,
where last sale information is not generally available, such pricing procedures
may include "matrix" comparisons to the prices for comparable instruments on the
basis of quality, yield, maturity and other special factors involved. The
Manager may use pricing services approved by the Board of Trustees to price U.S.
Government Securities, mortgage-backed securities, foreign government securities
and corporate bonds. The Manager will monitor the accuracy of such pricing
services, which may include comparing prices used for portfolio evaluation to
actual sales prices of selected securities.
Trading in securities on European and Asian exchanges and over-the-counter
markets is normally completed before the close of the Exchange. Events affecting
the values of foreign securities traded in securities markets that occur between
the time their prices are determined and the close of the Exchange will not be
reflected in the Fund's calculation of net asset value unless the Board of
Trustees or the Manager, under procedures established by the Board of Trustees,
determines that the particular event is likely to effect a material change in
the value of such security. Foreign currency, including forward contracts, will
be valued at the closing price in the London foreign exchange market that day as
provided by a reliable bank, dealer or pricing service. The values of securities
denominated in foreign currency will be converted to U.S. dollars at the closing
price in the London foreign exchange market that day as provided by a reliable
bank, dealer or pricing service.
Puts, calls and Futures are valued at the last sales price on the
principal exchange on which they are traded, or on NASDAQ, as applicable, as
determined by a pricing service approved by the Board of Trustees or by the
Manager. If there were no sales that day, value shall be the last sale price on
the preceding trading day if it is within the spread of the closing bid and
asked prices on the principal exchange or on NASDAQ on the valuation date, or,
if not, value shall be the closing bid price on the principal exchange or on
NASDAQ on the valuation date. If the put, call or future is not traded on an
exchange or on NASDAQ, it shall be valued at the mean between bid and asked
prices obtained by the Manager from two active market makers (which in certain
cases may be the bid price if no asked price is available).
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AccountLink. When shares are purchased through AccountLink, each purchase must
be at least $25.00. Shares will be purchased on the regular business day the
Distributor is instructed to initiate the Automated Clearing House ("ACH")
transfer to buy the shares. Dividends will begin to accrue on shares purchased
by the proceeds of ACH transfers on the business day the Fund receives Federal
funds for the purchase through the ACH system before the close of The New York
Stock Exchange. The Exchange normally closes at 4:00 P.M., but may close earlier
on certain days. If Federal funds are received on a business day after the close
of the Exchange, the shares will be purchased and dividends will begin to accrue
on the next regular business day. The proceeds of ACH transfers are normally
received by the Fund three days after the transfers are initiated. The
Distributor and the Fund are not responsible for any delays in purchasing shares
resulting from delays in ACH transmissions.
Reduced Sales Charges. As discussed in the Prospectus, a reduced sales charge
rate may be obtained for Class A shares under Right of Accumulation and Letters
of Intent because of the economies of sales efforts and reduction in expenses
realized by the Distributor, dealers and brokers making such sales. No sales
charge is imposed in certain other circumstances described in the Prospectus
because the Distributor or dealer or broker incurs little or no selling
expenses. The term "immediate family" refers to one's spouse, children,
grandchildren, grandparents, parents, aunts, uncles, nieces, nephews,
parents-in-law, brothers and sisters, sons- and daughters-in-law, a sibling's
spouse and a spouse's siblings. Relations by virtue of a remarriage
(stepchildren, step-parents, etc.) are included.
o The Oppenheimer Funds. The Oppenheimer funds are those mutual funds for
which the Distributor acts as the distributor or the sub-distributor and include
the following:
Oppenheimer Municipal Bond Fund
Oppenheimer New York Municipal Fund
Oppenheimer California Municipal Fund
Oppenheimer Intermediate Municipal Fund
Oppenheimer Insured Municipal Fund
Oppenheimer Main Street California Municipal Fund
Oppenheimer Florida Municipal Fund
Oppenheimer Pennsylvania Municipal Fund
Oppenheimer New Jersey Municipal Fund
Oppenheimer Capital Appreciation Fund
Oppenheimer Developing Markets Fund
Oppenheimer Discovery Fund Oppenheimer Growth Fund
Oppenheimer Equity Income Fund
Oppenheimer Multiple Strategies Fund
Oppenheimer Total Return Fund, Inc.
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Oppenheimer Main Street Income & Growth Fund
Oppenheimer International Growth Fund
Oppenheimer Enterprise Fund
Oppenheimer Bond Fund for Growth
Oppenheimer High Yield Fund
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Oppenheimer Champion Income Fund
Oppenheimer Bond Fund
Oppenheimer U.S. Government Trust
Oppenheimer Limited-Term Government Fund
Oppenheimer Global Fund
Oppenheimer Global Growth & Income Fund
Oppenheimer Gold & Special Minerals Fund
Oppenheimer International Bond Fund
Oppenheimer Strategic Income Fund
Oppenheimer Quest Global Value Fund, Inc.
Oppenheimer Quest Value Fund, Inc.
Oppenheimer Quest Small Cap Value Fund
Oppenheimer Quest Opportunity Value Fund
Oppenheimer Quest Officers Value Fund
Oppenheimer Quest Growth & Income Fund
Rochester Fund Municipals
Limited Term New York Municipal Fund
Oppenheimer Disciplined Value Fund
Oppenheimer Disciplined Allocation Fund
Oppenheimer LifeSpan Balanced Fund
Oppenheimer LifeSpan Growth Fund
Oppenheimer LifeSpan
Income Fund
and the following "Money Market Funds":
Oppenheimer Money Market Fund, Inc.
Oppenheimer Cash Reserves
Centennial Money Market Trust
Centennial Tax Exempt Trust
Centennial Government Trust
Centennial New York Tax Exempt Trust
Centennial California Tax Exempt Trust
Centennial America Fund, L.P.
Daily Cash Accumulation Fund, Inc.
There is an initial sales charge on the purchase of Class A shares of each of
the Oppenheimer funds except Money Market Funds (under certain circumstances
described herein, redemption proceeds of Money Market Fund shares may be subject
to a contingent deferred sales charge).
o Letters of Intent. A Letter of Intent (referred to as a "Letter") is an
investor's statement in writing to the Distributor of the intention to purchase
Class A shares or Class A and Class B shares of the Fund (and other Oppenheimer
funds) during a 13-month period (the "Letter of Intent period"), which may, at
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the investor's request, include purchases made up to 90 days prior to the date
of the Letter. The Letter states the investor's intention to make the aggregate
amount of purchases of shares which, when added to the investor's holdings of
shares of those funds, will equal or exceed the amount specified in the Letter.
Purchases made by reinvestment of dividends or distributions of capital gains
and purchases made at net asset value without sales charge do not count toward
satisfying the amount of the Letter. A Letter enables an investor to count the
Class A and Class B shares purchased under the Letter to obtain the reduced
sales charge rate on purchases of Class A shares of the Fund (and other
Oppenheimer funds) that applies under the Right of Accumulation to current
purchases of Class A shares. Each purchase of Class A shares under the Letter
will be made at the public offering price (including the sales charge) that
applies to a single lump-sum purchase of shares in the amount intended to be
purchased under the Letter.
In submitting a Letter, the investor makes no commitment to purchase
shares, but if the investor's purchases of shares within the Letter of Intent
period, when added to the value (at offering price) of the investor's holdings
of shares on the last day of that period, do not equal or exceed the intended
purchase amount, the investor agrees to pay the additional amount of sales
charge applicable to such purchases, as set forth in "Terms of Escrow," below
(as those terms may be amended from time to time). The investor agrees that
shares equal in value to 5% of the intended purchase amount will be held in
escrow by the Transfer Agent subject to the Terms of Escrow. Also, the investor
agrees to be bound by the terms of the Prospectus, this Statement of Additional
Information and the Application used for such Letter of Intent, and if such
terms are amended, as they may be from time to time by the Fund, that those
amendments will apply automatically to existing Letters of Intent.
For purchases of shares of the Fund and other Oppenheimer funds by
OppenheimerFunds prototype 401(k) plans under a Letter of Intent, the Transfer
Agent will not hold shares in escrow. If the intended purchase amount under the
Letter entered into by an OppenheimerFunds prototype 401(k) plan is not
purchased by the plan by the end of the Letter of Intent period, there will be
no adjustment of commissions paid to the broker-dealer or financial institution
of record for accounts held in the name of that plan.
If the total eligible purchases made during the Letter of Intent period do
not equal or exceed the intended purchase amount, the commissions previously
paid to the dealer of record for the account and the amount of sales charge
retained by the Distributor will be adjusted to the rates applicable to actual
purchases. If total eligible purchases during the Letter of Intent period exceed
the intended purchase amount and exceed the amount needed to qualify for the
next sales charge rate reduction set forth in the applicable prospectus, the
sales charges paid will be adjusted to the lower rate, but only if and when the
dealer returns to the Distributor the excess of the amount of commissions
allowed or paid
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to the dealer over the amount of commissions that apply to the actual amount of
purchases. The excess commissions returned to the Distributor will be used to
purchase additional shares for the investor's account at the net asset value per
share in effect on the date of such purchase, promptly after the Distributor's
receipt thereof.
In determining the total amount of purchases made under a Letter, shares
redeemed by the investor prior to the termination of the Letter of Intent period
will be deducted. It is the responsibility of the dealer of record and/or the
investor to advise the Distributor about the Letter in placing any purchase
orders for the investor during the Letter of Intent period. All of such
purchases must be made through the Distributor.
o Terms of Escrow That Apply to Letters of Intent.
1. Out of the initial purchase (or subsequent purchases if necessary) made
pursuant to a Letter, shares of the Fund equal in value up to 5% of the intended
purchase amount specified in the Letter shall be held in escrow by the Transfer
Agent. For example, if the intended purchase amount is $50,000, the escrow shall
be shares valued in the amount of $2,500 (computed at the public offering price
adjusted for a $50,000 purchase). Any dividends and capital gains distributions
on the escrowed shares will be credited to the investor's account.
2. If the intended purchase amount specified under the Letter is completed
within the thirteen-month Letter of Intent period, the escrowed shares will be
promptly released to the investor.
3. If, at the end of the thirteen-month Letter of Intent period the total
purchases pursuant to the Letter are less than the intended purchase amount
specified in the Letter, the investor must remit to the Distributor an amount
equal to the difference between the dollar amount of sales charges actually paid
and the amount of sales charges which would have been paid if the total amount
purchased had been made at a single time. Such sales charge adjustment will
apply to any shares redeemed prior to the completion of the Letter. If such
difference in sales charges is not paid within twenty days after a request from
the Distributor or the dealer, the Distributor will, within sixty days of the
expiration of the Letter, redeem the number of escrowed shares necessary to
realize such difference in sales charges. Full and fractional shares remaining
after such redemption will be released from escrow. If a request is received to
redeem escrowed shares prior to the payment of such additional sales charge, the
sales charge will be withheld from the redemption proceeds.
4. By signing the Letter, the investor irrevocably constitutes and appoints
the Transfer Agent as attorney-in-fact to surrender for redemption any or all
escrowed shares.
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5. The shares eligible for purchase under the Letter (or the holding of
which may be counted toward completion of a Letter) include (a) Class A shares
sold with a front-end sales charge or subject to a Class A contingent deferred
sales charge, (b) Class B shares acquired subject to a contingent deferred sales
charge, and (c) Class A or Class B shares acquired in exchange for either (i)
Class A shares of one of the other Oppenheimer funds that were acquired subject
to a Class A initial or contingent deferred sales charge or (ii) Class B shares
of one of the other Oppenheimer funds that were acquired subject to a contingent
deferred sales charge.
6. Shares held in escrow hereunder will automatically be exchanged for
shares of another fund to which an exchange is requested, as described in the
section of the Prospectus entitled "Exchange Privilege," and the escrow will be
transferred to that other fund.
Asset Builder Plans. To establish an Asset Builder Plan from a bank account, a
check (minimum $25) for the initial purchase must accompany the application.
Shares purchased by Asset Builder Plan payments from bank accounts are subject
to the redemption restrictions for recent purchases described in "How To Sell
Shares," in the Prospectus. Asset Builder Plans also enable shareholders of
Oppenheimer Cash Reserves to use those accounts for monthly automatic purchases
of shares of up to four other Oppenheimer funds. If you make payments from your
bank account to purchase shares of the Fund, your bank account will be
automatically debited normally four to five business days prior to the
investment dates selected in the Account Application. Neither the Distributor,
the Transfer Agent nor the Fund shall be responsible for any delays in
purchasing shares resulting from delays in ACH transmission.
There is a front-end sales charge on the purchase of certain Oppenheimer
funds, or a contingent deferred sales charge may apply to shares purchased by
Asset Builder payments. An application should be obtained from the Distributor,
completed and returned, and a prospectus of the selected fund(s) should be
obtained from the Distributor or your financial advisor before initiating Asset
Builder payments. The amount of the Asset Builder investment may be changed or
the automatic investments may be terminated at any time by writing to the
Transfer Agent. A reasonable period (approximately 15 days) is required after
the Transfer Agent's receipt of such instructions to implement them. The Fund
reserves the right to amend, suspend, or discontinue offering such plans at any
time without prior notice.
Cancellation of Purchase Orders. Cancellation of purchase orders for the Fund's
shares (for example, when a purchase check is returned to the Fund unpaid)
causes a loss to be incurred when the net asset value of the Fund's shares on
the cancellation date is less than on the purchase date. That loss is equal to
the amount of the decline in the net asset value per share multiplied by the
number of shares in the purchase order. The investor is responsible for that
loss. If the investor fails to compensate the
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Fund for the loss, the Distributor will do so. The Fund may reimburse the
Distributor for that amount by redeeming shares from any account registered in
that investor's name, or the Fund or the Distributor may seek other redress.
Retirement Plans. In describing certain types of employee benefit plans that may
purchase Class A shares without being subject to the Class A contingent differed
sales charge, the term "employee benefit plan" means any plan or arrangement,
whether or not "qualified" under the Internal Revenue Code, including, medical
savings accounts, payroll deduction plans or similar plans in which Class A
shares are purchased by a fiduciary or other person for the account of
participants who are employees of a single employer or of affiliated employers,
if the Fund account is registered in the name of the fiduciary or other person
for the benefit of participants in the plan.
The term "group retirement plan" means any qualified or non-qualified
retirement plan (including 457 plans, SEPs, SARSEPs, 403(b) plans, and SIMPLE
plans) for employees of a corporation or a sole proprietorship, members and
employees of a partnership or association or other organized group of persons
(the members of which may include other groups), if the group has made special
arrangements with the Distributor and all members of the group participating in
the plan purchase Class A shares of the Fund through a single investment dealer,
broker or other financial institution designated by the group.
How to Sell Shares
Information on how to sell shares of the Fund is stated in the Prospectus.
The information below supplements the terms and conditions for redemptions set
forth in the Prospectus.
o Payments "In Kind". The Prospectus states that payment for shares
tendered for redemption is ordinarily made in cash. However, the Board of
Trustees of the Fund may determine that it would be detrimental to the best
interests of the remaining shareholders of the Fund to make payment of a
redemption order wholly or partly in cash. In that case the Fund may pay the
redemption proceeds in whole or in part by a distribution "in kind" of
securities from the portfolio of the Fund, in lieu of cash, in conformity with
applicable rules of the Securities and Exchange Commission. The Fund has elected
to be governed by Rule 18f-1 under the Investment Company Act, pursuant to which
the Fund is obligated to redeem shares solely in cash up to the lesser of
$250,000 or 1% of the net assets of the Fund during any 90-day period for any
one shareholder. If shares are redeemed in kind, the redeeming shareholder might
incur brokerage or other costs in selling the securities for cash. The method of
valuing securities used to make redemptions in kind will be the same as the
method the Fund uses to value it portfolio securities described above under
"Determination of Net Asset Values Per Share" and that valuation will be made as
of the time the redemption price is determined.
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o Selling Shares by Wire. The wire of redemption proceeds may be delayed
if a Fund's Custodian bank is not open for business on a day when the Fund would
normally authorize the wire to be made, which is usually the Fund's next regular
business day following the redemption. In those circumstances, the wire will not
be transmitted until the next bank business day on which the Fund is open for
business. No dividends will be paid on the proceeds of redeemed shares awaiting
transfer by wire.
o Involuntary Redemptions. The Fund's Board of Trustees has the right to
cause the involuntary redemption of the shares held in any account if the
aggregate net asset value of those shares is less than $500 or such lesser
amount as the Board may fix. The Board of Trustees will not cause the
involuntary redemption of shares in an account if the aggregate net asset value
of the shares has fallen below the stated minimum solely as a result of market
fluctuations. Should the Board elect to exercise this right, it may also fix, in
accordance with the Investment Company Act, the requirements for any notice to
be given to the shareholders in question (not less than 30 days), or the Board
may set requirements for granting permission to the Shareholder to increase the
investment, and set other terms and conditions so that the shares would not be
involuntarily redeemed.
Reinvestment Privilege. Within six months of a redemption, a shareholder may
reinvest all or part of the redemption proceeds of (i) Class A shares purchased
subject to an initial sales charge, or (ii) Class B shares on which the
shareholder paid a contingent deferred sales charge when redeemed. This
privilege does not apply to Class C shares. The reinvestment may be made without
sales charge only in Class A shares of the Fund or any of the other Oppenheimer
funds into which shares of the Fund are exchangeable as described below, at the
net asset value next computed after the Transfer Agent receives the reinvestment
order. The shareholder must ask the Distributor for that privilege at the time
of reinvestment. Any capital gain that was realized when the shares were
redeemed is taxable, and reinvestment will not alter any capital gains tax
payable on that gain. If there has been a capital loss on the redemption, some
or all of the loss may not be tax deductible, depending on the timing and amount
of the reinvestment. Under the Internal Revenue Code, if the redemption proceeds
of Fund shares on which a sales charge was paid are reinvested in shares of the
Fund or another of the Oppenheimer funds within 90 days of payment of the sales
charge, the shareholder's basis in the shares of the Fund that were redeemed may
not include the amount of the sales charge paid. That would reduce the loss or
increase the gain recognized from the redemption. However, in that case the
sales charge would be added to the basis of the shares acquired by the
reinvestment of the redemption proceeds. The Fund may amend, suspend or cease
offering this reinvestment privilege at any time as to shares redeemed after the
date of such amendment, suspension or cessation.
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Transfers of Shares. Shares are not subject to the payment of a contingent
deferred sales charge at the time of transfer to the name of another person or
entity (whether the transfer occurs by absolute assignment, gift or bequest, not
involving, directly or indirectly, a public sale). The transferred shares will
remain subject to the contingent deferred sales charge, calculated as if the
transferee shareholder had acquired the transferred shares in the same manner
and at the same time as the transferring shareholder. If less than all shares
held in an account are transferred, and some but not all shares in the account
would be subject to a contingent deferred sales charge if redeemed at the time
of transfer, the priorities described in the Prospectus under "How to Buy
Shares" for the imposition of the Class B or the Class C contingent deferred
sales charge will be followed in determining the order in which shares are
transferred.
Distributions From Retirement Plans. Requests for distributions from
OppenheimerFunds-sponsored IRAs, 403(b)(7) custodial plans, 401(k) plans or
pension or profit-sharing plans should be addressed to "Trustee,
OppenheimerFunds Retirement Plans," c/o the Transfer Agent at its address listed
in "How To Sell Shares" in the Prospectus or on the back cover of this Statement
of Additional Information. The request must: (i) state the reason for the
distribution; (ii) state the owner's awareness of tax penalties if the
distribution is premature; and (iii) conform to the requirements of the plan and
the Fund's other redemption requirements. Participants (other than self-employed
persons maintaining a plan account in their own name) in
OppenheimerFunds-sponsored prototype pension plans or 401(k) profit-sharing or
401(k) plans may not directly redeem or exchange shares held for their accounts
under those plans. The employer or plan administrator must sign the request.
Distributions from pension and profit sharing plans are subject to special
requirements under the Internal Revenue Code and certain documents (available
from the Transfer Agent) must be completed before the distribution may be made.
Distributions from retirement plans are subject to withholding requirements
under the Internal Revenue Code, and IRS Form W-4P (available from the Transfer
Agent) must be submitted to the Transfer Agent with the distribution request, or
the distribution may be delayed. Unless the shareholder has provided the
Transfer Agent with a certified tax identification number, the Internal Revenue
Code requires that tax be withheld from any distribution even if the shareholder
elects not to have tax withheld. The Fund, the Manager, the Distributor, the
Trustee and the Transfer Agent assume no responsibility to determine whether a
distribution satisfies the conditions of applicable tax laws and will not be
responsible for any tax penalties assessed in connection with a distribution.
Special Arrangements for Repurchase of Shares from Dealers and Brokers. The
Distributor is the Fund's agent to repurchase its shares from authorized dealers
or brokers on behalf of their customers. The shareholder should contact the
broker or dealer to
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arrange this type of redemption. The repurchase price per share will be the net
asset value next computed after the Distributor receives an order placed by the
dealer or broker, except that if the Distributor receives a repurchase order
from a dealer or broker after the close of The New York Stock Exchange on a
regular business day, it will be processed at that day's net asset value if the
order was received by the dealer or broker from its customer prior to the time
the Exchange closes (normally, that is 4:00 P.M. but may be earlier on some
days) and the order was transmitted to and received by the Distributor prior to
its close of business that day (normally 5:00 P.M.). Ordinarily, for accounts
redeemed by a broker-dealer under this procedure, payment will be made within
three business days after the shares have been redeemed upon the Distributor's
receipt of the required redemption documents in proper form, with the
signature(s) of the registered owners guaranteed on the redemption document as
described in the Prospectus.
Automatic Withdrawal and Exchange Plans. Investors owning shares of the Fund
valued at $5,000 or more can authorize the Transfer Agent to redeem shares
(minimum $50) automatically on a monthly, quarterly, semi-annual or annual basis
under an Automatic Withdrawal Plan. Shares will be redeemed three business days
prior to the date requested by the shareholder for receipt of the payment.
Automatic withdrawals of up to $1,500 per month may be requested by telephone if
payments are to be made by check payable to all shareholders of record and sent
to the address of record for the account (and if the address has not been
changed within the prior 30 days). Required minimum distributions from
OppenheimerFunds-sponsored retirement plans may not be arranged on this basis.
Payments are normally made by check, but shareholders having AccountLink
privileges (see "How To Buy Shares") may arrange to have Automatic Withdrawal
Plan payments transferred to the bank account designated on the OppenheimerFunds
New Account Application or signature-guaranteed instructions. Shares are
normally redeemed pursuant to an Automatic Withdrawal Plan three business days
before the date you select in the Account Application. If a contingent deferred
sales charge applies to the redemption, the amount of the check or payment will
be reduced accordingly. The Fund cannot guarantee receipt of a payment on the
date requested and reserves the right to amend, suspend or discontinue offering
such plans at any time without prior notice. Because of the sales charge
assessed on Class A share purchases, shareholders should not make regular
additional Class A share purchases while participating in an Automatic
Withdrawal Plan. Class B and Class C shareholders should not establish
withdrawal plans because of the imposition of the contingent deferred sales
charge on such withdrawals (except where the Class B and Class C contingent
deferred sales charge is waived as described in the Prospectus under "Waivers of
Class B and Class C Contingent Deferred Sales Charges").
By requesting an Automatic Withdrawal or Exchange Plan, the shareholder
agrees to the terms and conditions applicable to such
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plans, as stated below , as well as the Prospectus. These provisions may be
amended from time to time by the Fund and/or the Distributor. When adopted, such
amendments will automatically apply to existing Plans.
o Automatic Exchange Plans. Shareholders can authorize the Transfer Agent
(on the OppenheimerFunds Application or signature- guaranteed instructions) to
exchange a pre-determined amount of shares of the Fund for shares (of the same
class) of other Oppenheimer funds automatically on a monthly, quarterly,
semi-annual or annual basis under an Automatic Exchange Plan. The minimum amount
that may be exchanged to each other fund account is $25. Exchanges made under
these plans are subject to the restrictions that apply to exchanges as set forth
in "How to Exchange Shares" in the Prospectus and below in this Statement of
Additional Information.
o Automatic Withdrawal Plans. Fund shares will be redeemed as necessary to
meet withdrawal payments. Shares acquired without a sales charge will be
redeemed first and shares acquired with reinvested dividends and capital gains
distributions will be redeemed next, followed by shares acquired with a sales
charge, to the extent necessary to make withdrawal payments. Depending upon the
amount withdrawn, the investor's principal may be depleted. Payments made under
withdrawal plans should not be considered as a yield or income on your
investment. It may not be desirable to purchase additional shares of Class A
shares while maintaining automatic withdrawals because of the sales charges that
apply to purchases when made. Accordingly, a shareholder normally may not
maintain an Automatic Withdrawal Plan while simultaneously making regular
purchases of Class A shares.
The Transfer Agent will administer the investor's Automatic Withdrawal
Plan (the "Plan") as agent for the investor (the "Planholder") who executed the
Plan authorization and application submitted to the Transfer Agent. Neither the
Fund nor the Transfer Agent shall incur any liability to the Planholder for any
action taken or omitted by the Transfer Agent in good faith to administer the
Plan. Certificates will not be issued for shares of the Fund purchased for and
held under the Plan, but the Transfer Agent will credit all such shares to the
account of the Planholder on the records of the Fund. Any share certificates
held by a Planholder may be surrendered unendorsed to the Transfer Agent with
the Plan application so that the shares represented by the certificate may be
held under the Plan.
For accounts subject to Automatic Withdrawal Plans, distributions of
capital gains must be reinvested in shares of the Fund, which will be done at
net asset value without a sales charge. Dividends on shares held in the account
may be paid in cash or reinvested.
Redemptions of shares needed to make withdrawal payments will be made at
the net asset value per share determined on the
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redemption date. Checks or AccountLink payments of the proceeds of Plan
withdrawals will normally be transmitted three business days prior to the date
selected for receipt of the payment (receipt of payment on the date selected
cannot be guaranteed), according to the choice specified in writing by the
Planholder.
The amount and the interval of disbursement payments and the address to
which checks are to be mailed or AccountLink payments are to be sent may be
changed at any time by the Planholder by writing to the Transfer Agent. The
Planholder should allow at least two weeks' time in mailing such notification
for the requested change to be put in effect. The Planholder may, at any time,
instruct the Transfer Agent by written notice (in proper form in accordance with
the requirements of the then-current Prospectus of the Fund) to redeem all, or
any part of, the shares held under the Plan. In that case, the Transfer Agent
will redeem the number of shares requested at the net asset value per share in
effect in accordance with the Fund's usual redemption procedures and will mail a
check for the proceeds to the Planholder.
The Plan may be terminated at any time by the Planholder by writing to the
Transfer Agent. A Plan may also be terminated at any time by the Transfer Agent
upon receiving directions to that effect from the Fund. The Transfer Agent will
also terminate a Plan upon receipt of evidence satisfactory to it of the death
or legal incapacity of the Planholder. Upon termination of a Plan by the
Transfer Agent or the Fund, shares that have not been redeemed from the account
will be held in uncertificated form in the name of the Planholder, and the
account will continue as a dividend- reinvestment, uncertificated account unless
and until proper instructions are received from the Planholder or his or her
executor or guardian, or other authorized person.
To use Class A shares held under the Plan as collateral for a debt, the
Planholder may request issuance of a portion of the Class A shares in
certificated form. Share certificates are not available for Class B or Class C
shares. Upon written request from the Planholder, the Transfer Agent will
determine the number of Class A shares for which a certificate may be issued
without causing the withdrawal checks to stop because of exhaustion of
uncertificated shares needed to continue payments. However, should such
uncertificated shares become exhausted, Plan withdrawals will terminate.
If the Transfer Agent ceases to act as transfer agent for the Fund, the
Planholder will be deemed to have appointed any successor transfer agent to act
as agent in administering the Plan.
How To Exchange Shares
As stated in the Prospectus, shares of a particular class of Oppenheimer
funds having more than one class of shares may be exchanged only for shares of
the same class of other Oppenheimer funds. Shares of Oppenheimer funds that have
a single class
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without a class designation are deemed "Class A" shares for this purpose. All of
the Oppenheimer funds offer Class A, B and C shares except Oppenheimer Money
Market Fund, Inc., Centennial Money Market Trust, Centennial Tax Exempt Trust,
Centennial Government Trust, Centennial New York Tax Exempt Trust, Centennial
California Tax Exempt Trust, Centennial America Fund, L.P., and Daily Cash
Accumulation Fund, Inc., which only offer Class A shares and Oppenheimer Main
Street California Municipal Fund which only offers Class A and Class B shares,
(Class B and Class C shares of Oppenheimer Cash Reserves are generally available
only by exchange from the same class of shares of other Oppenheimer funds or
through OppenheimerFunds sponsored 401(k) plans). A current list showing which
funds offer which Class can be obtained by calling the distributor at
1-800-525-7048.
For accounts established on or before March 8, 1996 holding Class M shares
of Oppenheimer Bond Fund for Growth, Class M shares can be exchanged only for
Class A shares of other Oppenheimer funds Municipals}. Exchanges to Class M
shares of Oppenheimer Bond Fund for Growth are permitted from Class A shares of
Oppenheimer Money Market Fund, Inc. or Oppenheimer Cash Reserves that were
acquired by exchange from Class M shares. Otherwise no exchanges of any class of
any Oppenheimer fund into Class M shares are permitted.
Class A shares of Oppenheimer funds may be exchanged at net asset value for
shares of any Money Market Fund. Shares of any Money Market Fund purchased
without a sales charge may be exchanged for shares of Oppenheimer funds offered
with a sales charge upon payment of the sales charge (or, if applicable, may be
used to purchase shares of Oppenheimer funds subject to a contingent deferred
sales charge).
Shares of this Fund acquired by reinvestment of dividends or distributions
from any other of the Oppenheimer funds (except Oppenheimer Cash Reserves) or
from any unit investment trust for which reinvestment arrangements have been
made with the Distributor may be exchanged at net asset value for shares of any
of the Oppenheimer funds.
No contingent deferred sales charge is imposed on exchanges of shares of
either class purchased subject to a contingent deferred sales charge. However,
shares of Oppenheimer Money Market Fund, Inc. purchased with the redemption
proceeds of shares of other mutual funds (other than funds managed by the
Manager or its subsidiaries) redeemed within the 12 months prior to that
purchase may subsequently be exchanged for shares of other Oppenheimer funds
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without being subject to an initial or contingent deferred sales charge,
whichever is applicable. To qualify for that privilege, the investor or the
investor's dealer must notify the Distributor of eligibility for this privilege
at the time the shares of Oppenheimer Money Market Fund, Inc. are purchased,
and, if requested, must supply proof of entitlement to this privilege. The Class
C contingent deferred sales charge is imposed on Class C shares acquired by
exchange if they are redeemed within 12 months of the initial purchase of the
exchanged Class C shares.
When Class B or Class C shares are redeemed to effect an exchange, the
priorities described in "How To Buy Shares" in the Prospectus for the imposition
of the Class B or the Class C contingent deferred sales charge will be followed
in determining the order in which the shares are exchanged. Shareholders should
take into account the effect of any exchange on the applicability and rate of
any contingent deferred sales charge that might be imposed in the subsequent
redemption of remaining shares. Shareholders owning shares of more than one
class must specify whether they intend to exchange Class A, Class B or Class C
shares.
The Fund reserves the right to reject telephone or written exchange
requests submitted in bulk by anyone on behalf of more than one account. The
Fund may accept requests for exchanges of up to 50 accounts per day from
representatives of authorized dealers that qualify for this privilege. In
connection with any exchange request, the number of shares exchanged may be less
than the number requested if the exchange or the number requested would include
shares subject to a restriction cited in the Prospectus or this Statement of
Additional Information or would include shares covered by a share certificate
that is not tendered with the request. In those cases, only the shares available
for exchange without restriction will be exchanged.
When exchanging shares by telephone, a shareholder must either have an
existing account in, or obtain and acknowledge receipt of a prospectus of, the
fund to which the exchange is to be made. For full or partial exchanges of an
account made by telephone, any special account features such as Asset Builder
Plans, Automatic Withdrawal Plans and retirement plan contributions will be
switched to the new account unless the Transfer Agent is instructed otherwise.
If all telephone lines are busy (which might occur, for example, during periods
of substantial market fluctuations), shareholders might not be able to request
exchanges by telephone and would have to submit written exchange requests.
Shares to be exchanged are redeemed on the regular business day the
Transfer Agent receives an exchange request in proper form (the "Redemption
Date"). Normally, shares of the fund to be acquired are purchased on the
Redemption Date, but such purchases may be delayed by either fund up to five
business days if it determines that it would be disadvantaged by an immediate
transfer of the redemption proceeds. The Fund reserves the right, in its
discretion, to refuse any exchange request that may disadvantage it
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(for example, if the receipt of multiple exchange requests from a dealer might
require the disposition of portfolio securities at a time or at a price that
might be disadvantageous to the Fund).
The different Oppenheimer funds available for exchange have different
investment objectives, policies and risks, and a shareholder should assure that
the Fund selected is appropriate for his or her investment and should be aware
of the tax consequences of an exchange. For federal income tax purposes, an
exchange transaction is treated as a redemption of shares of one fund and a
purchase of shares of another. "Reinvestment Privilege," above, discusses some
of the tax consequences of reinvestment of redemption proceeds in such cases.
The Fund, the Distributor, and the Transfer Agent are unable to provide
investment, tax or legal advice to a shareholder in connection with an exchange
request or any other investment transaction.
Dividends, Capital Gains and Taxes
Dividends and Distributions. Dividends will be payable on shares held of record
at the time of the previous determination of net asset value, or as otherwise
described in "How to Buy Shares." Daily dividends on newly purchased shares will
not be declared or paid until such time as Federal Funds (funds credited to a
member bank's account at the Federal Reserve Bank) are available from the
purchase payment for such shares. Normally, purchase checks received from
investors are converted to Federal Funds on the next business day. Dividends
will be declared on shares repurchased by a dealer or broker for three business
days following the trade date (i.e., to and including the day prior to
settlement of the repurchase). If all shares in an account are redeemed, all
dividends accrued on shares of the same class in the account will be paid
together with the redemption proceeds.
Dividends, distributions and the proceeds of the redemption of Fund shares
represented by checks returned to the Transfer Agent by the Postal Service as
undeliverable will be invested in shares of Oppenheimer Money Market Fund, Inc.,
as promptly as possible after the return of such checks to the Transfer Agent to
enable the investor to earn a return on otherwise idle funds.
The amount of a class's distributions may vary from time to time depending
on market conditions, the composition of a Fund's portfolio, and expenses borne
by the Fund or borne separately by a class, as described in "Alternative Sales
Arrangements -- Class A, Class B and Class C shares" above. Dividends are
calculated in the same manner, at the same time and on the same day for shares
of each class. However, dividends on Class B and Class C shares are expected to
be lower than dividends on Class A shares as a result of the asset-based sales
charges on Class B and Class C shares, and will also differ in amount as a
consequence of any difference in net asset value between the classes.
Tax Status of the Fund's Dividends and Distributions. The Federal
-60-
<PAGE>
tax treatment of the Fund's dividends and capital gains distributions is
explained in the Prospectus under the caption "Dividends, Capital Gains and
Taxes." Special provisions of the Internal Revenue Code govern the eligibility
of the Fund's dividends for the dividends-received deduction for corporate
shareholders. Long-term capital gains distributions are not eligible for the
deduction. In addition, the amount of dividends paid by the Fund which may
qualify for the deduction is limited to the aggregate amount of qualifying
dividends that the Fund derives from its portfolio investments that the Fund has
held for a minimum period, usually 46 days. A corporate shareholder will not be
eligible for the deduction on dividends paid on Fund shares held for 45 days or
less. To the extent the Fund's dividends are derived from gross income from
option premiums, interest income or short-term gains from the sale of securities
or dividends from foreign corporations, those dividends will not qualify for the
deduction.
Under the Internal Revenue Code, by December 31 each year, the Fund must
distribute 98% of its taxable investment income earned from January 1 through
December 31 of that year and 98% of its capital gains realized in the period
from November 1 of the prior year through October 31 of the current year, or
else the Fund must pay an excise tax on the amounts not distributed. While it is
presently anticipated that the Fund will meet those requirements, the Fund's
Board of Trustees and the Manager might determine in a particular year that it
would be in the best interest of shareholders for the Fund not to make such
distributions at the required levels and to pay the excise tax on the
undistributed amounts. That would reduce the amount of income or capital gains
available for distribution to shareholders.
If prior distributions must be re-characterized at the end of the fiscal
year as a result of the effect of a Fund's investment policies, shareholders may
have a non-taxable return of capital, which will be identified in notices to
shareholders. There is no fixed dividend rate and there can be no assurance as
to the payment of any dividends or the realization of any capital gains.
If the Fund has more than 50% of its total assets invested in foreign
securities at the end of its fiscal year, it may elect the application of
Section 853 of the Internal Revenue Code to permit shareholders to take a credit
(or, at their option, a deduction) for foreign taxes paid by the Fund. Under
Section 853, shareholders would be entitled to treat the foreign taxes withheld
from interest and dividends paid to the Fund from its foreign investments as a
credit on their federal income taxes. As an alternative, shareholders could, if
to their advantage, treat the foreign tax withheld as a deduction from gross
income in computing taxable income rather than as a tax credit. In substance,
the Fund's election would enable shareholders to benefit from the same foreign
tax credit or deduction that would be received if they had been the record
owners of the Fund's foreign securities and had paid foreign taxes on the income
received.
-61-
<PAGE>
If the Fund qualifies as a "regulated investment company" under the
Internal Revenue Code, it will not be liable for Federal income taxes on amounts
paid by it as dividends and distributions. The Fund qualified during its last
fiscal year, and intends to qualify in current and future years, but reserves
the right not to do so. The Internal Revenue Code contains a number of complex
tests relating to such qualification. For example, if the Fund derives 30% or
more of its gross income from the sale of securities held less than three
months, it may fail to qualify (see "Tax Aspects of Covered Calls and Hedging
Instruments", above). If it did not so qualify, the Fund would be treated for
tax purposes as an ordinary corporation and would not receive a tax deduction
for payments made to shareholders.
The Fund's investments in Metal Investments could result in the Fund's
failing to meet the Internal Revenue Code's prescribed income or asset tests to
qualify as a "regulated investment company." This would occur if, during a
fiscal year, the Fund either (i) derived 10% or more of its gross income from
Metal Investments, or (ii) held more than 50% of its net assets, determined at
the end of each fiscal quarter, in Metal Investments and/or securities (other
than U.S. Government securities) as to which securities either (a) the Fund had
more than 5% of its total assets invested; or (b) the Fund held more than 10% of
the outstanding voting securities of the issuer of such securities. Accordingly,
the Fund will endeavor to manage its portfolio within the above limitations, but
there can be no assurance that it will be successful in doing so.
Dividend Reinvestment in Another Fund. Shareholders of the Fund may elect to
reinvest all dividends and/or capital gains distributions in shares of the same
class of any of the other Oppenheimer funds listed in "Reduced Sales Charges,"
above, at net asset value without sales charge. To elect this option, a
shareholder must notify the Transfer Agent in writing and either have an
existing account in the fund selected for reinvestment or must obtain a
prospectus for that fund and an application from the Distributor to establish an
account. The investment will be made at the net asset value per share in effect
at the close of business on the payable date of the dividend or distribution.
Dividends and/or distributions from shares of other Oppenheimer funds may be
invested in shares of this Fund on the same basis.
Additional Information About the Fund
The Custodian. The Bank of New York is the Custodian of the Fund's assets. The
Custodian's responsibilities include safeguarding and controlling the Fund's
portfolio securities, collecting income on the portfolio securities and handling
the delivery of such securities to and from the Fund. The Manager has
represented to the Fund that the banking relationships between the Manager and
the Custodian have been and will continue to be unrelated to and unaffected by
the relationship between the Fund and the Custodian. It will be the practice of
the Fund to deal with the Custodian in
-62-
<PAGE>
a manner uninfluenced by any banking relationship the Custodian may have with
the Manager and its affiliates. The Fund's cash balances with the Custodian in
excess of 100,000 are not protected by Federal deposit insurance. Those
uninsured balances at times may be substantial.
Independent Auditors. The independent auditors of the Fund audit the Fund's
financial statements and perform other related audit services. They also act as
auditors for certain other funds advised by the Manager and its affiliates.
-63-
<PAGE>
- --------------------------------------------------------------------------------
Independent Auditors' Report
- --------------------------------------------------------------------------------
================================================================================
The Board of Trustees and Shareholders of
Oppenheimer Gold & Special Minerals Fund:
We have audited the accompanying statements of investments and assets and
liabilities of Oppenheimer Gold & Special Minerals Fund as of June 30, 1997, and
the related statement of operations for the year then ended, the statements of
changes in net assets for each of the years in the two-year period then ended
and the financial highlights for each of the years in the five-year 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 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 and financial highlights. Our procedures included
confirmation of securities owned as of June 30, 1997, by correspondence with the
custodian and brokers; and where confirmations 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, the financial statements and financial highlights
referred to above present fairly, in all material respects, the financial
position of Oppenheimer Gold & Special Minerals Fund as of June 30, 1997, the
results of its operations for the year then ended, the changes in its net assets
for each of the years in the two-year period then ended, and the financial
highlights for each of the years in the five-year period then ended, in
conformity with generally accepted accounting principles.
KPMG Peat Marwick LLP
/s/ KPMG Peat Marwick LLP
Denver, Colorado
July 22, 1997
<PAGE>
- -------------------------------------------------------------------------------
Statement of Investments June 30, 1997
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Face Market Value
Amount(1) See Note 1
==============================================================================
<S> <C> <C>
Convertible Corporate Bonds and Notes -- 2.4%
- ------------------------------------------------------------------------------
Lonrho Finance plc, 6% Gtd. Cv. Bonds, 2/27/04(GBP) 1,000,000 $1,560,282
- ------------------------------------------------------------------------------
TVX Gold, Inc., 5% Cv. Sub. Nts., 3/28/02 1,971,000 1,783,755
----------
Total Convertible Corporate Bonds and Notes
(Cost $3,423,151) 3,344,037
Shares
==============================================================================
Common Stocks -- 90.8%
- ------------------------------------------------------------------------------
Basic Materials -- 88.3%
- ------------------------------------------------------------------------------
Chemicals -- 3.4%
Engelhard Corp. 130,000 2,721,875
- ------------------------------------------------------------------------------
Johnson Matthey plc 202,500 1,951,351
----------
4,673,226
- ------------------------------------------------------------------------------
Gold and Platinum -- 66.7%
- ------------------------------------------------------------------------------
Gold -- 0.4%
Greenstone Resources Ltd.(2) 45,000 394,692
- ------------------------------------------------------------------------------
Manila Mining Corp., Cl. B 355,800,000 175,364
----------
570,056
- ------------------------------------------------------------------------------
Gold Mining: Australia -- 5.8%
Acacia Resources Ltd.(2) 250,000 327,946
- ------------------------------------------------------------------------------
Ashanti Goldfields Co. Ltd. 88,888 1,021,943
- ------------------------------------------------------------------------------
Aurora Gold Ltd.(2) 200,000 284,974
- ------------------------------------------------------------------------------
Delta Gold NL 800,000 1,332,895
- ------------------------------------------------------------------------------
Great Central Mines NL 267,000 507,657
- ------------------------------------------------------------------------------
Newcrest Mining Ltd. 400,000 1,103,408
- ------------------------------------------------------------------------------
Plutonic Resources Ltd. 300,000 936,344
- ------------------------------------------------------------------------------
RGC Ltd. 334,000 1,221,242
- ------------------------------------------------------------------------------
Resolute Ltd. 225,000 400,321
- ------------------------------------------------------------------------------
Sons of Gwalia Ltd. 230,000 854,847
----------
7,991,577
- ------------------------------------------------------------------------------
Gold Mining: Canada -- 23.2%
Barrick Gold Corp. 270,000 5,940,000
- ------------------------------------------------------------------------------
Battle Mountain Canada, Inc. 270,000 1,546,147
- ------------------------------------------------------------------------------
Bema Gold Corp.(2) 95,000 575,003
- ------------------------------------------------------------------------------
Bema Gold Corp.(2) 10,000 60,000
- ------------------------------------------------------------------------------
Cambior, Inc. 257,000 2,924,777
- ------------------------------------------------------------------------------
Corriente Resources, Inc.(2) 30,000 71,762
- ------------------------------------------------------------------------------
Dayton Mining Corp.(2) 388,000 1,349,998
- ------------------------------------------------------------------------------
Dayton Mining Corp.(2)(3) 288,000 1,002,060
- ------------------------------------------------------------------------------
Eldorado Gold Corp. Ltd.(2) 117,000 457,973
<PAGE>
- ------------------------------------------------------------------------------
Statement of Investments (Continued)
- ------------------------------------------------------------------------------
Market Value
Shares See Note 1
- ------------------------------------------------------------------------------
Gold Mining: Canada (continued)
Glamis Gold Ltd. 100,000 $ 719,433
- ------------------------------------------------------------------------------
Goldcorp, Inc., Cl. A(2) 140,000 1,009,744
- ------------------------------------------------------------------------------
Kap Resources Ltd.(2) 515,000 1,166,587
- ------------------------------------------------------------------------------
Kinross Gold(2) 94,600 421,722
- ------------------------------------------------------------------------------
Meridian Gold, Inc., Installment Receipts(2)(3) 140,000 380,557
- ------------------------------------------------------------------------------
Metallica Resources, Inc.(2) 160,000 353,736
- ------------------------------------------------------------------------------
Pangea Goldfields, Inc.(2) 50,000 144,974
- ------------------------------------------------------------------------------
Placer Dome, Inc. 50,000 811,854
- ------------------------------------------------------------------------------
Placer Dome, Inc. 285,000 4,666,875
- ------------------------------------------------------------------------------
Prime Resource Group, Inc. 325,000 2,355,827
- ------------------------------------------------------------------------------
Rio Narcea Gold Mines Ltd.(2) 190,000 571,560
- ------------------------------------------------------------------------------
Teck Corp., Cl. B 140,000 2,836,416
- ------------------------------------------------------------------------------
TVX Gold, Inc.(2) 385,000 2,037,247
- ------------------------------------------------------------------------------
TVX Gold, Inc.(2) 35,000 185,938
- ------------------------------------------------------------------------------
Viceroy Resources Corp.(2) 205,000 668,692
-----------
32,258,882
- ------------------------------------------------------------------------------
Gold Mining: South Africa -- 6.1%
Anglo American Corp. of South Africa Ltd., ADR 37,000 2,233,875
- ------------------------------------------------------------------------------
Ashanti Goldfields Co. Ltd., Sponsored GDR 145,000 1,694,688
- ------------------------------------------------------------------------------
Driefontein Consolidated Ltd., Sponsored ADR 135,000 911,250
- ------------------------------------------------------------------------------
Free State Consolidated Gold Mines Ltd., ADR 57,000 285,000
- ------------------------------------------------------------------------------
IAMGOLD(2) 50,000 195,715
- ------------------------------------------------------------------------------
Randgold & Exploration Co. Ltd.(2) 75,000 330,721
- ------------------------------------------------------------------------------
Southvaal Holdings Ltd., ADR 50,000 1,003,185
- ------------------------------------------------------------------------------
Vaal Reefs Exploration & Mining Co. Ltd., ADR 170,000 818,125
- ------------------------------------------------------------------------------
Western Areas Gold Mining Co. Ltd., Unsponsored ADR 79,945 537,598
- ------------------------------------------------------------------------------
Western Deep Levels Ltd., Unsponsored ADR 20,000 477,500
-----------
8,487,657
- ------------------------------------------------------------------------------
Gold Mining: United States -- 16.4%
Battle Mountain Gold Co. 180,000 1,023,750
- ------------------------------------------------------------------------------
Crown Resources Corp.(2) 185,000 1,179,375
- ------------------------------------------------------------------------------
Getchell Gold Corp.(2) 102,000 3,595,500
- ------------------------------------------------------------------------------
Homestake Mining Co. 278,000 3,631,375
- ------------------------------------------------------------------------------
Newmont Mining Corp. 340,871 13,293,969
-----------
22,723,969
<PAGE>
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
Market Value
Shares See Note 1
- ------------------------------------------------------------------------------
Gold-Related Investment -- 9.8%
Cambiex Exploration, Inc.(2)(4) 1,500,000 $ 581,708
- ------------------------------------------------------------------------------
Canarc Resource Corp.(2) 282,500 192,489
- ------------------------------------------------------------------------------
Canarc Resource Corp.(2) 450,000 306,620
- ------------------------------------------------------------------------------
Euro-Nevada Mining Corp. 221,000 6,808,340
- ------------------------------------------------------------------------------
Franco-Nevada Mining Corp. Ltd. 89,000 4,467,554
- ------------------------------------------------------------------------------
Normandy Mining Ltd. 1,151,077 1,293,017
-----------
13,649,728
- ------------------------------------------------------------------------------
Platinum Mining -- 5.0%
Anglo American Platinum Ltd., Unsponsored ADR 138,114 1,141,927
- ------------------------------------------------------------------------------
Rustenburg Platinum Holdings Ltd., ADR 83,718 1,532,031
- ------------------------------------------------------------------------------
Stillwater Mining Co.(2) 192,000 4,272,000
-----------
6,945,958
-----------
92,627,827
- ------------------------------------------------------------------------------
Metals -- 18.2%
- ------------------------------------------------------------------------------
Copper -- 5.6%
Freeport-McMoRan Copper & Gold, Inc., Cl. A 199,455 5,834,059
- ------------------------------------------------------------------------------
Freeport-McMoRan Copper & Gold, Inc., Cl. B 15,000 466,875
- ------------------------------------------------------------------------------
Phelps Dodge Corp. 17,000 1,448,188
-----------
7,749,122
- ------------------------------------------------------------------------------
Metals: Diversified -- 9.2%
Aber Resources Ltd.(2) 74,000 1,035,259
- ------------------------------------------------------------------------------
Aluminum Co. of America 23,000 1,733,625
- ------------------------------------------------------------------------------
Ashton Mining Ltd. 600,000 823,259
- ------------------------------------------------------------------------------
Boliden Ltd., Installment Receipts(2) 200,000 1,065,559
- ------------------------------------------------------------------------------
Breakwater Resources Ltd.(2) 75,000 260,953
- ------------------------------------------------------------------------------
Brush Wellman, Inc. 50,000 1,046,875
- ------------------------------------------------------------------------------
Cominco Ltd. 30,000 799,169
- ------------------------------------------------------------------------------
Elkem ASA 120,000 2,352,204
- ------------------------------------------------------------------------------
Repadre Capital Corp.(2) 50,000 291,760
- ------------------------------------------------------------------------------
Rio Tinto plc 93,000 1,619,772
- ------------------------------------------------------------------------------
WMC Ltd. 199,988 1,258,937
- ------------------------------------------------------------------------------
Westmin Resources Ltd.(2) 100,000 478,414
-----------
12,765,786
<PAGE>
- ------------------------------------------------------------------------------
Statement of Investments (Continued)
- ------------------------------------------------------------------------------
Market Value
Shares See Note 1
- ------------------------------------------------------------------------------
Metals: Miscellaneous -- 2.2%
Cameco Corp. 20,000 $ 750,240
- ------------------------------------------------------------------------------
Pasminco Ltd. 1,150,000 2,332,189
------------
3,082,429
- ------------------------------------------------------------------------------
Nickel -- 1.2%
Falconbridge Ltd. 75,000 1,473,298
- ------------------------------------------------------------------------------
Sutton Resources Ltd.(2) 23,000 187,560
------------
1,660,858
------------
25,258,195
- ------------------------------------------------------------------------------
Industrial -- 2.5%
- ------------------------------------------------------------------------------
Industrial Services -- 0.6%
Calgon Carbon Corp. 60,000 832,500
- ------------------------------------------------------------------------------
Manufacturing -- 1.9%
Svedala Industri, AB Free 125,000 2,602,692
------------
Total Common Stocks (Cost $107,444,311) 125,994,440
==============================================================================
Preferred Stocks -- 1.3%
- ------------------------------------------------------------------------------
Ashanti GSM Ltd. Redeemable Preferred, A Shares(2)(5) 88,888 199,998
- ------------------------------------------------------------------------------
Battle Mountain Gold Co., $3.25 Cum. Cv. 34,500 1,649,531
------------
Total Preferred Stocks (Cost $1,900,876) 1,849,529
Units
==============================================================================
Rights, Warrants and Certificates -- 0.7%
- ------------------------------------------------------------------------------
Kap Resources Ltd. Special Wts. 200,000 453,044
- ------------------------------------------------------------------------------
Kap Resources Ltd. Wts., Cl. A, Exp. 8/00 252,500 196,757
- ------------------------------------------------------------------------------
Lynas Gold NL Wts., Exp. 6/99 1,200,000 41,615
- ------------------------------------------------------------------------------
Minefinders Corp. Special Wts., Exp. 4/98(5) 75,000 149,512
- ------------------------------------------------------------------------------
Rea Corp. Special Wts., Exp. 4/98 330,000 183,591
------------
Total Rights, Warrants and Certificates
(Cost $1,211,886) 1,024,519
<PAGE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Face Market Value
Amount(1) See Note 1
===============================================================================
Repurchase Agreements -- 3.8%
- -------------------------------------------------------------------------------
Repurchase agreement with J.P. Morgan Securities, Inc., 5.95%,
dated 6/30/97, to be repurchased at $5,200,859 on 7/1/97,
collateralized by U.S. Treasury Bonds, 8.875%-12%,
8/15/13-2/15/19, with a value of $4,879,420 and
U.S. Treasury Nts., 7.875%, 11/15/04,
with a value of $444,938 (Cost $5,200,000) $ 5,200,000 $ 5,200,000
- -------------------------------------------------------------------------------
Total Investments, at Value (Cost $119,180,224) 99.0% 137,412,525
- -------------------------------------------------------------------------------
Other Assets Net of Liabilities 1.0 1,324,855
----------- ------------
Net Assets 100.0% $138,737,380
=========== ============
</TABLE>
1. Face amount is reported in U.S. dollars, except for those denoted in the
following currency:
GBP -- British Pound Sterling
2. Non-income producing security.
3. Represents securities sold under Rule 144A, which are exempt from
registration under the Securities Act of 1933, as amended. These securities have
been determined to be liquid under guidelines established by the Board of
Trustees. These securities amount to $1,382,617, or 1.00% of the Fund's net
assets, at June 30, 1997. 4. Affiliated company. Represents ownership of at
least 5% of the voting securities of the issuer and is or was an affiliate, as
defined in the Investment Company Act of 1940, at or during the period ended
June 30, 1997. The aggregate fair value of all securities of affiliated
companies as of June 30, 1997 amounted to $581,708. There were no transactions
with affiliates during the period ended June 30, 1997.
<TABLE>
<CAPTION>
Shares Gross Gross Shares
June 30, 1996 Additions Reductions June 30, 1997
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Cambiex Exploration, Inc. 1,500,000 -- -- 1,500,000
</TABLE>
5. Identifies issues considered to be illiquid or restricted -- See Note 5 of
Notes to Financial Statements.
See accompanying Notes to Financial Statements.
<PAGE>
- -------------------------------------------------------------------------------
Statement of Assets and Liabilities June 30, 1997
- -------------------------------------------------------------------------------
<TABLE>
<S> <C>
=================================================================================================
Assets
Investments, at value -- see accompanying statement:
Unaffiliated companies (cost $118,423,651) $136,830,817
Affiliated companies (cost $756,573) 581,708
- -------------------------------------------------------------------------------------------------
Cash 1,113,806
- -------------------------------------------------------------------------------------------------
Receivables:
Investments sold 2,307,138
Shares of beneficial interest sold 1,253,373
Interest and dividends 200,747
- -------------------------------------------------------------------------------------------------
Other 11,723
-------------
Total assets 142,299,312
=================================================================================================
Liabilities Payables and other liabilities:
Shares of beneficial interest redeemed 3,130,242
Investments purchased 96,960
Trustees' fees -- Note 1 86,988
Shareholder reports 84,917
Distribution and service plan fees 77,245
Transfer and shareholder servicing agent fees 31,236
Other 54,344
-------------
Total liabilities 3,561,932
=================================================================================================
Net Assets $138,737,380
============
=================================================================================================
Composition of Net Assets
Paid-in capital $130,432,686
- -------------------------------------------------------------------------------------------------
Undistributed net investment income 263,701
- -------------------------------------------------------------------------------------------------
Accumulated net realized loss on investments and foreign currency transactions
(10,191,852)
- -------------------------------------------------------------------------------------------------
Net unrealized appreciation on investments and translation of assets and
liabilities denominated in foreign currencies 18,232,845
-------------
Net assets $138,737,380
=============
</TABLE>
<PAGE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<TABLE>
<S> <C>
=======================================================================================
Net Asset Value Per Share
Class A Shares:
Net asset value and redemption price per share (based on net assets of
$126,086,276 and 9,945,213 shares of beneficial interest outstanding) $12.68
Maximum offering price per share (net asset value plus sales charge of
5.75% of offering price) $13.45
- ---------------------------------------------------------------------------------------
Class B Shares:
Net asset value, redemption price (less applicable contingent deferred sales
charge) and offering price per share (based on net assets of $8,715,783 and
693,768 shares of beneficial interest outstanding) $12.56
- ---------------------------------------------------------------------------------------
Class C Shares:
Net asset value, redemption price (less applicable contingent deferred sales
charge) and offering price per share (based on net assets of $3,935,321 and
312,660 shares of beneficial interest outstanding) $12.59 </TABLE>
See accompanying Notes to Financial Statements.
<PAGE>
- -------------------------------------------------------------------------------
Statement of Operations For the Year Ended June 30, 1997
- -------------------------------------------------------------------------------
<TABLE>
<S> <C>
========================================================================================
Investment Income
Dividends (net of foreign withholding taxes of $125,905) $ 1,895,631
- ----------------------------------------------------------------------------------------
Interest 704,308
------------
Total income 2,599,939
========================================================================================
Expenses
Management fees -- Note 4 1,195,285
- ----------------------------------------------------------------------------------------
Distribution and service plan fees -- Note 4:
Class A 308,600
Class B 73,620
Class C 26,693
- ----------------------------------------------------------------------------------------
Transfer and shareholder servicing agent fees -- Note 4 364,731
- ----------------------------------------------------------------------------------------
Shareholder reports 130,544
- ----------------------------------------------------------------------------------------
Custodian fees and expenses 42,254
- ----------------------------------------------------------------------------------------
Legal and auditing fees 35,463
- ----------------------------------------------------------------------------------------
Trustees' fees and expenses -- Note 1 20,149
- ----------------------------------------------------------------------------------------
Insurance expenses 9,980
- ----------------------------------------------------------------------------------------
Registration and filing fees:
Class B 1,465
Class C 875
- ----------------------------------------------------------------------------------------
Other 12,829
------------
Total expenses 2,222,488
========================================================================================
Net Investment Income 377,451
========================================================================================
Realized and Unrealized Gain (Loss) Net realized gain (loss) on:
Investments 1,612,811
Foreign currency transactions (584,613)
------------
Net realized gain 1,028,198
- ----------------------------------------------------------------------------------------
Net change in unrealized appreciation or depreciation on:
Investments (17,688,639)
Translation of assets and liabilities denominated in foreign currencies (731,490)
------------
Net change (18,420,129)
------------
Net realized and unrealized loss (17,391,931)
========================================================================================
Net Decrease in Net Assets Resulting From Operations $(17,014,480)
============
</TABLE>
See accompanying Notes to Financial Statements.
<PAGE>
- -------------------------------------------------------------------------------
Statements of Changes in Net Assets
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended June 30,
1997 1996
=================================================================================================
<S> <C> <C>
Operations
Net investment income $ 377,451 $ 431,529
- --------------------------------------------------------------------------------------------------
Net realized gain (loss) 1,028,198
(1,488,121)
- -------------------------------------------------------------------------------------------------
Net change in unrealized appreciation or depreciation (18,420,129) 10,541,186
------------
- -------------
Net increase (decrease) in net assets resulting
from operations (17,014,480)
9,484,594
=================================================================================================
Dividends and Distributions To Shareholders Dividends from net investment
income:
Class A (302,998) (705,030)
=================================================================================================
Beneficial Interest Transactions
Net increase (decrease) in net assets resulting from beneficial interest
transactions -- Note 2:
Class A (19,702,023) (18,971,659)
Class B 4,828,099 5,082,545
Class C 2,887,566 1,429,900
=================================================================================================
Net Assets
Total decrease (29,303,836) (3,679,650)
- -------------------------------------------------------------------------------------------------
Beginning of period 168,041,216 171,720,866
------------ ------------
End of period (including undistributed net investment
income of $263,701 and $196,070, respectively) $138,737,380 $168,041,216
============ =============
</TABLE>
See accompanying Notes to Financial Statements.
<PAGE>
- -------------------------------------------------------------------------------
Financial Highlights
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Class A
------------------------------------
Year Ended June 30,
1997 1996 1995
============================================================================================
<S> <C> <C> <C>
Per Share Operating Data:
Net asset value, beginning of period $14.15 $13.48 $13.28
- ----------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income (loss) .04 .04 .06
Net realized and unrealized gain (1.48) .69 .21
----------- ------- -------
Total income (loss) from investment operations (1.44) .73 .27
- ----------------------------------------------------------------------------------------------
Dividends and distributions to shareholders:
Dividends from net investment income (.03) (.06) (.07)
----------- -------- --------
Total dividends and distributions to shareholders (.03) (.06) (.07)
- ----------------------------------------------------------------------------------------------
Net asset value, end of period $12.68 $14.15 $13.48
=========== ========= =========
==============================================================================================
Total Return, at Net Asset Value(2) (10.20)% 5.44% 2.03%
==============================================================================================
Ratios/Supplemental Data:
Net assets, end of period
(in thousands) $126,086 $161,769 $171,721
- ----------------------------------------------------------------------------------------------
Average net assets (in thousands) $149,564 $171,427 $178,579
- ----------------------------------------------------------------------------------------------
Ratios to average net assets:
Net investment income (loss) 0.28% 0.25% 0.45%
Expenses 1.34% 1.38% 1.36%
- ----------------------------------------------------------------------------------------------
Portfolio turnover rate(4) 20.5% 37.6% 35.8%
Average brokerage commission rate(5) $0.0030 $0.0211 $0.0204
</TABLE>
1. For the period from November 1, 1995 (inception of offering) to June 30,
1996. 2. Assumes a hypothetical initial investment on the business day before
the first day of the fiscal period (or inception of offering), with all
dividends and distributions reinvested in additional shares on the reinvestment
date, and redemption at the net asset value calculated on the last business day
of the fiscal period. Sales charges are not reflected in the total returns.
Total returns are not annualized for periods of less than one full year.
3. Annualized.
<PAGE>
<TABLE>
<CAPTION>
Class A Class B Class C
- --------------------- ---------------------- ----------------------
Year Ended June 30, Year Ended June 30, Year Ended June 30,
1994 1993 1997 1996(1) 1997 1996(1)
================================================================================
<S> <C> <C> <C> <C> <C>
$12.32 $10.68 $14.11 $12.33 $14.13 $12.33
- -------------------------------------------------------------------------------
.06 .06 (.04) (.01) (.02) (.01)
.96 1.72 (1.51) 1.79 (1.52) 1.81
------- ---- ------- ------ ------ ----
1.02 1.78 (1.55) 1.78 (1.54) 1.80
------- ----- ------ ------ ----- ----
(.06) (.14) -- -- -- --
------- ----- ------ ------ ----- ----
(.06) (.14) -- -- -- --
- -------------------------------------------------------------------------------
$13.28 $12.32 $12.56 $14.11 $12.59 $14.13
======== ====== ====== ====== ====== ======
===============================================================================
8.25% 17.15% (10.99)% 14.25% (10.90)% 14.41%
===============================================================================
$179,015 $158,982 $8,716 $4,882 $3,935 $1,390
- -------------------------------------------------------------------------------
$175,093 $124,869 $7,361 $2,588 $2,672 $ 840
- -------------------------------------------------------------------------------
0.50% 0.61% (0.48)% (0.25)%(3) (0.45)% (0.26)%(3)
1.31% 1.38% 2.16% 2.22%(3) 2.18% 2.19%(3)
- -------------------------------------------------------------------------------
29.5% 23.9% 20.5% 37.6% 20.5% 37.6%
-- -- $0.0030 $0.0211 $0.0030 $0.0211
</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 June 30, 1997 were $30,398,518 and $38,564,264, respectively. 5. Total
brokerage commissions paid on applicable purchases and sales of portfolio
securities for the period, divided by the total of related shares purchased and
sold. Generally, non-U.S. commissions are lower than U.S. commissions when
expressed as cents per share but higher when expressed as a percentage of
transactions because of the lower per-share prices of many non-U.S. securities.
See accompanying Notes to Financial Statements.
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements
- --------------------------------------------------------------------------------
================================================================================
1. Significant Accounting Policies
Oppenheimer Gold & Special Minerals Fund (the Fund) is registered under the
Investment Company Act of 1940, as amended, as a diversified, open-end
management investment company. The Fund's investment objective is to seek
capital appreciation by primarily investing in securities of companies that
mine or produce gold or other metals and minerals. The Fund's investment
adviser is OppenheimerFunds, Inc. (the Manager). The Fund offers Class A, Class
B and Class C shares. Class A shares are sold with a front-end sales charge.
Class B and Class C shares may be subject to a contingent deferred sales
charge. All classes of shares have identical rights to earnings, assets and
voting privileges, except that each class has its own distribution and/or
service plan, expenses directly attributable to that class and exclusive voting
rights with respect to matters affecting that class. Class B shares will
automatically convert to Class A shares six years after the date of purchase.
The following is a summary of significant accounting policies consistently
followed by the Fund.
- --------------------------------------------------------------------------------
Investment Valuation. Portfolio securities are valued at the close of the New
York Stock Exchange on each trading day. Listed and unlisted securities for
which such information is regularly reported are valued at the last sale price
of the day or, in the absence of sales, at values based on the closing bid or
the last sale price on the prior trading day. Long-term and short-term
"non-money market" debt securities are valued by a portfolio pricing service
approved by the Board of 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.
- --------------------------------------------------------------------------------
Foreign Currency Translation. The accounting records of the Fund are maintained
in U.S. dollars. Prices of securities denominated in foreign currencies are
translated into U.S. dollars at the closing rates of exchange. Amounts related
to the purchase and sale of foreign securities and investment income are
translated at the rates of exchange prevailing on the respective dates of such
transactions.
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
================================================================================
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.
- --------------------------------------------------------------------------------
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, and Gains and Losses. Income, expenses (other
than those attributable to a specific class) and gains and losses are allocated
daily to each class of shares based upon the relative proportion of net assets
represented by such class. Operating expenses directly attributable to a
specific class are charged against the operations of that class.
- --------------------------------------------------------------------------------
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 June 30, 1997, the Fund
had available for federal income tax purposes an unused capital loss carryover
of approximately $10,035,000, which expires between 2000 and 2004.
- --------------------------------------------------------------------------------
Trustees' Fees and Expenses. The Fund has adopted a nonfunded retirement plan
for the Fund's independent trustees. Benefits are based on years of service and
fees paid to each trustee during the years of service. During the year ended
June 30, 1997, a credit of $9,193 and payments of $1,013 were made, resulting in
an accumulated liability of $81,234 at June 30, 1997.
- --------------------------------------------------------------------------------
Distributions to Shareholders. Dividends and distributions to shareholders are
recorded on the ex-dividend date.
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (Continued)
- --------------------------------------------------------------------------------
================================================================================
1. Significant Accounting Policies (continued)
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 the recognition of certain foreign currency gains (losses)
as ordinary income (loss) for tax purposes. The character of the 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.
During the year ended June 30, 1997, the Fund changed the
classification of distributions to shareholders to better disclose the
differences between financial statement amounts and distributions determined in
accordance with income tax regulations. Accordingly, during the year ended June
30, 1997, amounts have been reclassified to reflect a decrease in undistributed
net investment income of $6,822. Accumulated net realized loss on investments
was decreased by the same amount.
- --------------------------------------------------------------------------------
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 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.
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
================================================================================
2. Shares of Beneficial Interest
The Fund has authorized an unlimited number of no par value shares of beneficial
interest. Transactions in shares of beneficial interest were as follows:
<TABLE>
<CAPTION>
Year Ended June 30, 1997 Year Ended June 30, 1996(1)
---------------------------- -----------------------------
Shares Amount Shares Amount
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class A:
Sold 9,092,060 $ 125,381,941 11,015,184 $ 155,317,009
Dividends reinvested 19,635 265,853 48,035 625,897
Redeemed (10,597,946) (145,349,817) (12,375,016) (174,914,565)
------------ ------------- ------------ -------------
Net decrease (1,486,251) $ (19,702,023) (1,311,797) $ (18,971,659)
============ ============= ============ =============
- -----------------------------------------------------------------------------------------
Class B:
Sold 650,210 $ 8,951,921 434,241 $ 6,371,373
Dividends reinvested -- -- -- --
Redeemed (302,540) (4,123,822) (88,143) (1,288,828)
------------ ------------- ------------ -------------
Net increase 347,670 $ 4,828,099 346,098 $ 5,082,545
============ ============= ============ =============
- -----------------------------------------------------------------------------------------
Class C:
Sold 1,715,098 $ 23,557,280 665,116 $ 9,742,400
Dividends reinvested -- -- -- --
Redeemed (1,500,859) (20,669,714) (566,695) (8,312,500)
------------ ------------- ------------ -------------
Net increase 214,239 $ 2,887,566 98,421 $ 1,429,900
============ ============= ============ =============
</TABLE>
1. For the year ended June 30, 1996 for Class A shares, and for the period from
November 1, 1995 (inception of offering) to June 30, 1996 for Class B and
Class C shares.
================================================================================
3. Unrealized Gains and Losses on Investments
At June 30, 1997, net unrealized appreciation on investments of $18,232,301 was
composed of gross appreciation of $32,416,626, and gross depreciation of
$14,184,325.
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (Continued)
- --------------------------------------------------------------------------------
================================================================================
4. Management Fees and Other Transactions with Affiliates
Management fees paid to the Manager were in accordance with the investment
advisory agreement with the Fund which provides for a fee of 0.75% of the first
$200 million of aggregate net assets, 0.72% of the next $200 million, 0.69% of
the next $200 million, 0.66% of the next $200 million and 0.60% of net assets in
excess of $800 million.
For the year ended June 30, 1997, commissions (sales charges paid
by investors) on sales of Class A shares totaled $412,453, of which $96,752 was
retained by OppenheimerFunds Distributor, Inc. (OFDI), a subsidiary of the
Manager, 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 $231,888 and $33,341, of which $5,367 was paid to an
affiliated broker/dealer for Class B shares. During the year ended June 30,
1997, OFDI received contingent deferred sales charges of $34,108 and $3,974,
respectively, upon redemption of Class B and Class C shares as reimbursement for
sales commissions advanced by OFDI at the time of sale of such shares.
OppenheimerFunds Services (OFS), a division of the Manager, is the
transfer and shareholder servicing agent for the Fund and for other registered
investment companies. OFS's total costs of providing such services are allocated
ratably to these companies.
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 June
30, 1997, OFDI paid $7,782 to an affiliated broker/dealer as reimbursement for
Class A personal service and maintenance expenses.
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
================================================================================
The Fund has adopted Distribution and Service Plans for Class B and Class C
shares to compensate OFDI for its services and costs in distributing Class B and
Class C shares and servicing accounts. Under the Plans, the Fund pays OFDI an
annual asset-based sales charge of 0.75% per year on Class B and Class C shares,
as compensation for sales commissions paid from its own resources at the time of
sale and associated financing costs. OFDI also receives a service fee of 0.25%
per year as compensation for costs incurred in connection with the personal
service and maintenance of accounts that hold shares of the Fund, including
amounts paid to brokers, dealers, banks and other financial institutions. Both
fees are computed on the average annual net assets of Class B and Class C
shares, determined as of the close of each regular business day. During the year
ended June 30, 1997, OFDI retained $68,461 and $21,390, 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. At June
30, 1997, OFDI had incurred unreimbursed expenses of $339,068 for Class B and
$64,753 for Class C.
================================================================================
5. Illiquid and Restricted Securities
At June 30, 1997, 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 also 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 and 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 June 30, 1997 was $349,510, which represents 0.25%
of the Fund's net assets, of which $149,512 is considered restricted.
Information concerning restricted securities is as follows:
<TABLE>
<CAPTION>
Valuation Per Unit
Security Acquisition Date Cost Per Unit As of June 30, 1997
- -------------------------------------------------------------------------------------
<S> <C> <C> <C>
Minefinders Corp. Ltd. Wts. 3/11/97 $3.66 $1.99
====================================================================================
</TABLE>
6. Subsequent Event
Effective July 18, 1997, the Fund's portfolio managers are Frank Jennings and
Shanquan Li. Messrs. Jennings and Li are the persons principally responsible
for the day-to-day management of the Fund's portfolio.
<PAGE>
<PAGE>
Appendix A
Corporate Industry Classifications
Aerospace/Defense
Air Transportation
Auto Parts Distribution
Automotive
Bank Holding Companies
Banks
Beverages
Broadcasting
Broker-Dealers
Building Materials
Cable Television
Chemicals
Commercial Finance
Computer Hardware
Computer Software
Conglomerates
Consumer Finance
Containers
Convenience Stores
Department Stores
Diversified Financial
Diversified Media
Drug Stores
Drug Wholesalers
Durable Household Goods
Education
Electric Utilities
Electrical Equipment
Electronics
Energy Services & Producers
Entertainment/Film
Environmental
Food
Gas Utilities
Gold
Health Care/Drugs
Health Care/Supplies & Services
Homebuilders/Real Estate
Hotel/Gaming
Industrial Services
Information Technology
Insurance
Leasing & Factoring
Leisure
Manufacturing
Metals/Mining
Nondurable Household Goods
Oil - Integrated
A-1
<PAGE>
Paper
Publishing/Printing
Railroads
Restaurants
Savings & Loans
Shipping
Special Purpose Financial
Specialty Retailing
Steel
Supermarkets
Telecommunications - Technology
Telephone - Utility
Textile/Apparel
Tobacco
Toys
Trucking
Wireless Services
A-2
<PAGE>
Investment Adviser
OppenheimerFunds, Inc.
Two World Trade Center
New York, New York 10048
Distributor
OppenheimerFunds Distributor, Inc.
Two World Trade Center
New York, New York 10048
Transfer and Shareholder Servicing Agent
OppenheimerFunds Services
P.O. Box 5270
Denver, Colorado 80217
1-800-525-7048
Custodian of Portfolio Securities
The Bank of New York
One Wall Street
New York, New York 10015
Independent Auditors
KPMG Peat Marwick LLP
707 Seventeenth Street
Denver, Colorado 80202
Legal Counsel
Gordon Altman Butowsky Weitzen Shalov & Wein
114 West 47th Street
New York, New York 10036
410SAI
