OPPENHEIMER
Gold & Special Minerals Fund
Prospectus dated October 28, 1998
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 28, 1998 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.
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
<PAGE>
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, 1998.
|X| 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.
Class A Class B Class C
Shares Shares Shares
- ------------------------------------------------------------------------------
Maximum Sales Charge on 5.75% None None
Purchases(as a % of
offering price)
- ------------------------------------------------------------------------------
Maximum Deferred Sales None(1) 5% in the first 1% if shares
Charge (as a % of 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 None None None
Reinvested Dividends
- ------------------------------------------------------------------------------
Exchange Fee None None None
- ------------------------------------------------------------------------------
Redemption Fee None None None
(1) If you invest $1 million or more ($500,000 or more for purchases by
"Retirement Plans" as defined in "Class A Contingent Deferred Sales Charge"
on page 28) in Class A shares, you may have to pay a sales charge of up to 1%
if you sell your shares within 18 calendar months from the end of the
calendar month during which you purchased those shares. 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.
|X| 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):
Class A Class B Class C
Shares Shares Shares
- ------------------------------------------------------------------------------
Management Fees 0.75% 0.75% 0.75%
- ------------------------------------------------------------------------------
12b-1 Plan Fees 0.21% 1.00% 1.00%
- ------------------------------------------------------------------------------
Other Expenses 0.47% 0.46% 0.45%
- ------------------------------------------------------------------------------
Total Fund Operating Expenses 1.43% 2.21% 2.20%
The numbers in the chart above are based upon the Fund's expenses in
its last fiscal year ended June 30, 1998. 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, 1998. The actual expenses for each class of shares
in future years may be more or 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%.
|X| Examples. To try to show the effect of these expenses on an
investment over time, we have created the hypothetical examples shown below.
Assume that you make a $1,000 investment in each class of shares of the Fund,
and that the Fund's annual return is 5%, and that its operating expenses for
each class are the ones shown in the Annual Fund Operating Expenses table
above. If you were to redeem your shares at the end of each period shown
below, your investment would incur the following expenses by the end of 1, 3,
5 and 10 years:
1 year 3 years 5 years 10 years*
- ------------------------------------------------------------------------------
Class A Shares $71 $100 $131 $219
- ------------------------------------------------------------------------------
Class B Shares $72 $99 $138 $217
- ------------------------------------------------------------------------------
Class C Shares $32 $69 $118 $253
If you did not redeem your investment, it would incur the following expenses:
1 year 3 years 5 years 10 years*
- ------------------------------------------------------------------------------
Class A Shares $71 $100 $131 $219
- ------------------------------------------------------------------------------
Class B Shares $22 $69 $118 $217
- ------------------------------------------------------------------------------
Class C Shares $22 $69 $118 $253
*In the first example, expenses include the Class A initial sales charge and
the applicable Class B or Class C contingent deferred sales charge. In the
second example, Class A expenses include the initial sales charge but Class B
and Class C expenses do not include contingent deferred sales charges. The
Class B expenses in years 7 through 10 are based on the Class A expenses
shown above, because the Fund automatically converts your Class B shares into
Class A shares after 6 years. Because of the effect of the 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.
|X| 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.
|X| 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.
|X| Who Manages the Fund? The Fund's investment adviser (the
"Manager") is OppenheimerFunds, Inc. The Manager (including subsidiaries)
manages investment company portfolios having over $85 billion in assets at
September 30, 1998. The Manager is paid an advisory fee by the Fund, based
on its net assets. 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.
|X| 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.
|X| 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.
|X| 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 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.
|X| 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.
|X| 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, 1998, is
included in the Statement of Additional Information.
<TABLE>
<CAPTION>
CLASS A
------------------------------------------------------------
YEAR ENDED JUNE 30,
1998 1997 1996 1995 1994 1993
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING DATA
Net asset value, begin-
ning of period $12.68 $14.15 $13.48 $13.28 $12.32 $10.68
- ---------------------------------------------------------------------------------------
Income (loss) from in-
vestment operations:
Net investment income
(loss) .04 .04 .04 .06 .06 .06
Net realized and
unrealized gain (loss) (3.87) (1.48) .69 .21 .96 1.72
-------- -------- -------- -------- -------- --------
Total income (loss) from
investment operations (3.83) (1.44) .73 .27 1.02 1.78
- ---------------------------------------------------------------------------------------
Dividends and distribu-
tions to shareholders:
Dividends from net in-
vestment income (.04) (.03) (.06) (.07) (.06) (.14)
Distributions from net
realized gain -- -- -- -- -- --
-------- -------- -------- -------- -------- --------
Total dividends and
distributions to
shareholders (.04) (.03) (.06) (.07) (.06) (.14)
- ---------------------------------------------------------------------------------------
Net asset value, end of
period $ 8.81 $12.68 $14.15 $13.48 $13.28 $12.32
======== ======== ======== ======== ======== ========
- ---------------------------------------------------------------------------------------
TOTAL RETURN, AT NET AS-
SET VALUE(/2/) (30.23)% (10.20)% 5.44% 2.03% 8.25% 17.15%
- ---------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Net assets, end of pe-
riod (in thousands) $ 78,458 $126,086 $161,769 $171,721 $179,015 $158,982
- ---------------------------------------------------------------------------------------
Average net assets (in
thousands) $102,501 $149,564 $171,427 $178,579 $175,093 $124,869
- ---------------------------------------------------------------------------------------
Ratios to average net
assets:
Net investment income
(loss) 0.32% 0.28% 0.25% 0.45% 0.50% 0.61%
Expenses 1.43% 1.34% 1.38% 1.36% 1.31% 1.38%
- ---------------------------------------------------------------------------------------
Portfolio turnover
rate(/4/) 64.9% 20.5% 37.6% 35.8% 29.5% 23.9%
</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.
8
<PAGE>
<TABLE>
<CAPTION>
CLASS B CLASS C
- -------------------------------------- ----------------------------- -----------------------------
YEAR ENDED JUNE 30, YEAR ENDED JUNE 30,
1992 1991 1990 1989 1998 1997 1996(/1/) 1998 1997 1996(/1/)
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$10.36 $11.65 $12.58 $12.82 $12.56 $14.11 $12.33 $12.59 $14.13 $12.33
- --------------------------------------------------------------------------------------------------------------
.16 .17 .14 .23 (.01) (.04) (.01) (.01) (.02) (.01)
.35 (1.42) .54 .50 (3.85) (1.51) 1.79 (3.86) (1.52) 1.81
- -------- -------- -------- -------- ------- ------- ------ ------- ------- ------
.51 (1.25) .68 .73 (3.86) (1.55) 1.78 (3.87) (1.54) 1.80
- --------------------------------------------------------------------------------------------------------------
(.19) (.04) (.27) (.18) -- -- -- -- -- --
-- -- (1.34) (.79) -- -- -- -- -- --
- -------- -------- -------- -------- ------- ------- ------ ------- ------- ------
(.19) (.04) (1.61) (.97) -- -- -- -- -- --
- --------------------------------------------------------------------------------------------------------------
$10.68 $10.36 $11.65 $12.58 $ 8.70 $12.56 $14.11 $ 8.72 $12.59 $14.13
======== ======== ======== ======== ======= ======= ====== ======= ======= ======
- --------------------------------------------------------------------------------------------------------------
5.08% (10.71)% 3.10% 6.43% (30.73)% (10.99)% 14.25% (30.74)% (10.90)% 14.41%
- --------------------------------------------------------------------------------------------------------------
$133,345 $150,907 $163,118 $120,198 $10,681 $8,716 $4,882 $5,271 $3,935 $1,390
- --------------------------------------------------------------------------------------------------------------
$137,906 $154,318 $154,079 $110,873 $10,150 $7,361 $2,588 $4,215 $2,672 $ 840
- --------------------------------------------------------------------------------------------------------------
1.25% 1.67% 1.17% 1.97% (0.41)% (0.48)% (0.25)%(/3/) (0.41)% (0.45)% (0.26)%(/3/)
1.38% 1.43% 1.37% 1.22% 2.21% 2.16% 2.22%(/3/) 2.20% 2.18% 2.19%(/3/)
- --------------------------------------------------------------------------------------------------------------
39.4% 113.3% 82.3% 111.7% 64.9% 20.5% 37.6% 64.9% 20.5% 37.6%
</TABLE>
3. Annualized.
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, 1998 were $73,641,552 and $72,306,033,
respectively.
<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.
|X| 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
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.
|X| 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 total 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 total 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 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.
|X| 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.
|X| 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
"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.
|X| 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.
|X| 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.
|X| 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 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.
|X| Year 2000 Risks. Because many computer software systems in use
today cannot distinguish the year 2000 from the year 1900, the markets for
securities in which the Fund invests could be detrimentally affected by
computer failures beginning January 1, 2000. Failure of computer systems
used for securities trading could result in settlement and liquidity problems
for the Fund and other investors. Data processing errors by corporate and
government issuers of securities could result in production problems and
economic uncertainties, and those issuers may incur substantial costs in
attempting to prevent or fix such errors, all of which could have a negative
effect on the Fund's investments and returns.
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.
|X| Foreign Securities. Because generally over 90% of the world's gold
production is currently 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.
|X| 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.
|X| 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 total assets in those investments. Instead, the Fund may
invest a portion of its assets in other types of securities for "defensive
purposes." Securities 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.
|X| 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.
|X| 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."
|X| 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.
|X| 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, 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 total assets in
securities of small, unseasoned issuers.
|X| 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 to determine whether to sell any holdings to
maintain adequate liquidity. See "Illiquid and Restricted Securities" in the
Statement of Additional Information.
|X| 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.
|X| 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 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.
|X| 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.
|X| 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.
|X| Put and Call Options. The Fund may buy and sell certain kinds of
put options (puts) and call options (calls). 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, (3) foreign currencies and (4)
commodities (these are referred to as commodity futures).
The Fund may buy and sell exchange-traded and over-the-counter put and
call options, including index options, securities options, currency options,
commodities options, and options on the other types of futures described in
Futures, above. A call or put may be purchased only if, after the purchase,
the value of all call and put options held by the Fund will not exceed 10% of
the Fund's total assets.
If the Fund sells (that is, writes) a call option, it much be
"covered." That means the Fund must own the security subject to the call
while the call is outstanding, or, for other types of written calls, the Fund
must segregate liquid assets to enable it to satisfy its obligations if the
call is exercised. Up to 25% of the Fund's total assets may be subject to
calls.
The Fund may buy puts whether or not it holds the underlying investment
in the portfolio. If the Fund writes a put, the put must be covered by
segregated liquid assets. The Fund will not write puts if more than 25% of
the Fund's total assets would have to be segregated to cover put options.
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.
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.
|X| 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.
|X| 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."
|X| "Portfolio turnover" describes the rate at which the fund traded
its portfolio securities during its last fiscal year. For example, if a fund
sold all of its securities during the year, its portfolio turnover rate would
have been 100%. Portfolio turnover affects brokerage costs the Fund pays.
The Fund does not engage in substantial short-term trading to try to achieve
its objective. The Financial Highlights table above shows the Fund's
portfolio turnover rates during prior fiscal years.
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:
|_| 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.
|_| 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).
|_| The Fund cannot acquire more than 10% of the outstanding voting
securities of any one issuer.
|_| 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).
|_| 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).
|_| 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.
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 $85 billion as of
September 30, 1998, and with more than 4 million shareholder accounts. The
Manager is owned by Oppenheimer Acquisition Corp., a holding company that is
owned in part by senior officers of the Manager and controlled by
Massachusetts Mutual Life Insurance Company.
The management services provided to the Fund by the Manager, and the
services provided by the Distributor and the Transfer Agent to shareholders,
depend on the smooth functioning of their computer systems. Many computer
software systems in use today cannot distinguish the year 2000 from the year
1900 because of the way dates are encoded and calculated. That failure could
have a negative impact on handling securities trades, pricing and account
services. The Manager, the Distributor and Transfer Agent have been actively
working on necessary changes to their computer systems to deal with the year
2000 and expect that their systems will be adapted in time for that event,
although there cannot be assurance of success. Additionally, because the
services they provide depend on the interaction of their computer systems
with the computer systems of brokers, information services and other parties,
any failure on the part of the computer systems of those third parties to
deal with the year 2000 may also have a negative effect on the services
provided to the Fund.
|X| Portfolio Manager. The Fund=s portfolio managers are Frank
Jennings and Shanquan Li. Messrs. Jennings and Li have been the persons
principally responsible for the day-to-day management of the Fund=s portfolio
since July 18, 1997. 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.
|X| 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.
|X| 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.
|X| 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.
|X| Total Returns. There are different types of "total returns" used to
measure the Fund's performance. Total return is the change in value of a
hypothetical investment in the Fund over a given period, assuming that all
dividends and capital gains distributions are reinvested in additional
shares. The cumulative total return measures the change in value over the
entire period (for example, ten years). An average annual total return shows
the average rate of return for each year in a period that would produce the
cumulative total return over the entire period. However, average annual
total returns do not show the Fund's actual year-by-year performance.
When total returns are quoted for Class A shares, normally the current
maximum initial sales charge has been deducted. When total returns are shown
for Class B 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, 1998, followed
by a graphical comparison of the Fund's performance to an appropriate
broad-based market index.
|X| Management's Discussion of Performance. The Fund's performance
during its past fiscal year ended June 30, 1998 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. 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 benefited from its focus on
investments in securities of companies that were well-capitalized, lower-cost
mineral producers with rising production capacities. The Fund's portfolio
holdings, allocations and strategies are subject to change.
|X| 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, 1998. 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 classes
on November 1, 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.
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 6/30/98(1)
1-Year 5-Year 10-Year
- -34.24% -7.22% -1.85%
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 6/30/98(2)
1-year Life
- -34.20% -13.32%
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 6/30/98(3)
1-year Life
- -31.43% -12.25%
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 3%
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 3% 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.
|X| Class A Shares. If you purchase Class A shares as part of an
investment of at least $1 million ($500,000 for Retirement Plans) in shares
of one or more Oppenheimer funds, you will not pay an initial sales charge,
but if you sell any of those shares within 18 months of buying them, you may
pay a contingent deferred sales charge, described below.
|X| 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.
|X| 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 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.
|X| 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.
|_| 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 6 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 Distributor normally will not accept
purchase orders of $500,000 or more of Class B shares or $1 million or more
of Class C shares, from a single investor.
|_| Investing for the Longer Term. If you are investing for the longer
term, for example, for retirement, and do not expect to need access to your
money for seven years or more, Class B shares may be an appropriate
consideration, if you plan to invest less than $100,000. If you plan to
invest more than $100,000 over the long term, Class A shares will likely be
more advantageous than Class B shares or Class C shares, as discussed above,
because of the effect of the expected lower expenses for Class A shares and
the reduced initial sales charges available for larger investments in Class A
shares under the Fund's Right of Accumulation.
Of course, these examples are based on approximations of the effect of
current sales charges and expenses on a hypothetical investment over time,
using the assumed annual performance returns stated above, and therefore, you
should analyze your options carefully.
|X| 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.
|X| 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 minimum investments under special investment
plans.
|_| With Asset Builder Plans, Automatic Exchange Plans, 403(b)(7)
custodial plans and military allotment plans, you can make initial and
subsequent investments of as little as $25; and subsequent purchases of at
least $25 can be made by telephone through AccountLink.
|_| Under pension, profit-sharing and 401(k) plans and Individual
Retirement Accounts (IRAs), you can make an initial investment of as little
as $250 (if your IRA is established under an Asset Builder Plan, the $25
minimum applies), and subsequent investments may be as little as $25.
|_| There is no minimum investment requirement if you are buying shares
by reinvesting dividends 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.
|X| 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.
|X| Buying Shares Through Your Dealer. Your dealer will place your
order with the Distributor on your behalf.
|X| 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.
|_| 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.
|X| 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 to your bank account.
Shares are purchased for your account through 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.
|X| 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.
|X| 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, or the order is received and transmitted to the
Distributor by an entity authorized by the Fund to accept purchase or
redemption orders. The Fund has authorized the Distributor, certain
broker-dealers and agents or intermediaries designated by the Distributor or
those broker-dealers to accept orders. In most cases, to enable you to
receive that day's offering price, the Distributor or an authorized entity
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, normally your order must be
transmitted to the Distributor so that it is received before the
Distributor's close of business that day, which is normally 5:00 P.M. The
Distributor, in its sole discretion, may reject any purchase order for the
Fund's shares.
Special Sales Charge Arrangements for Certain Persons. Appendix A to this
Prospectus sets forth conditions for the waiver of, or exemption from, sales
charges or the special sales charge rates that apply to 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).
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:
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
- ------------------------------------------------------------------------------
Less than $25,000 5.75% 6.10% 4.75%
- ------------------------------------------------------------------------------
$25,000 or more but
less than $50,000 5.50% 5.82% 4.75%
- ------------------------------------------------------------------------------
$50,000 or more but
less than $100,000 4.75% 4.99% 4.00%
- ------------------------------------------------------------------------------
$100,000 or more but
less than $250,000 3.75% 3.90% 3.00%
- ------------------------------------------------------------------------------
$250,000 or more but
less than $500,000 2.50% 2.56% 2.00%
- ------------------------------------------------------------------------------
$500,000 or more but
less than $1 million 2.00% 2.04% 1.60%
The Distributor reserves the right to reallow the entire commission to
dealers. If that occurs, the dealer may be considered an "underwriter" under
Federal securities laws.
|X| Class A Contingent Deferred Sales Charge. There is no initial
sales charge on purchases of Class A shares of any one or more of the
Oppenheimer funds in the following cases:
|_| Purchases aggregating $1 million or more;
|_| Purchases by a retirement plan qualified under section 401 (a) or
401(k) if the retirement plan has total plan assets of $500,000 or more;
|_| Purchases by a retirement plan qualified under sections 401(a) or
401(k) of the Internal Revenue Code, by a non-qualified deferred compensation
plan, 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;
or
|_| Purchases by an OppenheimerFunds-sponsored 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 Class A shares subject to the contingent deferred
sales charge described above 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 different holding period may apply to shares
purchased prior to June 1, 1998). 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. The Class A contingent deferred sales
charge will not exceed the aggregate amount of the commissions the
Distributor paid to your dealer on all Class A shares of all Oppenheimer
funds you purchased subject to the Class A contingent deferred sales charge.
In determining whether a contingent deferred sales charge is payable,
the Fund will first redeem shares that are not subject to the sales charge,
including shares purchased by reinvestment of dividends and capital gains,
and then will redeem other shares in the order that you purchased them. The
Class A contingent deferred sales charge is waived in certain cases described
in "Waivers of Class A Sales Charges," below.
No Class A contingent deferred sales charge is charged on exchanges of
shares under the Fund's Exchange Privilege (described below). However, if the
shares acquired by exchange are redeemed within 18 months of the end of the
calendar month of the purchase of the exchanged shares, the contingent
deferred sales charge will apply. (A different holding period may apply to
shares purchased prior to June 1, 1998).
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:
|X| 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
minor children. 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 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.
|X| 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.
|X| 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. In order to receive a waiver of the Class A
contingent deferred sales charge, you must notify the Transfer Agent which
conditions apply.
Waivers of Initial and Contingent Deferred Sales Charges for Certain
Purchasers. Class A shares purchased by the following investors are not
subject to any Class A sales charges:
|_| the Manager or its affiliates;
|_| present or former officers, directors, trustees and employees (and
their "immediate families" as defined in "Reduced Sales Charges" in the
Statement of Additional Information) of the Fund, the Manager and its
affiliates, and retirement plans established by them for their employees;
|_| registered management investment companies, or separate accounts of
insurance companies having an agreement with the Manager or the Distributor
for that purpose;
|_| dealers or brokers that have a sales agreement with the
Distributor, if they purchase shares for their own accounts or for retirement
plans for their employees;
|_| employees and registered representatives (and their spouses) of
dealers or brokers described above or financial institutions that have
entered into sales arrangements with such dealers or brokers (and are
identified to the Distributor) or with the Distributor; the purchaser must
certify to the Distributor at the time of purchase that the purchase is for
the purchaser's own account (or for the benefit of such employee's spouse or
minor children);
|_| dealers, brokers, banks or registered investment advisers that have
entered into an agreement with the Distributor providing specifically for the
use of shares of the Fund in particular investment products 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);
|_| (1) investment advisors and financial planners who have entered
into an agreement for this purpose with the Distributor and 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 have entered into an agreement for this
purpose with the Distributor) 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);
|_| 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;
|_| accounts for which Oppenheimer Capital is the investment adviser
(the Distributor must be advised of this arrangement) and persons who are
directors or trustees of the company or trust which is the beneficial owner
of such accounts;
|_| any unit investment trust that has entered into an appropriate
agreement with the Distributor;
|_| a TRAC-2000 401(k) plan (sponsored by the former Quest for Value
Advisors) whose Class B or Class C shares of a Former Quest for Value Fund
were exchanged for Class A shares of that Fund due to the termination of the
Class B and Class C TRAC-2000 program on November 24, 1995; or
|_| qualified retirement plans that had agreed with the former Quest
for Value Advisors to purchase shares of any of the Former Quest for Value
Funds at net asset value, with such shares to be held through DCXchange, a
sub-transfer agency mutual fund clearinghouse, provided that such
arrangements were consummated and share purchases commenced by December 31,
1996.
Waivers of Initial and Contingent Deferred Sales Charges in Certain
Transactions. Class A shares issued or purchased in the following
transactions are not subject to Class A sales charges:
|_| shares issued in plans of reorganization, such as mergers, asset
acquisitions and exchange offers, to which the Fund is a party;
|_| shares purchased by the reinvestment of loan repayments by a
participant in a retirement plan for which the Manager or its affiliates acts
as sponsor;
|_| shares purchased by the reinvestment of dividends or other
distributions reinvested from the Fund or other Oppenheimer funds (other than
Oppenheimer Cash Reserves) or unit investment trusts for which reinvestment
arrangements have been made with the Distributor;
|_| shares purchased and paid for with the proceeds of shares redeemed
in the prior 30 days from a mutual fund (other than a fund managed by the
Manager or any of its subsidiaries) on which an initial sales charge or
contingent deferred sales charge was paid (this waiver also applies to shares
purchased by exchange of shares of Oppenheimer Money Market Fund, Inc. that
were purchased and paid for in this manner); this waiver must be requested
when the purchase order is placed for your shares of the Fund, and the
Distributor may require evidence of your qualification for this waiver; or
|_| shares purchased with the proceeds of maturing principal of units
of any Qualified Unit Investment Liquid Trust Series.
Waivers of the Class A Contingent Deferred Sales Charge for Certain
Redemptions. The Class A contingent deferred sales charge is also waived if
shares that would otherwise be subject to the contingent deferred sales
charge are redeemed in the following cases:
|_| to make Automatic Withdrawal Plan payments that are limited
annually to no more than 12% of the original account value;
|_| involuntary redemptions of shares by operation of law or
involuntary redemptions of small accounts (see "Shareholder Account Rules and
Policies," below);
|_| for distributions from TRAC-2000 401(k) plan sponsored by the
Distributor due to the termination of the TRAC-2000 program;
|_| for distributions from Retirement Plans, deferred compensation
plans or other employee benefit plans for any of the following purposes: (1)
following the death or disability (as defined in the Internal Revenue Code)
of the participant or beneficiary (the death or disability must occur after
the participant's account was established); (2) to return excess
contributions; (3) to return contributions made due to a mistake of fact; (4)
hardship withdrawals, as defined in the plan; (5) under a Qualified Domestic
Relations Order, as defined in the Internal Revenue Code; (6) to meet the
minimum distribution requirements of the Internal Revenue Code; (7) to
establish "substantially equal periodic payments" as described in Section
72(t) of the Internal Revenue Code; (8) for retirement distributions or loans
to participants or beneficiaries; (9) separation from service; (10)
participant-directed redemptions to purchase shares of a mutual fund (other
than a fund managed by the Manager or its subsidiary) offered as an
investment option in a Retirement Plan in which Oppenheimer funds are also
offered as investment options under a special arrangement with the
Distributor; or (11) plan termination or "in-service distributions," if the
redemption proceeds are rolled over directly to an OppenheimerFunds-sponsored
IRA;
|_| for distributions from Retirement Plans having 500 or more eligible
participants, except distributions due to termination of all of the
Oppenheimer funds as an investment option under the Plan; and
|_| for distributions from 401(k) plans sponsored by broker-dealers
that have entered into a special agreement with the Distributor allowing this
waiver.
|X| 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 compensate the Distributor for its expenses of providing
distribution-related services to the Fund in connection with the sale of
Class B shares.
To determine whether the contingent deferred sales charge applies to a
redemption, the Fund redeems shares in the following order: (1) shares
acquired by reinvestment of dividends and capital gains distributions, (2)
shares held for over 6 years, and (3) shares held the longest during the
6-year period. The contingent deferred sales charge is not imposed in the
circumstances described in "Waivers of Class B and Class C Sales Charges,"
below.
The amount of the contingent deferred sales charge will depend on the
number of years since you invested and the dollar amount being redeemed,
according to the following schedule:
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)
- ------------------------------------------------------------------------------
0 - 1 5.0%
1 - 2 4.0%
2 - 3 3.0%
3 - 4 3.0%
4 - 5 2.0%
5 - 6 1.0%
6 and following None
In the table, a "year" is a 12-month period. All purchases are considered to
have been made on the first regular business day of the month in which the
purchase was made.
|X| 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.
|X| Distribution and Service Plan for Class B Shares. The Fund has
adopted a Distribution and Service Plan for Class B shares to compensate the
Distributor for distributing Class B shares and servicing accounts. This Plan
is described below under "Distribution and Service Plans for Class B and
Class C Shares."
|X| 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.
|X| 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 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, 1998, the end of the
Class B Plan year, the Distributor had incurred unreimbursed expenses in
connection with sales of Class B shares of $535,917 (equal to 5.02% of the
Fund's net assets represented by Class B shares on that date). At June 30,
1998, the end of the Class C Plan year, the Distributor had incurred
unreimbursed expenses in connection with sales of Class C shares of $85,393
(equal to 1.62% of the Fund's net assets represented by Class C shares on
that date).
|X| 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. In order to receive a waiver of the Class B or Class
C contingent deferred sales charge, you must notify the Transfer Agent which
conditions apply.
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:
|_| 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);
|_| redemptions from accounts other than Retirement Plans following the
death or disability of the last surviving shareholder, including a trustee of
a "grantor" trust or revocable living trust for which the trustee is also the
sole beneficiary(the death or disability must have occurred after the account
was established and for disability you must provide evidence of a
determination of disability by the Social Security Administration);
|_| returns of excess contributions to Retirement Plans;
|_| distributions from retirement plans to make "substantially equal
periodic payments" 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;
|_| shares redeemed involuntarily, as described in "Shareholder Account
Rules and Policies," below;
|_| distributions from OppenheimerFunds prototype 401(k) plans and from
certain Massachusetts Mutual Life Insurance Company 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; or
|_| 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:
|_| shares sold to the Manager or its affiliates;
|_| shares sold to registered management investment companies or
separate accounts of insurance companies having an agreement with the Manager
or the Distributor for that purpose; or
|_| shares issued in plans of reorganization to which the Fund is a
party.
Special Investor Services
AccountLink. OppenheimerFunds AccountLink links your Fund account to your
account at your bank or other financial institution to enable you to send
money electronically between those accounts to perform a number of types of
account transactions. These include purchases of shares by telephone (either
through a service representative or by PhoneLink, described below), automatic
investments under Asset Builder Plans, and sending dividends and
distributions or Automatic Withdrawal Plan payments directly to your bank
account. Please call the Transfer Agent for more information.
AccountLink privileges should be requested on your dealer's settlement
instructions if you buy your shares through your dealer. After your account
is established, you can request AccountLink privileges by sending
signature-guaranteed instructions to the Transfer Agent. AccountLink
privileges will apply to each shareholder listed in the registration on your
account as well as to your dealer representative of record unless and until
the Transfer Agent receives written instructions terminating or changing
those privileges. After you establish AccountLink for your account, any
change of bank account information must be made by signature-guaranteed
instructions to the Transfer Agent signed by all shareholders who own the
account.
|X| 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.
|X| PhoneLink. PhoneLink is the OppenheimerFunds automated telephone
system that enables shareholders to perform a number of account transactions
automatically using a touch-tone phone. PhoneLink may be used on
already-established Fund accounts after you obtain a Personal Identification
Number (PIN), by calling the special PhoneLink number: 1-800-533-3310.
|_| Purchasing Shares. You may purchase shares in amounts up to
$100,000 by phone, by calling 1-800-533-3310. You must have established
AccountLink privileges to link your bank account with the Fund, to pay for
these purchases.
|_| Exchanging Shares. With the OppenheimerFunds Exchange Privilege,
described below, you can exchange shares automatically by phone from your
Fund account to another Oppenheimer funds account you have already
established by calling the special PhoneLink number. Please refer to "How to
Exchange Shares," below for details.
|_| Selling Shares. You can redeem shares by telephone automatically
by calling the PhoneLink number and the Fund will send the proceeds directly
to your AccountLink bank account. Please refer to "How to Sell Shares,"
below for details.
Shareholder Transactions by Fax. 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.
OppenheimerFunds Internet Web Site. Information about the Fund, including
your account balance, daily share prices, market and Fund portfolio
information, may be obtained by visiting the OppenheimerFunds Internet Web
Site, at the following Internet address: http://www.oppenheimerfunds.com.
Additionally, certain account transactions may be requested by any
shareholder listed in the registration on an account as well as by the dealer
representative of record, through a special section of that Web Site. To
access that section of the Web Site, you must first obtain a personal
identification number ("PIN") by calling OppenheimerFunds PhoneLink at
1-800-533-3310. If you do not wish to have Internet account transactions
capability for your account, please call our customer service representatives
at 1-800-525-7048. To find out more information about Internet transactions
and procedures, please visit the Web Site.
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:
|X| 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 through
AccountLink. You may even set up certain types of withdrawals of up to
$1,500 per month by telephone. You should consult the Statement of
Additional Information for more details.
|X| 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:
|X| Individual Retirement Accounts including rollover IRAs, for
individuals and their spouses and SIMPLE IRAs offered by employers
|X| 403(b)(7) Custodial Plans for employees of eligible tax-exempt
organizations, such as schools, hospitals and charitable organizations
|X| SEP-IRAs (Simplified Employee Pension Plans) for small business
owners or people with income from self-employment, including SAR/SEP-IRAs
|X| Pension and Profit-Sharing Plans for self-employed persons and
other employers
|X| 401(k) Prototype Retirement Plans for businesses
Please call the Distributor for the OppenheimerFunds plan documents,
which contain important information and applications.
How to Sell Shares
You can arrange to take money out of your account by selling
(redeeming) some or all of your shares on any regular business day. Your
shares will be sold at the next net asset value calculated after your order
is received and accepted by the Transfer Agent. The Fund offers you a number
of ways to sell your shares: in writing or by telephone. You can also set up
Automatic Withdrawal Plans to redeem shares on a regular basis, as described
above. If you have questions about any of these procedures, and especially if
you are redeeming shares in a special situation, such as due to the death of
the owner, or from a retirement plan, please call the Transfer Agent first,
at 1-800-525-7048, for assistance.
|X| Retirement Accounts. To sell shares in an
OppenheimerFunds-sponsored 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.
|X| Certain Requests Require a Signature Guarantee. To protect you
and the Fund from fraud, certain redemption requests must be in writing and
must include a signature guarantee in the following situations (there may be
other situations also requiring a signature guarantee):
|_| You wish to redeem more than $50,000 worth of shares and receive a
check
|_| The redemption check is not payable to all shareholders listed on
your account statement
|_| The redemption check is not sent to the address of record on your
account statement
|_| Shares are being transferred to a Fund account with a different
owner or name
|_| Shares are redeemed by someone other than the owners (such as an
Executor)
|X| Where Can I Have My Signature Guaranteed? The Transfer Agent will
accept a guarantee of your signature by a number of financial institutions,
including: a U.S. bank, trust company, credit union or savings association,
or by a foreign bank that has a U.S. correspondent bank, or by a U.S.
registered dealer or broker in securities, municipal securities or government
securities, or by a U.S. national securities exchange, a registered
securities association or a clearing agency. If you are signing as a
fiduciary or on behalf of a corporation, partnership or other business, you
must also include your title in the signature.
Selling Shares by Mail. Write a "letter of instructions" that includes:
|_| Your name
|_| The Fund's name
|_| Your Fund account number (from your account statement)
|_| The dollar amount or number of shares to be redeemed
|_| Any special payment instructions
|_| Any share certificates for the shares you are selling
|_| The signatures of all registered owners exactly as the account is
registered, and
|_| Any special requirements or documents requested by the Transfer
Agent to assure proper authorization of the person asking to sell shares.
Use the following address for 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-sponsored retirement plan or under a share certificate by
telephone.
|_| To redeem shares through a service representative, call
1-800-852-8457
|_| To redeem shares automatically on PhoneLink, call 1-800-533-3310
Whichever method you use, you may have a check sent to the address on
the account statement, or, if you have linked your Fund account to your bank
account on AccountLink, you may have the proceeds wired to that bank
account.
|X| 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.
|X| Telephone Redemptions Through AccountLink. 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.
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:
|_| Shares of the fund selected for exchange must be available for
sale in your state of residence
|_| The prospectuses of this Fund and the fund whose shares you want
to buy must offer the exchange privilege
|_| You must hold the shares you buy when you establish your account
for at least 7 days before you can exchange them; after the account is open 7
days, you can exchange shares every regular business day
|_| You must meet the minimum purchase requirements for the fund you
purchase by exchange
|_| Before exchanging into a fund, you should obtain and read its
prospectus
Shares of a particular class of the Fund may be exchanged only for
shares of the same class in the other Oppenheimer funds. For example, you can
exchange Class A shares of this Fund only for Class A shares of another
fund. At present, Oppenheimer Money Market Fund, Inc. offers only one class
of shares, which are considered to be Class A shares for this purpose. In
some cases, sales charges may be imposed on exchange transactions. Please
refer to "How to Exchange Shares" in the Statement of Additional Information
for more details.
Exchanges may be requested in writing or by telephone:
|X| 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."
|X| Telephone Exchange Requests. Telephone exchange requests may be
made either by calling a service representative at 1-800-852-8457 or by using
PhoneLink for automated exchanges, by calling 1-800-533-3310. Telephone
exchanges may be made only between accounts that are registered with the same
name(s) and address. Shares held under certificates may not be exchanged by
telephone.
You can find a list of Oppenheimer funds currently available for
exchanges in the Statement of Additional Information or obtain one by calling
a service representative at 1-800-525-7048. That list can change from time
to time.
There are certain exchange policies you should be aware of:
|_| Shares are normally redeemed from one fund and purchased into 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.
|_| Because excessive trading can hurt fund performance and harm
shareholders, the Fund reserves the right to refuse any exchange request that
will disadvantage it, or to refuse multiple exchange requests submitted by a
shareholder or dealer.
|_| The Fund may amend, suspend or terminate the exchange privilege at
any time. Although the Fund will attempt to provide you notice whenever it
is reasonably able to do so, it may impose these changes at any time.
|_| For tax purposes, exchanges of shares involve a redemption of the
shares of the Fund you own and a purchase of the shares of the other fund,
which may result in a capital gain or loss. For more information about taxes
affecting exchanges, please refer to "How to Exchange Shares" in the
Statement of Additional Information.
|_| If the Transfer Agent cannot exchange all the shares you request
because of a restriction cited above, only the shares eligible for exchange
will be exchanged.
Shareholder Account Rules and Policies
|X| 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.
|X| 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.
|X| 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.
|X| The Transfer Agent will record any telephone calls to verify data
concerning transactions and has adopted other procedures to confirm that
telephone instructions are genuine, by requiring callers to provide tax
identification numbers and other account data or by using PINs, and by
confirming such transactions in writing. If the Transfer Agent does not use
reasonable procedures it may be liable for losses due to unauthorized
transactions, but otherwise neither the Transfer Agent nor the Fund will be
liable for losses or expenses arising out of telephone instructions
reasonably believed to be genuine. If you are unable to reach the Transfer
Agent during periods of unusual market activity, you may not be able to
complete a telephone transaction and should consider placing your order by
mail.
|X| 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.
|X| 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.
|X| 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.
|X| Payment for redeemed shares is ordinarily made 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
federal funds wire, certified check or arrange with your bank to provide
telephone or written assurance to the Transfer Agent that your purchase
payment has cleared.
|X| 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.
|X| 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.
|X| "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 correct and properly
certified Social Security or Employer Identification Number when you sign
your application, or if you underreport your income to the Internal Revenue
Service.
|X| 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.
|X| 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 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:
|X| 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.
|X| Reinvest Long-Term Capital Gains Only. You can elect to reinvest
long-term capital gains in the Fund while receiving dividends by check or you
can have them sent to your bank account through AccountLink.
|X| 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 through AccountLink.
|X| Reinvest Your Distributions in Another Oppenheimer Fund Account.
You can reinvest all distributions in the same class of shares of 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 in the previous year. So that the Fund
will not have to pay taxes on the amount it distributes to shareholders as
dividends and capital gains, the Fund intends to manage its investments so
that it will qualify as a "regulated investment company" under the Internal
Revenue Code; although the Fund reserves the right not to qualify in a
particular 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.
|X| "Buying a Dividend": If you buy shares on or just before the
ex-dividend date, or just before the Fund declares a capital gains
distribution, you will pay the full price for the shares and then receive a
portion of the price back as a taxable dividend or capital gain, respectively.
|X| 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.
|X| 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.
<PAGE>
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.
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.
Number of Front-End Sales Front-End Sales
Eligible Charge as a Charge as a Commission as
Employees or Percentage of Percentage of Percentage of
Members Offering Price Amount Invested Offering Price
9 or fewer 2.50% 2.56% 2.00%
At least 10 but not 2.00% 2.04% 1.60%
more than 49
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 28 and 29 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.
[PG NUMBER]|X| Waiver of Class A Sales Charges for Certain Shareholders
Class A shares of the Fund purchased by the following investors are not
subject to any Class A initial or contingent deferred sales charges:
|_| Shareholders of the Fund who were shareholders of the AMA Family
of Funds on February 28, 1991 and who acquired shares of any of the Former
Quest for Value Funds by merger of a portfolio of the AMA Family of Funds.
|_| Shareholders of the Fund who acquired shares of any Former Quest
for Value Fund by merger of any of the portfolios of the Unified Funds.
|X| Waiver of Class A Contingent Deferred Sales Charge in Certain
Transactions. the Class A contingent deferred sales charge will not apply to
redemptions of Class A shares of the Fund purchased by the following
investors who were shareholders of any Former Quest for Value Fund:
|_| Investors who purchased Class A shares from a dealer that is not
or was not permitted to receive a sales load or redemption fee imposed on a
shareholder with whom that dealer has a fiduciary relationship under the
Employee Retirement Income Security Act of 1974 and regulations adopted under
that law.
|_| Participants in Qualified Retirement Plans that purchased shares
of any of the Former Quest For Value Funds pursuant to a special "strategic
alliance" with the distributor of those funds. The Fund's Distributor will
pay a commission to the dealer for purchases of Fund shares as described
above in "Class A Contingent Deferred Sales Charge."
Class A, Class B and Class C Contingent Deferred Sales Charge Waivers
|X| Waivers for Redemptions of Shares Purchased Prior to March 6, A-2
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
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.
|X| 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.
<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 6/30/88 through 6/30/98 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, 1998. 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."
Oppenheimer Morgan
Fiscal Year Gold & Special Stanley
(Period) Ended Minerals Fund A World Index
06/30/88 $9,425 $10,000
06/30/89 $10,032 $11,307
06/30/90 $10,342 $12,172
06/30/91 $9,234 $11,648
06/30/92 $9,704 $12,210
06/30/93 $11,367 $14,337
06/30/94 $12,306 $15,881
06/30/95 $12,555 $17,663
06/30/96 $13,239 $21,018
06/30/97 $11,888 $25,812
06/30/98 $8,294 $30,319
Oppenheimer Morgan
Fiscal Year Gold & Special Stanley
(Period) Ended Minerals Fund B World Index
11/01/95(1) $10,000 $10,000
06/30/96 $11,425 $11,434
06/30/97
$10,170 $14,042
06/30/98 $6,833 $16,494
<PAGE>
Oppenheimer Morgan
Fiscal Year Gold & Special Stanley
(Period) Ended Minerals Fund C World Index
11/01/95(2) $10,000 $10,000
06/30/96 $11,441 $11,434
06/30/97 $10,194 $14,042
06/30/98 $7,061 $16,494
- ----------------------
(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 and Shareholder Servicing Agent
OppenheimerFunds Services
P.O. Box 5270
Denver, Colorado 80217
1-800-525-7048
OppenheimerFunds Internet Website
http://www.oppenheimerfunds.com
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.
PRO410.001.1098 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 28, 1998
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 28, 1998. 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....................................... 2
Investment Policies and Strategies................................... 2
Other Investment Techniques and Strategies........................... 6
Other Investment Restrictions........................................ 17
How the Fund is Managed ................................................ 18
Organization and History............................................. 18
Trustees and Officers of the Fund.................................... 18
The Manager and Its Affiliates....................................... 24
Brokerage Policies of the Fund.......................................... 26
Performance of the Fund................................................. 28
Distribution and Service Plans.......................................... 30
About Your Account
How To Buy Shares.................................................... 32
How To Sell Shares................................................... 40
How To Exchange Shares............................................... 45
Dividends, Capital Gains and Taxes...................................... 47
Additional Information About the Fund................................... 49
Financial Information About the Fund
Independent Auditors' Report............................................ 50
Financial Statements.................................................... 51
Appendix A: Industry Classifications................................... A-1
<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).
|X| 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 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.
[PG NUMBER]
|_| 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.
|_| Risks of Conversion to Euro. On January 1, 1999, eleven countries
in the European Monetary Union will adopt the euro as their official
currency. However, their current currencies (for example, the franc, the
mark, and the lire) will also continue in use until January 1, 2002. After
that date, it is expected that only the euro will be used in those countries.
A common currency is expected to confer some benefits in those markets, by
consolidating the government debt market for those countries and reducing
some currency risks and costs. But the conversion to the new currency will
affect the Fund operationally and also has potential risks, some of which are
listed below. Among other things, the conversion will affect:
o issuers in which the Fund invests, because of changes in the
competitive environment from a consolidated currency market and greater
operational costs from converting to the new currency. This might
depress stock values.
o vendors the Fund depends on to carry out its business, such as its
Custodian (which holds the foreign securities the Fund buys), the
Manager (which must price the Fund's investments to deal with the
conversion to the euro) and brokers, foreign markets and securities
depositories. If they are not prepared, there could be delays in
settlements and additional costs to the Fund.
o exchange contracts and derivatives that are outstanding during the
transition to the euro. The lack of currency rate calculations between
the affected currencies and the need to update the Fund's contracts
could pose extra costs to the Fund.
The Manager is upgrading (at its expense) its computer and bookkeeping
systems to deal with the conversion. The Fund's Custodian has advised
the Manager of its plans to deal with the conversion, including how it
will update its record keeping systems and handle the redenomination of
outstanding foreign debt. The Fund's portfolio manager will also
monitor the effects of the conversion on the issuers in which the Fund
invests. The possible effect of these factors on the Fund's investments
cannot be determined with certainty at this time, but they may reduce
the value of some of the Fund's holdings and increase its operational
costs.
|X| 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.
|X| 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.
|_| 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.
|_| 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.
|_| 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.
|_| 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.
|_| 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 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."
|X| 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
|X| 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.
|X| 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.
|X| 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.
|X| Illiquid and Restricted Securities. To enable the Fund to sell
restricted securities not registered under the Securities Act of 1933, the
Fund may have to cause those securities to be registered. The expenses of
registration of restricted securities may be negotiated by the Fund with the
issuer at the time such securities are purchased by the Fund, if such
registration is required before such securities may be sold publicly. When
registration must be arranged because the Fund wishes to sell the security, a
considerable period may elapse between the time the decision is made to sell
the securities and the time the Fund would be permitted to sell them. The
Fund would bear the risks of any downward price fluctuation during that
period. The Fund may also acquire, through private placements, securities
having contractual restrictions on their resale, which might limit the Fund's
ability to dispose of such securities and might lower the amount realizable
upon the sale of such securities. 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.
|X| 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.
|X| 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 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.
|X| 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.
|_| Stock Index Futures. As described in the Prospectus, the Fund may
invest in Stock Index Futures only if they relate to broadly-based stock
indices. A stock index is considered to be broadly-based if it includes
stocks that are not limited to issuers in any particular industry or group of
industries. A stock index assigns relative values to the common stocks
included in the index and fluctuates with the changes in the market value of
those stocks. Stock indices cannot be purchased or sold directly.
Stock index futures are contracts based on the future value of the
basket of securities that comprise the underlying stock index. The contracts
obligate the seller to deliver, and the purchaser to take, cash to settle the
futures transaction or to enter into an offsetting contract. No physical
delivery of the securities underlying the index is made on settling the
futures obligation. No monetary amount is paid or received by the Fund on the
purchase or sale of a Stock Index Future. Upon entering into a Futures
transaction, the Fund will be required to deposit an initial margin payment,
in cash or U.S. Treasury bills, with the futures commission merchant (the
"futures broker"). Initial margin payments will be deposited with the Fund's
Custodian in an account registered in the futures broker's name; however, the
futures broker can gain access to that account only under certain specified
conditions. As the Future is marked to market (that is, its value on the
Fund's books is changed) to reflect changes in its market value, subsequent
margin payments, called variation margin, will be paid to or by the futures
broker on a daily basis.
At any time prior to the expiration of the Future, the Fund may elect
to close out its position by taking an opposite position, at which time a
final determination of variation margin is made and additional cash is
required to be paid by or released to the Fund. Any gain or loss is then
realized by the Fund on the Future for tax purposes. Although Stock Index
Futures by their terms call for settlement by the delivery of cash, in most
cases the settlement obligation is fulfilled without such delivery by
entering into an offsetting transaction. All futures transactions are
effected through a clearing house associated with the exchange on which the
contracts are traded.
|_| 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.
|_| 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.
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.
|_| 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 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.
|_| 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.
|_| 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 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.
|_| 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.
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 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.
|_| Additional Information About Hedging Instruments and Their Use.
The Fund's Custodian, or a securities depository acting for the Custodian,
will act as the Fund's escrow agent, through the facilities of the Options
Clearing Corporation ("OCC"), as to the investments on which the Fund has
written options 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.
|_| 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 identify liquid assets of any
type, including equity and debt securities of any grade, in an amount equal
to the market value of the securities underlying such Future, less the margin
deposit applicable to it on its records as segregated.
|_| 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).
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 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.
|_| 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.
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:
|_| 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;
|_| invest in real estate or in interests in real estate, but may
purchase readily marketable securities of companies holding real estate or
interests therein;
|_| 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;
|_| 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;
|_| 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;
|_| 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;
|_| invest in interests in oil or gas exploration or development
programs; or
|_| invest in companies for the purpose of acquiring control or
management thereof.
|_| 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.
Previously, in connection with the registration of its shares in
certain states, the Fund made certain undertakings as non-fundamental
policies because of certain state regulations. Due to changes in federal
securities laws, such state regulations no longer apply and the undertakings
are therefore inapplicable and have been withdrawn.
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.
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 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 October 2, 1998 the Trustees and
officers of the Fund as a group owned of record or beneficially 1.23% of the
outstanding Class A shares and less than 1% of the outstanding Class B and
Class C shares 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: 72
280 Park Avenue, New York, New York 10017
General Partner of Odyssey Partners, L.P. (investment partnership) and
Chairman of Avatar Holdings, Inc. (real estate development).
Robert G. Galli, Trustee; Age: 64
19750 Beach Road, Jupiter Island, Florida 33469
Formerly he held the following positions: Vice Chairman of
OppenheimerFunds, Inc. (the "Manager") (October 1995 to December 1997),
Vice President (June 1990 to March 1994) and Counsel of Oppenheimer
Acquisition Corp. ("OAC"), the Manager's parent holding company; Executive
Vice President (December 1977 to October 1995), General Counsel and a
director (December 1975 to October 1993) of the Manager; Executive Vice
President and a director of OppenheimerFunds Distributor, Inc. (the
"Distributor") (July 1978 to October 1993); Executive Vice President and a
director of HarbourView Asset Management Corporation ("HarbourView") (April
1986 to October 1995), an investment adviser subsidiary of the Manager;
Vice President and a director (October 1988 to October 1993) and Secretary
(March 1981 to September 1988) of Centennial Asset Management Corporation
("Centennial"), an investment adviser subsidiary of the Manager; a director
(November 1989 to October 1993) and Executive Vice President (November 1989
to January 1990) of Shareholder Financial Services, Inc. ("SFSI"), a
transfer agent subsidiary of the Manager; a director of Shareholder
Services, Inc. ("SSI") (August 1984 to October 1993), a transfer agent
subsidiary of the Manager; an officer of other Oppenheimer funds.
Benjamin Lipstein, Trustee; Age: 75
591 Breezy Hill Road, Hillsdale, New York 12529
Professor Emeritus of Marketing, Stern Graduate School of Business
Administration, New York University.
Bridget A. Macaskill, President and Trustee*#; Age: 50
President (since June 1991), Chief Executive Officer (since September 1995)
and a Director (since December 1994) of the Manager; President and director
(since June 1991) of HarbourView; Chairman and a director of SSI (since
August 1994), and SFSI (September 1995); President (since September 1995)
and a director (since October 1990) of OAC; President (since September
1995) and a director (since November 1989) of Oppenheimer Partnership
Holdings, Inc., a holding company subsidiary of the Manager; a director of
Oppenheimer Real Asset Management, Inc. (since July 1996); President and a
director (since October 1997) of OppenheimerFunds International Ltd., an
offshore fund manager subsidiary of the Manager ("OFIL"); Chairman,
President and a director of Oppenheimer Millennium Funds plc (since October
1997); President and a director or trustee of other Oppenheimer funds;
Member, Board of Governors, NASD, Inc.; and a director of Hillsdown
Holdings plc (a U.K. food company); formerly an Executive Vice President of
the Manager, a director of NASDAQ Stock Market, Inc.
- ----------------------
*A Trustee who is an "interested person" of the Fund and the Manager.
#Not a Director of Oppenheimer Money Market Fund, Inc.
Elizabeth B. Moynihan, Trustee; Age: 69
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: 71
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), Texas 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: 68
40 Park Avenue, New York, New York 10016
Chairman of Municipal Assistance Corporation for the City of New York;
Senior Fellow of Jerome Levy Economics Institute, Bard College; a
member of the U.S. Competitiveness Policy Council; a director of River
Bank America (real estate manager); Trustee, Financial Accounting
Foundation (FASB and GASB); formerly New York State Comptroller and a
trustee, New York State and Local Retirement Fund.
Russell S. Reynolds, Jr., Trustee; Age: 66
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.
Donald W. Spiro, Vice Chairman and Trustee*; Age: 72
Chairman Emeritus (since August 1991) and a director (since January
1969) of the Manager; formerly Chairman of the Manager and the
Distributor.
- ----------------------
*A Trustee who is an "interested person" of the Fund and of the Manager.
Pauline Trigere, Trustee; Age: 85
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: 67
1325 Merrie Ridge Road, McLean, Virginia 22101
Of Counsel, 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), 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: 48
Executive Vice President (since January 1993), General Counsel (since
October 1991) and a Director (since September 1995) of the Manager;
Executive Vice President and General Counsel (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);
President and a director of Centennial (since September 1995);
President, General Counsel 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.
Frank Jennings, Vice President and Portfolio Manager; Age: 51
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: 44
Vice President of the Manager (since November 1997); formerly Assistant
Vice President of the Manager (July 1997-November 1997), a Senior
Quantitative Analyst in the Investment Management Policy Group of Brown
Brothers Harriman & Co., and a Consultant for Acadian Asset Management,
Inc.
George C. Bowen, Treasurer; Age: 62
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); Assistant Treasurer
of OAC (since March 1998); Treasurer of Oppenheimer Partnership Holdings,
Inc. (since November 1989); Vice President and Treasurer of Oppenheimer
Real Asset Management, Inc. (since July 1996); Treasurer of OFIL and
Oppenheimer Millennium Fund plc (since October 1997); a trustee or director
and an officer of other Oppenheimer funds; formerly Treasurer of OAC (June
1990 - March 1998).
Robert G. Zack, Assistant Secretary; Age: 50
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: 33
6803 South Tucson Way, Englewood, Colorado 80112
Vice President of the Manager/Mutual Fund Accounting (since May 1996);
Assistant Treasurer of Oppenheimer Millennium Funds plc (since October
1997); 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.
|X| Remuneration of Trustees. The officers of the Fund and certain
Trustees of the Fund (Ms. Macaskill and Mr. Spiro) who are affiliated with
the Manager receive no salary or fee from the Fund. Mr. Galli received no
salary or fee prior to January 1, 1998. 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, 1998. The compensation from all
of the New York-based Oppenheimer funds includes the Fund and is compensation
received as a director, trustee or member of a committee of the Board during
the calendar year 1997.
------------------------------------------------------------------------------
Retirement Total
Benefits Compensation
Aggregate Accrued from all
Compensation as Fund New York-Based
Name and Position from Fund Expenses Oppenheimer
Funds(1)
------------------------------------------------------------------------------
Leon Levy $9,249 $5,061 $158,500
Chairman and Trustee
------------------------------------------------------------------------------
Robert G. Galli $0 $0 $0
Study Committee
Member
and Trustee
------------------------------------------------------------------------------
Benjamin Lipstein $7,995 $4,374 $137,000
Study Committee
Member and Trustee (2)
------------------------------------------------------------------------------
Elizabeth B. Moynihan $5,631 $3,081 $96,500
Study Committee
Member and Trustee
------------------------------------------------------------------------------
Kenneth A. Randall $5,164 $2,826 $88,500
Audit Committee
Chairman and Trustee
------------------------------------------------------------------------------
Edward V. Regan $5,106 $2,794 $87,500
Proxy Committee
Chairman, Audit
Committee Member
and Trustee
------------------------------------------------------------------------------
Russell S. Reynolds, $3,822 $2,091 $65,500
Jr.
Proxy Committee
Member and Trustee
------------------------------------------------------------------------------
Pauline Trigere $3,414 $1,868 $58,500
Trustee
------------------------------------------------------------------------------
Clayton K. Yeutter $3,822 $2,091 $65,500
Proxy Committee
Member and Trustee
------------------------------------------------------------------------------
(1) For the 1997 calendar year.
Committee position held during a portion of the period shown.
Deferred Compensation Plan. The Board of Trustees has adopted a Deferred
Compensation Plan for disinterested Trustees that enables them to elect to
defer receipt of all or a portion of the annual fees they are entitled to
receive from the Fund. Under the plan, the compensation deferred by a
Trustee is periodically adjusted as though an equivalent amount had been
invested in shares of one or more Oppenheimer funds selected by the Trustee.
The amount paid to the Trustees under the plan will be determined based upon
the performance of the selected funds. Deferral of Trustees' fees under the
plan will not materially affect the Fund's assets, liabilities and net income
per share. The plan will not obligate the Fund to retain the services of any
Trustee or to pay any particular level of compensation to any Trustee.
Pursuant to an Order issued by the Securities and Exchange Commission, the
Fund may, without shareholder approval and notwithstanding its fundamental
policy restricting investment in other open-end investment companies, as
described in the Prospectus invest in the funds selected by the Trustee under
the plan for the limited purpose of determining the value of the Trustee's
deferred fee account.
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, 1998 a
provision of $20,921 was made for the Fund's projected retirement obligations
and payments of $4,526 were made to retired trustees, resulting in an
accumulated liability of $97,629 at June 30, 1998.
|X| Major Shareholders. As of October 2, 1998, 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 541,268.268 Class A shares (6.02% of the
Fund's outstanding Class 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 141,991.664 Class B shares (10.44% 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 113,340.547 shares (17.98% of the Fund's outstanding Class C
shares as of such date) and (iv) Stanley F. Brenner, P.O. Box 5157, Palo
Alto, California 94309-5157, who owned of record 59,225.720 Class C shares
(9.40% 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 (Ms. Macaskill and Mr. 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.
|X| Portfolio Management. The Portfolio Managers of the Fund are Frank
Jennings and Shanquan Li, who are principally responsible for the day-to-day
management of the Fund's portfolio. Messrs. Jennings' and Li's background
are described in the Prospectus under "Portfolio Manager." Other members of
the Manager's Equity Portfolio Department provide the Portfolio Managers with
counsel and support in managing the Fund's portfolio.
|X| 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, 1996,
1997 and 1998, the management fees paid by the Fund to the Manager were
$1,302,108, $1,195,285 and $877,463, 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 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.
|X| 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,
1996, 1997 and 1998, the aggregate sales charges on sales of the Fund's Class
A shares were $632,631, $412,453 and $326,078, respectively, of which the
Distributor and an affiliated broker-dealer retained in the aggregate
$149,888, $96,752 and $77,457 in those respective years. During the Fund's
fiscal year ended June 30, 1998, the contingent deferred sales charges on the
Fund's Class B shares totaled $58,219, all of which the Distributor
retained. During the Fund's fiscal year ended June 30, 1998, the contingent
deferred sales charges collected on the Fund's Class C shares totaled $5,010,
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.
|X| 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
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, 1996, 1997 and 1998,
total brokerage commissions paid by the Fund (not including spreads or
concessions on principal transactions on a net trade basis) were $394,900,
$211,912 and $571,003, respectively. Of that amount, during the fiscal year
ended June 30, 1998, $540,545 was paid to brokers as commissions in return
for research services; the aggregate dollar amount of those transactions was
$111,233,902. 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.
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 )
|X| Cumulative Total Returns. The cumulative "total return" calculation
measures the change in value of a hypothetical investment of $1,000 over an
entire period of years. Its calculation uses some of the same factors as
average annual total return, but it does not average the rate of return on an
annual basis. Cumulative total return is determined as follows:
ERV - P
------- = Total Return
P
In calculating total returns for 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 1-, 5- and 10-year periods ended June 30, 1998 were
- -34.24%, -7.22% and -1.85%, respectively. The cumulative "total return" on
Class A shares of the Fund for the 10-year period ended June 30, 1998 was
- -17.06%. The cumulative total return on Class B shares of the Fund for the
period June 30, 1998 was -31.67%. The cumulative total return on Class C
shares for the period from November 1, 1995, through June 30, 1998 was
29.39%.
|X| 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 10-year period ended June 30, 1998 was -12.00%. The
average annual total returns at net asset value for the 1-, 5- and 10-year
periods ended June 30, 1998, for Class A shares of the Fund were -30.23%,
- -6.11% and -1.27%, respectively. The cumulative total return at net asset
value for Class B shares for the period from November 1, 1995 through June
30, 1998 was -29.55%. The cumulative total return at net asset value for
Class C shares for the period from November 1, 1995 through June 30, 1998 was
- -29.39%.
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 or Class C 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 or Class C shares by Morningstar, Inc.,
an independent mutual fund monitoring service. Morningstar ranks mutual
funds in broad investment categories (domestic stock funds, international
stock funds, taxable bond funds and municipal bond funds) based on
risk-adjusted 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), 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 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, 1998, payments under the Plan for
Class A shares totaled $212,635, all of which was paid by the Distributor to
Recipients including $4,903 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.
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,
1998 totaled $101,446, of which $89,760 was retained by the Distributor.
Payments made under the Class C Plan during the period from November 1, 1995
through June 30, 1998 totaled $42,138, of which $28,516 was retained by the
Distributor. As of June 30, 1998, the Distributor had incurred unreimbursed
expenses under the Class B and Class C Plans of $535,917 and $85,393,
respectively (equal to 5.02% and 1.62% 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 compensation with respect to one class of shares than the
other.
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 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 "NYSE") on each day
that the NYSE 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 NYSE 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 NYSE's most recent annual announcement
(which is subject to change) states that it will close on New Year's Day,
Martin Luther King, Jr. 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.
(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 the principal exchange for such security or NASDAQ
that day (the "Valuation -56-
Date") or, in the absence of sales that day, at the last reported sale
price preceding the Valuation Date if it is within the spread of the
closing "bid" and "asked" prices on the Valuation Date or, if not, the
closing "bid" price on the Valuation Date;
(ii) equity securities traded on a foreign securities exchange are
valued generally 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 at
its last trading session on or immediately preceding the Valuation
Date, or, if unavailable, 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) a non-money market fund will value (x) debt instruments that had
a maturity of more than 397 days when issued, (y) debt instruments that
had a maturity of 397 days or less when issued and have a remaining
maturity in excess of 60 days, and (z) non-money market type debt
instruments that had a maturity of 397 days or less when issued and
have a remaining maturity of sixty days or less, at the mean between
"bid" and "asked" prices determined by a pricing service approved by
the Fund's Board of Trustees or, if unavailable, obtained by the
Manager from two active market makers in the security on the basis of
reasonable inquiry;
(iv) money market-type debt securities held by a non-money market fund
that had a maturity of less than 397 days when issued and have a
remaining maturity of 60 days or less, and debt instruments held by a
money market fund that have a remaining maturity of 397 days or less,
shall be valued at cost, adjusted for amortization of premiums and
accretion of discount; and
(v) 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 active market makers willing to
give quotes (see (ii) and (iii) 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) provided that the Manager is satisfied that the firm rendering the
quotes is reliable and that the quotes reflect the current market value.
The Manager may use pricing services approved by the Board of Trustees
to price U.S. Government securities or corporate debt securities for which
last sale information is not generally available. The pricing service, when
valuing such securities, may use "matrix" comparisons to the prices for
comparable instruments on the basis of quality, yield, maturity and other
special factors involved. The Manager will monitor the accuracy of the
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 NYSE.
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 NYSE 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 "ask" 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 "ask" prices obtained by the Manager from two active market
makers. If the Manager is unable to locate two active market makers willing
to give quotes, the security may be priced at the mean between the "bid" and
"asked" prices provided by a single active market maker (which in certain
cased may be the "bid" price if no "asked" price is available) provided that
the manager is satisfied that the firm rendering the quotes is reliable and
that the quotes reflect the current market value.
AccountLink. When shares are purchased through AccountLink, each purchase
must be at least $25. 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 NYSE, 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 (step-children, step-parents, etc.) are included.
|X| 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:
<PAGE>
Oppenheimer Bond Fund
Oppenheimer California Municipal Fund
Oppenheimer Capital Appreciation Fund
Oppenheimer Champion Income Fund
Oppenheimer Convertible Securities Fund
Oppenheimer Developing Markets Fund
Oppenheimer Discovery Fund
Oppenheimer Disciplined Value Fund
Oppenheimer Disciplined Allocation Fund
Oppenheimer Enterprise Fund
Oppenheimer Equity Income Fund
Oppenheimer Florida Municipal Fund
Oppenheimer Global Fund
Oppenheimer Global Growth & Income Fund
Oppenheimer Gold & Special Minerals Fund
Oppenheimer Growth Fund
Oppenheimer High Yield Fund
Oppenheimer Intermediate Municipal Fund
Oppenheimer Insured Municipal Fund
Oppenheimer International Bond Fund
Oppenheimer International Growth Fund
Oppenheimer International Small Company Fund
Limited Term New York Municipal Fund
Oppenheimer Main Street Income & Growth Fund
Oppenheimer Limited-Term Government Fund
Oppenheimer Main Street California Municipal Fund
Oppenheimer MidCap Fund
Oppenheimer Multiple Strategies Fund
Oppenheimer Municipal Bond Fund
Oppenheimer New Jersey Municipal Fund
Oppenheimer New York Municipal Fund
Panorama Series Fund, Inc.
Oppenheimer Pennsylvania Municipal Fund
Oppenheimer Quest Balanced Value Fund
Oppenheimer Quest Capital Value Fund, Inc.
Oppenheimer Quest Global Value Fund, Inc.
Oppenheimer Quest Opportunity Value Fund
Oppenheimer Quest Small Cap Value Fund
Oppenheimer Quest Value Fund, Inc.
Oppenheimer Real Asset Fund
Rochester Fund Municipals
Oppenheimer Series Fund, Inc.
Oppenheimer Strategic Income Fund
Oppenheimer Total Return Fund, Inc.
Oppenheimer U.S. Government Trust
Oppenheimer World Bond Fund
<PAGE>
and the following "Money Market Funds:"
<PAGE>
Centennial America Fund, L.P.
Centennial California Tax Exempt Trust
Centennial Government Trust
Centennial Money Market Trust
Centennial New York Tax Exempt Trust
Centennial Tax Exempt Trust
Oppenheimer Cash Reserves
Oppenheimer Money Market Fund, Inc.
<PAGE>
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).
|X| 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
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-sponsored 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-sponsored 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 to the dealer over the amount of commissions that apply to the
actual amount of purchases. The excess commissions returned to the Distributor
will be used to purchase additional shares for the investor's account at the net
asset value per share in effect on the date of such purchase, promptly after the
Distributor's receipt thereof.
In determining the total amount of purchases made under a Letter, shares
redeemed by the investor prior to the termination of the Letter of Intent period
will be deducted. It is the responsibility of the dealer of record and/or the
investor to advise the Distributor about the Letter in placing any purchase
orders for the investor during the Letter of Intent period. All of such
purchases must be made through the Distributor.
|_| Terms of Escrow That Apply to Letters of Intent.
1. Out of the initial purchase (or subsequent purchases if necessary) made
pursuant to a Letter, shares of the Fund equal in value up to 5% of the intended
purchase amount specified in the Letter shall be held in escrow by the Transfer
Agent. For example, if the intended purchase amount is $50,000, the escrow shall
be shares valued in the amount of $2,500 (computed at the public offering price
adjusted for a $50,000 purchase). Any dividends and capital gains distributions
on the escrowed shares will be credited to the investor's account.
2. If the 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.
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 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. "Group retirement
plan" also includes qualified retirement plans and non-qualified deferred
compensation plans and IRAs that purchase Class A shares of the Fund through a
single investment dealer, broker, or other financial institution, if that
broker-dealer has made special arrangements with the Distributor enabling those
plans to purchase Class A shares of the Fund at net asset value but subject to a
contingent deferred sales charge.
In addition to the discussion in the Prospectus relating to the ability of
Retirement Plans to purchase Class A shares at net asset value in certain
circumstances, there is no initial sales charge on purchases of Class A shares
of any one or more of the Oppenheimer funds by a Retirement Plan in the
following cases:
(i) the recordkeeping for the Retirement Plan is performed on a daily
valuation basis by Merrill Lynch Pierce Fenner & Smith, Inc. ("Merrill
Lynch") and, on the date the plan sponsor signs the Merrill Lynch
recordkeeping service agreement, the Retirement Plan has $3 million or more
in assets invested in mutual funds other than those advised or managed by
Merrill Lynch Asset Management, L.P. ("MLAM") that are made available
pursuant to a Service Agreement between Merrill Lynch and the mutual fund's
principal underwriter or distributor and in funds advised or managed by
MLAM (collectively, the "Applicable Investments"); or
(ii) the recordkeeping for the Retirement Plan is performed on a daily
valuation basis by an independent record keeper whose services are provided
under a contract or arrangement between the Retirement Plan and Merrill
Lynch. On the date the plan sponsor signs the Merrill Lynch record keeping
service agreement, the Plan must have $3 million or more in assets,
excluding assets held in money market funds, invested in Applicable
Investments; or
(iii) the Plan has 500 or more eligible employees, as determined by the
Merrill Lynch plan conversion manager on the date the plan sponsor signs
the Merrill Lynch record keeping service agreement.
If a Retirement Plan's records are maintained on a daily valuation basis by
Merrill Lynch or an independent record keeper under a contract or alliance
arrangement with Merrill Lynch, and if on the date the plan sponsor signs the
Merrill Lynch record keeping service agreement the Retirement Plan has less than
$3 million in assets, excluding money market funds, invested in Applicable
Investments, then the Retirement Plan may purchase only Class B shares of one or
more of the Oppenheimer funds. Otherwise, the Retirement Plan will be permitted
to purchase Class A shares of one or more of the Oppenheimer funds. Any of those
Retirement Plans that currently invest in Class B shares of the Fund will have
their Class B shares be converted to Class A shares of the Fund once the Plan's
Applicable Investments have reached $5 million.
Any redemptions of shares of the Fund held by Retirement Plans whose
records are maintained on a daily valuation basis by Merrill Lynch or an
independent record keeper under a contract with Merrill Lynch that are currently
invested in Class B shares of the Fund shall not be subject to the Class B CDSC.
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.
|X| 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.
|X| 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.
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 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 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.
|X| 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.
|X| 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 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 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 and Centennial America Fund, L.P.,
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 Convertible Securities Fund, Class M shares can be exchanged only
for Class A shares of other Oppenheimer funds. Exchanges to Class M shares of
Oppenheimer Convertible Securities Fund are permitted from Class A shares of
Oppenheimer Money Market Fund, Inc. or Oppenheimer Cash Reserves that were
acquired by exchange from Class M shares. Otherwise no exchanges of any class of
any Oppenheimer fund into Class M shares are permitted.
Class A shares of Oppenheimer funds may be exchanged at net asset value for
shares of any Money Market Fund. Shares of any Money Market Fund purchased
without a sales charge may be exchanged for shares of Oppenheimer funds offered
with a sales charge upon payment of the sales charge (or, if applicable, may be
used to purchase shares of Oppenheimer funds subject to a contingent deferred
sales charge). However, shares of Oppenheimer Money Market Fund, Inc. purchased
with the redemption proceeds of shares of other mutual funds (other than funds
managed by the Manager or its subsidiaries) redeemed within the 30 days prior to
that purchase may subsequently be exchanged for shares of other Oppenheimer
funds without being subject to an initial or contingent deferred sales charge,
whichever is applicable. To qualify for that privilege, the investor or the
investor's dealer must notify the Distributor of eligibility for this privilege
at the time the shares of Oppenheimer Money Market Fund, Inc. are purchased,
and, if requested, must supply proof of entitlement to this privilege.
Shares of 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
any class purchased subject to a contingent deferred sales charge. However, if
you redeem Class A shares of the Fund that were acquired by exchange of Class A
shares of other Oppenheimer funds purchased subject to a Class A contingent
deferred sales charge within 18 months of the end of the calendar month of the
purchase of the exchanged Class A shares, the Class A contingent deferred sales
charge is imposed on the redeemed shares (see "Class A Contingent Deferred Sales
Charge" in the Prospectus). (A different holding period may apply to shares
purchased prior to June 1, 1998). The Class B contingent deferred sales charge
is imposed on Class B shares acquired by exchange if they are redeemed within
six years of the initial purchase of the exchanged Class B shares. The Class C
contingent deferred sales charge is imposed on Class C shares acquired by
exchange if they are redeemed within 12 months of the initial purchase of the
exchanged Class C shares.
When Class B or Class C shares are redeemed to effect an exchange, the
priorities described in "How To Buy Shares" in the Prospectus for the imposition
of the Class B 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 (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 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.
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 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.
<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, 1998, 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, 1998, 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, 1998, 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.
/s/ KPMG Peat Marwick LLP
KPMG Peat Marwick LLP
Denver, Colorado
July 22, 1998
27 Oppenheimer Gold & Special Minerals Fund
<PAGE>
- --------------------------------------------------------------------------------
Statement of Investments June 30, 1998
- --------------------------------------------------------------------------------
Market Value
Shares See Note 1
================================================================================
Common Stocks--94.4%
- --------------------------------------------------------------------------------
Basic Materials--94.4%
- --------------------------------------------------------------------------------
Chemicals--4.2%
AMCOL International Corp. 60,000 $ 723,750
- --------------------------------------------------------------------------------
Carbide/Graphite Group, Inc. (The)(1) 10,000 278,125
- --------------------------------------------------------------------------------
IMC Global, Inc. 15,000 451,875
- --------------------------------------------------------------------------------
Johnson Matthey plc 202,500 1,820,035
- --------------------------------------------------------------------------------
Quimica Minera Chile SA, Sponsored ADR 20,000 670,000
-----------
3,943,785
- --------------------------------------------------------------------------------
Gold & Platinum--77.8%
- --------------------------------------------------------------------------------
Diamond Mining & Marketing--0.7%
SouthernEra Resources Ltd.(1) 150,000 647,720
- --------------------------------------------------------------------------------
Gold--0.6%
Greenstone Resources Ltd.(1) 150,000 566,118
- --------------------------------------------------------------------------------
Gold Mining: Australia--9.6%
Acacia Resources Ltd. 1,130,000 1,203,570
- --------------------------------------------------------------------------------
Aurora Gold Ltd.(1) 150,000 112,393
- --------------------------------------------------------------------------------
Centaur Mining & Exploration Ltd.(1) 2,094,000 726,154
- --------------------------------------------------------------------------------
Delta Gold NL 1,000,000 1,226,110
- --------------------------------------------------------------------------------
Goldfields Ltd. 200,000 222,929
- --------------------------------------------------------------------------------
Great Central Mines NL 400,000 381,457
- --------------------------------------------------------------------------------
Lihir Gold Ltd.(1) 1,000,000 1,232,303
- --------------------------------------------------------------------------------
Lihir Gold Ltd., Sponsored ADR(1) 50,000 1,218,750
- --------------------------------------------------------------------------------
Newcrest Mining Ltd.(1) 700,000 858,277
- --------------------------------------------------------------------------------
Ranger Minerals NL(1) 100,000 222,310
- --------------------------------------------------------------------------------
Resolute Ltd.(1) 942,000 571,665
- --------------------------------------------------------------------------------
Sons of Gwalia Ltd. 453,019 1,122,124
-----------
9,098,042
- --------------------------------------------------------------------------------
Gold Mining: Canada--21.6%
Barrick Gold Corp. 292,000 5,602,750
- --------------------------------------------------------------------------------
Bema Gold Corp.(1) 500,000 809,225
- --------------------------------------------------------------------------------
Cambior, Inc. 285,000 1,676,423
- --------------------------------------------------------------------------------
Goldcorp, Inc., Cl. A(1) 225,000 1,055,733
- --------------------------------------------------------------------------------
Kinross Gold(1) 560,000 1,885,020
- --------------------------------------------------------------------------------
Placer Dome, Inc. 530,000 6,214,120
- --------------------------------------------------------------------------------
Prime Resource Group, Inc. 175,800 1,231,342
- --------------------------------------------------------------------------------
Rio Narcea Gold Mines Ltd.(1) 100,000 221,687
- --------------------------------------------------------------------------------
TVX Gold, Inc.(1) 400,000 1,225,000
- --------------------------------------------------------------------------------
Viceroy Resources Corp.(1) 300,000 469,215
-----------
20,390,515
11 Oppenheimer Gold & Special Minerals Fund
<PAGE>
- --------------------------------------------------------------------------------
Statement of Investments (Continued)
- --------------------------------------------------------------------------------
Market Value
Shares See Note 1
- --------------------------------------------------------------------------------
Gold Mining: South Africa--8.1%
Anglogold Ltd. 61,500 $ 2,495,492
- --------------------------------------------------------------------------------
Anglogold Ltd., Sponsored ADR 48,000 973,848
- --------------------------------------------------------------------------------
Ashanti Goldfields Co. Ltd., Sponsored GDR 156,120 1,268,475
- --------------------------------------------------------------------------------
Gold Fields of South Africa Ltd. 100,000 1,154,495
- --------------------------------------------------------------------------------
Harmony Gold Mining Co.(1) 100,000 415,958
- --------------------------------------------------------------------------------
IAMGOLD, International African Mining Gold Corp.(1) 200,000 510,016
- --------------------------------------------------------------------------------
Western Areas Gold Mining Co. Ltd. 245,000 790,320
-----------
7,608,604
- --------------------------------------------------------------------------------
Gold Mining: United States--14.4%
Battle Mountain Gold Co. 150,000 890,625
- --------------------------------------------------------------------------------
Getchell Gold Corp.(1) 157,000 2,413,875
- --------------------------------------------------------------------------------
Homestake Mining Co. 280,000 2,905,000
- --------------------------------------------------------------------------------
Newmont Mining Corp. 310,871 7,344,327
-----------
13,553,827
- --------------------------------------------------------------------------------
Gold Related Investment--14.3%
Euro-Nevada Mining Corp. 442,000 6,026,417
- --------------------------------------------------------------------------------
Franco-Nevada Mining Corp. Ltd. 203,000 4,023,993
- --------------------------------------------------------------------------------
Normandy Mining Ltd. 4,186,946 3,422,438
-----------
13,472,848
- --------------------------------------------------------------------------------
Platinum Mining--8.5%
Anglo American Platinum Corp. Ltd. 73,600 805,973
- --------------------------------------------------------------------------------
Anglo American Platinum Corp. Ltd., ADR 113,718 1,245,292
- --------------------------------------------------------------------------------
Stillwater Mining Co.(1) 222,000 6,021,750
-----------
8,073,015
-----------
73,410,689
- --------------------------------------------------------------------------------
Metals--12.4%
- --------------------------------------------------------------------------------
Aluminum--0.5%
Kaiser Aluminum Corp.(1) 50,000 478,125
- --------------------------------------------------------------------------------
Copper--0.2%
Freeport-McMoRan Copper & Gold, Inc., Cl. A 10,000 142,500
- --------------------------------------------------------------------------------
Metals: Diversified--5.9%
Aluminum Co. of America 23,000 1,516,562
- --------------------------------------------------------------------------------
Brush Wellman, Inc. 15,000 308,437
- --------------------------------------------------------------------------------
Cia de Minas Buenaventura SA, Sponsored ADR, Series B 35,600 467,250
- --------------------------------------------------------------------------------
Cia Vale do Rio Doce, Preference 130,000 2,540,189
- --------------------------------------------------------------------------------
Dia Met Minerals Ltd., Cl. B(1) 50,000 765,024
-----------
5,597,462
12 Oppenheimer Gold & Special Minerals Fund
<PAGE>
Market Value
Shares See Note 1
- --------------------------------------------------------------------------------
Metals: Miscellaneous--5.8%
Caemi Mineracao e Metalurgia SA 100,000 $ 5,793
- --------------------------------------------------------------------------------
Cameco Corp. 20,000 557,618
- --------------------------------------------------------------------------------
Impala Platinum Holdings Ltd. 180,000 1,543,288
- --------------------------------------------------------------------------------
Korea Zinc Co. 100,000 779,315
- --------------------------------------------------------------------------------
Lepanto Consolidated Mining Co., Cl. B 10,000,000 107,913
- --------------------------------------------------------------------------------
Major Drilling Group International, Inc.(1) 20,000 112,204
- --------------------------------------------------------------------------------
PT International Nickel Indonesia 80,000 42,162
- --------------------------------------------------------------------------------
RMI Titanium Co.(1) 70,000 1,592,500
- --------------------------------------------------------------------------------
Union Miniere SA 8,000 494,491
- --------------------------------------------------------------------------------
Westralian Sands Ltd. 100,000 207,448
-----------
11,660,819
-----------
Total Common Stocks (Cost $97,706,329) 89,015,293
================================================================================
Preferred Stocks--1.7%
- --------------------------------------------------------------------------------
Ashanti GSM Ltd. Redeemable Preferred, A Shares(2) 88,888 137,777
- --------------------------------------------------------------------------------
Battle Mountain Gold Co., $3.25 Cum. Cv. 34,500 1,580,531
-----------
Total Preferred Stocks (Cost $1,900,877) 1,718,308
Units
================================================================================
Rights, Warrants and Certificates--0.0%
- --------------------------------------------------------------------------------
Resolute Ltd. Rts., Exp. 7/98 (Cost $0) 137,571 1,533
Face
Amount(3)
================================================================================
Convertible Corporate Bonds and Notes--1.6%
- --------------------------------------------------------------------------------
Lonrho Finance plc, 6% Cv. Gtd. Bonds, 2/27/04(GBP)
(Cost $1,521,959) $ 1,000,000 1,536,185
================================================================================
Repurchase Agreements--1.4%
- --------------------------------------------------------------------------------
Repurchase agreement with Salomon Smith Barney
Holdings, Inc., 5.90%, dated 6/30/98, to be
repurchased at $1,300,213 on 7/1/98,
collateralized by U.S. Treasury Bonds,
8.75%-11.25%, 2/15/15-2/15/19, with a value
of $1,334,565 (Cost $1,300,000) 1,300,000 1,300,000
- --------------------------------------------------------------------------------
Total Investments, at Value (Cost $102,429,165) 99.1% 93,571,319
- --------------------------------------------------------------------------------
Other Assets Net of Liabilities 0.9 838,840
----------- -----------
Net Assets 100.0% $94,410,159
=========== ===========
1. Non-income producing security.
2. Identifies issues considered to be illiquid or restricted--See Note 5 of
Notes to Financial Statements.
3. Face amount is reported in U.S. Dollars, except for those denoted in the
following currency: GBP--British Pound Sterling
See accompanying Notes to Financial Statements.
13 Oppenheimer Gold & Special Minerals Fund
<PAGE>
- --------------------------------------------------------------------------------
Statement of Assets and Liabilities June 30, 1998
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
=============================================================================================
Assets
Investments, at value (cost $102,429,165)--see accompanying statement $ 93,571,319
- ---------------------------------------------------------------------------------------------
Cash 103,393
- ---------------------------------------------------------------------------------------------
Receivables:
Shares of beneficial interest sold 1,123,696
Interest and dividends 83,500
- ---------------------------------------------------------------------------------------------
Other 8,593
-------------
Total assets 94,890,501
=============================================================================================
Liabilities
Payables and other liabilities:
Shares of beneficial interest redeemed 143,836
Trustees' fees--Note 1 103,759
Shareholder reports 75,185
Investments purchased 69,231
Distribution and service plan fees 55,897
Transfer and shareholder servicing agent fees 6,916
Custodian fees 3,935
Other 21,583
-------------
Total liabilities 480,342
=============================================================================================
Net Assets $ 94,410,159
=============
=============================================================================================
Composition of Net Assets
Paid-in capital $ 128,195,864
- ---------------------------------------------------------------------------------------------
Overdistributed net investment income (97,629)
- ---------------------------------------------------------------------------------------------
Accumulated net realized loss on investments and foreign currency transactions (24,830,325)
- ---------------------------------------------------------------------------------------------
Net unrealized depreciation on investments and translation of assets and
liabilities denominated in foreign currencies (8,857,751)
-------------
Net assets $ 94,410,159
=============
</TABLE>
14 Oppenheimer Gold & Special Minerals Fund
<PAGE>
================================================================================
Net Asset Value Per Share
Class A Shares:
Net asset value and redemption price per share (based on net assets of
$78,458,152 and 8,905,765 shares of beneficial interest outstanding) $8.81
Maximum offering price per share (net asset value plus sales charge of
5.75% of offering price) $9.35
- --------------------------------------------------------------------------------
Class B Shares:
Net asset value, redemption price (excludes applicable contingent
deferred sales charge) and offering price per share (based on net assets
of $10,680,957 and 1,227,753 shares of beneficial interest outstanding) $8.70
- --------------------------------------------------------------------------------
Class C Shares:
Net asset value, redemption price (excludes applicable contingent
deferred sales charge) and offering price per share (based on net assets
of $5,271,050 and 604,682 shares of beneficial interest outstanding) $8.72
See accompanying Notes to Financial Statements.
15 Oppenheimer Gold & Special Minerals Fund
<PAGE>
- --------------------------------------------------------------------------------
Statement of Operations For the Year Ended June 30, 1998
- --------------------------------------------------------------------------------
================================================================================
Investment Income
Dividends (net of foreign withholding taxes of $87,663) $ 1,544,078
- --------------------------------------------------------------------------------
Interest 508,826
------------
Total income 2,052,904
================================================================================
Expenses
Management fees--Note 4 877,463
- --------------------------------------------------------------------------------
Distribution and service plan fees--Note 4:
Class A 212,635
Class B 101,446
Class C 42,138
- --------------------------------------------------------------------------------
Transfer and shareholder servicing agent fees--Note 4 350,260
- --------------------------------------------------------------------------------
Shareholder reports 75,477
- --------------------------------------------------------------------------------
Custodian fees and expenses 46,311
- --------------------------------------------------------------------------------
Trustees' fees and expenses--Note 1 46,202
- --------------------------------------------------------------------------------
Legal, auditing and other professional fees 24,229
- --------------------------------------------------------------------------------
Insurance expenses 7,386
- --------------------------------------------------------------------------------
Other 2,586
------------
Total expenses 1,786,133
================================================================================
Net Investment Income 266,771
================================================================================
Realized and Unrealized Loss
Net realized loss on:
Investments (12,350,200)
Foreign currency transactions (3,183,046)
------------
Net realized loss (15,533,246)
- --------------------------------------------------------------------------------
Net change in unrealized appreciation or depreciation on:
Investments (24,543,053)
Translation of assets and liabilities denominated in
foreign currencies (2,547,543)
------------
Net change (27,090,596)
------------
Net realized and unrealized loss (42,623,842)
================================================================================
Net Decrease in Net Assets Resulting from Operations $(42,357,071)
============
See accompanying Notes to Financial Statements.
16 Oppenheimer Gold & Special Minerals Fund
<PAGE>
- --------------------------------------------------------------------------------
Statements of Changes in Net Assets
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended June 30,
1998 1997
=============================================================================================
<S> <C> <C>
Operations
Net investment income $ 266,771 $ 377,451
- ---------------------------------------------------------------------------------------------
Net realized gain (loss) (15,533,246) 1,028,198
- ---------------------------------------------------------------------------------------------
Net change in unrealized appreciation or depreciation (27,090,596) (18,420,129)
------------- -------------
Net decrease in net assets resulting from operations (42,357,071) (17,014,480)
=============================================================================================
Dividends and Distributions to Shareholders
Dividends from net investment income:
Class A (360,008) (302,998)
=============================================================================================
Beneficial Interest Transactions
Net increase (decrease) in net assets
resulting from beneficial interest
transactions--Note 2:
Class A (10,099,835) (19,702,023)
Class B 5,712,711 4,828,099
Class C 2,776,982 2,887,566
=============================================================================================
Net Assets
Total decrease (44,327,221) (29,303,836)
- ---------------------------------------------------------------------------------------------
Beginning of period 138,737,380 168,041,216
------------- -------------
End of period [including undistributed (overdistributed)
net investment income of $(97,629) and $263,701, respectively] $ 94,410,159 $ 138,737,380
============= =============
</TABLE>
See accompanying Notes to Financial Statements.
17 Oppenheimer Gold & Special Minerals Fund
<PAGE>
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Class A
-------------------------------------------------------------
Year Ended June 30,
1998 1997 1996 1995 1994
===========================================================================================================
<S> <C> <C> <C> <C> <C>
Per Share Operating Data
Net asset value, beginning
of period $12.68 $14.15 $13.48 $13.28 $12.32
- -----------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income (loss) .04 .04 .04 .06 .06
Net realized and unrealized
gain (loss) (3.87) (1.48) .69 .21 .96
--------- --------- --------- --------- ---------
Total income (loss) from
investment operations (3.83) (1.44) .73 .27 1.02
- -----------------------------------------------------------------------------------------------------------
Dividends and distributions to shareholders:
Dividends from net investment
income (.04) (.03) (.06) (.07) (.06)
--------- --------- --------- --------- ---------
Total dividends and distributions
to shareholders (.04) (.03) (.06) (.07) (.06)
- -----------------------------------------------------------------------------------------------------------
Net asset value, end of period $8.81 $12.68 $14.15 $13.48 $13.28
========= ========= ========= ========= =========
===========================================================================================================
Total Return, at Net Asset Value(2) (30.23)% (10.20)% 5.44% 2.03% 8.25%
===========================================================================================================
Ratios/Supplemental Data
Net assets, end of period
(in thousands) $78,458 $126,086 $161,769 $171,721 $179,015
- -----------------------------------------------------------------------------------------------------------
Average net assets
(in thousands) $102,501 $149,564 $171,427 $178,579 $175,093
- -----------------------------------------------------------------------------------------------------------
Ratios to average net assets:
Net investment income (loss) 0.32% 0.28% 0.25% 0.45% 0.50%
Expenses 1.43% 1.34% 1.38% 1.36% 1.31%
- -----------------------------------------------------------------------------------------------------------
Portfolio turnover rate(4) 64.9% 20.5% 37.6% 35.8% 29.5%
</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.
18 Oppenheimer Gold & Special Minerals Fund
<PAGE>
<TABLE>
<CAPTION>
Class B Class C
--------------------------------- -----------------------------------
Year Ended June 30, Year Ended June 30,
1998 1997 1996(1) 1998 1997 1996(1)
=========================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Per Share Operating Data
Net asset value, beginning
of period $12.56 $14.11 $12.33 $12.59 $14.13 $12.33
- -------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income (loss) (.01) (.04) (.01) (.01) (.02) (.01)
Net realized and unrealized
gain (loss) (3.85) (1.51) 1.79 (3.86) (1.52) 1.81
------- --------- --------- --------- --------- ---------
Total income (loss) from
investment operations (3.86) (1.55) 1.78 (3.87) (1.54) 1.80
- -------------------------------------------------------------------------------------------------------------------------
Dividends and distributions to shareholders:
Dividends from net investment
income -- -- -- -- -- --
------- --------- --------- --------- --------- ---------
Total dividends and distributions
to shareholders -- -- -- -- -- --
- -------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $8.70 $12.56 $14.11 $8.72 $12.59 $14.13
======= ========= ========= ========= ========= =========
=========================================================================================================================
Total Return, at Net Asset Value(2) (30.73)% (10.99)% 14.25% (30.74)% (10.90)% 14.41%
=========================================================================================================================
Ratios/Supplemental Data
Net assets, end of period
(in thousands) $10,681 $8,716 $4,882 $5,271 $3,935 $1,390
- -------------------------------------------------------------------------------------------------------------------------
Average net assets
(in thousands) $10,150 $7,361 $2,588 $4,215 $2,672 $840
- -------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets:
Net investment income (loss) (0.41)% (0.48)% (0.25)%(3) (0.41)% (0.45)% (0.26)%(3)
Expenses 2.21% 2.16% 2.22%(3) 2.20% 2.18% 2.19%(3)
- -------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate(4) 64.9% 20.5% 37.6% 64.9% 20.5% 37.6%
</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, 1998 were $73,641,552 and $72,306,033, respectively.
See accompanying Notes to Financial Statements.
19 Oppenheimer Gold & Special Minerals Fund
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements
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================================================================================
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 engaged
in mining, processing, fabricating or distributing gold or other metals or
minerals in the United States and in foreign countries. The Fund's investment
advisor 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.
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Investment Valuation. Portfolio securities are valued at the close of the New
York Stock Exchange on each trading day. Listed and unlisted securities for
which such information is regularly reported are valued at the last sale price
of the day or, in the absence of sales, at values based on the closing bid or
the last sale price on the prior trading day. Long-term and short-term
"non-money market" debt securities are valued by a portfolio pricing service
approved by the Board of Trustees. Such securities which cannot be valued by an
approved portfolio pricing service are valued using dealer-supplied valuations
provided the Manager is satisfied that the firm rendering the quotes is reliable
and that the quotes reflect current market value, or are valued under
consistently applied procedures established by the Board of Trustees to
determine fair value in good faith. Short-term "money market type" debt
securities having a remaining maturity of 60 days or less are valued at cost (or
last determined market value) adjusted for amortization to maturity of any
premium or discount. Forward foreign currency exchange contracts are valued
based on the closing prices of the forward currency contract rates in the London
foreign exchange markets on a daily basis as provided by a reliable bank or
dealer.
20 Oppenheimer Gold & Special Minerals Fund
<PAGE>
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.
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.
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Repurchase Agreements. The Fund requires the custodian to take possession, to
have legally segregated in the Federal Reserve Book Entry System or to have
segregated within the custodian's vault, all securities held as collateral for
repurchase agreements. The market value of the underlying securities is required
to be at least 102% of the resale price at the time of purchase. If the seller
of the agreement defaults and the value of the collateral declines, or if the
seller enters an insolvency proceeding, realization of the value of the
collateral by the Fund may be delayed or limited.
- --------------------------------------------------------------------------------
Allocation of Income, Expenses, Gains and Losses. Income, expenses (other than
those attributable to a specific class), gains and losses are allocated daily to
each class of shares based upon the relative proportion of net assets
represented by such class. Operating expenses directly attributable to a
specific class are charged against the operations of that class.
- --------------------------------------------------------------------------------
Federal Taxes. The Fund intends to continue to comply with provisions of the
Internal Revenue Code applicable to regulated investment companies and to
distribute all of its taxable income, including any net realized gain on
investments not offset by loss carryovers, to shareholders. Therefore, no
federal income or excise tax provision is required. As of June 30, 1998, the
Fund had available for federal income tax purposes an unused capital loss
carryover of approximately $16,300,000 which expires between 2000 and 2006.
21 Oppenheimer Gold & Special Minerals Fund
<PAGE>
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Notes to Financial Statements (Continued)
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1. Significant Accounting Policies (continued)
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, 1998, a provision of $20,921 was made for the Fund's projected benefit
obligations and payments of $4,526 were made to retired trustees, resulting in
an accumulated liability of $97,629 at June 30, 1998.
The Board of Trustees has adopted a Deferred Compensation plan for
independent Trustees that enables Trustees to elect to defer receipt of all or a
portion of annual fees they are entitled to receive from the Fund. Under the
plan, the compensation deferred is periodically adjusted as though an equivalent
amount had been invested for the Trustee in shares of one or more Oppenheimer
funds selected by the Trustee. The amount paid to the Trustee under the plan
will be determined based upon the performance of the selected funds. Deferral of
Trustees' fees under the plan will not affect the net assets of the Fund, and
will not materially affect the Fund's assets, liabilities or net income per
share.
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Distributions to Shareholders. Dividends and distributions to shareholders are
recorded on the ex-dividend date.
- --------------------------------------------------------------------------------
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 disallowed losses and 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, 1998, 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, 1998, amounts have been reclassified to reflect a decrease in undistributed
net investment income of $268,093, a decrease in accumulated net realized loss
of $894,773, and a decrease in paid-in capital of $626,680.
22 Oppenheimer Gold & Special Minerals Fund
<PAGE>
================================================================================
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.
================================================================================
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, 1998 Year Ended June 30, 1997
----------------------------- -----------------------------
Shares Amount Shares Amount
- -----------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class A:
Sold 12,853,959 $ 135,829,366 9,092,060 $ 125,381,941
Dividends reinvested 36,061 325,275 19,635 265,853
Redeemed (13,929,468) (146,254,476) (10,597,946) (145,349,817)
------------- ------------- ------------- -------------
Net decrease (1,039,448) $ (10,099,835) (1,486,251) $ (19,702,023)
============= ============= ============= =============
- -----------------------------------------------------------------------------------
Class B:
Sold 1,457,504 $ 15,191,579 650,210 $ 8,951,921
Redeemed (923,519) (9,478,868) (302,540) (4,123,822)
------------- ------------- ------------- -------------
Net increase 533,985 $ 5,712,711 347,670 $ 4,828,099
============= ============= ============= =============
- -----------------------------------------------------------------------------------
Class C:
Sold 2,406,210 $ 24,524,520 1,715,098 $ 23,557,280
Redeemed (2,114,188) (21,747,538) (1,500,859) (20,669,714)
------------- ------------- ------------- -------------
Net increase 292,022 $ 2,776,982 214,239 $ 2,887,566
============= ============= ============= =============
</TABLE>
23 Oppenheimer Gold & Special Minerals Fund
<PAGE>
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Notes to Financial Statements (Continued)
- --------------------------------------------------------------------------------
3. Unrealized Gains and Losses on Investments
At June 30, 1998, net unrealized depreciation on investments of $8,857,846 was
composed of gross appreciation of $12,361,408, and gross depreciation of
$21,219,254.
- --------------------------------------------------------------------------------
4. Management Fees and Other Transactions
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 average annual 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, 1998, commissions (sales charges paid by
investors) on sales of Class A shares totaled $326,078, of which $77,457 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 $276,714 and $27,913, respectively, of which $8,163, was
paid to an affiliated broker/dealer for Class B shares. During the year ended
June 30, 1998, OFDI received contingent deferred sales charges of $58,219 and
$5,010, 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, 1998, OFDI paid $4,903 to an
affiliated broker/dealer as reimbursement for Class A personal service and
maintenance expenses.
24 Oppenheimer Gold & Special Minerals Fund
<PAGE>
================================================================================
The Fund has adopted Distribution and Service Plans for Class B and Class C
shares to compensate OFDI for its costs in distributing Class B and Class C
shares and servicing accounts. Under the Plans, the Fund pays OFDI an annual
asset-based sales charge of 0.75% per year on Class B and Class C shares for its
services rendered in distributing Class B and Class C shares. OFDI also receives
a service fee of 0.25% per year to compensate dealers for providing personal
services for accounts that hold Class B and Class C shares. Each fee is computed
on the average annual net assets of Class B or Class C shares, determined as of
the close of each regular business day. During the year ended June 30, 1998,
OFDI retained $89,760 and $28,516, 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, 1998, OFDI had
incurred excess distribution and servicing costs of $535,917 for Class B and
$85,393 for Class C.
================================================================================
5. Illiquid and Restricted Securities
At June 30, 1998, investments in securities included issues that are illiquid or
restricted. Restricted securities are often purchased in private placement
transactions, are not registered under the Securities Act of 1933, may have
contractual restrictions on resale, and are valued under methods approved by the
Board of Trustees as reflecting fair value. A security may 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 securities subject to
this limitation at June 30, 1998 was $137,777, which represents 0.15% of the
Fund's net assets.
25 Oppenheimer Gold & Special Minerals Fund
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (Continued)
- --------------------------------------------------------------------------------
================================================================================
6. Bank Borrowings
The Fund may borrow from a bank for temporary or emergency purposes including,
without limitation, funding of shareholder redemptions provided asset coverage
for borrowings exceeds 300%. The Fund has entered into an agreement which
enables it to participate with other Oppenheimer funds in an unsecured line of
credit with a bank, which permits borrowings up to $400 million, collectively.
Interest is charged to each fund, based on its borrowings, at a rate equal to
the Federal Funds Rate plus 0.35%. Borrowings are payable 30 days after such
loan is executed. The Fund also pays a commitment fee equal to its pro rata
share of the average unutilized amount of the credit facility at a rate of
0.0575% per annum.
The Fund had no borrowings outstanding during the period ended June
30, 1998.
================================================================================
7. Forward Contracts
A forward foreign currency exchange contract (forward contract) is a commitment
to purchase or sell a foreign currency at a future date, at a negotiated rate.
The fund uses forward contracts to seek to manage foreign currency
risks. They may also be used to tactically shift portfolio currency risk. The
Fund generally enters into forward contracts as a hedge upon the purchase or
sale of a security denominated in a foreign currency. In addition, the Fund may
enter into such contracts as a hedge against charges in foreign currency
exchange rates on portfolio positions.
Forward contracts are valued based on the closing prices of the
forward currency contract rates in the London foreign exchange markets on a
daily basis as provided by a reliable bank or dealer. The Fund will realize a
gain or loss upon the closing or settlement of the forward transaction.
Securities held in segregated accounts to cover net exposure on
outstanding forward contracts are noted in the Statement of Investments where
applicable. Unrealized appreciation or depreciation on forward contracts is
reported in the Statement of Assets of Liabilities. Realized gains and loses are
reported with all foreign currency gains and losses in the Fund's Statement of
Operations.
Risks include the potential inability of the counterparty to meet
the terms of the contract and unanticipated movements in the value of a foreign
currency relative to the U.S. dollar.
<PAGE>
Appendix A
Corporate Industry Classifications
Aerospace/Defense Gas Utilities
Air Transportation Gold
Auto Parts Distribution Health Care/Drugs
Automotive Health Care/Supplies & Services
Bank Holding Companies Homebuilders/Real Estate
Banks Hotel/Gaming
Beverages Industrial Services
Broadcasting Information Technology
Broker-Dealers Insurance
Building Materials Leasing & Factoring
Cable Television Leisure
Chemicals Manufacturing
Commercial Finance Metals/Mining
Computer Hardware Nondurable Household Goods
Computer Software Oil - Integrated
Conglomerates Paper
Consumer Finance Publishing/Printing
Containers Railroads
Convenience Stores Restaurants
Department Stores Savings & Loans
Diversified Financial Shipping
Diversified Media Special Purpose Financial
Drug Stores Specialty Retailing
Drug Wholesalers Steel
Durable Household Goods Supermarkets
Education Telecommunications - Technology
Electric Utilities Telephone - Utility
Electrical Equipment Textile/Apparel
Electronics Tobacco
Energy Services & Producers Toys
Entertainment/Film Trucking
Environmental Wireless Services
Food
<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.97
